HEADLANDS MORTGAGE SECURITIES INC, S-3, 1998-02-10

HEADLANDS MORTGAGE SECURITIES INC
S-3, 1998-02-10
ASSET-BACKED SECURITIES

Previous: NEWSOUTH BANCORP INC, 10-Q, 1998-02-10

Next: ADVISORS SERIES TRUST, 485APOS, 1998-02-10

As filed with the Securities and Exchange Commission on February 10, 1997
Registration No. 333-

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

HEADLANDS MORTGAGE SECURITIES INC.
(Exact name of registrant as specified in its Charter)
Delaware 68-0397342
(State of Incorporation) (I.R.S. Employer Identification No.)

700 Larkspur Landing Circle, Suite 240
Larkspur, California 94939

(415) 925-5442
(Address, including zip code, and telephone number, including
area code, of principal executive offices)

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

Peter T. Paul
Headlands Mortgage Securities Inc.
700 Larkspur Landing Circle, Suite 240
Larkspur, California 94939

(415) 461-6790
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

With a copy to:
Phillip R. Pollock, Esq. Michael P. Braun, Esq.
Tobin & Tobin Brown & Wood LLP
One Montgomery Street One World Trade Center
San Francisco, California 94104 New York, New York 10048
---------------------------------

Approximate date of commencement of proposed sale to the public:
From time to time on or after the effective date of the registration
statement, as determined by market conditions.
If the only securities being registered on this form are being
offered pursuant to dividend or interest reinvestment plans, please
check the following box.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, other than securities offered only in
connection with dividend or interest reinvestment plans, please check
the following box.
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b), under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for
the same offering.
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, please check the following box and
list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
If delivery of the prospectus is expected to be made pursuant to

Rule 434, please check the following box.

CALCULATION OF REGISTRATION FEE

Title of Each Amount Proposed Maximum Proposed Amount Amount
Class of Securities to be Offering Price Aggregate of Regis-
to be Registered Registered Per Unit (1) Offering Price(1) tration(2)
<S> <C> <C> <C> <C>
Certificates . . . $1,500,000,000 100% $1,500,000,000 $443,649.75
</TABLE>

(1) Estimated for the purpose of calculating the registration
fee.
(2) $143,177,029 in securities are being carried forward and
$43,386.97 of the filing fee is associated with the
securities being carried forward and was previously paid
with the earlier registration statement.

Pursuant to Rule 429 of the Securities and Exchange Commission's
Rules and Regulations under the Securities Act of 1933, as amended,
the Prospectus and Prospectus Supplement contained in this
Registration Statement also relate to the Registrant's registration
statement No. 333-32485, as previously filed by the Registrant on Form
S-3.

The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until
the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of
1933 or until the Registration Statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a), may
determine.

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

SUBJECT TO COMPLETION DATED FEBRUARY 10, 1998

PROSPECTUS SUPPLEMENT
(To Prospectus dated ______________ ___, 199_)

HEADLANDS MORTGAGE SECURITIES INC.
Sponsor

[HEADLANDS MORTGAGE COMPANY]
Seller and Master Servicer

Mortgage Pass-Through Certificates, Series [199_-_]
Distributions payable on the [ ] day of each month, commencing on [ ],
199_
_________________

The Mortgage Pass Through Certificates, Series [199_-_]
(the "Certificates") will represent the entire beneficial ownership
interest in a trust fund (the "Pool") to be created pursuant to a
Pooling and Servicing Agreement, dated as of [ ], 199_ (the "Pooling
Agreement"), among Headlands Mortgage Securities Inc. (the "Sponsor"),
[Headlands Mortgage Company], as master servicer (the "Master
Servicer"), [Headlands Mortgage Company], as seller (the "Seller") and
[ ], as trustee (the "Trustee"). The Pool will consist primarily of a
pool of conventional fixed rate mortgage loans (the "Mortgage Loans"),
substantially all of which will have original terms to maturity of not
more than [ ] months. The Mortgage Loans are secured by first liens
on one- to four-family residential properties (the "Mortgaged
Properties"). Only the Classes identified in the table below (the
"Offered Certificates") are offered hereby.

On the [ ]th day of each month or, if such [ ]th day is not
a business day, on the first business day thereafter (each, a
"Distribution Date"), commencing on [ ], 199_, from and to the extent
of funds available therefor in the Certificate Account referred to
herein, a distribution will be made on the Offered Certificates in the
amounts and in the priorities set forth herein.

The yield to investors on each Class of Offered
Certificates will be sensitive in varying degrees to, among other
things, the rate and timing of principal payments (including
prepayments) of the Mortgage Loans. The yield to maturity of a Class
of Offered Certificates purchased at a discount or premium will be
more sensitive to the rate and timing of payments thereon than a Class
purchased at par. Holders of Certificates should consider, in the
case of any such Certificates purchased at a discount, the risk that a
lower than anticipated rate of principal payments could result in an
actual yield that is lower than the anticipated yield and, in the case
of any Offered Certificates purchased at a premium, particularly the
Class X Certificates, the risk that a faster than anticipated rate of
principal payments could result in an actual yield that is lower than
the anticipated yield. In certain extreme prepayment scenarios,
investors in the Class X Certificates may fail to recover their
initial investments. The yield to investors in the Offered
Certificates also will be adversely affected by Net Interest
Shortfalls and by Realized Losses.

<TABLE>

Initial
Class Certificate Principal Interest Pass-Through Price to Underwriting Proceeds to
Class Balance (1) Type Type Rate Public (4) Discount(4) Sponsor

<S> <C> <C> <C> <C>
A-1 . . . $ [%] [Variable $ $ $
Rate (2)]
X. . . . .$ (3) $ $ $
M-1 . . . $ [%] [Variable $ $ $
Rate (2)]
Total . . $ N/A $ $ $
</TABLE>

(1) The aggregate initial Class Certificate Balance of the Offered
Certificates is subject to a permitted variance in the aggregate of
plus or minus [ ]%.
[(2)The Pass-Through Rate for any Distribution Date will equal the
weighted average of the Net Mortgage Rates then in effect for each
Mortgage Loan. The Net Mortgage Rate for each Mortgage Loan will
equal the Mortgage Rate thereon on the first day of the month
preceding the month of the related Distribution Date less the related
Expense Rate. The Pass-Through Rate for the first Distribution Date
is expected to be approximately [ ]% per annum.]
(3) The Pass-Through Rate for this Class for any Distribution Date will
be equal to the excess of (a) the weighted average of the Net Mortgage
Rates of the Mortgage Loans over (b) [ ]%.

PROSPECTIVE INVESTORS IN THE OFFERED CERTIFICATES SHOULD REVIEW THE
INFORMATION SET FORTH UNDER "RISK FACTORS" ON PAGE S-7 OF THIS
PROSPECTUS SUPPLEMENT AND IN THE PROSPECTUS ON PAGE 14.

THE CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE
SPONSOR, THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES, EXCEPT AS
SET FORTH HEREIN. NEITHER THE CERTIFICATES NOR THE MORTGAGE LOANS ARE
INSURED OR GUARANTEED BY THE UNITED STATES GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
-------------------------------

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

THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

The Offered Certificates are offered by the Underwriter, subject to
prior sale, when, as and if delivered to and accepted by the
Underwriter and subject to its right to reject orders in whole or in
part. It is expected that delivery of the Offered Certificates will
be made in book-entry form only through the facilities of The
Depository Trust Company on or about [date].
________________ ___, 199_
[Underwriter]
Each of the Mortgage Loans was purchased or originated by the
Seller, and will be sold by the Seller to Headlands Mortgage
Securities Inc. (the "Sponsor") for deposit to the Pool prior to
the date of initial issuance of the Certificates.

An election will be made to treat the Pool as a real estate
mortgage investment conduit (the "REMIC") for federal income tax
purposes. As described more fully herein and in the Prospectus,
the Senior Certificates and the Subordinate Certificates will
constitute "regular interests" in the REMIC. See "Certain
Federal Income Tax Consequences" herein and in the Prospectus.

There is currently no secondary market for the Offered
Certificates and there can be no assurance that such a market
will develop or, if it does develop, that it will continue.
______________________

This Prospectus Supplement does not contain complete
information about the offering of the Offered Certificates.
Additional information is contained in the Prospectus dated
____________ ___, 199_ (the "Prospectus") and purchasers are
urged to read both this Prospectus Supplement and the Prospectus
in full. Sales of the Offered Certificates may not be
consummated unless the purchaser has received both this
Prospectus Supplement and the Prospectus.

Until ninety days after the date of this Prospectus Supplement,
all dealers effecting transactions in the Offered Certificates,
whether or not participating in this distribution, may be
required to deliver a Prospectus Supplement and the Prospectus.
This is in addition to the obligation of dealers to deliver a
Prospectus Supplement and the Prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.

SUMMARY OF TERMS

This Summary of Terms is qualified in its entirety by reference
to the detailed information appearing elsewhere in this
Prospectus Supplement and in the accompanying Prospectus.
Certain capitalized terms used in this Summary of Terms are
defined elsewhere in this Prospectus Supplement or in the
Prospectus.

Title of Securities Mortgage Pass-Through Certificates,
Series [199_-_] (the
"Certificates").

Designations

Offered Certificates Class A-1, Class X and Class M-1
Certificates.

Approximate
Initial Class Pass-Through
Class Certificate Balance Rate
_____ ___________________ ____

Non-Offered Certificates B-1 $ %
B-2 $ %
R (1) (1)
___________
(1) The Class R Certificates will not
have a Class Certificate Balance
and will not bear interest.

Senior Certificates Class A-1 and Class X Certificates.

Mezzanine Certificates Class M-1 Certificates.

Subordinate Certificates The Mezzanine Certificates and
the Class B-1 and B-2 Certificates.

Residual Certificates Class R Certificates.

[Fixed Rate Certificates
]

[Variable Rate
Certificates ]

Book-Entry Certificates

Sponsor Headlands Mortgage Securities Inc.,
a Delaware corporation (the
"Sponsor").

Seller [Headlands Mortgage Company] (the
"Seller")

Master Servicer [Headlands Mortgage Company] (the
"Master Servicer"). See "The
Master Servicer" herein.

Trustee [ ] (the "Trustee").

Cut-off Date [ ], 199_.

Distribution Date The [ ]th day of each month, or, if
such day is not a Business Day, the
next succeeding Business Day,
commencing in [month] 199_.

Record Date The Record Date for each
Distribution Date will be the last
day of the preceding month.

Mortgage Pool The Mortgage Pool will consist of
fully-amortizing, [ ] to [ ] month,
[fixed interest] [adjustable] rate,
conventional first mortgage loans
(the "Mortgage Loans") having, as
of the Cut-off Date, an aggregate
principal balance equal to
approximately $[ ] (the "Cut-off
Date Pool Principal Balance"). See
"The Mortgage Pool" herein.

Pooling and Servicing
Agreement The Certificates will be issued
pursuant to a Pooling and Servicing
Agreement to be dated as of [date]
(the "Pooling Agreement") among the
Sponsor, the Master Servicer, the
Seller and the Trustee.

Priority of Distributions As more fully described herein,
distributions will be made on
the Certificates on each
Distribution Date from Available
Funds in the following order of
priority:
(i) to interest on each
[interest bearing] Class of Senior
Certificates;
(ii) to principal on the Class
A-1 Certificates, up to the maximum
amount of principal distributed on
such Class on such Distribution
Date as described herein;
(iii) to interest on the Class M-
1 Certificates;
(iv) to principal on the Class
M-1 Certificates, up to the maximum
amount of principal to be
distributed on such Class on such
Distribution Date as described
herein; and
(v) to interest on and then
principal of each other Class of
Subordinate Certificates in
increasing order of numerical Class
designation, up to the maximum
amount of interest and principal to
be distributed on each such Class
on such Distribution Date [and
subject to certain limitations set
forth herein under "Description of
the Certificates Principal"].

Class X Notional Amount With respect to the first
Distribution Date, the initial
Class X Notional Amount will be
equal to the aggregate principal
balance of the Mortgage Loans as of
the Cut-off Date. On any
Distribution Date thereafter, the
Class X Notional Amount will be
equal to the aggregate of the
Principal Balances of the Mortgage
Loans (the "Pool Principal
Balance") as of the first day of
the month preceding the month of
such Distribution Date.

Interest On each Distribution Date, each
Class of interest bearing Offered
Certificates, to the extent
Available Funds are available for
the distribution of interest on
such Class on such Distribution
Date, as described above under
"Priority of Distributions",
generally will be entitled to
receive an amount allocable to
interest equal to the sum of (i)
one month's interest at the
applicable Pass-Through Rate set
forth on the cover page hereof (as
to each Class, the "Pass-Through
Rate") on the related Class
Certificate Balance or the Class X
Notional Amount, as applicable,
immediately prior to such
Distribution Date and (ii) the sum
of the amounts, if any, by which
the amount described in clause (i)
above on each prior Distribution
Date exceeded the amount actually
distributed as interest on such
prior Distribution Dates and not
subsequently distributed ("Unpaid
Interest Shortfall"). The interest
entitlement for each Class of
Offered Certificates described
above shall be reduced by the
allocable share of Net Interest
Shortfalls for each such Class, as
described herein under "Description
of the Certificates Interest."

Principal (including
prepayments) On each Distribution Date an amount
allocable to principal will be
distributed on the Class A-1
Certificates generally equal to the
lesser of (x) Available Funds
reduced by the amount of interest
distributed on the Senior
Certificates on such Distribution
Date and (y) the sum of (i) the
Class A-1 Percentage of (a) all
scheduled payments of principal due
on each Mortgage Loan on the Due
Date for such Mortgage Loan in the
month in which such Distribution
Date occurs, (b) the Principal
Balance of each Mortgage Loan that
became a Liquidated Mortgage Loan
during the month preceding the
month of such Distribution Date,
(c) the Principal Balance of each
Mortgage Loan that was repurchased
by the Seller or another person as
of such Distribution Date pursuant
to the Agreement, (d) certain
amounts that may be required to be
paid in connection with any
substitution of Mortgage Loans on
such Distribution Date pursuant to
the Pooling Agreement and (e) any
net insurance or liquidation
proceeds received during the month
preceding the month of such
Distribution Date allocable to
recoveries of principal of Mortgage
Loans that are not yet Liquidated
Mortgage Loans and (ii) the Class
A-1 Prepayment Percentage of all
partial principal prepayments and
all principal prepayments in full
("Principal Prepayments") received
during such preceding month.

On each Distribution Date an amount
allocable to principal will be
distributed on Class M-1
Certificates equal to the lesser of
(x) Available Funds reduced by the
amount of interest and principal
distributed on the Senior
Certificates and interest on the
Class M-1 Certificates, in each
case on such Distribution Date and
(y) the sum of (i) the applicable
Subordinate Percentage Allocation
of the sum of the amounts
calculated pursuant to clauses (a)
through (e) in the preceding
paragraph for such Distribution
Date and (ii) the applicable
Subordinate Prepayment Percentage
Allocation of all Principal
Prepayments received during the
preceding month.

See "Description of the
Certificates Principal" herein.

[Credit Support
General Credit support for the Senior
Certificates will be provided by
the Subordinate Certificates as
described below. Credit support
for the Mezzanine Certificates will
be provided by the Class B-1 and
Class B-2 Certificates.

A. Subordination The rights of holders of the
Subordinate Certificates to receive
distributions with respect to the
Mortgage Loans in the Pool will be
subordinated to such rights of
holders of the Senior Certificates,
and the rights of holders of the
Class B-1 and Class B-2
Certificates to receive such
distributions will be further
subordinated to such rights of
holders of the Mezzanine
Certificates, in each case only to
the extent described below. See
"Description of the Certificates
Priority of Distributions Among
Certificates," " Allocation of
Losses" and "Credit Support
Subordination of Subordinate
Certificates" herein.

The subordination of the
Subordinate Certificates to the
Senior Certificates, and the
further subordination of the Class
B-1 and Class B-2 Certificates to
the Mezzanine Certificates is
intended to increase the likelihood
of receipt by Senior
Certificateholders and Mezzanine
Certificateholders, respectively,
of the maximum amount to which they
are entitled on any Distribution
Date, to provide such holders
protection against losses on the
Mortgage Loans to the extent
described herein and, to a lesser
extent, against losses on [Special
Hazard Mortgage Loans] [Fraud
Loans] [and] [Bankruptcy Loans.]
However, in certain circumstances
the amount of available
subordination may be exhausted and
shortfalls in distributions on the
Certificates may result. Holders
of the Senior Certificates will
bear their proportionate share of
any losses realized on the Mortgage
Loans in excess of the available
subordination amount. See "Credit
Support Subordination of
Subordinated Certificates" and "
Allocation of Losses" herein.

[B. Description of other types
of credit support,
if any]

Weighted Average
Lives (in years)* PSA
______________________________________
Class % % % %
- - - -
-------------
*Determined as described under
"Prepayment and Yield Considerations
Weighted Average Lives of the
Offered Certificates" herein.
Prepayments will not occur at any
assumed rate shown or any other
constant rate, and the actual
weighted average lives of any or all
of the Classes of Offered
Certificates are likely to differ
from those shown, perhaps
significantly.

Last Scheduled
Distribution Date
Class Last Scheduled Distribution Date
_____ ________________________________
A-1
X
M-1

Servicing Fees and Other
Expenses As compensation for their services,
the servicers engaged by the Master
Servicer to perform the day-to-day
servicing functions relating to the
Mortgage Loans and the Master
Servicer will be entitled to retain,
from amounts received in respect of
the Mortgage Loans which are
allocable to interest, an amount
equal to the Servicing Fee and
Master Servicing Fee, respectively.

In addition to the Servicing Fee and
the Master Servicing Fee, there will
be deducted from amounts received in
respect of the Mortgage Loans which
are allocable to interest an amount
sufficient to provide for the
payment of the Trustee's fee. As to
each Mortgage Loan, the sum of the
Master Servicing Fee Rate, the
Servicing Fee Rate and the rate at
which the Trustee's fee is
determined is referred to as the
"Expense Rate."

See "Servicing of Mortgage Loans
Servicing Compensation and Payment
of Expenses" herein.

[Advances The Master Servicer, directly or
through one or more servicers, will
be obligated to advance, four
business days prior to each
Distribution Date an amount equal to
all delinquent amounts (net of the
related Servicing Fee and Master
Servicing Fee and Relief Act
Reductions) on each Mortgage Loan in
the Mortgage Pool and not previously
advanced to the extent that such
Advances are determined by the
Master Servicer to be recoverable.

[With respect to any Mortgage Loan
requiring a balloon payment on the
maturity date of such Mortgage Loan,
in the event of default in any such
payment, the Master Servicer will
continue to advance, subject to the
Master Servicer's determination as
to recoverability, an amount equal
to interest on the principal balance
of such Mortgage Loan deemed to be
due thereon after such default.]

Any Advance made by the Master
Servicer or a servicer with respect
to a Mortgage Loan is reimbursable
to it as described herein under
"Servicing of Mortgage Loans
Advances." Under the limited
circumstances described herein, the
Master Servicer will be entitled to
reimburse itself and any servicer
from funds on deposit in the
Certificate Account before
distributions are made to holders of
Certificates.]

[Optional Termination At its option, the Master Servicer
may purchase from the Pool all
remaining Mortgage Loans in the Pool
and thereby effect early retirement
of the Certificates, on any
Distribution Date on which the Pool
Principal Balance is less than 10%
of the Cut-off Date Pool Principal
Balance. See "Description of the
Certificates Termination; Optional
Termination" herein.]

If the Master Servicer exercises its
If the Master Servicer exercises its
right to repurchase all of the
right to repurchase all of the
Mortgage Loans, the Certificates
Mortgage Loans, the Certificates
outstanding at the time of such
outstanding at the time of such
repurchase will be retired earlier
repurchase will be retired earlier
than would otherwise be the case.
than would otherwise be the case.
See "Prepayment and Yield
Considerations" herein.

Federal Income
Tax Consequences [For federal income tax purposes,
the Pool will be treated as a "real
estate mortgage investment conduit"
("REMIC"). The Senior Certificates
and the Subordinate Certificates
will constitute "regular interests"
in the REMIC and will be treated as
debt instruments of the Pool for
federal income tax purposes with
payment terms equivalent to the
terms of such Certificates. The
Class R Certificates will constitute
the sole class of "residual
interest" in the REMIC and will be
the Class of Residual Certificates,
as described in the Prospectus.]

Holders of the Offered Certificates
will be required to include in
income interest on such Certificates
in accordance with the accrual
method of accounting. The Class X
Certificates will, and the other
Classes of Offered Certificates may,
depending on their respective issue
prices, be treated as having been
issued with original issue discount
for federal income tax purposes.
For further information regarding
the federal income tax consequences
of investing in the Certificates,
see "Certain Federal Income Tax
Consequences" herein and in the
Prospectus.

Legal Investment The Senior Certificates [and the
Class M-1 Certificates] will
constitute "mortgage related
securities" for purposes of the
Secondary Mortgage Market
Enhancement Act of 1984 ("SMMEA"),
and as such, will be legal
investments for certain entities to
the extent provided in SMMEA. See
"Legal Investment" in the
Prospectus.

[It is anticipated that the Class M-
1 Certificates will not be rated in
one of the two highest rating
categories by a nationally
recognized statistical rating
organization and, therefore, will
not constitute "mortgage related
securities" for purposes of SMMEA.]

Certain Classes of Certificates may
be deemed "high-risk mortgage
securities" as defined in the
supervisory policy statement on
securities activities approved by
the Federal Financial Institutions
Examination Council on December 3,
1991 and adopted by the Comptroller
of the Currency, the Federal Deposit
Insurance Corporation, the Federal
Reserve Board and the Office of
Thrift Supervision. See "Legal
Investment" in the Prospectus.

ERISA Considerations A fiduciary of any employee benefit
plan subject to the Employee
Retirement Income Security Act of
1974, as amended ("ERISA"), or the
Internal Revenue Code of 1986, as
amended (the "Code"), should
carefully review with its legal
advisors whether the purchase or
holding of an Offered Certificate
could give rise to a transaction
prohibited or not otherwise
permissible under ERISA or the Code.
The Class M-1 Certificates may not
be transferred except upon
satisfaction of certain conditions.
See "ERISA Considerations" herein
and in the Prospectus.

Certificate Rating It is a condition to the issuance of
the Offered Certificates that the
Senior Certificates and the Class M-
1 Certificates be rated by [ ] and
by [ ] at least as follows:

Class __________
_____
A-1
X
M-1

See "Ratings" herein.

RISK FACTORS

Investors should consider the following factors in connection
with the purchase of the Certificates.

Yield and Prepayment Considerations

The rate of principal payments on the Certificates, the amount
of principal and interest payments on the Certificates and the
yield to maturity of the Certificates will be directly related to
the rate of payments of principal on the Mortgage Loans. The
rate of principal payments on the Mortgage Loans will in turn be
affected by the amortization schedules of the Mortgage Loans, the
rate of principal prepayments (including partial prepayments and
those resulting from refinancing) thereon by mortgagors,
liquidations of defaulted Mortgage Loans, repurchases by the
Seller of Mortgage Loans as a result of defective documentation
or breaches of representations or warranties and optional
purchase by the Master Servicer of all of the Mortgage Loans in
connection with the termination of the Pool. [The Mortgagors may
prepay any Mortgage Loan at any time without penalty.]

The rate of payments (including prepayments) on mortgage loans
is influenced by a variety of economic, geographic, social and
other factors. If prevailing rates for similar mortgage loans
fall below the Mortgage Rates on the Mortgage Loans, the rate of
prepayment would generally be expected to increase. Conversely,
if prevailing rates for similar mortgage loans rise above the
Mortgage Rates on the Mortgage Loans, the rate of prepayment
would generally be expected to decrease. An investor that
purchases an Offered Certificate at a discount should consider
the risk that a slower than anticipated rate of principal
payments on the Mortgage Loans will result in an actual yield
that is lower than such investor's expected yield. An investor
that purchases an Offered Certificate at a premium should
consider the risk that a faster than anticipated rate of
principal payments on the Mortgage Loans will result in an actual
yield that is lower than such investor's expected yield.

The timing of changes in the rate of prepayments may
significantly affect an investor's actual yield to maturity, even
if the average rate of principal prepayments is consistent with
an investor's expectations. In general, the earlier a prepayment
of principal of the Mortgage Loans the greater the effect on an
investor's yield to maturity. The effect on an investor's yield
as a result of principal payments occurring at a rate higher (or
lower) than the rate anticipated by the investor during the
period immediately following the issuance of the Offered
Certificates will not be offset by a subsequent like reduction
(or increase) in the rate of principal prepayments. The yield on
the Class X Certificates will be highly sensitive to the rate and
timing of prepayments on the Mortgage Loans. A rapid rate of
principal prepayments on the Mortgage Loans (as defined below)
may have a material negative effect on the yield of the Class X
Certificates. Investors must make their own decisions as to the
appropriate prepayment assumptions to be used in deciding whether
to purchase the Offered Certificates. See "Prepayment and Yield
Considerations- Sensitivity of the Class X Certificates" herein.

Risks of Holding Subordinated Certificates

The rights of the holders of the Class M-1 Certificates to
receive distributions with respect to the Mortgage Loans will be
subordinated to such rights of the Senior Certificates and the
rights of the holders of the Class B-1 Certificates to receive
distributions with respect to the Mortgage Loans will be
subordinated to such rights of the Senior Certificates and the
Class M-1 Certificates. Delinquencies that are not advanced by
or on behalf of the Master Servicer (because the amounts, if
advanced, would be nonrecoverable), will adversely affect the
yield on the Certificates. Because of the priority of
distributions, shortfalls resulting from delinquencies not so
advanced will be borne first by the Class B-2 Certificates,
second by the Class B-1 Certificates, third by the Class M-1
Certificates and finally by the Senior Certificates.

The weighted average life of, and the yield to maturity on,
the Subordinate Certificates, in decreasing order of their
priority of distributions, will be progressively more sensitive
to the rate and timing of Mortgagor defaults and the severity of
ensuing losses on the Mortgage Loans. If the actual rate and
severity of losses on the Mortgage Loans is higher than those
assumed by a holder of a Subordinate Certificate, the actual
yield to maturity of such Certificate may be lower than the yield
expected by such holder based on such assumption. The timing of
losses on the Mortgage Loans will also affect an investor's
actual yield to maturity, even if the rate of defaults and
severity of losses over the life of the Mortgage Loans are
consistent with such investor's expectations. In general, the
earlier a loss occurs the greater the effect on an investor's
yield to maturity. Realized Losses on the Mortgage Loans will
reduce the Class Certificate Balance of the Subordinate
Certificates to the extent of any losses allocated thereto
without the receipt of cash attributable to such reduction. See
"Description of the Certificates--Allocation of Losses" herein.

Limited Source of Payments - No Recourse to Seller, Master
Servicer or Trustee

The Mortgage Loans are be the sole source of payments on the
Certificates. The Certificates do not represent an interest in
or obligation of the Seller, the Master Servicer, the Trustee or
any of their affiliates, except for limited obligations of the
Master Servicer with respect to certain breaches of its
representations and warranties and its obligations as Master
Servicer. Neither the Certificates nor the Mortgage Loans will
be guaranteed by or insured by any governmental agency or
instrumentality, the Seller, the Master Servicer, the Trustee or
any of their affiliates. Consequently, in the event that
payments on the Mortgage Loans are insufficient or otherwise
unavailable to make all payments required on the Certificates,
there will be no recourse to the Seller, the Master Servicer, the
Trustee or any of their affiliates.

Limited Liquidity

The Underwriter intends to make a secondary market in the
Offered Certificates, but has no obligation to do so. There is
currently no secondary market in the Offered Certificates and
there can be no assurance that such a market will develop or, if
it does develop, that it will provide Certificateholders with
liquidity of investment or that it will continue for the life of
the Certificates.

Geographic Concentration

[Approximately [ ]% of the Mortgage Loans (by aggregate
outstanding principal balance as of the Cut-off Date) are secured
by Mortgaged Properties located in the State of California.
Property values of residential real estate in California have
declined in recent years. If the California residential real
estate market should continue to experience an overall decline in
property values after the dates of origination of the Mortgage
Loans, the rates of delinquency, foreclosure, bankruptcy and loss
on the Mortgage Loans may be expected to increase, and may
increase substantially, as compared to such rates in a stable or
improving real estate market.]

[describe other geographic concentrations presenting
significant risks]

Consequences of Owning Book-Entry Certificates

Since transactions in the [ ] Certificates (the "Book-Entry
Certificates") generally can be effected only through DTC,
Participants and Indirect Participants, the ability of a
Beneficial Owner to pledge Book-Entry Certificates to persons or
entities that do not participate in the DTC system, or to
otherwise act with respect to such Book-Entry Certificates, may
be limited due to the lack of a physical certificate for such
Book-Entry Certificates. in addition, under a book-entry format,
Beneficial Owners may experience delays in their receipt of
payments, since distributions will be made by the Trustee, or a
paying agent on behalf of the Trustee, to CEDE & Co., as nominee
for DTC. Also, issuance of Book-Entry Certificates in book-entry
form may reduce the liquidity thereof in any secondary trading
market that may develop therefor because investors may be
unwilling to purchase securities for which they cannot obtain
delivery of physical certificates. See "Description of the
Certificates Book-Entry Certificates" herein.

THE MORTGAGE POOL

General

Certain information with respect to the Mortgage Loans
included in the Mortgage Pool is set forth below. [A detailed
description of such Mortgage Loans on Form 8-K (the "Detailed
Description") will be available to purchasers of the Offered
Certificates at or before, and will be filed with the Securities
and Exchange Commission within fifteen days of, the initial
delivery of the Offered Certificates. The Detailed Description
will specify the aggregate principal balances of the Mortgage
Loans included in the Mortgage Pool as of the Cut-off Date (the
"Cut-off Date Pool Principal Balance") and will also include the
following information in tabular format regarding such Mortgage
Loans: years of origination of such Mortgage Loans, the purposes
of such Mortgage Loans, the original principal balances of such
Mortgage Loans, the outstanding principal balances of such
Mortgage Loans as of the Cut-off Date, the Mortgage Rates borne
by such Mortgage Loans, the original Loan-to-Value Ratios of such
Mortgage Loans, the remaining months to stated maturity of such
Mortgage Loans, the types of properties securing such Mortgage
Loans and the geographical distribution of such Mortgage Loans by
state.] Prior to the Closing Date, Mortgage Loans may be removed
from the Mortgage Pool and other Mortgage Loans may be
substituted therefor. The Sponsor believes that the information
set forth herein with respect to the Mortgage Pool as presently
constituted is representative of the characteristics of the
Mortgage Pool as it will be constituted at the Closing Date,
although the range of the Mortgage Rates and the maturities and
certain other characteristics of the Mortgage Loans in the
Mortgage Pool may vary. In no event will more than 5% of the
Cut-Off Date Pool Principal Balance of the Mortgage Pool deviate
from the characteristics of the Mortgage Loans described herein.

The Mortgage Pool will consist of Mortgage Loans with a
Cut-off Date Principal Balance expected to be approximately $[ ].
The Mortgage Loans provide for the amortization of the amount
financed over a series of monthly payments. All the Mortgage
Loans provide for payments due [as of the first day of each month
(each a "Due Date")]. The Mortgage Loans to be included in the
Mortgage Pool were originated or acquired in the normal course of
its [mortgage banking business] by the Seller substantially in
accordance with the underwriting criteria specified herein. At
origination, [substantially all] [specify percentage] of the
Mortgage Loans had a stated term to maturity of [ ] years.
[Monthly payments made by the Mortgagors on the Mortgage Loans
either earlier or later than the related Due Date will not affect
the amortization schedule or the relative application of such
payments to principal and interest.] [The Mortgagors may prepay
any Mortgage Loan at any time without penalty.]

[Other than during the first [six] [twelve] months following
origination, during which time each such Mortgage Loan will bear
interest at a Mortgage Rate fixed at origination, each Mortgage
Loan has a Mortgage Rate subject to [semi-annual] [annual]
adjustment on the first day of the month specified in the related
Mortgage Note (each such date, an "Adjustment Date") to equal the
sum, rounded to the nearest [ ]%, of (i) [the weekly average
yield on United States Treasury securities adjusted to a constant
maturity of one year] [the weekly average of secondary market
interest rates on six-month negotiable certificates of deposit]
[the London interbank offered rate ("LIBOR") for [three-month]
United States dollar deposits] [other indices] (the "Index")[, as
published by the Federal Reserve Board in Statistical Release
H.15(519) and most recently available as of 45 days prior to the
Adjustment Date] [which appears on the Reuters Screen LIBO Page
as of [ ], London time, on the first business day of the month
prior to the Adjustment Date] and (ii) a fixed percentage amount
specified in the related Mortgage Note (the "Gross Margin");
provided, however, that the Mortgage Rate will not increase or
decrease by more than the Periodic Rate Cap on any Adjustment
Date. All the Mortgage Loans provide that over the life of the
Mortgage Loan the Mortgage Rate will in no event be more than the
initial Mortgage Rate plus a fixed percentage (such rate, the
"Maximum Rate"). [In addition, each Mortgage Loan provides that
in no event will the Mortgage Rate be less than the initial
Mortgage Rate (such rate, the "Minimum Rate").] Effective with
the first payment due on a Mortgage Loan after each related
Adjustment Date, the monthly payment will be adjusted to an
amount which will fully amortize the outstanding principal
balance of the Mortgage Loan over its remaining term.
[Approximately [ ]% of the Mortgage Loans were originated with a
Mortgage Rate less than the sum of the then-applicable Index and
Gross Margin, rounded as described herein.] If the Index ceases
to be published or is otherwise unavailable, the Master Servicer
will select an alternative index for mortgage loans on
single-family residential properties, based upon comparable
information, over which it has no control and which is readily
verifiable by mortgagors.]

[Each Mortgage Loan was originated on or after [date], [and
has an initial Adjustment Date on or before [date]].

The latest date on which any Mortgage Loan matures is [date].
The earliest stated maturity date of any Mortgage Loan is [date].

[As of the Cut-off Date, no Mortgage Loan was delinquent more
than 30 days.]

[None] of the Mortgage Loans will be subject to any buydown
agreement.

No Mortgage Loan will have a Loan-to-Value Ratio as of the
Cut-off Date of more than [ ]%. The weighted average of the
Loan-to-Value Ratios as of the Cut-off Date of the Mortgage Loans
was approximately [ ]%. Each Mortgage Loan with a Loan-to-Value
Ratio as of the Cut-off Date of greater than 80% will be covered
by a primary mortgage guaranty insurance policy issued by a
mortgage insurance company approved by the Federal National
Mortgage Association ("FNMA") or the Federal Home Loan Mortgage
Corporation ("FHLMC"), which policy will provide coverage in an
amount equal to the excess of the original principal balance of
the related Mortgage Loan plus accrued interest thereon and
related foreclosure expenses in excess of 75% of the value of the
related Mortgaged Property. No such primary mortgage insurance
policy will be required with respect to any such Mortgage Loan
after the date on which the related Loan-to-Value Ratio is less
than 80%.

The "Loan-to-Value Ratio" of a Mortgage Loan at any given time
is a fraction, expressed as a percentage, of the principal
balance of the Mortgage Loan at origination to the original value
of the Mortgaged Property (i.e., the value at origination based
upon an appraisal or the selling price, whichever is less, or in
the case of certain refinancings, the value set forth in an
appraisal). No assurance can be given that the value of any
Mortgaged Property has remained or will remain at the level that
existed on the appraisal or sales date. If residential real
estate values generally or in a particular geographic area
decline, the Loan-to-Value Ratios might not be a reliable
indicator of the rates of delinquencies, foreclosures and losses
that could occur with respect to such Mortgage Loans.

[None of the Mortgage Loans is insured by any primary mortgage
guaranty insurance policy.]

[No] Mortgage Loan provides for deferred interest or negative
amortization. Approximately [ ]% and [ ]% (by Cut-off Date Pool
Principal Balance) will be secured by Mortgaged Properties
located in [ ] and [ ], respectively. Except as indicated in
the preceding sentence no more than approximately [ ]% of the
Mortgage Loans will be secured by Mortgaged Properties located in
any one state. No more than approximately [ ]% of the Mortgage
Loans (by principal balance as of the Cut-off Date) will be
secured by Mortgaged Properties located in any one postal zip
code area.

[The first and last date on which any Convertible Mortgage
Loan is convertible from an adjustable Mortgage Rate to a fixed
Mortgage Rate is [date] and [date], respectively.]

The following information sets forth in tabular format certain
information, as of the Cut-off Date, as to the Mortgage Loans.
Percentages (approximate) are stated by principal balance as of
the Cut-off Date.

MORTGAGE LOAN STATISTICS

Mortgage Pool
_____________

Number of Mortgage Loans . . . . . . . . . .
Cut-off Date Pool Principal Balance . . . . . $
[Rate Adjustment Frequency:] . . . . . . . .
[6 months] . . . . . . . . . . . . . . . . %
[12 months] . . . . . . . . . . . . . . . . %
[24 months] . . . . . . . . . . . . . . . . %
[36 months] . . . . . . . . . . . . . . . . %
[60 months] . . . . . . . . . . . . . . . . %
[Payment Adjustment Frequency:] . . . . . . .
[6 months] . . . . . . . . . . . . . . . . %
[12 months] . . . . . . . . . . . . . . . . %
[24 months] . . . . . . . . . . . . . . . . %
[36 months] . . . . . . . . . . . . . . . . %
[60 months] . . . . . . . . . . . . . . . . %
[Convertible Mortgage Loans . . . . . . . . . %]
Original Principal Balance:
Ranges . . . . . . . . . . . . . . . . . . $ to $
Average . . . . . . . . . . . . . . . . . . $
Original Term to Stated Maturity:
Ranges . . . . . . . . . . . . . . . . . . to months
Weighted Average . . . . . . . . . . . . . months
Remaining Months to Stated Maturity:
Ranges . . . . . . . . . . . . . . . . . . to months
Weighted Average . . . . . . . . . . . . . months
Mortgage Rate:
Ranges . . . . . . . . . . . . . . . . . . % to %
Weighted Average . . . . . . . . . . . . . %
[Net Mortgage Rate:]
Ranges . . . . . . . . . . . . . . . . . . % to %
Weighted Average . . . . . . . . . . . . . %
[Gross Margin:]
Ranges . . . . . . . . . . . . . . . . . . % to %
Weighted Average . . . . . . . . . . . . . %
[Weighted Average Months to Next Rate
. . . . . . . . . . . . . . . . . . . Not more than
Adjustment Date] . . . . . . . . . . . . . months
[Periodic Rate Cap:]
Ranges . . . . . . . . . . . . . . . . . .
Weighted Average . . . . . . . . . . . . .
[Maximum Rate:]
Ranges . . . . . . . . . . . . . . . . . . % to %
Weighted Average . . . . . . . . . . . . . %
[Minimum Rate:]
Ranges . . . . . . . . . . . . . . . . . . % to %
Weighted Average . . . . . . . . . . . . . %
Expense Fees:
Ranges . . . . . . . . . . . . . . . . . . % to %
Weighted Average . . . . . . . . . . . . . %
Primary Residences . . . . . . . . . . . . . At least %
Investment Properties . . . . . . . . . . . . No more than %
Second Homes . . . . . . . . . . . . . . . . No more than %
Single-family Detached Residences . . . . . . At least %
Condominiums . . . . . . . . . . . . . . . . No more than %
Planned Unit Developments or De Minimis
Planned Unit Developments . . . . . . . . . No more than %
Located in [ ] . . . . . . . . . . . . . . . No more than %
Number of Other States* . . . . . . . . . . . No more than %
Two- to Four-Family Residences . . . . . . . No more than %
Purchase Money Mortgage Loans . . . . . . . . At least %
Rate/Term Refinancing Mortgage Loans . . . . No more than %
Cash Out Refinance Mortgage Loans . . . . . . No more than %
Limited Documentation . . . . . . . . . . . . No more than %
No Asset and/or Income Certificate . . . . . No more than %]
________________

* No more than 5% of the Mortgage Loans (by aggregate principal
balance as of the Cut-off Date) are secured by Mortgaged
Properties in such states.

Assignment of the Mortgage Loans

Pursuant to the Pooling Agreement, the Sponsor on the Closing
Date will sell, transfer, assign, set over and otherwise convey
without recourse to the Trustee in trust for the benefit of
Certificateholders all right, title and interest of the Sponsor
in and to each Mortgage Loan and all right, title and interest in
and to all other assets included in the Pool, including all
principal and interest received by the Master Servicer on or with
respect to the Mortgage Loans after the Cut-off Date (to the
extent not applied in computing the Cut-off Date Pool Principal
Balance), exclusive of interest accruing thereon prior to the
Cut-off Date.

In connection with such transfer and assignment, the Sponsor
will deliver or cause to be delivered, with respect to each
Mortgage Loan, to the Trustee, or a custodian for the Trustee,
among other things, the original loan agreement or promissory
note (the "Mortgage Note") (and any modification or amendment
thereto) endorsed without recourse to the order of the Trustee
(or its nominee) showing an unbroken chain of endorsements from
the original payee thereof to the Person endorsing it to the
Trustee, the original agreement or instrument creating a first
lien on the related Mortgaged Property (the "Mortgage") with
evidence of recording indicated thereon, the assignment (which
may be in the form of a blanket assignment if permitted) to the
Trustee of the Mortgage with evidence of recording in the name of
the Trustee thereon and, if applicable, any riders or
modifications to such Mortgage Note and Mortgage (collectively,
the "Mortgage File"). Where the original Mortgage or assignment
has been delivered to the recording office and has not yet been
returned, the Sponsor may deliver or cause to be delivered a true
copy thereof with a certification by the Master Servicer, or if
the original Mortgage or assignment has been lost or destroyed,
the Sponsor may deliver or cause to be delivered photocopies of
such documents containing an original certification by the
judicial or other governmental authority of the jurisdiction
where such documents were recorded. Assignments of the Mortgage
Loans to the Trustee (or its nominee) will be recorded in the
appropriate public office for real property records, except in
states where, in the opinion of counsel acceptable to the
Trustee, such recording is not required to protect the Trustee's
interests in the Mortgage Loan against the claim of any
subsequent transferee or any successor to or creditor of the
Sponsor or the Seller.

The Trustee will review each Mortgage File within 90 days of
the Closing Date (or promptly after the Trustee's receipt of any
document permitted to be delivered after the Closing Date) and if
any such document is found to be defective in a material respect
and the Seller does not cure such defect within 90 days (or 270
days where the defect relates solely to the inability of the
Master Servicer to deliver the original or certified copy of the
Mortgage or assignment) of notice thereof from the Trustee, the
Seller following delivery of the opinion referred to below, will
on the Distribution Date in the month following the expiration of
such 90 days (or 270 days) either (i) repurchase the related
Mortgage Loan (or any property acquired in respect thereof) at a
price equal to 100% of the unpaid principal balance of such
Mortgage Loan plus accrued and unpaid interest on such principal
balance at the related Net Mortgage Rate less any unreimbursed
Advances made with respect thereto, or (ii) during a limited
period of time after the Closing Date as specified in the Pooling
Agreement and upon satisfaction of the conditions set forth in
the Pooling Agreement, substitute an Eligible Substitute Mortgage
Loan (as defined in the Pooling Agreement) meeting the criteria
specified in the Pooling Agreement. This repurchase or
substitution obligation constitutes the sole remedy available to
Certificateholders or the Trustee for a material defect in a
constituent document. The Sponsor will make no representations
and warranties with respect to the Mortgage Loans and will have
no obligation to purchase or substitute for a Mortgage Loan with
deficient documentation or which is otherwise defective. Prior
to any such repurchase or substitution, the Seller shall deliver
an opinion of counsel to the Trustee to the effect that such
repurchase or substitution will not (i) give rise to a
"prohibited transaction" under Section 860F(A)(2) of the Code,
(ii) be deemed a contribution to the Pool after the "start-up
date" that would give rise to the tax specified under Section
860G(a)(1) of the Code or (iii) adversely affect the status of
the Pool as a REMIC. Any such substitution or purchase that
otherwise would have been required but for the inability to
deliver the opinion referred to above will not be permitted until
such opinion is delivered.

SERVICING OF MORTGAGE LOANS

[Headlands Mortgage Company

Headlands Mortgage Company ("Headlands") is a California
corporation which was organized in 1981. Headlands is engaged in
the mortgage banking business, which consists of the origination,
acquisition, sale and servicing of residential mortgage loans
secured by one- to four-unit family residences, and the purchase
and sale of mortgage servicing rights.

Headlands is headquartered in Northern California, and has
production branches in California, Washington, Oregon, Nevada, Idaho,
Florida, New Jersey and Arizona. Loans are originated primarily on a
wholesale basis, through a network of independent mortgage loan
brokers approved by Headlands.

Headland's executive offices are located at 1100 Larkspur
Landing Circle, Suite 101, Larkspur, CA 94939.

Underwriting Standards

All of the Mortgage Loans were originated or acquired by
Headlands. Headlands originates and purchases "conventional non-
conforming mortgage loans" (i.e., loans which are not insured by
the Federal Housing Authority ("FHA") or partially guaranteed by
the Veterans Administration ("VA") or which do not qualify
for sale to FNMA or FHLMC) secured by first liens on one- to
four-family residential properties. These loans typically differ
from those underwritten to the guidelines established by FNMA,
FHLMC and the Government National Mortgage Association ("GNMA")
primarily with respect to original principal balances, loan-to-value
ratios, borrower income, required documentation, interest rates,
borrower occupancy of the mortgaged property and/or property types.
To the extent that these programs reflect underwriting standards
different from those of FNMA, FHLMC and GNMA, the performance of loans
made thereunder may reflect higher delinquency rates and/or credit
losses.

All mortgage loans originated or acquired by Headlands are
underwritten by Headlands according to its credit, appraisal and
underwriting standards. Such underwriting standards (the
"Underwriting Standards") are applied to evaluate the
prospective borrower's credit standing and repayment ability and
the value and adequacy of the mortgaged property as collateral.
These standards are applied in accordance with applicable federal
and state laws and regulations. Exceptions to the Underwriting
Standards are permitted where compensating factors are present.

Headlands' Underwriting Standards for purchase money or
rate/term refinance loans secured by one- to two-family primary
residences generally allow Loan-to-Value Ratios at origination of
up to 95% for mortgage loans with original principal balances of
up to $400,000, up to 90% for mortgage loans secured by one- to
four-family, primary residences with original principal balances
of up to $400,000, up to 85% for mortgage loans with original
principal balances of up to $500,000 and up to 80% for mortgage
loans with original principal balances up to $650,000. Headlands
may acquire mortgage loans with principal balances up to
$3,000,000 ("super jumbos") if the loan is secured by the
borrower's primary residence. The Loan-to-Value Ratio for super
jumbos generally may not exceed 60%. For cash-out refinance
loans, the maximum Loan-to-Value Ratio generally is 80%, and the
maximum "cash out" amount permitted is based in part on the
original amount of the related mortgage loan.

Headlands' Underwriting Standards for mortgage loans secured
by investment properties generally allow Loan-to-Value Ratios at
origination of up to 90% for mortgage loans with original
principal balances up to $250,000. Headlands' Underwriting
Standards permit mortgage loans secured by investment properties
to have higher original principal balances if they have lower
Loan-to-Value Ratios at origination.

For each mortgage loan with a Loan-to-Value Ratio at
origination exceeding 80%, Headlands generally requires a primary
mortgage insurance policy insuring a portion of the
balance of the mortgage loan at least equal to the product of the
original principal balance of such mortgage loan and a fraction,
the numerator of which is the excess of the original principal
balance of such mortgage loan over 75% of the lesser of the
appraised value and selling price of the related mortgage
property and the denominator of which is the original principal
balance of the related mortgage loan plus accrued interest
thereon and related foreclosure expenses. No such primary
mortgage insurance policy will be required with respect
to any such mortgage loan after the date on which the related
Loan-to-Value Ratio decreases to 80% or less or, based upon a new
appraisal, the principal balance of such mortgage loan represents
80% or less of the new appraised value. All of the insurers
which have issued primary mortgage insurance policies
with respect to the Mortgage Loans meet FNMA's or FHLMC's
standards or are acceptable to the Rating Agencies. In certain
circumstances, however, Headlands does not require primary
mortgage insurance on mortgage loans with principal
balances up to $500,000 that have Loan-to-Value Ratios exceeding
80% but less than or equal to 85%. All residences except
cooperatives and certain high-rise condominium dwellings are
eligible for this program. Each qualifying mortgage loan will be
made at an interest rate that is higher than the rate would be if
the Loan-to-Value Ratio was 80% or less or if primary mortgage
insurance was obtained. Under such circumstances, the
Certificateholders will not have the benefit of primary mortgage
insurance coverage.

In determining whether a prospective borrower has sufficient
monthly income available (i) to meet the borrower's monthly
obligation on the proposed mortgage loan and (ii) to meet monthly
housing expenses and other financial obligations including the
borrower's monthly obligations on the proposed mortgage loan,
Headlands generally considers, when required by the applicable
documentation program, the ratio of such amounts to the
proposed borrower's acceptable stable monthly gross income. Such
ratios vary depending on a number of underwriting criteria,
including Loan-to-Value Ratios, and are determined on a loan-by-
loan basis.

Headlands also examines a prospective borrower's credit report.
Generally, each credit report provides a credit score for the
borrower. Credit scores generally range from 350 to 850 and are
available from three major credit bureaus: Experian
(formerly, TRW Information Systems and Services), Equifax and Trans
Union. Headlands attempts to obtain for each borrower a credit
score from each credit bureau. If three credit scores are obtained,
Headlands applies the middle score of the primary wage earner. If
two scores are obtained, Headlands applies the lower score of the
primary wage earner. These scores estimate, on a relative basis,
which loans are most likely to default in the future. Lower scores
imply higher default risk relative to a higher score. Credit scores
are empirically derived from historical credit bureau data and
represent a numerical weighing of a borrower's credit
characteristics over a two-year period. A credit score is generated
through the statistical analysis of a number of credit-related
characteristics or variables. Common characteristics include number
of credit lines (trade lines), payment history, past delinquencies,
severity of delinquencies, current levels of indebtedness, types of
credit and length of credit history. Attributes are the specific
values of each characteristic. A scorecard (the model) is created
with weights or points assigned to each attribute. An individual
loan applicant's credit score is derived by summing together the
attribute weights for that applicant.

Headlands originates and acquires loans which have been
underwritten under one of five documentation programs: full
documentation, alternative documentation, limited documentation,
no ratio loan documentation and no income/no asset verification.

Under full documentation, the prospective borrower's
employment, income and assets are verified through written and
telephonic communications. Alternative documentation provides
for alternative methods of employment verification generally using
W-2 forms or pay stubs. Generally, under the full documentation
program, a prospective borrower is required to have a minimum
credit score of 620 and under the alternative documentation program,
a minimum credit score of 640.

Under the limited documentation program, more emphasis is
placed on the value and adequacy of the mortgaged property as
collateral and other assets of the borrower than on credit
underwriting. Mortgage loans underwritten using the limited
documentation program are limited to borrowers with credit
histories that demonstrate an established ability to repay
indebtedness in a timely fashion. Under the limited
documentation program, a prospective borrower is required to have
a minimum credit score of 640. Under the limited documentation
program, certain credit underwriting documentation concerning
income or income verification and/or employment verification is
waived. Loans originated and acquired with limited documentation
include cash-out refinance loans, super jumbos and mortgage loans
secured by investor-owned properties. Permitted maximum Loan-to-
Value Ratios (including secondary financing) under the limited
documentation program, which range up to 80%, are more
restrictive than mortgage loans originated with full
documentation or alternative documentation.

Under the no ratio loan documentation program, income ratios
for the prospective borrower are not calculated. Mortgage loans
underwritten using the no ratio loan documentation program have
Loan-to-Value Ratios less than or equal to 80% and meet the
standards for the limited documentation program. A minimum credit
score of 680 is required for this program.

Under the no income/no asset verification program, emphasis is
placed on the value and adequacy of the mortgaged property as
collateral and credit history rather than on verified income and
assets of the borrower. Mortgage loans underwritten under no
income/no asset verification are limited to borrowers with
excellent credit histories. A minimum credit score of 680 is
required for this program. Under the no income/no asset
verification program, credit underwriting documentation
concerning income, employment verification and asset verification
is waived and income ratios are not calculated. The maximum
permitted Loan-to-Value Ratio under the no income/no asset
verification program is 75%.

Headlands generally performs a pre-funding audit on each
mortgage loan. This audit includes a review for compliance with
applicable underwriting program guidelines and accuracy of the
credit report and phone verification of employment. Headlands
performs a post-funding quality control review on a minimum of
4% of the mortgage loans originated or acquired for complete re-
verification of employment, income and liquid assets used to
qualify for such mortgage loan. Such review also includes
procedures intended to detect evidence of fraudulent
documentation and/or imprudent activity during the processing,
funding, servicing or selling of the mortgage loan. Verification
of occupancy and applicable information is made by regular mail.

One- to four-family residential properties are appraised by
qualified independent appraisers who are approved by Headlands.
All appraisals are required to conform to the Uniform Standards
of Professional Appraisal Practice adopted by the Appraisal
Standards Board of the Appraisal Foundation and must be on forms
acceptable to FNMA and FHLMC. As part of Headlands' pre-funding
quality control procedures, either field or desk appraisal
reviews are obtained on 10% of all mortgage loans.

Servicing Overview

Headlands (in its capacity as master servicer) will act as
master servicer for the Mortgage Loans pursuant to the Agreement.
[All of the Mortgage Loans are serviced by Headlands.]

As of September 30, 1997, Headlands' mortgage loan servicing
portfolio consisted of 36,985 one- to four-family residential
mortgage loans with an aggregate principal balance of $4.0
billion. Headlands' primary source of mortgage servicing rights
is from mortgage loans originated through mortgage brokers.

Headlands' Servicing Center was established in January 1994. As
of September 30, 1997, it had a staff of 63 employees. Prior to
January 1994, Headlands' servicing portfolio was subserviced by a
third party.

Mortgage loan servicing includes collecting payments from
borrowers and remitting those funds to investors, accounting for
mortgage loan principal and interest, reporting to investors,
holding custodial funds for payment of mortgage and mortgage
related expenses such as taxes and insurance, advancing funds to
cover delinquent payments, inspecting foreclosures and property
disposition in the event of unremedied defaults, and otherwise
administering the mortgages.

The following table summarizes the delinquency experience
including pending foreclosures on residential mortgage loans
(including home equity loans) originated or acquired as part of
Headlands' mortgage banking operations and included in Headlands'
servicing portfolio at the dates indicated. As of December 31,
1995 and 1996, and September 30, 1997, the total principal balance
of loans serviced by Headlands was (in billions) $4.149, $4.387,
and $4.003, respectively.

Delinquencies and foreclosures generally are expected to occur
more frequently after the first full year of the life of mortgage
loans. Accordingly, because a large number of mortgage loans
serviced by Headlands have been recently originated, the current
level of delinquencies and foreclosures may not be representative
of the levels which may be experienced over the lives of such
mortgage loans. If the volume of Headlands' new loan
originations and acquisitions does not continue to grow at the
rate experienced in recent years, the levels of delinquencies and
foreclosures as percentages of the portfolio could rise
significantly above the rates indicated in the following table.

<TABLE>
December 31,
_________________________________________

1995 1996 1997
___________ ___________ ___________

Percent of Percent of Percent of
Number Servicing Number Servicing Number Servicing
of Loans Portfolio of Loans Portfolio of Loans Portfolio
-------- --------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>

Total Portfolio* 27,261 100% 34,363 100% 36,985 100%

Period of Delinquency:
30-59 days 280 1.0% 466 1.4% 355 1.0%
60-89 days 62 0.2% 43 0.1% 49 0.1%
90 days or more 47 0.2% 14 0.0% 48 0.1%

Total Delinquencies
(excluding Foreclosures) 389 1.4% 523 1.5% 452 1.2%

Foreclosures Pending 145 0.5% 197 0.6% 96 .3%

</TABLE>

__________________
* The total loans in portfolio have been reduced by the number of
loans which are pending service release or have been foreclosed.
** Percentages may not total properly due to rounding.

[Discuss reasons for variations in delinquency and foreclosure experience,
if any.]

There can be no assurance that the delinquency and foreclosure
experience of the Mortgage Loans will correspond to the
delinquency and foreclosure experience of the servicing portfolio
of Headlands set forth in the foregoing tables. The statistics
shown above represent the respective delinquency and foreclosure
experiences only at the dates presented, whereas the aggregate
delinquency and foreclosure experience on the Mortgage Loans will
depend on the results obtained over the life of the Pool. The
servicing portfolio includes mortgage loans with a variety of
payment and other characteristics (including geographic location)
which are not necessarily representative of the payment and other
characteristics of the Mortgage Loans. The servicing portfolio
includes mortgage loans underwritten pursuant to guidelines not
necessarily representative of those applicable to the Mortgage
Loans. It should be noted that if the residential real estate
market should experience an overall decline in property values,
the actual rates of delinquencies and foreclosures could be
higher than those previously experienced by Headlands or First
California. In addition, adverse economic conditions may affect
the timely payment by mortgagors of scheduled payments of
principal and interest on the Mortgage Loans and, accordingly,
the actual rates of delinquencies and foreclosures with respect
to the Mortgage Loans.

[Servicing Compensation and Payment of Expenses

The Expense Fees with respect to the Mortgage Pool are payable
out of the interest payments on each Mortgage Loan. The Expense
Rate in respect of each Mortgage Loan will be at least [ ]% per
annum and not more than [ ]% per annum of the Principal Balance
of such Mortgage Loan. The Expense Fees consist of (a) servicing
compensation payable to the Master Servicer in respect of its
master servicing activities (the "Master Servicing Fee"), [(b)
servicing and other related compensation payable to the Master
Servicer in respect of its servicing activities (the "Servicing
Fee")] and (c) certain credit support fees and fees paid to the
Trustee. The Master Servicing Fees will be [ ]% per annum of the
Principal Balance of each Mortgage Loan and the Servicing Fee
will be [ ]% per annum of the Principal Balance of each Mortgage
Loan. The Master Servicer is obligated to pay certain ongoing
expenses associated with the Pool and incurred by the Master
Servicer in connection with its responsibilities under the
Pooling Agreement and such amounts will be paid by the Master
Servicer out of the Master Servicing Fee. [The amount of the
Master Servicing Fee is subject to adjustment with respect to
prepaid Mortgage Loans, as described herein under " Adjustment
to the Master Servicing Fee in Connection with Prepaid Mortgage
Loans."] [The Master Servicer is also entitled to receive all
late payment fees, assumption fees and other similar charges and
all reinvestment income earned on amounts on deposit in the
Certificate Account and Distribution Account.]

[Adjustment to Master Servicing Fee in Connection with Prepaid

Mortgage Loans

When a Mortgage Loan is prepaid between Due Dates, the
borrower is required to pay interest on the amount prepaid only
to the date of prepayment and not thereafter. Prepayments
received during a calendar month will be distributed to
Certificateholders on the Distribution Date in the month
following the month of receipt. Pursuant to the Agreement, the
Master Servicing Fee for any month will be reduced by an amount
with respect to each such Mortgage Loan sufficient to pass
through to the Pool on such Distribution Date an amount equal to
30 days' interest at the Net Mortgage Rate for each such Mortgage
Loan. Any such shortfalls in interest as a result of prepayments
in excess of the amount of the Master Servicing Fee for a month
will reduce the amount of interest available to be distributed to
Certificateholders from what would have been the case in the
absence of such prepayments. See "Description of the
Certificates Interest" herein.]

[Advances

Subject to the following limitations, the Master Servicer will
be required to advance four business days prior to each
Distribution Date [occurring on or before the Distribution Date
in [ ] from its own funds or funds in the Certificate Account
that do not constitute Available Funds for such Distribution
Date, in an amount equal to the aggregate of payments of
principal and interest (adjusted to the applicable Net Mortgage
Rate) which were due on the related Due Date and which were
delinquent on the related Determination Date, together with an
amount equivalent to interest on each Mortgaged Property acquired
by the Master Servicer through foreclosure or deed-in-lieu of
foreclosure in connection with a defaulted Mortgage Loan ("REO
Property") (any such advance, an "Advance").]

Advances are intended to maintain a regular flow of scheduled
interest and principal payments on the Certificates rather than
to guarantee or insure against losses. The Master Servicer is
obligated to make Advances with respect to delinquent payments of
principal of or interest on each Mortgage Loan (with such
payments of interest adjusted to the related Net Mortgage Rate),
other than those resulting from a Relief Act Reduction, to the
extent that the Master Servicer determines that such Advances are
recoverable from future payments and collections or insurance
payments or proceeds of liquidation of the related Mortgage Loan.
If the Master Servicer determines on any Determination Date to
make an Advance, such Advance will be included with the
distribution to Certificateholders on the related Distribution
Date. Any failure by the Master Servicer to make an Advance as
required under the Agreement with respect to the Certificates
will constitute an Event of Default thereunder, in which case the
Trustee or the successor servicer will be obligated to make any
such Advance, in accordance with the terms of the Agreement.]

DESCRIPTION OF THE CERTIFICATES

General

The Certificates will be issued pursuant to a Pooling and
Servicing Agreement, dated as of [ ] (the "Pooling Agreement"),
among the Sponsor, the Seller, the Master Servicer and the
Trustee. The form of Pooling Agreement has been filed as an
exhibit to the Registration Statement of which the Prospectus
Supplement and the Prospectus is a part. The following is a
summary of the material terms of the Offered Certificates.
Reference is made to the Prospectus for important additional
information regarding the terms and conditions of the Pooling
Agreement and the Certificates. When particular provisions or
terms used in the Pooling Agreement are referred to, the actual
provisions (including definitions of terms) are incorporated by
reference.

The Mortgage Pass-Through Certificates, Series [199_-_] (the
"Certificates") will consist of the Class A-1 Certificates and
the Class X Certificates (the "Class A-1 Certificates" and the
"Class X Certificates," respectively, and collectively, the
"Senior Certificates"), three classes of subordinated
certificates (the "Class M-1 Certificates," the "Class B-1
Certificates" and the "Class B-2 Certificates," respectively and
collectively, the "Subordinate Certificates"), and the Class R
Certificates (the "Residual Certificates"). Only the Senior
Certificates and the Class M-1 Certificates (the "Offered
Certificates") are offered hereby.

The Senior Certificates in the aggregate will evidence an
initial beneficial ownership interest of approximately [ ]% in
the Pool, the Class M-1 Certificates in the aggregate will
evidence approximately [ ]% of the undivided interest in the
principal balance of the Pool and the Class B-1 and Class B-2
Certificates evidence in the aggregate the remaining [ ]%
undivided interest in the principal balance of the assets in the
Pool. The Class X Certificates will have no principal balance,
are entitled only to a portion of the interest on the Mortgage
Loans and are not entitled to any distributions of principal.
The Residual Certificates will not have a Class Certificate
Balance and will not bear interest.

The Class A-1 Certificates will be issuable in [book-entry]
[fully registered] form only. [The Class A-1 Certificates will
be issued in minimum dollar denominations of $[ ] and integral
multiples of $[ ] in excess thereof.] The Class X [and Class M-
1] Certificates will be issued in fully registered certificated
form in minimum dollar denomination of $[ ] and integral
multiples of $[ ] in excess thereof. A single certificate of
each Class may be issued in any amount in excess of the minimum
denomination.

Book-Entry Certificates

The Offered Certificates will be book-entry Certificates (the
"Book-Entry Certificates"). The Book-Entry Certificates will be
issued in one or more certificates which equal the aggregate
principal balance of each such Class of Offered Certificates
which will be held by a nominee of The Depository Trust Company
(together with any successor depository selected by the Sponsor,
the "Depository"). Beneficial interests in the Book-Entry
Certificates will be indirectly held by investors through the
book-entry facilities of the Depository, as described herein.
Investors may hold such beneficial interests in the Book-Entry
Certificates in minimum denominations of $1,000 and in integral
multiples in excess thereof, except that one Book-Entry
Certificate of each such Class may be issued in an amount which
is not an integral multiple of $1,000. The Sponsor has been
informed by the Depository that its nominee will be CEDE & Co.
("CEDE"). Accordingly, CEDE is expected to be the holder of
record of the Book-Entry Certificates. Except as described
below, no person acquiring a Book-Entry Certificate (each, a
"beneficial owner") will be entitled to receive a physical
certificate representing such Certificate (a "Definitive
Certificate").

The beneficial owner's ownership of a Book-Entry Certificate
will be recorded on the records of the brokerage firm, bank,
thrift institution or other financial intermediary (each, a
"Financial Intermediary") that maintains the beneficial owner's
account for such purpose. In turn, the Financial Intermediary's
ownership of such Book-Entry Certificate will be recorded on the
records of the Depository (or of a participating firm that acts
as agent for the Financial Intermediary, whose interests will in
turn be recorded on the records of the Depository, if the
beneficial owner's Financial Intermediary is not a Depository
participant). Therefore, the beneficial owner must rely on the
foregoing procedures to evidence its beneficial ownership of a
Book-Entry Certificate. Beneficial ownership of a Book-Entry
Certificate may only be transferred by compliance with the
procedures of such Financial Intermediaries and Depository
participants.

The Depository is a limited purpose trust company organized
under the laws of the State of New York, a member of the Federal
Reserve System, a "Clearing Corporation" within the meaning of
the Uniform Commercial Code as in effect in the State of New York
and a "Clearing Agency" registered pursuant to Section 17A of the
Securities Exchange Act of 1934, as amended. The Depository
performs services for its participants, some of which (and/or
their representatives) own the Depository. In accordance with
its normal procedures, the Depository is expected to record the
positions held by each Depository participant in the Book-Entry
Certificates, whether held for its own account or as a nominee
for another person. In general, beneficial ownership of Book-
Entry Certificates will be subject to the rules, regulations and
procedures governing the Depository and Depository participants
as in effect from time to time.

Distributions on the Book-Entry Certificates will be made on
each Distribution Date by the Trustee to the Depository. The
Depository will be responsible for crediting the amount of such
payments to the accounts of the applicable Depository
participants in accordance with the Depository's normal
procedures. Each Depository participant will be responsible for
disbursing such payments to the beneficial owners of the Book-
Entry Certificates that it represents and to each Financial
Intermediary for which it acts as agent. Each such Financial
Intermediary will be responsible for disbursing funds to the
beneficial owners of the Book-Entry Certificates that it
represents.

Under a book-entry format, beneficial owners of the Book-Entry
Certificates may experience some delay in their receipt of
payments, since such payments will be forwarded by the Trustee to
CEDE. Because the Depository can only act on behalf of Financial
Intermediaries, the ability of a beneficial owner to pledge Book-
Entry Certificates to persons or entities that do not participate
in the Depository system, or otherwise take actions in respect of
such Book-Entry Certificates, may be limited due to the lack of
physical certificates for such Book-Entry Certificates. In
addition, issuance of the Book-Entry Certificates in book-entry
form may reduce the liquidity of such Certificates in the
secondary market since certain potential investors may be
unwilling to purchase Certificates for which they cannot obtain
physical certificates.

None of the Sponsor, the Master Servicer or the Trustee will
have any responsibility for any aspect of the records relating to
or payments made on account of beneficial ownership interests of
the Book-Entry Certificates held by CEDE, as nominee for DTC, or
for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests. In the event of the
insolvency of the Depository, a Depository participant or an
indirect Depository participant in whose name Book-Entry
Certificates are registered, the ability of the Beneficial Owners
of such Book-Entry Certificates to obtain timely payment may be
impaired.

Unless and until Definitive Certificates are issued, it is
anticipated that the only "Certificateholder" of the Book-Entry
Certificates will be CEDE, as nominee of the Depository.
Beneficial owners of the Book-Entry Certificates will not be
Certificateholders, as that term is used in the Pooling
Agreement. Beneficial owners are only permitted to exercise the
rights of Certificateholders indirectly through Financial
Intermediaries and the Depository. Monthly and annual reports on
the Pool provided by the Master Servicer to CEDE, as nominee of
the Depository, may be made available to beneficial owners upon
request, in accordance with the rules, regulations and procedures
creating and affecting the Depository, and to the Financial
Intermediaries to whose Depository accounts the Book-Entry
Certificates of such beneficial owners are credited.

The Depository has advised the Sponsor and the Trustee that,
unless and until Definitive Certificates are issued, the
Depository will take any action permitted to be taken by the
holders of the Book-Entry Certificates under the Pooling
Agreement only at the direction of one or more Financial
Intermediaries to whose Depository accounts the Book-Entry
Certificates are credited, to the extent that such actions are
taken on behalf of Financial Intermediaries whose holdings
include such Book-Entry Certificates.

Definitive Certificates will be issued to beneficial owners of
the Book-Entry Certificates, or their nominees, rather than to
the Depository, only if (a) the Depository or the Sponsor advises
the Trustee in writing that the Depository is no longer willing,
qualified or able to discharge properly its responsibilities as
nominee and depository with respect to the Book-Entry
Certificates and the Sponsor or the Trustee is unable to locate a
qualified successor; (b) the Sponsor, at its sole option, elects
to terminate a book-entry system through the Depository; or (c)
after the occurrence of an Event of Default (as described in the
accompanying Prospectus), beneficial owners having Percentage
Interests aggregating not less than 51% of all Percentage
Interests evidenced by each Class of the Book-Entry Certificates
advise the Trustee and the Depository through the Financial
Intermediaries in writing that the continuation of a book-entry
system through the Depository (or a successor thereto) is no
longer in the best interests of beneficial owners.

Upon the occurrence of any of the events described in the
immediately preceding paragraph, the Trustee will be required to
notify all beneficial owners of the occurrence of such event and
the availability through the Depository of Definitive
Certificates. Upon surrender by the Depository of the global
certificate or certificates representing the Book-Entry
Certificates and instructions for re-registration, the Trustee
will issue the Definitive Certificates, and thereafter the
Trustee will recognize the holders of such Definitive
Certificates as Certificateholders under the Pooling Agreement.

Payments on Mortgage Loans; Accounts
Payments on Mortgage Loans; Accounts

On or prior to the Closing Date, the Master Servicer will
establish an account (the "Certificate Account") with [ ], which
shall be maintained [as a separate trust account] by the Master
Servicer in trust for the benefit of Certificateholders. Funds
credited to the Certificate Account may be invested for the
benefit and at the risk of the Master Servicer in Eligible
Investments, as defined in the Pooling Agreement, that are
scheduled to mature on or prior to the business day preceding the
next Distribution Date. On or prior to the business day
immediately preceding each Distribution Date, the Master Servicer
shall withdraw from the Certificate Account the amount of
Available Funds and shall deposit such Available Funds in an
account established and maintained with the Trustee on behalf of
Certificateholders (the "Distribution Account").

Priority of Distributions Among Certificates.

As more fully described herein, distributions will be made on
the Certificates on each Distribution Date from Available Funds
in the following order of priority: (i) to interest on each
Class of Senior Certificates, (ii) to principal on the Class A-1
Certificates, up to the maximum amount of principal to be
distributed on the Class A-1 Certificates on such Distribution
Date, (iii) to interest on the Class M-1 Certificates, (iv) to
principal on the Class M-1 Certificates, up the maximum amount of
principal to be distributed on such Class on such Distribution
Date, and (v) to interest on and then principal of each other
Class of Subordinate Certificates, up to the maximum amount of
interest and principal to be distributed on such Class on such
Distribution Date [and subject to certain limitations set forth
below under "Principal."]

Distributions

Distributions of principal and interest to holders of the
Offered Certificates will be made on each Distribution Date to
the extent of Available Funds to holders of record of such
Offered Certificates on [the last day of the preceding month,]
(the "Record Date") except that the final distribution in respect
of any Class of Offered Certificates will be made only upon
presentation and surrender of such Certificates at the office or
agency appointed by the Trustee for that purpose in [ ].

Distributions of interest and principal to holders of
Subordinate Certificates will be subordinate to distributions of
interest on and principal of the Senior Certificates and
distributions of interest and principal to holders of the Class
B-1 and Class B-2 Certificates will be subordinate to
distributions of interest on and principal of the Class M-1
Certificates. See " Allocation of Losses" and "Credit Support."

The aggregate amount of funds available in the Certificate
Account on a Distribution Date for distribution on the
Certificates is equal to "Available Funds". Available Funds for
any Distribution Date is the sum of (i) all scheduled
installments of interest (net of related Expense Fees) and
principal due on the first day of the month in which such
Distribution Date occurs and received prior to the related
Determination Date together with any Advances in respect thereof,
(ii) all insurance and liquidation proceeds (net of related
expenses) received during the month preceding such Distribution
Date, (iii) all partial or full prepayments received during the
month preceding such Distribution Date and (iv) the amount
required to be paid in respect of a Mortgage Loan that became
required to be repurchased or substituted during the month
preceding such Distribution Date, reduced by amounts in
reimbursement for Advances previously made and other amounts as
to which the Master Servicer or a servicer is entitled to be
reimbursed from the Certificate Account pursuant to the Pooling
Agreement. See "The Mortgage Pool Assignment of Mortgage
Loans" herein.

The Trustee will forward with each distribution on a
Distribution Date to each Offered Certificateholder and the
Master Servicer a statement or statements setting forth, among
other things, (i) the amount of such distribution allocable to
principal and (ii) the amount of such distribution allocable to
interest. Such amounts will be expressed as a dollar amount per
$1,000 of Class Certificate Balance. See "Description of the
Certificates Reports to Certificateholders" in the Prospectus
for a detailed description of the information to be included in
such statements.

Interest

On each Distribution Date, each Class of Offered Certificates,
to the extent of Available Funds on such Distribution Date
applied in the order described above under " Priority of
Distributions Among Classes of Certificates", will be entitled to
receive an amount allocable to interest equal to the sum of (i)
one month's interest at the applicable Pass-Through Rate on the
Class Certificate Balance or Class X Notional Amount, as the case
may be, and (ii) the sum of the amounts, if any, by which the
amount described in clause (i) above on each prior Distribution
Date exceeded the amount actually distributed as interest on such
prior Distribution Dates and not subsequently distributed
("Unpaid Interest Amounts"). [Interest will be calculated and
payable on the basis of a 360-day year divided into twelve 30-day
months.]

The interest entitlement described above for each Class of
Offered Certificates will be reduced by (i) such Class of
Certificates allocable share of "Net Interest Shortfalls" with
respect to such Distribution Date, which is equal to the amount
of interest any Class of Certificateholders would otherwise have
been entitled to receive with respect to any Mortgage Loan that
was the subject of (a) a Relief Act Reduction [or (b) after the
coverage provided by the Subordinate Certificates is exhausted
for such type of loss, a Special Hazard Loss, Fraud Loss or a
Bankruptcy Loss,] and (ii) such Class' pro rata share of Net
Prepayment Interest Shortfalls. A "Relief Act Reduction" is a
reduction in the amount of monthly interest payment on a Mortgage
Loan pursuant to the Soldiers' and Sailors' Civil Relief Act of
1940. See "Certain Legal Aspects of Mortgage Loans Soldiers'
and Sailors' Civil Relief Act" in the Prospectus. "Net
Prepayment Interest Shortfall" is the amount by which the
aggregate of Prepayment Interest Shortfalls during the calendar
month immediately preceding the month in which the related Due
Date occurs exceeds the aggregate amount of the Master Servicing
Fee for such period. A "Prepayment Interest Shortfall" is the
amount by which interest at the Net Mortgage Rate received in
connection with a prepayment of principal on a Mortgage Loan is
less than one month's interest at the Net Mortgage Rate on the
Principal Balance of the related Mortgage Loan that is prepaid.
Each Class' pro rata share of such Net Prepayment Interest
Shortfalls will be based on the amount of interest such Class of
Certificates otherwise would have been entitled to receive.

In the event that, on a particular Distribution Date,
Available Funds on such Distribution Date applied in the order
described above under " Priority of Distributions Among Classes
of Certificates," are not sufficient to make a full distribution
of interest to holders of the Offered Certificates, interest will
be distributed on such Class or Classes of Offered Certificates
of equal priority in proportion to the amount of interest each
such Class or Classes would otherwise have been entitled to
receive in the absence of such shortfall. The amount of any
resulting shortfall will be carried forward and added to the
amount holders of each such Class of Offered Certificates will be
entitled to receive on the next Distribution Date. Such a
shortfall could occur, for example, if losses realized on the
Mortgage Loans were exceptionally high or were concentrated in a
particular month. Any such amount so carried forward will not
bear interest.

Principal

On each Distribution Date, the Class A-1 Certificates will be
entitled to receive a amount allocable to principal equal to the
lesser of (x) Available Funds reduced by the amount of interest
distributed on the Senior Certificates on such Distribution Date
and (y) the sum of (i) the Class A-1 Percentage of (a) all
scheduled payments of principal due on each Mortgage Loan on the
Due Date for such Mortgage Loan in the month in which such
Distribution Date occurs, (b) the Principal Balance of each
Mortgage Loan that became a Liquidated Mortgage Loan during the
month preceding the month of such Distribution Date, (c) the
Pooling Principal Balance of each Mortgage Loan that was
repurchased by the Seller or another person as of such
Distribution Date pursuant to the Pooling Agreement, (d) certain
amounts that may be required to be paid in connection with any
substitution of Mortgage Loans and (e) any net insurance or
liquidation proceeds received during the month preceding the
month of such Distribution Date allocable to recoveries of
principal of Mortgage Loans that are not yet Liquidated Mortgage
Loans and (ii) the Class A-1 Prepayment Percentage of all partial
principal prepayments and of all principal prepayments in full
("Principal Prepayments") received during such preceding month.

On each Distribution Date, the Class M-1 Certificates will be
entitled to receive an amount allocable to principal equal to the
lesser of (x) Available Funds reduced by the amount of interest
and principal distributed on the Senior Certificates and interest
on the Class M-1 Certificates, in each case on such Distribution
Date and (y) the sum of (i) the applicable Subordinate Percentage
Allocation of the sum of the amounts calculated pursuant to
clauses (a) through (e) in the preceding paragraph for such
Distribution Date and (ii) the applicable Subordinate Prepayment
Percentage Allocation of all Principal Prepayments received
during the preceding month.

"Principal Balance" of a Mortgage Loan as of any Due Date is
the unpaid principal balance of such Mortgage Loan as specified
in the amortization schedule at the time relating thereto (before
any adjustment to such schedule by reason of moratorium or
similar waive or grace period) for such Due Date, after giving
effect to any previous partial payments and to the payment of
principal due on such Due Date and irrespective of any
delinquency in payment by the Mortgagor. The "Pool Principal
Balance" will equal the aggregate of the Principal Balances of
all Mortgage Loans. The "Due Date" for a Mortgage Loan is the
first day of each calendar month on which the scheduled
installment of principal and interest with respect thereto is
due.

The "Class A-1 Percentage" for any Distribution Date is the
percentage obtained by dividing the sum of the Class Certificate
Balance of the Class A-1 Certificates immediately prior to such
date by the aggregate of the Class Certificate Balances of all
Classes of Certificates immediately prior to such date. The
"Subordinate Percentage" for any Distribution Date is the
percentage calculated as the difference between 100% and the
Class A-1 Percentage for such date.

The "Subordinate Percentage Allocation" for any Distribution
Date and Class of Subordinate Certificates, is equal to a
fraction, the numerator of which is the related Class Certificate
Balance immediately prior to such date and the denominator of
which is the aggregate of the Class Certificate Balances of all
Subordinate Certificates immediately prior to such date.

The "Class A-1 Prepayment Percentage" for any Distribution
Date occurring during the five years beginning on the first
Distribution Date will, except as provided below, equal 100%.
Thereafter, the Class A-1 Prepayment Percentage will be subject
to gradual reduction as described in the following paragraph.
This disproportionate allocation of certain unscheduled payments
in respect of principal will have the effect of accelerating the
amortization of the Class A-1 Certificates while, in the absence
of Realized Losses, increasing the interest in the principal
balance of the Mortgage Loans evidenced by the Subordinate
Certificates. Increasing the respective interest of the
Subordinate Certificates relative to that of the Senior
Certificates is intended to preserve the availability of the
subordination provided by the Subordinate Certificates.

The "Class A-1 Prepayment Percentage" for any Distribution
Date occurring on or after the fifth anniversary of the first
Distribution Date will be as follows: for any Distribution Date
in the first year thereafter, the Class A-1 Percentage for such
Distribution Date plus 70% of the Subordinate Percentage for such
Distribution Date; for any distribution Date in the second year
thereafter, the Class A-1 Percentage for such Distribution Date
plus 60% of the Subordinate Percentage for such Distribution
Date; for any Distribution Date in the third year thereafter, the
Class A-1 Percentage for such Distribution Date plus 40% of the
Subordinate Percentage for such Distribution Date; for any
Distribution Date in the fourth year thereafter, the Class A-1
Percentage for such Distribution Date plus 20% of the Subordinate
Percentage for such Distribution Date; and for any Distribution
Date thereafter, the Class A-1 Percentage for such Distribution
Date (unless on any of the foregoing Distribution Dates the Class
A-1 Percentage exceeds the initial Class A-1 Percentage, in which
case the Class A-1 Prepayment Percentage for such Distribution
Date will once again equal 100%). Notwithstanding the foregoing,
no reduction to the Senior Prepayment Percentage will occur if
[(i) as of the first Distribution Date as to which any such
reduction applies, the dollar amount of all monthly payments on
the Mortgage Loans due in each of the preceding six months that
are delinquent 60 days or more exceeds a monthly average of [ ]%
of all monthly payments due in such month (including for this
purpose any Mortgage Loans in foreclosure and Mortgage Loans with
respect to which the related Mortgaged Property has been acquired
by the Pool), or (ii) cumulative Realized Losses with respect to
the Mortgage Loans exceed (a) with respect to the Distribution
Date in [ ], [ %] of the Class Certificate Balance of the
Subordinate Certificates as of the Cut-off Date (the "Original
Subordinate Principal Balance"), (b) with respect to the
Distribution Date in [ ], [ %] of the Original Subordinate
Principal Balance, (c) with respect to the Distribution Date in [
], [ %] of the Original Subordinate Principal Balance, (d) with
respect to the Distribution Date in [ ], [ %] of the Original
Subordinate Principal Balance, and (e) with respect to the
Distribution Date in [ ], [ %] of the Original Subordinate
Principal Balance.

The "Subordinate Prepayment Percentage" for any Distribution
Date is 100% minus the Senior Prepayment Percentage for such
Distribution Date. The "Subordinate Prepayment Percentage
Allocation" for any Distribution Date and Class of Subordinate
Certificates, is equal to the product of the Subordinate
Prepayment Percentage and a fraction, the numerator of which is
the related Class Certificate Balance immediately prior to such
date and the denominator of which is the aggregate of the Class
Certificate Balances of all Subordinate Certificates immediately
prior to such date.

If on any Distribution Date the allocation to the Class of
Certificates then entitled to principal of full and partial
principal prepayments and other amounts in the percentages
required above would reduce the outstanding Class Certificate
Balance of such Class below zero, the distribution to such Class
of Certificates will be limited to the amount necessary to reduce
the related Class Certificate Balance to zero and any remaining
portion thereof will be distributed to the Class of Certificates
next entitled to distributions of principal.

Allocation of Losses

On each Distribution Date, any Realized Loss on a Mortgage
Loan, other than any Excess Loss, will be allocated first,
sequentially, to the Class B-2, Class B-1 and Class M-1
Certificates, in that order, in each case until the respective
Class Certificate Balance thereof is reduced to zero, and
thereafter to the Class A-1 Certificates.

On each Distribution Date, Excess Losses will be allocated pro
rata among the Class A-1 Certificates and the Subordinate
Certificates based upon their respective Class Certificate
Balances.

In general, a "Realized Loss" means, with respect to a
Liquidated Mortgage Loan, the amount by which the remaining
unpaid principal balance of the Mortgage Loan exceeds the amount
of liquidation proceeds applied to the principal balance of the
Mortgage Loan. "Excess Losses" are (i) Special Hazard Losses in
excess of the Special Hazard Loss Coverage Amount, (ii)
Bankruptcy Losses in excess of the Bankruptcy Loss Coverage
Amount and (iii) Fraud Losses in excess of the Fraud Loss
Coverage Amount. "Bankruptcy Losses" are losses that are
incurred as a result of Debt Service Reductions and Deficient
Valuations. "Special Hazard Losses" are Realized Losses in
respect of Special Hazard Mortgage Loans. "Fraud Losses" are
losses sustained on a Liquidated Mortgage Loan by reason of a
default arising from fraud, dishonesty or misrepresentation. See
"Credit Support Subordination of Subordinate Certificates"
herein.

A "Liquidated Mortgage Loan" is a defaulted Mortgage Loan as
to which the Master Servicer has determined that all recoverable
liquidation and insurance proceeds have been received. A
"Special Hazard Mortgage Loan" is a Liquidated Mortgage Loan as
to which the ability to recover the full amount due thereunder
was substantially impaired by a hazard not insured against under
a standard hazard insurance policy of the type described in the
Prospectus under "Credit Support Special Hazard Insurance
Policies." See "Credit Support Subordination of Subordinate
Certificates" herein.

The "Class Certificate Balance" of any Class of Certificates
as of any Distribution Date is the initial Class Certificate
Balance thereof, reduced by the sum of (i) all amounts previously
distributed to holders of such Class as payments of principal and
(ii) the amount of Realized Losses and Excess Losses allocated to
such Class, as described in the preceding paragraph.

Termination; Optional Termination

The circumstances under which the obligations created by the
Pooling Agreement will terminate in respect of the Certificates
are described in "General Provisions of Pooling Agreements
Termination; Repurchase of Mortgage Loans and Mortgage
Certificates" in the Prospectus. [The Master Servicer will have
the option to purchase all remaining Mortgage Loans and other
assets in the Pool, thereby effecting early retirement of the
Certificates [and causing the termination of the Pool's status as
a REMIC,] but such option will not be exercisable until such time
as the Pool Principal Balance as of the Distribution Date on
which the purchase proceeds are to be distributed to
Certificateholders is less than 10% of the Cut-off Date Pool
Principal Balance. Distributions in respect of any such optional
termination will be paid to Certificateholders in order of their
priority of distribution as described under " Priority of
Distributions Among Classes of Certificates." The proceeds from
such a distribution may not be sufficient to distribute the full
amount to which each Class is entitled if the purchase price is
based in part on the fair market value of the property acquired
upon foreclosure of a Mortgage Loan and such fair market value is
less than the Principal Balance of the related Mortgage Loan. In
no event will the trust created by the Pooling Agreement continue
beyond the later of (a) the repurchase described above, (b) the
expiration of 21 years from the death of the survivor of the
person named in the Pooling Agreement and (c) [ ]. The
termination of the Pool will be effected in a manner consistent
with applicable federal income tax regulations [and the status of
the Pool as a REMIC.]

Last Scheduled Distribution Date

The Last Scheduled Distribution Date for each Class of Offered
Certificates is the latest date on which the Class Certificate
Balance is expected to be reduced to zero, and has been
calculated on the basis of the assumptions described above under
"Prepayment and Yield Considerations Assumptions Relating to
Tables" except for the following additional assumptions:
[describe]. Since the rate of distributions in reduction of the
Class Certificate Balance on each Class of Offered Certificates
will depend on the rate of payment (including prepayments) of the
Mortgage Loans as well as the frequency and severity of losses
experienced by the Pool, the Class Certificate Balance of any
such Class could reach zero significantly earlier or later than
its Last Scheduled Distribution Date. The rate of payments on
the Mortgage Loans will depend on their particular
characteristics, as well as on prevailing interest rates from
time to time and other economic factors, and no assurance can be
given as to the actual payment experience of the Mortgage Loans.
See "Maturity, Prepayment and Weighted Average Life of
Certificates" in the Prospectus.

Events of Default

Events of Default will consist of: (i)(a) any failure by the
Master Servicer to make an Advance which continues unremedied for
two business days or (b) any failure by the Master Servicer to
make or cause to be made any other required payment pursuant to
the Pooling Agreement which continues unremedied for five
business days (ii) any failure by the Master Servicer to observe
or perform in any material respect any other of its covenants or
agreements in the Pooling Agreement, which continues unremedied
for 60 days after the giving of written notice of such failure to
the Master Servicer by the Trustee or to the Master Servicer and
the Trustee by holders of Certificates evidencing not less than
25% of the Pool Principal Balance; (iii) certain events of
insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings, and certain actions by or on
behalf of the Master Servicer indicating its insolvency or
inability to pay its obligations; or (iv) the Master Servicer
assigns or delegates its duties or rights under the Pooling
Agreement in contravention of the provisions therein.

Rights Upon Event of Default

So long as an Event of Default remains unremedied, the Trustee
or holders of Certificates evidencing not less than 51% of the
Pool Principal Balance by notice in writing to the Master
Servicer may terminate all of the rights and obligations of the
Master Servicer under the Pooling Agreement and in and to the
Mortgage Loans, whereupon the Trustee will succeed to all of the
responsibilities, duties, and liabilities of the Master Servicer
under the Pooling Agreement, including the obligation to make
Advances; provided, however, that the Trustee shall have no
obligation whatsoever with respect to any liability incurred by
the Master Servicer at or prior to the receipt by the Master
Servicer of such notice. Notwithstanding the foregoing, in the
event of an Event of Default arising from the Master Servicer's
failure to make an Advance as described in clause (i)(a) in the
preceding paragraph, the Trustee shall terminate all of the
rights and obligations of the Master Servicer under the Pooling
Agreement and in and to the Mortgage Loans as described in the
preceding sentence.

[No Certificateholder, solely by virtue of such holder's
status as a Certificateholder, will have any right under the
Pooling Agreement to institute any proceeding with respect
thereto, unless such holder previously has given to the Trustee
written notice of an Event of Default and unless the holders of
Certificates evidencing not less than 25% of the Pool Principal
Balance have made written request to the Trustee to institute
such proceeding in its own name as Trustee thereunder and have
offered to the Trustee reasonable indemnity, and the Trustee for
[ ] days has neglected or refused to institute any such
proceeding.]

The Trustee

[ ] will be the Trustee under the Pooling Agreement. The
Sponsor and [ ] may maintain other banking relationships in the
ordinary course of business with the Trustee. Offered
Certificates may be surrendered at the Corporate Trust Office of
the Trustee located at [ ], Attention: [ ] or at such other
addresses as the Trustee may designate from time to time.

PREPAYMENT AND YIELD CONSIDERATIONS

General

Because principal payments on the Mortgage Loans will be
distributed to Certificateholders as they are received from
Mortgagors, the rate of principal payments on the Offered
Certificates, the aggregate amount of each interest payment on
the interest bearing Offered Certificates and the yield to
maturity of Offered Certificates purchased at a price other than
par are directly related to the rate of payments of principal on
the Mortgage Loans. The principal payments on the Mortgage Loans
may be in the form of scheduled principal payments or principal
prepayments (for this purpose, the term "principal prepayment"
includes prepayments and any other recovery of principal in
advance of its scheduled Due Date, including liquidations due to
default, casualty, condemnation and the like). Any such
prepayments will result in distributions to holders of the
Offered Certificates of amounts which would otherwise be
distributed over the remaining term of the Mortgage Loans. See
"Maturity, Prepayment Considerations and Weighted Average Life of
the Certificates" in the Prospectus. The rate at which mortgage
loans in general prepay may be influenced by a number of factors,
including general economic conditions, mortgage market interest
rates, availability of mortgage funds and homeowner mobility. In
general, if prevailing interest rates fall significantly below
the interest rates on the Mortgage Loans, the Mortgage Loans are
likely to prepay at higher rates than if prevailing rates remain
at or above the interest rates on the Mortgage Loans.
Conversely, if interest rates rise above the interest rates on
the Mortgage Loans, the rate of prepayment would be expected to
decrease.

The timing of changes in the rate of prepayments may
significantly affect the actual yield to investors, even if the
average rate of principal prepayments is consistent with the
expectations of investors. In general, the earlier the payment
of principal of the Mortgage Loans the greater the effect on an
investor's yield to maturity. As a result, the effect on an
investor's yield of principal prepayments occurring at a rate
higher (or lower) than the rate anticipated by the investor
during the period immediately following the issuance of the
Certificates will not be offset by a subsequent like reduction
(or increase) in the rate of principal prepayments. The yield on
the Class X Certificates will be highly sensitive to the rate and
timing of prepayments on the Mortgage Loans. A rapid rate of
principal prepayments on the Mortgage Loans (as defined below)
may have a material negative effect on the yield of the Class X
Certificates. Investors must make their own decisions as to the
appropriate prepayment assumptions to be used in deciding whether
to purchase the Offered Certificates. See " Sensitivity of the
Class X Certificates" herein.

As described herein under "Description of the Certificates
Principal", the Class A-1 Prepayment Percentage of Principal
Prepayments and excluding for this purpose, liquidations due to
default, casualty, condemnation and the like will be initially
distributed to the Class A-1 Certificates. This may result in
all (or a disproportionate percentage) of such principal
prepayments being distributed to holders of the Class A-1
Certificates and none (or less than their pro rata share) of such
principal prepayments being distributed to holders of Subordinate
Certificates during the periods of time described in the
definition of "Class A-1 Prepayment Percentage."

[Mortgagors are permitted to prepay the Mortgage Loans, in
whole or in part, at any time without penalty.] The rate of
payment of principal may also be affected by any repurchase of
the Mortgage Loans permitted or required by the Pooling
Agreement. See "The Mortgage Pool Assignment of Mortgage
Loans" and "Description of the Certificates Termination;
Optional Termination" herein.

Each monthly interest payment on a Mortgage Loan will be
calculated as the product of one-twelfth of the applicable
Mortgage Rate at the time of such calculation and the then unpaid
principal balance on such Mortgage Loan. The Net Mortgage Rate
with respect to each Mortgage Loan will be similarly calculated
on a loan-by-loan basis, by subtracting from the applicable
Mortgage Rate the related Expense Rate.

The effective yield to holders of interest bearing Offered
Certificates will be reduced slightly below the yield otherwise
produced by the applicable Pass-Through Rate because, while
interest will accrue from the first day of each month, the
distribution of such interest will not be made until the [ ]th
day of the month following the month of accrual.

[Substantially all] of the Mortgage Loans will include due-on-
sale clauses which allow the holder of the Mortgage Loan to
demand payment in full of the remaining principal balance upon
sale or certain transfers of the property securing such Mortgage
Loan. The Master Servicer, or the applicable servicer, will
enforce "due-on-sale" clauses to the extent permitted by
applicable law. Each Mortgage Note which contains "due-on-sale"
provisions permits the holder of the Mortgage Note to accelerate
the maturity of the Mortgage Loan upon conveyance by the
Mortgagor of the underlying Mortgaged Property. The Master
Servicer, or the applicable servicer, will enforce any "due-on-
sale" clause to the extent it has knowledge of the conveyance or
proposed conveyance of the underlying Mortgaged Property and
reasonably believes that it is entitled to do so under applicable
law; provided, however, that the Master Servicer or any such
servicer will not take any action in relation to the enforcement
of any "due-on-sale" provisions which would impair or threaten to
impair any recovery under any related Primary Mortgage Insurance
Policy. See "Maturity, Prepayment Considerations and Weighted
Average Life of Certificates" in the Prospectus. Acceleration of
Mortgage Loans as a result of enforcement of such "due-on-sale"
provisions in connection with transfers of the related Mortgaged
Properties or the occurrence of certain other events resulting in
acceleration would affect the level of prepayments on the
Mortgage Loans, thereby affecting the weighted average lives of
the Classes of the Offered Certificates.

[See "Description of the Certificates Termination; Optional
Termination" herein in the Prospectus for a description of the
Master Servicer's option to repurchase the Mortgage Loans when
the Pool Principal Balance is less than 10% of the Cut-off Date
Pool Principal Balance. The Seller may be required to repurchase
Mortgage Loans because of defective documentation or material
breaches in its representations and warranties with respect to
such Mortgage Loans. Any such repurchases will shorten the
weighted average lives of the Classes of Offered Certificates.

[Although each of the Mortgage Loans bears interest at an
adjustable Mortgage Rate, the [semi-annual] [annual] adjustments
of the Mortgage Rate for any Mortgage Loan will not exceed the
Periodic Rate Cap and the Mortgage Rate will in no event exceed
the Maximum Rate for such Mortgage Loan, regardless of the level
of interest rates generally or the rate otherwise produced by the
Index and the Gross Margin. [In addition, such adjustments will
be subject to rounding to the nearest one-eighth of 1%.]

Assumptions Relating to Tables

The Decrement Tables have been prepared on the basis of the
following assumptions (the "Assumptions"): [describe
assumptions]. Although the characteristics of the mortgage loans
for the Decrement Tables have been prepared on the basis of the
characteristics of the Mortgage Loans which are expected to be in
the Pool, there is no assurance that the Assumptions will reflect
the actual characteristics or performance of the Mortgage Loans
or that the performance of the Offered Certificates will conform
to the results set forth in the tables.

Weighted Average Lives of the Offered Certificates

Weighted average life refers to the average amount of time
that will elapse from the date of issuance of an Offered
Certificate until each dollar in reduction of the Class
Certificate Balance thereof is distributed to the investor. The
weighted average lives of such Classes of Offered Certificates
will be influenced by, among other things, the rate at which
principal of the Mortgage Loans is paid, which may be in the form
of scheduled amortization or prepayments (for this purpose, the
term "prepayments" includes prepayments and liquidations due to
default, casualty, condemnation and the like), the timing of
changes in such rate of payments and the priority sequence of
distributions of principal of such Offered Certificates. The
interaction of the foregoing factors may have different effects
on each Class of Offered Certificates and the effects on any such
Class may vary at different times during the life of such Class.
Accordingly, no assurance can be given as to the weighted average
life of any such Class of Offered Certificates. For an example
of how the weighted average lives of the Offered Certificates are
affected by the foregoing factors at various constant percentages
of PSA, see the Decrement Tables below.

Prepayments on mortgage loans are commonly measured relative
to a prepayment standard or model. The model used in this
Prospectus Supplement is the Prepayment Standard Assumption
("PSA"), which represents an assumed rate of prepayment each
month relative to the then outstanding principal balance of a
pool of mortgage loans for the life of such mortgage loans. A
prepayment assumption of 100% PSA assumes constant prepayment
rates of 0.2% per annum of the then outstanding principal balance
of such mortgage loans in the first month of the life of the
mortgage loans and an additional 0.2% per annum in each month
thereafter until the thirtieth month. Beginning in the thirtieth
month and in each month thereafter during the life of the
mortgage loans, 100% PSA assumes a constant prepayment rate of 6%
per annum each month. As used in the table below, "0% PSA"
assumes prepayment rates equal to 0% of PSA, i.e., no
prepayments. Correspondingly, "125% PSA" assumes prepayment
rates equal to 125% of PSA, and so forth. PSA does not purport
to be a historical description of prepayment experience or a
prediction of the anticipated rate of prepayment of any pool of
mortgage loans, including the Mortgage Loans. The Sponsor
believes that no existing statistics of which it is aware provide
a reliable basis for holders of Offered Certificates to predict
the amount or the timing of receipt of prepayments on the
Mortgage Loans.

The Decrement Tables set forth below have been prepared on the
basis of the Assumptions described above under " Assumptions
Relating to Tables." There will likely be discrepancies between
the characteristics of the actual Mortgage Loans included in the
Pool and the characteristics of the Mortgage Loans assumed in
preparing the Decrement Tables. Any such discrepancy may have an
effect upon the percentages of initial Class Certificate Balances
outstanding set forth in the Decrement Tables (and the weighted
average lives of the Offered Certificates). In addition, to the
extent that the Mortgage Loans that actually are included in the
Pool have characteristics that differ from those assumed in
preparing the following Decrement Tables, the Class Certificate
Balance of any such Class of Offered Certificates will be reduced
to zero earlier or later than indicated by such Decrement Tables.

Furthermore, the information contained in the Decrement Tables
with respect to the weighted average life of any Offered
Certificate is not necessarily indicative of the weighted average
life of such Class of Offered Certificate that might be
calculated or projected under different or varying prepayment
assumptions.

It is not likely that (i) all of the Mortgage Loans will have
the Mortgage Rates or remaining terms to maturity assumed or (ii)
the Mortgage Loans will prepay at the indicated percentage of PSA
until maturity. In addition, the diverse remaining terms to
maturity of the Mortgage Loans (which includes many recently
originated Mortgage Loans) could produce slower or faster
distributions in reduction of Class Certificate Balances than
indicated in the Decrement Table at the various percentages of
PSA specified.

Based upon the foregoing assumptions, the following Decrement
Tables indicate the projected weighted average life of each Class
of the Offered Certificates and set forth the percentages of the
initial Class Certificate Balance of each such Class that would
be outstanding after each of the dates shown at various constant
percentages of the PSA.

Percentage of Initial Class Certificate Balance Outstanding
For the Offered Certificates at the Respective Percentages
of PSA set Forth Below:

<TABLE>
Class A-1 Class M-1
----------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>

Distribution Date % % % % % % % % % %
- ----------------- - - - - - - - - - -

Initial Class
Certificate Balance

-----------
Weighted Average
Life
(in years)

</TABLE>

- ----------------------
/F1/ The weighted average life of an Offered Certificate is
determined by (i) multiplying the amount of each
distribution in reduction of the Class Certificate
Balance thereof by the number of years from the date of
the issuance of the Offered Certificate to the related
Distribution Date, (ii) adding the results and (iii)
dividing the sum by the initial Class Certificate Balance
of the Offered Certificates of such Class.

Yield on Class X Certificates

The significance of the effects of prepayments on the Class X
Certificates is illustrated in the following table entitled
"Sensitivity of the Class X Certificates to Prepayments," which
shows the pre-tax yield (on a corporate bond equivalent basis) to
holders of such Certificates under different constant percentages
________
of the Prepayment Assumption. The yields of such Certificates
set forth in the following table were calculated using the
assumptions specified above under " Decrement Tables" and
assuming that the purchase price of the Class X Certificates is
approximately [ ]% for 100% of such Class of Certificates and
such Certificates are purchased on [date].

As indicated in the following table, the yield to investors in
the Class X Certificates will be highly sensitive to the rate of
principal payments (including prepayments) of the Mortgage Loans
(especially those with high Net Mortgage Rates), which generally
can be prepaid at any time. On the basis of the assumptions
described above, the yield to maturity on the Class X
Certificates would be 0% if prepayments were to occur at a
rate of approximately [ ]% of the Prepayment
Assumption. Using such assumptions, if the actual prepayment
rate of the Mortgage Loans were to exceed the foregoing rate for
as little as one month (while equaling such rate for all other
months), investors in the Class X Certificates would not recover
fully their initial investments.

It is not likely that the Mortgage Loans will prepay at a
constant rate until maturity or that all of the Mortgage Loans
will prepay at the same rate or that they will have the
characteristics assumed. There can be no assurance that the
Mortgage Loans will prepay at any of the rates shown in the table
or at any other particular rate. The timing of changes in the
rate of prepayments may affect significantly the yield realized
by a holder of a Class X Certificate and there can be no
assurance that the pre-tax yield to an investor in the Class X
Certificates will correspond to any of the pre-tax yields shown
herein. Each investor must make its own decision as to the
appropriate prepayment assumptions to be used in deciding whether
or not to purchase a Class X Certificate.

Sensitivity of the Class X
Certificates to Prepayments
(Pre-Tax Yields to Maturity)

% of Prepayment Assumption
--------------------------
50% 75% 100% 125% 200%
___ ___ ____ ____ ____

Pre-Tax Yields to Maturity % % % % %

The yields set forth in the preceding table were calculated by
determining the monthly discount rates which, when applied to the
assumed stream of cash flows to be paid on the Class X
Certificates, would cause the discounted present value of such
assumed stream of cash flows to equal the assumed purchase price
of the Class X Certificates indicated above and converting such
monthly rates to corporate bond equivalent rates. Such
calculation does not take into account variations that may occur
in the interest rates at which investors may be able to reinvest
funds received by them as payments of interest on the Class X
Certificates and consequently does not purport to reflect the
return on any investment in the Class X Certificates when such
reinvestment rates are considered.

CREDIT SUPPORT

Subordination of Subordinate Certificates

The rights of Subordinate Certificateholders to receive
distributions with respect to the Mortgage Loans will be
subordinated to such rights of Senior Certificateholders, and the
rights of the holders of the Class B-1 and Class B-2 Certificates
to receive such distributions will be further subordinated to
such rights of the Mezzanine Certificates, in each case only to
the extent described herein. The subordination of the
Subordinate Certificates to the Senior Certificates and the
subordination of the Class B-1 and Class B-2 Certificates to the
Mezzanine Certificates is intended to increase the likelihood of
receipt, respectively, by Senior Certificateholders and Mezzanine
Certificateholders, respectively, of the maximum amount to which
they are entitled on any Distribution Date and to provide such
holders protection against Realized Losses, other than Excess
Losses.

In addition, the Subordinate Certificates will provide limited
protection against Special Hazard Losses, Bankruptcy Losses and
Fraud Losses up to the Special Hazard Loss Coverage Amount,
Bankruptcy Loss Coverage Amount and Fraud Loss Coverage Amount,
respectively, as described below. However, in certain
circumstances the amount of available subordination may be
exhausted and shortfalls in distributions on the Certificates may
result. Holders of the Senior Certificates will bear their
proportionate share of any losses realized on the Mortgage Loans
in excess of the available subordination amount.

The Subordinated Certificates will provide protection to the
Classes of Certificates of higher relative priority against (i)
Special Hazard Losses in an initial amount expected to be up to
approximately $[ ] (the "Special Hazard Loss Coverage Amount"),
(ii) Bankruptcy Losses in an initial amount expected to be up to
approximately $[ ] (the "Bankruptcy Loss Coverage Amount") and
(iii) Fraud Losses in an initial amount expected to be up to
approximately $[ ] (the "Fraud Loss Coverage Amount").

The Special Hazard Loss Coverage Amount will be reduced, from
time to time, to be an amount equal on any Distribution Date to
the lesser of [(a) the greatest of (i) 1% of the aggregate of the
principal balances of the Mortgage Loans, (ii) twice the
principal balance of the largest Mortgage Loan and (iii) the
aggregate principal balances of the Mortgage Loans secured by
Mortgaged Properties located in the single [California] postal
zip code area having the highest aggregate principal balance of
any such zip code area and (b) the Special Hazard Loss Coverage
Amount as of the Closing Date less the amount, if any, of losses
attributable to Special Hazard Mortgage Loans incurred since the
Closing Date.] All principal balances for the purpose of this
definition will be calculated as of the first day of the month
preceding such Distribution Date after giving effect to scheduled
installments of principal and interest on the Mortgage Loans then
due, whether or not paid.

The Fraud Loss Coverage Amount will be reduced, from time to
time, by the amount of Fraud Losses allocated to the
Certificates. In addition, on each anniversary of the Cut-off
Date, the Fraud Loss Coverage Amount will be reduced as follows:
[(a) on the first and second anniversaries of the Cut-off Date,
to an amount equal to the excess of [ %] of the Cut-off Date Pool
Principal Balance over the cumulative amount of Fraud Losses
allocated to the Certificates, (b) on the third and fourth
anniversaries of the Cut-off Date, to an amount equal to the
excess of [ %] of the Cut-off Date Pool Principal Balance over
the cumulative amount of Fraud Losses allocated to the
Certificates and (c) on the fifth anniversary of the Cut-off
Date, to zero.]

The Bankruptcy Loss Coverage Amount will be reduced, from time
to time, by the amount of Bankruptcy Losses allocated to the
Certificates.

The amount of coverage provided by the Subordinate
Certificates for Special Hazard Losses, Bankruptcy Losses and
Fraud Losses may be cancelled or reduced from time to time for
each of the risks covered, provided that the then current ratings
of the Certificates assigned by the Rating Agencies are not
adversely affected thereby. [In addition, a reserve fund or
other form of credit support may be substituted for the
protection provided by the Subordinated Certificates for Special
Hazard Losses, Bankruptcy Losses and Fraud Losses.]

As used herein, a "Deficient Valuation" is a bankruptcy
proceeding whereby the bankruptcy court may establish the value
of the Mortgaged Property at an amount less than the then
outstanding principal balance of the Mortgage Loan secured by
such Mortgaged Property or may reduce the outstanding principal
balance of a Mortgage Loan. In the case of a reduction in the
value of the related Mortgaged Property, the amount of the
secured debt could be reduced to such value, and the holder of
such Mortgage Loan thus would become an unsecured creditor to the
extent the outstanding principal balance of such Mortgage Loan
exceeds the value so assigned to the Mortgaged Property by the
bankruptcy court. In addition, certain other modifications of
the terms of a Mortgage Loan can result from a bankruptcy
proceeding, including the reduction (a "Debt Service Reduction")
of the amount of the monthly payment on the related Mortgage
Loan. Notwithstanding the foregoing, no such occurrence shall be
considered a Debt Service Reduction or Deficient Valuation so
long as the Master Servicer is pursuing any other remedies that
may be available with respect to the related Mortgage Loan and
(i) such Mortgage Loan is not in default with respect to payment
due thereunder or (ii) scheduled monthly payments of principal
and interest are being advanced by the Master Servicer without
giving effect to any Debt Service Reduction.

USE OF PROCEEDS

The Sponsor will apply the net proceeds of the sale of the
Offered Certificates [(together with the net proceeds of the sale
of the Class B-1 and Class B-2 Certificates)] against the
purchase price of the Mortgage Loans.

FEDERAL INCOME TAX CONSEQUENCES

[An election will be made to treat the Pool as a "real estate
mortgage investment conduit" ("REMIC") for federal income tax
purposes under the Internal Revenue Code of 1986, as amended (the
"Code"). The Offered Certificates will be designated as "regular
interests" in the REMIC and the Residual Certificate will be
designated as the sole class of residual interests in the REMIC.
See "Certain Federal Income Tax Consequences REMIC
Certificates" in the Prospectus.

Offered Certificates. The Offered Certificates generally will
_____________________
be treated as debt instruments issued by the REMIC for federal
income tax purposes. Income on the Offered Certificates must be
reported under an accrual method of accounting.]

The Class X Certificates will, and the other Classes of
Offered Certificates may, depending on their respective issue
prices, be treated for federal income tax purposes as having been
issued with an amount of original issue discount equal to the
difference between its principal balance and its issue price.
See "Certain Federal Income Tax Consequences" in the Prospectus.
For purposes of determining the amount and the rate of accrual of
original issue discount and market discount, the Sponsor intends
to assume that there will be prepayments on the Mortgage Loans at
a rate equal to [ ]% PSA.

[The Offered Certificates will be treated as regular interests
in a REMIC under section 860G of the Code. Accordingly, the
Offered Certificates will be treated as (i) assets described in
section 7701(a)(19)(C) of the Code, and (ii) "real estate assets"
within the meaning of section 856(c)(5) of the Code, in each case
to the extent described in the Prospectus. Interest on the
Offered Certificates will be treated as interest on obligations
secured by mortgages on real property within the meaning of
section 856(c)(3)(B) of the Code to the same extent that the
Offered Certificates are treated as real estate assets. See
"Certain Federal Income Tax Consequences" in the Prospectus.]

ERISA CONSIDERATIONS

A fiduciary of any employee benefit plan subject to the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or the Code, should carefully review with its legal
advisors whether the purchase or holding of an Offered
Certificate could give rise to a transaction prohibited or not
otherwise permissible under ERISA or the Code. No Class M-1
Certificate may be transferred unless the transferor delivers to
the Trustee (i) a certificate satisfactory to the Trustee to the
effect that such transferee neither is nor is acting on behalf of
a plan subject to ERISA or (ii) an opinion of counsel
satisfactory to the Trustee to the effect that such transfer will
not result in the assets of the Pool being "plan assets." See
"ERISA Considerations" in the Prospectus.

[The U.S. Department of Labor has granted to [ ], an
administrative exemption (Prohibited Transaction Exemption [ ];
Exemption Application No. [ ]) (the "Exemption") from certain of
the prohibited transaction rules of ERISA and the related excise
tax provisions of Section 4975 of the Code with respect to the
initial purchase, the holding and the subsequent resale by Plans
of certificates in pass-through trusts that consist of certain
receivables, loans and other obligations that meet the conditions
and requirements of the Exemption. The Exemption applies to
mortgage loans such as the Mortgage Loans in the Pool.

For a general description of the Exemption and the conditions
that must be satisfied for the Exemption to apply, see "ERISA
Considerations" in the Prospectus.

The Underwriter believes that the Exemption will apply to the
acquisition and holding of the Class A-1 Certificates and the
Class X Certificates by Plans and that all conditions of the
Exemption other than those within the control of the investors
will be met. In addition, as of the date hereof, there is no
single Mortgagor that is the obligor on 5% of the Mortgage Loans
included in the Pool by aggregate unamortized principal balance
of the assets of the Pool.

Prospective Plan investors should consult with their legal
advisors concerning the impact of ERISA and the Code, the
applicability of PTCE 83-1 described in the Prospectus and the
Exemption, and the potential consequences in their specific
circumstances, prior to making an investment in the Class A-1
Certificates or the Class X Certificates. Moreover, each Plan
fiduciary should determine whether under the general fiduciary
standards of investment prudence and diversification, an
investment in the Class A-1 Certificates or the Class X
Certificates is appropriate for the Plan, taking into account the
overall investment policy of the Plan and the composition of the
Plan's investment portfolio.

METHOD OF DISTRIBUTION

Subject to the terms and conditions set forth in the
Underwriting Agreement between the Sponsor and [ ], (the
"Underwriter"), the Sponsor has agreed to sell to the
Underwriter, and the Underwriter has agreed to purchase from the
Sponsor, the Offered Certificates. Distribution of the Offered
Certificates will be made by the Underwriter from time to time in
negotiated transactions or otherwise at varying prices to be
determined at the time of sale. In connection with the sale of
the Offered Certificates, the Underwriter may be deemed to have
received compensation from the Sponsor in the form of
underwriting discounts.

The Sponsor has been advised by the Underwriter that it
intends to make a market in the Offered Certificates but has no
obligation to do so. There can be no assurance that a secondary
market for the Offered Certificates will develop or, if it does
develop, that it will continue.

The Sponsor has agreed to indemnify the Underwriter against,
or make contributions to the Underwriter with respect to, certain
liabilities, including liabilities under the Securities Act of
1933, as amended.

LEGAL MATTERS

The validity of the Certificates will be passed upon for the
Sponsor by Tobin & Tobin, a professional corporation, San
Francisco, California. Certain federal income tax consequences
with respect to the Certificates will be passed upon for the
Sponsor by Brown & Wood LLP, New York, New York. Brown & Wood
LLP, New York, New York will act as counsel for the Underwriter.

CERTIFICATE RATING

It is a condition to the issuance of the Offered Certificates
that the Offered Certificates be rated [Aaa] and [AAA] by [ ] and
[ ].

Ratings on mortgage pass-through certificates address the
likelihood of receipt by Certificateholders of payments required
under the Pooling Agreement.

[ ]'s and [ ]'s ratings take into consideration the credit
quality of the Mortgage Pool including any credit support
providers, structural and legal aspects associated with the
Offered Certificates, and the extent to which the payment stream
of the Mortgage Pool is adequate to make payments required under
the Offered Certificates. [ ]'s and [ ]'s ratings on the Offered
Certificates do not, however, constitute a statement regarding
frequency of prepayments on the Mortgage Loans or address the
remote possibility that, in the event of the insolvency of the
Seller or the Sponsor, the sale of the Offered Certificates may
be recharacterized as a financing and that, as a result of such
recharacterization, the Senior Certificates may be accelerated.
The ratings also do not address the possibility that, as a result
of principal prepayments, holders of the Certificates may receive
a lower than anticipated yield and that in extreme cases, holders
of stripped pass-through certificates, such as the Class X
Certificates, may fail to recoup their initial investments.

The Sponsor has not requested a rating of any Class of
Offered Certificates by any rating agency other than [ ] and [ ].
However, there can be no assurance as to whether any other rating
agency will rate the Offered Certificates, or if it does, what
rating would be assigned by such other rating agency. The rating
assigned by any such other rating agency to a Class of Offered
Certificates may be lower than the ratings assigned by [ ] and [
].

The rating of the Offered Certificates should be evaluated
independently from similar ratings on other types of securities.
A security rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any
time by the assigning rating agency.

INDEX TO DEFINED TERMS
______________________
Page
____
Adjustment Date . . . . . . . . . . . . . . . . . . . . . S-9
Advance . . . . . . . . . . . . . . . . . . . . . . . . . S-17
Assumptions . . . . . . . . . . . . . . . . . . . . . . . S-25
Available Funds . . . . . . . . . . . . . . . . . . . . . S-20
Bankruptcy Loss Coverage Amount . . . . . . . . . . . . . S-29
Bankruptcy Losses . . . . . . . . . . . . . . . . . . . . S-22
Beneficial Owner . . . . . . . . . . . . . . . . . . . . S-18
Book-Entry Certificates . . . . . . . . . . . . . . . . . S-8,S-17
CEDE . . . . . . . . . . . . . . . . . . . . . . . . . . S-18
Certificate Account . . . . . . . . . . . . . . . . . . . S-19
Certificateholder . . . . . . . . . . . . . . . . . . . . S-18
Certificates . . . . . . . . . . . . . . . . . Cover,S-1,S-17
Class A-1 Certificates . . . . . . . . . . . . . . . . . S-17
Class A-1 Percentage . . . . . . . . . . . . . . . . . . S-21
Class A-1 Prepayment Percentage . . . . . . . . . . . . . S-21
Class B-1 Certificates . . . . . . . . . . . . . . . . . S-17
Class B-2 Certificates . . . . . . . . . . . . . . . . . S-17
Class Certificate Balance . . . . . . . . . . . . . . . . S-22
Class M-1 Certificates . . . . . . . . . . . . . . . . . S-17
Class X Certificates . . . . . . . . . . . . . . . . . . S-17
Clearing Agency . . . . . . . . . . . . . . . . . . . . . S-18
Clearing Corporation . . . . . . . . . . . . . . . . . . S-18
Code . . . . . . . . . . . . . . . . . . . . . . . . . . S-6,S-30
Cut-off Date Pool Principal Balance . . . . . . . . . . . S-2,S-8
Debt Service Reduction . . . . . . . . . . . . . . . . . S-30
Deficient Valuation . . . . . . . . . . . . . . . . . . . S-29
Definitive Certificate . . . . . . . . . . . . . . . . . S-18
Depository . . . . . . . . . . . . . . . . . . . . . . . S-17
Detailed Description . . . . . . . . . . . . . . . . . . S-8
Distribution Account . . . . . . . . . . . . . . . . . . S-19
Distribution Date . . . . . . . . . . . . . . . . . . . . Cover
Due Date . . . . . . . . . . . . . . . . . . . . . . . . S-9,S-21
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . S-6,S-30
Excess Losses . . . . . . . . . . . . . . . . . . . . . . S-22
Exemption . . . . . . . . . . . . . . . . . . . . . . . . S-30
Expense Rate . . . . . . . . . . . . . . . . . . . . . . S-5
FHLMC . . . . . . . . . . . . . . . . . . . . . . . . . . S-9
Financial Intermediary . . . . . . . . . . . . . . . . . S-18
FNMA . . . . . . . . . . . . . . . . . . . . . . . . . . S-9
Fraud Loss Coverage Amount . . . . . . . . . . . . . . . S-29
Fraud Losses . . . . . . . . . . . . . . . . . . . . . . S-22
GNMA . . . . . . . . . . . . . . . . . . . . . . . . . . S-13
Gross Margin . . . . . . . . . . . . . . . . . . . . . . S-9
Headlands . . . . . . . . . . . . . . . . . . . . . . . . S-12
Index . . . . . . . . . . . . . . . . . . . . . . . . . . S-9
LIBOR . . . . . . . . . . . . . . . . . . . . . . . . . . S-9
Liquidated Mortgage Loan . . . . . . . . . . . . . . . . S-22
Loan-to-Value Ratio . . . . . . . . . . . . . . . . . . . S-10
Master Servicer . . . . . . . . . . . . . . . . . . . . . Cover,S-1
Master Servicing Fee . . . . . . . . . . . . . . . . . . S-16
Maximum Rate . . . . . . . . . . . . . . . . . . . . . . S-9
Minimum Rate . . . . . . . . . . . . . . . . . . . . . . S-9
Mortgage . . . . . . . . . . . . . . . . . . . . . . . . S-12
Mortgage File . . . . . . . . . . . . . . . . . . . . . . S-12
Mortgage Loans . . . . . . . . . . . . . . . . . . . . . Cover,S-1
Mortgage Note . . . . . . . . . . . . . . . . . . . . . . S-12
Mortgaged Properties . . . . . . . . . . . . . . . . . . Cover
Net Interest Shortfalls . . . . . . . . . . . . . . . . . S-20
Net Prepayment Interest Shortfall . . . . . . . . . . . . S-20
Offered Certificates . . . . . . . . . . . . . . . . . . Cover,S-17
Original Subordinate Principal Balance . . . . . . . . . S-22
Pass-Through Rate . . . . . . . . . . . . . . . . . . . . S-2
Pool . . . . . . . . . . . . . . . . . . . . . . . . . . Cover
Pooling Agreement . . . . . . . . . . . . . . . . . . Cover,S-2,S-17
Pool Principal Balance . . . . . . . . . . . . . . . . . S-2,S-21
Prepayment Interest Shortfall . . . . . . . . . . . . . . S-20
Principal Balance . . . . . . . . . . . . . . . . . . . . S-21
Principal Prepayments . . . . . . . . . . . . . . . . . . S-3,S-21
Prospectus . . . . . . . . . . . . . . . . . . . . . . . i
PSA . . . . . . . . . . . . . . . . . . . . . . . . . . . S-26
Realized Loss . . . . . . . . . . . . . . . . . . . . . . S-22
Record Date . . . . . . . . . . . . . . . . . . . . . . . S-19
Relief Act Reduction . . . . . . . . . . . . . . . . . . S-20
REMIC . . . . . . . . . . . . . . . . . . . . . . . . . . i,S-5,S-30
REO Property . . . . . . . . . . . . . . . . . . . . . . S-17
Residual Certificates . . . . . . . . . . . . . . . . . . S-17
Seller . . . . . . . . . . . . . . . . . . . . . . . . . Cover,S-1
Senior Certificates . . . . . . . . . . . . . . . . . . . S-17
Servicing Fee . . . . . . . . . . . . . . . . . . . . . . S-16
SMMEA . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Special Hazard Losses . . . . . . . . . . . . . . . . . . S-22
Special Hazard Loss Coverage Amount . . . . . . . . . . . S-29
Special Hazard Mortgage Loan . . . . . . . . . . . . . . S-22
Sponsor . . . . . . . . . . . . . . . . . . . . . . . . .
Cover,i,S-1
Subordinate Certificates . . . . . . . . . . . . . . . . S-17
Subordinate Percentage . . . . . . . . . . . . . . . . . S-21
Subordinate Percentage Allocation . . . . . . . . . . . . S-21
Subordinate Prepayment Percentage . . . . . . . . . . . . S-22
Subordinate Prepayment Percentage Allocation . . . . . . S-22
Super Jumbos . . . . . . . . . . . . . . . . . . . . . . S-13
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . Cover,S-1
Underwriter . . . . . . . . . . . . . . . . . . . . . . . S-31
Underwriting Standards . . . . . . . . . . . . . . . . . S-13
Unpaid Interest Amounts . . . . . . . . . . . . . . . . . S-20
Unpaid Interest Shortfall . . . . . . . . . . . . . . . . S-2

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

SUBJECT TO COMPLETION DATED FEBRUARY 10, 1998
PROSPECTUS

HEADLANDS MORTGAGE SECURITIES INC. (Sponsor)
Mortgage Pass-Through Certificates (Issuable In Series)

THESE CERTIFICATES DO NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
HEADLANDS MORTGAGE SECURITIES INC. OR ANY OF ITS AFFILIATES, EXCEPT AS SET
FORTH BELOW. THESE CERTIFICATES ARE NOT INSURED OR GUARANTEED BY ANY AGENCY
OR INSTRUMENTALITY OF THE UNITED STATES.

Each Series of Certificates to be offered from time to time hereby and
by Supplements hereto will evidence the entire ownership interest of a
trust fund (the "Trust"), the assets of which will consist primarily of
Mortgage Loans and/or Mortgage Certificates (collectively, "Mortgage
Assets"), as further described herein. The Prospectus Supplement relating
to a particular Series of Certificates (the "Supplement") will describe any
forms of credit support (such as a pool policy, letter of credit, guaranty,
surety bond, insurance contract or reserve fund) which may be applicable to
a Series of Certificates and/or to the assets included in the related
Trust.

Distributions of principal of and interest on each Series of
Certificates will be made (to the extent of available funds) on each
Distribution Date and allocated to the classes of such Series at the Pass-
Through Rates, in the amounts and in the order specified in the related
Supplement. Each Series will consist of one or more classes of
Certificates. Each class of Certificates of a Series will evidence
beneficial ownership of a specified percentage (which may be 0%) or portion
of future interest payments and a specified percentage (which may be 0%) or
portion of future principal payments on the Mortgage Assets in the related
Trust. A Series of Certificates may include one or more classes that are
senior in right of payment to one or more other classes of Certificates of
such Series. One or more classes of Certificates of a Series may be
entitled to receive distributions of principal, interest or any combination
thereof prior to one or more other classes of Certificates of such Series
or after the occurrence of specified events, in each case as specified in
the related Supplement. Distributions will be made pro rata among the
Certificates of each class then entitled to receive such distributions.

Mortgage Loans may be fixed- or adjustable-rate first mortgage loans
secured primarily by one- to four-family residences or shares in
cooperative corporations and the related proprietary leases, purchased by
the Sponsor from certain seller or sellers specified in the related
Supplement (each, a "Seller"). The credit support (if any) for Mortgage
Loans will be subject to the terms and conditions (including any
limitations in amount) described in the related Supplement. Mortgage
Certificates will be either (a) GNMA Certificates guaranteed as to full and
timely payment of principal and interest by the Government National
Mortgage Association ("GNMA"), (b) FHLMC Certificates guaranteed as to
timely payment of interest and ultimate collection (and, if so specified in
the related Supplement, timely payment) of principal by the Federal Home
Loan Mortgage Corporation ("FHLMC"), or (c) FNMA Certificates guaranteed as
to timely payment of principal and interest by the Federal National
Mortgage Association ("FNMA"). GNMA Certificates will be backed by the full
faith and credit of the United States. FNMA Certificates and FHLMC
Certificates will not be backed, directly or indirectly, by the full faith
and credit of the United States. The only obligations of the Sponsor and
the Seller with respect to a Series of Certificates will be pursuant to
their respective representations and warranties in connection with such
Series. The principal obligations of the Master Servicer named in the
related Supplement will be limited to its contractual servicing obligations
and to obligations pursuant to certain representations and warranties.

An election may be made to treat a Trust as a real estate mortgage
investment conduit (a "REMIC"). See "Certain Federal Income Tax
Consequences".

FOR A DISCUSSION OF CERTAIN RISKS ASSOCIATED WITH AN INVESTMENT IN THE
CERTIFICATES, SEE THE INFORMATION UNDER "RISK FACTORS" COMMENCING
ON PAGE 14 AND IN THE PROSPECTUS SUPPLEMENT COMMENCING
ON PAGE S-7.
____________________________________________________

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

Prior to issuance there will have been no market for the Certificates
of any Series, and there can be no assurance that a secondary market for
any Certificates will develop or, if it does develop, that it will
continue. This Prospectus may not be used to consummate sales of a Series
of Certificates unless accompanied by a Supplement.

Offers of the Certificates may be made through one or more different
methods, as more fully described under "Plans of Distribution" herein and
"Method of Distribution" in the related Supplement.

This Prospectus may not be used to consummate sales of Certificates
unless accompanied by a Supplement.

__________ ___, 1998

PROSPECTUS SUPPLEMENT

The Supplement relating to a Series of Certificates to be offered hereunder
and thereunder will, among other things, set forth with respect to such
Series: (i) a description of the class or classes of Certificates to be
offered; (ii) the initial aggregate Certificate Balance of each class of
Certificates included in such Series and offered by such Supplement; (iii)
the Pass-Through Rate (or the method of determining such Pass-Through Rate)
of each class of such Certificates; (iv) the Last Scheduled Distribution
Date of each class of such Certificates, if applicable; (v) the method to
be used to calculate the amount to be distributed as principal on each
Distribution Date; (vi) the application of distributions of principal and
interest to the classes of such Certificates and the allocation of the
amounts to be so applied; (vii) whether an election will be made to treat
the Trust as a REMIC; (viii) certain information concerning the Mortgage
Assets and any other assets included in the Trust for such Series
(including, in the case of Mortgage Loans: (a) the number of Mortgage
Loans; (b) the geographic distribution of the Mortgage Loans; (c) the
aggregate principal balance of the Mortgage Loans; (d) the types of
dwelling constituting the Mortgaged Properties; (e) the longest and
shortest scheduled terms to maturity of the Mortgage Loans; (f) the maximum
principal balance of the Mortgage Loans; (g) the maximum LTV of the
Mortgage Loans at origination; (h) the maximum and minimum Mortgage Rates
borne by the Mortgage Loans; and (i) the aggregate principal balance of
non-owner-occupied properties); (ix) the extent, nature and terms of any
credit support applicable to such Series; (x) the method of distribution of
the Certificates; and (xi) other specific terms of the offering.

ADDITIONAL INFORMATION

The Sponsor has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Certificates. This
Prospectus, which forms a part of the Registration Statement, and the
Supplement relating to each Series of Certificates contain information set
forth in the Registration Statement pursuant to the Rules and Regulations
of the Commission. For further information, reference is made to such
Registration Statement and the exhibits thereto, which may be inspected and
copied at the facilities maintained by the Commission at its Public
Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
its Regional Offices located as follows: Chicago Regional Office, 500 West
Madison Street, Chicago, Illinois 60661; and New York Regional Office,
Seven World Trade Center, New York, New York 10048.

The Commission maintains a Web site at http://www.sec.gov. that contains
reports, proxy and information statements and other information regarding
registrants including the Sponsor, that file electronically with the
Commission.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

All documents filed by or on behalf of the Trust referred to in the
accompanying Supplement with the Commission pursuant to Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), on or after the date of such Supplement and prior to the
termination of any offering of the Certificates issued by such Trust shall
be deemed to be incorporated by reference in this Prospectus and to be a
part of this Prospectus from the date of the filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for all
purposes of this Prospectus to the extent that a statement contained herein
(or in the accompanying Supplement) or in any other subsequently filed
document which also is or is deemed to be incorporated by reference
modifies or replaces such statement. Any such statement so modified or
superseded shall not be deemed, except as modified or superseded, to
constitute a part of this Prospectus. Neither the Sponsor nor the Master
Servicer for any Series intends to file with the Commission periodic
reports with respect to the related Trust following completion of the
reporting period required by Rule 15d-1 or Regulation 15D under the
Exchange Act.

The Trust will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of such person, a
copy of any or all of the documents referred to above that have been or may
be incorporated by reference in this Prospectus (not including exhibits to
the information that is incorporated by reference unless such exhibits are
specifically incorporated by reference into the information that this
Prospectus incorporates). Such requests should be directed to the Corporate
Trust Office of the Trustee specified in the accompanying Supplement.

UNTIL 90 DAYS AFTER THE DATE OF EACH SUPPLEMENT, ALL DEALERS EFFECTING
TRANSACTIONS IN THE REGISTERED SECURITIES COVERED BY SUCH SUPPLEMENT,
WHETHER OR NOT PARTICIPATING IN THE DISTRIBUTION THEREOF, MAY BE REQUIRED
TO DELIVER SUCH SUPPLEMENT AND THIS PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A SUPPLEMENT AND PROSPECTUS WHEN ACTING AS
UNDERWRITERS OF THE SERIES OF CERTIFICATES COVERED BY SUCH SUPPLEMENT AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
NO PERSON HAS BEEN AUTHORIZED TO GIVE INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND ANY
SUPPLEMENT WITH RESPECT HERETO AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON. THIS PROSPECTUS AND ANY SUPPLEMENT
WITH RESPECT HERETO DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES OTHER THAN THE CERTIFICATES OFFERED HEREBY
AND THEREBY OR AN OFFER OF THE CERTIFICATES TO ANY PERSON IN ANY STATE OR
OTHER JURISDICTION IN WHICH SUCH OFFER WOULD BE UNLAWFUL. THE DELIVERY OF
THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

SUMMARY OF THE PROSPECTUS

The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and by
reference to information with respect to each Series of Certificates
contained in the Supplement to be prepared and delivered in connection with
the offering of the Certificates of such Series.

Title of Security Mortgage Pass-Through Certificates (the
"Certificates"), Each Series will be
agreement (each a "Pooling Agreement").
Sponsor.......................... Headlands Mortgage Securities Inc., a
Delaware corporation (the "Sponsor").
Seller........................... The seller or sellers (each, a "Seller")
for a particular Series will be named in
the Supplement relating to such
Series (the "Supplement"). A Seller may
be an affiliate of the Sponsor.
Trustee ......................... The trustee (the "Trustee") for a
particular Series will be named in the
related Supplement.
Master Servicer ................. The entity or entities named as Master
Servicer (the "Master Servicer") in the
related Supplement, which may be an
affiliate of the Sponsor. See "The
Pooling and Servicing Agreement --
Certain Matters Regarding the Sponsor,
the Seller and the Master Servicer."
Closing Date .................... The date (the "Closing Date") of the
initial issuance of a Series, as
specified in the related Supplement.
The Trusts....................... Each Trust will consist of Mortgage
Loans and/or Mortgage "Mortgage
Assets"), any real estate acquired
through foreclosure or similar support,
the assets in the Certificate
Account, any minimum prepayment,
reinvestment or similar agreement
and any other assets described in the
related Supplement, all as described
herein and therein.
A. Mortgage Loans................ The mortgage loans included in a Trust
(the "Mortgage Loans") will be secured
primarily by liens on residential
properties or shares in cooperative
corporations ("Cooperatives") and the
related proprietary leases. If so
specified in the related Supplement,
the Mortgage Assets of the related
Trust may include mortgage
participation certificates or other
beneficial interests evidencing
interests in mortgage loans. Such
mortgage loans may be conventional
loans (i.e., loans that are not
insured by any governmental agency) or
may be insured or guaranteed by the
Federal Housing Authority ("FHA"), or
the Veterans Administration ("VA"), as
specified in the related Supplement.
All Mortgage Loans will have been
purchased by the Sponsor, either
directly or through an affiliate, from
one or more Sellers.

The payment terms of the Mortgage Loans
to be included in a Trust will be
described in the related Supplement and
may include any of the following
features or combinations the related
Supplement: (a) Interest may be payble
at a fixed rate, rate to an index
(which will be specified in the related
Supplement), a or under certain
circumstances and is followed by an
adjustable rate, a rate that otherwise
varies from time to time, or a rate
that is convertible from an adjustable
rate to a fixed rate. Changes to an
adjustable rate may be subject to
periodic limitations, maximum rates,
minimum rates or a interest may be
deferred and added to the principal of a
loan for such periods and under such
circumstances as may be specified in
the related Supplement. The loan
agreement or respect of a Mortgage
Loan may provide for the payment
of interest at a rate lower than the
interest rate (the "Mortgage Rate")
specified in such Mortgage Note for a
period of time or of any difference may
be contributed from funds supplied by a
third party.
(b) Principal may be payable on a level
debt service its term, may be calculated
on the basis of an assumed
amortization schedule that is longer
than the interest rate on the
Mortgage Loan or may not be original
term. Payment of all or a substantial
portion of the
principal may be due on umaturity
("balloon payments"). Principal may
include interest that has been
deferred and added to the principal
balance of the Mortgage Loan.
(c) Monthly payments of principal and
interest may be fixed for the life of
the Mortgage Loan, may increase
over a specified period of time or may
change from period to period. Mortgage
Loans may include limits on periodic
increases or decreases in the amount of
monthly payments and may include
maximum or minimum amounts of monthly
payments.
(d) The Mortgage Loans generally may be
prepaid at any time without payment of
any prepayment so specified in the
related Supplement, prepayments of
principal may be prohibited for the
life of any such Mortgage Loan or
for certain periods ("lockout
periods"), which may be fixed for the
life of any such Mortgage Loan or may
decline permit prepayments after
expiration of the applicable lockout
period and may in connection with any
such subsequent prepayment. The
Mortgage Loans permit the mortgagee to
demand payment of the entire Mortgage
Loan in connection with the sale or
certain transfers of the related
Mortgaged Property. Other Mortgage
Loans may be applicable underwriting
standards of the Seller.
(e) The real property constituting
security for repayment of a Mortgage
Loan may be located in any one of the
fifty Puerto Rico or any other
territory of the United States.
The Mortgage Loans may be covered by
standard hazard insurance policies
insuring against losses due to fire
and various other causes. The Mortgage
Loans may be covered by primary
mortgage insurance policies to the
extent provided in the related
Supplement.
B. Mortgage Certificates......... The Trust may include certain assets
(the "Mortgage Certificates") which
are limited to GNMA Certificates,
FNMA Certificates, FHLMC Certificates or
a combination thereof. Any GNMA
Certificates included be guaranteed
as to full and timely payment of
principal and interest by GNMA, which
guaranty is backed by the full faith
and credit of the United States.
Any FHLMC Certificates included in the
Trust will be guaranteed as to the
timely payment of interest and
ultimate collection (and, if so
specified in the related Supplement,
timely payment) of principal by FHLMC.
Any FNMA Certificates included in a
Trust will be guaranteed as to timely
payment of scheduled payments of
principal and interest by FNMA. No
FNMA or FHLMC Certificates will be
backed, directly or indirectly, by
the full faith and credit of
the United States.

Each Mortgage Certificate will evidence
an interest in a pool of mortgage
loans and/or cooperative loans, and/or
in principal distributions and interest
distributions thereon. The Supplement
for each Series will specify the
aggregate approximate principal balance
of GNMA, FNMA and FHLMC Certificates
included in a Trust and will describe
the principal characteristics of the
underlying mortgage loans or
cooperative loans and any insurance,
guaranty or other credit support
applicable to such underlying loans,
the Mortgage Certificates or both.
In addition, the related Supplement
will describe the terms upon which
distributions will be made to the
Trustee as the holder of the Mortgage
Certificates. The Mortgage
Certificates included in any Trust
will be registered in the name of
the Trustee or its nominee or in
the case of book-entry Mortgage
Certificates in the name of a
financial intermediary with a Federal
Reserve Bank or a clearing corporation
and will be held by the Trustee
only for the benefit of holders of the
related Series of Certificates.
C. Certificate Account .......... All distributions on any Mortgage
Certificates and all payments
(including prepayments, liquidation
proceeds and insurance proceeds)
received from the Master Servicer on
any Mortgage Loans included in the Trust
for a Series will be remitted to
an account (the "Certificate
Account"), and, together with any
amounts available pursuant to the
terms of any applicable credit support
and any other amounts described in the
related Supplement, will be available
for distribution on the Certificates
of such Series as described in the
related Supplement. Such Certificate
Account shall be an Eligible Account
or Accounts established and
maintained by the Master Servicer
for the benefit of holders of a
Series of Certificates.
Description of Certificates ..... Each Certificate will represent a
beneficial ownership interest in a
Trust to be formed by the Sponsor
pursuant to a Pooling Agreement. Each
Series of Certificates may contain
one or more classes of
certificates (the "Senior
Certificates") which are senior in
right of distribution to one or more
classes of certificates (the
"Subordinate Certificates") and may
also contain one or more classes
of the types described herein under
"Description of Certificates --
Categories of Classes of Certificates"
herein.
Distributions on the Certificates.. Distributions on the Certificates
entitled thereto will be made monthly,
quarterly, semi-annually or at such
other intervals and on the dates
specified in the related Supplement
(each, a "Distribution Date") out of the
payments received in respect of the
assets of the related Trust. The amount
allocable to payments of principal and
interest on any Distribution Date will
be determined as specified in the
related Supplement. Unless otherwise
specified in the related Supplement, all
distributions will be made pro rata to
Certificateholders of the class
entitled thereto. The aggregate original
balance of the Certificates (the
"Certificate Balance") will equal the
aggregate distributions allocable to
principal that such Certificates
will be entitled to receive.
A. Interest...................... Each class of Certificates of a Series
will accrue interest from the date and
at the fixed or adjustable rate set
forth (or determined as set forth)
in the related Supplement (the
"Pass-Through Rate"), except for
certain classes of Certificates that
are only entitled to distributions of
principal ("PO Certificates"). Accrued
interest will be distributed (to the
extent of funds available therefor), at
the times and in the manner specified
in such Supplement. Distributions of
interest on any class of Accrual
Certificates will commence at the time
specified in such Supplement; until
then, interest on the Accrual
Certificates will be added to the
Certificate Balance thereof.
B. Principal..................... Each class of Certificates of a Series
will receive distributions of principal
in the amounts, at the times
and in the manner specified in
the related Supplement until its
initial aggregate Certificate Balance
has been fully amortized, except for
certain classes of Certificates that
are only entitled to distributions of
interest ("1O Certificates").
Allocations of distributions of
principal will be made to the
Certificates of each class during
the periods and in the order specified
in the related Supplement.
Credit Enhancement .............. The assets in a Trust or the
Certificates of one or more classes in
the related Series may have the benefit
of one or more types of credit support
as described in the related Supplement.
The protection against losses afforded
by any such credit support may be
limited. The type, characteristics and
amount of credit enhancement will be
determined based on the characteristics
of the Mortgage Loans underlying or
comprising the Mortgage Assets and
other factors and will be established
on the basis of requirements of each
Rating Agency rating the Certificates
of such Series. See "Credit
Enhancement" herein.
A. Subordination ............... A Series of Certificates may consist of
one or more or more classes of
Subordinate Certificates. If so
specified in the related Supplement,
certain classes of Subordinate
Certificates may be senior to other
Classes of Subordinate Certificates and
be rated investment grade ("Mezzanine
Certificates"). The rights of holders
of the Subordinate Certificates of a
Series ("Subordinate Certificate-
holders") to receive distributions with
respect to the assets in the related
Trust will be subordinated to such
rights of holders of the Senior
Certificates of the same Series
("Senior Certificateholders") to the
extent described in the related
Supplement. This subordination is
intended to enhance the likelihood of
regular receipt by Senior
Certificateholders of the full amount
of their scheduled monthly payments of
principal and interest. The protection
afforded to Senior Certificateholders
of a Series by means of the
subordination feature will be
accomplished by (i) the preferential
right of such holders to receive,
prior to any distribution being made
in respect of the related Subordinate
Certificates, the amounts of principal
and interest due them on each
Distribution Date out of the funds
available for distribution on such date
and, to the extent described in the
related Supplement, by the right of
such holders to receive future
distributions on the assets in the
related Trust that would otherwise have
been payable to Subordinate
Certificateholders; (ii) reducing the
ownership interest of the related
Subordinate Certificates; (iii) a
combination of clauses (i) and (ii)
above; or (iv) as otherwise described
in the related Supplement. If so
specified in the related Supplement,
subordination may apply only in the
event of certain types of losses not
covered by other forms of credit
enhancement, such as hazard losses not
covered by standard hazard insurance
policies or losses due to the
bankruptcy or fraud of the mortgagor.
The related Supplement will set forth
information concerning, among other
things, the amount of subordination of
a class or classes of Subordinate
Certificates in a Series, the
circumstances in which such
subordination will be applicable and
the manner, if any, in which the
amount of subordination will decrease
over time.
B. Reserve Fund.................. One or more reserve funds (the "Reserve
Fund") may be established and
maintained for each Series. The related
Supplement will specify whether or not
any such Reserve Fund will be included
in the corpus of the Trust for such
Series and will also specify the manner
of funding the related Reserve Fund and
the conditions under which the amounts
in any such Reserve Fund will be used
to make distributions to holders of
Certificates of a particular class or
released from the related Trust.
C. Surety Bond ................. A surety bond or bonds may be obtained
and maintained for a Series or certain
classes thereof, which will, subject
to certain conditions and limitations,
guaranty payments of all or limited
amounts of principal and interest due
on the classes of such Series or
certain classes thereof.
D. Mortgage Pool Insurance Policy. A mortgage pool insurance policy or
policies (the "Mortgage Pool
Insurance Policy"), may be obtained and
maintained for a Series, which shall
be limited in scope, covering defaults
on the related Mortgage Loans in an
initial amount equal to a specified
percentage of the aggregate principal
balance of all Mortgage Loans included
in the Trust as of the first day of the
month of issuance of the related Series
or such other date as is specified in
the related Supplement (the "Cut-off
Date").
E. Fraud Waiver.................. If so specified in the related
Supplement, a letter may be obtained
from the issuer of a Mortgage Pool
Insurance Policy (the "Waiver Letter")
waiving its right to deny a claim or
rescind coverage under the related
Mortgage Pool Insurance Policy by
reason of fraud, dishonesty or
misrepresentation in connection with
the origination of, or application
for insurance for, the related
Mortgage Loan or the denial or
adjustment of coverage under any
related Primary Mortgage Insurance
Policy because of such fraud,
dishonesty or misrepresentation.
In such circumstances, the issuer of
the Mortgage Pool Insurance Policy
will be indemnified by the Seller for
the amount of any loss paid by the
issuer of the Mortgage Pool Insurance
Policy (each such amount, a "Fraud
Loss") under the terms of the Waiver
Letter. The maximum aggregate amount
of Fraud Losses covered under the
Waiver Letter and the period of time
during which such coverage will be
provided will be specified in the
related Supplement.
F. Special Hazard Insurance
Policy ....................... A special hazard insurance policy or
policies (the "Special Hazard
Insurance Policy") may be obtained
and maintained for a Series, covering
certain physical risks that are not
otherwise insured against by standard
hazard insurance policies. Each
Special Hazard Insurance Policy will
be limited in scope and will cover
losses pursuant to the provisions of
each such Special Hazard Insurance
Policy as described in the related
Supplement.
G. Bankruptcy Bond ............. A bankruptcy bond or bonds (the
"Bankruptcy Bond") may be obtained to
cover certain losses resulting from
action that may be taken by a
bankruptcy court in connection with a
Mortgage Loan. The level of coverage
and the limitations in scope of each
Bankruptcy Bond will be specified in
the related Supplement.
H. Cross Support ............... If specified in the related Supplement,
the beneficial ownership of separate
groups of assets included in a Trust
may be evidenced by separate classes of
the related Series of Certificates. In
such case, credit support may be
provided by a cross-support feature
which requires that distributions be
made with respect to Certificates
evidencing beneficial ownership of one
or more asset groups prior to
distributions to Subordinate
Certificates evidencing a beneficial
ownership interest in other asset
groups within the same Trust.
I. FHA Insurance and VA
Guaranty ..................... All or a portion of the Mortgage Loans
in a Trust may be insured by FHA
insurance ("FHA Insurance") and may be
partially guaranteed by the VA (a "VA
Guaranty").
J. Other Forms of Credit
Support ...................... Other forms of credit support to
provide coverage for certain risks of
default or various types of losses
(such as a letter of credit, limited
guaranty or insurance contract) may be
applicable to a Series of Certificates,
to the Mortgage Assets included in the
related Trust and/or to the mortgage
loans underlying such Mortgage
Certificates, as described in the
related Supplement.
Advances ....................... If so specified in the related
Supplement, the Master Servicer,
directly or through subservicers, will
be obligated or have the right at its
option to make certain advances (each
an "Advance") with respect to
delinquent payments on such Mortgage
Loans. Any such advances will be
reimbursable to the extent described
herein and in the related Supplement.
Optional Termination ........... The Master Servicer or, if specified in
the related Supplement for a Series of
REMIC Certificates, the holders of the
Residual Certificates of such Series
may have the option to repurchase the
Mortgage Assets included in the related
Trust and thereby effect early
retirement of a Series of Certificates.
Any such option will be exercisable at
the times and upon satisfaction of the
conditions specified in the related
Supplement.
Tax Status of REMIC
Certificates .................... Regular Certificates of a particular
Series will be treated as "regular
interests" in the REMIC and will be
treated as debt instruments for
federal income tax purposes, and the
Residual Certificates of such Series
will be treated as "residual interests"
in the REMIC. Holders of Residual
Certificates generally will include
their pro rata shares of the net income
or loss of the REMIC in determining
their federal taxable income. Holders
of Accrual Certificates and any other
classes of Regular Certificates issued
with original issue discount generally
will be required to include the
original issue discount (which for
federal income tax purposes includes
interest accrued on Accrual
Certificates as well as current
interest paid thereon) in gross
income over the life of the Regular
Certificates. Distributions on Regular
Certificates to foreign investors
generally will not be subject to U.S.
withholding tax, provided applicable
certification procedures are complied
with. Subject to certain limitations
that may be applicable to Buydown
Loans, REMIC Certificates will be
treated as "regular or residual
interests in a REMIC" for domestic
building and loan associations and
"real estate assets" for real estate
investment trusts. See "Certain
Federal Income Tax Consequences --
REMIC Certificates" herein.
Tax Status of Non-REMIC
Certificates .................... For federal income tax purposes, the
trust created to hold the Mortgage
Assets for each Series of Non-REMIC
Certificates will be classified as a
grantor trust and not as an
association taxable as a corporation.
Holders of Non-REMIC Certificates of
such Series which are not IO
Certificates will be treated as owners
of undivided interests in the trust and
as equitable owners of undivided
interests in each of the Mortgage
Assets held by the trust, and such
holders will be taxed on their pro
rata shares of the income from the
related Mortgage Assets and may be
allowed to deduct their pro rata shares
of reasonable servicing fees,
consistent with their methods of
accounting, subject to limitation in
the case of Non-REMIC Certificates
held by individuals, estates, or
trusts (either directly or indirectly
through certain pass-through entities).
If a Series of Non-REMIC Certificates
includes IO Certificates, holders of
the Certificates of such Series will
be subject to the "Stripped Bond
Rules" of Section 1286 of the Code.
Subject to certain limitations that may
be applicable to Buydown Loans, to the
extent the Mortgage Assets and the
related interests qualify for such
treatment, interests in the Mortgage
Assets held by holders of applicable
Non-REMIC Certificates which are not IO
Certificates will be considered to
represent "loans... secured by an
interest in real property" for
domestic building and loan
associations and "real estate assets"
for real estate investment trusts.
It is not clear whether IO Certificates
will be treated as representing an
ownership interest in qualifying
assets and income under Sections
7701(a)(19)(C)(v), 856(c)(5)(A) and
856(c)(3)(B) of the Code, although the
policy considerations underlying those
Sections suggest that such treatment
should be available. It is also not
clear whether a reasonable prepayment
assumption should be applied in
accruing original issue discount on
the IO Certificates.
See "Certain Federal Income Tax
Consequences -- Non-REMIC
Certificates" herein.
Legal Investment ............... The Supplement for each Series of
Certificates will specify which, if
any, of the classes of Certificates
offered thereby will constitute
"mortgage-related securities" for
purposes of the Secondary Mortgage
Market Enhancement Act of 1984
("SMMEA"). Classes of Certificates
that qualify as "mortgage related
securities" will be legal investments
for certain types of institutional
investors to the extent provided in
SMMEA, subject, in any case, to any
other regulations that may govern
investments by such institutional
investors. Institutions whose
investment activities are subject to
review by federal or state
authorities should consult with their
counsel or the applicable authorities
to determine whether an investment in
a particular class of Certificates
(whether or not such class constitutes
a "mortgage related security") complies
with applicable guidelines, policy
statements or restrictions.
ERISA Considerations ............ A fiduciary of any employee benefit
plan or other retirement plan or
arrangement subject to the Employee
Retirement Income Security Act of 1974,
as amended ("ERISA") or the Code should
carefully review with its legal
advisors whether the purchase or
holding of Certificates could give rise
to a transaction prohibited or not
otherwise permissible under ERISA or
the Code. See "ERISA Considerations"
herein. Certain classes of Certificates
may not be transferred unless the
Trustee and the Sponsor are furnished
with a letter of representation or an
opinion of counsel to the effect that
such transfer will not result in
violation of the prohibited transaction
provisions of ERISA and the Code and
will not subject the Trustee, the
Sponsor or the Master Servicer to
additional obligations. See "ERISA
Considerations" herein.
Rating ......................... The Certificates of each class offered
hereby and by a Supplement will be
rated in one of the four highest
rating categories by one or more
nationally recognized statistical
rating organizations, as specified in
such Supplement (with respect to each
Series of Certificates, the "Rating
Agency"). A security rating is not a
recommendation to buy, sell or hold the
Certificates of any Series and is
subject to revision or withdrawal at
any time by the Rating Agency. Further,
such ratings do not address the effect
of prepayments on the yield
anticipated by an investor. See
"Rating" herein.

RISK FACTORS

Investors should consider the following factors in connection with the
purchase of Certificates.

NATURE OF MORTGAGES

PROPERTY VALUES. There are several factors that could adversely affect the
value of Mortgaged Properties such that the outstanding balance of the
related Mortgage Loan would equal or exceed the value of the Mortgaged
Properties. Among the factors that could adversely affect the value of the
Mortgaged Properties are an overall decline in the residential real estate
market in the areas in which the Mortgaged Properties are located or a
decline in the general condition of the Mortgaged Properties as a result of
failure of borrowers to maintain adequately the Mortgaged Properties or of
natural disasters that are not necessarily covered by insurance, such as
earthquakes and floods. Although Mortgaged Properties located in certain
identified flood zones will be required to be covered, to the maximum
extent available, by flood insurance, as discussed under "The Pooling and
Servicing Agreement -- Hazard Insurance", no Mortgaged Property will
otherwise be required to be insured against earthquake damage or any other
loss not covered by a standard hazard insurance policy, as described under
"The Pooling and Servicing Agreement -- Hazard Insurance." If such a
decline or natural disaster occurs, the actual rates of delinquencies,
foreclosures and losses on all Mortgage Loans could be higher than those
currently experienced in the mortgage lending industry in general. Losses
on such Mortgage Loans will be borne by the holders of one or more classes
of Certificates of the related Series.

DELAYS DUE TO LIQUIDATION. Even assuming that the Mortgaged Properties
provide adequate security for the Mortgage Loans, substantial delays could
be encountered in connection with the liquidation of defaulted Mortgage
Loans and corresponding delays in the receipt of related proceeds by
Certificateholders could occur. An action to foreclose on a Mortgaged
Property securing a Mortgage Loan is regulated by state statutes and rules
and is subject to many of the delays and expenses of other lawsuits if
defenses or counterclaims are interposed, sometimes requiring several years
to complete. Furthermore, in some states an action to obtain a deficiency
judgment is not permitted following a nonjudicial sale of a Mortgaged
Property. See "Certain Legal Aspects of the Mortgage Loans" herein. In the
event of a default by a borrower, these restrictions, among other things,
may impede the ability of the Master Servicer to foreclose on or sell the
Mortgaged Property or to obtain liquidation proceeds sufficient to repay
all amounts due on the related Mortgage Loan. In addition, the Master
Servicer will be entitled to deduct from related liquidation proceeds all
expenses reasonably incurred in attempting to recover amounts due on
defaulted Mortgage Loans and not yet repaid, including legal fees and costs
of legal action, real estate taxes and maintenance and preservation
expenses.

DISPROPORTIONATE EFFECT OF LIQUIDATION EXPENSES. Liquidation expenses with
respect to defaulted Mortgage Loans do not vary directly with the
outstanding principal balance of the Mortgage Loan at the time of default.
Therefore, assuming that the Master Servicer took the same steps in
realizing upon a defaulted Mortgage Loan having a small remaining principal
balance as it would in the case of a defaulted Mortgage Loan having a large
remaining principal balance, the amount realized after expenses of
liquidation would be smaller as a percentage of the outstanding principal
balance of the small Mortgage Loan than would be the case with the
defaulted Mortgage Loan having a large remaining principal balance.

LIMITATIONS, REDUCTION AND SUBSTITUTION OF CREDIT ENHANCEMENT

With respect to each Series of Certificates, credit enhancement may be
provided in limited amounts to cover certain types of losses on the
underlying Mortgage Loans. Credit enhancement will be provided in one or
more of the forms referred to herein, including, but not limited to:
subordination of other Classes of Certificates of the same Series; a
limited guarantee; a financial guaranty insurance policy; a surety bond; a
letter of credit; a mortgage pool insurance policy; a special hazard
insurance policy; a mortgagor bankruptcy bond; a reserve fund and any
combination thereof. See "Credit Enhancement" herein. Regardless of the
form of credit enhancement provided, the amount of coverage will be limited
in amount and in most cases will be subject to periodic reduction in
accordance with a schedule or formula. Furthermore, such credit
enhancements may provide only very limited coverage as to certain types of
losses, and may provide no coverage as to certain other types of losses.
All or a portion of the credit enhancement for any Series of Certificates
may be permitted to be reduced, terminated or substituted for, if each
applicable Rating Agency indicates that the then current rating thereof
will not be adversely affected. In the event losses exceed the amount of
coverage provided by any credit enhancement or losses of a type not covered
by any credit enhancement occur, such losses will be borne by the holders
of the related Certificates (or certain Classes thereof). The rating of any
Series of Certificates by any applicable Rating Agency may be lowered
following the initial issuance thereof as a result of the downgrading of
the obligations of any applicable credit support provider, or as a result
of losses on the related Mortgage Loans in excess of the levels
contemplated by such Rating Agency at the time of its initial rating
analysis. Neither the Sponsor, the Seller, the Master Servicer, the
Trustee, nor any of their affiliates will have any obligation to replace
or supplement any credit enhancement, or to take any other action to
maintain any rating of any Class of Certificates of a Series.

BANKRUPTCY AND INSOLVENCY RISKS

The Seller and the Sponsor will treat the transfer of the Mortgage Loans by
the Seller to the Sponsor as a sale for accounting purposes. The Sponsor
and the Trust will treat the transfer of Mortgage Loans from the Sponsor to
the Trust as a sale for accounting purposes. As a sale of the Mortgage
Loans by the Seller to the Sponsor, the Mortgage Loans would not be part of
the Seller's bankruptcy estate and would not be available to the Seller's
creditors. However, in the event of the insolvency of the Seller, it is
possible that the bankruptcy trustee or a creditor of the Seller may
attempt to recharacterize the sale of the Mortgage Loans as a borrowing by
the Seller, secured by a pledge of the Mortgage Loans. Similarly, as a sale
of the Mortgage Loans by the Sponsor to the Trust, the Mortgage Loans would
not be part of the Sponsor's bankruptcy estate and would not be available
to the Sponsor's creditors. However, in the event of the insolvency of the
Sponsor, it is possible that the bankruptcy trustee or a creditor of the
Sponsor may attempt to recharacterize the sale of the Mortgage Loans as a
borrowing by the Sponsor, secured by a pledge of the Mortgage Loans. In
either case, this position, if argued before or accepted by a court, could
prevent timely payments of amounts due on the Certificates and result in a
reduction of payments due on the Certificates.

In the event of a bankruptcy or insolvency of the Master Servicer, the
bankruptcy trustee or receiver may have the power to prevent the Trustee or
the Certificateholders from appointing a successor Master Servicer.

The time period during which cash collections may be commingled with the
Master Servicer's own funds prior to each deposit to the Certificate
Account will be specified in the related Supplement. In the event of the
insolvency of the Master Servicer and if such cash collections are
commingled with the Master Servicer's own funds for at least ten days, the
Trust will likely not have a perfected interest in such collections since
such collections would not have been deposited in a segregated account
within ten days after the collection thereof, and the inclusion thereof in
the bankruptcy estate of the Master Servicer may result in delays in
payment and failure to pay amounts due on the Certificates.

In addition, federal and state statutory provisions, including the federal
bankruptcy laws and state laws affording relief to debtors, may interfere
with or affect the ability of the secured mortgage lender to realize upon
its security. For example, in a proceeding under the Bankruptcy Reform Act
of 1978, as amended (the "Bankruptcy Code"), a lender may not foreclose on
a Mortgaged Property without the permission of the bankruptcy court. The
rehabilitation plan proposed by the debtor may provide, if the court
determines that the value of the Mortgaged Property is less than the
principal balance of the Mortgage Loan, for the reduction of the secured
indebtedness to the value of the Mortgaged Property as of the date of the
commencement of the bankruptcy, rendering the lender a general unsecured
creditor for the difference, and also may reduce the monthly payments due
under such Mortgage Loan, change the rate of interest and alter the
Mortgage Loan repayment schedule. The effect of any such proceedings under
the federal Bankruptcy Code, including but not limited to any automatic
stay, could result in delays in receiving payments on the Mortgage Loans
underlying the Certificates and possible reductions in the aggregate amount
of such payments.

CERTAIN OTHER LEGAL CONSIDERATIONS REGARDING THE MORTGAGE LOANS

Applicable federal and state laws regulate interest rates and other charges
and require certain disclosures. In addition, other laws, public policy and
general principles of equity relating to the protection of consumers,
unfair and deceptive practices and debt collection practices may apply to
the origination, servicing and collection of the Mortgage Loans. For
example, the federal district court for the eastern district of Virginia
recently announced a decision indicating that federal law prohibited
lenders from paying independent mortgage brokers a premium for loans with
above-market interest rates. Depending on the provisions of the applicable
law and the specific facts and circumstances involved, violations of these
laws, policies and principles may limit the ability to collect all or part
of the principal of or interest on the Mortgage Loans, may entitle the
borrower to a refund of amounts previously paid and, in addition, could
subject the owner of the Mortgage Loans to damages and administrative
enforcement.

THE TRUSTS*

GENERAL

The Trust for each Series will be held by the Trustee for the benefit of
the related Certificateholders. Each Trust will consist of certain
mortgage-related assets (the "Mortgage Assets") consisting of (A) a
mortgage pool (a "Mortgage Pool") comprised of Mortgage Loans or (B)
Mortgage Certificates, in each case as specified in the related Supplement,
together with payments in respect of such Mortgage Assets and certain other
accounts, obligations or agreements, in each case as specified in the
related Supplement.

The Certificates will be entitled to payment from the assets of the related
Trust or other assets pledged for the benefit of the holders of such
Certificates (the "Certificateholders") as specified in the related
Supplement and will not be entitled to payments in respect of the assets of
any other trust fund established by the Sponsor.

The Mortgage Assets for each Series may be acquired by the Sponsor, either
directly or through affiliates, from originators or sellers that may be
affiliates of the Sponsor (the "Seller") and conveyed by the Sponsor to the
related Trust. Mortgage Loans acquired by the Sponsor will have been
originated in accordance with the underwriting criteria specified below
under "Mortgage Loan Program -- Underwriting Standards" or as otherwise
described in the related Supplement.

The following is a brief description of the Mortgage Assets expected to be
included in the Trusts. A schedule of the Mortgage Assets relating to such
Series will be attached to the Pooling Agreement delivered to the Trustee
upon delivery of the Certificates.

THE MORTGAGE LOANS

The Mortgage Loans may be fixed- or adjustable-rate mortgage loans, or
participations or other beneficial interests in such mortgage loans,
evidenced by notes or other evidence of indebtedness (the "Mortgage Notes")
secured primarily by first liens on one- to four-family residential
properties in any one of the fifty states, the District of Columbia, Guam,
Puerto Rico or any other territory of the United States. The Mortgage Loans
may be conventional loans (i.e., loans that are not insured or guaranteed
by any governmental agency) or loans insured by the FHA or partially
guaranteed by the VA, as specified in the related Supplement.

If so specified in the related Supplement, the Mortgage Loans may include
cooperative apartment loans ("Cooperative Loans") secured by security
interests in shares issued by private, non-profit cooperative housing
corporations and in the related proprietary leases or occupancy agreements
granting exclusive rights to occupy specific dwelling units in such
buildings. A "Mortgage" is a mortgage, deed of trust or similar instrument
with respect to a Mortgaged Property. The "Mortgaged Properties" securing
the Mortgage Notes will be comprised of one- to four-family dwelling units
that are either detached or semi-detached townhouses, rowhouses, individual
condominium units, individual units in planned unit developments,
manufactured homes and certain other dwelling units. The Mortgaged
Properties may include leasehold interests in residential properties, the
title to which is held by third party lessors. The term of any such
leasehold interest will exceed the term of the related Mortgage Note by at
least five years. For a discussion of leasehold mortgages, see "Certain
Legal Aspects of the Mortgage

* Whenever the terms "Mortgage Pool" and "Certificates" are used in this
Prospectus, such terms will be deemed to apply, unless the context
indicates otherwise, to one specific Mortgage Pool and the
Certificates representing certain undivided interests, as described
below, in a single trust fund (the "Trust") consisting primarily of
the Mortgage Assets in such Mortgage Pool. Similarly, the term "Pass-
Through Rate" will refer to the Pass-Through Rate borne by the
Certificates of one specific Series and the term "Trust" will refer to
one specific Trust.

Loans -- General -- Leaseholds". The Mortgaged Properties may include
vacation and second homes and investment properties. An investment property
is a Mortgage Property owned in fee simple by the borrower and is rented by
the borrower to a third party. Each Mortgage Loan will be selected by the
Sponsor for inclusion in a Trust from among those purchased, either
directly or through affiliates. Originators, servicers or sellers may be
affiliated with the Sponsor. All transactions involving affiliates will be
conducted in a commercially reasonable manner at arm's length.

Unless otherwise specified in the related Supplement, all of the Mortgage
Loans in a Mortgage Pool will have monthly payments due on the first day of
each month. The payment terms of the Mortgage Loans to be included in a
Trust will be described in the related Supplement and may include any of
the following features or combinations thereof or other features described
in the related Supplement:

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

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

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

(d) The Mortgage Loans generally may be prepaid at any time without
the payment of any prepayment fee. If so specified in the related
Supplement, some prepayments of principal may be subject to a
prepayment fee, which may be fixed for the life of any such Mortgage
Loan or may decline over time, and may be prohibited for the life of
such Mortgage Loan or for certain periods ("lockout periods").
Certain Mortgage Loans may permit prepayments after expiration of
the applicable lockout period and may require the payment of a
prepayment fee in connection with any such subsequent prepayment.
Other Mortgage Loans may permit prepayments without payment of a fee
unless the prepayment occurs during specified time periods. The
Mortgage Loans may include "due-on-sale" clauses that permit the
mortgagee to demand payment of the entire Mortgage Loan in
connection with the sale or certain transfers of the related
Mortgaged Property. Other Mortgage Loans may be assumable by persons
meeting the then applicable underwriting standards of the Seller.

A Trust may contain certain Mortgage Loans ("Buydown Loans"), which include
provisions whereby a third party partially subsidizes the monthly payments
of the Mortgagor during the early years of the Mortgage Loan, the
difference to be made up from a fund (a "Buydown Fund") contributed by such
third party at the time of origination of the Mortgage Loan. A Buydown Fund
will be in an amount equal either to the discounted value or full aggregate
amount of future payment subsidies. The underlying assumption of buydown
plans is that the income of the Mortgagor will increase during the buydown
period as a result of normal increases in compensation and of inflation, so
that the Mortgagor will be able to meet the full mortgage payments at the
end of the buydown period. To the extent that this assumption as to
increased income is not fulfilled, the possibility of defaults on Buydown
Loans is increased. The related Supplement will contain information with
respect to any Buydown Loan concerning limitations on the interest rate
paid by the Mortgagor initially, on annual increases in the interest rate
and on the length of the buydown period.

Mortgage Loans with certain LTVs and/or certain principal balances may be
covered wholly or partially by primary mortgage guaranty insurance policies
(each, a "Primary Mortgage Insurance Policy"). The existence, extent and
duration of any such coverage will be described in the related Supplement.
The loan-to-value ratio ("LTV") of a Mortgage Loan at any given time is the
ratio, expressed as a percentage, of the then-outstanding principal balance
of the Mortgage Loan to the Appraised Value of the related Mortgaged
Property. If so specified in the related Supplement, the "Appraised Value"
is either (x) the lesser of (a) the appraised value determined in an
appraisal obtained by the originator at origination of such Mortgage Loan
and (b) the sales price for such property, except that, in the case of
Mortgage Loans the proceeds of which were used to refinance an existing
mortgage loan, the Appraised Value of the related Mortgaged Property is the
appraised value thereof determined in an appraisal obtained at the time of
refinancing or (y) the appraised value determined in an appraisal made at
the request of a Mortgagor subsequent to origination in order to eliminate
the Mortgagor's obligation to keep a Primary Mortgage Insurance Policy in
force.

Each Supplement for a Series will contain information, as of the Cut-off
Date and to the extent known to the Sponsor, with respect to the Mortgage
Loans contained in such Trust, including: (i) the number of Mortgage Loans,
(ii) the geographic distribution of the Mortgage Loans; (iii) the aggregate
outstanding principal balance and the average outstanding principal balance
of the Mortgage Loans as of the applicable Cut-off Date; (iv) the types of
dwelling constituting the Mortgaged Properties; (v) the original terms to
maturity of the Mortgage Loans; (vi) the largest principal balance and the
smallest principal balance of the Mortgage Loans; (vii) the maximum LTV of
the Mortgage Loans at origination; (viii) the maximum and minimum Mortgage
Rates; (ix) the aggregate principal balance of nonowner-occupied Mortgaged
Properties; (x) the earliest origination date and latest maturity date of
any of the Mortgage Loans; and (xi) the aggregate principal balance of
Mortgage Loans having LTVs at origination exceeding 80%.

No assurance can be given that values of the Mortgaged Properties have
remained or will remain at their levels on the dates of origination of the
related Mortgage Loans. If the residential real estate market should
experience an overall decline in property values such that the outstanding
principal balances of the Mortgage Loans, and any secondary financing on
the Mortgaged Properties, in a particular Mortgage Pool become equal to or
greater than the value of the Mortgaged Properties, the actual rates of
delinquencies, foreclosures and losses could be higher than those now
generally experienced in the mortgage lending industry. In addition,
adverse economic conditions (which may or may not affect real property
values) may affect the timely payment by Mortgagors of scheduled payments
of principal and interest on the Mortgage Loans and, accordingly, the
actual rates of delinquencies, foreclosures and losses with respect to any
Mortgage Pool. If losses on defaulted Mortgage Loans exceed the coverage of
any Primary Mortgage Insurance Policy or the amount of any credit support
arrangement described in the related Supplement, such losses will be borne
by holders of Certificates ("Certificateholders").

MORTGAGE CERTIFICATES

All of the Mortgage Certificates will be registered in the name of the
Trustee or its nominee or, in the case of Mortgage Certificates issued only
in book-entry form, a financial intermediary (which may be the Trustee)
that is a member of the Federal Reserve System or of a clearing corporation
on the books of which the security is held. Each Mortgage Certificate will
evidence an interest in a pool of mortgage loans and/or cooperative loans
and/or in principal distributions and interest distributions thereon.

The descriptions of GNMA, FHLMC and FNMA Certificates that are set forth
below are descriptions of certificates representing proportionate interests
in a pool of mortgage loans and in the payments of principal and interest
thereon. GNMA, FHLMC or FNMA may also issue mortgage-backed securities
representing a right to receive distributions of interest only or principal
only or disproportionate distributions of principal or interest or to
receive distributions of principal and/or interest prior or subsequent to
distributions on other certificates representing interests in the same pool
of mortgage loans. In addition, any of such issuers may issue certificates
representing interests in mortgage loans having characteristics that are
different from the types of mortgage loans described below. The terms of
any such certificates to be included in a Trust (and of the underlying
mortgage loans) will be described in the related Supplement, and the
descriptions that follow are subject to modification as appropriate to
reflect the terms of any such certificates that are actually included in a
Trust.

GNMA. GNMA is a wholly owned corporate instrumentality of the United States
within the Department of Housing and Urban Development ("HUD"). Section
306(g) of Title III of the National Housing Act of 1934, as amended (the
"Housing Act"), authorizes GNMA to guarantee the timely payment of the
principal of and interest on certificates that are based on and backed by a
pool of loans ("FHA Loans") insured or guaranteed by the United States
Federal Housing Administration (the "FHA") under the Housing Act or Title V
of the Housing Act of 1949, or by the United States Department of Veteran
Affairs (the "VA") under the Servicemen's Readjustment Act of 1944, as
amended, or Chapter 37 of Title 38, United States Code or by pools of other
eligible mortgage loans.

Section 306(g) of the Housing Act provides that "the full faith and credit
of the United States is pledged to the payment of all amounts which may be
required to be paid under any guaranty under this subsection". To meet its
obligations under its guaranties, GNMA is authorized, under Section 306(d)
of the Housing Act, to borrow from the United States Treasury with no
limitations as to amount.

GNMA CERTIFICATES. All of the GNMA Certificates (the "GNMA Certificates")
will be mortgage-backed certificates issued and serviced by GNMA- or FNMA-
approved mortgage servicers. The mortgage loans underlying GNMA
Certificates may consist of FHA Loans secured by mortgages on one- to four-
family residential properties or multifamily residential properties, loans
secured by mortgages on one- to four-family residential properties or
multifamily residential properties, mortgage loans which are partially
guaranteed by the VA and other mortgage loans eligible for inclusion in
mortgage pools underlying GNMA Certificates. Unless otherwise specified in
the related Supplement, at least 90 percent by original principal amount of
the mortgage loans underlying a GNMA Certificate will be mortgage loans
having maturities of 20 years or more.

Each GNMA Certificate provides for the payment by or on behalf of the
issuer of the GNMA Certificate to the registered holder of such GNMA
Certificate of monthly payments of principal and interest equal to the
registered holder's proportionate interest in the aggregate amount of the
monthly scheduled principal and interest payments on each underlying
eligible mortgage loan, less servicing and guaranty fees aggregating the
excess of the interest on each such mortgage loan over the GNMA Certificate
pass-through rate. In addition, each payment to a GNMA Certificateholder
will include proportionate pass-through payments to such holder of any
prepayments of principal of the mortgage loan underlying the GNMA
Certificate, and the holder's proportionate interest in the remaining
principal balance in the event of a foreclosure or other disposition of any
such mortgage loan.

The GNMA Certificates included in a Trust may be issued under either or
both of the GNMA I program ("GNMA I Certificates") and the GNMA II program
("GNMA II Certificates"). All mortgages underlying a particular GNMA I
Certificate must have the same annual interest rate (except for pools of
mortgages secured by mobile homes). The annual interest rate on each GNMA I
Certificate is one-half percentage point less than the annual interest rate
on the mortgage loans included in the pool of mortgages backing such GNMA I
Certificate. Mortgage Loans underlying a particular GNMA II Certificate may
have annual interest rates that vary from each other by up to one
percentage point. The annual interest rate on each GNMA II Certificate will
be between one-half percentage point and one and one-half percentage points
less than the highest annual interest rate on the mortgage loans included
in the pool of mortgages backing such GNMA II Certificate.

GNMA will have approved the issuance of each of the GNMA Certificates in
accordance with a guaranty agreement between GNMA and the servicer of the
mortgage loans underlying such GNMA Certificate. Pursuant to such
agreement, the servicer is required to advance its own funds in order to
make timely payments of all amounts due on the GNMA Certificate, even if
the payments received by such servicer on the mortgage loans backing the
GNMA Certificate are less than the amounts due on such GNMA Certificate. If
a servicer is unable to make payments on a GNMA Certificate as it becomes
due, it must promptly notify GNMA and request GNMA to make such payment.
Upon such notification and request, GNMA will make such payments directly
to the registered holder of the GNMA Certificate. In the event no payment
is made by such servicer and such servicer fails to notify and request GNMA
to make such payment, the registered holder of the GNMA Certificate has
recourse only against GNMA to obtain such payment. The registered holder of
the GNMA Certificates included in a Trust is entitled to proceed directly
against GNMA under the terms of each GNMA Certificate or the guaranty
agreement or contract relating to such GNMA Certificate for any amounts
that are not paid when due under each GNMA Certificate.

As described above, the GNMA Certificates included in a Trust, and the
related underlying mortgage loans, may have characteristics and terms
different from those described above. Any such different characteristics
and terms will be described in the related Supplement.

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

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

Mortgage loans underlying the FHLMC Certificates held by a Trust will
consist of mortgage loans with original terms to maturity of between 10 and
40 years. Each such mortgage loan must meet the applicable standards set
forth in the FHLMC Act. A FHLMC Certificate group may include whole loans,
participation interests in whole loans and undivided interests in whole
loans and/or participations comprising another FHLMC Certificate group.
Under the Guarantor Program, any such FHLMC Certificate group may include
only whole loans or participation interests in whole loans.
FHLMC guarantees to each registered holder of a FHLMC Certificate the
timely payment of interest on the underlying mortgage loans to the extent
of the applicable certificate interest rate on the registered holder's pro
rata share of the unpaid principal balance outstanding on the underlying
mortgage loans in the FHLMC Certificate group represented by such FHLMC
Certificate, whether or not received. FHLMC also guarantees to each
registered holder of a FHLMC Certificate collection by such holder of all
principal on the underlying mortgage loans, without any offset or
deduction, to the extent of such holder's pro rata share thereof, but does
not, except if and to the extent specified in the related Supplement for a
Series of Certificates, guarantee the timely payment of scheduled
principal. Under FHLMC's Gold PC Program, FHLMC guarantees the timely
payment of principal based on the difference between the pool factor
published in the month preceding the month of distribution and the pool
factor published in such month of distribution. Pursuant to its guaranties,
FHLMC indemnifies holders of FHLMC Certificates against any diminution in
principal by reason of charges for property repairs, maintenance and
foreclosure. FHLMC may remit the amount due on account of its guaranty of
collection of principal at any time after default on an underlying mortgage
loan, but not later than (i) 30 days following foreclosure sale, (ii) 30
days following payment of the claim by any mortgage insurer or (iii) 30
days following the expiration of any right of redemption, whichever occurs
later, but in any event no later than one year after demand has been made
upon the mortgagor for accelerated payment of principal. In taking actions
regarding the collection of principal after default on the mortgage loans
underlying FHLMC Certificates, including the timing of demand for
acceleration, FHLMC reserves the right to exercise its judgment with
respect to the mortgage loans in the same manner as for mortgage loans that
it has purchased but not sold. The length of time necessary for FHLMC to
determine that a mortgage loan should be accelerated varies with the
particular circumstances of each mortgagor, and FHLMC has not adopted
standards which require that the demand be made within any specified
period.

FHLMC Certificates are not guaranteed by the United States or by any
Federal Home Loan Bank and do not constitute debts or obligations of the
United States or any Federal Home Loan Bank. The obligations of FHLMC under
its guaranty are obligations solely of FHLMC and are not backed by, or
entitled to, the full faith and credit of the United States. If FHLMC were
unable to satisfy such obligations, distributions to holders of FHLMC
Certificates would consist solely of payments and other recoveries on the
underlying mortgage loans and, accordingly, monthly distributions to
holders of FHLMC Certificates would be affected by delinquent payments and
defaults on such mortgage loans.

Registered holders of FHLMC Certificates are entitled to receive their
monthly pro rata share of all principal payments on the underlying mortgage
loans received by FHLMC, including any scheduled principal payments, full
and partial prepayments of principal and principal received by FHLMC by
virtue of condemnation, insurance, liquidation or foreclosure, and
repurchases of the mortgage loans by FHLMC or the seller thereof. FHLMC is
required to remit each registered FHLMC certificateholder's pro rata share
of principal payments on the underlying mortgage loans, interest at the
FHLMC pass-through rate and any other sums such as prepayment fees, within
60 days of the date on which such payments are deemed to have been received
by FHLMC.

Under FHLMC's Cash Program, there is no limitation on the amount by which
interest rates on the mortgage loans underlying a FHLMC Certificate may
exceed the pass-through rate on the FHLMC Certificate. Under such program,
FHLMC purchases groups of whole mortgage loans from sellers at specified
percentages of their unpaid principal balances, adjusted for accrued or
prepaid interest, which when applied to the interest rate of the mortgage
loans and participations purchased results in the yield (expressed as a
percentage) required by FHLMC. The required yield, which includes a minimum
servicing fee retained by the servicer, is calculated using the outstanding
principal balance. The range of interest rates on the mortgage loans and
participations in a FHLMC Certificate group under the Cash Program will
vary since mortgage loans and participations are purchased and assigned to
a FHLMC Certificate group based upon their yield to FHLMC rather than on
the interest rate on the underlying mortgage loans. Under FHLMC's Guarantor
Program, the pass-through rate on a FHLMC Certificate is established based
upon the lowest interest rate on the underlying mortgage loans, minus a
minimum servicing fee and the amount of FHLMC's management and guaranty
income as agreed upon between the seller and FHLMC.

FHLMC Certificates duly presented for registration of ownership on or
before the last business day of a month are registered effective as of the
first day of the month. The first remittance to a registered holder of a
FHLMC Certificate will be distributed so as to be received normally by the
15th day of the second month following the month in which the purchaser
became a registered holder of such FHLMC Certificate. Thereafter, such
remittance will be distributed monthly to the registered holder so as to be
received normally by the 15th day of each month. The Federal Reserve Bank
of New York maintains book-entry accounts with respect to FHLMC
Certificates sold by FHLMC on or after January 2, 1985, and makes payments
of principal and interest each month to the registered holders thereof in
accordance with such holders' instructions.

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

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

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

Mortgage loans underlying FNMA Certificates held by a Trust will consist of
conventional mortgage loans, FHA Loans or VA Loans. Original maturities of
substantially all of the conventional, level payment mortgage loans
underlying a FNMA Certificate are expected to be between either 8 to 15
years or 20 to 40 years. The original maturities of substantially all of
the fixed rate, level payment FHA Loans or VA Loans are expected to be 30
years.

Mortgage loans underlying a FNMA Certificate may have annual interest rates
that vary by as much as two percentage points from each other. The rate of
interest payable on a FNMA Certificate is equal to the lowest interest rate
of any mortgage loan in the related pool, less a specified minimum annual
percentage representing servicing compensation and FNMA's guaranty fee.
Under a regular servicing option (pursuant to which the mortgagee or each
other servicer assumes the entire risk of foreclosure losses), the annual
interest rates on the mortgage loans underlying a FNMA Certificate will be
between 50 basis points and 250 basis points greater than is its annual
pass-through rate and under a special servicing option (pursuant to which
FNMA assumes the entire risk for foreclosure losses), the annual interest
rates on the mortgage loans underlying a FNMA Certificate will generally be
between 55 basis points and 255 basis points greater than the annual FNMA
Certificate pass-through rate. If specified in the related Supplement, FNMA
Certificates may be backed by adjustable rate mortgages.

FNMA guarantees to each registered holder of a FNMA Certificate that it
will distribute amounts representing scheduled principal and interest at
the applicable pass-through rate on the underlying mortgage loans, whether
or not received, and such holder's proportionate share of the full
principal amount of any foreclosed or other finally liquidated mortgage
loan, whether or not such principal amount is actually recovered. If FNMA
were unable to perform such obligations, distributions on FNMA Certificates
would consist solely of payments and other recoveries on the underlying
mortgage loans and, accordingly, delinquencies and defaults would affect
monthly distributions to holders of FNMA Certificates. The obligations of
FNMA under its guarantees are obligations solely of FNMA and are not backed
by, nor entitled to, the full faith and credit of the United States.

As described above, the FNMA Certificates included in a Trust, and the
related underlying mortgage loans, may have characteristics and terms
different from those described above. Any such different characteristics
and terms will be described in the related Supplement.

FNMA Certificates evidencing interests in pools of mortgage loans formed on
or after May 1, 1985 (other than FNMA Certificates backed by pools
containing graduated payment mortgage loans or mortgage loans secured by
multifamily projects) are available in book-entry form only. Distributions
of principal and interest on each FNMA Certificate will be made by FNMA on
the 25th day of each month to the persons in whose name the FNMA
Certificate is entered in the books of the Federal Reserve Banks (or
registered on the FNMA Certificate register in the case of fully registered
FNMA Certificates) as of the close of business on the last day of the
preceding month. With respect to FNMA Certificates issued in book-entry
form, distributions thereon will be made by wire, and with respect to fully
registered FNMA Certificates, distributions thereon will be made by check.

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

CERTIFICATE ACCOUNT

The Master Servicer or other entity identified in the related Supplement
will, as to each Series of Certificates, establish and maintain a
Certificate Account for the benefit of the Trustee and holders of the
Certificates of such Series for receipt of (i) each distribution or monthly
payment, as the case may be, made to the Trustee with respect to the
Mortgage Assets, (ii) the amount of cash, if any, specified in the related
Pooling Agreement to be initially deposited therein, (iii) the amount of
cash, if any, withdrawn from any related Reserve Fund or other fund, and
(iv) the reinvestment income thereon, if any. The Pooling Agreement for a
Series may authorize the Trustee to invest the funds in the Certificate
Account in certain investments ("Eligible Investments") that will qualify
as "permitted investments" under Section 860G(a)(5) of the Code in the case
of REMIC Certificates. The Eligible Investments will generally mature not
later than the business day immediately preceding the next Distribution
Date for such Series (or, in certain cases, on such Distribution Date).
Eligible Investments include, among other investments, obligations of the
United States and certain agencies thereof, federal funds, certificates of
deposit, commercial paper carrying the ratings specified in the related
Pooling Agreement of each Rating Agency rating the Certificates of such
Series that has rated such commercial paper, demand and time deposits and
banker's acceptances sold by eligible commercial and certain repurchase
agreements of United States government securities. Reinvestment earnings,
if any, on funds in the Certificate Account generally will belong to the
Master Servicer.

SUBSTITUTION OF MORTGAGE ASSETS

Substitution of Mortgage Assets will be permitted in the event of breaches
of representations and warranties with respect to any original Mortgage
Asset or in the event the documentation with respect to any Mortgage Asset
is determined by the Trustee to be incomplete. The period during which such
substitution will be permitted generally will be indicated in the related
Supplement. See "The Pooling and Servicing Agreement -- Representations and
Warranties".

DESCRIPTION OF CERTIFICATES

GENERAL

Each Series of Certificates will be issued pursuant to a separate Pooling
Agreement among the Sponsor, the Seller, the Trustee and the Master
Servicer, if such Series relates to Mortgage Loans. A form of Pooling
Agreement is filed as an exhibit to the Registration Statement of which
this Prospectus is a part. The following summaries describe certain
provisions that may appear in each Pooling Agreement. The Supplement for a
Series of Certificates will describe any provision of the Agreement
relating to such Series that materially differs from the description
thereof contained in this Prospectus. The summaries do not purport to be
complete and are subject to, and are qualified in their entirety by
reference to, all of the provisions of the Pooling Agreement and the
Supplement related to a particular Series of Certificates. References
herein to a Trustee or the Master Servicer include, unless otherwise
specified, any agents acting on behalf of such Trustee or any subcontractor
of the Master Servicer, any of which agents or subcontractors may be one of
their affiliates.

The Certificates are issuable in Series, each evidencing the entire
ownership interest in a Trust of assets consisting primarily of Mortgage
Assets. The Certificates of each Series will be issued in fully registered
form or book-entry form and will be issued in the authorized denominations
for each class specified in the related Supplement, will evidence specified
beneficial ownership interests in the related Trust created pursuant to the
related Pooling Agreement and will not be entitled to payments in respect
of the assets included in any other Trust established by the Sponsor. The
transfer of the Certificates may be registered, and the Certificates may be
exchanged, at the office or agency of the Trustee specified in the related
Supplement without the payment of any service charge other than any tax or
governmental charge payable in connection with such registration of
transfer or exchange. The transfer of any class of a Series of Certificates
may be subject to the satisfaction of certain conditions set forth in the
related Supplement. Any qualifications on direct or indirect ownership of
Residual Certificates, as well as restrictions on the transfer of such
Residual Certificates, will be set forth in the related Supplement. The
Certificates will not represent obligations of the Sponsor or any affiliate
of the Sponsor. The Mortgage Assets will not be insured or guaranteed by
any governmental entity or other person, unless otherwise specified in the
related Supplement.

Each Series of Certificates will be issued in one or more classes. Each
class of Certificates of a Series will evidence beneficial ownership of a
specified percentage (which may be 0%) or portion of future interest
payments and a specified percentage (which may be 0%) or portion of future
principal payments on the Mortgage Assets in the related Trust. A Series of
Certificates may include one or more classes that are senior in right to
payment to one or more other classes of Certificates of such Series.
Certain Series or classes of Certificates may be covered by insurance
policies, surety bonds or other forms of credit enhancement, in each case
as described herein and in the related Supplement. One or more classes of
Certificates of a Series may be entitled to receive distributions of
principal, interest or any combination thereof. Distributions on one or
more classes of a Series of Certificates may be made prior to one or more
other classes, after the occurrence of specified events, in accordance with
a schedule or formula, on the basis of collections from designated portions
of the Mortgage Assets in the related Trust, or on a different basis, in
each case as specified in the related Supplement. The timing and amounts of
such distributions may vary among classes or over time as specified in the
related Supplement.

DISTRIBUTIONS

Distributions of principal and interest (or, where applicable, of principal
only or interest only) on the related Certificates will be made by the
Trustee on each Distribution Date (i.e., monthly, quarterly, semi-annually
or at such other intervals and on the dates as are specified in the
Supplement) in proportion to the percentages specified in the related
Supplement. Distributions will be made by wire transfer (in the case of
Certificates which are of a certain minimum denomination, as specified in
the related Supplement) or by check mailed to record holders of such
Certificates as of the date or dates specified in the related Supplement
(each, a "Record Date") at their addresses appearing in the register
maintained for holders of Certificates (the "Certificate Register"), except
that the final distribution of principal will be made only upon
presentation and surrender of such Certificate at the office or agency of
the Paying Agent for such Certificate specified in the related Supplement.
Notice will be mailed before the Distribution Date on which the final
distribution is expected to be made to the holder of such Certificate. In
the event the Certificates of a Series are issued in book-entry form,
distributions on such Certificates, including the final distribution in
retirement of such Certificates, will be made through the facilities of a
depository in accordance with its usual procedures in the manner described
in the related Supplement.

Distributions of principal of and interest on the Certificates will be made
by the Trustee out of the Certificate Account established under the Pooling
Agreement. All distributions on the Mortgage Certificates, if any, included
in the Trust for a Series, remittances on the Mortgage Loans by the Master
Servicer pursuant to the Pooling Agreement, together with any reinvestment
income (if so specified in the related Supplement) thereon and amounts
withdrawn from any Reserve Fund or other fund or payments in respect of
other credit enhancement and required to be so deposited, will be deposited
directly into the Certificate Account and thereafter will be available
(except for funds held for future distribution and for funds payable to the
Master Servicer) to make distributions on Certificates of such Series on
the next succeeding Distribution Date. See "The Trusts -- Certificate
Account" and "The Pooling and Servicing Agreement -- Payments on Mortgage
Loans" herein.

INTEREST. Interest will accrue on the aggregate Certificate Balance (or, in
the case of IO Certificates, the aggregate notional amount) of each class
of Certificates (the "Class Certificate Balance") entitled to interest at
the Pass-Through Rate (which may be a fixed rate or a rate adjustable as
specified in such Supplement) during each Interest Accrual Period specified
in such Supplement. The "Interest Accrual Period" with respect to any
Distribution Date shall be the period from (and including) the first day of
the month preceding the month of such Distribution Date (or, in the case of
the first Distribution Date, from the Closing Date) through the last day of
such preceding month, or such other period as may be specified in the
related Supplement. To the extent funds are available therefor, interest
accrued during each such Interest Accrual Period on each class of
Certificates entitled to interest (other than a class of Certificates that
provides for interest that accrues, but is not currently payable, referred
to hereafter as "Accrual Certificates") will be distributable on the
Distribution Dates specified in the related Supplement until the Class
Certificate Balance of such class is reduced to zero or, in the case of
Certificates entitled only to distributions allocable to interest, until
the aggregate notional amount of such Certificates is reduced to zero or
for the period of time designated in the related Supplement. Unless
otherwise specified in the related Supplement, distributions allocable to
interest on each Certificate that is not entitled to distributions
allocable to principal will be calculated based on the notional amount of
such Certificate. The notional amount of a Certificate will not evidence an
interest in or entitlement to distributions allocable to principal but will
be used solely for convenience in expressing the calculation of interest
and for certain other purposes. Unless otherwise specified in the related
Supplement, interest on the Certificates of each class will be calculated
on the basis of a 360-day year consisting of twelve 30-day months.

Distributions of interest on each class of Accrual Certificates will
commence only after the occurrence of the events specified in the related
Supplement and, prior to such time, such interest will be added to the
Class Certificate Balance of such class of Accrual Certificates. Any such
class of Accrual Certificates will thereafter accrue interest on its
outstanding Class Certificate Balance as so adjusted.

PRINCIPAL. Unless otherwise specified in the related Supplement, the Class
Certificate Balance of any class of Certificates entitled to distributions
of principal will be the original Class Certificate Balance of such class
of Certificates specified in such Supplement, reduced by all distributions
reported to holders of such Certificates as allocable to principal and
adjustments, if any, in respect of losses and (i) in the case of Accrual
Certificates, increased by all interest accrued but not then distributable
on such Accrual Certificates and (ii) in the case of adjustable rate
Certificates, subject to the effect of negative amortization. The related
Supplement will specify the method by which the amount of principal to be
distributed on the Certificates on each Distribution Date will be
calculated and the manner in which such amount will be allocated among the
classes of Certificates entitled to distributions of principal.

Each class of Certificates of a Series (except for IO Certificates) will
(to the extent of funds available therefor) receive distributions of
principal in the amounts, at the times and in the manner specified in the
related Supplement until its initial aggregate Class Certificate Balance
has been fully amortized. Allocations of distributions of principal will be
made to the Certificates of each class, during the periods and in the order
specified in the related Supplement. Unless otherwise specified in the
related Supplement, distributions will be made pro rata among the
Certificates of each class then entitled to receive such distributions.

If so provided in the related Supplement, one or more classes of Senior
Certificates will be entitled to receive all or a disproportionate
percentage of the payments of principal that are received from borrowers in
advance of their scheduled due dates and are not accompanied by amounts
representing scheduled interest due after the month of such payments
("Principal Prepayments") in the percentages and under the circumstances or
for the periods specified in such Supplement. Any such allocation of
Principal Prepayments to such class or classes of Certificates will have
the effect of accelerating the amortization of such Senior Certificates
while increasing the interests evidenced by the Subordinate Certificates in
the Trust. Increasing the interests of the Subordinate Certificates
relative to that of the Senior Certificates is intended to preserve the
availability of the subordination provided by the Subordinate Certificates.
See "Credit Enhancement -- Subordination" herein and "Credit Enhancement --
Subordination of the Subordinated Certificates" in the related Supplement.

UNSCHEDULED DISTRIBUTIONS. If specified in the related Supplement, the
Certificates will be subject to receipt of distributions before the next
scheduled Distribution Date under the circumstances and in the manner
described below and in such Supplement. If applicable, the Trustee will be
required to make such unscheduled distributions on the day and in the
amount specified in the related Supplement if, due to substantial payments
of principal (including Principal Prepayments) on the Mortgage Assets, the
Trustee or the Master Servicer determines that the funds available or
anticipated to be available from the Certificate Account and, if
applicable, any Reserve Fund, may be insufficient to make required
distributions on the Certificates on such Distribution Date. Unless
otherwise specified in the related Supplement, the amount of any such
unscheduled distribution that is allocable to principal will not exceed the
amount that would otherwise have been required to be distributed as
principal on the Certificates on the next Distribution Date. Unless
otherwise specified in the related Supplement, all unscheduled
distributions will include interest at the applicable Pass-Through Rate (if
any) on the amount of the unscheduled distribution allocable to principal
for the period and to the date specified in such Supplement.

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

The "Last Scheduled Distribution Date" for a class of Certificates is the
latest date as of which the Class Certificate Balance of the Certificates
of such class is expected to be fully amortized, either based on the
assumptions that all scheduled payments (with no prepayments) on the
Mortgage Assets in the related Trust are timely received and, if
applicable, that all such scheduled payments are reinvested on receipt at
the rate or rates specified in the related Supplement at which amounts in
the Certificate Account are assumed to earn interest (the "Assumed
Reinvestment Rate"). (If an Assumed Reinvestment Rate is specified for a
Series of Certificates, reinvestment earnings on funds in the Certificate
Account will not belong to the Master Servicer as additional servicing
compensation. Such amounts will be part of the Trust and will be available
to make distributions on the related Certificates.) The "Last Scheduled
Distribution Date" for each class of Certificates will be specified in the
related Supplement.

CATEGORIES OF CLASSES OF CERTIFICATES

In general, the classes of certificates of each Series fall into different
categories. The following chart identifies and generally defines certain of
the more typical categories. The Supplement for a Series of Certificates
may identify the classes which comprise such Series by reference to the
following categories.

CATEGORIES OF CLASSES DEFINITION

PRINCIPAL TYPES

Accretion Directed . . . . A class that receives principal payments
from the accreted interest from specified
Accrual Classes. An Accretion Directed
Class also may receive principal payments
from principal paid on the Mortgage Assets
or other assets of the Trust for the
related Series.
Component Certificates . . A class consisting of "Components." The
Components of a class of Component
Certificates may have different principal
and/or interest payment characteristics but
together constitute a single class. Each
Component of a class of Component
Certificates may be identified as falling
into one or more of the categories in this
chart.
Notional Amount Certificates A class having no principal balance and
bearing interest on the related notional
amount. The notional amount is used for
purposes of the determination of interest
distributions.
Planned Principal Class
(also sometimes referred
to as "PACs") . . . . . . . A class that is designed to receive
principal payments using a predetermined
principal balance schedule derived by
assuming two constant prepayment rates for
the underlying Mortgage Assets. These two
rates are the endpoints for the
"structuring range" for the Planned
Principal Class. The Planned Principal
Classes in any Series of Certificates may
be subdivided into different categories
(e.g., PRIMARY PLANNED PRINCIPAL CLASSES,
SECONDARY PLANNED PRINCIPAL CLASSES and so
forth) having different effective
structuring ranges and different principal
payment priorities. The structuring range
for the Secondary Planned Principal Class
of a Series of Certificates will be
narrower than that for the Primary Planned
Principal Class of such Series.
Scheduled Principal Class. A class that is designed to receive
principal payments using a predetermined
principal balance schedule but is not
designated as a Planned Principal Class or
Targeted Principal Class. In many cases,
the schedule is derived by assuming two
constant prepayment rates for the Mortgage
Assets. These two rates are the endpoints
for the "structuring range" for the
Scheduled Principal Class.
Sequential Pay . . . . . . Classes that receive principal payments in a
prescribed sequence, that do not have
predetermined principal balance schedules
and that under all circumstances receive
payments of principal continuously from the
first Distribution Date on which they
receive principal until they are retired.
A single class that receives principal
payments before or after all other classes
in the same Series of Certificates may be
identified as a Sequential Pay Class.
Strip. . . . . . . . . . . A class that receives a constant proportion,
or "strip," of the principal payments on the
Mortgage Assets. The constant proportion of
such principal payments may or may not vary
for each Mortgage Asset included in the
Trust and will be calculated in the manner
described in the related Supplement. Such
Classes may also receive payments of
interest.

Support Class (also
sometimes referred to
as "companion
classes") . . . . . . . . A class that receives principal payments on
any Distribution Date only if scheduled
payments have been made on specified
Planned Principal Classes, Targeted
Principal Classes and/or Scheduled
Principal Classes.
Targeted Principal Class
(also sometimes
referred to as "TACs") . A class that is designed to receive
principal payments using a predetermined
principal balance schedule derived by
assuming a single constant prepayment
rate for the Mortgage Assets.

INTEREST TYPES
Accrual. . . . . . . . . . A class that accretes the amount of accrued
interest otherwise distributable on such
class, which amount will be added as
principal to the principal balance of such
class on each applicable Distribution Date.
Such accretion may continue until some
specified event has occurred or until such
class of Accrual Certificates is retired.
Fixed Rate . . . . . . . . A class with a Pass-Through Rate that is
fixed throughout the life of the class.
Floating Rate. . . . . . . A class with a Pass-Through Rate that resets
periodically based upon a designated Index
and that varies directly with changes in
such Index.
Inverse Floating Rate. . . A class with a Pass-Through Rate that resets
periodically based upon a designated Index
and that varies inversely with changes in
such Index.
IO . . . . . . . . . . . . Certificates that receive some or all of the
interest payments made on the Mortgage
Assets and little or no principal. IO
Certificates have either a nominal principal
balance or a notional amount. A nominal
principal balance represents actual
principal that will be paid on such
Certificates. It is referred to as nominal
since it is extremely small compared to
other classes. A notional amount is the
amount used as a reference to calculate the
amount of interest due on an IO Certificate
that is not entitled to any distributions in
respect of principal.
Partial Accrual. . . . . . A class that accretes a portion of the
amount of accrued interest thereon, which
amount will be added to the principal
balance of such class on each applicable
Distribution Date, with the remainder of
such accrued interest to be distributed
currently as interest on such class. Such
accretion may continue until a specified
event has occurred or until such class of
Partial Accrual Certificates is retired.
PO . . . . . . . . . . . . A class that does not bear interest and is
entitled to receive only distributions in
respect of principal.
Variable Rate. . . . . . . A class with a Pass-Through Rate that resets
periodically and is calculated by reference
to the rate or rates of interest applicable
to specified assets or instruments (e.g.,
the Mortgage Rates borne by the Mortgage
Loans in the related Trust).

RESIDUAL CERTIFICATES

A Series of REMIC Certificates will include a class of Residual
Certificates representing the right to receive on each Distribution Date,
in addition to any other distributions to which they are entitled in
accordance with their terms and as described in the related Supplement, the
excess of the sum of distributions, payments and other amounts received
over the sum of (i) the amount required to be distributed to
Certificateholders on such Distribution Date and (ii) certain expenses, all
as more specifically described in the related Supplement. In addition,
after the aggregate Class Certificate Balances of all classes of Regular
Certificates has been fully amortized, holders of the Residual Certificates
will be the sole owners of the related Trust and will have sole rights with
respect to the Mortgage Assets and other assets remaining in such Trust.
Some or all of the Residual Certificates of a Series may be offered by this
Prospectus and the related Supplement; if so, the terms of such Residual
Certificates will be described in such Supplement. Any qualifications on
direct or indirect ownership of Residual Certificates offered hereby and by
the related Supplement, as well as restrictions on the transfer of such
Residual Certificates, will be set forth in the related Supplement. If such
Residual Certificates are not so offered, the Sponsor may (but need not)
sell some or all of such Residual Certificates on or after the date of
original issuance of such Series in transactions exempt from registration
under the Securities Act and otherwise under circumstances that will not
adversely affect the REMIC status of the Trust.

ADVANCES

The Master Servicer may be obligated or have the right at its option under
the Pooling Agreement for a Series of Certificates backed in whole or in
part by Mortgage Loans to advance, on or prior to any Distribution Date,
from its own funds and/or funds being held in the Certificate Account for
future distribution to Certificateholders in an amount up to the aggregate
of interest and principal installments on the Mortgage Loans that are
delinquent on the related Determination Date. If specified in the related
Supplement, in the case of Cooperative Loans, the Master Servicer will be
required to advance any unpaid maintenance fees and other charges under the
related proprietary leases. The Master Servicer may be obligated to make
such Advances only to the extent any such Advance, in the judgment of the
Master Servicer made on the Determination Date, will be reimbursable from
late payments made by Mortgagors, payments under any Primary Mortgage
Insurance Policy or other form of credit support or proceeds of
liquidation. Any Master Servicer funds thus advanced are reimbursable to
the Master Servicer from cash in the Certificate Account to the extent that
the Master Servicer shall determine that any such Advances previously made
are not ultimately recoverable from the sources described above.

In making Advances, the Master Servicer will endeavor to maintain a regular
flow of scheduled interest and principal payments to holders of the related
classes of Certificates, rather than to guarantee or insure against losses.
If Advances are made by the Master Servicer from funds being held for
future distribution to Certificateholders, the Master Servicer will replace
such funds on or before any future Distribution Date to the extent that
funds in the Certificate Account on such Distribution Date would be less
than the amount required to be available for distributions to
Certificateholders on such date.

The Master Servicer may also be obligated to make advances, to the extent
recoverable out of insurance proceeds, liquidation proceeds or otherwise,
in respect of certain taxes and insurance premiums not paid by Mortgagors
on a timely basis. Funds so advanced are reimbursable to the Master
Servicer to the extent permitted by the Pooling Agreement. If specified in
the related Supplement, the obligations of the Master Servicer to make
Advances may be supported by a cash advance reserve fund, a surety bond or
other arrangement, in each case as described in such Supplement.

REPORTS TO CERTIFICATEHOLDERS

Prior to or concurrently with each distribution on a Distribution Date, the
Master Servicer or the Trustee will furnish to each Certificateholder of
record of the related Series a statement setting forth, to the extent
applicable to such Series of Certificates:

(i) the amount of such distribution allocable to principal,
separately identifying the aggregate amount of any Principal
Prepayments and, if so specified in the related Supplement,
prepayment penalties included therein;

(ii) the amount of such distribution allocable to interest;

(iii) the amount of any Advance;

(iv) the aggregate amount withdrawn from the Reserve Fund, if any,
that is included in the amounts distributed to Certificateholders;

(v) the Class Certificate Balance or notional amount of each class
of the related Series after giving effect to the distribution of
principal on such Distribution Date;

(vi) the percentage of principal payments on the Mortgage Assets
(excluding prepayments), if any, which each such class will be
entitled to receive on the following Distribution Date;
(vii) the percentage of Principal Prepayments with respect to the
Mortgage Assets, if any, which each such class will be entitled to
receive on the following Distribution Date;

(viii) the related amount of the servicing compensation retained or
withdrawn from the Certificate Account by the Master Servicer, and
the amount of additional servicing compensation received by the
Master Servicer attributable to penalties, fees, excess Liquidation
Proceeds and other similar charges and items;
(ix) the number and aggregate principal balances of Mortgage Loans
(A) delinquent (exclusive of Mortgage Loans in foreclosure) (1) 1 to
30 days, (2) 31 to 60 days, (3) 61 to 90 days and (4) 91 or more
days and (B) in foreclosure and delinquent, as of the close of
business on the last day of the calendar month preceding such
Distribution Date;

(x) the book value of any real estate acquired through foreclosure
or grant of a deed in lieu of foreclosure ("REO Property");

(xi) the Pass-Through Rate, if adjusted from the date of the last
statement, of any such class expected to be applicable to the next
distribution to such class;

(xii) if applicable, the amount remaining in the Reserve Fund at the
close of business on the Distribution Date;

(xiii) the Pass-Through Rate as of the day prior to the immediately
preceding Distribution Date; and

(xiv) any amounts remaining under letters of credit, pool policies
or other forms of credit support.

Where applicable, any amount set forth above may be expressed as a dollar
amount per single Certificate of the relevant class specified in the
related Supplement. The report to Certificateholders for any Series of
Certificates may include additional or other information of a similar
nature to that specified above.

In addition, within a reasonable period of time after the end of each
calendar year, the Master Servicer or the Trustee will mail to each
Certificateholder of record at any time during such calendar year a report
(a) as to the aggregate of amounts reported pursuant to (i) and (ii) for
such calendar year or, in the event such person was a Certificateholder of
record during a portion of such calendar year, for the applicable portion
of such year and (b) such other customary information as may be deemed
necessary or desirable for Certificateholders to prepare their tax returns.

CREDIT ENHANCEMENT

GENERAL

Credit enhancement may be provided with respect to one or more classes of a
Series of Certificates or with respect to the Mortgage Assets in the
related Trust. Credit enhancement may be in the form of a limited financial
guaranty policy issued by an entity named in the related Supplement, the
subordination of one or more classes of the Certificates of such Series,
the establishment of one or more reserve funds, the use of a cross-support
feature, the use of a mortgage pool insurance policy, bankruptcy bond,
special hazard insurance policy, surety bond, letter of credit, guaranteed
investment contract or other method of credit enhancement described in the
related Supplement, or any combination of the foregoing. Unless otherwise
specified in the related Supplement, no credit support will provide
protection against all risks of loss or guarantee repayment of the entire
principal balance of the Certificates and interest thereon. If losses occur
which exceed the amount covered by credit enhancement or which are not
covered by the credit enhancement, Certificateholders will bear their
allocable share of any deficiencies.

If specified in the related Supplement, the coverage provided by one or
more forms of credit enhancement may apply concurrently to two or more
related Trusts. If applicable, the related Supplement will identify the
Trusts to which such credit enhancement relates and the manner of
determining the amount of the coverage provided thereby and of the
application of such coverage to the identified Trusts.

SUBORDINATION

If so specified in the related Supplement, the rights of holders of one or
more classes of Subordinate Certificates will be subordinate to the rights
of holders of one or more classes of Senior Certificates of such Series to
distributions in respect of scheduled principal, Principal Prepayments,
interest or any combination thereof that otherwise would have been payable
to holders of Subordinate Certificates under the circumstances and to the
extent specified in the related Supplement. If so specified in the related
Supplement, certain classes of Subordinate Certificates may be senior to
other classes of Subordinate Certificates and be rated investment grade
("Mezzanine Certificates"). If specified in the related Supplement, delays
in receipt of scheduled payments on the Mortgage Assets and certain losses
with respect to the Mortgage Assets will be borne first by the various
classes of Subordinate Certificates and thereafter by the various classes
of Senior Certificates, in each case under the circumstances and subject to
the limitations specified in such related Supplement. The aggregate
distributions in respect of delinquent payments on the Mortgage Assets over
the lives of the Certificates or at any time, the aggregate losses in
respect of Mortgage Assets which must be borne by the Subordinate
Certificates by virtue of subordination and the amount of distributions
otherwise distributable to Subordinate Certificateholders that will be
distributable to Senior Certificateholders on any Distribution Date may be
limited as specified in the related Supplement. If aggregate distributions
in respect of delinquent payments on the Mortgage Assets or aggregate
losses in respect of such Mortgage Assets were to exceed the amount
specified in the related Supplement, Senior Certificateholders would
experience losses on their Certificates.

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

As between classes of Senior Certificates and as between classes of
Subordinate Certificates, distributions may be allocated among such classes
(i) in the order of their scheduled final distribution dates, (ii) in
accordance with a schedule or formula, (iii) in relation to the occurrence
of events or (iv) otherwise, in each case as specified in the related
Supplement.

SURETY BONDS

A surety bond or bonds may be obtained and maintained for a Series or
certain classes thereof which will, subject to certain conditions and
limitations, guaranty payments of all or limited amounts of principal and
interest due on all or certain of the classes of such Series.

MORTGAGE POOL INSURANCE POLICIES

If specified in the related Supplement, a separate mortgage pool insurance
policy ("Mortgage Pool Insurance Policy") will be obtained for the Trust
and issued by the insurer (the "Pool Insurer") named in such Supplement.
Each Mortgage Pool Insurance Policy will, subject to the limitations
described below, cover loss by reason of default in payment on Mortgage
Loans in the Trust in an amount equal to a percentage specified in such
Supplement of the aggregate principal balance of such Mortgage Loans on the
Cut-off Date. As more fully described below, the Master Servicer will
present claims thereunder to the Pool Insurer on behalf of itself, the
Trustee and Certificateholders. The Mortgage Pool Insurance Policies,
however, are not blanket policies against loss, since claims thereunder may
be made only respecting particular defaulted Mortgage Loans and only upon
satisfaction of certain conditions precedent described below. Unless
otherwise specified in the related Supplement, the Mortgage Pool Insurance
Policies will not cover losses due to a failure to pay or denial of a claim
under a Primary Mortgage Insurance Policy.

Unless otherwise specified in the related Supplement, each Mortgage Pool
Insurance Policy will provide that no claims may be validly presented
unless (i) any required Primary Mortgage Insurance Policy is in effect for
the defaulted Mortgage Loan and a claim thereunder has been submitted and
settled; (ii) hazard insurance on the related Mortgaged Property has been
kept in force and real estate taxes and other protection and preservation
expenses have been paid; (iii) if there has been physical loss or damage to
the Mortgaged Property, it has been restored to its physical condition
(reasonable wear and tear excepted) at the time of issuance of the policy;
and (iv) the insured has acquired good and merchantable title to the
Mortgaged Property free and clear of liens except certain permitted
encumbrances. Upon satisfaction of these conditions, the Pool Insurer will
have the option either (a) to purchase the Mortgaged Property at a price
equal to the principal balance of the related Mortgage Loan plus accrued
and unpaid interest at the Mortgage Rate to the date of such purchase and
certain expenses incurred by the Master Servicer on behalf of the Trustee
and Certificateholders or (b) to pay the amount by which the sum of the
principal balance of the defaulted Mortgage Loan plus accrued and unpaid
interest at the Mortgage Rate to the date of payment of the claim and the
aforementioned expenses exceeds the proceeds received from an approved sale
of the Mortgaged Property, in either case net of certain amounts paid or
assumed to have been paid under the related Primary Mortgage Insurance
Policy. If any Mortgaged Property is damaged, and proceeds, if any, from
the related hazard insurance policy or the applicable Special Hazard
Insurance Policy are insufficient to restore the damaged property to a
condition sufficient to permit recovery under the Mortgage Pool Insurance
Policy, the Master Servicer will not be required to expend its own funds to
restore the damaged property unless it determines that (i) such restoration
will increase the proceeds to Certificateholders on liquidation of the
Mortgage Loan after reimbursement of the Master Servicer for its expenses
and (ii) such expenses will be recoverable by it through proceeds of the
sale of the Mortgaged Property or proceeds of the related Mortgage Pool
Insurance Policy or any related Primary Mortgage Insurance Policy.

No Mortgage Pool Insurance Policy will insure (and many Primary Mortgage
Insurance Policies do not insure) against loss sustained by reason of a
default arising from, among other things, (i) fraud or negligence in the
origination or servicing of a Mortgage Loan, including misrepresentation by
the Mortgagor, the originator or persons involved in the origination
thereof, or (ii) failure to construct a Mortgaged Property in accordance
with plans and specifications. A failure of coverage attributable to one of
the foregoing events might result in a breach of the related Seller's
representations described herein and, in such event, might give rise to an
obligation on the part of such Seller to repurchase the defaulted Mortgage
Loan if the breach cannot be cured by such Seller. No Mortgage Pool
Insurance Policy will cover (and many Primary Mortgage Insurance Policies
do not cover) a claim in respect of a defaulted Mortgage Loan occurring
when the servicer of such Mortgage Loan, at the time of default or
thereafter, was not approved by the applicable insurer.

The original amount of coverage under each Mortgage Pool Insurance Policy
will be reduced over the life of the related Certificates by the aggregate
dollar amount of claims paid less the aggregate of the net amounts realized
by the Pool Insurer upon disposition of all foreclosed properties. The
amount of claims paid will include certain expenses incurred by the Master
Servicer as well as accrued interest on delinquent Mortgage Loans to the
date of payment of the claim, unless otherwise specified in the related
Supplement. Accordingly, if aggregate net claims paid under any Mortgage
Pool Insurance Policy reach the original policy limit, coverage under that
Mortgage Pool Insurance Policy will be exhausted and any further losses
will be borne by Certificateholders.

FRAUD WAIVER

If so specified in the related Supplement, a letter may be obtained from
the issuer of a Mortgage Pool Insurance Policy (the "Waiver Letter")
waiving its right to deny a claim or rescind coverage under the related
Mortgage Pool Insurance Policy by reason of fraud, dishonesty or
misrepresentation in connection with the origination of, or application for
insurance for, the related Mortgage Loan or the denial or adjustment of
coverage under any related Primary Mortgage Insurance Policy because of
such fraud, dishonesty or misrepresentation. In such circumstances, the
issuer of the Mortgage Pool Insurance Policy will be indemnified by the
Seller for the amount of any loss paid by the issuer of the Mortgage Pool
Insurance Policy (each such amount, a "Fraud Loss") under the terms of the
Waiver Letter. The maximum aggregate amount of Fraud Losses covered under
the Waiver Letter and the period of time during which such coverage will be
provided will be specified in the related Supplement.

SPECIAL HAZARD INSURANCE POLICIES

If specified in the related Supplement, a separate Special Hazard Insurance
Policy will be obtained for the Trust and will be issued by the insurer
(the "Special Hazard Insurer") named in such Supplement. Each Special
Hazard Insurance Policy will, subject to limitations described below,
protect holders of the related Certificates from (i) loss by reason of
damage to Mortgaged Properties caused by certain hazards (including
earthquakes and, to a limited extent, tidal waves and related water damage
and such other hazards as are specified in the related Supplement) not
insured against under the standard form of hazard insurance policy for the
respective states in which the Mortgaged Properties are located or under a
flood insurance policy if the Mortgaged Property is located in a federally
designated flood area and (ii) loss caused by reason of the application of
the coinsurance clause contained in hazard insurance policies. See
"Servicing of Mortgage Loans -- Hazard Insurance" herein. No Special Hazard
Insurance Policy will cover losses occasioned by fraud or conversion by the
Trustee or Master Servicer, war, insurrection, civil war, certain
governmental action, errors in design, faulty workmanship or materials
(except under certain circumstances), nuclear or chemical reaction, flood
(if the Mortgaged Property is located in a federally designated flood
area), nuclear or chemical contamination and certain other risks. The
amount of coverage under any Special Hazard Insurance Policy will be
specified in the related Supplement. Each Special Hazard Insurance Policy
will provide that no claim may be paid unless hazard and, if applicable,
flood insurance on the property securing the Mortgage Loan have been kept
in force and other protection and preservation expenses have been paid.

Subject to the foregoing limitations and unless otherwise specified in the
related Supplement, each Special Hazard Insurance Policy will provide that
where there has been damage to property securing a foreclosed Mortgage Loan
(title to which has been acquired by the insured) and to the extent such
damage is not covered by the hazard insurance policy or flood insurance
policy, if any, maintained by the Mortgagor or the Master Servicer, the
Special Hazard Insurer will pay the lesser of (i) the cost of repair or
replacement of such property or (ii) upon transfer of the property to the
Special Hazard Insurer, the unpaid principal balance of such Mortgage Loan
at the time of acquisition of such property by foreclosure or deed in lieu
of foreclosure, plus accrued interest to the date of claim settlement and
certain expenses incurred by the Master Servicer with respect to such
property. If the unpaid principal balance of a Mortgage Loan plus accrued
interest and certain expenses is paid by the Special Hazard Insurer, the
amount of further coverage under the related Special Hazard Insurance
Policy will be reduced by such amount less any net proceeds from the sale
of the property. Any amount paid as the cost of repair of such property
will also reduce coverage by such amount. So long as a Mortgage Pool
Insurance Policy remains in effect, the payment by the Special Hazard
Insurer of the cost of repair or of the unpaid principal balance of the
related Mortgage Loan plus accrued interest and certain expenses will not
affect the total insurance proceeds paid to Certificateholders, but will
affect the relative amounts of coverage remaining under the related Special
Hazard Insurance Policy and Mortgage Pool Insurance Policy.

To the extent specified in the Supplement, the Master Servicer may deposit
cash, an irrevocable letter of credit or any other instrument acceptable to
each nationally recognized rating agency rating the Certificates of the
related Series in a special trust account to provide protection in lieu of
or in addition to that provided by a Special Hazard Insurance Policy. The
amount of any Special Hazard Insurance Policy or of the deposit to the
special trust account in lieu thereof relating to such Certificates may be
reduced so long as any such reduction will not result in a downgrading of
the rating of such Certificates by any such rating agency.

BANKRUPTCY BONDS

If specified in the related Supplement, a bankruptcy bond (the "Bankruptcy
Bond") to cover losses resulting from proceedings under the Bankruptcy Code
with respect to a Mortgage Loan will be issued by an insurer named in such
Supplement. Each Bankruptcy Bond will cover, to the extent specified in the
related Supplement, certain losses resulting from a reduction by a
bankruptcy court of scheduled payments of principal and interest on a
Mortgage Loan or a reduction by such court of the principal amount of a
Mortgage Loan and will cover certain unpaid interest on the amount of such
a principal reduction from the date of the filing of a bankruptcy petition.
The required amount of coverage under each Bankruptcy Bond will be set
forth in the related Supplement. Coverage under a Bankruptcy Bond may be
cancelled or reduced by the Master Servicer if such cancellation or
reduction would not adversely affect the then current rating or ratings of
the related Certificates. See "Certain Legal Aspects of the Mortgage Loans
-- Anti-Deficiency Legislation and Other Limitations on Sellers" herein.

To the extent specified in the Supplement, the Master Servicer may deposit
cash, an irrevocable letter of credit or any other instrument acceptable to
each nationally recognized rating agency rating the Certificates of the
related Series in a special trust account to provide protection in lieu of
or in addition to that provided by a Bankruptcy Bond. The amount of any
Bankruptcy Bond or of the deposit to the special trust account in lieu
thereof relating to such Certificates may be reduced so long as any such
reduction will not result in a downgrading of the rating of such
Certificates by any such rating agency.

RESERVE FUND

If so specified in the related Supplement, credit support with respect to a
Series of Certificates may be provided by the establishment and maintenance
with the Trustee for such Series of Certificates, in trust, of one or more
reserve funds (the "Reserve Fund") for such Series. The related Supplement
will specify whether or not a Reserve Fund will be included in the Trust
for such Series.

The Reserve Fund for a Series will be funded (i) by the deposit therein of
cash, U.S. Treasury securities or instruments evidencing ownership of
principal or interest payments thereon, letters of credit, demand notes,
certificates of deposit or a combination thereof in the aggregate amount
specified in the related Supplement, (ii) by the deposit therein from time
to time of certain amounts, as specified in the related Supplement, to
which Subordinate Certificateholders, if any, would otherwise be entitled
or (iii) in such other manner as may be specified in the related
Supplement.

Any amounts on deposit in the Reserve Fund and the proceeds of any other
instrument deposited therein upon maturity will be held in cash or will be
invested in Eligible Investments. Any instrument deposited therein will
name the Trustee, in its capacity as trustee for Certificateholders, or
such other entity as is specified in the related Supplement, as beneficiary
and will be issued by an entity acceptable to each rating agency that rates
the Certificates. Additional information with respect to such instruments
deposited in the Reserve Funds will be set forth in the related Supplement.

Any amounts so deposited and payments on instruments so deposited will be
available for withdrawal from the Reserve Fund for distribution to
Certificateholders for the purposes, in the manner and at the times
specified in the related Supplement.

CROSS SUPPORT

If specified in the related Supplement, the beneficial ownership of
separate groups of assets included in a Trust may be evidenced by separate
classes of the related Series of Certificates. In such case, credit support
may be provided by a cross support feature which requires that
distributions be made with respect to Certificates evidencing a beneficial
ownership interest in other asset groups within the same Trust. The related
Supplement for a Series that includes a cross support feature will describe
the manner and conditions for applying such cross support feature.

OTHER INSURANCE, GUARANTIES, LETTERS OF CREDIT AND SIMILAR INSTRUMENTS OR
AGREEMENTS

If specified in the related Supplement, a Trust may also include insurance,
guaranties, letters of credit or similar arrangements for the purpose of
(i) maintaining timely payments or providing additional protection against
losses on the assets included in such Trust, (ii) paying administrative
expenses or (iii) establishing a minimum reinvestment rate on the payments
made in respect of such assets or principal payment rate on such assets.
Such arrangements may include agreements under which Certificateholders are
entitled to receive amounts deposited in various accounts held by the
Trustee upon the terms specified in such Supplement.

YIELD AND PREPAYMENT CONSIDERATIONS

The weighted average life of a Series of Certificates and the yield to
investors depend in part on the rate and timing of principal payments
received on or in respect of the Mortgage Assets included in the related
Trust. Prepayments on mortgage loans are commonly measured relative to a
prepayment standard or model. The prepayment model, if any, used with
respect to a particular Series will be identified and described in the
related Supplement.

The Supplement for a Series of Certificates may contain a table setting
forth percentages of the initial Certificate Balance of each class expected
to be outstanding after each of the dates shown in such table. Any such
table will be based upon a number of assumptions stated in such Supplement,
including assumptions that prepayments on the mortgage loans underlying the
related Mortgage Certificates or on the Mortgage Loans are made at rates
corresponding to various percentages of the prepayment model specified in
the related Supplement. It is unlikely, however, that the prepayment of the
mortgage loans underlying the Mortgage Certificates, or of the Mortgage
Loans, underlying any Series will conform to any of the percentages of the
prepayment model described in the table set forth in such Supplement.

The rate of principal prepayments on pools of mortgage loans underlying the
Mortgage Certificates and Mortgage Loans is influenced by a variety of
economic, geographic, social and other factors. In general, however, if
prevailing interest rates fall significantly below the interest rates on
such mortgage loans or on the Mortgage Loans included in a Trust, such
mortgage loans or Mortgage Loans are likely to be the subject of higher
principal prepayments than if prevailing rates remain at or above the rates
borne by such mortgage loans or Mortgage Loans. Conversely, if prevailing
interest rates rise appreciably above the interest rates on such mortgage
loans or on the Mortgage Rates borne by the Mortgage Loans included in a
Trust, such mortgage loans or Mortgage Loans are likely to experience a
lower prepayment rate than if prevailing rates remain at or below the rates
borne by such mortgage loans or Mortgage Rates. Other factors affecting
prepayment of mortgage loans include changes in mortgagors' housing needs,
job transfers, unemployment, mortgagors' net equity in the properties
securing the mortgage loans and the availability of mortgage funds.

Prepayments may also result from the enforcement of any "due-on-sale"
provisions contained in a Mortgage Note permitting the holder of the
Mortgage Note to demand immediate repayment of the outstanding balance of
the Mortgage Loan upon conveyance by the Mortgagor of the underlying
Mortgaged Property. The Master Servicer will agree that it will enforce any
"due-on-sale" clause to the extent it has knowledge of the conveyance or
proposed conveyance of the underlying Mortgaged Property and reasonably
believes that it is entitled to do so under applicable law; PROVIDED,
HOWEVER, that the Master Servicer will not take any action in relation to
the enforcement of any "due-on-sale" provision which would impair or
threaten to impair any recovery under any related Primary Mortgage
Insurance Policy. Under current law, such exercise is permitted for
substantially all the mortgage loans which contain such clauses.
Acceleration is not permitted, however, for certain types of transfers,
including transfers upon the death of a joint tenant or tenant by the
entirety and the granting of a leasehold interest of three years or less
not containing an option to purchase.

Mortgage Loans insured by the FHA and Mortgage Loans partially guaranteed
by the VA are assumable with the consent of the FHA and the VA,
respectively. Thus, the rate of prepayments on such Mortgage Loans may be
lower than that on conventional Mortgage Loans bearing comparable interest
rates.

When a full prepayment is made on a Mortgage Loan, the Mortgagor is charged
interest on the principal amount of the Mortgage Loan so prepaid only for
the number of days in the month actually elapsed up to the date of the
prepayment rather than for a full month. Unless otherwise specified in the
related Supplement, the effect of prepayments in full will be to reduce the
amount of interest passed through in the following month to
Certificateholders because interest on the principal amount of any Mortgage
Loan so prepaid will be paid only to the date of prepayment. Partial
prepayments in a given month may be applied to the outstanding principal
balances of the Mortgage Loans so prepaid on the first day of the month of
receipt or the month following receipt. In the latter case, partial
prepayments will not reduce the amount of interest passed through in such
month. Unless otherwise specified in the related Supplement, both full and
partial prepayments will not be passed through until the month following
receipt.

The effective yield to Certificateholders will be slightly lower than the
yield otherwise produced by the applicable Pass-Through Rate and purchase
price because while interest will accrue on each Mortgage Loan from the
first day of the month (unless otherwise provided in the related
Supplement), the distribution of such interest will not be made earlier
than the month following the month of accrual.
Under certain circumstances, the Master Servicer or, if specified in the
related Supplement for a Series of REMIC Certificates, the holders of the
Residual Certificates of such Series may have the option to purchase the
assets of a Trust thereby effecting early retirement of the related Series
of Certificates. See "The Pooling and Servicing Agreement -- Termination;
Optional Termination" herein.

Factors other than those identified herein and in the related Supplement
could significantly affect principal prepayments at any time and over the
lives of the Certificates. The relative contribution of the various factors
affecting prepayment may also vary from time to time. There can be no
assurance as to the rate of payment of principal of the Mortgage Assets at
any time or over the lives of the Certificates.

The Supplement relating to a Series of Certificates will discuss in greater
detail the effect of the rate and timing of principal payments (including
Principal Prepayments), delinquencies and losses on the yield, weighted
average lives and maturities of such Certificates.

THE SPONSOR

Headlands Mortgage Securities Inc., a Delaware corporation (the "Sponsor"),
was organized on November 18, 1996 for the limited purpose of acquiring,
owning and transferring Mortgage Assets and selling interests therein or
bonds secured thereby. The Sponsor is a subsidiary of Headlands Mortgage
Company, a California corporation engaged in the mortgage banking business.
The Sponsor maintains its principal office at 700 Larkspur Landing Circle,
Suite 250, Larkspur, California 94939. Its telephone number is (415)
925-5442.

Neither the Sponsor nor any of the Sponsor's affiliates will ensure or
guarantee distributions on the Certificates of any Series.

USE OF PROCEEDS

The net proceeds to be received from the sale of each Series of
Certificates will be used by the Sponsor to either purchase the Mortgage
Assets related to that Series or to return to the Sponsor the amounts
previously used to effect such a purchase, the costs of carrying the
Mortgage Assets until sale of the Certificates and other expenses connected
with pooling the Mortgage Assets and issuing the Certificates.

MORTGAGE LOAN PROGRAM

Set forth below is a description of aspects of the Sponsor's purchase
program for Mortgage Loans eligible for inclusion in a Trust. The related
Supplement will contain additional information regarding the origination of
the Mortgage Loans.

The Sponsor will purchase Mortgage Loans, either directly or through
affiliates, from Sellers. The Mortgage Loans so acquired by the Sponsor
will have been originated in accordance with the underwriting criteria
specified below under " -- Underwriting Standards".

UNDERWRITING STANDARDS

Each Seller will represent and warrant that all Mortgage Loans originated
and/or sold by it to the Sponsor or one of its affiliates will have been
underwritten in accordance with standards consistent with those utilized by
mortgage lenders generally during the period of origination for similar
types of loans. As to any Mortgage Loan insured by the FHA or partially
guaranteed by the VA, the Seller will represent that it has complied with
underwriting policies of the FHA or the VA, as the case may be.

Underwriting standards are applied by or on behalf of a lender to evaluate
the borrower's credit standing and repayment ability, and the value and
adequacy of the mortgaged property as collateral. In general, a prospective
borrower applying for a mortgage loan is required to fill out a detailed
application designed to provide to the underwriting officer pertinent
credit information. As part of the description of the borrower's financial
condition, the borrower generally is required to provide a current list of
assets and liabilities and a statement of income and expenses, as well as
an authorization to apply for a credit report which summarizes the
borrower's credit history with local merchants and lenders and any record
of bankruptcy. In most cases, an employment verification is obtained from
an independent source (typically the borrower's employer), which
verification reports the length of employment with that organization, the
borrower's current salary and whether it is expected that the borrower will
continue such employment in the future. If a prospective borrower is self-
employed, the borrower may be required to submit copies of signed tax
returns. The borrower may also be required to authorize verification of
deposits at financial institutions where the borrower has demand or savings
accounts.

In determining the adequacy of the mortgaged property as collateral, an
appraisal is made of each property considered for financing. The appraiser
is required to inspect the property and verify that it is in good repair
and that construction, if new, has been completed. The appraisal is based
on the market value of comparable homes, the estimated rental income (if
considered applicable by the appraiser) and the cost of replacing the home.

Once all applicable employment, credit and property information is
received, a determination generally is made as to whether the prospective
borrower has sufficient monthly income available (i) to meet the borrower's
monthly obligations on the proposed mortgage loan (generally determined on
the basis of the monthly payments due in the year of origination) and other
expenses related to the mortgaged property (such as property taxes and
hazard insurance) and (ii) to meet monthly housing expenses and other
financial obligations and monthly living expenses. The underwriting
standards applied by a Seller, particularly with respect to the level of
loan documentation and the mortgagor's income and credit history, may be
varied in appropriate cases where factors such as low LTVs or other
favorable credit exist.

If specified in the related Supplement, a portion of the Mortgage Loans in
a Mortgage Pool may have been originated under a limited documentation
program. Under a limited documentation program, more emphasis is placed on
the value and adequacy of the mortgaged property as collateral and other
assets of the borrower than on credit underwriting. Under a limited
documentation program, certain credit underwriting documentation concerning
income or income verification and/or employment verification is waived. The
Supplement for each Series of Certificates will indicate the types of
limited documentation programs pursuant to which the related Mortgage Loans
were originated and the underwriting standards applicable to such limited
documentation programs.

In the case of a Mortgage Loan secured by a leasehold interest in real
property, the title to which is held by a third party lessor, the Seller
will represent and warrant, among other things, that the remaining term of
the lease and any sublease is at least five years longer than the remaining
term on the Mortgage Note.

Certain of the types of Mortgage Loans that may be included in a Trust may
involve additional uncertainties not present in traditional types of loans.
For example, certain of such Mortgage Loans may provide for escalating or
variable payments by the Mortgagor. These types of Mortgage Loans are
underwritten on the basis of a judgment that the Mortgagors have the
ability to make the monthly payments required initially. In some instances,
however, a Mortgagor's income may not be sufficient to permit continued
loan payments as such payments increase. These types of Mortgage Loans may
also be underwritten primarily upon the basis of LTVs or other favorable
credit factors.

QUALIFICATIONS OF SELLERS

Each Seller must be an institution experienced in originating and servicing
mortgage loans of the type contained in the related Mortgage Pool in
accordance with accepted practices and prudent guidelines, and must
maintain satisfactory facilities to originate and service those mortgage
loans. Each Seller must be a seller/servicer approved by either FNMA or
FHLMC. Each Seller must be a mortgagee approved by the FHA or an
institution the deposit accounts in which are insured by the Federal
Deposit Insurance Corporation.

THE POOLING AND SERVICING AGREEMENT

Set forth below is a summary of certain provisions of the Pooling Agreement
which are not described elsewhere in this Prospectus.

ASSIGNMENT OF MORTGAGE LOANS

ASSIGNMENT OF MORTGAGE LOANS. At the time of issuance of each Series of
Certificates, the Sponsor will cause the Mortgage Loans comprising the
related Trust to be assigned to the Trustee together with all principal and
interest on the Mortgage Loans, except for principal and interest due on or
before the Cut-off Date. The Trustee will, concurrently with such
assignment, authenticate and deliver the Certificates to the Sponsor or its
designated agent in exchange for the Mortgage Loans and other assets, if
any. Each Mortgage Loan will be identified in a schedule appearing as an
exhibit to the Pooling Agreement. Such schedule will include information as
to the outstanding principal balance of each Mortgage Loan after
application of payments due on the Cut-off Date, as well as information
regarding the Mortgage Rate, the current scheduled monthly payment of
principal and interest, the maturity of each Mortgage Note, the LTV and
certain other information.

In addition, the Sponsor will, as to each Mortgage Loan, deliver to the
Trustee (or a custodian) the Mortgage Note endorsed without recourse in
blank or to the order of the Trustee, an assignment to the Trustee of the
Mortgage in form for recording or filing as may be appropriate in the state
of the Mortgaged Property, the original recorded Mortgage with evidence of
recording or filing indicated thereon, or a copy of such Mortgage certified
by the recording office in those jurisdictions where the original is
retained by the recording office, a copy of the title insurance policy or
other evidence of title, and evidence of any Primary Mortgage Insurance
Policy for such Mortgage Loan, if applicable. In certain instances where
documents respecting a Mortgage Loan may not be available prior to
execution of the Pooling Agreement, the Sponsor may deliver copies thereof
and deliver such documents to the Trustee promptly upon receipt.

With respect to any Mortgage Loans that are Cooperative Loans, the Sponsor
will cause to be delivered to the Trustee the related original cooperative
note endorsed without recourse in blank or to the order of the Trustee, the
original security agreement, the proprietary lease or occupancy agreement,
the recognition agreement, an executed financing agreement and the relevant
stock certificate, related blank stock powers and any other document
specified in the related Supplement. The Sponsor will cause to be filed in
the appropriate office an assignment and a financing statement evidencing
the Trustee's security interest in each Cooperative Loan.

The Trustee (or a custodian) will review the Mortgage Loan documents within
a specified number of days of receipt thereof in original form to ascertain
that all required documents have been properly executed and received. The
Trustee will hold such documents for each Series in trust for the benefit
of holders of the Certificates of such Series. Unless otherwise specified
in the related Supplement, if any document is found by the Trustee not to
have been properly executed or received or to be unrelated to the Mortgage
Loans identified in the Pooling Agreement, and such defect cannot be cured
within the permitted time period, the Seller will replace such Mortgage
Loan with an eligible substitute mortgage loan (as described in the related
Supplement) or repurchase the related Mortgage Loan from the Trustee within
a specified number of days of receipt of notice of the defect at a price
generally equal to the outstanding principal balance thereof, plus accrued
and unpaid interest thereon at the applicable Mortgage Rate to the first
day of the month following the month of repurchase (less any unreimbursed
Advances or amounts payable as related servicing compensation if the Seller
is the Master Servicer with respect to such Mortgage Loan). Upon receipt of
the repurchase price, in the case of a repurchase, the Trustee will
reimburse any unreimbursed Advances of principal and interest by the Master
Servicer with respect to such Mortgage Loan or unreimbursed payments under
any form of credit enhancement. The remaining portion of such repurchase
price will then be passed through to holders of the Certificates as
liquidation proceeds in accordance with the procedures specified under
"Description of Certificates -- Distributions" herein. This
substitution/repurchase obligation constitutes the sole remedy available to
Certificateholders or the Trustee for such a defect in a constituent
document.

Any restrictions on such substitution or repurchase with respect to a
Series of Certificates will be set forth in the related Supplement.

The Trustee will be authorized to appoint a custodian pursuant to a
custodial agreement to maintain possession of and, if applicable, to review
the documents relating to the Mortgage Loans as agent of the Trustee.

Unless otherwise specified in the related Supplement, assignments of the
Mortgage Loans to the Trustee will be recorded or filed in the appropriate
jurisdictions except in jurisdictions where, in the written opinion of
local counsel acceptable to the Sponsor, such filing or recording is not
required to protect the Trustee's interest in the Mortgage Loans against
the claim of any subsequent transferee or any successor to or creditor of
the Sponsor or the Seller.

ASSIGNMENT OF MORTGAGE CERTIFICATES. The Sponsor will cause the Mortgage
Certificates to be registered in the name of the Trustee or its nominee,
and the Trustee concurrently will authenticate and deliver the
Certificates. The Trustee (or the custodian) will hold the Mortgage
Certificates in the manner described in the related Supplement. Each
Mortgage Certificate will be identified in a schedule appearing as an
exhibit to the Pooling Agreement, which will specify as to each Mortgage
Certificate the original principal amount and outstanding principal balance
as of the Cut-off Date, the annual pass-through rate (if any) and the
maturity date.

REPRESENTATIONS AND WARRANTIES

Unless otherwise specified in the related Supplement, the Sponsor will not
make any representations and warranties regarding the Mortgage Loans, and
its assignment of the Mortgage Loans to the Trustee will be without
recourse. As further described below, the Seller will make certain
representations and warranties concerning the Mortgage Loans in the related
Pooling Agreement and under certain circumstances may be required to
repurchase or substitute a Mortgage Loan as a result of a breach of any
such representation or warranty.

In the Pooling Agreement for each Series of Certificates backed in whole or
in part by Mortgage Loans, the Seller will represent and warrant to the
Trustee, unless otherwise specified in the related Supplement, among other
things, that: (i) the information set forth in the schedule of Mortgage
Loans is true and correct in all material respects; (ii) at the time of
transfer the Seller had good title to the Mortgage Loans and the Mortgage
Notes were subject to no offsets, defenses or counterclaims, except to the
extent that the buydown agreement for a Buydown Loan forgives certain
indebtedness of a Mortgagor; (iii) as of the Cut-off Date, no Mortgage Loan
was more than 30 days delinquent; (iv) a title policy (or other
satisfactory evidence of title) was issued on the date of the origination
of each Mortgage Loan and each such policy or other evidence of title is
valid and remains in full force and effect; (v) if a Primary Mortgage
Insurance Policy is required with respect to such Mortgage Loan, such
policy is valid and remains in full force and effect as of the Closing
Date; (vi) as of the Closing Date, each Mortgage is a valid first lien on
the related Mortgaged Property (subject only to (a) liens for current real
property taxes and special assessments, (b) covenants, conditions and
restrictions, rights of way, easements and other matters of public record
as of the date of recording of such Mortgage, such exceptions appearing of
record being acceptable to mortgage lending institutions generally or
specifically reflected in the mortgage originator's appraisal, and (c)
other matters to which like properties are commonly subject which do not
materially interfere with the benefits of the security intended to be
provided by the Mortgage); (vii) as of the Closing Date, each Mortgaged
Property is free of damage and is in good repair; (viii) as of the time
each Mortgage Loan was originated, the Mortgage Loan complied with all
applicable state and federal laws, including usury, equal credit
opportunity, disclosure and recording laws; and (ix) as of the Closing
Date, there are no delinquent tax or assessment liens against any Mortgaged
Property.

In the event of the discovery by the Seller of a breach of any of its
representations or warranties which materially and adversely affects the
interest of Certificateholders in the related Mortgage Loan, or the receipt
of notice thereof from the Trustee, the Seller will, with respect to a
breach of its representations or warranties, cure the breach within the
time permitted by the related Pooling Agreement or substitute a
substantially similar substitute mortgage loan for such Mortgage Loan or
repurchase the related Mortgage Loan, or any Mortgaged Property acquired in
respect thereof, on the terms set forth above under " -- Assignment of
Mortgage Loans" and in the related Supplement. The proceeds of any such
repurchase will be passed through to Certificateholders as liquidation
proceeds. This substitution/repurchase obligation constitutes the sole
remedy available to Certificateholders and the Trustee for any such breach.
Neither the Sponsor nor the Master Servicer (unless the Master Servicer is
the Seller) will be obligated to purchase a Mortgage Loan if a Seller
defaults on its obligation to do so, and no assurance can be given that the
Seller will carry out their respective repurchase obligations with respect
to the Mortgage Loans.

Since the representations and warranties of a Seller do not address events
that may occur following the sale of a Mortgage Loan by such Seller, its
repurchase obligation described below will not arise if the relevant event
that would otherwise have given rise to such an obligation with respect to
a Mortgage Loan occurs after the date of sale of such Mortgage Loan by such
Seller to the Sponsor or its affiliates.

SERVICING

The Master Servicer will be responsible for servicing and administering the
Mortgage Loans and will agree to perform diligently all services and duties
customary to the servicing by prudent mortgage lending institutions or
mortgages of the same type as the Mortgage Loans in those jurisdictions
where the related Mortgage Properties are located. The Master Servicer may
enter into a subservicing agreement with a subservicer to perform, as an
independent contractor, certain servicing functions for the Master Servicer
subject to its supervision. A subservicing agreement will not contain any
terms or conditions that are inconsistent with the related Pooling
Agreement. The subservicer will receive a fee for such services which will
be paid by the Master Servicer out of the Master Servicing Fee. The Master
Servicer will have the right to remove the subservicer of any Mortgage Loan
at any time for cause and at any other time upon the giving of the required
notice. In such event, the Master Servicer would continue to be responsible
for servicing such Mortgage Loan and may designate a replacement
subservicer (which may include an affiliate of the Sponsor or the Master
Servicer).

The Master Servicer is required to maintain a fidelity bond and errors and
omissions policy or their equivalent with respect to officers and employees
which provide coverage against losses which may be sustained as a result of
an officer's or employee's misappropriation of funds or errors and
omissions in failing to maintain insurance, subject to certain limitations
as to amount of coverage, deductible amounts, conditions, exclusions and
exceptions in the form and amount specified in the Pooling Agreement.

PAYMENTS ON MORTGAGE LOANS

The Master Servicer will establish and maintain or cause to be established
and maintained with respect to the related Trust one or more accounts for
the collection of payments on the related Mortgage Assets (the "Certificate
Account") which must be an Eligible Account. An "Eligible Account" is an
account or accounts which is either (i) maintained with a depository
institution the short-term debt obligations of which (or, in the case of a
depository institution that is the principal subsidiary of a holding
company, the short-term debt obligations of such holding company) are rated
in one of the two highest short-term rating categories by the Rating Agency
that rated one or more classes of the related Series of Certificates, (ii)
an account or accounts the deposits in which are fully insured by the FDIC,
(iii) an account or accounts the deposits in which are insured by the FDIC
to the limits established by the FDIC and the uninsured deposits in which
are otherwise secured such that, as evidenced by an opinion of counsel,
Certificateholders have a claim with respect to the funds in such account
or accounts, or a perfected first-priority security interest against any
collateral securing such funds, that is superior to the claims of any other
depositors or general creditors of the depository institution with which
such account or accounts are maintained or (iv) an account or accounts
otherwise acceptable to such Rating Agency. The collateral eligible to
secure amounts in the Certificate Account is limited to investments
consisting of United States government securities and other high-quality
investments ("Eligible Investments"). A Certificate Account may be
maintained as an interest-bearing account, or the funds held therein may be
invested pending each succeeding Distribution Date in Eligible Investments.
The Master Servicer or its designee will generally be entitled to receive
any such interest or other income earned on funds in the Certificate
Account as additional compensation and will be obligated to deposit in the
Certificate Account the amount of any loss immediately as realized. The
Certificate Account may be maintained with the Master Servicer or the
Seller or with a depository institution that is an affiliate of the Master
Servicer or the Sponsor, provided it is an Eligible Account.

Unless otherwise specified in the related Supplement, the Master Servicer
will deposit in the Certificate Account for each Trust on a daily basis, to
the extent applicable, the following payments and collections received by
or on behalf of it subsequent to the Cut-off Date (other than payments due
on or before the Cut-off Date):

(i) All payments on account of principal and interest (which, at its
option, may be net of the applicable servicing compensation), including
Principal Prepayments;

(ii) All amounts received by foreclosure or otherwise in connection
with the liquidation of defaulted Mortgage Loans, net of expenses incurred
in connection with such liquidation;

(iii) All proceeds received under any Primary Mortgage Insurance
Policy or title, hazard or other insurance policy covering any Mortgage
Loan, other than proceeds to be applied to the restoration or repair of the
related Mortgaged Property;

(iv) All advances as described herein under "Advances";

(v) All proceeds of any Mortgage Loans or property acquired in
respect thereof repurchased as described herein under " -- Assignment of
Mortgage Loans" and " -- Representations and Warranties";

(vi) Any Buydown Funds (and, if applicable, investment earnings
thereon) required to be deposited in the Certificate Account as described
below;

(vii) All payments required to be deposited in the Certificate
Account with respect to any deductible clause in any blanket insurance
policy described under " -- Hazard Insurance" herein;

(viii) Any amount required to be deposited by the Master Servicer in
connection with losses realized on investments for the benefit of the
Master Servicer of funds held in the Certificate Account; and

(ix) All other amounts required to be deposited in the Certificate
Account.

Under the Pooling Agreement for each Series, the Master Servicer
will be authorized to make the following withdrawals from the Certificate
Account:

(i) To clear and terminate the Certificate Account upon liquidation
of all Mortgage Loans or other termination of the Trust;

(ii) To reimburse any provider of credit support for payments under
such credit support from amounts received as late payments on related
Mortgage Loans or from related insurance or liquidation proceeds;

(iii) To reimburse the Master Servicer for Advances from amounts
received as late payments on related Mortgage Loans, from related insurance
or liquidation proceeds or from other amounts received with respect to such
Mortgage Loans;

(iv) To reimburse the Master Servicer from related insurance or
liquidation proceeds for amounts expended by the Master Servicer in
connection with the restoration of property damaged by an uninsured cause
or the liquidation of a Mortgage Loan;

(v) To pay to the Master Servicer its Master Servicing Fee (and
other servicing compensation, if applicable) and to the Trustee its fee;

(vi) To reimburse the Master Servicer for Advances which the Master
Servicer has determined to be otherwise nonrecoverable;

(vii) To withdraw any amount deposited to the Certificate Account in
error; and

(viii) To pay any expenses which were incurred and are reimbursable
pursuant to the Pooling Agreement.

COLLECTION AND OTHER SERVICING PROCEDURES

The Master Servicer will agree to proceed diligently to collect all
payments called for under the Mortgage Loans. Consistent with the above,
the Master Servicer may, in its discretion, (i) waive any prepayment
charge, assumption fee, late payment charge or any other charge in
connection with the prepayment of a Mortgage Loan and (ii) to the extent
not inconsistent with the coverage of such Mortgage Loan by a Mortgage Pool
Insurance Policy, Primary Mortgage Insurance Policy, FHA Insurance, VA
Guaranty or Bankruptcy Bond or alternative arrangements, if applicable,
suspend or reduce regular monthly payments for a period of up to six
months, or arrange with a Mortgagor a schedule for the liquidation of
delinquencies. In the event of any such arrangement, but only to the extent
of the amount of any credit support, the provider of such credit support
will honor requests for payment or otherwise distribute funds with respect
to such Mortgage Loan during the scheduled period in accordance with the
amortization schedule thereof and without regard to the temporary
modification thereof. In addition, in the event of any such arrangement,
the Master Servicer's obligation to make Advances on the related Mortgage
Loan shall continue during the scheduled period.

Under the Pooling Agreement, the Master Servicer will be required to
enforce "due-on-sale" clauses with respect to the Mortgage Loans to the
extent contemplated by the terms of the Mortgage Loans and permitted by
applicable law. Where an assumption of, or substitution of liability with
respect to, a Mortgage Loan is required by law, upon receipt of assurance
that the Primary Mortgage Insurance Policy covering such Mortgage Loan will
not be affected, the Master Servicer may permit the assumption of a
Mortgage Loan, pursuant to which the Mortgagor would remain liable on the
Mortgage Note, or a substitution of liability with respect to such Mortgage
Loan, pursuant to which the new Mortgagor would be substituted for the
original Mortgagor as being liable on the Mortgage Note. Any fees collected
for entering into an assumption or substitution of liability agreement may
be retained by the Master Servicer as additional servicing compensation. In
connection with any assumption or substitution, the Mortgage Rate borne by
the related Mortgage Note may not be changed.

The Pooling Agreement may require the Master Servicer to establish and
maintain one or more escrow accounts into which Mortgagors deposit amounts
sufficient to pay taxes, assessments, hazard insurance premiums or
comparable items. Withdrawals from the escrow accounts maintained for
Mortgagors may be made to effect timely payment of taxes, assessments and
hazard insurance premiums or comparable items, to reimburse the Master
Servicer out of related assessments for maintaining hazard insurance, to
refund to Mortgagors amounts determined to be overages, to remit to
Mortgagors, if required, interest earned, if any, on balances in any of the
escrow accounts, to repair or otherwise protect the Mortgaged Property and
to clear and terminate any of the escrow accounts. The Master Servicer will
be solely responsible for administration of the escrow accounts and will be
expected to make advances to such account when a deficiency exists therein.

HAZARD INSURANCE

Unless otherwise specified in the related Supplement, under the Pooling
Agreement, the Master Servicer will be required to maintain for each
Mortgage Loan a hazard insurance policy providing coverage against loss by
fire and other hazards which are covered under the standard extended
coverage endorsement customary in the state in which the property is
located. Such coverage will be in an amount at least equal to the lesser of
(i) the maximum insurable value of the improvements securing such Mortgage
Loan or (ii) the greater of (y) the outstanding principal balance of the
Mortgage Loan and (z) an amount such that the proceeds of such policy shall
be sufficient to prevent the Mortgagor and/or the mortgagee from becoming a
co-insurer. As set forth above, all amounts collected by the Master
Servicer under any hazard policy (except for amounts to be applied to the
restoration or repair of the Mortgaged Property or released to the
Mortgagor in accordance with the Master Servicer's normal servicing
procedures) will be deposited in the Certificate Account. In the event that
the Master Servicer maintains a blanket policy insuring against hazard
losses on all of the Mortgage Loans, it shall conclusively be deemed to
have satisfied its obligation relating to the maintenance of hazard
insurance. Such blanket policy may contain a deductible clause, in which
case the Master Servicer will deposit in the Certificate Account all sums
which would have been deposited therein but for such clause.

In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements on the property by
fire, lightning, explosion, smoke, windstorm and hail, and riot, strike and
civil commotion, subject to the conditions and exclusions particularized in
each policy. Although the policies relating to the Mortgage Loans will be
underwritten by different insurers under different state laws in accordance
with different applicable state forms and therefore will not contain
identical terms and conditions, the basic terms thereof are dictated by
respective state laws, and most such policies typically do not cover (among
other things) any physical damage resulting from the following: war,
revolution, governmental actions, floods and other water-related causes,
earth movement (including earthquakes, landslides and mud flows), nuclear
reactions, wet or dry rot, vermin, rodents, insects or domestic animals,
theft and, in certain cases, vandalism. The foregoing list is merely
indicative of certain kinds of uninsured risks and is not intended to be
all inclusive.

If, however, any Mortgaged Property at the time of origination of the
related Mortgage Loan is located in an area identified by the Flood
Emergency Management Agency as having special flood hazards and flood
insurance has been made available, the Master Servicer will cause to be
maintained with a generally acceptable insurance carrier a flood insurance
policy in accordance with mortgage servicing industry practice. Such flood
insurance policy will provide coverage in an amount not less than the
lesser of (i) the principal balance of the Mortgage Loan or (ii) the
minimum amount required under the terms of coverage to compensate for any
damage or loss on a replacement cost basis, but not more than the maximum
amount of such insurance available for the related Mortgaged Property under
either the regular or emergency programs of the National Flood Insurance
Program.

The hazard insurance policies covering the Mortgaged Properties typically
contain a clause which, in effect, requires the insured at all times to
carry insurance of a specified percentage (generally 80% to 90%) of the
full replacement value of the improvements on the property in order to
recover the full amount of any partial loss. If the insured's coverage
falls below this specified percentage, such clause provides that the
insurer's liability in the event of partial loss does not exceed the larger
of (i) the replacement cost of the improvements less physical depreciation,
and (ii) such proportion of the loss as the amount of insurance carried
bears to the specified percentage of the full replacement cost of such
improvements. Since the amount of hazard insurance the Master Servicer may
cause to be maintained on the improvements securing the Mortgage Loans
declines as the principal balance owing thereon decrease, and since
improved real estate generally has appreciated in value over time in the
past, the effect of this requirement in the event of partial loss may be
that hazard insurance proceeds will be insufficient to restore fully the
damaged property.

PRIMARY MORTGAGE INSURANCE

The Master Servicer will maintain or cause to be maintained, as the case
may be, in full force and effect, to the extent specified in the related
Supplement, a Primary Mortgage Insurance Policy with regard to each
Mortgage Loan for which such coverage is required. The Master Servicer will
not cancel or refuse to renew any such Primary Mortgage Insurance Policy in
effect at the time of the initial issuance of a Series of Certificates that
is required to be kept in force under the applicable Pooling Agreement
unless the replacement Primary Mortgage Insurance Policy for such cancelled
or nonrenewed policy is maintained with an insurer (a "Primary Insurer")
whose claims-paying ability is sufficient to maintain the current rating of
the classes of Certificates of such Series that have been rated.

Although the terms and conditions of primary mortgage insurance vary, the
amount of a claim for benefits under a Primary Mortgage Insurance Policy
covering a Mortgage Loan will consist of the insured percentage of the
unpaid principal amount of the covered Mortgage Loan and accrued and unpaid
interest thereon and reimbursement of certain expenses, less (i) all rents
or other payments collected or received by the insured (other than the
proceeds of hazard insurance) that are derived from or in any way related
to the Mortgaged Property, (ii) hazard insurance proceeds in excess of the
amount required to restore the Mortgaged Property and which have not been
applied to the payment of the Mortgage Loan, (iii) amounts expended but not
approved by the Primary Insurer of the related Primary Mortgage Insurance
Policy, (iv) claim payments previously made by the Primary Insurer and (v)
unpaid premiums.

Primary Mortgage Insurance Policies reimburse certain losses sustained by
reason of default in payments by borrowers. Primary Mortgage Insurance
Policies will not insure against, and exclude from coverage, a loss
sustained by reason of a default arising from or involving certain matters,
including (i) fraud or negligence in origination or servicing of the
Mortgage Loans, including misrepresentation by the originator, Mortgagor or
other persons involved in the origination of the Mortgage Loan; (ii)
failure to construct the Mortgaged Property subject to the Mortgage Loan in
accordance with specified plans; (iii) physical damage to the Mortgaged
Property; and (iv) the related sub-servicer not being approved as a
servicer by the Primary Insurer.

Evidence of each Primary Mortgage Insurance Policy will be provided to the
Trustee simultaneously with the transfer to the Trustee of the related
Mortgage Loan. The Master Servicer, on behalf of itself, the Trustee and
Certificateholders, is required to present claims to the insurer under any
Primary Mortgage Insurance Policy and to take such reasonable steps as are
necessary to permit recovery thereunder with respect to defaulted Mortgage
Loans. Amounts collected by the Master Servicer on behalf of the Master
Servicer, the Trustee and Certificateholders shall be deposited in the
Certificate Account for distribution as set forth above. The Master
Servicer will not cancel or refuse to renew any Primary Mortgage Insurance
Policy required to be kept in force by the Pooling Agreement.

CLAIMS UNDER INSURANCE POLICIES AND OTHER REALIZATION UPON DEFAULTED
MORTGAGE LOANS

The Master Servicer, on behalf of the Trustee and Certificateholders, will
present claims to the insurer under any applicable Primary Mortgage
Insurance Policy and will take such reasonable steps as are necessary to
permit recovery under such other insurance policies respecting defaulted
Mortgage Loans. If any Mortgaged Property securing a defaulted Mortgage
Loan is damaged and proceeds, if any, from the related hazard insurance
Policy are insufficient to restore the damaged property to a condition
sufficient to permit recovery under any applicable Primary Mortgage
Insurance Policy, the Master Servicer will not be required to expend its
own funds to restore the damaged property unless the Master Servicer
determines (i) that such restoration will increase the proceeds to
Certificateholders upon liquidation of the Mortgage Loan after
reimbursement of the Master Servicer for its expenses and (ii) that such
expenses will be recoverable to it through liquidation proceeds.

Regardless of whether recovery under any Primary Mortgage Insurance Policy
is available or any further amount is payable under the credit enhancement
for a Series of Certificates, the Master Servicer is nevertheless obligated
to follow such normal practices and procedures as it deems necessary or
advisable to realize upon the defaulted Mortgage Loan. If at any time no
further amount is payable under the credit enhancement for a Series of
Certificates, and if the proceeds of any liquidation of the Mortgaged
Property securing the defaulted Mortgage Loan are less than the principal
balance of the defaulted Mortgage Loan plus interest accrued thereon,
Certificateholders will realize a loss in the amount of such difference
plus the aggregate of unreimbursed advances of the Master Servicer with
respect to such Mortgage Loan and expenses incurred by the Master Servicer
in connection with such proceedings and which are reimbursable under the
Pooling Agreement.

SERVICING COMPENSATION AND PAYMENT OF EXPENSES

The Master Servicer's primary compensation for its activities as Master
Servicer will come from the payment to it, with respect to each interest
payment on a Mortgage Loan, of the amount specified in the related
Supplement (the "Master Servicing Fee"). As principal payments are made on
the Mortgage Loans, the portion of each monthly payment which represents
interest will decline, and thus servicing compensation to the Master
Servicer will decrease as the Mortgage Loans amortize. Prepayments and
liquidations of Mortgage Loans prior to maturity will also cause servicing
compensation to the Master Servicer to decrease.

In addition, the Master Servicer will be entitled to retain all prepayment
fees, assumption fees and late payment charges, to the extent collected
from Mortgagors and any benefit that may accrue as a result of the
investment of funds in the Certificate Account (unless otherwise specified
in the related Supplement).

The Master Servicer will pay all expenses incurred in connection with its
activities as Master Servicer (subject to limited reimbursement), including
payments of expenses incurred in connection with distributions and reports
to Certificateholders of each Series and, if so specified in the related
Supplement, payment of the fees and disbursements of the Trustee and
payment of any fees for providing credit enhancement. The Master Servicer
will be entitled to reimbursement for certain expenses incurred by it in
connection with any defaulted Mortgage Loan as to which it has determined
that all recoverable liquidation proceeds and insurance proceeds have been
received, such right of reimbursement being prior to the rights of
Certificateholders to receive any such proceeds.

EVIDENCE AS TO COMPLIANCE

Each Pooling Agreement will provide that the Master Servicer at its expense
shall cause a firm of independent public accountants to furnish a report
annually to the Trustee to the effect that such firm has performed certain
procedures specified in the Pooling Agreement and that such review has
disclosed no items of noncompliance with the provisions of such Pooling
Agreement which, in the opinion of such firm, are material, except for such
items of noncompliance as shall be set forth in such report.

Each Pooling Agreement will provide for delivery to the Trustee of an
annual statement signed by an officer of the Master Servicer to the effect
that the Master Servicer has fulfilled its obligations under the Pooling
Agreement throughout the preceding year.

CERTAIN MATTERS REGARDING THE SPONSOR, THE SELLER AND THE MASTER SERVICER

The Pooling Agreement for each Series of Certificates backed in whole or in
part by Mortgage Loans will provide that the Master Servicer (i) may not
pledge its rights thereunder except upon receipt by the Trustee of a letter
from the Rating Agency that such pledge shall not result in a downgrading
of the Certificates and (ii) may not resign from its obligations and duties
as Master Servicer thereunder, except upon (a) appointment of a successor
servicer and receipt by the Trustee of a letter from the Rating Agency that
such resignation and appointment will not result in the downgrading of the
Certificates or (b) determination that its duties thereunder are no longer
permissible under applicable law. No such resignation under (ii)(b) above
will become effective until the Trustee or a successor has assumed the
Master Servicer's obligations and duties under such Pooling Agreement.

The Pooling Agreement for each such Series will also provide that neither
the Sponsor, the Master Servicer nor the Seller, nor any directors,
officers, employees or agents of any of them (collectively, the
"Indemnified Parties") will be under any liability to the Trust or
Certificateholders or the Trustee, any subservicer or others for any action
taken (or not taken) by any Indemnified Party, any subservicer or the
Trustee in good faith pursuant to the Pooling Agreement, or for errors in
judgment; PROVIDED, HOWEVER, that neither the Sponsor, the Seller, the
Master Servicer nor any such person will be protected against any liability
which would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence in the performance of duties or by reason of
reckless disregard of obligations and duties thereunder. The Pooling
Agreement will further provide that each Indemnified Party is entitled to
indemnification by the Trust and will be held harmless against any loss,
liability or expense incurred in connection with any legal action relating
to the Pooling Agreement or the Certificates for such Series, other than
any loss, liability or expense related to any specific Mortgage Loan or
Mortgage Loans (except any such loss, liability or expense otherwise
reimbursable pursuant to the Pooling Agreement) and any loss, liability or
expense incurred by reason of willful misfeasance, bad faith or gross
negligence in the performance of such indemnified Party's duties thereunder
or by reason of reckless disregard by such indemnified Party of its
obligations and duties thereunder. In addition, the Pooling Agreement will
provide that neither the Sponsor, the Seller nor the Master Servicer is
under any obligation to appear in, prosecute or defend any legal action
which is not incidental to, in the case of the Sponsor, the Seller or the
Master Servicer, its duties under the Pooling Agreement and which in its
opinion may involve it in any expense or liability. Each of the Sponsor,
the Seller and the Master Servicer may, however, in its discretion,
undertake any such action which it may deem necessary or desirable with
respect to the Pooling Agreement and the rights and duties of the parties
thereto and the interests of Certificateholders thereunder. In such event,
the legal expenses and costs of such action and any liability resulting
therefrom will be expenses, costs and liabilities of the Trust and the
Sponsor, the Seller and the Master Servicer will be entitled to be
reimbursed therefor out of the Certificate Account.

EVENTS OF DEFAULT

Events of default by the Master Servicer under the Pooling Agreement for
each Series of Certificates evidencing an interest in Mortgage Loans will
consist of (i)(a) any failure by the Master Servicer to make an Advance
which continues unremedied for one business day or (b) any failure by the
Master Servicer to make or cause to be made any other required payment
pursuant to the Pooling Agreement which continues unremedied for five days;
(ii) any failure by the Master Servicer duly to observe or perform in any
material respects any other of its covenants or agreements in the
Certificates or in such Pooling Agreement which continues unremedied for 60
days after the giving of written notice of such failure to the Master
Servicer by the Trustee, or to the Master Servicer and the Trustee by
holders of Certificates evidencing not less than 25% of the aggregate
voting rights of the Certificates for such Series; and (iii) certain events
of insolvency, readjustment of debt, marshalling of assets and liabilities
or similar proceedings and certain actions by the Master Servicer
indicating insolvency, reorganization or inability to pay its obligations.

RIGHTS UPON EVENT OF DEFAULT

As long as an Event of Default under the Pooling Agreement for any Series
of Certificates evidencing an interest in Mortgage Loans remains
unremedied, the Trustee or holders of Certificates evidencing not less than
a majority of the aggregate voting rights of the Certificates for such
Series may terminate all of the rights and obligations of the Master
Servicer under such Pooling Agreement, whereupon the Trustee will succeed
to all the responsibilities, duties and liabilities of the Master Servicer
under such Pooling Agreement, including, if specified in the related
Supplement, the obligation to make Advances and will be entitled to
similar compensation arrangements and limitations on liability.In the event
that the Trustee is unwilling or unable so to act, it may appoint or
petition a court of competent jurisdiction for the appointment of a housing
and home finance institution which is a FNMA or FHLMC approved servicer
with a net worth of at least $10,000,000 to act as successor Master
Servicer under such Pooling Agreement. Pending any such appointment, the
Trustee is obligated to act in such capacity. The Trustee and such
successor may agree upon the servicing compensation to be paid, which
in no event may be
greater than the compensation to the Master Servicer under such Pooling
Agreement.

ENFORCEMENT

No Certificateholder of any Series will have any right under the applicable
Pooling Agreement to institute any proceeding with respect to such Pooling
Agreement unless such Certificateholder previously has given to the Trustee
written notice of default and unless holders of Certificates evidencing not
less than 25% of the aggregate voting rights of the Certificates for such
Series have made written requests to the Trustee to institute such
proceeding in its own name as Trustee thereunder and have offered and
provided to the Trustee reasonable indemnity and the Trustee for 60 days
has neglected or refused to institute any such proceeding. However, the
Trustee is under no obligation to exercise any of the trusts or powers
vested in it by the Pooling Agreement for any Series or to make any
investigation of matters arising thereunder or to institute, conduct or
defend any litigation thereunder or in relation thereto at the request,
order or direction of any Certificateholders, unless such
Certificateholders have offered and provided to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may
be incurred therein or thereby.

AMENDMENT

The Pooling Agreement for each Series may be amended by the Sponsor, the
Seller, the Master Servicer and the Trustee, without notice to or the
consent of any Certificateholder, (i) to cure any ambiguity, (ii) to
correct a defective provision or correct or supplement any provision
therein that may be inconsistent with any other provision therein, (iii) to
make any other revisions with respect to matters or questions arising under
such Pooling Agreement which are not inconsistent with the provisions of
such Pooling Agreement, or (iv) to comply with any requirements imposed by
the Code or any regulation thereunder; PROVIDED, HOWEVER, that no such
amendments (except those pursuant to clause (iv)) will adversely affect in
any material respect the interests of any Certificateholder of that Series.
Any such amendment except pursuant to clause (iv) of the preceding sentence
will be deemed not to adversely affect in any material respect the
interests of any Certificateholders if the Trustee receives written
confirmation from the Rating Agency rating such Certificates that such
amendment will not cause such Rating Agency to downgrade or withdraw the
then current rating thereof. The Pooling Agreement for each Series may also
be amended by the Sponsor, the Seller, the Master Servicer and the Trustee
with the consent of holders of Certificates evidencing not less than 66
2/3% of the aggregate voting rights of each class of Certificates for such
Series affected thereby for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of such Pooling
Agreement or of modifying in any manner the rights of holders of
Certificates of that Series; PROVIDED, HOWEVER, that no such amendment may
(i) reduce in any manner the amount of, or delay the timing of, payments
received on the Mortgage Assets that are required to be distributed in
respect or any such Certificate without the consent of the holder of such
Certificate or (ii) with respect to any Series of Certificates, reduce the
aforesaid percentages of Certificates the holders of which are required to
consent to any such amendment without the consent of the holders of all
Certificates of such Series then outstanding.

LIST OF CERTIFICATEHOLDERS

In the event the Trustee is not the Certificate Registrar for a Series of
Certificates, upon written request of the Trustee, the Certificate
Registrar will provide to the Trustee within 30 days after the receipt of
such request a list of the names and addresses of all Certificateholders of
record of a particular Series as of the most recent Record Date for payment
of distributions to Certificateholders of that Series. Upon written request
of three or more Certificateholders of record of a Series of Certificates,
for purposes of communicating with other Certificateholders with respect to
their rights under the Pooling Agreement for such Series, the Trustee will
afford such Certificateholders access during business hours to the most
recent list of Certificateholders of that Series held by the Trustee.

TERMINATION; OPTIONAL TERMINATION

The obligations of the Sponsor, the Seller, the Master Servicer and the
Trustee created by the Pooling Agreement will terminate upon the earlier of
(i) the maturity or other liquidation of the last Mortgage Loan or Mortgage
Certificate subject thereto and the disposition of all property acquired
upon foreclosure of any Mortgage Loan and (ii) the purchase by the Master
Servicer or, if REMIC treatment has been elected and if specified in the
related Supplement, by the holder of the residual interest in the REMIC,
from the related Trust of all of the remaining Mortgage Assets and all
property acquired in respect of such Mortgage Assets. In no event, however,
will the Trust created by any Pooling Agreement continue beyond the
expiration of 21 years from the death of the survivor of the persons named
in such Pooling Agreement.

Unless otherwise specified in the related Supplement, any purchase of
Mortgage Assets and property acquired in respect of Mortgage Assets
evidenced by a Series of Certificates will be made at the option of the
Master Servicer or, if specified in the related Supplement for a Series of
REMIC Certificates the holders of the Residual Certificates of such Series,
at a price, and in accordance with the procedures, specified in the related
Supplement. The exercise of such right will effect early retirement of the
Certificates of that Series, but the right of the Master Servicer or, if
applicable, such holder of the Residual Certificates of such Series, to so
purchase is subject to the principal balance of the related Mortgage Assets
being less than the percentage specified in the related Supplement of the
aggregate principal balance of the Mortgage Assets at the Cut-off Date for
the Series. The foregoing is subject to the provision that if a REMIC
election is made with respect to a Trust, any repurchase pursuant to clause
(ii) above will be made only in connection with a "qualified liquidation"
of the REMIC within the meaning of Section 860F(g)(4) of the Code.

For each Series, the holder or holders of the Residual Certificates or the
Trustee, as the case may be, will give written notice of termination of the
Pooling Agreement to each Certificateholder, and the final distribution
will be made only upon surrender and cancellation of the Certificates at an
office or agency of the Trustee specified in the notice of termination.

THE TRUSTEE

The identity of the commercial bank, savings and loan association or trust
company named as Trustee for each Series of Certificates will be set forth
in the related Supplement. The Trustee may have normal banking
relationships with the Sponsor, the Seller, the Master Servicer and/or the
subservicers.

CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS

The following discussion contains summaries, which are general in nature,
of certain legal matters relating to the Mortgage Loans. Because such legal
aspects are governed primarily by applicable state law (which laws may
differ substantially), the summaries do not purport to be complete or to
reflect the laws of any particular state or to encompass the laws of all
states in which the security for the Mortgage Loans is situated. The
summaries are qualified in their entirety by reference to the appropriate
laws of the states in which Mortgage Loans may be originated.

GENERAL

The Mortgage Loans will be secured by deeds of trust, mortgages, security
deeds or deeds to secure debt, depending upon the prevailing practice in
the state in which the property subject to the loan is located. Deeds of
trust are used almost exclusively in California instead of mortgages. A
mortgage creates a lien upon the real property encumbered by the mortgage,
which lien is generally not prior to the lien for real estate taxes and
assessments. Priority between mortgages depends on their terms and
generally on the order of recording with a state or county office. There
are two parties to a mortgage, the mortgagor, who is the borrower and owner
of the mortgaged property, and the mortgagee, who is the lender. Under the
mortgage instrument, the mortgagor delivers to the mortgagee a note or bond
and the mortgage. Although a deed of trust is similar to a mortgage, a deed
of trust formally has three parties, the borrower-property owner called the
trustor (similar to a mortgagor), a lender (similar to a mortgagee) called
the beneficiary, and a third-party grantee called the trustee. Under a deed
of trust, the borrower grants the property, irrevocably until the debt is
paid, in trust, generally with a power of sale, to the trustee to secure
payment of the obligation. A security deed and a deed to secure debt are
special types of deeds which indicate on their face that they are granted
to secure an underlying debt. By executing a security deed or deed to
secure debt, the grantor conveys title to, as opposed to merely creating
a lien upon, the subject property to the grantee until such time as the
underlying debt is repaid. The trustee's authority under a deed of trust,
the mortgagee's authority under a mortgage and the grantee's authority
under a security deed or deed to secure debt are governed by law and, with
respect to some deeds of trust, the directions of the beneficiary.

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

The Cooperative is owned by tenant-stockholders who, through ownership of
stock, shares or membership certificates in the corporation, receive
proprietary leases or occupancy agreements which confer exclusive rights to
occupy specific units. Generally, a tenant-stockholder of a Cooperative
must make a monthly payment to the Cooperative representing such tenant-
stockholder's pro rata share of the Cooperative's payments for its blanket
mortgage, real property taxes, maintenance expenses and other capital or
ordinary expenses. An ownership interest in a Cooperative and accompanying
rights is financed through a Cooperative share loan evidenced by a
promissory note and secured by a security interest in the occupancy
agreement or proprietary lease and in the related Cooperative shares. The
lender takes possession of the share certificate and a counterpart of the
proprietary lease or occupancy agreement, and a financing statement
covering the proprietary lease or occupancy agreement and the Cooperative
shares is filed in the appropriate state and local offices to perfect the
lender's interest in its collateral. Subject to the limitations discussed
below, upon default of the tenant-stockholder, the lender may sue for
judgment on the promissory note, dispose of the collateral at a public or
private sale or otherwise proceed against the collateral or tenant-
stockholder as an individual as provided in the security agreement covering
the assignment of the proprietary lease or occupancy agreement and the
pledge of Cooperative shares.

LEASEHOLDS. Certain of the Mortgage Loans may be secured by a mortgage on a
ground lessee's interest in a ground lease. Leasehold mortgages are subject
to certain risks not associated with mortgage loans secured by the fee
estate of the mortgagor. The most significant of these risks is that the
ground lease creating the leasehold estate could terminate, leaving the
leasehold mortgagee without its security. The ground lease may terminate,
if among other reasons, the ground lessee breaches or defaults in its
obligations under the ground lease or there is a bankruptcy of the ground
lessee or the ground lessor. The terms of the ground lease may also
terminate prior to the maturity date of the indebtedness secured by the
mortgage. This risk may be minimized if the ground lease contains certain
provisions protective of the mortgagee, but the ground leases that secure
mortgage loans may not contain some of these protective provisions, and
mortgages may not contain the other protection discussed in the next
paragraph. Protective ground lease provisions include the right of the
leasehold mortgagee to receive notices from the ground lessor of any
defaults by the mortgagor; the right to cure such defaults, with adequate
cure periods; if a default is not susceptible of cure by the leasehold
mortgagee, the right to acquire the leasehold estate through foreclosure or
otherwise; the ability of the ground lease to be assigned to and by the
leasehold mortgagee or purchaser at a foreclosure sale and for the
concomitant release of the ground lessee's liabilities thereunder; and the
right of the leasehold mortgagee to enter into a new ground lease with the
ground lessor on the same terms and conditions as the old ground lease in
the event of a termination thereof.

In addition to the foregoing protections, a leasehold mortgagee may require
that the ground lease or leasehold mortgage prohibit the ground lessee from
treating the ground lease as terminated in the event of the ground lessor's
bankruptcy and rejection of the ground lease by the trustee for the debtor-
ground lessor. As further protection, a leasehold mortgage may provide for
the assignment of the debtor-ground lessee's right to reject a lease
pursuant to Section 365 of the Bankruptcy Code, although the enforceability
of such clause has not been established. Without the protections described
in the foregoing paragraph, a leasehold mortgagee may lose the collateral
securing its leasehold mortgage. In addition, terms and conditions of a
leasehold mortgage are subject to the terms and conditions of the ground
lease. Although certain rights given to a ground lessee can be limited by
the terms of a leasehold mortgage, the rights of a ground lessee or a
leasehold mortgagee with respect to, among other things, insurance,
casualty and condemnation will be governed by the provisions of the ground
lease.

FORECLOSURE/REPOSSESSION

DEED OF TRUST. Foreclosure of a deed of trust is generally accomplished by
a non-judicial sale under a specific provision in the deed of trust which
authorizes the trustee to sell the property at public auction upon any
default by the borrower under the terms of the note or deed of trust. In
certain states, such foreclosure also may be accomplished by judicial
action in the manner provided for foreclosure of mortgages. In some states,
such as California, the trustee must record a notice of default and send a
copy to the borrower-trustor and to any person who has recorded a request
for a copy of any notice of default and notice of sale. In addition, the
trustee must provide notice in some states, including California, to any
other individual having an interest of record in the real property,
including any junior lienholders. If the deed of trust is not reinstated
within any applicable cure period, a notice of sale must be posted in a
public place and, in most states, including California, published for a
specified period of time in one or more newspapers. In addition, these
notice provisions require that a copy of the notice of sale be posted on
the property and sent to all parties having an interest of record in the
property. In California, the entire process from recording a notice of
default to a non-judicial sale usually takes four to five months.

In some states, including California, the borrower-trustor has the right to
reinstate the loan at any time following default until shortly before the
trustee's sale. In general, the borrower, or any other person having a
junior encumbrance on the real estate, may, during a reinstatement period,
cure the default by paying the entire amount in arrears plus the costs and
expenses incurred in enforcing the obligation. Certain state laws control
the amount of foreclosure expenses and costs, including attorney's fees,
which may be recoverable by a lender.

MORTGAGES. Foreclosure of a mortgage is generally accomplished by judicial
action. The action is initiated by the service of legal pleadings upon all
parties having an interest in the real property. Delays in completion of
the foreclosure may occasionally result from difficulties in locating
necessary parties. Judicial foreclosure proceedings are often not contested
by any of the parties. When the mortgagee's right to foreclosure is
contested, the legal proceedings necessary to resolve the issue can be time
consuming. After the completion of a judicial foreclosure proceeding, the
court generally issues a judgment of foreclosure and appoints a referee or
other court officer to conduct the sale of the property. In general, the
borrower, or any other person having a junior encumbrance on the real
estate, may, during a statutorily prescribed reinstatement period, cure a
monetary default by paying the entire amount in arrears plus other
designated costs and expenses incurred in enforcing the obligation.
Generally, state law controls the amount of foreclosure expenses and costs,
including attorney's fees, which may be recovered by a lender. After the
reinstatement period has expired without the default having been cured, the
borrower or junior lienholder no longer has the right to reinstate the loan
and must pay the loan in full to prevent the scheduled foreclosure sale. If
the deed of trust is not reinstated, a notice of sale must be posted in a
public place and, in most states, published for a specific period of time
in one or more newspapers. In addition, some state laws require that a copy
of the notice of sale be posted on the property and sent to all parties
having an interest in the real property.

Although foreclosure sales are typically public sales, frequently no third
party purchaser bids in excess of the lender's lien because of the
difficulty of determining the exact status of title to the property, the
possible deterioration of the property during the foreclosure proceedings
and a requirement that the purchaser pay for the property in cash or by
cashier's check. Thus the foreclosing lender often purchases the property
from the trustee or referee for an amount equal to the principal amount
outstanding under the loan, accrued and unpaid interest and the expenses of
foreclosure. Thereafter, the lender will assume the burden of ownership,
including obtaining hazard insurance and making such repairs at its own
expense as are necessary to render the property suitable for sale. The
lender will commonly obtain the services of a real estate broker and pay
the broker's commission in connection with the sale of the property.
Depending upon market conditions, the ultimate proceeds of the sale of the
property may not equal the lender's investment in the property.

Courts have imposed general equitable principles upon foreclosure, which
are generally designed to mitigate the legal consequences to the borrower
of the borrower's defaults under the loan documents. Some courts have been
faced with the issue of whether federal or state constitutional provisions
reflecting due process concerns for fair notice require that borrowers
under deeds of trust receive notice longer than that prescribed by statute.
For the most part, these cases have upheld the notice provisions as being
reasonable or have found that the sale by a trustee under a deed of trust
does not involve sufficient state action to afford constitutional
protection to the borrower.

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

The recognition agreement generally provides that, in the event that the
tenant-stockholder has defaulted under the proprietary lease or occupancy
agreement, the Cooperative will take no action to terminate such lease or
agreement until the lender has been provided with an opportunity to cure
the default. The recognition agreement typically provides that if the
proprietary lease or occupancy agreement is terminated, the Cooperative
will recognize the lender's lien against proceeds from the sale of the
Cooperative apartment, subject, however, to the Cooperative's right to sums
due under such proprietary lease or occupancy agreement. The total amount
owed to the Cooperative by the tenant-stockholder, which the lender
generally cannot restrict and does not monitor, could reduce the value of
the collateral below the outstanding principal balance of the Cooperative
Loan and accrued and unpaid interest thereon.

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

In some states, foreclosure on the Cooperative shares is accomplished by a
sale in accordance with the provisions of Article 9 of the Uniform
Commercial Code (the "UCC") and the security agreement relating to those
shares. Article 9 of the UCC requires that a sale be conducted in a
"commercially reasonable" manner. Whether a foreclosure sale has been
conducted in a "commercially reasonable" manner will depend on the facts in
each case. In determining commercial reasonableness, a court will look to
the notice given the debtor and the method, manner, time, place and terms
of the foreclosure. Generally, a sale conducted according to the usual
practice of banks selling similar collateral will be considered reasonably
conducted.

Article 9 of the UCC provides that the proceeds of the sale will be applied
first to pay the costs and expenses of the sale and then to satisfy the
indebtedness secured by the lender's security interest. The recognition
agreement, however, generally provides that the lender's right to
reimbursement is subject to the right of the Cooperative to receive sums
due under the proprietary lease or occupancy agreement. If there are
proceeds remaining, the lender must account to the tenant-stockholder for
the surplus. Conversely, if a portion of the indebtedness remains unpaid,
the tenant-stockholder is generally responsible for the deficiency. See
"Anti-Deficiency Legislation and Other Limitations on Lenders" below.

RIGHTS OF REDEMPTION

In some states after sale pursuant to a deed of trust or foreclosure of a
mortgage, the borrower and certain foreclosed junior lienors are given a
statutory period in which to redeem the property from the foreclosure sale.
In certain other states, including California, this right of redemption
applies only to sales following judicial foreclosure, and not to sales
pursuant to a non-judicial power of sale. In most states where the right of
redemption is available, statutory redemption may occur upon payment of the
foreclosure purchase price, accrued interest and taxes. In some states, the
right to redeem is an equitable right. The effect of a right of redemption
is to diminish the ability of the lender to sell the foreclosed property.
The exercise of a right of redemption would defeat the title of any
purchaser at a foreclosure sale, or of any purchaser from the lender
subsequent to judicial foreclosure or sale under a deed of trust.
Consequently, the practical effect of the redemption right is to force the
lender to retain the property and pay the expenses of ownership until the
redemption period has run.

ANTI-DEFICIENCY LEGISLATION AND OTHER LIMITATIONS ON LENDERS

Certain states have imposed statutory restrictions that limit the remedies
of a beneficiary under a deed of trust or a mortgagee under a mortgage. In
some states, including California, statutes limit the right of the
beneficiary or mortgagee to obtain a deficiency judgment against the
borrower following foreclosure or sale under a deed of trust. A deficiency
judgment is a personal judgment against the borrower equal in most cases to
the difference between the amount due to the lender and the current fair
market value of the property at the time of the foreclosure sale.

Some state statutes may require the beneficiary or mortgagee to exhaust the
security afforded under a deed of trust or mortgage by foreclosure in an
attempt to satisfy the full debt before bringing a personal action against
the borrower. In certain other states, the lender has the option of
bringing a personal action against the borrower on the debt without first
exhausting such security; however, in some of these states, the lender,
following judgment on such personal action, may be deemed to have elected a
remedy and may be precluded from exercising remedies with respect to the
security. Consequently, the practical effect of the election requirement,
when applicable, is that lenders will usually proceed first against the
security rather than bringing a personal action against the borrower.

In some states, exceptions to the anti-deficiency statutes are provided for
in certain instances where the value of the lender's security has been
impaired by acts or omissions of the borrower, for example, in the event of
waste of the property.

In addition to anti-deficiency and related legislation, numerous other
federal and state statutory provisions, including the federal bankruptcy
laws, the federal Soldiers' and Sailors' Civil Relief Act of 1940 and state
laws affording relief to debtors, may interfere with or affect the ability
of the secured mortgage lender to realize upon its security. For example,
in a proceeding under the federal Bankruptcy Code, a lender may not
foreclose on a mortgaged property without the permission of the bankruptcy
court. The rehabilitation plan proposed by the debtor may provide, if the
mortgaged property is not the debtor's principal residence and the court
determines that the value of the mortgaged property is less than the
principal balance of the mortgage loan, for the reduction of the secured
indebtedness to the value of the mortgaged property as of the date of the
commencement of the bankruptcy, rendering the lender a general unsecured
creditor for the difference, and also may reduce the monthly payments due
under such mortgage loan, change the rate of interest and alter the
mortgage loan repayment schedule. The effect of any such proceedings under
the federal Bankruptcy Code, including but not limited to any automatic
stay, could result in delays in receiving payments on the Mortgage Loans
underlying a Series of Certificates and possible reductions in the
aggregate amount of such payments.

The federal tax laws provide priority to certain tax liens over the lien of
a mortgage or secured party. Numerous federal and state consumer protection
laws impose substantive requirements upon mortgage lenders in connection
with the origination, servicing and enforcement of mortgage loans. These
laws include the federal Truth-in-Lending Act, Real Estate Settlement
Procedures Act, Equal Credit Opportunity Act, Fair Credit Billing Act, Fair
Credit Reporting Act and related statutes and regulations. These federal
and state laws impose specific statutory liabilities upon lenders who fail
to comply with the provisions of the law. In some cases, this liability may
affect assignees of the loans or contracts.

Generally, Article 9 of the UCC governs foreclosure on Cooperative shares
and the related proprietary lease or occupancy agreement. Some courts have
interpreted section 9-504 of the UCC to prohibit a deficiency award unless
the creditor establishes that the sale of the collateral (which, in the
case of a Cooperative Loan, would be the shares of the Cooperative and the
related proprietary lease or occupancy agreement) was conducted in a
commercially reasonable manner.

ENVIRONMENTAL RISKS

Real property pledged as security to a lender may be subject to unforeseen
environmental risks. Under the laws of certain states, contamination of a
property may give rise to a lien on the property to assure the payment of
the costs of clean-up. In several states such a lien has priority over the
lien of an existing mortgage against such property. In addition, under the
federal Comprehensive Environmental Response, Compensation and Liability
Act of 1980 ("CERCLA"), the United States Environmental Protection Agency
("EPA") may impose a lien on property where the EPA has incurred clean-up
costs. However, a CERCLA lien is subordinate to pre-existing, perfected
security interests.

Under the laws of some states, and under CERCLA, it is conceivable that a
secured lender may be held liable as an "owner" or "operator" for the costs
of addressing releases or threatened releases of hazardous substances at a
Mortgaged Property, even though the environmental damage or threat was
caused by a prior or current owner or operator. CERCLA imposes liability
for such costs on any and all "responsible parties," including owners or
operators. However, CERCLA excludes from the definition of "owner or
operator" a secured creditor who holds indicia of ownership primarily to
protect its security interest (the "secured creditor exclusion"). Thus, if
a lender's activities begin to encroach on the actual management of a
contaminated facility or property, the lender may incur liability as an
"owner or operator" under CERCLA. Similarly, if a lender forecloses and
takes title to a contaminated facility or property, the lender may incur
CERCLA liability in various circumstances, including, but not limited to,
when it holds the facility or property as an investment (including leasing
the facility or property to a third party), or fails to market the property
in a timely fashion.

If a lender is or becomes liable, it can bring an action for contribution
against any other "responsible parties," including a previous owner or
operator, who created the environmental hazard, but those persons or
entities may be bankrupt or otherwise judgment proof. The costs associated
with environmental cleanup may be substantial. It is conceivable that such
costs arising from the circumstances set forth above would result in a loss
to Certificateholders.

CERCLA does not apply to petroleum products, and the secured creditor
exclusion does not govern liability for cleanup costs under federal laws
other than CERCLA, in particular Subtitle I of the federal Resource
Conservation and Recovery Act ("RCRA"), which regulates underground
petroleum storage tanks (except heating oil tanks). The EPA has adopted a
lender liability rule for underground storage tanks under Subtitle I of
RCRA. Under such rule, a holder of a security interest in an underground
storage tank or real property containing an underground storage tank is not
considered an operator of the underground storage tank as long as petroleum
is not added to, stored in or dispensed from the tank. In addition, under
the Asset Conservation, Lender Liability and Deposit Insurance Protection
Act of 1996, the protections accorded to lenders under CERCLA are also
accorded to holders of security interests in underground tanks. It should
be noted, however, that liability for cleanup of petroleum contamination
may be governed by state law, which may not provide for any specific
protection for secured creditors.

Except as otherwise specified in the applicable Supplement, at the time the
Mortgage Loans were originated, no environmental assessment or a very
limited environmental assessment of the Mortgage Properties was conducted.

Whether actions taken by a lender would constitute participation in the
management of a mortgaged property, or the business of a borrower, so as to
render the secured creditor exemption unavailable to a lender has been a
matter of judicial interpretation of the statutory language, and court
decisions have been inconsistent. In 1990, the Court of Appeals for the
Eleventh Circuit suggested that the mere capacity of the lender to
influence a borrower's decisions regarding disposal of hazardous substances
was sufficient participation in the management of the borrower's business
to deny the protection of the secured creditor exemption to the lender.

This ambiguity appears to have been resolved by the enactment of the Asset
Conservation, Lender Liability and Deposit Insurance Protection Act of
1996, which was signed into law by President Clinton on September 30, 1996.
The new legislation provides that in order to be deemed to have
participated in the management of a mortgaged property, a lender must
actually participate in the operational affairs of the property or the
borrower. The legislation also provides that participation in the
management of the property does not include "merely having the capacity to
influence, or unexercised right to control" operations. Rather, a lender
will lose the protection of the secured creditor exemption only if it
exercises decision-making control over the borrower's environmental
compliance and hazardous substance handling and disposal practices, or
assumes day-to-day management of all operational functions of the mortgaged
property.

DUE-ON-SALE CLAUSES

Unless otherwise provided in the related Supplement, each conventional
Mortgage Loan will contain a due-on-sale clause which will generally
provide that if the mortgagor or obligor sells, transfers or conveys the
Mortgaged Property, the loan may be accelerated by the mortgagee. In recent
years, court decisions and legislative actions have placed substantial
restriction on the right of lenders to enforce such clauses in many states.
For instance, the California Supreme Court in August 1978 held that due-on-
sale clauses were generally unenforceable. However, the Garn-St Germain
Depository Institutions Act of 1982 (the "Garn-St Germain Act"), subject to
certain exceptions, preempts state constitutional, statutory and case law
prohibiting the enforcement of due-on-sale clauses. As to loans secured by
an owner-occupied residence, the Garn-St Germain Act sets forth nine
specific instances in which a mortgagee covered by the Garn-St Germain Act
may not exercise its rights under a due- on-sale clause, notwithstanding
the fact that a transfer of the property may have occurred. The inability
to enforce a due-on-sale clause may result in transfer of the related
Mortgaged Property to an uncreditworthy person, which could increase the
likelihood of default or may result in a mortgage bearing an interest rate
below the current market rate being assumed by a new home buyer, which may
affect the average life of the Mortgage Loans and the number of Mortgage
Loans which may extend to maturity.

PREPAYMENT CHARGES

Under certain state laws, prepayment charges may not be imposed after a
certain period of time following the origination of mortgage loans with
respect to prepayments on loans secured by liens encumbering owner-occupied
residential properties. Since many of the Mortgaged Properties will be
owner-occupied, it is anticipated that prepayment charges may not be
imposed with respect to many of the Mortgage Loans. The absence of such a
restraint on prepayment, particularly with respect to fixed rate Mortgage
Loans having higher Mortgage Rates, may increase the likelihood of
refinancing or other early retirement of such loans or contracts.

APPLICABILITY OF USURY LAWS

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

SOLDIERS' AND SAILORS' CIVIL RELIEF ACT

Generally, under the terms of the Soldiers' and Sailors' Civil Relief Act
of 1940, as amended (the "Relief Act"), a borrower who enters military
service after the origination of such borrower's mortgage loan (including a
borrower who is a member of the National Guard or is in reserve status at
the time of the origination of the mortgage loan and is later called to
active duty) may not be charged interest above an annual rate of 6% during
the period of such borrower's active duty status, unless a court orders
otherwise upon application of the lender. It is possible that such interest
rate limitation could have an effect, for an indeterminate period of time,
on the ability of the Master Servicer to collect full amounts of
interest on certain of the Mortgage Loans. Unless otherwise provided in the
applicable Supplement, any shortfall in interest collections resulting
from the application of the Relief Act could result in losses to the
holders of the Certificates. In addition, the Relief Act imposes
limitations which would impair the ability of the Master Servicer to
foreclose on an affected Mortgage Loan during the borrower's period of
active duty status. Thus, in the event that such a Mortgage Loan goes into
default, there may be delays and losses occasioned by the inability to
realize upon the Mortgaged Property in a timely fashion.

ERISA CONSIDERATIONS

ERISA and Section 4975 of the Code impose certain requirements on those
employee benefit plans and arrangements to which either ERISA or the Code
applies (each a "Plan") and on those persons who are fiduciaries with
respect to such Plans. In accordance with ERISA's general fiduciary
standards, before investing in a Certificate a Plan fiduciary should
determine whether such an investment is permitted under the governing Plan
instruments and is appropriate for the Plan in view of its overall
investment policy and the composition and diversification of its portfolio.
Other provisions of ERISA and the Code prohibit certain transactions
involving the assets of a Plan and persons who have certain specified
relationships to the Plan (I.E., "parties in interest" within the meaning
of ERISA or "disqualified persons" within the meaning of the Code). Thus, a
Plan fiduciary considering an investment in Certificates should also
consider whether such an investment might constitute or give rise to a
prohibited transaction under ERISA or the Code.

PLAN ASSETS REGULATIONS

If an investing Plan's assets were deemed to include an undivided ownership
interest in the assets included in a Trust, a Plan's investment in the
Certificates might be deemed to constitute a delegation under ERISA of the
duty to manage Plan assets by the fiduciaries deciding to invest in the
Certificates, and certain transactions involved in the operation of the
Trust might be deemed to constitute prohibited transactions under ERISA and
the Code. ERISA and the Code do not define "plan assets". The U.S.
Department of Labor has published regulations (the "Labor Regulations")
concerning whether or not a Plan's assets would be deemed to include an
interest in the underlying assets of an entity for purposes of the
reporting, disclosure and fiduciary responsibility provisions of ERISA, if
the Plan acquires an "equity interest" in such entity (such as by acquiring
Certificates). The Labor Regulations state that the underlying assets of an
entity will not be considered "plan assets" if, immediately after the most
recent acquisition of any equity interest in the entity, whether from the
issuer or an underwriter, less than twenty-five percent (25%) of the value
of each class of equity interest is held by "benefit plan investors" ,
individual retirement accounts, and other employee benefit plans not
subject to ERISA (for example, governmental plans). The Sponsor cannot
predict whether under the Labor Regulations the assets of a Plan investing
in Certificates will be deemed to include an interest in the assets of the
Trust.

The Labor Regulations provide that where a Plan acquires a "guaranteed
governmental mortgage pool certificate", the Plan's assets include such
certificate but do not solely by reason of the Plan's holdings of such
certificate include any of the mortgages underlying such certificate. The
Labor Regulations include in the definition of a "guaranteed governmental
mortgage pool certificate" the types of FHLMC Certificates, GNMA
Certificates and FNMA Certificates which may be included in a Trust
underlying a Series of Certificates. Accordingly, even if such Mortgage
Certificates included in a Trust were deemed to be assets of Plan
investors, the mortgages underlying such Mortgage Certificates would not be
treated as assets of such Plans. Potential Plan investors should consult
the ERISA discussion in the related Supplement before purchasing any such
Certificates.

UNDERWRITER'S EXEMPTIONS

The U.S. Department of Labor has granted to certain underwriters individual
administrative exemptions (the "Underwriter's Exemptions") from certain of
the prohibited transaction rules of ERISA and the related excise tax
provisions of Section 4975 of the Code with respect to the initial
purchase, the holding and the subsequent resale by Plans of certificates in
pass-through trusts that consist of certain receivables, loans and other
obligations that meet the conditions and requirements of the Underwriter's
Exemptions.

While each Underwriter's Exemption is an individual exemption separately
granted to a specific underwriter, the terms and conditions which generally
apply to the Underwriter's Exemptions are substantially identical, and
include the following:

(1) the acquisition of the certificates by a Plan is on terms
(including the price for the certificates) that are at least as
favorable to the Plan as they would be in an arm's-length
transaction with an unrelated party;

(2) the rights and interests evidenced by the certificates acquired
by the Plan are not subordinated to the rights and interests
evidenced by other certificates of the trust fund;

(3) the certificates required by the Plan have received a rating at
the time of such acquisition that is one of the three highest
generic rating categories from Standard & Poor's Ratings Group, a
division of The McGraw-Hill Companies ("S&P"), Moody's Investors
Service, Inc. ("Moody's"), Duff & Phelps Credit Rating Co. ("D&P")
or Fitch Investors Service, L.P. ("Fitch");

(4) the trustee must not be an affiliate of any other member of the
Restricted Group;

(5) the sum of all payments made to and retained by the underwriters
in connection with the distribution of the certificates represents
not more than reasonable compensation for underwriting the
certificates; the sum of all payments made to and retained by the
seller pursuant to the assignment of the loans to the trust fund
represents not more than the fair market value of such loans; the
sum of all payments made to and retained by the servicer and any
other servicer represents not more than reasonable compensation for
such person's services under the agreement pursuant to which the
loans are pooled and reimbursements of such person's reasonable
expenses in connection therewith; and

(6) the Plan investing in the certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the
Securities and Exchange Commission under the Securities Act.

The trust fund must also meet the following requirements:

(i) the corpus of the trust fund must consist solely of assets of
the type that have been included in other investment pools;
(ii) certificates in such other investment pools must have been
rated in one of the three highest rating categories of S&P, Moody's,
Fitch or D&P for at least one year prior to the Plan's acquisition
of certificates; and

(iii) certificates evidencing interests in such other investment
pools must have been purchased by investors other than Plans for at
least one year prior to any Plan's acquisition of certificates.

Moreover, the Underwriter's Exemptions generally provide relief from
certain self-dealing/conflict of interest prohibited transactions that may
occur when the Plan fiduciary causes a Plan to acquire certificates in a
trust as to which the fiduciary (or its affiliate) is an obligor on the
receivables held in the trust provided that, among other requirements: (i)
in the case of an acquisition in connection with the initial issuance of
certificates, at least fifty percent (50%) of each class of certificates in
which Plans have invested is acquired by persons independent of the
Restricted Group, (ii) such fiduciary (or its affiliate) is an obligor with
respect to five percent (5%) or less of the fair market value of the
obligations contained in the trust; (iii) the Plan's investment in
certificates of any class does not exceed twenty-five percent (25%) of all
of the certificates of that class outstanding at the time of the
acquisition; and (iv) immediately after the acquisition, no more than
twenty-five percent (25%) of the assets of the Plan with respect to which
such person is a fiduciary is invested in certificates representing an
interest in one or more trusts containing assets sold or serviced by the
same entity. The Underwriter's Exemptions do not apply to Plans sponsored
by the Seller, the related underwriter, the Trustee, the Master Servicer,
any insurer with respect to the Mortgage Loans, any obligor with respect to
Mortgage Loans included in the Trust constituting more than five percent
(5%) of the aggregate unamortized principal balance of the assets in the
Trust, or any affiliate of such parties.

The Supplement for each Series of Certificates will indicate the classes of
Certificates, if any, offered thereby as to which it is expected that an
Underwriter's Exemption will apply.

OTHER EXEMPTIONS

In addition to making its own determination as to the availability of the
exemptive relief provided in the Underwriter's Exemptions, the Plan
fiduciary should consider the possible availability of any other prohibited
transaction exemptions, in particular, Prohibited Transaction Class
Exemption 83-1 for Certain Transactions Involving Mortgage Trust Investment
Trusts ("PTE 83-1"). PTE 83-1 permits certain transactions involving the
creation, maintenance and termination of certain residential mortgage pools
and the acquisition and holding of certain residential mortgage pool pass-
through certificates by Plans, whether or not the Plan's assets would be
deemed to include an ownership interest in the mortgages in the mortgage
pool, and whether or not such transactions would otherwise be prohibited
under ERISA. The Sponsor believes that the "general conditions" set forth
in Section II of PTE 83-1, which are required for its applicability, would
be met with respect to most classes of Certificates evidencing ownership
interest in a Trust consisting solely of Mortgage Loans secured by first or
second mortgages or deeds of trust on single-family residential property.
PTE 83-1 would not apply to Certificates which are part of a class that is
subordinate to one or more other classes of the same Series of
Certificates. It is not clear whether PTE 83-1 applies to Residual
Certificates, Certificates which do not pass through both principal and
interest, to any Certificates evidencing ownership interests in a Trust
containing Mortgage Certificates, or to any Certificates evidencing
ownership interests in the reinvestment income of funds on deposit in the
related Certificate Account or in Mortgage Loans secured by shares in a
cooperative corporation. Before purchasing any Certificates, a Plan
fiduciary should consult with its counsel and determine whether PTE 83-1
applies, including whether the appropriate "specific conditions" set forth
in Section I of PTE 83-1, in addition to the "general conditions" set forth
in Section II, would be met, or whether any other ERISA prohibited
transaction exemption is applicable. Furthermore, a Plan fiduciary should
consult the ERISA discussion in the related Supplement relating to a Series
of Certificates before purchasing Certificates.

The Sponsor, or certain affiliates of the Sponsor, might be considered or
might become "parties in interest" (as defined under ERISA) or
"disqualified persons" (as defined under the Code) with respect to a Plan.
If so, the acquisition or holding of Certificates by or on behalf of such
Plan could be considered to give rise to a "prohibited transaction" within
the meaning of ERISA and the Code unless PTE 83-1, the Underwriter's
Exemptions, or some other exemption is available. Special caution ought to
be exercised before a Plan purchases a Certificate in such circumstances.
Employee benefit plans which are governmental plans (as defined in Section
3(32) of ERISA), and certain church plans (as defined in Section 3(33) of
ERISA), are not subject to the ERISA fiduciary requirements. However, the
purchase of a Residual Certificate by some of such plans, or by most
varieties of ERISA Plans, may give rise to "unrelated business taxable
income" as described in Sections 511-515 and 860E of the Code. Prior to the
purchase of Residual Certificates, a prospective purchaser may be required
to provide an affidavit to the Trustee and the Sponsor that it is not a
"disqualified organization" , which term as defined herein includes certain
tax-exempt entities not subject to Section 511 of the Code, including
certain governmental plans. In addition, prior to the transfer of a
Residual Certificate, the Trustee or the Sponsor may require an opinion of
counsel to the effect that such transfer will not result in a violation of
the prohibited transactions provisions of ERISA and the Code and will not
subject the Trustee, the Sponsor or the Master Servicer to additional
obligations.

Due to the complexity of these rules and the penalties imposed upon persons
involved in prohibited transactions, it is particularly important that
potential Plan investors consult with their counsel regarding the
consequences under ERISA and the Code of their acquisition and ownership of
Certificates.

LEGAL INVESTMENT CONSIDERATIONS

The Supplement for each Series of Certificates will specify which, if any,
of the classes of Certificates offered thereby will constitute "mortgage
related securities" for purposes of SMMEA. Classes of Certificates that
qualify as "mortgage related securities" will be legal investments for
persons, trusts, corporations, partnerships, associations, business trusts
and business entities (including depository institutions, life insurance
companies and pension funds) created pursuant to or existing under the laws
of the United States or of any state (including the District of Columbia
and Puerto Rico) whose authorized investments are subject to state
regulation to the same extent as, under applicable law, obligations issued
by or guaranteed as to principal and interest by the United States or any
such entities. Under SMMEA, if a state enacts legislation prior to October
4, 1991 specifically limiting the legal investment authority of any such
entities with respect to "mortgage related securities," the Certificates
will constitute legal investments for entities subject to such legislation
only to the extent provided therein. Approximately twenty-one states
adopted such legislation prior to the October 4, 1991 deadline. SMMEA
provides, however, that in no event will the enactment of any such
legislation affect the validity of any contractual commitment to purchase,
hold or invest in Certificates, or require the sale or other disposition of
Certificates, so long as such contractual commitment was made or such
Certificates acquired prior to the enactment of such legislation.

SMMEA also amended the legal investment authority of federally-chartered
depository institutions as follows: federal savings and loan associations
and federal savings banks may invest in, sell or otherwise deal in
Certificates without limitations as to the percentage of their assets
represented thereby, federal credit unions may invest in mortgage related
securities, and national banks may purchase Certificates for their own
account without regard to the limitations generally applicable to
investment securities set forth in 12 U.S.C. (section mark)24 (Seventh),
subject in each case to such regulations as the applicable federal
authority may prescribe. In this connection, federal credit unions should
review the National Credit Union Administration ("NCUA") Letter to Credit
Unions No. 96, as modified by Letter to Credit Unions No. 108, which
includes guidelines to assist federal credit unions in making investment
decisions for mortgage related securities, and the NCUA's regulation
"Investment and Deposit Activities" (12 C.F.R. Part 703), (whether or not
the class of Certificates under consideration for purchase constitutes a
"mortgage related security").

All depository institutions considering an investment in the Certificates
(whether or not the class of Certificates under consideration for purchase
constitutes a "mortgage related security") should review the Federal
Financial Institutions Examination Council's Supervisory Policy Statement
on Securities Activities (to the extent adopted by their respective
regulators) (the "Policy Statement"), setting forth, in relevant part,
certain securities trading and sales practices deemed unsuitable for an
institution's investment portfolio, and guidelines for (and restrictions
on) investing in mortgage derivative products, including "mortgage related
securities" that are "high-risk mortgage securities" as defined in the
Policy Statement. According to the Policy Statement, such "high-risk
mortgage securities" include securities such as Certificates not entitled
to distributions allocated to principal or interest, or Subordinate
Certificates. Under the Policy Statement, it is the responsibility of each
depository institution to determine, prior to purchase (and at stated
intervals thereafter), whether a particular mortgage derivative product is
a "high-risk mortgage security", and whether the purchase (or retention) of
such a product would be consistent with the Policy Statement.

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

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

LEGAL MATTERS

The validity of the Certificates will be passed upon for the Sponsor by
Tobin & Tobin, a professional corporation, San Francisco, California.
Certain federal income tax consequences with respect to the Certificates
will be passed upon for the Sponsor by Brown & Wood LLP, New York, New
York. Brown & Wood LLP, New York, New York will act as counsel for the
Underwriter.

FEDERAL INCOME TAX CONSEQUENCES

The following summary of the material federal income tax consequences of
the purchase, ownership and disposition of Certificates is based on the
advice of Brown & Wood LLP, counsel to the Sponsor. This summary is based
on laws, regulations, including the REMIC regulations promulgated by the
Treasury Department on December 23, 1992, and generally effective for
REMICs with start-up dates on or after November 12, 1991 (the "REMIC
Regulations"), rulings and decisions now in effect or (with respect to
regulations) proposed, all of which are subject to change either
prospectively or retroactively. This summary does not address the federal
income tax consequences of an investment in Certificates applicable to all
categories of investors, some of which (for example, banks and insurance
companies) may be subject to special rules. Prospective investors should
consult their tax advisors regarding the federal, state, local and any
other tax consequences to them of the purchase, ownership and disposition
of Certificates.

GENERAL

The federal income tax consequences to Certificateholders will vary
depending on whether an election is made to treat the Trust relating to a
particular Series of Certificates as a real estate mortgage investment
conduit ("REMIC") under the Internal Revenue Code of 1986, as amended (the
"Code"). The Supplement for each Series of Certificates will specify
whether a REMIC election will be made.

NON-REMIC CERTIFICATES

If a REMIC election is not made, Brown & Wood LLP will deliver its opinion
that the Trust will be classified as a grantor trust under subpart E, Part
I of subchapter J of the Code. In this case, owners of Certificates will be
treated for federal income tax purposes as owners of a portion of the
Trust's assets as described below.

SINGLE CLASS OF SENIOR CERTIFICATES

CHARACTERIZATION. The Trust may be created with one class of Senior
Certificates and one class of Subordinate Certificates. In this case, each
Senior Certificateholder will be treated as the owner of a pro rata
undivided interest in the interest and principal portions of the Trust
represented by that Senior Certificate and will be considered the equitable
owner of a pro rata undivided interest in each of the Mortgage Loans in the
Trust. Any amounts received by a Senior Certificateholder in lieu of
amounts due with respect to any Mortgage Loan because of a default or
delinquency in payment will be treated for federal income tax purposes as
having the same character as the payments they replace.

Each holder of a Senior Certificate will be required to report on its
federal income tax return its pro rata share of the entire income from the
Mortgage Loans in the Trust represented by that Senior Certificate,
including interest, original issue discount, if any, prepayment fees,
assumption fees, any gain recognized upon an assumption and late payment
charges received by the Master Servicer in accordance with such Senior
Certificateholder's method of accounting. Under Code Sections 162 or 212
each Senior Certificateholder will be entitled to deduct its pro rata share
of servicing fees, prepayment fees, assumption fees, any loss recognized
upon an assumption and late payment charges retained by the Master
Servicer, provided that such amounts are reasonable compensation for
services rendered to the Trust. Senior Certificateholders that are
individuals, estates or trusts will be entitled to deduct their share of
expenses only to the extent such expenses plus all other Code Section 212
expenses exceed two percent of its adjusted gross income. A Senior
Certificateholder using the cash method of accounting must take into
account its pro rata share of income and deductions as and when collected
by or paid to the Master Servicer. A Senior Certificateholder using an
accrual method of accounting must take into account its pro rata share of
income and deductions as they become due or are paid to the Master
Servicer, whichever is earlier. If the Master Servicing Fees paid to the
Master Servicer were deemed to exceed reasonable servicing compensation,
the amount of such excess could be considered as a retained ownership
interest by the Master Servicer (or any person to whom the Master Servicer
assigned for value all or a portion of the Master Servicing Fees) in a
portion of the interest payments on the Mortgage Loans. The Mortgage Loans
may then be subject to the "coupon stripping" rules of the Code discussed
below.

Unless otherwise specified in the related Supplement, as to each series of
Certificates Brown & Wood LLP will have advised the Sponsor that:

(i) a Senior Certificate owned by a "domestic building and loan
association" within the meaning of Code Section 7701(a)(19)
representing principal and interest payments on Mortgage Loans will
be considered to represent "loans . . . secured by an interest in
real property which is . . . residential property" within the
meaning of Code Section 7701(a)(19)(C)(v); provided that the real
property securing the Mortgage Loans represented by that Senior
Certificate is of a type described in such Code section;

(ii) a Senior Certificate owned by a real estate investment trust
representing an interest in Mortgage Loans will be considered to
represent "real estate assets" within the meaning of Code Section
856(c)(5)(A), and interest income on the Mortgage Loans will be
considered "interest on obligations secured by mortgages on real
property" within the meaning of Code Section 856(c)(3)(B); provided
that the real property securing the Mortgage Loans represented by
that Senior Certificate is of a type described in such Code section;
and

(iii) a Senior Certificate owned by a REMIC will be an "obligation .
. . which is principally secured, directly or indirectly, by an
interest in real property" within the meaning of Code Section
860G(a)(3).

The assets constituting certain Trusts may include Buydown Mortgage Loans.
The characterization of any investment in Buydown Mortgage Loans will
depend upon the precise terms of the related Buydown Agreement, but to the
extent that such Buydown Mortgage Loans are secured in part by a bank
account or other personal property, they may not be treated in their
entirety as assets described in the foregoing sections of the Code. There
are no directly applicable precedents with respect to the federal income
tax treatment or the characterization of investments in Buydown Mortgage
Loans. Accordingly, holders of Senior Certificates should consult their own
tax advisors with respect to characterization of investments in Senior
Certificates representing an interest in a Trust that includes Buydown
Mortgage Loans.

PREMIUM. The price paid for a Senior Certificate by a holder will be
allocated to such holder's undivided interest in each Mortgage Loan based
on each Mortgage Loan's relative fair market value, so that such holder's
undivided interest in each Mortgage Loan will have its own tax basis. A
Senior Certificateholder that acquires an interest in Mortgage Loans at a
premium may elect to amortize such premium under a constant interest
method, provided that such Mortgage Loan was originated after September 27,
1985. Premium allocable to a Mortgage Loan originated on or before
September 27, 1985 should be allocated among the principal payments on the
Mortgage Loan and allowed as an ordinary deduction as principal payments
are made. Amortizable bond premium will be treated as an offset to interest
income on such Senior Certificate. The basis for such Senior Certificate
will be reduced to the extent that amortizable premium is applied to offset
interest payments.

It is not clear whether a reasonable prepayment assumption should be used
in computing amortization of premium allowable under Code Section 171.
If a premium is not subject to amortization using a reasonable prepayment
assumption, the holder of a Senior Certificate acquired at a premium should
recognize a loss, if a Mortgage Loan prepays in full, equal to the
difference between the portion of the prepaid principal amount of the
Mortgage Loan that is allocable to the Certificate and the portion of the
adjusted basis of the Certificate that is allocable to the Mortgage Loan.
If a reasonable prepayment assumption is used to amortize such premium, it
appears that such a loss would be available, if at all, only if prepayments
have occurred at a rate faster than the reasonable assumed prepayment rate.
It is not clear whether any other adjustments would be required to reflect
differences between an assumed prepayment rate and the actual rate of
prepayments.

ORIGINAL ISSUE DISCOUNT. The Internal Revenue Service (the "IRS") has
stated in published rulings that, in circumstances similar to those
described herein, the special rules of the Code relating to "original issue
discount" (currently Code Sections 1271 through 1273 and 1275) will be
applicable to a Senior Certificateholder's interest in those Mortgage Loans
meeting the conditions necessary for these sections to apply. Rules
regarding periodic inclusion of original issue discount income are
applicable to mortgages of corporations originated after May 27, 1969,
mortgages of noncorporate mortgagors (other than individuals) originated
after July 1, 1982, and mortgages of individuals originated after March 2,
1984. Such original issue discount could arise by the financing of points
or other charges by the originator of the mortgages in an amount greater
than a statutory DE MINIMIS exception to the extent that the points are not
currently deductible under applicable Code provisions or are not for
services provided by the lender. Additionally, under regulations issued on
January 27, 1994, as amended on June 11, 1996, with respect to original
issue discount (the "OID Regulations"), original issue discount may be
created when the rate produced (on the issue date) by the index formula on
an adjustable rate mortgage ("ARM") is greater than the initial interest
rate payable on the ARM. Original issue discount generally must be reported
as ordinary gross income as it accrues under a constant interest method.
See "Accrual of Original Issue Discount" under "Multiple Classes of Senior
Certificates" below.

MARKET DISCOUNT. A Senior Certificateholder that acquires an undivided
interest in Mortgage Loans may be subject to the market discount rules of
Code Sections 1276 through 1278 to the extent an undivided interest in a
Mortgage Loan is considered to have been purchased at a "market discount".
Generally, market discount is the excess of the portion of the principal
amount of such Mortgage Loan allocable to such holder's undivided interest
over such holder's tax basis in such interest. Market discount with respect
to a Senior Certificate will be considered to be zero if the amount
allocable to the Senior Certificate is less than 0.25% of the Senior
Certificate's stated redemption price at maturity multiplied by the
weighted average maturity remaining after the date of purchase. Treasury
regulations implementing the market discount rules have not yet been
issued; therefore, investors should consult their own tax advisors
regarding the application of these rules and the advisability of making any
of the elections allowed under Code Sections 1276 through 1278.

The Code provides that any principal payment (whether a scheduled payment
or a prepayment) or any gain on disposition of a market discount bond
acquired by the taxpayer after October 22, 1986 shall be treated as
ordinary income to the extent that it does not exceed the accrued market
discount at the time of such payment. The amount of accrued market discount
for purposes of determining the tax treatment of subsequent principal
payments or dispositions of the market discount bond is to be reduced by
the amount so treated as ordinary income. The Code also grants the Treasury
Department authority to issue regulations providing for the computation of
accrued market discount on debt instruments, the principal of which is
payable in more than one installment. While the Treasury Department has not
yet issued regulations, rules described in the relevant legislative history
will control. Under those rules, the holder of a market discount bond may
elect to accrue market discount either on the basis of a constant interest
rate or according to one of the following methods. If a Senior Certificate
is issued with original issue discount, the amount of market discount that
accrues during any accrual period would be equal to the product of (i) the
total remaining market discount, multiplied by (ii) a fraction, the
numerator of which is the original issue discount accruing during the
period and the denominator of which is the total remaining original issue
discount at the beginning of the accrual period. For Senior Certificates
issued without original issue discount, the amount of market discount that
accrues during a period is equal to the product of (i) the total remaining
market discount, multiplied by (ii) a fraction, the numerator of which is
the amount of stated interest paid during the accrual period and the
denominator of which is the total amount of stated interest remaining to be
paid at the beginning of the accrual period. For purposes of calculating
market discount under any of the above methods in the case of instruments
(such as the Senior Certificates) which provide for payments which may be
accelerated by reason of prepayments of other obligations securing such
instruments, the same prepayment assumption applicable to calculating the
accrual of original issue discount will apply. Because the regulations
described above have not been issued, it is impossible to predict what
effect those regulations might have on the tax treatment of a Senior
Certificate purchased at a discount or premium in the secondary market.

A holder who acquired a Senior Certificate at a market discount also may be
required to defer, until the maturity date of such Senior Certificate or
its earlier disposition in a taxable transaction, the deduction of a
portion of the amount of interest that the holder paid or accrued during
the taxable year on indebtedness incurred or maintained to purchase or
carry the Senior Certificate in excess of the aggregate amount of interest
(including original issue discount) includible in such holder's gross
income for the taxable year with respect to such Senior Certificate. The
amount of such net interest expense deferred in a taxable year may not
exceed the amount of market discount accrued on the Senior Certificate for
the days during the taxable year on which the holder held the Senior
Certificate and, in general, would be deductible when such market discount
is includible in income. The amount of any remaining deferred deduction is
to be taken into account in the taxable year in which the Senior
Certificate matures or is disposed of in a taxable transaction. In the case
of a disposition in which gain or loss is not recognized in whole or in
part, any remaining deferred deduction will be allowed to the extent of
gain recognized on the disposition. This deferral rule does not apply, if
the Senior Certificateholder elects to include such market discount in
income currently as it accrues on all market discount obligations acquired
by such Senior Certificateholder in that taxable year or thereafter.

MULTIPLE CLASSES OF SENIOR CERTIFICATES

STRIPPED BONDS AND STRIPPED COUPONS. Pursuant to Code Section 1286, the
separation of ownership of the right to receive some or all of the interest
payments on an obligation from ownership of the right to receive some or
all of the principal payments on such obligation results in the creation of
"stripped bonds" with respect to principal payments and "stripped coupons"
with respect to interest payments. For purposes of Code Sections 1271
through 1288, Code Section 1286 treats a stripped bond or a stripped coupon
as an obligation issued on the date that such stripped interest is
purchased. If a Trust is created with two classes of Senior Certificates,
one class of Senior Certificates will represent the right to principal and
interest, or principal only, on all or a portion of the Loans (the
"Stripped Bond Certificates"), while the second class of Senior
Certificates will represent the right to some or all of the interest on
such portion (the "Stripped Coupon Certificates").

The precise tax treatment of Stripped Coupon Certificates is substantially
uncertain. The Code could be read literally to require that original issue
discount computations be made on a Loan by Loan basis. However, based on
the recent IRS guidance, it appears that a Stripped Coupon Certificate
should be treated as a single installment obligation subject to the
original issue discount rules of the Code. As a result, all payments on a
Stripped Coupon Certificate would be included in the certificate's stated
redemption price at maturity for purposes of calculating income on such
certificate under the original issue discount rules of the Code.

It is unclear under what circumstances, if any, the prepayment of Mortgage
Loans will give rise to a loss to the holder of a Stripped Bond Certificate
purchased at a premium or a Stripped Coupon Certificate. If such
Certificate is treated as a single instrument (rather than an interest in
discrete mortgage loans) and the effect of prepayments is taken into
account in computing yield with respect to such Senior Certificate, it
appears that no loss may be available as a result of any particular
prepayment unless prepayments occur at a rate faster than the assumed
prepayment rate. However, if such Certificate is treated as an interest in
discrete Mortgage Loans, or if no prepayment assumption is used, then when
a Mortgage Loan is prepaid, the holder of such Certificate should be able
to recognize a loss equal to the portion of the adjusted issue price of
such Certificate that is allocable to such Mortgage Loan.

Holders of Stripped Bond Certificates and Stripped Coupon Certificates are
urged to consult with their own tax advisors regarding the proper treatment
of these Certificates for federal income tax purposes.

TREATMENT OF CERTAIN OWNERS. Several Code sections provide beneficial
treatment to certain taxpayers that invest in mortgage loans of the type
that make up the Trust. With respect to these Code sections, no specific
legal authority exists regarding whether the character of the Senior
Certificates for federal income tax purposes, will be the same as that of
the underlying Mortgage Loans. While Code Section 1286 treats a stripped
obligation as a separate obligation for purposes of the Code provisions
addressing original issue discount, it is not clear whether such
characterization would apply with regard to these other Code sections.
Although the issue is not free from doubt, based on policy considerations,
each class of Senior Certificates should be considered to represent "real
estate assets" within the meaning of Code Section 856(c)(4)(A) and "loans .
. . secured by, an interest in real property which is . . . residential
real property" within the meaning of Code Section 7701(a)(19)(C)(v), and
interest income attributable to Senior Certificates should be considered to
represent "interest on obligations secured by mortgages on real property"
within the meaning of Code Section 856(c)(3)(B), provided that in each case
the underlying Mortgage Loans and interest on such Mortgage Loans qualify,
for such treatment. Prospective purchasers to which such characterization
of an investment in Senior Certificates is material should consult their
own tax advisors regarding the characterization of the Senior Certificates
and the income therefrom. Senior Certificates will be "obligation[s]
(including any participation or certificate of beneficial ownership
therein) which [are] principally secured, directly or indirectly, by an
interest in real property" within the meaning of Code Section 860G(a)(3).

SENIOR CERTIFICATES REPRESENTING INTERESTS IN LOANS OTHER THAN ARMS.
Original issue discount on each Senior Certificate must be included in the
owner's ordinary income for federal income tax purposes as it accrues, in
accordance with a constant interest method that takes into account the
compounding of interest, in advance of receipt of the cash attributable to
such income. Based in part on the OID Regulations, the amount of original
issue discount required to be included in an owner's income in any taxable
year with respect to a Senior Certificate representing an interest in
Mortgage Loans other than ARMs likely will be computed as described below
under " -- Accrual of Original Issue Discount." Owners should be aware,
however, that the OID Regulations either do not address, or are subject to
varying interpretations with regard to, several issues relevant to
obligations, such as the Mortgage Loans, which are subject to prepayment.

Under the Code, the Mortgage Loans underlying the Senior Certificates will
be treated as having been issued on the date they were originated with an
amount of OID equal to the excess of such Mortgage Loan's stated redemption
price at maturity over its issue price. The issue price of a Mortgage Loan
is generally the amount lent to the mortgagee, which may be adjusted to
take into account certain loan origination fees. The stated redemption
price at maturity of a Mortgage Loan is the sum of all payments to be made
on such Mortgage Loan other than payments that are treated as qualified
stated interest payments. The accrual of this OID, as described below
under " -- Accrual of Original Issue Discount," will, unless otherwise
specified in the related Supplement, utilize the original yield to maturity
of the Senior Certificates calculated based on a reasonable assumed
prepayment rate for the mortgage loans underlying the Senior Certificates
(the "Prepayment Assumption"), and will take into account events that
occur during the calculation period. The Prepayment Assumption will be
determined in the manner prescribed by regulations that have not yet been
issued. The legislative history of the 1986 Act (the "Legislative History")
provides, however, that the regulations will require that the Prepayment
Assumption be the prepayment assumption that is used in determining the
offering price of such Certificate. No representation is made that any
Senior Certificate will prepay at the Prepayment Assumption. The prepayment
assumption provision contained in the Code literally only applies to debt
instruments collateralized by other debt instruments that are subject to
prepayment rather than direct ownership interest in such debt instruments,
such as the Senior Certificates represent. However, no other legal
authority provides guidance with regard to the proper method for accruing
OID on obligations that are subject to prepayment, and, until further
guidance is issued, the Master Servicer intends to calculate and report OID
under the method described below.

ACCRUAL OF ORIGINAL ISSUE DISCOUNT. Generally, the owner of a Senior
Certificate must include in gross income the sum of the "daily portions,"
as defined below, of the OID on such Senior Certificate for each day on
which it owns such Senior Certificate, including the date of purchase but
excluding the date of disposition. In the case of an original owner, the
daily portions of OID with respect to each component generally will be
determined as set forth under the OID Regulations. A calculation will be
made by the Master Servicer or such other entity specified in the related
Supplement of the portion of OID that accrues during each successive
monthly accrual period (or shorter period from the date of original issue)
that ends on the day in the calendar year corresponding to each of the
Distribution Dates on the Senior Certificates (or the day prior to each
such date). This will be done, in the case of each full month accrual
period, by adding (i) the present value at the end of the accrual period
(determined by using as a discount factor the original yield to maturity of
the respective component under the Prepayment Assumption) of all remaining
payments to be received under the Prepayment Assumption on the respective
component and (ii) any payments received during such accrual period, and
subtracting from that total the "adjusted issue price" of the respective
component at the beginning of such accrual period. The adjusted issue price
of a Senior Certificate at the beginning of the first accrual period is its
issue price; the adjusted issue price of a Senior Certificate at the
beginning of a subsequent accrual period is the adjusted issue price at the
beginning of the immediately preceding accrual period plus the amount of
OID allocable to that accrual period reduced by the amount of any payment
made at the end of or during that accrual period. The OID accruing during
such accrual period will then be divided by the number of days in the
period to determine the daily portion of OID for each day in the period.
With respect to an initial accrual period shorter than a full monthly
accrual period, the daily portions of OID must be determined according to
an appropriate allocation under any reasonable method.

Original issue discount generally must be reported as ordinary gross income
as it accrues under a constant interest method that takes into account the
compounding of interest as it accrues rather than when received. However,
the amount of original issue discount includible in the income of a holder
of an obligation is reduced when the obligation is acquired after its
initial issuance at a price greater than the sum of the original issue
price and the previously accrued original issue discount, less prior
payments of principal. Accordingly, if such Mortgage Loans acquired by a
Certificateholder are purchased at a price equal to the then unpaid
principal amount of such Mortgage Loan, no original issue discount
attributable to the difference between the issue price and the original
principal amount of such Mortgage Loan (i.e. points) will be includible by
such holder. Other original issue discount on the Mortgage Loans (e.g.,
that arising from a "teaser" rate) would still need to be accrued.

SENIOR CERTIFICATES REPRESENTING INTERESTS IN ARM LOANS. The OID
Regulations do not address the treatment of instruments, which represent
interests in Mortgage Loans with Mortgage Rates which adjust periodically
("ARM Loans"). Additionally, the IRS has not issued guidance under the
Code's coupon stripping rules with respect to such instruments. In the
absence of any authority, the Master Servicer will report original issue
discount on Senior Certificates attributable to ARM Loans ("Stripped ARM
Obligations") to holders in a manner it believes is consistent with the
rules described above under the heading "Senior Certificates Representing
Interests in Loans Other Than ARM Loans" and with the OID Regulations. In
general, application of these rules may require inclusion of income on a
Stripped ARM Obligation in advance of the receipt of cash attributable to
such income. Further, the addition of interest deferred by reason of
negative amortization to the principal balance of an ARM Loan may require
the inclusion of such amount in the income of the Certificateholder when
such amount accrues. Furthermore, the addition of Deferred Interest to the
Certificate's principal balance will result in additional income (including
possibly original issue discount income) to the Certificateholder over the
remaining life of such Certificate. Because the treatment of Stripped ARM
Obligations is uncertain, investors are urged to consult their tax advisors
regarding how income will be includible with respect to such Certificates.

SALE OR EXCHANGE OF A SENIOR CERTIFICATE

Sale or exchange of a Senior Certificate prior to its maturity will result
in gain or loss equal to the difference, if any, between the amount
received, and the owner's adjusted basis in the Senior Certificate. Such
adjusted basis generally will equal the seller's purchase price for the
Senior Certificate, increased by the original issue discount included in
the seller's gross income with respect to the Senior Certificate, and
reduced by principal payments on the Senior Certificate previously received
by the seller. Such gain or loss will be capital gain or loss to an owner
for which a Senior Certificate is a "capital asset" within the meaning of
Code Section 1221, and will be long-term or short-term depending on whether
the Senior Certificate has been owned for the long-term capital gain
holding period (generally more than one year). The Taxpayer Relief Act of
1997 (the "Act") reduced the maximum rates on long-term capital gains
recognized on capital assets held by individuals taxpayers for more than
eighteen months as of the date of disposition (and would further reduce the
maximum rates on such gains in the year 2001 and thereafter for certain
individual taxpayers who meet specified conditions). The capital gains rate
for capital assets held by individual taxpayers for more than twelve months
but less than eighteen months was not changed by the Act ("mid-term rate").
The Act does not change the capital gains rates for corporations.
Prospective investors should consult their own tax advisors concerning
these tax law changes.

Senior Certificates will be "evidences of indebtedness" within the meaning
of Code Section 582(c)(1), so that gain or loss recognized from the sale of
a Senior Certificate by a bank or a thrift institution to which such
section applies will be ordinary income or loss.

NON-U.S. PERSONS

Generally, to the extent that a Senior Certificate evidences ownership in
Mortgage Loans that are issued on or before July 18, 1984, interest or
original issue discount paid by the person required to withhold tax under
Code Section 1441 or 1442 to (i) an owner that is not a U.S. Person (as
defined below), or (ii) a Senior Certificateholder holding on behalf of an
owner that is not a U.S. Person, will be subject to federal income tax,
collected by withholding, at a rate of 30% or such lower rate as may be
provided for interest by an applicable tax treaty. Accrued original issue
discount recognized by the owner on the sale or exchange of such a Senior
Certificate also will be subject to federal income tax at the same rate.
Generally, such payments would not be subject to withholding to the extent
that a Senior Certificate evidences ownership in Mortgage Loans issued
after July 18, 1984 if (i) such Senior Certificateholder does not actually
or constructively own 10 percent or more of the combined voting power of
all classes of equity in the issuer (which for purposes of this discussion
may be defined as the Trust (the "Issuer")); (ii) such Senior
Certificateholder is not a controlled foreign corporation (within the
meaning of Code Section 957) related to the Issuer; and (iii) such Senior
Certificateholder complies with certain identification requirements
(including delivery of a statement, signed by the Senior Certificateholder
under penalties of perjury, certifying that such Senior Certificateholder
is not a U.S. Person and providing the name and address of such Senior
Certificateholder).

For purposes of this discussion, a "U.S. Person" means a citizen or
resident of the United States, a corporation or a partnership organized in
or under the laws of the United States, or any political subdivision
thereof (other than a partnership that is not treated as a United States
person under any applicable Treasury regulations), an estate whose income
is subject to U.S. federal income tax regardless of its source of income,
or a trust if a court within the United States is able to exercise primary
supervision of the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of
the trust. Notwithstanding the preceding sentence, to the extent provided
in regulations, certain trusts in existence on August 20, 1996 and treated
as United States persons prior to such date that elect to continue to be
treated as United States persons shall be considered U.S. Persons as well.

INFORMATION REPORTING AND BACKUP WITHHOLDING

The Master Servicer will furnish or make available, within a reasonable
time after the end of each calendar year, to each Certificateholder at any
time during such year, such information as may be deemed necessary or
desirable to assist Certificateholders in preparing their federal income
tax returns, or to enable holders to make such information available to
owners or other financial intermediaries of holders that hold such
Certificates as nominees. If a holder, owner or other recipient of a
payment on behalf of an owner fails to supply a certified taxpayer
identification number or if the Secretary of the Treasury determines that
such person has not reported all interest and dividend income required to
be shown on its federal income tax return, 31% backup withholding may be
required with respect to any payments. Any amounts deducted and withheld
from a distribution to a recipient would be allowed as a credit against
such recipient's federal income tax liability.

REMIC CERTIFICATES

The Trust relating to a Series of Certificates may elect to be treated as a
REMIC. Qualification as a REMIC requires ongoing compliance with certain
conditions. Although a REMIC is not generally subject to federal income tax
(see, however "Residual Certificates -- Prohibited Transactions"), if a
Trust with respect to which a REMIC election is made fails to comply with
one or more of the ongoing requirements of the Code for REMIC status during
any taxable year, including the implementation of restrictions on the
purchase and transfer of the residual interest in a REMIC as described
below under "Residual Certificates", the Code provides that a Trust will
not be treated as a REMIC for such year and thereafter. In that event, such
entity may be taxable as a separate corporation under Treasury regulations,
and the related REMIC Certificates may not be accorded the status or given
the tax treatment described below. While the Code authorizes the Treasury
Department to issue regulations providing relief in the event of an
inadvertent termination of REMIC status, no such regulations have been
issued. Any such relief moreover, may be accompanied by sanctions, such as
the imposition of a corporate tax on all or a portion of the REMIC's income
for the period in which the requirements for such status are not satisfied.
With respect to each such Trust that elects REMIC status, Brown & Wood LLP
will deliver its opinion generally to the effect that, under then existing
law and assuming compliance with all provisions of the related Agreement,
such Trust will qualify as a REMIC and the related Certificates will be
considered to be regular interests ("Regular Certificates") or residual
interests ("Residual Certificates") in the REMIC.

The Supplement for each Series of Certificates will indicate whether the
Trust will make a REMIC election and whether a class of Certificates will
be treated as a regular or residual interest in the REMIC.

In general, with respect to each Series of Certificates for which a REMIC
election is made, (i) Certificates held by a thrift institution taxed as a
"domestic building and loan association" will constitute assets described
in Code Section 7701(a)(19)(C); (ii) Certificates held by a real estate
investment trust will constitute "real estate assets" within the meaning of
Code Section 856(c)(4)(A); and (iii) interest on Certificates will be
considered "interest on obligations secured by mortgages on real property"
within the meaning of Code Section 856(c)(3)(B). If less than 95% of the
REMIC's assets are assets qualifying under any of the foregoing Code
sections, the Certificates will be qualifying assets only to the extent
that the REMIC's assets are qualifying assets. In addition, payments on
Mortgage Loans held pending distribution on the REMIC Certificates will be
treated as real estate assets for purposes of Code Section 856(c).
The Small Business Job Protection Act of 1996, as part of the repeal of the
bad debt reserve method for thrift institutions, repealed the application
of Code Section 593(d) to any taxable year beginning after December 31,
1995.

TIERED REMIC STRUCTURES. For certain series of Certificates, two separate
elections may be made to treat designated portions of the related Trust as
REMICs (respectively, the "Subsidiary REMIC" and the "Master REMIC") for
federal income tax purposes. Upon the issuance of any such series of
Certificates, Brown & Wood LLP, counsel to the Sponsor, will deliver its
opinion generally to the effect that, assuming compliance with all
provisions of the related Pooling and Servicing Agreement and Trust
Agreement, the Subsidiary REMIC and the Master REMIC will each qualify as
a REMIC and the REMIC Certificates issued by the Subsidiary REMIC and the
Master REMIC, respectively, will be considered to evidence ownership of
Regular Certificates or Residual Certificates in the related REMIC within
the meaning of the REMIC provisions.

Only REMIC Certificates (other than the Residual Certificates in the
Subsidiary REMIC) issued by the Master REMIC will be offered hereunder. The
Subsidiary REMIC and the Master REMIC will be treated as one REMIC solely
for purposes of determining whether the REMIC Certificates will be (i)
"real estate assets" within the meaning of Section 856(c)(4)(A) of the
Code, (ii) "loans secured by an interest in real property" under Section
7701(a)(19)(C) of the Code and (iii) whether the income on such
Certificates is Interest described in Section 856(c)(3)(B) of the Code.

REGULAR CERTIFICATES

GENERAL. Except as otherwise stated in this discussion, Regular
Certificates will be treated for federal income tax purposes as debt
instruments issued by the REMIC and not as ownership interests in the REMIC
or its assets. Moreover, holders of Regular Certificates that otherwise
report income under a cash method of accounting will be required to report
income with respect to Regular Certificates under an accrual method.

ORIGINAL ISSUE DISCOUNT AND PREMIUM. The Regular Certificates may be issued
with "original issue discount" within the meaning of Code Section 1273(a).
Generally, such original issue discount, if any, will equal the difference
between the "stated redemption price at maturity" of a Regular Certificate
and its "issue price." Holders of any class of Certificates issued with
original issue discount will be required to include such original issue
discount in gross income for federal income tax purposes as it accrues, in
accordance with a constant interest method based on the compounding of
interest, as it accrues rather than in accordance with receipt of the
interest payments. The following discussion is based in part on Treasury
regulations issued on January 27, 1994, as amended on June 11, 1996, under
Code Sections 1271 through 1273 and 1275 (the "OID Regulations") and in
part on the provisions of the Tax Reform Act of 1986 (the "1986 Act"). The
holder of a Regular Certificate should be aware, however, that the OID
Regulations do not adequately address certain issues relevant to prepayable
securities, such as the Regular Certificates.

Rules governing original issue discount are set forth in Code Sections 1271
through 1273 and 1275. These rules require that the amount and rate of
accrual of original issue discount be calculated based on a Prepayment
Assumption and prescribe a method for adjusting the amount and rate of
accrual of such discount where the actual prepayment rate differs from the
Prepayment Assumption. Under the Code, the Prepayment Assumption must be
determined in the manner prescribed by regulations which have not yet been
issued. The Legislative History provides, however, that Congress intended
the regulations to require that the Prepayment Assumption be the prepayment
assumption that is used in determining the initial offering price of such
Regular Certificates. The Supplement for each Series of Regular
Certificates will specify the Prepayment Assumption to be used for the
purpose of determining the amount and rate of accrual of original issue
discount. No representation is made that the Regular Certificates will
prepay at the Prepayment Assumption or at any other rate.

In general, each Regular Certificate will be treated as a single
installment obligation issued with an amount of original issue discount
equal to the excess of its "stated redemption price at maturity" over its
"issue price." The issue price of a Regular Certificate is the first price
at which a substantial amount of Regular Certificates of that class are
sold to the public (excluding bond houses, brokers, underwriters or
wholesalers). The issue price of a Regular Certificate also includes the
amount paid by an initial Regular Certificateholder for accrued interest
that relates to a period prior to the issue date of the Regular
Certificate. The stated redemption price at maturity of a Regular
Certificate includes the original principal amount of the Regular
Certificate, but generally will not include distributions of interest if
such distributions constitute "qualified stated interest." Under the OID
Regulations, qualified stated interest generally means interest payable at
a single fixed rate or qualified variable rate (as described below)
provided that such interest payments are unconditionally payable at
intervals of one year or less during the entire term of the Regular
Certificate. Interest is payable at a single fixed rate only if the rate
appropriately takes into account the length of the interval between
payments. Distributions of interest on Regular Certificates with respect to
which deferred interest will accrue, will not constitute qualified stated
interest payments, in which case the stated redemption price at maturity of
such Regular Certificates includes all distributions of interest as well as
principal thereon.

Where the interval between the issue date and the first Distribution Date
on a Regular Certificate is longer than the interval between subsequent
Distribution Dates, the greater of any original issue discount disregarding
the rate in the first period and any interest foregone during the first
period is treated as the amount by which the stated redemption price of the
Regular Certificate exceeds its issue price for purposes of the DE MINIMIS
rule described below. The OID Regulations suggest that all interest on a
long first period Regular Certificate that is issued with non-DE MINIMIS
OID will be treated as OID. Where the interval between the issue date and
the first Distribution Date on a Regular Certificate is shorter than the
interval between subsequent Distribution Dates, interest due on the first
Distribution Date in excess of the amount that accrued during the first
period would be added to the Certificates stated redemption price at
maturity. Regular Certificateholders should consult their own tax advisors
to determine the issue price and stated redemption price at maturity of a
Regular Certificate.

Under the DE MINIMIS rule, original issue discount on a Regular Certificate
will be considered to be zero if such original issue discount is less than
0.25% of the stated redemption price at maturity of the Regular Certificate
multiplied by the weighted average maturity of the Regular Certificate. For
this purpose, the weighted average maturity of the Regular Certificate is
computed as the sum of the amounts determined by multiplying the number of
full years (I.E., rounding down partial years) from the issue date until
each distribution in reduction of stated redemption price at maturity is
scheduled to be made by a fraction, the numerator of which is the amount of
each distribution included in the stated redemption price at maturity of
the Regular Certificate and the denominator of which is the stated
redemption price at maturity of the Regular Certificate. Although currently
unclear, it appears that the schedule of such distributions should be
determined in accordance with the assumed rate of prepayment of the
Mortgage Loans and the anticipated reinvestment rate, if any, relating to
the Regular Certificates (the "Prepayment Assumption"). The Prepayment
Assumption with respect to a Series of Regular Certificates will be set
forth in the related Supplement. Holders generally must report DE MINIMIS
OID pro rata as principal payments are received, and such income will be
capital gain if the Regular Certificate is held as a capital asset.

Generally, a Regular Certificateholder must include in gross income the
"daily portions," as determined below, of the original issue discount that
accrues on a Regular Certificate for each day the Regular Certificateholder
holds the Regular Certificate, including the purchase date but excluding
the disposition date. In the case of an original holder of a Regular
Certificate, a calculation will be made of the portion of the original
issue discount that accrues during each successive period (an "accrual
period") that ends on the day in the calendar year corresponding to a
Distribution Date (or if Distribution Dates are on the first day or first
business day of the immediately preceding month, interest may be treated as
payable on the last day of the immediately preceding month) and begins on
the day after the end of the immediately preceding accrual period (or on
the issue date in the case of the first accrual period). This will be done,
in the case of each full accrual period, by (i) adding (a) the present
value at the end of the accrual period (determined by using as a discount
factor the original yield to maturity of the Regular Certificates as
calculated under the Prepayment Assumption) of all remaining payments to be
received on the Regular Certificate under the Prepayment Assumption, and
(b) any payments included in the stated redemption price at maturity
received during such accrual period, and (ii) subtracting from that total
the "adjusted issue price" of the Regular Certificates at the beginning of
such accrual period. The "adjusted issue price" of a Regular Certificate at
the beginning of the first accrual period is its issue price; the "adjusted
issue price" of a Regular Certificate at the beginning of a subsequent
accrual period is the "adjusted issue price" at the beginning of the
immediately preceding accrual period plus the amount of original issue
discount allocable to that accrual period and reduced by the amount of any
payment other than a payment of qualified stated interest made at the end
of or during that accrual period. The original issue discount accrued
during an accrual period will then be divided by the number of days in the
period to determine the daily portion of original issue discount for each
day in the accrual period. The calculation of original issue discount under
the method described above will cause the accrual of original issue
discount to either increase or decrease (but never below zero) in a given
accrual period to reflect the fact that prepayments are occurring faster or
slower than under the Prepayment Assumption. With respect to an initial
accrual period shorter than a full accrual period the daily portions of
original issue discount must be determined according to an appropriate
allocation under any reasonable method.

A subsequent purchaser of a Regular Certificate issued with original issue
discount who purchases the Regular Certificate at a cost less than the
remaining stated redemption price at maturity will also be required to
include in gross income the sum of the daily portions of original issue
discount on that Regular Certificate. In computing the daily portions of
original issue discount for such a purchaser (as well as an initial
purchaser that purchases at a price higher than the adjusted issue price
but less than the stated redemption price at maturity), however, the daily
portion is reduced by the amount that would be the daily portion for such
day (computed in accordance with the rules set forth above) multiplied by a
fraction, the numerator of which is the amount, if any, by which the price
paid by such holder for that Regular Certificate exceeds the following
amount: (a) the sum of the issue price plus the aggregate amount of
original issue discount that would have been includible in the gross income
of an original Regular Certificateholder (who purchased the Regular
Certificate at its issue price), (b) less any prior payments included in
the stated redemption price at maturity, and the denominator of which is
the sum of the daily portions for that Regular Certificate for all days
beginning on the date after the purchase date and ending on the maturity
date computed under the Prepayment Assumption. A holder who pays an
acquisition premium instead may elect to accrue OID by treating the
purchase as a purchase of original issue.

The IRS recently finalized regulations (the "Contingent Regulations")
governing the calculation of OID on instruments having contingent interest
payments. The Contingent Regulations, effective for debt instruments issued
after August 13, 1996, represent the only guidance regarding the views of
the IRS with respect to contingent interest instruments and specifically do
not apply for purposes of calculating OID on debt instruments subject to
Code Section 1272(a)(6), such as the Regular Certificates. Additionally,
the OID Regulations do not contain provisions specifically interpreting
Code Section 1272(a)(6). Until the Treasury issues guidance to the
contrary, the Trustee intends to base its computation on Code Section
1272(a)(6) and the OID Regulations as described in this Prospectus.
However, because no regulatory guidance currently exists under Code Section
1272(a)(6), there can be no assurance that such methodology represents the
correct manner of calculating OID.

VARIABLE RATE REGULAR CERTIFICATES. Regular Certificates may provide for
interest based on a variable rate. Interest is treated as payable at a
variable rate and not as contingent interest if, generally, (i) the issue
price does not exceed the original principal balance by more than a
specified amount, and (ii) the compound compounds or is payable at least
annually at current values of certain objective rates measured by or based
on lending rate for newly borrowed funds. For a debt instrument issued
after August 13, 1996, an objective rate is a rate (other than a qualified
floating rate) that is determined using a single fixed formula and that is
based on objective financial or economic information. The variable interest
generally will be qualified stated interest to the extent it is
unconditionally payable at least annually and, to the extent successive
variable rates are used, interest is not significantly accelerated or
deferred.

The amount of OID with respect to a Regular Certificate bearing a variable
rate of interest will accrue in the manner described above under "Original
Issue Discount," by assuming generally that the index used for the variable
rate will remain fixed throughout the term of the Certificate. Approximate
adjustments are made for the actual variable rate.

Although unclear at present, it is anticipated that Regular Certificates
bearing an interest rate that is a weighted average of the net interest
rates on Mortgage Loans will be treated as variable rate certificates. In
such case, the weighted average rates used to compute the initial pass-
through rate on the Regular Certificates will be deemed to be the index in
effect through the life of the Regular Certificates. It is possible,
however, that the IRS may treat some or all of the interest on Regular
Certificates with a weighted average rate as taxable under the rules
relating to obligations providing for contingent payments. Such treatment
may effect the timing of income accruals on such Regular Certificates.
Additionally, if some or all of the Mortgage Loans are subject to "teaser
rates" (I.E., the initial rates on the Mortgage Loans are less than
subsequent rates on the Mortgage Loans) the interest paid on some or all of
the Regular Certificates may be subject to accrual using a constant yield
method notwithstanding the fact that such Certificates may not have been
issued with "true" non-DE MINIMIS original issue discount.

ELECTION TO TREAT ALL INTEREST AS OID. The OID Regulations permit a
Certificateholder to elect to accrue all interest, discount (including DE
MINIMIS market or original issue discount) and premium in income as
interest, based on a constant yield method for Certificates acquired on or
after April 4, 1994. If such an election were to be made with respect to a
Regular Certificate with market discount, the Certificateholder would be
deemed to have made an election to include in income currently market
discount with respect to all other debt instruments having market discount
that such Certificateholder acquires during the year of the election or
thereafter. Similarly, a Certificateholder that makes this election for a
Certificate that is acquired at a premium will be deemed to have made an
election to amortize bond premium with respect to all debt instruments
having amortizable bond premium with that such Certificateholder owns or
acquires. See " -- Regular Certificates -- Premium" herein. The election to
accrue interest, discount and premium on a constant yield method with
respect to a Certificate cannot be revoked without the consent of the IRS.

MARKET DISCOUNT. A purchaser of a Regular Certificate also may be subject
to the market discount provisions of Code Sections 1276 through 1278. Under
these provisions and the OID Regulations "market discount" equals the
excess, if any, of (i) the Regular Certificate's stated principal amount
or, in the case of a Regular Certificate with original issue discount, the
adjusted issue price (determined for this purpose as if the purchaser had
purchased such Regular Certificate from an original holder) over (ii) the
price for such Regular Certificate paid by the purchaser. A
Certificateholder that purchases a REMIC Regular Certificate at a market
discount, will recognize gain upon receipt of each distribution
representing stated redemption price. In particular, under Section 1276 of
the Code such a holder generally will be required to allocate each such
principal distribution first to accrued market discount not previously
included in income, and to recognize ordinary income to that extent. A
Certificateholder may elect to include market discount in income currently
as it accrues rather than including it on a deferred basis in accordance
with the foregoing. If made, such election will apply to all market
discount bonds acquired by such Certificateholder on or after the first day
of the first taxable year to which such election applies. In addition, the
OID Regulations permit a Certificateholder using either the accrual or cash
method of accounting to elect to accrue all interest, discount (including
DE MINIMIS market or original issue discount) and premium in income as
interest, based on a constant yield method. If such an election were made
with respect to a REMIC Regular Certificate with market discount, the
Certificateholder would be deemed to have made an election to include in
income currently market discount with respect to all other debt instruments
having market discount that such Certificateholder acquires during the year
of the election or thereafter. Similarly, a Certificateholder that makes
this election for a Certificate that is acquired at a premium is deemed to
have made an election to amortize bond premium with respect to all debt
instruments having amortizable bond premium that such Certificateholder
owns or acquires. See "Taxation of Regular Certificates -- Premium". The
election to accrue interest, discount and premium on a constant yield
method with respect to a Certificate is irrevocable.

Market discount with respect to a Regular Certificate will be considered to
be zero if the amount allocable to the Regular Certificate is less than
0.25% of the Regular Certificate's stated redemption price at maturity
multiplied by the Regular Certificate's weighted average maturity remaining
after the date of purchase. If market discount on a Regular Certificate is
considered to be zero under this rule, the actual amount of market discount
must be allocated to the remaining principal payments on the Regular
Certificate and gain equal to such allocated amount will be recognized when
the corresponding principal payment is made. Treasury regulations
implementing the market discount rules have not yet been issued; therefore,
investors should consult their own tax advisors regarding the application
of these rules and the advisability of making any of the elections allowed
under Code Sections 1276 through 1278.

The Code also grants authority to the Treasury Department to issue
regulations providing for the computation of accrued market discount on
debt instruments, the principal of which is payable in more than one
installment. Until such time as regulations are issued by the Treasury,
rules described in the Legislative History will apply. Under those rules,
the holder of a market discount bond may elect to accrue market discount
either on the basis of a constant interest rate or according to one of the
following methods. For Regular Certificates issued with original issue
discount, the amount of market discount that accrues during a period is
equal to the product of (i) the total remaining market discount, multiplied
by (ii) a fraction, the numerator of which is the original issue discount
accruing during the period and the denominator of which is the total
remaining original issue discount at the beginning of the period. For
Regular Certificates issued without original issue discount, the amount of
market discount that accrues during a period is equal to the product of (i)
the total remaining market discount, multiplied by (ii) a fraction, the
numerator of which is the amount of stated interest paid during the accrual
period and the denominator of which is the total amount of stated interest
remaining to be paid at the beginning of the period. For purposes of
calculating market discount under any of the above methods in the case of
instruments (such as the Regular Certificates) which provide for payments
which may be accelerated by reason of prepayments of other obligations
securing such instruments, the same Prepayment Assumption applicable to
calculating the accrual of original issue discount will apply.

A holder of a Regular Certificate who acquires such Regular Certificate at
a market discount also may be required to defer, until the maturity date of
such Regular Certificate or its earlier disposition in a taxable
transaction, the deduction of a portion of the amount of interest that the
holder paid or accrued during the taxable year on indebtedness incurred or
maintained to purchase or carry the Regular Certificate in excess of the
aggregate amount of interest (including original issue discount) includible
in such holder's gross income for the taxable year with respect to such
Regular Certificate. The amount of such net interest expense deferred in a
taxable year may not exceed the amount of market discount accrued on the
Regular Certificate for the days during the taxable year on which the
holder held the Regular Certificate and, in general, would be deductible
when such market discount is includible in income. The amount of any
remaining deferred deduction is to be taken into account in the taxable
year in which the Regular Certificate matures or is disposed of in a
taxable transaction. In the case of a disposition in which gain or loss is
not recognized in whole or in part any remaining deferred deduction will be
allowed to the extent of gain recognized on the disposition. This deferral
rule does not apply if the Regular Certificateholder elects to include such
market discount in income currently as it accrues on all market discount
obligations acquired by such Regular Certificateholder in that taxable year
or thereafter.

PREMIUM. A purchaser of a Regular Certificate who purchases the Regular
Certificate at a cost (not including accrued qualified stated interest)
greater than its remaining stated redemption price at maturity will be
considered to have purchased the Regular Certificate at a premium, and may
elect to amortize such premium under a constant yield method. It is not
clear whether the Prepayment Assumption would be taken into account in
determining the life of the Regular Certificate for this purpose. The
Amortizable Bond Premium Regulations described above specifically do not
apply to prepayable debt instruments subject to Code Section 1272(a)(6)
such as the Regular Certificates. Absent further guidance from the IRS, the
Trustee intends to account for amortizable bond premium in the manner
described herein. However, the Legislative History states that the same
rules that apply to accrual of market discount (which rules require use of
a Prepayment Assumption in accruing market discount with respect to Regular
Certificates without regard to whether such Certificates have original
issue discount) will also apply in amortizing bond premium under Code
Section 171. The Code provides that amortizable bond premium will be
allocated among the interest payments on such Regular Certificates and will
be applied as an offset against such interest payment. Prospective
purchasers of the Regular Certificates should consult their tax advisors
regarding the possible application of the Amortizable Bond Premium
Regulations.

DEFERRED INTEREST. Certain classes of Regular Certificates will provide for
the accrual of interest when one or more ARM Loans are adding interest to
their principal balance by reason of negative amortization ("Deferred
Interest"). Any Deferred Interest that accrues with respect to a class of
Regular Certificates will constitute income to the holders of such
Certificates prior to the time distributions of cash with respect to such
Deferred Interest are made. It is unclear, under the OID Regulations,
whether any of the interest on such Certificates will constitute qualified
stated interest or whether all or a portion of the interest payable on the
Certificate must be included in the stated redemption price at maturity of
the Certificate and accounted for as original issue discount (which could
accelerate such inclusion). Interest on Regular Certificates must in any
event be accounted for under an accrual method by the holders of such
Certificates, and therefore applying the latter analysis may result only in
a slight difference in the timing of the inclusion in income of interest on
such Regular Certificates.

ACCRUED INTEREST CERTIFICATES. Certain of the Regular Certificates
("Payment Lag Certificates") may provide for payments of interest based on
a period that corresponds to the interval between Distribution Dates but
that ends prior to each such Distribution Date. The period between the
Closing Date for Payment Lag Certificates and their first Distribution Date
may or may not exceed such interval. Purchasers of Payment Lag Certificates
for which the period between the Closing Date and the first Distribution
Date does not exceed such interval could pay upon purchase of the Regular
Certificates accrued interest in excess of the accrued interest that would
be paid if the interest paid on the Distribution Date were interest accrued
from Distribution Date to Distribution Date. If a portion of the initial
purchase price of a Regular Certificate is allocable to interest that has
accrued prior to the issue date ("pre-issuance accrued interest") and the
Regular Certificate provides for a payment of stated interest on the first
payment date, within one year of the issue date, that equals or exceeds the
amount of the pre-issuance accrued interest, then the Regular Certificates
issue price may be computed by subtracting from the issue price the amount
of pre-issuance accrued interest, rather than as an amount payable on the
Regular Certificate. However, it is unclear under this method how the OID
Regulations treat interest on Payment Lag Certificates as described above.
Therefore, in the case of a Payment Lag Certificate, the REMIC intends to
include accrued interest in the issue price and report interest payments
made on the first Distribution Date as interest to the extent such payments
represent interest for the number of days which the Certificateholder has
held such Payment Lag Certificate during the first Accrual Period.

SALE, EXCHANGE OR REDEMPTION OF REGULAR CERTIFICATES. If a Regular
Certificate is sold, exchanged, redeemed or retired, the seller will
recognize gain or loss equal to the difference between the amount realized
on the sale, exchange or redemption and the seller's adjusted basis in the
Regular Certificate. Such adjusted basis generally will equal the cost of
the Regular Certificate to the seller, increased by any original issue
discount and market discount included in the seller's gross income with
respect to the Regular Certificate, and reduced (but not below zero) by
payments included in the stated redemption price at maturity previously
received by the seller and by any amortized premium. Similarly, a holder
who receives a payment which is part of the stated redemption price at
maturity of a Regular Certificate will recognize gain equal to the excess,
if any, of the amount of the payment over his adjusted basis in the Regular
Certificate. A holder of a Regular Certificate who receives a final payment
which is less than his adjusted basis in the Regular Certificate will
generally recognize a loss. Except as provided in the following paragraph
and as provided under "Market Discount" below, any such gain or loss will
be capital gain or loss, provided that the Regular Certificate is held as a
"capital asset" (generally, property held for investment) within the
meaning of Code Section 1221. Any such capital gain or loss will generally
be long-term capital gain or loss if the holder held the Regular
Certificate for more than one year. The Taxpayer Relief Act of 1997 (the
"Act") reduces the maximum rates on long-term capital gains recognized on
capital assets held by individual taxpayers for more than eighteen months
as of the date of disposition (and would further reduce the maximum rates
on such gains in the year 2001 and thereafter for certain individual tax-
payers who meet specified conditions). The capital gains rate for capital
assets held by individual taxpayers for more than twelve months but less
than eighteen months was not changed by the Act. The Act does not change
the capital gains rates for corporations. Prospective investors should
consult their own tax advisors concerning these tax law changes.

Gain from the sale or other disposition of a Regular Certificate that might
otherwise be capital gain will be treated as ordinary income to the extent
that such gain does not exceed the excess, if any, of (i) the amount that
would have been includible in such holder's income with respect to the
Regular Certificate had income accrued thereon at a rate equal to 110% of
the AFR as defined in Code Section 1274(d) determined as of the date of
purchase of such Regular Certificate, over (ii) the amount actually
includible in such holder's income. Additionally, gain will be treated as
ordinary income if the Trust had an "intention to call" the Regular
Certificates prior to maturity. The OID Regulations provide that the
presence of a sinking fund or optimal call does not give rise to such an
intention, and the Seller does not believe such an intention is otherwise
present; however, the application of these rules to REMIC Certificates is
unclear.

Regular Certificates will be "evidences of indebtedness" within the meaning
of Code Section 582(c)(1), so that gain or loss recognized from the sale of
a Regular Certificate by a bank or a thrift institution to which such
section applies will be ordinary income or loss.

Because the regulations described above have not been issued, it is
impossible to predict what effect those regulations might have on the tax
treatment of a Regular Certificate purchased at a discount or premium in
the secondary market.

The Regular Certificate information reports will include a statement of the
adjusted issue price of the Regular Certificate at the beginning of each
accrual period. In addition, the reports will include information necessary
to compute the accrual of any market discount that may arise upon secondary
trading of Regular Certificates. Because exact computation of the accrual
of market discount on a constant yield method would require information
relating to the holder's purchase price which the REMIC may not have, it
appears that this provision will only require information pertaining to the
appropriate proportionate method of accruing market discount.

REMIC EXPENSES. As a general rule, all of the expenses of a REMIC will be
taken into account by holders of the Residual Interests. In the case of a
"single class REMIC" , however, the expenses and a matching amount of
additional income will be allocated, under temporary Treasury regulations,
among the holders of the Regular Certificates and the holders of the
Residual Interests on a daily basis in proportion to the relative amounts
of income accruing to each Certificateholder on that day. In the case of
individuals (or trusts, estates, or other persons who compute their income
in the same manner as individuals) who own an interest in a Regular
Certificate directly or through a pass-through entity which is required to
pass miscellaneous itemized deductions through to its owners or
beneficiaries (E.G. a partnership, an S corporation, or a grantor trust),
such expenses will be deductible only to the extent that such expenses,
plus other "miscellaneous itemized deductions" of the individual, exceed 2%
of such individual's adjusted gross income. In addition, the personal
exemptions and itemized deductions of individuals with adjusted gross
incomes above particular levels are subject to certain limitations which
reduce or eliminate the benefit of such items. The reduction or
disallowance of this deduction coupled with the allocation of additional
income may have a significant impact on the yield of the Regular
Certificate to such a Holder. Further, holders (other than corporations)
subject to the alternative minimum tax may not deduct miscellaneous
itemized deductions in determining such holders' alternative minimum
taxable income. In general terms, a single class REMIC is one that either
(i) would qualify, under existing Treasury regulations, as a grantor trust
if it were not a REMIC (treating all interests as ownership interests, even
if they would be classified as debt for federal income tax purposes) or
(ii) is similar to such a trust and is structured with the principal
purpose of avoiding the single class REMIC rules. Unless otherwise stated
in the related Supplement, the expenses of the REMIC will be allocated to
holders of the related Residual Interests in their entirety and not to
holders of the related Regular Certificates.

NON-U.S. PERSONS. Generally, payments of interest (including any payment
with respect to accrued original issue discount) on the Regular
Certificates to a Regular Certificateholder who is a non-U.S. Person not
engaged in a trade or business within the United States, will not be
subject to federal withholding tax if (i) such Regular Certificateholder
does not actually or constructively own 10 percent or more of the combined
voting power of all classes of equity in the issuer (which for purposes of
this discussion may be defined as the Trust or the beneficial owners of the
related Residual Certificates (the "Issuer")); (ii) such Regular
Certificateholder is not a controlled foreign corporation (within the
meaning of Code Section 957) related to the Issuer; and (iii) such Regular
Certificateholder complies with certain identification requirements
(including delivery of a statement, signed by the Regular Certificateholder
under penalties of perjury, certifying that such Regular Certificateholder
is a foreign person and providing the name and address of such Regular
Certificateholder). If a Regular Certificateholder is not exempt from
withholding, distributions of interest, including distributions in respect
of accrued original issue discount, such holder may be subject to a 30%
withholding tax, subject to reduction under any applicable tax treaty.

Regular Certificateholders who are non-U.S. Persons and persons related to
such holders should not acquire any Residual Certificates, and Residual
Certificateholders and persons related to Residual Certificateholders
should not acquire any Regular Certificates without consulting their tax
advisors as to the possible adverse tax consequences of such acquisition.

INFORMATION REPORTING AND BACKUP WITHHOLDING. The Master Servicer will
furnish or make available, within a reasonable time after the end of each
calendar year, to each Regular Certificateholder at any time during such
year, such information as may be deemed necessary or desirable to assist
Regular Certificateholders in preparing their federal income tax returns,
or to enable holders to make such information available to owners or other
financial intermediaries of holders that hold such Regular Certificates as
nominees. If a holder, owner or other recipient of a payment on behalf of
an owner fails to supply a certified taxpayer identification number or if
the Secretary of the Treasury determines that such person has not reported
all interest and dividend income required to be shown on its federal income
tax return, 31% backup withholding may be required with respect to any
payments.

Any amounts deducted and withheld from a distribution to a recipient would
be allowed as a credit against such recipient's federal income tax
liability.

NEW WITHHOLDING REGULATIONS

On October 6, 1997, the Treasury Department issued new regulations (the
"New Regulations") which make certain modifications to the withholding,
backup withholding and information reporting rules described above. The New
Regulations attempt to unify certification requirements and modify reliance
standards. The New Regulations will generally be effective for payments
made after December 31, 1998, subject to certain transition rules.
Prospective investors are urged to consult their own tax advisors regarding
the New Regulations.

RESIDUAL CERTIFICATES

ALLOCATION OF THE INCOME OF THE REMIC TO THE RESIDUAL CERTIFICATES. The
REMIC will not be subject to federal income tax except with respect to
income from prohibited transactions and certain other transactions. See
"Prohibited Transactions and Other Taxes" herein. Instead, each original
holder of a Residual Certificate will report on its federal income tax
return, as ordinary income, its share of the taxable income of the REMIC
for each day during the taxable year on which such holder owns any Residual
Certificates. The taxable income of the REMIC for each day will be
determined by allocating the taxable income of the REMIC for each calendar
quarter ratably to each day in the quarter. Such a holder's share of the
taxable income of the REMIC for each day, will be based on the portion of
the outstanding Residual Certificates that such holder owns on that day.
The taxable income of the REMIC will be determined under an accrual method
and will be taxable to the Residual Certificateholders without regard to
the timing or amounts of cash distributions by the REMIC. Ordinary income
derived from Residual Certificates will be "portfolio income" for purposes
of the taxation of taxpayers subject to the limitations on the
deductibility of "passive losses." As residual interests, the Residual
Certificates will be subject to tax rules, described below, that differ
from those that would apply if the Residual Certificates were treated for
federal income tax purposes as direct ownership interests in the
Certificates, or as debt instruments issued by the REMIC.

A Residual Certificateholder may be required to include taxable income from
the Residual Certificate in excess of the cash distributed. For example, a
structure where principal distributions are made serially on regular
interests (that is, a fast-pay, slow-pay structure) may generate such a
mismatching of income and cash distributions (that is, "phantom income").
This mismatching may be caused by the use of certain required tax
accounting methods by the REMIC, variations in the prepayment rate of the
underlying Mortgage Loans and certain other factors. Depending upon the
structure of a particular transaction, the aforementioned factors may
significantly reduce the after-tax yield of a Residual Certificate to a
Residual Certificateholder. Investors should consult their own tax advisors
concerning the federal income tax treatment of a Residual Certificate and
the impact of such tax treatment on the after-tax yield of a Residual
Certificate.

A subsequent Residual Certificateholder also will report on its federal
income tax return amounts representing a daily share of the taxable income
of the REMIC for each day that such Residual Certificateholder owns such
Residual Certificate. Those daily amounts generally would equal the amounts
that would have been reported for the same days by an original Residual
Certificateholder, as described above. The Legislative History indicates
that certain adjustments may be appropriate to reduce (or increase) the
income of a subsequent holder of a Residual Certificate that purchased such
Residual Certificate at a price greater than (or less than) the adjusted
basis (see "Sales of Residual Certificates" below) such Residual
Certificate would have in the hands of an original Residual
Certificateholder. It is not clear, however, whether such adjustments will
in fact be permitted or required and, if so, how they would be made.

TAXABLE INCOME OF THE REMIC ATTRIBUTABLE TO RESIDUAL INTERESTS. The taxable
income of the REMIC will reflect a netting of (i) the income from the
Mortgage Loans and the REMIC's other assets, and (ii) the deductions
allowed to the REMIC for interest and original issue discount on the
Regular Certificates and, except as described below under "Non-Interest
Expenses of the REMIC," other expenses.

For purposes of determining its taxable income, the REMIC will have an
initial aggregate tax basis in its assets equal to the sum of the issue
prices of the Regular and Residual Certificates (or, if a class of
Certificates is not sold initially, their fair market values). Such
aggregate basis will be allocated among the Mortgage Loans and other assets
of the REMIC in proportion to their respective fair market values. A
Mortgage Loan will be deemed to have been acquired with discount or premium
to the extent that the REMIC's basis therein is less than or greater than
its principal balance, respectively. Any such discount (whether market
discount or original issue discount) will be includible in the income of
the REMIC as it accrues, in advance of receipt of the cash attributable to
such income, under a method similar to the method described above for
accruing original issue discount on the Regular Certificates. The REMIC
expects to elect under Code Section 171 to amortize any premium on the
Mortgage Loans. Premium on any Mortgage Loan to which such election applies
would be amortized under a constant yield method. It is not clear whether
the yield of a Mortgage Loan would be calculated for this purpose based on
scheduled payments or taking account of the Prepayment Assumption.
Additionally, such an election would not apply to any Mortgage Loan
originated on or before September 27, 1985. Instead, premium on such a
Mortgage Loan would be allocated among the principal payments thereon and
would be deductible by the REMIC as those payments become due.

The REMIC will be allowed a deduction for interest and original issue
discount on the Regular Certificates. The amount and method of accrual of
original issue discount will be calculated for this purpose in the same
manner as described above with respect to Regular Certificates (except that
the 0.25% per annum DE MINIMIS rule and adjustments for subsequent holders
described therein will not apply).

A Residual Certificateholder will not be permitted to amortize the cost of
the Residual Certificate as an offset to its share of the REMIC's taxable
income. However, that taxable income will not include cash received by the
REMIC that represents a recovery of the REMIC's basis in its assets, and,
as described above, the issue price of the Residual Certificates will be
added to the issue price of the Regular Certificates in determining the
REMIC's initial basis in its assets. See "Sales of Residual Certificates"
herein. For a discussion of possible adjustments to income of a subsequent
holder of a Residual Certificate to reflect any difference between the
actual cost of such Residual Certificate to such holder and the adjusted
basis such Residual Certificate would have in the hands of an original
Residual Certificateholder, see "Allocation of the Income of the REMIC to
the Residual Certificates" above.

NET LOSSES OF THE REMIC. The REMIC will have a net loss for any calendar
quarter in which its deductions exceed its gross income. Such net loss
would be allocated among the Residual Certificateholders in the same manner
as the REMIC's taxable income. The net loss allocable to any Residual
Certificate will not be deductible by the holder to the extent that such
net loss exceeds such holder's adjusted basis in such Residual Certificate.
Any net loss that is not currently deductible by reason of this limitation
may be used by such Residual Certificateholder to offset its share of the
REMIC's taxable income in future periods (but not otherwise). The ability
of Residual Certificateholders that are individuals or closely held
corporations to deduct net losses may be subject to additional limitations
under the Code.

NON-INTEREST EXPENSES OF THE REMIC. As a general rule, the REMIC's taxable
income will be determined in the same manner as if the REMIC were an
individual. However, all or a portion of the REMIC's servicing,
administrative and other non-interest expenses will be allocated as a
separate item to Residual Certificateholders that are "pass-through
interest holders." Such a holder would be required to add its allocable
share, if any, of such expenses to its gross income and to treat the same
amount as an item of investment expense. An individual would generally be
allowed a deduction for such an expense item only as a miscellaneous
itemized deduction subject to the limitations under Code Section 67. That
section allows such deduction only to the extent that in the aggregate all
such expenses exceed two percent of an individual's adjusted gross income.
The REMIC is required to report to each pass-through interest holder and to
the IRS such holder's allocable share, if any, of the REMIC's non-interest
expenses. The term "pass-through interest holder" generally refers to
individuals, entities taxed as individuals and certain pass-through
entities, but does not include real estate investment trusts. Residual
Certificateholders that are "pass-through interest holders" should consult
their own tax advisors about the impact of these rules on an investment in
the Residual Certificates. See "Non-Interest Expenses of the REMIC" under
"Regular Certificates" above.

DEFERRED INTEREST. Any Deferred Interest that accrues with respect to any
ARM Loans held by the REMIC will constitute income to the REMIC and will be
treated in a manner similar to the Deferred Interest that accrues with
respect to Regular Certificates as described above under "Regular
Certificates -- Deferred Interest."

EXCESS INCLUSIONS. A portion of the income on a Residual Certificate
(referred to in the Code as an "excess inclusion") for any calendar quarter
will be subject to federal income tax in all events. Thus, for example, an
excess inclusion (i) may not be offset by any unrelated losses or loss
carryovers of a Residual Certificateholder; (ii) will be treated as
"unrelated business taxable income" within the meaning of Code Section 512
if the Residual Certificateholder is a pension fund or any other
organization that is subject to tax only on its unrelated business taxable
income (see "Tax-Exempt Investors" below); and (iii) is not eligible for
any reduction in the rate of withholding tax in the case of a Residual
Certificateholder that is a foreign investor. See "Non-U.S. Persons" below.
The exception for thrift institutions is available only to the institution
holding the Residual Certificate, and not to any affiliate of the
institution, unless the affiliate is a subsidiary all the stock of which,
and substantially all the indebtedness of which, is held by the
institution, and which is organized and operated exclusively in connection
with the organization and operation of one or more REMICs.

With respect to any Residual Certificateholder, the excess inclusion for
any calendar quarter is the excess, if any, of (i) the income of such
Residual Certificateholder for that calendar quarter from its Residual
Certificate over (ii) the sum of the "daily accruals" (as defined below)
for all days during the calendar quarter on which the Residual
Certificateholder holds such Residual Certificate. For this purpose, the
daily accruals with respect to a Residual Certificate are determined by
allocating to each day in the calendar quarter its ratable portion of the
product of the "adjusted issue price" (as defined below) of the Residual
Certificate at the beginning of the calendar quarter and 120 percent of the
"Federal long-term rate" in effect at the time the Residual Certificate is
issued. For this purpose, the "adjusted issue price" of a Residual
Certificate at the beginning of any calendar quarter equals the issue price
of the Residual Certificate, increased by the amount of daily accruals for
all prior quarters, and decreased (but not below zero) by the aggregate
amount of payments made on the Residual Certificate before the beginning of
such quarter. The "Federal long-term rate" is an average of current yields
on Treasury securities with a remaining term of greater than nine years,
computed and published monthly by the IRS.

The Small Business Job Protection Act of 1996 has eliminated the special
rule permitting Section 593 institutions ("thrift institutions") to use net
operating losses and other allowable deductions to offset their excess
inclusion income from REMIC residual certificates that have "significant
value" within the meaning of the REMIC Regulations, effective for taxable
years beginning after December 31, 1995, except with respect to residual
certificates continuously held by a thrift institution since November 1,
1995.

In addition, the Small Business Job Protection Act of 1996 provides three
rules for determining the effect on excess inclusions on the alternative
minimum taxable income of a residual holder. First, alternative minimum
taxable income for such residual holder is determined without regard to the
special rule that taxable income cannot be less than excess inclusions.
Second, a residual holder's alternative minimum taxable income for a tax
year cannot be less than the excess inclusions for the year. Third, the
amount of any alternative minimum tax net operating loss deductions must be
computed without regard to any excess inclusions. These rules are effective
for tax years beginning after December 31, 1986, unless a residual holder
elects to have such rules apply only to tax years beginning after August
20, 1996.

In the case of any Residual Certificates held by a real estate investment
trust, the aggregate excess inclusions with respect to such Residual
Certificates, reduced (but not below zero) by the real estate investment
trust taxable income (within the meaning of Code Section 857(b)(2),
excluding any net capital gain), will be allocated among the shareholders
of such trust in proportion to the dividends received by such shareholders
from such trust, and any amount so allocated will be treated as an excess
inclusion with respect to a Residual Certificate as if held directly by
such shareholder. Regulated investment companies, common trust funds, and
certain cooperatives are subject to similar rules.

PAYMENTS. Any payment made on a Residual Certificate to a Residual
Certificateholder will be treated as a non-taxable return of capital to the
extent it does not exceed the Residual Certificateholder's adjusted basis
in such Residual Certificate. To the extent a distribution exceeds such
adjusted basis, it will be treated as gain from the sale of the Residual
Certificate.

SALE OR EXCHANGE OF RESIDUAL CERTIFICATES. If a Residual Certificate is
sold or exchanged, the seller will generally recognize gain or loss equal
to the difference between the amount realized on the sale or exchange and
its adjusted basis in the Residual Certificate (except that the recognition
of loss may be limited under the "wash sale" rules described below). A
holder's adjusted basis in a Residual Certificate generally equals the cost
of such Residual Certificate to such Residual Certificateholder, increased
by the taxable income of the REMIC that was included in the income of such
Residual Certificateholder with respect to such Residual Certificate, and
decreased (but not below zero) by the net losses that have been allowed as
deductions to such Residual Certificateholder with respect to such Residual
Certificate and by the distributions received thereon by such Residual
Certificateholder. In general, any such gain or loss will be capital gain
or loss provided the Residual Certificate is held as a capital asset.
However, Residual Certificates will be "evidences of indebtedness" within
the meaning of Code Section 582(c)(1), so that gain or loss recognized from
sale of a Residual Certificate by a bank or thrift institution to which
such section applies would be ordinary income or loss.

Except as provided in Treasury regulations, if the seller of a Residual
Certificate reacquires such Residual Certificate, or acquires any other
Residual Certificate, any residual interest in another REMIC or similar
interest in a "taxable mortgage pool" (as defined in Code Section 7701(i))
during the period beginning six months before, and ending six months after,
the date of such sale, such sale will be subject to the "wash sale" rules
of Code Section 1091. In that event, any loss realized by the Residual
Certificateholder on the sale will not be deductible, but, instead, will
increase such Residual Certificateholder's adjusted basis in the newly
acquired asset.

MARK TO MARKET RULES. Prospective purchasers of a Residual Certificate
should be aware that the IRS recently released final regulations under Code
Section 475 (the "Mark-to-Market Regulations") which provide that any REMIC
Residual Certificate acquired after January 3, 1995 cannot be marked to
market.

PROHIBITED TRANSACTIONS AND OTHER TAXES

The REMIC is subject to a tax at a rate equal to 100 percent of the net
income derived from "prohibited transactions." In general, a prohibited
transaction means the disposition of a Mortgage Loan other than pursuant to
certain specified exceptions, the receipt of investment income from a
source other than a Mortgage Loan or certain other permitted investments,
or the disposition of an asset representing a temporary investment of
payments on the Mortgage Loans pending payment on the Residual Certificates
or Regular Certificates. In addition, the assumption of a Mortgage Loan by
a subsequent purchaser could cause the REMIC to recognize gain, which would
also be subject to the 100 percent tax on prohibited transactions.

In addition, certain contributions to a REMIC made after the Closing Date
could result in the imposition of a tax on the REMIC equal to 100% of the
value of the contributed property.

It is not anticipated that the REMIC will engage in any prohibited
transactions or receive any contributions subject to the contributions tax.
However, in the event that the REMIC is subject to any such tax, unless
otherwise disclosed in the related Supplement, such tax would be borne
first by the Trustee, the Master Servicer, the Sponsor or the Seller, as
applicable, if such tax results from a breach of such party's obligations
under the Pooling Agreement, and then by the Residual Certificateholders.

LIQUIDATION AND TERMINATION

If the REMIC adopts a plan of complete liquidation, within the meaning of
Code Section 860F(a)(4)(A)(i), which may be accomplished by designating in
the REMIC's final tax return a date on which such adoption is deemed to
occur, and sells all of its assets (other than cash) within a 90-day period
beginning on such date, the REMIC will recognize no gain or loss on the
sale of its assets, provided that the REMIC credits or distributes in
liquidation all of the sale proceeds plus its cash (other than the amounts
retained to meets claims) to holders of Regular and Residual Certificates
within the 90-day period.

The REMIC will terminate shortly following the retirement of the Regular
Certificates. If a Residual Certificateholder's adjusted basis in the
Residual Certificate exceeds the amount of cash distributed to such
Residual Certificateholder in final liquidation of its interest, then,
although the matter is not entirely free from doubt, it would appear that
the Residual Certificateholder would be entitled to a loss equal to the
amount of such excess. It is unclear whether such a loss, if allowed, will
be a capital loss or an ordinary loss.

ADMINISTRATIVE MATTERS

Solely for the purpose of the administrative provisions of the Code, the
REMIC will be treated as a partnership and the Residual Certificateholders
will be treated as the partners thereof; however, under Temporary
Regulations if there is at no time during the taxable year more than one
Residual Certificateholder, a REMIC shall not be subject to the rules of
Subchapter C of chapter 63 of the Code, relating to the treatment of
Partnership items for a taxable year. Accordingly, the REMIC will file an
annual tax return on Form 1066, U.S. Real Estate Mortgage Investment
Conduit Income Tax Return. In addition, certain other information will be
furnished quarterly to each Residual Certificateholder who held such
Residual Certificate on any day in the previous calendar quarter.

The Treasury Department has issued final regulations concerning certain
aspects of REMIC tax administration. Under those regulations, a Residual
Certificateholder must be designated as the REMIC "tax matters person." The
tax matters person, generally, has responsibility for overseeing and
providing notice to the other Residual Certificateholders of certain
administrative and judicial proceedings regarding the REMIC's tax affairs.
Unless otherwise indicated in the related Prospectus Supplement, the
Trustee will be designated as tax matters person for each REMIC, and
will act as the agent of the Residual Certificateholders in the
preparation and filing of the REMIC's federal and state income tax and
other information returns.

Each Residual Certificateholder is required to treat items on its return
consistently with their treatment on the REMIC's return, unless the
Residual Certificateholder either files a statement identifying the
inconsistency or establishes that the inconsistency resulted from incorrect
information received from the REMIC. The IRS may assert a deficiency
resulting from a failure to comply with the consistency requirement without
instituting an administrative proceeding at the REMIC level. The REMIC does
not intend to register as a tax shelter pursuant to Code Section 6111
because it is not anticipated that the REMIC will have a net loss for any
of the first five taxable years of its existence. Any person that holds a
Residual Certificate as a nominee for another person may be required to
furnish the REMIC, in a manner to be provided in Treasury regulations, with
the name and address of such person and other information.

TAX-EXEMPT INVESTORS

Any Residual Certificateholder that is a pension fund or other entity that
is subject to federal income taxation only on its "unrelated business
taxable income" within the meaning of Code Section 512 will be subject to
such tax on that portion of the distributions received on a Residual
Certificate that is considered an "excess inclusion." See "Excess
Inclusions" herein.

NON-U.S. PERSONS

NON-U.S. PERSONS. Amounts paid to Residual Certificateholders who are not
U.S. Persons (see "Regular Certificates -- Non-U.S. Persons") are treated
as interest for purposes of the 30% (or lower treaty rate) United States
withholding tax. Amounts distributed to Residual Holders should qualify as
"portfolio interest," subject to the conditions described in "Regular
Certificates" above, but only to the extent that the Mortgage Loans were
originated after July 18,1984. Furthermore, the rate of withholding on any
income on a Residual Certificate that is an excess inclusion will not be
subject to reduction under any applicable tax treaties. See "Residual
Certificates -- Excess Inclusions." If the portfolio interest exemption is
unavailable, such amount will be subject to United States withholding tax
when paid or otherwise distributed (or when the Residual Certificate is
disposed of) under rules similar to those for withholding upon disposition
of debt instruments that have original issue discount. The Code, however,
grants the Treasury Department authority to issue regulations requiring
that those amounts be taken into account earlier than otherwise provided
where necessary to prevent avoidance of tax (for example, where the
Residual Certificates do not have significant value). See "Residual
Certificates -- Excess Inclusions." If the amounts paid to Residual
Certificateholders that are not U.S. persons are effectively connected with
their conduct of a trade or business within the United States, the 30% (or
lower treaty rate) withholding will not apply. Instead, the amounts paid to
such non-U.S. Person will be subject to U.S. federal income taxation at
regular graduated rates.

For this purpose, a "U.S. Person" includes a citizen or resident of the
United States, a corporation, partnership or other entity created or
organized under the laws of the United States or any political subdivision
thereof (other than a partnership that is not treated as a United States
person under any applicable Treasury regulations), an estate whose income
from sources without the United States is includible in gross income for
United States federal income tax purposes regardless of its connection with
the conduct of a trade or business in the United States or a trust if a
court within the United States is able to exercise primary supervision of
the administration of the trust and one or more United States persons have
the authority to control all substantial decisions of the trust.
Notwithstanding the preceding sentence, to the extent provided in
regulations, certain trusts in existence on August 20, 1996 and treated as
United States persons prior to such date that elect to continue to be so
treated also shall be considered U.S. Persons.

Regular Certificateholders and persons related to such holders should not
acquire any Residual Certificates, and Residual Certificateholders and
persons related to Residual Certificateholders should not acquire any
Regular Certificates without consulting their tax advisors as to the
possible adverse tax consequences of doing so.

TAX-RELATED RESTRICTIONS ON TRANSFER

An entity may not qualify as a REMIC unless there are reasonable
arrangements designed to ensure that residual interests in such entity are
not held by "disqualified organizations" (as defined below). Further, a tax
is imposed on the transfer of a residual interest in a REMIC to a
"disqualified organization." The amount of the tax equals the product of
(A) an amount (as determined under regulations) equal to the present value
of the total anticipated "excess inclusions" with respect to such interest
for periods after the transfer, and (B) the highest marginal federal income
tax rate applicable to corporations. The tax is imposed on the transferor
unless the transfer is through an agent (including a broker or other
middlemen) for a disqualified organization, in which event the tax is
imposed on the agent. The person otherwise liable for the tax shall be
relieved of liability for the tax if the transferee furnished to such
person an affidavit that the transferee is not a disqualified organization
and, at the time of the transfer, such person does not have actual
knowledge that the affidavit is false. A "disqualified organization" means
(A) the United States, any State, possession, or political subdivision
thereof, any foreign government, any international organization, or any
agency or instrumentality of any of the foregoing (provided that such term
does not include an instrumentality if all its activities are subject to
tax and, except for FHLMC, a majority of its board of directors is not
selected by any such governmental agency), (B) any organization (other than
certain farmers' cooperatives) generally exempt from federal income taxes
unless such organization is subject to the tax on "unrelated business
taxable income" and (C) a rural electric or telephone cooperative.

A tax is imposed on a "pass-through entity" (as defined below) holding a
residual interest in a REMIC if at any time during the taxable year of the
pass-through entity a disqualified organization is the record holder of an
interest in such entity. The amount of the tax is equal to the product of
(A) the amount of excess inclusions for the taxable year allocable to the
interest held by the disqualified organization, and (B) the highest
marginal federal income tax rate applicable to corporations. The pass-
through entity otherwise liable for the tax, for any period during which
the disqualified organization is the record holder of an interest in such
entity, will be relieved of liability for the tax if such record holder
furnishes to such entity an affidavit that such record holder is not a
disqualified organization and, for such period, the pass-through entity
does not have actual knowledge that the affidavit is false. For this
purpose, a "pass-through entity" means (i) a regulated investment company,
real estate investment trust or common trust fund, (ii) a partnership,
trust or estate and (iii) certain cooperatives. Except as may be provided
in Treasury regulations, any person holding an interest in a pass-through
entity as a nominee for another will, with respect to such interest, be
treated as a pass-through entity. The tax on pass-through entities is
generally effective for periods after March 31,1988, except that in the
case of regulated investment companies, real estate investment trusts,
common trust funds and publicly-traded partnerships the tax shall apply
only to taxable years of such entities beginning after December 31, 1988.

In order to comply with these rules, the Agreement will provide that no
record or beneficial ownership interest in a Residual Certificate may be,
directly or indirectly, purchased, transferred or sold without the express
written consent of the Master Servicer. The Master Servicer will grant such
consent to a proposed transfer only if it receives the following: (i) an
affidavit from the proposed transferee to the effect that it is not a
disqualified organization and is not acquiring the Residual Certificate as
a nominee or agent for a disqualified organization, and (ii) a covenant by
the proposed transferee to the effect that the proposed transferee agrees
to be bound by and to abide by the transfer restrictions applicable to the
Residual Certificate.

Any attempted transfer or pledge in violation of the transfer restrictions
shall be absolutely null and void and shall vest no rights in any purported
transferee. Investors in Residual Certificates are advised to consult their
own tax advisors with respect to transfers of the Residual Certificates
and, in addition, pass-through entities are advised to consult their own
tax advisors with respect to any tax which may be imposed on a pass-through
entity.

NONECONOMIC RESIDUAL CERTIFICATES. The REMIC Regulations disregard, for
federal income tax purposes, any transfer of a Noneconomic Residual
Certificate to a "U.S. Person," as defined in the following section of this
discussion, unless no significant purpose of the transfer is to enable the
transferor to impede the assessment or collection of tax. A Noneconomic
Residual Certificate is any Residual Certificate (including a Residual
Certificate with a positive value at issuance) unless, at the time of
transfer, taking into account the Prepayment Assumption, (i) the present
value of the expected future distributions on the Residual Certificate at
least equals the product of the present value of the anticipated excess
inclusions and the highest corporate income tax rate in effect for the year
in which the transfer occurs and (ii) the transferor reasonably expects
that the transferee will receive distributions from the REMIC at or after
the time at which taxes accrue on the anticipated excess inclusions in an
amount sufficient to satisfy the accrued taxes. A significant purpose to
impede the assessment or collection of tax exists if the transferor, at the
time of the transfer, either knew or should have known that the transferee
would be unwilling or unable to pay taxes due on its share of the taxable
income of the REMIC. A transferor is presumed not to have such knowledge if
(i) the transferor conducted a reasonable investigation of the transferee
and (ii) the transferee acknowledges to the transferor that the residual
interest may generate tax liabilities in excess of the cash flow and the
transferee represents that it intends to pay such taxes associated with the
residual interest as they become due. If a transfer of a Noneconomic
Residual Certificate is disregarded, the transferor would continue to be
treated as the owner of the Residual Certificate and would continue to be
subject to tax on its allocable portion of the net income of the REMIC.

FOREIGN INVESTORS. The REMIC Regulations provide that the transfer of a
Residual Certificate that has a "tax avoidance potential" to a "foreign
person" will be disregarded for federal income tax purposes. This rule
appears to apply to a transferee who is not a "U.S. Person" , as defined
below, unless such transferee's income in respect of the Residual
Certificate is effectively connected with the conduct of a United States
trade or business. A Residual Certificate is deemed to have a tax avoidance
potential unless, at the time of transfer, the transferor reasonably
expects that the REMIC will distribute to the transferee amounts that will
equal at least 30 percent of each excess inclusion, and that such amounts
will be distributed at or after the time the excess inclusion accrues and
not later than the end of the calendar year following the year of accrual.
If the non-U.S. Person transfers the Residual Certificate to a U.S. Person,
the transfer will be disregarded, and the foreign transferor will continue
to be treated as the owner, if the transfer has the effect of allowing the
transferor to avoid tax on accrued excess inclusions. The provisions in the
REMIC Regulations regarding transfers of Residual Certificates that have
tax avoidance potential to foreign persons are effective for all transfers
after June 30,1992. Until further guidance is issued concerning the
treatment of Residual Certificates held by non-U.S. Persons, the Pooling
and Servicing Agreement will provide that no record or beneficial ownership
interest in a Residual Certificate may be, directly or indirectly,
transferred to a non-U.S. Person unless such person provides the Trustee
with a duly completed I.R.S. Form 4224 and the Trustee consents to such
transfer in writing.

For purposes of this discussion, a "U.S. Person" means a citizen or
resident of the United States, or any political subdivision thereof (other
than a partnership that is not treated as a United States person under any
applicable Treasury regulations), or an estate whose income is subject to
U.S. federal income tax regardless of its source of income, or a trust if a
court within the United States is able to exercise primary supervision of
the administration of the trust and one or more United States persons have
the authority to control all substantial decisions of the trust.
Notwithstanding the preceding sentence, to the extent provided in
regulations, certain trusts in existence on August 20, 1996 and treated as
United States persons prior to such date that elect to continue to be
treated as United States persons shall be considered U.S. Persons as well.

STATE TAX CONSIDERATIONS

In addition to the federal income tax consequences described in "Certain
Federal Income Tax Considerations", potential investors should consider the
state income tax consequences of the acquisition, ownership, and
disposition of the Certificates. State income tax law may differ
substantially from the corresponding federal law, and this discussion does
not purport to describe any aspect of the income tax laws of any state.
Therefore, potential investors should consult their own tax advisors with
respect to the various tax consequences of investments in the Certificates.

PLANS OF DISTRIBUTION

Certificates are being offered hereby in Series from time to time (each
Series evidencing a separate Trust) through any of the following methods:

1. By negotiated firm commitment underwriting and public reoffering by
underwriters;

2. By agency placements through one or more placement agents primarily
with institutional investors and dealers; and

3. By placement directly by the Sponsor with institutional investors.

A Supplement will be prepared for each Series which will describe the
method of offering being used for that Series and will set forth the
identity of any underwriters thereof and either the price at which such
Series is being offered, the nature and amount of any underwriting
discounts or additional compensation to such underwriters and the proceeds
of the offering to the Sponsor, or the method by which the price at which
the underwriters will sell the Certificates will be determined. Each
Supplement for an underwritten offering will also contain information
regarding the nature of the underwriters' obligations, any material
relationship between the Sponsor and any underwriter and, where
appropriate, information regarding any discounts or concessions to be
allowed or reallowed to dealers or others and any arrangements to stabilize
the market for the certificates so offered. In firm commitment underwritten
offerings, the underwriters will be obligated to purchase all of the
Certificates of such Series if any such Certificates are purchased.
Certificates may be acquired by the underwriters for their own accounts and
may be resold from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying
prices determined at the time of sale.

Underwriters and agents may be entitled under agreements entered into with
the Sponsor to indemnification by the Sponsor against certain civil
liabilities, including liabilities under the Securities Act of 1933, as
amended, or to contribution with respect to payments which such
underwriters or agents may be required to make in respect thereof.

If a Series is offered other than through underwriters, the Supplement
relating thereto will contain information regarding the nature of such
offering and any agreements to be entered into between Sponsor and
purchasers of Certificates of such Series.

FINANCIAL INFORMATION

A new Trust will be formed with respect to each Series of Certificates and
no Trust will engage in any business activities or have any assets or
obligations prior to the issuance of the related Series of Certificates.
Accordingly, no financial statements with respect to any Trust will be
included in this Prospectus or in the related Supplement.

RATING

It is a condition to the issuance of the Certificates of each Series
offered hereby and by the Supplement that they shall be rated in one of the
four highest rating categories by the nationally recognized statistical
rating agency or agencies specified in the related Supplement.

Ratings on mortgage pass-through certificates address the likelihood of
receipt by certificateholders of all distributions on the mortgage assets
in the related trust. These ratings address the structural, legal and
issuer-related aspects associated with such certificates, the nature of the
mortgage assets in the related trust and the credit quality of the credit
enhancer or guarantor, if any. Ratings on mortgage pass-through
certificates do not represent any assessment of the likelihood of principal
prepayments by mortgagors or of the degree by which such prepayments might
differ from those originally anticipated. As a result, certificateholders
might suffer a lower than anticipated yield, and, in addition, holders of
stripped pass-through certificates in extreme cases might fail to recoup
their underlying investments.

A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning
rating organization. Further, such ratings do not address the effect of
prepayments on the yield anticipated by the investor. Each security rating
should be evaluated independently of any other security rating.

INDEX TO DEFINED TERMS

PAGE
____

1986 Act. . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Accrual Certificates. . . . . . . . . . . . . . . . . . . . . 24
Accrual Period. . . . . . . . . . . . . . . . . . . . . . . . 65
Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Appraised Value . . . . . . . . . . . . . . . . . . . . . . . 18
ARM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARM Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Assumed Reinvestment Rate . . . . . . . . . . . . . . . . . . 25
Balloon Payments. . . . . . . . . . . . . . . . . . . . . . . 5,17
Bankruptcy Bond . . . . . . . . . . . . . . . . . . . . . . . 10,32
Bankruptcy Code . . . . . . . . . . . . . . . . . . . . . . . 15
Buydown Fund. . . . . . . . . . . . . . . . . . . . . . . . . 17
Buydown Loans . . . . . . . . . . . . . . . . . . . . . . . . 17
CERCLA. . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Certificates. . . . . . . . . . . . . . . . . . . . . . . . . 4,16
Certificate Account . . . . . . . . . . . . . . . . . . . . . 7,39
Certificate Balance . . . . . . . . . . . . . . . . . . . . . 8
Certificate Register. . . . . . . . . . . . . . . . . . . . . 24
Certificateholders. . . . . . . . . . . . . . . . . . . . . . 16,18
Class Certificate Balance . . . . . . . . . . . . . . . . . . 24
Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . 4
Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Commission. . . . . . . . . . . . . . . . . . . . . . . . . . 2
Companion Classes . . . . . . . . . . . . . . . . . . . . . . 27
Contingent Regulations. . . . . . . . . . . . . . . . . . . . 66
Cooperatives. . . . . . . . . . . . . . . . . . . . . . . . . 4
Cooperative Loans . . . . . . . . . . . . . . . . . . . . . . 16
Cut-off Date. . . . . . . . . . . . . . . . . . . . . . . . . 10
D&P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Deferred Interest . . . . . . . . . . . . . . . . . . . . . . 68
Distribution Date . . . . . . . . . . . . . . . . . . . . . . 8
Eligible Account. . . . . . . . . . . . . . . . . . . . . . . 39
Eligible Investments. . . . . . . . . . . . . . . . . . . . . 22,39
EPA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Exchange Act. . . . . . . . . . . . . . . . . . . . . . . . . 2
FHA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
FHA Insurance . . . . . . . . . . . . . . . . . . . . . . . . 11
FHA Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 19
FHLMC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
FHLMC Act . . . . . . . . . . . . . . . . . . . . . . . . . . 20
FHLMC Certificate Group . . . . . . . . . . . . . . . . . . . 20
Fitch . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
FNMA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
FNMA Certificates . . . . . . . . . . . . . . . . . . . . . . 21
Fraud Loss. . . . . . . . . . . . . . . . . . . . . . . . . . 10,31
Garn-St Germain Act . . . . . . . . . . . . . . . . . . . . . 52
GNMA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
GNMA Certificates . . . . . . . . . . . . . . . . . . . . . . 19
GNMA I Certificates . . . . . . . . . . . . . . . . . . . . . 19
GNMA II Certificates. . . . . . . . . . . . . . . . . . . . . 19
Housing Act . . . . . . . . . . . . . . . . . . . . . . . . . 19
HUD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Indemnified Parties . . . . . . . . . . . . . . . . . . . . . 44
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Interest Accrual Period . . . . . . . . . . . . . . . . . . . 24
IO Certificates . . . . . . . . . . . . . . . . . . . . . . . 8
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Issuer. . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,70
Labor Regulations . . . . . . . . . . . . . . . . . . . . . . 53
Last Scheduled Distribution Date. . . . . . . . . . . . . . . 25
Legislative History . . . . . . . . . . . . . . . . . . . . . 61
Lockout Periods . . . . . . . . . . . . . . . . . . . . . . . 6,17
LTV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Master REMIC. . . . . . . . . . . . . . . . . . . . . . . . . 63
Master Servicer . . . . . . . . . . . . . . . . . . . . . . . 4
Master Servicing Fee. . . . . . . . . . . . . . . . . . . . . 43
Mezzanine Certificates. . . . . . . . . . . . . . . . . . . . 9,30
Moody's . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Mortgage. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Mortgage Assets . . . . . . . . . . . . . . . . . . . . . . . 1,4,16
Mortgage Certificates . . . . . . . . . . . . . . . . . . . . 6
Mortgage Loans. . . . . . . . . . . . . . . . . . . . . . . . 4
Mortgage Note(s). . . . . . . . . . . . . . . . . . . . . . . 5,16
Mortgage Pool . . . . . . . . . . . . . . . . . . . . . . . . 16
Mortgage Pool Insurance Policy. . . . . . . . . . . . . . . . 10,30
Mortgage Rate . . . . . . . . . . . . . . . . . . . . . . . . 5
Mortgaged Properties. . . . . . . . . . . . . . . . . . . . . 16
NCUA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
OID Regulations . . . . . . . . . . . . . . . . . . . . . . . 58,64
PACs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Pass-Through Rate . . . . . . . . . . . . . . . . . . . . . . 8,16
Payment Lag Certificates. . . . . . . . . . . . . . . . . . . 68
Phantom Income. . . . . . . . . . . . . . . . . . . . . . . . 70
Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
PO Certificates . . . . . . . . . . . . . . . . . . . . . . . 8
Policy Statement. . . . . . . . . . . . . . . . . . . . . . . 56
Pool Insurer. . . . . . . . . . . . . . . . . . . . . . . . . 30
Pooling Agreement . . . . . . . . . . . . . . . . . . . . . . 4
Pre-Issuance Accrued Interest . . . . . . . . . . . . . . . . 68
Prepayment Assumption . . . . . . . . . . . . . . . . . . . . 61,75
Primary Insurer . . . . . . . . . . . . . . . . . . . . . . . 42
Primary Mortgage Insurance Policy . . . . . . . . . . . . . . 18
Principal Prepayments . . . . . . . . . . . . . . . . . . . . 25
Proposed Mark-to-Market Regulations . . . . . . . . . . . . . 73
PTE 83-1. . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Rating Agency . . . . . . . . . . . . . . . . . . . . . . . . 13
RCRA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . 24
Regular Certificates. . . . . . . . . . . . . . . . . . . . . 63
Relief Act. . . . . . . . . . . . . . . . . . . . . . . . . . 52
REMIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,57
REMIC Regulations . . . . . . . . . . . . . . . . . . . . . . 57
REO Property. . . . . . . . . . . . . . . . . . . . . . . . . 29
Reserve Fund. . . . . . . . . . . . . . . . . . . . . . . . . 9,33
Residual Certificates . . . . . . . . . . . . . . . . . . . . 63
S&P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Securities Act. . . . . . . . . . . . . . . . . . . . . . . . 2
Seller. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,4,16
Senior Certificates . . . . . . . . . . . . . . . . . . . . . 7
Senior Certificateholders . . . . . . . . . . . . . . . . . . 9
Series. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SMMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Special Hazard Insurer. . . . . . . . . . . . . . . . . . . . 32
Special Hazard Insurance Policy . . . . . . . . . . . . . . . 10
Sponsor . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,35
Stripped ARM Obligations. . . . . . . . . . . . . . . . . . . 61
Stripped Bond Certificates. . . . . . . . . . . . . . . . . . 60
Stripped Coupon Certificates. . . . . . . . . . . . . . . . . 60
Subordinate Certificates. . . . . . . . . . . . . . . . . . . 7
Subordinate Certificateholders. . . . . . . . . . . . . . . . 9
Subsidiary REMIC. . . . . . . . . . . . . . . . . . . . . . . 63
Supplement. . . . . . . . . . . . . . . . . . . . . . . . . . 1,4
TACs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Thrift Institutions . . . . . . . . . . . . . . . . . . . . . 72
Title V . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,16
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
UCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Underwriter's Exemptions. . . . . . . . . . . . . . . . . . . 53
U.S. Person . . . . . . . . . . . . . . . . . . . . . . . . .62,75,77
VA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,19
VA Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . 11
Waiver Letter . . . . . . . . . . . . . . . . . . . . . . . . 10,31

<S> <C>
- --------------------------------- --------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS OTHER THAN
THOSE CONTAINED IN THIS PROSPEC-
TUS SUPPLEMENT OR THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH IN-
FORMATION OR REPRESENTATIONS MUST $
NOT BE RELIED UPON. THIS
PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION (Approximate)
OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY, NOR AN
OFFER OF OFFERED CERTIFICATES IN
ANY STATE OR JURISDICTION IN
WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFER WOULD BE UNLAWFUL.
THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS AT
ANY TIME DOES NOT IMPLY THAT THE HEADLANDS MORTGAGE SECURITIES INC.
INFORMATION CONTAINED HEREIN OR Sponsor
THEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE; HOWEVER,
IF ANY MATERIAL CHANGE OCCURS
WHILE THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS IS REQUIRED BY
LAW TO BE DELIVERED, THIS
PROSPECTUS SUPPLEMENT OR THE (HEADLANDS MORTGAGE COMPANY)
PROSPECTUS IS REQUIRED BY LAW TO Seller and Master Servicer
BE DELIVERED, THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS
WILL BE AMENDED OR SUPPLEMENTED
ACCORDINGLY.

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

TABLE OF CONTENTS Mortgage Pass-Through

PAGE Certificates,
----

PROSPECTUS SUPPLEMENT Series 199_-_
Summary of Terms . . . . . . S-1
Risk Factors . . . . . . . . S-7
The Mortgage Pool . . . . . . S-8
Servicing of Mortgage Loans S-12
Description of the
Certificates . . . . . . . . S-17
Prepayment and Yield
Considerations . . . . . . S-24
Credit Support . . . . . . S-29
Use of Proceeds . . . . . . S-30
Federal Income Tax
Consequences . . . . . . . S-30
ERISA Considerations . . . S-30
Method of Distribution . . S-31 ---------------------------------
Legal Matters . . . . . . . S-31
Certificate Rating . . . . S-31 PROSPECTUS SUPPLEMENT
Index of Defined Terms . . S-33
---------------------------------
PROSPECTUS
Prospectus Supplement . . . . . 2
Additional Information . . . . 2
Incorporation of Certain
Documents by Reference . . . . 2
Summary of the Prospectus . . . 4
Risk Factors . . . . . . . . 14
The Trusts . . . . . . . . . 16
Description of Certificates . 23
Credit Enhancement . . . . . 29
Yield and Prepayment
Considerations . . . . . . . 33
The Sponsor . . . . . . . . . 35
Use of Proceeds . . . . . . . 35 _________, 199__
Mortgage Loan Program . . . . 35
The Pooling and Servicing
Agreement . . . . . . . . . . 37
Certain Legal Aspects of the
Mortgage Loans . . . . . . . 46
ERISA Considerations . . . . 53
Legal Investment Considerations 55
Legal Matters . . . . . . . . 56
Federal Income Tax Consequences 56
State Tax Considerations . . 77
Plans of Distribution . . . . 77
Financial Information . . . . 78
Rating . . . . . . . . . . . 78
Index to Defined Terms . . . 79

- --------------------------------- --------------------------------------
</TABLE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution

The following table sets forth the estimated expenses in connection
with the issuance and distribution of the Certificates being registered
under this Registration Statement, other than underwriting discounts and
commissions:

SEC Registration Fee . . . . . . . . . . . . . . . . . . . $400,262.78
Printing and Engraving . . . . . . . . . . . . . . . . . . $ 75,000.00
Legal Fees and Expenses . . . . . . . . . . . . . . . . . . $150,000.00
Trustee Fees and Expenses . . . . . . . . . . . . . . . . . $ 25,000.00
Rating Agency Fees . . . . . . . . . . . . . . . . . . . . $120,000.00
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . $ 15,000.00
__________

Total . . . . . . . . . . . . . . . . . . . . . . . . . $785,262.78

____________________

Item 15. Indemnification of Directors and Officers.

The Registrant's Certificate of Incorporation and By-Laws provide
for indemnification of directors and officers of the Registrant to the
fullest extent permitted by Delaware law.

Section 145 of the Delaware General Corporation Law, provides, in
substance, that Delaware corporations shall have the power, under specified
circumstances, to indemnify their directors, officers, employees and agents
in connection with actions, suits or proceedings brought against them by a
third party or in the right of the corporation, by reason of the fact that
they were or are such directors, officers, employees or agents, against
expenses incurred in any such action, suit or proceeding. The Delaware
General Corporation Law also provides that the Registrant may purchase
insurance on behalf of any such director, officer, employee or agent.

Item 16. Financial Statement and Exhibits.

1.1 Form of Underwriting Agreement. *
3.1 Certificate of Incorporation of the Registrant. **
3.2 Bylaws of the Registrant. *
4.1 Form of Pooling and Servicing Agreement. *
5.1 Opinion of Tobin & Tobin as to legality of the Certificates
(including consent of such firm).
8.1 Opinion of Brown & Wood LLP as to certain tax matters
(including consent of such firm).
23.1 Consent of Brown & Wood LLP (included in exhibit 8.1
hereof).
23.2 Consent of Tobin & Tobin (included in exhibits 5.1 hereof).
24.1 Power of Attorney (included at page II-3).

_____________
*Filed previously with the Commission as an exhibit to the Registration
Statement on Form S-3 (No. 333-16679).
**Filed previously with the Commission as an exhibit to the Registration
Statement on Form S-3 (No. 333-32485).

Item 17. Undertakings.

(a) The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:

(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent
no more than 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table
in the effective registration statement; and

(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change of such information
in the registration statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof.

(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering.

(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933,
each filing of the registrant's annual report pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

(f) The undersigned registrant hereby undertakes to provide to
the underwriter at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required
by the underwriter to permit prompt delivery to each purchaser.

(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Larkspur, State of California, on
the 31st day of January, 1998.
HEADLANDS MORTGAGE SECURITIES INC.

By /s/Gilbert J. MacQuarrie
Name: Gilbert J. MacQuarrie
Title: Vice President

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned Directors
and Officers of Headlands Mortgage Securities Inc., a Delaware corporation,
hereby constitute and appoint Peter T. Paul and Gilbert J. MacQuarrie, each
with full power of substitution and resubstitution, their true and lawful
attorneys and agents to sign the names of the undersigned Directors and
Officers in the capacities indicated below to the registration statement to
which this Power of Attorney is attached as an exhibit, and all amendments
(including post-effective amendments) and supplements thereto, and all
instruments or documents filed as a part thereof or in connection
therewith, and to file the same, with all exhibits thereto, and all other
instruments or documents in connection therewith, with the Securities and
Exchange Commission; and each of the undersigned hereby ratifies and
confirms all that said attorneys, agents or any of them shall do or cause
to be done by virtue thereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

Signature Title Date
_________ _____ ____

/s/Peter T. Paul President and Director January 31, 1998
Peter T. Paul (Principal Executive
Officer)

/s/Gilbert J. MacQuarrie Vice President, Secretary, January 31, 1998
Gilbert J. MacQuarrie Treasurer and Director
(Principal Financial Officer
and Principal Accounting
Officer)

/s/Becky S. Poisson Director January 31, 1998
Becky S. Poisson

/s/Steve Abreu Director January 31, 1998
Steve Abreu

/s/Kenneth Siprelle Director January 31, 1998
Kenneth Siprelle

/s/John Edmonds Director January 31, 1998
John Edmonds

EXHIBIT INDEX
=============

Exhibit
No. Description of Exhibit
- ------- ----------------------
1.1 Form of Underwriting Agreement. *
3.1 Certificate of Incorporation of the Registrant. **
3.2 Bylaws of the Registrant. *
4.1 Form of Pooling and Servicing Agreement. *
5.1 Opinion of Tobin & Tobin as to legality of the Certificates
(including consent of such firm).
8.1 Opinion of Brown & Wood LLP as to certain tax matters (including
consent of such firm).
23.1 Consent of Brown & Wood LLP (included in exhibit 8.1 hereof).
23.2 Consent of Tobin & Tobin (included in exhibits 5.1 hereof).
24.1 Power of Attorney (included at page II-3).
_____________
*Filed previously with the Commission as an exhibit to the Registration
Statement on Form S-3 (No. 333-16679).
**Filed previously with the Commission as an exhibit to the Registration
Statement on Form S-3 (No. 333-32485).

Exhibit 5.1
Opinion of Tobin & Tobin

February 9, 1998

Headlands Mortgage Securities Inc.
700 Larkspur Landing Circle
Suite 250
Larkspur, CA 94939

Re: Headlands Mortgage Securities Inc.
Registration Statement on Form S-3
----------------------------------

Ladies and Gentlemen:

We have acted as counsel to Headlands Mortgage Securities Inc., a
Delaware corporation (the "Company"), in connection with the preparation of a
registration statement on Form S-3 (the "Registration Statement") for the
registration with the Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Act"), of mortgage pass-through certificates
(the "Certificates") in an aggregate principal amount of up to
$1,500,000,000. As described in the Registration Statement, the Certificates
will be issued from time to time in series. Each series of Certificates will
be issued by a trust (each, a "Trust") formed by the Company pursuant to a
pooling and servicing agreement (each, a "Pooling and Servicing Agreement")
among the Company, a master servicer (the "Master Servicer"), a seller (the
"Seller") and a trustee (the "Trustee"). Each series of Certificates issued
by a Trust may include one or more classes of Certificates. The Certificates
will be sold from time to time pursuant to certain underwriting agreements
(each, an "Underwriting Agreement") among the Company and the underwriter or
underwriters named therein.

We have examined and relied upon copies of the Company's Bylaws, the
Registration Statement, the form of Pooling and Servicing Agreement and the
forms of Certificates included as exhibits thereto, the form of Underwriting
Agreement and such other records, documents and statutes as we have deemed
necessary for purposes of this opinion.

In our examination we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as
certified or photostatic copies and the authenticity of the originals of such
documents. As to any facts material to the opinions expressed herein that
were not independently established or verified, we have relied upon
statements and representations of officers and other representatives of the
Company and others.

Based upon the foregoing, we are of the opinion that:

1. When any Pooling and Servicing Agreement relating to a series of
Certificates has been duly and validly authorized by all necessary action on
the part of the Company and has been duly executed and delivered by the
Company, the Master Servicer, the Seller, the Trustee and any other party
thereto, such Pooling and Servicing Agreement will constitute a legal, valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency or other laws relating to or affecting creditors'
rights generally or by general equity principles.

2. When a series of Certificates has been duly authorized by all
necessary action on the part of the Company (subject to the terms thereof
being otherwise in compliance with applicable law at such time), duly
executed and authenticated by the Trustee for such series in accordance with
the terms of the related Pooling and Servicing Agreement and issued and
delivered against payment therefor as described in the Registration
Statement, such series of Certificates will be legally and validly issued,
fully paid and nonassessable, and the holders thereof will be entitled to the
benefits of the related Pooling and Servicing Agreement.

In rendering the foregoing opinions, we express no opinion as to the
laws of any jurisdiction other than the laws of the State of New York
(excluding choice of law principles therein), the corporation laws of the
State of Delaware and the federal laws of the United States of America.

We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to the references to this firm under the heading
"Legal Matters" in the base prospectus and prospectus supplement forming a
part of the Registration Statement, without admitting that we are "experts"
within the meaning of the Act or the Rules and Regulations of the Commission
issued thereunder, with respect to any part of the Registration Statement,
including this exhibit.

Very truly yours,

/s/ Tobin & Tobin

Exhibit 8.1
Opinion of Brown & Wood LLP
with respect to Tax Matters

February 9, 1998

Headlands Mortgage Securities Inc.
700 Larkspur Landing Circle, Suite 240
Larkspur, California 94939

Re: Headlands Mortgage Securities Inc.
Registration Statement on Form S-3
----------------------------------

Ladies and Gentlemen:

We have acted as special tax counsel to Headlands Mortgage Securities
Inc., a Delaware corporation (the "Company"), in connection with the
preparation of a registration statement on Form S-3 (the "Registration
Statement") for the registration with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the "Act"),
of mortgage pass-through certificates (the "Certificates") in an aggregate
principal amount of up to $1,500,000,000. As described in the Registration
Statement, the Certificates will be issued from time to time in series. Each
series of Certificates will be issued by a trust (each, a "Trust") formed by
the Company pursuant to a pooling and servicing agreement (each, a "Pooling
and Servicing Agreement") among the Company, a master servicer (the "Master
Servicer"), a seller (the "Seller") and a trustee (the "Trustee"). Each
series of Certificates issued by a Trust may include one or more classes of
Certificates. The Certificates will be sold from time to time pursuant to
certain underwriting agreements (each, an "Underwriting Agreement") among the
Company and the underwriter or underwriters named therein.

In arriving at the opinion expressed below, we have assumed that each
Pooling and Servicing Agreement will be duly authorized by all necessary
corporate action on the part of the Company, the Seller, the Trustee and the
Master Servicer for such series of Certificates and will be duly executed and
delivered by the Company, the Seller, the Trustee and the Master Servicer
substantially in the applicable form filed or incorporated by reference as an
exhibit to the Registration Statement, that each series of Certificates will
be duly executed and delivered in substantially the forms set forth in the
related Pooling and Servicing Agreement filed or incorporated by reference as
an exhibit to the Registration Statement, and that Certificates will be sold
as described in the Registration Statement.

We have advised the Registrant with respect to certain federal income
tax consequences of the proposed issuance of the Certificates. This advice
is summarized under the headings "Summary of The Prospectus -- Tax Status of
REMIC Certificates", "-- Tax Status of Non-REMIC Certificates" and "Federal
Income Tax Consequences" in the prospectus relating to the Certificates (the
"Prospectus"), all a part of the Registration Statement. Such description
does not purport to discuss all possible federal income tax ramifications of
the proposed issuance of the Certificates, but with respect to those tax
consequences that are discussed, in our opinion, the description is accurate
in all material respects.

This opinion is based on the facts and circumstances set forth in the
Registration Statement and in the other documents reviewed by us. Our
opinion as to the matters set forth herein could change with respect to a
particular series of Certificates as a result of changes in facts or
circumstances, changes in the terms of the documents reviewed by us, or
changes in the law subsequent to the date hereof. Because the Prospectus
contemplates series of Certificates with numerous different characteristics,
you should be aware that the particular characteristics of each series of
Certificates must be considered in determining the applicability of this
opinion to a particular series of Certificates.

We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to a reference to this firm (as counsel to the
Registrant) under the heading "Federal Income Tax Consequences" in the
Prospectus forming a part of the Registration Statement, without implying or
admitting that we are "experts" within the meaning of the Act or the rules
and regulations of the Commission issued thereunder, with respect to any part
of the Registration Statement, including this exhibit.

Very truly yours,

/s/ Brown & Wood LLP