HOME EQUITY SECURITIZATION CORP
S-3, 1998-01-16
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<PAGE>
    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 16, 1998

                                                Registration No.
                                                                -------------

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

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

                        HOME EQUITY SECURITIZATION CORP.
             (Exact Name of Registrant as Specified in its Charter)

<TABLE>
<CAPTION>
<S>                                         <C>                                                 <C>

                                             301 South College Street
NORTH CAROLINA                         Charlotte, North Carolina 28202-6001                      [  PENDING ]
(State or other jurisdiction           (Address, including zip code, and telephone number,     I.R.S Employer Identification
of incorporation or                     inluding area code, of registrant's principal           Number
organization)                                    executive offices)

</TABLE>

                           Marion A. Cowell, Jr., Esq.
            Executive Vice President, Secretary and General Counsel
                            First Union Corporation
                            One First Union Center
                            301 South College Street
                      Charlotte, North Carolina 28202-6001
         (Name, address, including zip code, and telephone number,
          including area code, of agent for service)
                                    Copy to:
                            Christopher J. DiAngelo
                              Dewey Ballantine LLP
                          1301 Avenue of the Americas
                         New York, New York 10019-6092

      Approximate Date of Commencement of Proposed Sale to the Public: As soon
 as practicable after the effective date of this Registration Statement.
      If the only securities being registered on this Form are being offered
pursuant to divivend 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, check the following box: [ X ]
    If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
     If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier 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.

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<CAPTION>

                        CALCULATION OF REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S>                    <C>                              <C>                        <C>                            <C>

Title of each class of         Amount to be             Proposed Maximum           Proposed Maximum               Amount of
securities registered          Registered               Aggregate Price Per Unit   Aggregate Offering Price      Registration Fee
- ---------------------------------------------------------------------------------------------------------------------------------

Asset Backed Securities     $1,000,000                    100%                      $1,000,000(1)               $295.00

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


   (1) Estimated solely for the purpose of calculating the registration fee.

<PAGE>

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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.

                                       2

<PAGE>


                        HOME EQUITY SECURITIZATION CORP.
                             CROSS REFERENCE SHEET
            (PURSUANT TO RULE 404(a) AND ITEM 501 OF REGULATION S-K)
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<CAPTION>


Item Location in Form S-3
- --------------------------
<S>                                                                            <C>

1.   Forepart of the Registration Statement and Outside Front Cover
     Page of Prospectus.................................................     Forepart of Registration
                                                                             Statement and Outside Front
                                                                             Cover Page of Prospectus
2.   Inside Front and Outside Back Cover Pages of Prospectus.............    Inside Front and Outside
                                                                             Back Cover Pages**
3.   Summary Information; Risk Factors and Ratio of Earnings to
     Fixed Charges* .....................................................     Prospectus Summary**; Risk
                                                                              Factors**;*
4.   Use of Proceeds ....................................................     Use of Proceeds
5.   Determination of Offering Price ....................................                   *
6.   Dilution ..........................................................                    *
7.   Selling Security Holders ...........................................                   *
8.   Plan of Distribution ...............................................     Underwriting **
9.   Description of Securities to be Registered .........................     Outside Front cover Page**;
                                                                              Prospectus Summary**;
                                                                              The Trust Fund**;
                                                                              Description of Certificates**
10.  Interests of Named Experts and Counsel .............................                   *
11.  Material Changes ...................................................                   *
12.  Incorporation of Certain Information by Reference ..................     Incorporation of Certain
                                                                              Documents by Reference
13.  Disclosure of Commission Position on Indemnification for
     Securities Act Liabilities .........................................     See Part II

</TABLE>

- ----------------------------
*   Answer negative or item inapplicable.
**  To be completed from time to time by Prospectus Supplement


                                       3


<PAGE>



PROSPECTUS

                        HOME EQUITY SECURITIZATION CORP.
                                   (DEPOSITOR)

         Home Equity Securitization Corp. (the "Depositor") may offer from time
to time under this Prospectus and related Prospectus Supplements the
Asset-Backed Notes (the "Notes") and the Asset-Backed Certificates (the
"Certificates" and, together with the Notes, the "Securities") which may be sold
from time to time in one or more series (each, a "Series").

         As specified in the related Prospectus Supplement, the Certificates of
a Series will evidence undivided interests in certain assets deposited into a
trust (each, a "Trust Fund") by the Depositor pursuant to a Pooling and
Servicing Agreement or a Trust Agreement, as described herein. As specified in
the related Prospectus Supplement, the Notes of a Series will be issued and
secured pursuant to an Indenture and will represent indebtedness of the related
Trust Fund. The Trust Fund for a Series of Securities will include assets
purchased from the seller or sellers specified in the related Prospectus
Supplement (the "Seller") composed of (a) Primary Assets, which may include one
or more pools of (i) closed-end home equity loans (the "Mortgage Loans"),
secured by mortgages on one- to four-family residential or mixed-use properties,
(ii) home improvement installment sales contracts and installment loan
agreements (the "Home Improvement Contracts") which are either unsecured or
secured by mortgages on one- to four-family residential or mixed-use properties,
or by purchase money security interests in the home improvements financed
thereby (the "Home Improvements") and (iii) securities backed or secured by
Mortgage Loans and/or Home Improvement Contracts, (b) all monies due thereunder
net, if and as provided in the related Prospectus Supplement, of certain amounts
payable to the servicer of the Mortgage Loans and/or Home Improvement Contracts
(collectively, the "Loans"), which servicer may also be the Seller, specified in
the related Prospectus Supplement (the "Servicer"), (c) if specified in the
related Prospectus Supplement, funds on deposit in one or more pre-funding
amounts and/or capitalized interest accounts and (d) reserve funds, letters of
credit, surety bonds, insurance policies or other forms of credit support as
described herein and in the related Prospectus Supplement. The amount initially
deposited in a pre-funding account for a Series of Securities will not exceed
fifty percent of the aggregate principal amount of such series of Securities.

                                                  (COVER CONTINUED ON NEXT PAGE)

         NOTES OF A GIVEN SERIES REPRESENT OBLIGATIONS OF, AND CERTIFICATES OF A
SERIES EVIDENCE BENEFICIAL INTERESTS IN, THE RELATED TRUST FUND ONLY AND ARE NOT
GUARANTEED BY ANY GOVERNMENTAL AGENCY OR BY THE DEPOSITOR, THE SELLER, THE
TRUSTEE, THE SERVICER OR BY ANY OF THEIR RESPECTIVE AFFILIATES OR, UNLESS
OTHERWISE SPECIFIED IN THE RELATED PROSPECTUS SUPPLEMENT, BY ANY OTHER PERSON OR
ENTITY. THE DEPOSITOR'S ONLY OBLIGATIONS WITH RESPECT TO ANY SERIES OF
SECURITIES WILL BE PURSUANT TO CERTAIN REPRESENTATIONS AND WARRANTIES SET FORTH
IN THE RELATED AGREEMENT AS DESCRIBED HEREIN OR IN THE RELATED PROSPECTUS
SUPPLEMENT.

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

         FOR A DISCUSSION OF CERTAIN RISKS ASSOCIATED WITH AN INVESTMENT IN THE
SECURITIES, SEE THE INFORMATION HEREIN UNDER "RISK FACTORS" BEGINNING ON PAGE
15.
                              --------------------

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

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

         The Securities offered by this Prospectus and by the related Prospectus
Supplement are offered by First Union Capital Markets Corp. and the other
underwriters set forth in the related Prospectus Supplement, if any, subject to
prior sale, to withdrawal, cancellation or modification of the offer without
notice, to delivery to and acceptance by First Union Capital Markets Corp. and
the other underwriters, if any, and certain further conditions. Retain this
Prospectus for future reference. This Prospectus may not be used to consummate
sales of the Securities offered hereby unless accompanied by a Prospectus
Supplement.

                              --------------------
                        FIRST UNION CAPITAL MARKETS CORP.
                                JANUARY __, 1998


<PAGE>


(CONTINUED FROM PREVIOUS PAGE)

         Each Series of Securities will be issued in one or more classes (each,
a "Class"). Interest on and principal of the Securities of a Series will be
payable on each Distribution Date specified in the related Prospectus
Supplement, at the times, at the rates, in the amounts and in the order of
priority set forth in the related Prospectus Supplement.

         If a Series includes multiple Classes, such Classes may vary with
respect to the amount, percentage and timing of distributions of principal,
interest or both and one or more Classes may be subordinated to other Classes
with respect to distributions of principal, interest or both as described herein
and in the related Prospectus Supplement. If so specified in the related
Prospectus Supplement, the Primary Assets and other assets comprising the Trust
Fund may be divided into one or more Asset Groups and each Class of the related
Series will evidence beneficial ownership of the corresponding Asset Group, as
applicable.

         The rate of reduction of the aggregate principal balance of each Class
of a Series may depend principally upon the rate of payment (including
prepayments) with respect to the Loans or Underlying Loans relating to the
Private Securities, as applicable. A rate of prepayment lower or higher than
anticipated will affect the yield on the Securities of a Series in the manner
described herein and in the related Prospectus Supplement. Under certain limited
circumstances described herein and in the related Prospectus Supplement, a
Series of Securities may be subject to termination or redemption under the
circumstances described herein and in the related Prospectus Supplement.

         If specified in the related Prospectus Supplement, an election may be
made to treat certain assets comprising the Trust Fund for a Series as a "real
estate mortgage investment conduit" (a "REMIC") for federal income tax purposes.
See "MATERIAL FEDERAL INCOME TAX CONSEQUENCES" herein.



                                       2

<PAGE>


                              PROSPECTUS SUPPLEMENT

         The Prospectus Supplement relating to a Series of Securities to be
offered hereunder will, among other things, set forth with respect to such
Series of Securities: (i) the aggregate principal amount, interest rate, and
authorized denominations of each Class of such Securities; (ii) certain
information concerning the Primary Assets, the Seller and any Servicer; (iii)
the terms of any Credit Enhancement with respect to such Series; (iv) the terms
of any insurance related to the Primary Assets; (v) information concerning any
other assets in the related Trust Fund, including any Reserve Fund; (vi) the
Final Scheduled Distribution Date of each Class of such Securities; (vii) the
method to be used to calculate the amount of principal required to be applied to
the Securities of each Class of such Series on each Distribution Date, the
timing of the application of principal and the order of priority of the
application of such principal to the respective Classes and the allocation of
principal to be so applied; (viii) the Distribution Dates and any Assumed
Reinvestment Rate (as defined herein); (ix) additional information with respect
to the plan of distribution of such Securities; and (x) whether a REMIC election
will be made with respect to some or all of the Trust Fund for such Series.

                               REPORTS TO HOLDERS

         Periodic and annual reports concerning the related Trust Fund for a
Series of Securities are required under the related Agreement to be forwarded to
Holders. Unless otherwise specified in the related Prospectus Supplement, such
reports will not be examined and reported on by an independent public
accountant. If so specified in the Prospectus Supplement for a Series of
Securities, such Series or one or more Classes of such Series will be issued in
book-entry form. In such event, (i) owners of beneficial interests in such
Securities will not be considered "Holders" under the Agreements and will not
receive such reports directly from the related Trust Fund; rather, such reports
will be furnished to such owners through the participants and indirect
participants of the applicable book-entry system and (ii) references herein to
the rights of "Holders" shall refer to the rights of such owners as they may be
exercised indirectly through such participants. See "THE AGREEMENTS-- Reports to
Holders" herein.

                              AVAILABLE INFORMATION

         The Depositor has filed with the Securities and Exchange Commission a
Registration Statement under the Securities Act of 1933, as amended, with
respect to the Securities. This Prospectus, which forms a part of the
Registration Statement, and the Prospectus Supplement relating to each Series of
Securities contain summaries of the material terms of the documents referred to
herein and therein, but do not contain all of the 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. Such Registration Statement and exhibits can be inspected
and copied at prescribed rates at the public reference facilities maintained by
the Commission at its Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at its Regional Office located as follows, Midwest
Regional Office, 500 West Madison Street, Chicago, Illinois 60661; and Northeast
Regional Office, Seven World Trade Center, New York, New York 10048. In
addition, the Commission maintains a World Wide Web site at http://www.sec.gov
containing reports, proxy and information statements and other information
regarding registrants, including the Depositor, that file electronically with
the Commission.

         Each Trust Fund will be required to file certain reports with the
Commission pursuant to the requirements of the Securities Exchange Act of 1934,
as amended. The Depositor intends to cause each Trust Fund to suspend filing
such reports if and when such reports are no longer required under said Act.

         No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus and any Prospectus
Supplement with respect hereto and, if given or made, such information or
representations must not be relied upon. This Prospectus and any Prospectus
Supplement with respect hereto do not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the Securities offered
hereby and thereby nor an offer of the Securities 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 information herein is correct as of
any time subsequent to its date.



                                       3
<PAGE>


                 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

         All documents subsequently filed by or on behalf of the Trust Fund
referred to in the accompanying Prospectus 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"), after the date of this Prospectus and
prior to the termination of any offering of the Securities issued by such Trust
Fund 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 Prospectus 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 so modified or superseded, to constitute a part of this
Prospectus.

         The Depositor on behalf of any Trust Fund 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
Depositor at One First Union Center, 301 S. College Street, Charlotte, North
Carolina 28288-0630.






                                       4
<PAGE>


                              SUMMARY OF PROSPECTUS

         THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS AND BY REFERENCE TO
THE INFORMATION WITH RESPECT TO EACH SERIES OF SECURITIES CONTAINED IN THE
PROSPECTUS SUPPLEMENT TO BE PREPARED AND DELIVERED IN CONNECTION WITH THE
OFFERING OF SECURITIES OF SUCH SERIES. CAPITALIZED TERMS USED AND NOT OTHERWISE
DEFINED HEREIN OR IN THE RELATED PROSPECTUS SUPPLEMENT SHALL HAVE THE MEANINGS
SET FORTH IN THE "GLOSSARY OF TERMS" HEREIN.


<TABLE>
<CAPTION>
<S>                                                  <C>
Securities Offered...................................Asset-Backed    Certificates    (the    "Certificates")    and
                                                     Asset-Backed  Notes (the "Notes").  Certificates  are issuable
                                                     from  time  to  time  in  Series  pursuant  to a  Pooling  and
                                                     Servicing  Agreement or Trust  Agreement.  Each Certificate of
                                                     a Series  will  evidence  an  interest  in the Trust  Fund for
                                                     such  Series,  or in an Asset Group  specified  in the related
                                                     Prospectus  Supplement.  Notes are issuable  from time to time
                                                     in  Series   pursuant   to  an   Indenture.   Each  Series  of
                                                     Securities  will consist of one or more  Classes,  one or more
                                                     of which  may be  Classes  of  Compound  Interest  Securities,
                                                     Planned   Amortization  Class  ("PAC")  Securities,   Variable
                                                     Interest  Securities,  Zero Coupon Securities,  Principal Only
                                                     Securities,    Interest   Only    Securities,    Participating
                                                     Securities,   Senior  Securities  or  Subordinate  Securities.
                                                     Each Class may differ in,  among  other  things,  the  amounts
                                                     allocated  to and  the  priority  of  principal  and  interest
                                                     payments,  Final Scheduled  Distribution  Dates,  Distribution
                                                     Dates and interest  rates.  The  Securities of each Class will
                                                     be  issued  in  fully  registered  form  in the  denominations
                                                     specified  in  the  related  Prospectus   Supplement.   If  so
                                                     specified   in  the   related   Prospectus   Supplement,   the
                                                     Securities  or  certain  Classes  of such  Securities  offered
                                                     thereby may be available in book-entry form only.

Depositor ...........................................Home  Equity   Securitization   Corp.  (the  "Depositor")  was
                                                     incorporated  in the  State of  North  Carolina.  in  December
                                                     1997, and is a wholly- owned,  special  purpose  subsidiary of
                                                     First Union  National  Bank,  a national  banking  association
                                                     with its  headquarters in Charlotte,  North Carolina.  Neither
                                                     First  Union   National   Bank  or  other   affiliate  of  the
                                                     Depositor,  the  Servicer,  the  Trustee  or  the  Seller  has
                                                     guaranteed  or is  otherwise  obligated  with  respect  to the
                                                     Securities of any Series.  See "THE DEPOSITOR."

Interest Payments ...................................Interest  payments on the  Securities of a Series  entitled by
                                                     their  terms  to  receive   interest  will  be  made  on  each
                                                     Distribution  Date,  to the  extent  set forth in,  and at the
                                                     applicable  rate  specified  in (or  determined  in the manner
                                                     set  forth  in),  the  related  Prospectus   Supplement.   The
                                                     interest  rate on  Securities  of a Series may be  variable or
                                                     change  with  changes in the rates of  interest on the related
                                                     Loans   or   Underlying   Loans   relating   to  the   Private
                                                     Securities,  as applicable  and/or as  prepayments  occur with
                                                     respect  to such Loans or  Underlying  Loans,  as  applicable.
                                                     Interest Only  Securities may be assigned a "Notional  Amount"
                                                     set forth in the related  Prospectus  Supplement which is used
                                                     solely  for  convenience  in  expressing  the  calculation  of
                                                     interest  and  for  certain   other   purposes  and  does  not
                                                     represent  the right to receive  any  




                                       5
<PAGE>


                                                     distributions allocable to principal. Principal Only Securities
                                                     may not be entitled to receive any interest  payments or may be
                                                     entitled to receive only nominal  interest  payments.  Interest
                                                     payable on the  Securities of a Series on a  Distribution  Date
                                                     will include all interest  accrued during the period  specified
                                                     in the related Prospectus  Supplement.  See "DESCRIPTION OF THE
                                                     SECURITIES--Payments of Interest."

Principal Payments ..................................All payments of principal  of a Series of  Securities  will be
                                                     made in an  aggregate  amount  determined  as set forth in the
                                                     related  Prospectus  Supplement  and will be paid at the times
                                                     and will be  allocated  among the  Classes  of such  Series in
                                                     the order and  amounts,  and will be  applied  either on a pro
                                                     rata or a random lot basis  among all  Securities  of any such
                                                     Class,   all   as   specified   in  the   related   Prospectus
                                                     Supplement.

Final Scheduled Distribution Date of the
Securities...........................................The Final  Scheduled  Distribution  Date with  respect  to each
                                                     Class  of  Notes is the  date no  later  than  which  principal
                                                     thereof  will be fully  paid and with  respect to each Class of
                                                     Certificates  is the date after which no  Certificates  of such
                                                     Class  are  expected  to  remain  outstanding,   in  each  case
                                                     calculated on the basis of the  assumptions  applicable to such
                                                     Series  described  in the related  Prospectus  Supplement.  The
                                                     Final  Scheduled  Distribution  Date of a Class  may  equal the
                                                     maturity  date of the Primary  Asset in the related  Trust Fund
                                                     which has the latest  stated  maturity or will be determined as
                                                     described herein and in the related Prospectus Supplement.

                                                     The  actual  final  Distribution  Date of the  Securities  of a
                                                     Series  will  depend   primarily   upon  the  rate  of  payment
                                                     (including  prepayments,   liquidations  due  to  default,  the
                                                     receipt  of  proceeds  from  casualty  insurance  policies  and
                                                     repurchases)  of the Loans or Underlying  Loans relating to the
                                                     Private Securities,  as applicable,  in the related Trust Fund.
                                                     Unless   otherwise   specified   in  the   related   Prospectus
                                                     Supplement,  the actual final Distribution Date of any Security
                                                     is likely to occur earlier and may occur substantially  earlier
                                                     or may occur later than its Final Scheduled  Distribution  Date
                                                     as a result of the  application of prepayments to the reduction
                                                     of the principal  balances of the Securities and as a result of
                                                     defaults  on the  Primary  Assets.  The rate of payments on the
                                                     Loans or Underlying  Loans relating to the Private  Securities,
                                                     as applicable,  in the Trust Fund for a Series will depend on a
                                                     variety of factors,  including certain  characteristics of such
                                                     Loans or Underlying  Loans,  as applicable,  and the prevailing
                                                     level of  interest  rates  from  time to time,  as well as on a
                                                     variety of economic,  demographic, tax, legal, social and other
                                                     factors.  No assurance can be given as to the actual prepayment
                                                     experience with respect to a Series.  See "RISK  FACTORS--Yield
                                                     May Vary" and "DESCRIPTION OF THE SECURITIES--Weighted  Average
                                                     Life of the Securities" herein.

Optional Termination.................................One  or  more  Classes  of  Securities  of any  Series  may be
                                                     redeemed  or   repurchased   in  whole  or  in  part,  at  the





                                                         6
<PAGE>


                                                     Depositor's or the Servicer's  option,  at such time and under
                                                     the   circumstances   specified  in  the  related   Prospectus
                                                     Supplement,  at the price set forth  therein.  If so specified
                                                     in  the  related   Prospectus   Supplement  for  a  Series  of
                                                     Securities,   the  Depositor,  the  Servicer,  or  such  other
                                                     entity   that  is   specified   in  the   related   Prospectus
                                                     Supplement,  may,  at its option,  cause an early  termination
                                                     of the related Trust Fund by  repurchasing  all of the Primary
                                                     Assets  remaining  in the Trust  Fund on or after a  specified
                                                     date,  or on or after  such  time as the  aggregate  principal
                                                     balance  of the  Securities  of  the  Series  or  the  Primary
                                                     Assets  relating to such  Series,  as specified in the related
                                                     Prospectus  Supplement,  is less than the amount or percentage
                                                     specified   in  the   related   Prospectus   Supplement.   See
                                                     "DESCRIPTION OF THE SECURITIES--Optional  Redemption, Purchase
                                                     or Termination."

                                                     In  addition,  the  Prospectus  Supplement  may  provide  other
                                                     circumstances  under which  Holders of  Securities  of a Series
                                                     could be fully paid significantly  earlier than would otherwise
                                                     be the case if payments or  distributions  were solely based on
                                                     the activity of the related Primary Assets.

The Trust Fund.......................................The Trust  Fund for a Series of  Securities  will  consist  of
                                                     one or more of the assets  described  below,  as  described in
                                                     the related Prospectus Supplement.

     A.  Primary Assets..............................The   Primary   Assets  for  a  Series  may   consist  of  any
                                                     combination  of the  following  assets,  to the  extent and as
                                                     specified in the related  Prospectus  Supplement.  The Primary
                                                     Assets will be  purchased  from the Seller or may be purchased
                                                     by  the   Depositor   in  the  open  market  or  in  privately
                                                     negotiated    transactions,    including   transactions   with
                                                     entities affiliated with the Depositor.

         (1)  Loans..................................Primary  Assets  for a  Series  will  consist,  in whole or in
                                                     part,   of   Loans.   Some   Loans   may  be   delinquent   or
                                                     non-performing   as  specified   in  the  related   Prospectus
                                                     Supplement.  Loans may be  originated  by or acquired  from an
                                                     affiliate of the  Depositor  and an affiliate of the Depositor
                                                     may be an obligor  with  respect  to any such Loan.  The Loans
                                                     will be  conventional  contracts or  contracts  insured by the
                                                     Federal   Housing    Administration   ("FHA")   or   partially
                                                     guaranteed  by the Veterans  Administration  ("VA").  See "The
                                                     Trust   Funds--The   Loans"   for   a   discussion   of   such
                                                     guarantees.   To  the   extent   provided   in   the   related
                                                     Prospectus  Supplement,  additional  Loans may be periodically
                                                     added to the Trust Fund,  or may be removed  from time to time
                                                     if certain  asset  value tests are met,  as  described  in the
                                                     related Prospectus Supplement.

                                                     The "Loans" for a Series will  consist of (i)  closed-end  home
                                                     equity loans (the "Mortgage  Loans") and (ii) home  improvement
                                                     installment  sales  contracts and  installment  loan agreements
                                                     (the "Home Improvement Contracts").  The Mortgage Loans and the
                                                     Home Improvement  Contracts are collectively referred to herein
                                                     as  the  "Loans."  Loans  may,  as  specified  in  the  related
                                                     Prospectus  Supplement,  have various 





                                        7
<PAGE>


                                                     payment  characteristics,  including balloon or other irregular
                                                     payment features, and may accrue interest at a fixed rate or an
                                                     adjustable  rate.  As  specified  in  the  related   Prospectus
                                                     Supplement,  the Mortgage  Loans will and the Home  Improvement
                                                     Contracts  may be  secured by  mortgages  and deeds of trust or
                                                     other  similar  security  instruments  creating  a  lien  on  a
                                                     Mortgaged  Property,  which may be  subordinated to one or more
                                                     senior  liens on the  Mortgaged  Property,  as described in the
                                                     related  Prospectus  Supplement.  As  specified  in the related
                                                     Prospectus  Supplement,   Home  Improvement  Contracts  may  be
                                                     unsecured or secured by purchase  money  security  interests in
                                                     the  Home   Improvements   financed   thereby.   The  Mortgaged
                                                     Properties and the Home Improvements are collectively  referred
                                                     to  herein  as  the   "Properties."   The  related   Prospectus
                                                     Supplement will describe certain  characteristics  of the Loans
                                                     for a Series, including,  without limitation, and to the extent
                                                     relevant:  (a) the aggregate  unpaid  principal  balance of the
                                                     Loans (or the aggregate  unpaid  principal  balance included in
                                                     the  Trust  Fund for the  related  Series);  (b) the  range and
                                                     weighted  average  Loan  Rate on the  Loans  and in the case of
                                                     adjustable  rate Loans,  the range and weighted  average of the
                                                     Current Loan Rates and the Lifetime  Rate Caps, if any; (c) the
                                                     range and the  average  outstanding  principal  balance  of the
                                                     Loans;   (d)  the  weighted   average  original  and  remaining
                                                     term-to-stated  maturity of the Loans and the range of original
                                                     and remaining terms-to-stated maturity, if applicable;  (e) the
                                                     range  and  Combined   Loan-to-Value  Ratios  or  Loan-to-Value
                                                     Ratios,  as  applicable,  of the Loans,  computed in the manner
                                                     described  in  the  related  Prospectus  Supplement;   (f)  the
                                                     percentage  (by  principal  balance as of the Cut-off  Date) of
                                                     Loans that accrue  interest  at  adjustable  or fixed  interest
                                                     rates;  (g) any Credit  Enhancement  relating to the Loans; (h)
                                                     the percentage (by principal balance as of the Cut-off Date) of
                                                     Loans  that  are   secured  by   Mortgaged   Properties,   Home
                                                     Improvements or are unsecured;  (i) the geographic distribution
                                                     of any Mortgaged Properties securing the Loans; (j) the use and
                                                     type of each Mortgaged  Property  securing a Loan; (k) the lien
                                                     priority of the Loans; and (l) the delinquency  status and year
                                                     of origination of the Loans.

         (2)  Private Securities.....................Primary  Assets  for a  Series  may  consist,  in whole or in
                                                     part, of Private  Securities  which  include (a)  pass-through
                                                     certificates  representing  beneficial  interests  in loans of
                                                     the type that would  otherwise  be  eligible  to be Loans (the
                                                     "Underlying Loans") or (b) collateralized  obligations secured
                                                     by  Underlying  Loans.   Such  pass-through   certificates  or
                                                     collateralized  obligations  will  have  previously  been  (a)
                                                     offered  and   distributed  to  the  public   pursuant  to  an
                                                     effective   registration  statement  or  (b)  purchased  in  a
                                                     transaction  not involving  any public  offering from a person
                                                     who is not an  affiliate of the issuer of such  securities  at
                                                     the  time  of sale  (nor  an  affiliate  thereof  at any  time
                                                     during  the  three  preceding  months);  provided  a period of
                                                     three  years  has  elapsed  since  the  later  of the date the
                                                     securities  were  acquired  from the  issuer  or an  affiliate
                                                     thereof.   Although   individual   Underlying   Loans  may  be
                                                     insured or  guaranteed  by the  United  States or an 





                                        8
<PAGE>



                                                     agency or  instrumentality  thereof,  they need not be, and the
                                                     Private  Securities  themselves  will  not  be  so  insured  or
                                                     guaranteed.  See "THE TRUST FUNDS--Private  Securities." Unless
                                                     otherwise specified in the Prospectus  Supplement relating to a
                                                     Series of Securities,  payments on the Private  Securities will
                                                     be distributed  directly to the Trustee as registered  owner of
                                                     such Private Securities.

                                                     The related  Prospectus  Supplement  for a Series will  specify
                                                     (such  disclosure may be on an approximate  basis, as described
                                                     above  and  will be as of the  date  specified  in the  related
                                                     Prospectus Supplement) to the extent relevant and to the extent
                                                     such  information is reasonably  available to the Depositor and
                                                     the  Depositor  reasonably  believes  such  information  to  be
                                                     reliable:  (i) the aggregate  approximate  principal amount and
                                                     type of any Private Securities to be included in the Trust Fund
                                                     for such Series; (ii) certain characteristics of the Underlying
                                                     Loans  including  (A) the payment  features of such  Underlying
                                                     Loans (i.e., whether they are fixed rate or adjustable rate and
                                                     whether  they  provide  for  fixed  level  payments,   negative
                                                     amortization  or other payment  features),  (B) the approximate
                                                     aggregate  principal  amount of such Underlying Loans which are
                                                     insured  or  guaranteed  by  a  governmental  entity,  (C)  the
                                                     servicing  fee or range of servicing  fees with respect to such
                                                     Underlying Loans, (D) the minimum and maximum stated maturities
                                                     of such Underlying Loans at origination,  (E) the lien priority
                                                     of such Underlying  Loans,  and (F) the delinquency  status and
                                                     year of origination of such Underlying Loans; (iii) the maximum
                                                     original  term-to-stated  maturity of the  Private  Securities;
                                                     (iv)  the  weighted  average  term-to-stated  maturity  of  the
                                                     Private Securities; (v) the pass-through or certificate rate or
                                                     ranges thereof for the Private Securities;  (vi) the sponsor or
                                                     depositor of the Private  Securities  (the "PS  Sponsor"),  the
                                                     servicer of the Private  Securities (the "PS Servicer") and the
                                                     trustee of the Private  Securities  (the "PS  Trustee");  (vii)
                                                     certain characteristics of Credit Enhancement,  if any, such as
                                                     reserve  funds,  insurance  policies,   letters  of  credit  or
                                                     guarantees,  relating  to  the  Loans  underlying  the  Private
                                                     Securities,  or to such Private Securities  themselves;  (viii)
                                                     the terms on which the  Underlying  Loans may, or are  required
                                                     to, be repurchased prior to stated maturity; and (ix) the terms
                                                     on  which  substitute  Underlying  Loans  may be  delivered  to
                                                     replace those initially deposited with the PS Trustee. See "THE
                                                     TRUST FUNDS--Additional Information" herein.

     B.  Collection and Distribution
         Accounts....................................Unless otherwise provided in the related Prospectus Supplement,
                                                     all  payments on or with  respect to the  Primary  Assets for a
                                                     Series will be remitted directly to an account (the "Collection
                                                     Account") to be established for such Series with the Trustee or
                                                     the  Servicer,  in the name of the  Trustee.  Unless  otherwise
                                                     provided  in the  related  Prospectus  Supplement,  the Trustee
                                                     shall be  required  to apply a  portion  of the  amount  in the
                                                     Collection  Account,  together with reinvestment  earnings from
                                                     eligible  investments   specified  in  the  related  Prospectus




                                        9
<PAGE>


                                                     Supplement,  to the payment of certain  amounts  payable to the
                                                     Servicer  under the  related  Agreement  and any  other  person
                                                     specified  in  the  Prospectus  Supplement,  and to  deposit  a
                                                     portion of the amount in the Collection Account into a separate
                                                     account (the "Distribution Account") to be established for such
                                                     Series,  each in the manner and at the times established in the
                                                     related  Prospectus  Supplement.  All amounts deposited in such
                                                     Distribution  Account  will  be  available,   unless  otherwise
                                                     specified  in  the  related  Prospectus  Supplement,   for  (i)
                                                     application to the payment of principal of and interest on such
                                                     Series of Securities on the next  Distribution  Date,  (ii) the
                                                     making of  adequate  provision  for future  payments on certain
                                                     Classes of Securities and (iii) any other purpose  specified in
                                                     the related Prospectus Supplement.  After applying the funds in
                                                     the Collection  Account as described above, any funds remaining
                                                     in the Collection Account may be paid over to the Servicer, the
                                                     Depositor,  any provider of Credit  Enhancement with respect to
                                                     such Series (an "Credit Enhancer") or any other person entitled
                                                     thereto  in the  manner  and at the  times  established  in the
                                                     related Prospectus Supplement.

     C.  Pre-Funding and Capitalized Interest
         Accounts....................................If specified in the related Prospectus Supplement, a Trust Fund
                                                     will include one or more  segregated  trust  accounts  (each, a
                                                     "Pre-Funding  Account")  established  and  maintained  with the
                                                     Trustee for the related Series. If so specified, on the closing
                                                     date for such Series,  a portion of the proceeds of the sale of
                                                     the  Securities  of such Series (such amount,  the  "Pre-Funded
                                                     Amount") will be deposited in the  Pre-Funding  Account and may
                                                     be used to purchase additional Primary Assets during the period
                                                     of time,  not to exceed six  months,  specified  in the related
                                                     Prospectus Supplement (the "Pre-Funding  Period").  The Primary
                                                     Assets to be so  purchased  will be  required  to have  certain
                                                     characteristics specified in the related Prospectus Supplement.
                                                     If any Pre-Funded  Amount remains on deposit in the Pre-Funding
                                                     Account at the end of the Pre-Funding  Period, such amount will
                                                     be applied in the manner  specified  in the related  Prospectus
                                                     Supplement to prepay the Notes and/or the  Certificates  of the
                                                     applicable  Series.   The  amount  initially   deposited  in  a
                                                     pre-funding  account for a Series of Securities will not exceed
                                                     fifty percent of the aggregate  principal amount of such Series
                                                     of Securities.

                                                     If a Pre-Funding Account is established, one or more segregated
                                                     trust accounts (each, a "Capitalized  Interest Account") may be
                                                     established  and  maintained  with the  Trustee for the related
                                                     Series.  On the closing date for such Series,  a portion of the
                                                     proceeds of the sale of the  Securities  of such Series will be
                                                     deposited in the Capitalized  Interest Account and used to fund
                                                     the  excess,  if  any,  of (x) the  sum of (i)  the  amount  of
                                                     interest  accrued on the  Securities of such Series and (ii) if
                                                     specified in the related Prospectus Supplement, certain fees or
                                                     expenses during the Pre-Funding Period such as trustee fees and
                                                     credit  enhancement  fees,  over  (y) the  amount  of  interest
                                                     available  therefor from the Primary  Assets in the Trust 





                                       10
<PAGE>


                                                     Fund.  Any  amounts  on  deposit  in the  Capitalized  Interest
                                                     Account  at the  end of the  Pre-Funding  Period  that  are not
                                                     necessary for such purposes will be  distributed  to the person
                                                     specified in the related Prospectus Supplement.

Credit Enhancement...................................If stated in the  Prospectus  Supplement  relating to a Series,
                                                     the  Depositor  will  obtain an  irrevocable  letter of credit,
                                                     surety bond, certificate insurance policy,  insurance policy or
                                                     other   form   of   credit   support   (collectively,   "Credit
                                                     Enhancement")  in favor of the Trustee on behalf of the Holders
                                                     of  such  Series  and  any  other  person   specified  in  such
                                                     Prospectus  Supplement  from an  institution  acceptable to the
                                                     rating agency or agencies  identified in the related Prospectus
                                                     Supplement as rating such Series of  Securities  (collectively,
                                                     the  "Rating  Agency")  for  the  purposes  specified  in  such
                                                     Prospectus Supplement.  The Credit Enhancement will support the
                                                     payments on the Securities and may be used for other  purposes,
                                                     to the  extent  and  under  the  conditions  specified  in such
                                                     Prospectus   Supplement.   See  "CREDIT   ENHANCEMENT."  Credit
                                                     Enhancement  for a  Series  may  include  one  or  more  of the
                                                     following  types of Credit  Enhancement,  or such other type of
                                                     Credit   Enhancement   specified  in  the  related   Prospectus
                                                     Supplement.

     A.  Subordinate Securities......................If  stated  in  the  related  Prospectus  Supplement,   Credit
                                                     Enhancement  for a Series may  consist of one or more  Classes
                                                     of  Subordinate  Securities.  The  rights of  Holders  of such
                                                     Subordinate   Securities  to  receive   distributions  on  any
                                                     Distribution  Date will be  subordinate  in right and priority
                                                     to the rights of holders of Senior  Securities  of the Series,
                                                     but only to the extent  described  in the  related  Prospectus
                                                     Supplement.


     B. .............................................Insurance  If  stated  in the  related  Prospectus  Supplement,
                                                     Credit  Enhancement  for a Series may consist of special hazard
                                                     insurance  policies,   bankruptcy  bonds  and  other  types  of
                                                     insurance supporting payments on the Securities.

     C.  Reserve Funds ..............................If stated  in the  Prospectus  Supplement,  the  Depositor  may
                                                     deposit  cash,  a  letter  or  letters  of  credit,  short-term
                                                     investments,  or other  instruments  acceptable  to the  Rating
                                                     Agency in one or more reserve  funds to be  established  in the
                                                     name of the  Trustee  (each a  "Reserve  Fund"),  which will be
                                                     used,  as  specified  in  such  Prospectus  Supplement,  by the
                                                     Trustee to make  required  payments of principal of or interest
                                                     on the  Securities of such Series,  to make adequate  provision
                                                     for future payments on such Securities or for any other purpose
                                                     specified in the Agreement, with respect to such Series, to the
                                                     extent  that  funds  are  not  otherwise   available.   In  the
                                                     alternative or in addition to such deposit,  a Reserve Fund for
                                                     a Series may be funded through  application of all or a portion
                                                     of the  excess  cash  flow  from the  Primary  Assets  for such
                                                     Series,  to the  extent  described  in the  related  Prospectus
                                                     Supplement.

     D.  Minimum Principal Payment



                                       11
<PAGE>


         Agreement...................................If stated in the  Prospectus  Supplement  relating to a Series
                                                     of  Securities,  the  Depositor  will  enter  into  a  minimum
                                                     principal  payment  agreement (the "Minimum  Principal Payment
                                                     Agreement")  with  an  entity  meeting  the  criteria  of  the
                                                     Rating  Agency,  pursuant to which such  entity  will  provide
                                                     funds in the event that  aggregate  principal  payments on the
                                                     Primary  Assets  for such  Series are not  sufficient  to make
                                                     certain  payments,  as  provided  in  the  related  Prospectus
                                                     Supplement.   See   "CREDIT   ENHANCEMENT--Minimum   Principal
                                                     Payment Agreement."

     E.  Deposit Agreement...........................If stated in the  Prospectus  Supplement,  the  Depositor  and
                                                     the Trustee will enter into a guaranteed  investment  contract
                                                     or  an  investment   agreement   (the   "Deposit   Agreement")
                                                     pursuant  to which all or a  portion  of  amounts  held in the
                                                     Collection  Account,   the  Distribution  Account  or  in  any
                                                     Reserve  Fund will be invested  with the entity  specified  in
                                                     such  Prospectus  Supplement.  The Trustee will be entitled to
                                                     withdraw  amounts so invested,  plus  interest at a rate equal
                                                     to the Assumed  Reinvestment  Rate, in the manner specified in
                                                     the Prospectus  Supplement.  See "CREDIT  ENHANCEMENT--Deposit
                                                     Agreement."

Servicing............................................The Servicer will be responsible  for servicing,  managing and
                                                     making  collections  on the Loans for a Series.  In  addition,
                                                     the  Servicer,  if so  specified  in  the  related  Prospectus
                                                     Supplement,  will act as  custodian  and  will be  responsible
                                                     for   maintaining   custody   of   the   Loans   and   related
                                                     documentation   on  behalf  of  the  Trustee.   Advances  with
                                                     respect to  delinquent  payments of principal or interest on a
                                                     Loan  will  be  made  by  the  Servicer  only  to  the  extent
                                                     described   in  the  related   Prospectus   Supplement.   Such
                                                     advances  will be  intended  to  provide  liquidity  only and,
                                                     unless   otherwise   specified   in  the  related   Prospectus
                                                     Supplement,   reimbursable  to  the  Servicer  from  scheduled
                                                     payments of  principal  and  interest,  late  collections,  or
                                                     from the  proceeds  of  liquidation  of the  related  Loans or
                                                     from other  recoveries  relating to such Loans  (including any
                                                     insurance  proceeds or payments  from other  credit  support).
                                                     In  performing  these  functions,  the Servicer  will exercise
                                                     the  same  degree  of  skill  and  care  that  it  customarily
                                                     exercises  with respect to similar  receivables or Loans owned
                                                     or serviced by it. Under certain  limited  circumstances,  the
                                                     Servicer  may resign or be removed,  in which event either the
                                                     Trustee  or  a  third-party  servicer  will  be  appointed  as
                                                     successor  servicer.  The  Servicer  will  receive a  periodic
                                                     fee as servicing  compensation  (the "servicing Fee") and may,
                                                     as   specified   herein   and   in  the   related   Prospectus
                                                     Supplement,   receive  certain  additional  compensation.  See
                                                     "SERVICING OF LOANS--  Servicing  Compensation  and Payment of
                                                     Expenses" herein.

Material Federal Income
  Tax Consequences...................................Securities  of each series  offered  hereby will,  for federal
                                                     income  tax   purposes,   constitute   either  (i)   interests
                                                     ("Grantor  Trust  Securities") in a Trust treated as a grantor
                                                     trust under  applicable  provisions of the Code, (ii) "regular
                                                     interests"   



                                       12
<PAGE>


                                                     ("REMIC Regular  Securities") or "residual  interests"  ("REMIC
                                                     Residual  Securities")  in a Trust  treated as a REMIC (or,  in
                                                     certain  instances,  containing  one  or  more  REMIC's)  under
                                                     Sections 860A through 860G of the Code, (iii) debt issued by an
                                                     Issuer ("Debt Securities") (iv) interests in an Issuer which is
                                                     treated  as a  partnership  ("Partnership  Interests"),  or (v)
                                                     "regular interests" ("FASIT Regular  Securities"),  "high-yield
                                                     interests"  ("FASIT  High-Yield  Securities")  or an  ownership
                                                     interest  in  a  Trust  treated  as a  FASIT  (or,  in  certain
                                                     circumstances containing one or more FASITs under Sections 860H
                                                     through 860L of the Code. .

                                                     Investors  are  advised to consult  their tax  advisors  and to
                                                     review "Material Federal Income Tax Consequences" herein and in
                                                     the related Prospectus Supplement.

ERISA Considerations.................................A  fiduciary  of any  employee  benefit  plan  subject  to the
                                                     Employee  Retirement  Income  Security Act of 1974, as amended
                                                     ("ERISA"),  or the Code should  carefully  review with its own
                                                     legal  advisors  whether the purchase or holding of Securities
                                                     could  give  rise to a  transaction  prohibited  or  otherwise
                                                     impermissible   under   ERISA   or  the   Code.   See   "ERISA
                                                     CONSIDERATIONS."

Legal Investment ....................................Unless   otherwise   specified   in  the  related   Prospectus
                                                     Supplement,   Securities  of  each  Series   offered  by  this
                                                     Prospectus  and the  related  Prospectus  Supplement  will not
                                                     constitute  "mortgage related  securities" under the Secondary
                                                     Mortgage   Market   Enhancement   Act   of   1984   ("SMMEA").
                                                     Investors  whose  investment  authority  is  subject  to legal
                                                     restrictions  should  consult  their  own  legal  advisors  to
                                                     determine   whether   and  to  what   extent  the   Securities
                                                     constitute   legal    investments   for   them.   See   "LEGAL
                                                     INVESTMENT."

Use of Proceeds .....................................The  Depositor  will  use the net  proceeds  from  the sale of
                                                     each  Series for one or more of the  following  purposes:  (i)
                                                     to  purchase  the  related  Primary  Assets,   (ii)  to  repay
                                                     indebtedness  which  has  been  incurred  to  obtain  funds to
                                                     acquire such Primary  Assets,  (iii) to establish  any Reserve
                                                     Funds  described  in the  related  Prospectus  Supplement  and
                                                     (iv)  to  pay   costs  of   structuring   and   issuing   such
                                                     Securities,   including   the   costs  of   obtaining   Credit
                                                     Enhancement,   if  any.  If  so   specified   in  the  related
                                                     Prospectus  Supplement,  the  purchase of the  Primary  Assets
                                                     for a Series will be  effected  by an  exchange of  Securities
                                                     with  the  Seller  of  such  Primary   Assets.   See  "USE  OF
                                                     PROCEEDS."

Ratings .............................................It will be a  requirement  for issuance of any Series that the
                                                     Securities   offered  by  this   Prospectus  and  the  related
                                                     Prospectus  Supplement  be rated by at least one Rating Agency
                                                     in one of  its  four  highest  applicable  rating  categories.
                                                     The  rating  or  ratings  applicable  to  Securities  of  each
                                                     Series   offered   hereby  and  by  the   related   Prospectus
                                                     Supplement  will be as set  forth  in the  related  Prospectus
                                                     Supplement.   A   securities   rating   should  be   evaluated
                                                     independently   of  similar  ratings  on  different  types  of
                                                     securities.  A securities  rating is not a  





                                       13
<PAGE>


                                                     recommendation  to buy,  hold or sell  securities  and does not
                                                     address  the effect  that the rate of  prepayments  on Loans or
                                                     Underlying Loans relating to Private Securities, as applicable,
                                                     for a  Series  may  have  on  the  yield  to  investors  in the
                                                     Securities of such Series. See "RISK  FACTORS--Ratings  Are Not
                                                     Recommendations."

</TABLE>



                                       14
<PAGE>

                                  RISK FACTORS

         Investors should consider, among other things, the following factors in
connection with the purchase of the Securities.

NO SECONDARY MARKET

         There will be no market for the Securities of any Series prior to the
issuance thereof, and there can be no assurance that a secondary market will
develop or, if it does develop, that it will provide Holders with liquidity of
investment or will continue for the life of the Securities of such Series. The
Underwriter(s) specified in the related Prospectus Supplement expects to make a
secondary market in the Securities, but has no obligation to do so.

PRIMARY ASSETS ARE ONLY SOURCE OF REPAYMENT

         The Depositor does not have, nor is it expected to have, any
significant assets. The Securities of a Series will be payable solely from the
assets of the Trust Fund for such Securities. There will be no recourse to the
Depositor or any other person for any default on the Notes or any failure to
receive distributions on the Certificates. Further, unless otherwise stated in
the related Prospectus Supplement, at the times set forth in the related
Prospectus Supplement, certain Primary Assets and/or any balance remaining in
the Collection Account or Distribution Account immediately after making all
payments due on the Securities of such Series and other payments specified in
the related Prospectus Supplement, may be promptly released or remitted to the
Depositor, the Servicer, the Credit Enhancer or any other person entitled
thereto and will no longer be available for making payments to Holders.
Consequently, Holders of Securities of each Series must rely solely upon
payments with respect to the Primary Assets and the other assets constituting
the Trust Fund for a Series of Securities, including, if applicable, any amounts
available pursuant to any Credit Enhancement for such Series, for the payment of
principal of and interest on the Securities of such Series.

         Holders of Notes will be required under the Indenture to proceed only
against the Primary Assets and other assets constituting the related Trust Fund
in the case of a default with respect to such Notes and may not proceed against
any assets of the Depositor. There is no assurance that the market value of the
Primary Assets or any other assets for a Series will at any time be equal to or
greater than the aggregate principal amount of the Securities of such Series
then outstanding, plus accrued interest thereon. Moreover, upon an event of
default under the Indenture for a Series of Notes and a sale of the assets in
the Trust Fund or upon a sale of the assets of a Trust Fund for a Series of
Certificates, the Trustee, the Servicer, if any, the Credit Enhancer and any
other service provider specified in the related Prospectus Supplement generally
will be entitled to receive the proceeds of any such sale to the extent of
unpaid fees and other amounts owing to such persons under the related Agreement
prior to distributions to Holders of Securities. Upon any such sale, the
proceeds thereof may be insufficient to pay in full the principal of and
interest on the Securities of such Series.

         The only obligations, if any, of the Depositor with respect to the
Securities of any Series will be pursuant to certain representations and
warranties. See "THE AGREEMENTS--Assignment of Primary Assets" herein. The
Depositor does not have, and is not expected in the future to have, any
significant assets with which to meet any obligation to repurchase Primary
Assets with respect to which there has been a breach of any representation or
warranty. If, for example, the Depositor were required to repurchase a Primary
Asset, its only sources of funds to make such repurchase would be from funds
obtained from the enforcement of a corresponding obligation, if any, on the part
of the originator of the Primary Assets, the Servicer or the Seller, as the case
may be, or from a Reserve Fund established to provide funds for such
repurchases.

LIMITED PROTECTION AGAINST LOSSES

         Although any Credit Enhancement is intended to reduce the risk of
delinquent payments or losses to holders of Securities entitled to the benefit
thereof, the amount of such Credit Enhancement will be limited, as set forth in
the related Prospectus Supplement, and will decline and could be depleted under
certain circumstances prior to the payment in full of the related Series of
Securities, and as a result Holders may suffer losses. See "CREDIT ENHANCEMENT."



                                       15
<PAGE>


YIELD MAY VARY

         The yield to maturity experienced by a Holder of Securities may be
affected by the rate of payment of principal of the Loans or Underlying Loans
relating to the Private Securities, as applicable. The timing of principal
payments of the Securities of a Series will be affected by a number of factors,
including the following: (i) the extent of prepayments of the Loans or
Underlying Loans relating to the Private Securities, as applicable, which
prepayments may be influenced by a variety of factors; (ii) the manner of
allocating principal payments among the Classes of Securities of a Series as
specified in the related Prospectus Supplement; and (iii) the exercise by the
party entitled thereto of any right of optional termination. See "DESCRIPTION OF
THE SECURITIES--Weighted Average Life of Securities." Prepayments may also
result from repurchases of Loans or Underlying Loans, as applicable, due to
material breaches of the Seller's or the Depositor's warranties.

         Interest payable on the Securities of a Series on a Distribution Date
will include all interest accrued during the period specified in the related
Prospectus Supplement. In the event interest accrues during the calendar month
prior to a Distribution Date, the effective yield to Holders will be reduced
from the yield that would otherwise be obtainable if interest payable on the
Security were to accrue through the day immediately preceding each Distribution
Date, and the effective yield (at par) to Holders will be less than the
indicated coupon rate. See "DESCRIPTION OF THE SECURITIES--Payments of
Interest."

PROPERTY VALUES MAY BE INSUFFICIENT

         If the Mortgages in a Trust Fund are primarily junior liens subordinate
to the rights of the mortgagee under the related senior mortgage or mortgages,
the proceeds from any liquidation, insurance or condemnation proceedings will be
available to satisfy the outstanding balance of such junior mortgage only to the
extent that the claims of such senior mortgagees have been satisfied in full,
including any related foreclosure costs. In addition, a junior mortgagee may not
foreclose on the Property securing a junior mortgage unless it forecloses
subject to the senior mortgages, in which case it must either pay the entire
amount due on the senior mortgages to the senior mortgagees at or prior to the
foreclosure sale or undertake the obligation to make payments on the senior
mortgages in the event the mortgagor is in default thereunder. The Trust Fund
will not have any source of funds to satisfy the senior mortgages or make
payments due to the senior mortgagees.

         There are several factors that could adversely affect the value of
Properties such that the outstanding balance of the related Loan, together with
any senior financing on the Properties, would equal or exceed the value of the
Properties. Among the factors that could adversely affect the value of the
Properties are an overall decline in the residential real estate market in the
areas in which the Properties are located or a decline in the general condition
of the Properties as a result of failure of borrowers to maintain adequately the
Properties or of natural disasters that are not necessarily covered by
insurance, such as earthquakes and floods. Any such decline could extinguish the
value of a junior interest in a Property before having any effect on the related
senior interest therein. If such a decline occurs, the actual rates of
delinquencies, foreclosure and losses on the junior Loans could be higher than
those currently experienced in the mortgage lending industry in general.

PRE-FUNDING MAY ADVERSELY AFFECT INVESTMENT

         If a Trust Fund includes a Pre-Funding Account and the principal
balance of additional Loans delivered to the Trust Fund during the Pre-Funding
Period is less than the original Pre-Funded Amount, the Holders of the
Securities of the related Series will receive a prepayment of principal as and
to the extent described in the related Prospectus Supplement. Any such principal
prepayment may adversely affect the yield to maturity of the applicable
Securities. Since prevailing interest rates are subject to fluctuation, there
can be no issuance that investors will be able to reinvest such a prepayment at
yields equaling or exceeding the yields on the related Securities. It is
possible that the yield on any such reinvestment will be lower, and may be
significantly lower, than the yield on the related Securities.

         The ability of a Trust Fund to invest in subsequent Loans during the
related Pre-Funding Period will be dependant on the ability of the Seller to
originate or acquire Loans that satisfy the requirements for transfer to the
Trust Fund. The ability of the Seller to originate or acquire such Loans will be
affected by a variety of social and 



                                       16
<PAGE>


economic factors, including the prevailing level of market interest rates,
unemployment levels and consumer perceptions of general economic conditions.

         Although subsequent Loans must satisfy the characteristics described in
the related Prospectus Supplement, such Loans may have been originated more
recently than the Loans originally transferred to the Trust Fund and may be of a
lesser credit quality. As a result, the addition of subsequent Loans may
adversely affect the performance of the related Securities.

POTENTIAL LIABILITY FOR ENVIRONMENTAL CONDITIONS

         Real property pledged as security to a lender may be subject to certain
environmental risks. Under the laws of certain states, contamination of a
property may give rise to a lien on the property to assure the costs of
clean-up. In several states, such a lien has priority over the lien of an
existing mortgage or owner's interest against such property. In addition, under
the laws of some states and under the federal Comprehensive Environmental
Response, Compensation, and Liability Act of 1980 ("CERCLA"), a lender may be
liable, as an "owner" or "operator," for costs of addressing releases or
threatened releases of hazardous substances that require remedy at a property,
if agents or employees of the lender have become sufficiently involved in the
operations of the borrower, regardless of whether or not the environmental
damage or threat was caused by a prior owner. A lender also risks such liability
on foreclosure of the Mortgaged Property.

CONSUMER PROTECTION LAWS MAY AFFECT LOANS

         Applicable state laws generally regulate interest rates and other
charges and require certain disclosures. In addition, other state 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 Loans. 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 of the
Servicer to collect all or part of the principal of or interest on the Loans,
may entitle the borrower to a refund of amounts previously paid and, in
addition, could subject the owner of the Loan to damages and administrative
enforcement.

         The Loans are also subject to Federal laws, including:

                  (i) the Federal Truth in Lending Act and Regulation Z
         promulgated thereunder, which require certain disclosures to the
         borrowers regarding the terms of the Loans;

                  (ii) the Equal Credit Opportunity Act and Regulation B
         promulgated thereunder, which prohibit discrimination on the basis of
         age, race, color, sex, religion, marital status, national origin,
         receipt of public assistance or the exercise of any right under the
         Consumer Credit Protection Act, in the extension of credit; and

                  (iii) the Fair Credit Reporting Act, which regulates the use
         and reporting of information related to the borrower's credit
         experience.

         The Home Improvement Contracts are also subject to the Preservation of
Consumers' Claims and Defenses regulations of the Federal Trade Commission and
other similar federal and state statutes and regulations (collectively, the
"Holder in Due Course Rules"), which protect the homeowner from defective
craftsmanship or incomplete work by a contractor. These laws permit the obligor
to withhold payment if the work does not meet the quality and durability
standards agreed to by the homeowner and the contractor. The Holder in Due
Course Rules have the effect of subjecting any assignee of the seller in a
consumer credit transaction to all claims and defenses which the obligor in the
credit sale transaction could assert against the seller of the goods.

         Violations of certain provisions of these Federal laws may limit the
ability of the Servicer to collect all or part of the principal of or interest
on the Loans and in addition could subject the Trust Fund to damages and
administrative enforcement. See "CERTAIN LEGAL ASPECTS OF THE LOANS."



                                       17
<PAGE>


CONTRACTS WILL NOT BE STAMPED

         In order to give notice of the right, title and interest of
Securityholders to the Home Improvement Contracts, the Depositor will cause a
UCC-1 financing statement to be executed by the Depositor or the Seller
identifying the Trustee as the secured party and identifying all Home
Improvement Contracts as collateral. Unless otherwise specified in the related
Prospectus Supplement, the Home Improvement Contracts will not be stamped or
otherwise marked to reflect their assignment to the Trust Fund. Therefore, if,
through negligence, fraud or otherwise, a subsequent purchaser were able to take
physical possession of the Home Improvement Contracts without notice of such
assignment, the interest of Securityholders in the Home Improvement Contracts
could be defeated. See "CERTAIN LEGAL ASPECTS OF THE LOANS--The Home Improvement
Contracts."

RATINGS ARE NOT RECOMMENDATIONS

         It will be a condition to the issuance of a Series of Securities that
they be rated in one of the four highest rating categories by the Rating Agency
identified in the related Prospectus Supplement. Any such rating would be based
on, among other things, the adequacy of the value of the Primary Assets and any
Credit Enhancement with respect to such Series. Such rating should not be deemed
a recommendation to purchase, hold or sell Securities, inasmuch as it does not
address market price or suitability for a particular investor. There is also no
assurance that any such rating will remain in effect for any given period of
time or may not be lowered or withdrawn entirely by the Rating Agency if in its
judgment circumstances in the future so warrant. In addition to being lowered or
withdrawn due to any erosion in the adequacy of the value of the Primary Assets,
such rating might also be lowered or withdrawn, among other reasons, because of
an adverse change in the financial or other condition of a Credit Enhancer or a
change in the rating of such Credit Enhancer's long term debt.

                          DESCRIPTION OF THE SECURITIES

GENERAL

         Each Series of Notes will be issued pursuant to an indenture (the
"Indenture") between the related Trust Fund and the entity named in the related
Prospectus Supplement as trustee (the "Trustee") with respect to such Series. A
form of Indenture has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. The Certificates will also be issued in
Series pursuant to separate agreements (each, a "Pooling and Servicing
Agreement" or a "Trust Agreement") among the Depositor, the Servicer, if the
Series relates to Loans, and the Trustee. A form of Pooling and Servicing
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part. A Series may consist of both Notes and
Certificates.

         The Seller may agree to reimburse the Depositor for certain fees and
expenses of the Depositor incurred in connection with the offering of the
Securities.

         The following summaries describe certain provisions in the Agreements
common to each Series of Securities. The summaries do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, the
provisions of the Agreements and the Prospectus Supplement relating to each
Series of Securities. Where particular provisions or terms used in the
Agreements are referred to, the actual provisions (including definitions of
terms) are incorporated herein by reference as part of such summaries.

         Each Series of Securities will consist of one or more Classes of
Securities, one or more of which may be Compound Interest Securities, Variable
Interest Securities, PAC Securities, Zero Coupon Securities, Principal Only
Securities, Interest Only Securities or Participating Securities. A Series may
also include one or more Classes of Subordinate Securities. The Securities of
each Series will be issued only in fully registered form, without coupons, in
the authorized denominations for each Class specified in the related Prospectus
Supplement. Upon satisfaction of the conditions, if any, applicable to a Class
of a Series, as described in the related Prospectus Supplement, the transfer of
the Securities may be registered and the Securities may be exchanged at the
office of the Trustee specified in the Prospectus 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. If specified in the
related Prospectus Supplement, one or more Classes of a Series may be available
in book-entry form only.



                                       18
<PAGE>


         Unless otherwise provided in the related Prospectus Supplement,
payments of principal of and interest on a Series of Securities will be made on
the Distribution Dates specified in the Prospectus Supplement relating to such
Series by check mailed to Holders of such Series, registered as such at the
close of business on the record date specified in the related Prospectus
Supplement applicable to such Distribution Dates at their addresses appearing on
the security register, except that (a) payments may be made by wire transfer (at
the expense of the Holder requesting payment by wire transfer) in certain
circumstances described in the related Prospectus Supplement and (b) final
payments of principal in retirement of each Security will be made only upon
presentation and surrender of such Security at the office of the Trustee
specified in the Prospectus Supplement. Notice of the final payment on a
Security will be mailed to the Holder of such Security before the Distribution
Date on which the final principal payment on any Security is expected to be made
to the holder of such Security.

         Payments of principal of and interest on the Securities will be made by
the Trustee, or a paying agent on behalf of the Trustee, as specified in the
related Prospectus Supplement. Unless otherwise provided in the related
Prospectus Supplement, all payments with respect to the Primary Assets for a
Series, together with reinvestment income thereon, amounts withdrawn from any
Reserve Fund, and amounts available pursuant to any other Credit Enhancement
will be deposited directly into the Collection Account. If provided in the
related Prospectus Supplement, such amounts may be net of certain amounts
payable to the related Servicer and any other person specified in the Prospectus
Supplement. Such amounts thereafter will be deposited into the Distribution
Account and will be available to make payments on the Securities of such Series
on the next Distribution Date. See "THE TRUST FUNDS--Collection and Distribution
Accounts."

VALUATION OF THE PRIMARY ASSETS

         If specified in the related Prospectus Supplement for a Series of
Notes, each Primary Asset included in the related Trust Fund for a Series will
be assigned an initial "Asset Value." Unless otherwise specified in the related
Prospectus Supplement, at any time the Asset Value of the Primary Assets will be
equal to the product of the Asset Value Percentage as set forth in the Indenture
and the lesser of (a) the stream of remaining regularly scheduled payments on
the Primary Assets, net, unless otherwise provided in the related Prospectus
Supplement, of certain amounts payable as expenses, together with income earned
on each such scheduled payment received through the day preceding the next
Distribution Date at the Assumed Reinvestment Rate, if any, discounted to
present value at the highest interest rate on the Notes of such Series over
periods equal to the interval between payments on the Notes, and (b) the then
principal balance of the Primary Assets. Unless otherwise specified in the
related Prospectus Supplement, the initial Asset Value of the Primary Assets
will be at least equal to the principal amount of the Notes of the related
Series at the date of issuance thereof.

         The "Assumed Reinvestment Rate," if any, for a Series will be the
highest rate permitted by the Rating Agency or a rate insured by means of a
surety bond, guaranteed investment contract, Deposit Agreement or other
arrangement satisfactory to the Rating Agency. If the Assumed Reinvestment Rate
is so insured, the related Prospectus Supplement will set forth the terms of
such arrangement.

PAYMENTS OF INTEREST

         The Securities of each Class by their terms entitled to receive
interest will bear interest (calculated, unless otherwise specified in the
related Prospectus Supplement, on the basis of a 360 day year of twelve 30-day
months) from the date and at the rate per annum specified, or calculated in the
method described, in the related Prospectus Supplement. Interest on such
Securities of a Series will be payable on the Distribution Date specified in the
related Prospectus Supplement. The rate of interest on Securities of a Series
may be variable or may change with changes in the annual percentage rates of the
Loans or Underlying Loans relating to the Private Securities, as applicable
included in the related Trust Fund and/or as prepayments occur with respect to
such Loans or Underlying Loans, as applicable. Principal Only Securities may not
be entitled to receive any interest distributions or may be entitled to receive
only nominal interest distributions. Any interest on Zero Coupon Securities that
is not paid on the related Distribution Date will accrue and be added to the
principal thereof on such Distribution Date.

         Interest payable on the Securities on a Distribution Date will include
all interest accrued during the period specified in the related Prospectus
Supplement. In the event interest accrues during the calendar month preceding a



                                       19
<PAGE>


Distribution Date, the effective yield to Holders will be reduced from the yield
that would otherwise be obtainable if interest payable on the Securities were to
accrue through the day immediately preceding such Distribution Date.

PAYMENTS OF PRINCIPAL

         On each Distribution Date for a Series, principal payments will be made
to the Holders of the Securities of such Series on which principal is then
payable, to the extent set forth in the related Prospectus Supplement. Such
payments will be made in an aggregate amount determined as specified in the
related Prospectus Supplement and will be allocated among the respective Classes
of a Series in the manner, at the times and in the priority (which may, in
certain cases, include allocation by random lot) set forth in the related
Prospectus Supplement.

FINAL SCHEDULED DISTRIBUTION DATE

         The Final Scheduled Distribution Date with respect to each Class of
Notes is the date no later than which the principal thereof will be fully paid
and with respect to each Class of a Series of Certificates will be the date on
which the entire aggregate principal balance of such Class is expected to be
reduced to zero, in each case calculated on the basis of the assumptions
applicable to such Series described in the related Prospectus Supplement. The
Final Scheduled Distribution Date for each Class of a Series will be specified
in the related Prospectus Supplement. Since payments on the Primary Assets will
be used to make distributions in reduction of the outstanding principal amount
of the Securities, it is likely that the actual final Distribution Date of any
such Class will occur earlier, and may occur substantially earlier, than its
Final Scheduled Distribution Date.

         Furthermore, with respect to a Series of Certificates, unless otherwise
specified in the related Prospectus Supplement, as a result of delinquencies,
defaults and liquidations of the Primary Assets in the Trust Fund, the actual
final Distribution Date of any Certificate may occur later than its Final
Scheduled Distribution Date. No assurance can be given as to the actual
prepayment experience with respect to a Series. See "Weighted Average Life of
the Securities" below.

SPECIAL REDEMPTION

         If so specified in the Prospectus Supplement relating to a Series of
Securities having other than monthly Distribution Dates, one or more Classes of
Securities of such Series may be subject to special redemption, in whole or in
part, on the day specified in the related Prospectus Supplement (a "special
Redemption Date") if, as a consequence of prepayments on the Loans or Underlying
Loans, as applicable, relating to such Securities or low yields then available
for reinvestment the entity specified in the related Prospectus Supplement
determines, based on assumptions specified in the applicable Agreement that the
amount available for the payment of interest that will have accrued on such
Securities (the "Available Interest Amount") through the designated interest
accrual date specified in the related Prospectus Supplement is less than the
amount of interest that will have accrued on such Securities to such date. In
such event and as further described in the related Prospectus Supplement, the
Trustee will redeem a principal amount of outstanding Securities of such Series
as will cause the Available Interest Amount to equal the amount of interest that
will have accrued through such designated interest accrual date for such Series
of Securities outstanding immediately after such redemption.

OPTIONAL REDEMPTION, PURCHASE OR TERMINATION

         The Depositor or the Servicer may, at its option, redeem, in whole or
in part, one or more Classes of Notes or purchase one or more Classes of
Certificates of any Series, on any Distribution Date under the circumstances, if
any, specified in the Prospectus Supplement relating to such Series.
Alternatively, if so specified in the related Prospectus Supplement for a Series
of Certificates, the Depositor, the Servicer, or another entity designated in
the related Prospectus Supplement may, at its option, cause an early termination
of a Trust Fund by repurchasing all of the Primary Assets from such Trust Fund
on or after a date specified in the related Prospectus Supplement, or on or
after such time as the aggregate outstanding principal amount of the
Certificates or Primary Assets, as specified in the related Prospectus
Supplement is less than the amount or percentage specified in the related
Prospectus Supplement. Notice of such redemption, purchase or termination must
be given by the Depositor or the Trustee prior to the related date. The
redemption, purchase or repurchase price will be set forth in the related
Prospectus 



                                       20
<PAGE>


Supplement. If specified in the related Prospectus Supplement, in the event that
a REMIC election has been made, the Trustee shall receive a satisfactory opinion
of counsel that the optional redemption, purchase or termination will be
conducted so as to constitute a "qualified liquidation" under Section 860F of
the Code.

         In addition, the Prospectus Supplement may provide other circumstances
under which Holders of Securities of a Series could be fully paid significantly
earlier than would otherwise be the case if payments or distributions were
solely based on the activity of the related Primary Assets.

WEIGHTED AVERAGE LIFE OF THE SECURITIES

         Weighted average life refers to the average amount of time that will
elapse from the date of issue of a security until each dollar of principal of
such security will be repaid to the investor. Unless otherwise specified in the
related Prospectus Supplement, the weighted average life of the Securities of a
Class will be influenced by the rate at which the amount financed under the
Loans or Underlying Loans relating to the Private Securities, as applicable,
included in the Trust Fund for a Series is paid, which may be in the form of
scheduled amortization or prepayments.

         Prepayments on loans and other receivables can be measured relative to
a prepayment standard or model. The Prospectus Supplement for a Series of
Securities will describe the prepayment standard or model, if any, used and may
contain tables setting forth the projected weighted average life of each Class
of Securities of such Series and the percentage of the original principal amount
of each Class of Securities of such Series that would be outstanding on
specified Distribution Dates for such Series based on the assumptions stated in
such Prospectus Supplement, including assumptions that prepayments on the Loans
or Underlying Loans relating to the Private Securities, as applicable, included
in the related Trust Fund are made at rates corresponding to various percentages
of the prepayment standard or model specified in such Prospectus Supplement.

         There is, however, no assurance that prepayment of the Loans or
Underlying Loans relating to the Private Securities, as applicable, included in
the related Trust Fund will conform to any level of any prepayment standard or
model specified in the related Prospectus Supplement. The rate of principal
prepayments on pools of loans may be influenced by a variety of factors,
including job related factors such as transfers, layoffs or promotions and
personal factors such as divorce, disability or prolonged illness. Economic
conditions, either generally or within a particular geographic area or industry,
also may affect the rate of principal prepayments. Demographic and social
factors may influence the rate of principal prepayments in that some borrowers
have greater financial flexibility to move or refinance than do other borrowers.
The deductibility of mortgage interest payments, servicing decisions and other
factors also affect the rate of principal prepayments. As a result, there can be
no assurance as to the rate or timing of principal prepayments of the Loans or
Underlying Loans either from time to time or over the lives of such Loans or
Underlying Loans.

         The rate of prepayments of conventional housing loans and other
receivables has fluctuated significantly in recent years. In general, however,
if prevailing interest rates fall significantly below the interest rates on the
Loans or Underlying Loans relating to the Private Securities, as applicable, for
a Series, such loans are likely to prepay at rates higher than if prevailing
interest rates remain at or above the interest rates borne by such loans. In
this regard, it should be noted that the Loans or Underlying Loans, as
applicable, for a Series may have different interest rates. In addition, the
weighted average life of the Securities may be affected by the varying
maturities of the Loans or Underlying Loans relating to the Private Securities,
as applicable. If any Loans or Underlying Loans relating to the Private
Securities, as applicable, for a Series have actual terms-to-stated maturity of
less than those assumed in calculating the Final Scheduled Distribution Date of
the related Securities, one or more Classes of the Series may be fully paid
prior to their respective Final Scheduled Distribution Date, even in the absence
of prepayments and a reinvestment return higher than the Assumed Reinvestment
Rate.



                                       21
<PAGE>


                                 THE TRUST FUNDS

GENERAL

         The Notes of each Series will be secured by the pledge of the assets of
the related Trust Fund, and the Certificates of each Series will represent
interests in the assets of the related Trust Fund. The Trust Fund of each Series
will include assets purchased from the Seller composed of (i) the Primary
Assets, (ii) amounts available from the reinvestment of payments on such Primary
Assets at the Assumed Reinvestment Rate, if any, specified in the related
Prospectus Supplement, (iii) any Credit Enhancement, (iv) any Property that
secured a Loan but which is acquired by foreclosure or deed in lieu of
foreclosure or repossession and (v) the amount, if any, initially deposited in
the Collection Account or Distribution Account for a Series as specified in the
related Prospectus Supplement.

         The Securities will be non-recourse obligations of the related Trust
Fund. The assets of the Trust Fund specified in the related Prospectus
Supplement for a Series of Securities, unless otherwise specified in the related
Prospectus Supplement, will serve as collateral only for that Series of
Securities. Holders of a Series of Notes may only proceed against such
collateral securing such Series of Notes in the case of a default with respect
to such Series of Notes and may not proceed against any assets of the Depositor
or the related Trust Fund not pledged to secure such Notes.

         The Primary Assets for a Series will be sold by the Seller to the
Depositor or purchased by the Depositor in the open market or in privately
negotiated transactions, which may include transactions with affiliates and will
be transferred by the Depositor to the Trust Fund. Loans relating to a Series
will be serviced by the Servicer, which may be the Seller, specified in the
related Prospectus Supplement, pursuant to a Pooling and Servicing Agreement,
with respect to a Series of Certificates or a servicing agreement (each, a
"Servicing Agreement") between the Trust Fund and Servicer, with respect to a
Series of Notes.

         As used herein, "Agreement" means, with respect to a Series of
Certificates, the Pooling and Servicing Agreement or Trust Agreement, and with
respect to a Series of Notes, the Indenture and the Servicing Agreement, as the
context requires.

         If so specified in the related Prospectus Supplement, a Trust Fund
relating to a Series of Securities may be a business trust formed under the laws
of the state specified in the related Prospectus Supplement pursuant to a trust
agreement (each, a "Trust Agreement") between the Depositor and the trustee of
such Trust Fund specified in the related Prospectus Supplement

         With respect to each Trust Fund, prior to the initial offering of the
related Series of Securities, the Trust Fund will have no assets or liabilities.
No Trust Fund is expected to engage in any activities other than acquiring,
managing and holding the related Primary Assets and other assets contemplated
herein and in the related Prospectus Supplement and the proceeds thereof,
issuing Securities and making payments and distributions thereon and certain
related activities. No Trust Fund is expected to have any source of capital
other than its assets and any related Credit Enhancement.

         Primary Assets included in the Trust Fund for a Series may consist of
any combination of Loans and Private Securities, to the extent and as specified
in the related Prospectus Supplement.

THE LOANS

         MORTGAGE LOANS. The Primary Assets for a Series may consist, in whole
or in part, of closed-end home equity loans (the "Mortgage Loans") secured by
mortgages primarily on Single Family Properties which may be subordinated to
other mortgages on the same Mortgaged Property. The Mortgage Loans may have
fixed interest rates or adjustable interest rates and may provide for other
payment characteristics as described below and in the related Prospectus
Supplement.

         Unless otherwise described in the related Prospectus Supplement, the
full principal amount of a Mortgage Loan is advanced at origination of the loan
and generally is repayable in equal (or substantially equal) installments 




                                       22
<PAGE>


of an amount sufficient to fully amortize such loan at its stated maturity. As
more fully described in the related Prospectus Supplement, interest on each
Mortgage Loan is calculated on the basis of the outstanding principal balance of
such loan multiplied by the Loan Rate thereon and further multiplied by a
fraction, the numerator of which is the number of days in the period elapsed
since the preceding payment of interest was made and the denominator is the
number of days in the annual period for which interest accrues on such loan.
Unless otherwise described in the related Prospectus Supplement the original
terms to stated maturity of Mortgage Loans will not exceed 360 months.

         The Mortgaged Properties will include Single Family Property (i.e.,
one-to four-family residential housing, including Condominium Units and
Cooperative Dwellings) and mixed-use property. Mixed-use properties will consist
of structures of no more than three stories, which include one to four
residential dwelling units and space used for retail, professional or other
commercial uses. Such uses, which will not involve more than 50% of the space in
the structure, may include doctor, dentist or law offices, real estate agencies,
boutiques, newsstands, convenience stores or other similar types of uses
intended to cater to individual customers as specified in the related Prospectus
Supplement. The properties may be located in suburban or metropolitan districts.
Any such non-residential use will be in compliance with local zoning laws and
regulations. The Mortgaged Properties may consist of detached individual
dwellings, individual condominiums, townhouses, duplexes, row houses, individual
units in planned unit developments and other attached dwelling units. Each
Single Family Property will be located on land owned in fee simple by the
borrower or on land leased by the borrower for a term at least ten years (unless
otherwise provided in the related Prospectus Supplement) greater than the term
of the related Loan. Attached dwellings may include owner-occupied structures
where each borrower owns the land upon which the unit is built, with the
remaining adjacent land owned in common or dwelling units subject to a
proprietary lease or occupancy agreement in a cooperatively owned apartment
building.

         Unless otherwise specified in the related Prospectus Supplement,
Mortgages on Cooperative Dwellings consist of a lien on the shares issued by
such Cooperative Dwelling and the proprietary lease or occupancy agreement
relating to such Cooperative Dwelling.

         The aggregate principal balance of Mortgage Loans secured by Mortgaged
Properties that are owner-occupied will be disclosed in the related Prospectus
Supplement. Unless otherwise specified in the Prospectus Supplement, the sole
basis for a representation that a given percentage of the Mortgage Loans are
secured by Single Family Property that is owner-occupied will be either (i) the
making of a representation by the Mortgagor at origination of the Mortgage Loan
either that the underlying Mortgaged Property will be used by the Mortgagor for
a period of at least six months every year or that the Mortgagor intends to use
the Mortgaged Property as a primary residence, or (ii) a finding that the
address of the underlying Mortgaged Property is the Mortgagor's mailing address
as reflected in the Servicer's records. To the extent specified in the related
Prospectus Supplement, the Mortgaged Properties may include non-owner occupied
investment properties and vacation and second homes.

         Unless otherwise specified in the related Prospectus Supplement, the
initial Combined Loan-to-Value Ratio of a Loan is computed in the manner
described in the related Prospectus Supplement, taking into account the amounts
of any related senior mortgage loans.

         HOME IMPROVEMENT CONTRACTS. The Primary Assets for a Series may
consist, in whole or part, of home improvement installment sales contracts and
installment loan agreements (the "Home Improvement Contracts") originated by a
home improvement contractor in the ordinary course of business. As specified in
the related Prospectus Supplement, the Home Improvement Contracts will either be
unsecured or secured by the Mortgages primarily on Single Family Properties
which are generally subordinate to other mortgages on the same Mortgaged
Property or by purchase money security interests in the Home Improvements
financed thereby. Unless otherwise specified in the applicable Prospectus
Supplement, the Home Improvement Contracts will be fully amortizing and may have
fixed interest rates or adjustable interest rates and may provide for other
payment characteristics as described below and in the related Prospectus
Supplement.

         Unless otherwise specified in the related Prospectus Supplement, the
home improvements (the "Home Improvements") securing the Home Improvement
Contracts include, but are not limited to, replacement windows, house siding,
new roofs, swimming pools, satellite dishes, kitchen and bathroom remodeling
goods and solar heating 



                                       23
<PAGE>



panels. The initial Loan-to-Value Ratio of a Home Improvement Contract will be
computed in the manner described in the related Prospectus Supplement.

         ADDITIONAL INFORMATION. The selection criteria which will apply with
respect to the Loans, including, but not limited to, the Combined Loan-to-Value
Ratios or Loan-to-Value Ratios, as applicable, original terms to maturity and
delinquency information, will be specified in the related Prospectus Supplement.

         The Loans for a Series may include Loans that do not amortize their
entire principal balance by their stated maturity in accordance with their terms
and require a balloon payment of the remaining principal balance at maturity, as
specified in the related Prospectus Supplement. As further described in the
related Prospectus Supplement, the Loans for a Series may include Loans that do
not have a specified stated maturity.

         The Loans will be conventional contracts or contracts insured by the
Federal Housing Administration ("FHA") or partially guaranteed by the Veterans
Administration ("VA"). Loans designated in the related Prospectus Supplement as
insured by the FHA will be insured by the FHA as authorized under the United
States Housing Act of 1937, as amended. Such Loans will be insured under various
FHA programs. These programs generally limit the principal amount and interest
rates of the mortgage loans insured. Loans insured by the FHA generally require
a minimum down payment of approximately 5% of the original principal amount of
the loan. No FHA-insured Loans relating to a Series may have an interest rate or
original principal amount exceeding the applicable FHA limits at the time of
origination of such loan.

         The insurance premiums for Loans insured by the FHA are collected by
lenders approved by the Department of Housing and Urban Development ("HUD") and
are paid to the FHA. The regulations governing FHA single-family mortgage
insurance programs provide that insurance benefits are payable either upon
foreclosure (or other acquisition of possession) and conveyance of the mortgaged
premises to HUD or upon assignment of the defaulted Loan to HUD. With respect to
a defaulted FHA-insured Loan, the Servicer is limited in its ability to initiate
foreclosure proceedings. When it is determined, either by the Servicer or HUD,
that default was caused by circumstances beyond the mortgagor's control, the
Servicer is expected to make an effort to avoid foreclosure by entering, if
feasible, into one of a number of available forms of forbearance plans with the
mortgagor. Such plans may involve the reduction or suspension of regular
mortgage payments for a specified period, with such payments to be made upon or
before the maturity date of the mortgage, or the recasting of payments due under
the mortgage up to or beyond the maturity date. In addition, when a default
caused by such circumstances is accompanied by certain other criteria, HUD may
provide relief by making payments to the Servicer in partial or full
satisfaction of amounts due under the Loan (which payments are to be repaid by
the mortgagor to HUD) or by accepting assignment of the loan from the Servicer.
With certain exceptions, at least three full monthly installments must be due
and unpaid under the Loan and HUD must have rejected any request for relief from
the mortgagor before the Servicer may initiate foreclosure proceedings.

         HUD has the option, in most cases, to pay insurance claims in cash or
in debentures issued by HUD. Currently, claims are being paid in cash, and
claims have not been paid in debentures since 1965. HUD debentures issued in
satisfaction of FHA insurance claims bear interest at the applicable HUD
debenture interest rate. The Servicer of each FHA-insured Loan will be obligated
to purchase any such debenture issued in satisfaction of such Loan upon default
for an amount equal to the principal amount of any such debenture.

         The amount of insurance benefits generally paid by the FHA is equal to
the entire unpaid principal amount of the defaulted Loan adjusted to reimburse
the Servicer for certain costs and expenses and to deduct certain amounts
received or retained by the Servicer after default. When entitlement to
insurance benefits results from foreclosure (or other acquisition of possession)
and conveyance to HUD, the Servicer is compensated for no more than two-thirds
of its foreclosure costs, and is compensated for interest accrued and unpaid
prior to such date but in general only to the extent it was allowed pursuant to
a forbearance plan approved by HUD. When entitlement to insurance benefits
results from assignment of the Loan to HUD, the insurance payment includes full
compensation for interest accrued and unpaid to the assignment date. The
insurance payment itself, upon foreclosure of an FHA-insured Loan, bears
interest from a date 30 days after the mortgagor's first uncorrected failure to
perform any obligation to make any payment due under the Loan and, upon
assignment, from the date of assignment to the date of payment of the claim, in
each case at the same interest rate as the applicable HUD debenture interest
rate as described above.



                                       24
<PAGE>


         Loans designated in the related Prospectus Supplement as guaranteed by
the VA will be partially guaranteed by the VA under the Serviceman's
Readjustment Act of 1944, as amended (a "VA Guaranty"). The Serviceman's
Readjustment Act of 1944, as amended, permits a veteran (or in certain instances
the spouse of a veteran) to obtain a mortgage loan guaranty by the VA covering
mortgage financing of the purchase of a one- to four-family dwelling unit at
interest rates permitted by the VA. The program has no mortgage loan limits,
requires no down payment from the purchaser and permits the guarantee of
mortgage loans of up to 30 years' duration.

         The maximum guaranty that may be issued by the VA under a VA guaranteed
mortgage loan depends upon the original principal amount of the mortgage loan,
as further described in 38 United States Code Section 1803(a), as amended. The
liability on the guaranty is reduced or increased pro rata with any reduction or
increase in the amount of indebtedness, but in no event will the amount payable
on the guaranty exceed the amount of the original guaranty. The VA may, at its
option and without regard to the guaranty, make full payment to a mortgage
holder of unsatisfied indebtedness on a mortgage upon its assignment to the VA.

         With respect to a defaulted VA guaranteed Loan, the Servicer is, absent
exceptional circumstances, authorized to announce its intention to foreclose
only when the default has continued for three months. Generally, a claim for the
guaranty is submitted after liquidation of the Mortgaged Property.

         The amount payable under the guaranty will be the percentage of the
VA-insured Loan originally guaranteed applied to indebtedness outstanding as of
the applicable date of computation specified in the VA regulations. Payments
under the guaranty will be equal to the unpaid principal amount of the loan,
interest accrued on the unpaid balance of the loan to the appropriate date of
computation and limited expenses of the mortgagee, but in each case only to the
extent that such amounts have not been recovered through liquidation of the
Mortgaged Property. The amount payable under the guaranty may in no event exceed
the amount of the original guaranty.

         The related Prospectus Supplement for each Series will provide
information with respect to the Loans that are Primary Assets as of the Cut-off
Date, including, among other things, and to the extent relevant: (a) the
aggregate unpaid principal balance of the Loans; (b) the range and weighted
average Loan Rate on the Loans, and, in the case of adjustable rate Loans, the
range and weighted average of the current Loan Rates and the Lifetime Rate Caps,
if any; (c) the range and average outstanding principal balance of the Loans;
(d) the weighted average original and remaining term-to-stated maturity of the
Loans and the range of original and remaining terms-to-stated maturity, if
applicable; (e) the range and weighted average of Combined Loan-to-Value Ratios
or Loan-to-Value Ratios for the Loans, as applicable; (f) the percentage (by
outstanding principal balance as of the Cut-off Date) of Loans that accrue
interest at adjustable or fixed interest rates; (g) any special hazard insurance
policy or bankruptcy bond or other Credit Enhancement relating to the Loans; (h)
the percentage (by principal balance as of the Cut-off Date) of Loans that are
secured by Mortgaged Properties, Home Improvements or are unsecured; (i) the
geographic distribution of any Mortgaged Properties securing the Loans; (j) the
percentage of Loans (by principal balance as of the Cut-off Date) that are
secured by Single Family Properties, shares relating to Cooperative Dwellings,
Condominium Units, investment property and vacation or second homes; (k) the
lien priority of the Loans; and (l) the delinquency status and year of
origination of the Loans. The related Prospectus Supplement will also specify
any other limitations on the types or characteristics of Loans for a Series.

         If information of the nature described above respecting the Loans is
not known to the Depositor at the time the Securities are initially offered,
approximate or more general information of the nature described above will be
provided in the Prospectus Supplement and additional information will be set
forth in a Current Report on Form 8-K to be available to investors on the date
of issuance of the related Series and to be filed with the Commission within 15
days after the initial issuance of such Securities.

PRIVATE SECURITIES

         GENERAL. Primary Assets for a Series may consist, in whole or in part,
of Private Securities which include pass-through certificates representing
beneficial interests in loans of the type that would otherwise be eligible to be
Loans (the "Underlying Loans") or (b) collateralized obligations secured by
Underlying Loans. Such pass-through certificates or collateralized obligations
will have previously been (a) offered and distributed to the public pursuant to
an effective registration statement or (b) purchased in a transaction not
involving any public offering from a person who is not an affiliate of the
issuer of such securities at the time of sale (nor an affiliate thereof at any
time 



                                       25
<PAGE>


during the three preceding months); provided a period of three years elapsed
since the later of the date the securities were acquired from the issuer or an
affiliate thereof. Although individual Underlying Loans may be insured or
guaranteed by the United States or an agency or instrumentality thereof, they
need not be, and Private Securities themselves will not be so insured or
guaranteed.

         Private Securities will have been issued pursuant to a pooling and
servicing agreement, a trust agreement or similar agreement (a "PS Agreement").
The seller/servicer of the Underlying Loans will have entered into the PS
Agreement with the trustee under such PS Agreement (the "PS Trustee"). The PS
Trustee or its agent, or a custodian, will possess the Underlying Loans.
Underlying Loans will be serviced by a servicer (the "PS Servicer") directly or
by one or more sub-servicers who may be subject to the supervision of the PS
Servicer.

         The sponsor of the Private Securities (the "PS Sponsor") will be a
financial institution or other entity engaged generally in the business of
lending; a public agency or instrumentality of a state, local or federal
government; or a limited purpose corporation organized for the purpose of, among
other things, establishing trusts and acquiring and selling loans to such
trusts, and selling beneficial interests in such trusts. If so specified in the
Prospectus Supplement, the PS Sponsor may be an affiliate of the Depositor. The
obligations of the PS Sponsor will generally be limited to certain
representations and warranties with respect to the assets conveyed by it to the
related trust. Unless otherwise specified in the related Prospectus Supplement,
the PS Sponsor will not have guaranteed any of the assets conveyed to the
related trust or any of the Private Securities issued under the PS Agreement.
Additionally, although the Underlying Loans may be guaranteed by an agency or
instrumentality of the United States, the Private Securities themselves will not
be so guaranteed.

         Distributions of principal and interest will be made on the Private
Securities on the dates specified in the related Prospectus Supplement. The
Private Securities may be entitled to receive nominal or no principal
distributions or nominal or no interest distributions. Principal and interest
distributions will be made on the Private Securities by the PS Trustee or the PS
Servicer. The PS Sponsor or the PS Servicer may have the right to repurchase the
Underlying Loans after a certain date or under other circumstances specified in
the related Prospectus Supplement.

         The Underlying Loans may be fixed rate, level payment, fully amortizing
loans or adjustable rate loans or loans having balloon or other irregular
payment features. Such Underlying Loans will be secured by mortgages on
Mortgaged Properties.

         CREDIT SUPPORT RELATING TO PRIVATE SECURITIES. Credit support in the
form of Reserve Funds, subordination of other private securities issued under
the PS Agreement, guarantees, letters of credit, cash collateral accounts,
insurance policies or other types of credit support may be provided with respect
to the Underlying Loans or with respect to the Private Securities themselves.
The type, characteristics and amount of credit support will be a function of
certain characteristics of the Underlying Loans and other factors and will have
been established for the Private Securities on the basis of requirements of the
nationally recognized statistical rating organization that rated the Private
Securities.

         ADDITIONAL INFORMATION. The Prospectus Supplement for a Series for
which the Primary Assets include Private Securities will specify (such
disclosure may be on an approximate basis and will be as of the date specified
in the related Prospectus Supplement), to the extent relevant and to the extent
such information is reasonably available to the Depositor and the Depositor
reasonably believes such information to be reliable: (i) the aggregate
approximate principal amount and type of the Private Securities to be included
in the Trust Fund for such Series; (ii) certain characteristics of the
Underlying Loans including (A) the payment features of such Underlying Loans
(i.e., whether they are fixed rate or adjustable rate and whether they provide
for fixed level payments or other payment features), (B) the approximate
aggregate principal balance, if known, of such Underlying Loans insured or
guaranteed by a governmental entity, (C) the servicing fee or range of servicing
fees with respect to the Underlying Loans, (D) the minimum and maximum stated
maturities of such Underlying Loans at origination, (E) the lien priority of
such Underlying Loans, and (F) the delinquency status and year of origination of
such Underlying Loans; (iii) the maximum original term-to-stated maturity of the
Private Securities; (iv) the weighted average term-to-stated maturity of the
Private Securities; (v) the pass-through or certificate rate or ranges thereof
for the Private Securities; (vi) the PS Sponsor, the PS Servicer (if other than
the PS Sponsor) and the PS Trustee for such Private Securities; (vii) certain
characteristics of credit support if any, such as Reserve Funds, insurance
policies, letters of credit or 



                                       26
<PAGE>


guarantees relating to such Loans underlying the Private Securities or to such
Private Securities themselves; (viii) the terms on which Underlying Loans may,
or are required to, be purchased prior to their stated maturity or the stated
maturity of the Private Securities; and (ix) the terms on which Underlying Loans
may be substituted for those originally underlying the Private Securities.

         If information of the nature described above representing the Private
Securities is not known to the Depositor at the time the Securities are
initially offered, approximate or more general information of the nature
described above will be provided in the Prospectus Supplement and the additional
information, if available, will be set forth in a Current Report on Form 8-K to
be available to investors on the date of issuance of the related Series and to
be filed with the Commission within 15 days of the initial issuance of such
Securities.

COLLECTION AND DISTRIBUTION ACCOUNTS

         A separate Collection Account will be established by the Trustee or the
Servicer, in the name of the Trustee, for each Series of Securities for receipt
of the amount of cash, if any, specified in the related Prospectus Supplement to
be initially deposited therein by the Depositor, all amounts received on or with
respect to the Primary Assets and, unless otherwise specified in the related
Prospectus Supplement, income earned thereon. Certain amounts on deposit in such
Collection Account and certain amounts available pursuant to any Credit
Enhancement, as provided in the related Prospectus Supplement, will be deposited
in a related Distribution Account, which will also be established by the Trustee
for each such Series of Securities, for distribution to the related Holders.
Unless otherwise specified in the related Prospectus Supplement, the Trustee
will invest the funds in the Collection and Distribution Accounts in Eligible
Investments maturing, with certain exceptions, not later, in the case of funds
in the Collection Account, than the day preceding the date such funds are due to
be deposited in the Distribution Account or otherwise distributed and, in the
case of funds in the Distribution Account, than the day preceding the next
Distribution Date for the related Series of Securities. Eligible Investments
include, among other investments, obligations of the United States and certain
agencies thereof, federal funds, certificates of deposit, commercial paper,
demand and time deposits and banker's acceptances, certain repurchase agreements
of United States government securities and certain guaranteed investment
contracts, in each case, acceptable to the Rating Agency.

         Notwithstanding any of the foregoing, amounts may be deposited and
withdrawn pursuant to any Deposit Agreement or Minimum Principal Payment
Agreement as specified in the related Prospectus Supplement.

         If specified in the related Prospectus Supplement, a Trust Fund will
include one or more segregated trust accounts (each, a "Pre-Funding Account")
established and maintained with the Trustee for the related Series. If so
specified, on the closing date for such Series, a portion of the proceeds of the
sale of the Securities of such Series (such amount, the "Pre-Funded Amount")
will be deposited in the Pre-Funding Account and may be used to purchase
additional Primary Assets during the period of time specified in the related
Prospectus Supplement (the "Pre-Funding Period"). The Primary Assets to be so
purchased will be required to have certain characteristics specified in the
related Prospectus Supplement. If any Pre-Funded Amount remains on deposit in
the Pre-Funding Account at the end of the Pre-Funding Period, such amount will
be applied in the manner specified in the related Prospectus Supplement to
prepay the Notes and/or the Certificates of the applicable Series.

         If a Pre-Funding Account is established, one or more segregated trust
accounts (each, a "Capitalized Interest Account") may be established and
maintained with the Trustee for the related Series. On the closing date for such
Series, a portion of the proceeds of the sale of the Securities of such Series
will be deposited in the Capitalized Interest Account and used to fund the
excess, if any, of the sum of (i) the amount of interest accrued on the
Securities of such Series and (ii) if specified in the related Prospectus
Supplement, certain fees or expenses during the Pre-Funding Period, over the
amount of interest available therefor from the Primary Assets in the Trust Fund.
Any amounts on deposit in the Capitalized Interest Account at the end of the
Pre-Funding Period that are not necessary for such purposes will be distributed
to the person specified in the related Prospectus Supplement.

                               CREDIT ENHANCEMENT

         If stated in the Prospectus Supplement relating to a Series of
Securities, simultaneously with the Depositor's assignment of the Primary Assets
to the Trustee, the Depositor will obtain an irrevocable letter of credit,
surety bond or insurance policy, issue Subordinate Securities or obtain any
other form of credit enhancement or 



                                       27
<PAGE>



combination thereof (collectively, "Credit Enhancement") in favor of the Trustee
on behalf of the Holders of the related Series or designated Classes of such
Series from an institution or by other means acceptable to the Rating Agency.
The Credit Enhancement will support the payment of principal and interest on the
Securities, and may be applied for certain other purposes to the extent and
under the conditions set forth in such Prospectus Supplement. Credit Enhancement
for a Series may include one or more of the following forms, or such other form
as may be specified in the related Prospectus Supplement. If so specified in the
related Prospectus Supplement, any of such Credit Enhancement may be structured
so as to protect against losses relating to more than one Trust Fund, in the
manner described therein.

SUBORDINATE SECURITIES

         If specified in the related Prospectus Supplement, Credit Enhancement
for a Series may consist of one or more Classes of Subordinate Securities. The
rights of holders of such Subordinate Securities to receive distributions on any
Distribution Date will be subordinate in right and priority to the rights of
Holders of Senior Securities of the Series, but only to the extent described in
the related Prospectus Supplement.

INSURANCE

         If stated in the related Prospectus Supplement, Credit Enhancement for
a Series may consist of special hazard insurance policies, bankruptcy bonds and
other types of insurance relating to the Primary Assets, as described below and
in the related Prospectus Supplement.

         POOL INSURANCE POLICY. If so specified in the Prospectus Supplement
relating to a Series of Securities, the Depositor will obtain a pool insurance
policy for the Loans in the related Trust Fund. The pool insurance policy will
cover any loss (subject to the limitations described in a related Prospectus
Supplement) by reason of default. but will not cover the portion of the
principal balance of any Loan that is required to be covered by any primary
mortgage insurance policy. The amount and terms of any such coverage will be set
forth in the related Prospectus Supplement.

         SPECIAL HAZARD INSURANCE POLICY. Although the terms of such policies
vary to some degree, a special hazard insurance policy typically provides that,
where there has been damage to Property securing a defaulted or foreclosed Loan
(title to which has been acquired by the insured) and to the extent such damage
is not covered by the standard hazard insurance policy or any flood insurance
policy, if applicable, required to be maintained with respect to such Property,
or in connection with partial loss resulting from the application of the
coinsurance clause in a standard hazard insurance policy, the special hazard
insurer will pay the lesser of (i) the cost of repair or replacement of such
Property or (ii) upon transfer of such Property to the special hazard insurer,
the unpaid principal balance of such 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 Servicer with
respect to such Property. If the unpaid principal balance plus accrued interest
and certain expenses is paid by the special hazard insurer, the amount of
further coverage under the special hazard insurance policy will be reduced by
such amount less any net proceeds from the sale of such Property. Any amount
paid as the cost of repair of such Property will reduce coverage by such amount.
Special hazard insurance policies typically do not cover losses occasioned by
war, civil insurrection, certain governmental actions, errors in design, faulty
workmanship or materials (except under certain circumstances), nuclear reaction,
flood (if the mortgaged property is in a federally designated flood area),
chemical contamination and certain other risks.

         Restoration of the Property with the proceeds described under (i) above
is expected to satisfy the condition under any pool insurance policy that such
Property be restored before a claim under such pool insurance policy may be
validly presented with respect to the defaulted Loan secured by such Property.
The payment described under (ii) above will render unnecessary presentation of a
claim in respect of such Loan under any pool insurance policy. Therefore, so
long as such 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 Loan plus accrued interest and certain expenses will not affect the
total insurance proceeds paid to Holders of the Securities, but will affect the
relative amounts of coverage remaining under the special hazard insurance policy
and pool insurance policy.



                                       28
<PAGE>


         BANKRUPTCY BOND. In the event of a bankruptcy of a borrower, the
bankruptcy court may establish the value of the Property securing the related
Loan at an amount less than the then-outstanding principal balance of such Loan.
The amount of the secured debt could be reduced to such value, and the holder of
such Loan thus would become an unsecured creditor to the extent the outstanding
principal balance of such Loan exceeds the value so assigned to the Property by
the bankruptcy court. In addition, certain other modifications of the terms of a
Loan can result from a bankruptcy proceeding. See "CERTAIN LEGAL ASPECTS OF
LOANS." If so provided in the related Prospectus Supplement, the Depositor or
other entity specified in the related Prospectus Supplement will obtain a
bankruptcy bond or similar insurance contract (the "bankruptcy bond") covering
losses resulting from proceedings with respect to borrowers under the Bankruptcy
Code. The bankruptcy bond will cover certain losses resulting from a reduction
by a bankruptcy court of scheduled payments of principal of and interest on a
Loan or a reduction by such court of the principal amount of a 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 bankruptcy bond will provide coverage in the aggregate amount
specified in the related Prospectus Supplement for all Loans in the Trust Fund
for such Series. Such amount will be reduced by payments made under such
bankruptcy bond in respect of such Loans, unless otherwise specified in the
related Prospectus Supplement, and will not be restored.

RESERVE FUNDS

         If so specified in the Prospectus Supplement relating to a Series of
Securities, the Depositor will deposit into one or more funds to be established
with the Trustee as part of the Trust Fund for such Series or for the benefit of
any Credit Enhancer with respect to such Series (the "Reserve Funds") cash, a
letter or letters of credit, cash collateral accounts, Eligible Investments, or
other instruments meeting the criteria of the Rating Agency rating any Series of
the Securities in the amount specified in such Prospectus Supplement. In the
alternative or in addition to such deposit, a Reserve Fund for a Series may be
funded over time through application of all or a portion of the excess cash flow
from the Primary Assets for such Series, to the extent described in the related
Prospectus Supplement. If applicable, the initial amount of the Reserve Fund and
the Reserve Fund maintenance requirements for a Series of Securities will be
described in the related Prospectus Supplement.

         Amounts withdrawn from any Reserve Fund will be applied by the Trustee
to make payments on the Securities of a Series, to pay expenses, to reimburse
any Credit Enhancer or for any other purpose, in the manner and to the extent
specified in the related Prospectus Supplement.

         Amounts deposited in a Reserve Fund will be invested by the Trustee, in
Eligible Investments maturing no later than the day specified in the related
Prospectus Supplement.

MINIMUM PRINCIPAL PAYMENT AGREEMENT

         If stated in the Prospectus Supplement relating to a Series of
Securities, the Depositor will enter into a Minimum Principal Payment Agreement
with an entity meeting the criteria of the Rating Agency pursuant to which such
entity will provide certain payments on the Securities of such Series in the
event that aggregate scheduled principal payments and/or prepayments on the
Primary Assets for such Series are not sufficient to make certain payments on
the Securities of such Series, as provided in the Prospectus Supplement.

DEPOSIT AGREEMENT

         If specified in a Prospectus Supplement, the Depositor and the Trustee
for such Series of Securities will enter into a Deposit Agreement with the
entity specified in such Prospectus Supplement on or before the sale of such
Series of Securities. The purpose of a Deposit Agreement would be to accumulate
available cash for investment so that such cash, together with income thereon,
can be applied to future distributions on one or more Classes of Securities. The
Prospectus Supplement for a Series of Securities pursuant to which a Deposit
Agreement is used will contain a description of the terms of such Deposit
Agreement.



                                       29
<PAGE>

                               SERVICING OF LOANS

GENERAL

         Customary servicing functions with respect to Loans comprising the
Primary Assets in the Trust Fund will be provided by the Servicer directly
pursuant to the related Servicing Agreement or Pooling and Servicing Agreement,
as the case may be, with respect to a Series of Securities.

COLLECTION PROCEDURES; ESCROW ACCOUNTS

         The Servicer will make reasonable efforts to collect all payments
required to be made under the Loans and will, consistent with the terms of the
related Agreement for a Series and any applicable Credit Enhancement, follow
such collection procedures as it follows with respect to comparable loans held
in its own portfolio. Consistent with the above, the Servicer may, in its
discretion, (i) waive any assumption fee, late payment charge, or other charge
in connection with a Loan and (ii) to the extent provided in the related
Agreement arrange with an obligor a schedule for the liquidation of
delinquencies by extending the Due Dates for Scheduled Payments on such Loan.

         If specified in the related Prospectus Supplement, the Servicer, to the
extent permitted by law, will establish and maintain escrow or impound accounts
("Escrow Accounts") with respect to Loans in which payments by obligors to pay
taxes, assessments, mortgage and hazard insurance premiums, and other comparable
items will be deposited. Loans may not require such payments under the loan
related documents, in which case the Servicer would not be required to establish
any Escrow Account with respect to such Loans. Withdrawals from the Escrow
Accounts are to be made to effect timely payment of taxes, assessments and
mortgage and hazard insurance, to refund to obligors amounts determined to be
overages, to pay interest to obligors on balances in the Escrow Account to the
extent required by law, to repair or otherwise protect the property securing the
related Loan and to clear and terminate such Escrow Account. The Servicer will
be responsible for the administration of the Escrow Accounts and generally will
make advances to such accounts when a deficiency exists therein.

DEPOSITS TO AND WITHDRAWALS FROM THE COLLECTION ACCOUNT

         Unless otherwise specified in the related Prospectus Supplement, the
Trustee or the Servicer will establish a separate account (the "Collection
Account") in the name of the Trustee. Unless otherwise indicated in the related
Prospectus Supplement, the Collection Account will be an account maintained (i)
at a depository institution, the long-term unsecured debt obligations of which
at the time of any deposit therein are rated by each Rating Agency rating the
Securities of such Series at levels satisfactory to each Rating Agency or (ii)
in an account or accounts the deposits in which are insured to the maximum
extent available by the FDIC or which are secured in a manner meeting
requirements established by each Rating Agency.

         Unless otherwise specified in the related Prospectus Supplement, the
funds held in the Collection Account may be invested, pending remittance to the
Trustee, in Eligible Investments. If so specified in the related Prospectus
Supplement, the Servicer will be entitled to receive as additional compensation
any interest or other income earned on funds in the Collection Account.

         Unless otherwise specified in the related Prospectus Supplement, the
Servicer, the Depositor, the Trustee or the Seller, as appropriate, will deposit
into the Collection Account for each Series on the Business Day following the
Closing Date any amounts representing Scheduled Payments due after the related
Cut-off Date but received by the Servicer on or before the Closing Date, and
thereafter, within two business days after the date of receipt thereof, the
following payments and collections received or made by it (other than, unless
otherwise provided in the related Prospectus Supplement, in respect of principal
of and interest on the related Primary Assets due on or before such Cut-off
Date):

                  (i)      All payments on account of principal, including 
         prepayments, on such Primary Assets;

                  (ii) All payments on account of interest on such Primary
         Assets after deducting therefrom, at the discretion of the Servicer but
         only to the extent of the amount permitted to be withdrawn or withheld



                                       30
<PAGE>


         from the Collection Account in accordance with the related Agreement,
         the Servicing Fee in respect of such Primary Assets;

                  (iii) All amounts received by the Servicer in connection with
         the liquidation of Primary Assets or property acquired in respect
         thereof, whether through foreclosure sale, repossession or otherwise,
         including payments in connection with such Primary Assets received from
         the obligor, other than amounts required to be paid or refunded to the
         obligor pursuant to the terms of the applicable loan documents or
         otherwise pursuant to law ("Liquidation Proceeds"), exclusive of, in
         the discretion of the Servicer, but only to the extent of the amount
         permitted to be withdrawn from the Collection Account in accordance
         with the related Agreement, the Servicing Fee, if any, in respect of
         the related Primary Asset;

                  (iv) All proceeds under any title insurance, hazard insurance
         or other insurance policy covering any such Primary Asset, other than
         proceeds to be applied to the restoration or repair of the related
         Property or released to the obligor in accordance with the related
         Agreement;

                  (v) All amounts required to be deposited therein from any
         applicable Reserve Fund for such Series pursuant to the related
         Agreement;

                  (vi) All Advances made by the Servicer required pursuant to
         the related Agreement; and

                  (vii) All repurchase prices of any such Primary Assets
         repurchased by the Depositor, the Servicer or the Seller pursuant to
         the related Agreement.

         Unless otherwise specified in the related Prospectus Supplement, the
Servicer is permitted, from time to time, to make withdrawals from the
Collection Account for each Series for the following purposes:

                  (i) to reimburse itself for Advances for such Series made by
         it pursuant to the related Agreement; the Servicer's right to reimburse
         itself is limited to amounts received on or in respect of particular
         Loans (including, for this purpose, Liquidation Proceeds and amounts
         representing proceeds of insurance policies covering the related
         Property) which represent late recoveries of Scheduled Payments
         respecting which any such Advance was made;

                  (ii) to the extent provided in the related Agreement, to
         reimburse itself for any Advances for such Series that the Servicer
         determines in good faith it will be unable to recover from amounts
         representing late recoveries of Scheduled Payments respecting which
         such Advance was made or from Liquidation Proceeds or the proceeds of
         insurance policies;

                  (iii) to reimburse itself from Liquidation Proceeds for
         liquidation expenses and for amounts expended by it in good faith in
         connection with the restoration of damaged Property and, in the event
         deposited in the Collection Account and not previously withheld, and to
         the extent that Liquidation Proceeds after such reimbursement exceed
         the outstanding principal balance of the related Loan, together with
         accrued and unpaid interest thereon to the Due Date for such Loan next
         succeeding the date of its receipt of such Liquidation Proceeds, to pay
         to itself out of such excess the amount of any unpaid Servicing Fee and
         any assumption fees, late payment charges, or other charges on the
         related Loan;

                  (iv) in the event it has elected not to pay itself the
         Servicing Fee out of the interest component of any Scheduled Payment,
         late payment or other recovery with respect to a particular Loan prior
         to the deposit of such Scheduled Payment, late payment or recovery into
         the Collection Account, to pay to itself the Servicing Fee, as adjusted
         pursuant to the related Agreement, from any such Scheduled Payment,
         late payment or such other recovery, to the extent permitted by the
         related Agreement;

                  (v) to reimburse itself for expenses incurred by and
         recoverable by or reimbursable to it pursuant to the related Agreement;




                                       31
<PAGE>


                  (vi) to pay to the applicable person with respect to each
         Primary Asset or REO Property acquired in respect thereof that has been
         repurchased or removed from the Trust Fund by the Depositor, the
         Servicer or the Seller pursuant to the related Agreement, all amounts
         received thereon and not distributed as of the date on which the
         related repurchase price was determined;

                  (vii) to make payments to the Trustee of such Series for
         deposit into the Distribution Account, if any, or for remittance to the
         Holders of such Series in the amounts and in the manner provided for in
         the related Agreement; and

                  (viii) to clear and terminate the Collection Account pursuant
to the related Agreement.

         In addition, if the Servicer deposits in the Collection Account for a
Series any amount not required to be deposited therein, it may, at any time,
withdraw such amount from such Collection Account.

ADVANCES AND LIMITATIONS THEREON

         The related Prospectus Supplement will describe the circumstances, if
any, under which the Servicer will make Advances with respect to delinquent
payments on Loans. If specified in the related Prospectus Supplement, the
Servicer will be obligated to make Advances, and such obligation may be limited
in amount, or may not be activated until a certain portion of a specified
Reserve Fund is depleted. Advances are intended to provide liquidity and, except
to the extent specified in the related Prospectus Supplement, not to guarantee
or insure against losses. Accordingly, any funds advanced are recoverable by the
Servicer out of amounts received on particular Loans which represent late
recoveries of principal or interest, proceeds of insurance policies or
Liquidation Proceeds respecting which any such Advance was made. If an Advance
is made and subsequently determined to be nonrecoverable from late collections,
proceeds of insurance policies, or Liquidation Proceeds from the related Loan,
the Servicer may be entitled to reimbursement from other funds in the Collection
Account or Distribution Account, as the case may be, or from a specified Reserve
Fund as applicable, to the extent specified in the related Prospectus
Supplement.

MAINTENANCE OF INSURANCE POLICIES AND OTHER SERVICING PROCEDURES

         STANDARD HAZARD INSURANCE; FLOOD INSURANCE. Except as otherwise
specified in the related Prospectus Supplement, the Servicer will be required to
maintain or to cause the obligor on each Loan to maintain a standard hazard
insurance policy providing coverage of the standard form of fire insurance with
extended coverage for certain other hazards as is customary in the state in
which the related Property is located. The standard hazard insurance policies
will provide for coverage at least equal to the applicable state standard form
of fire insurance policy with extended coverage for property of the type
securing the related Loans. In general, the standard form of fire and extended
coverage policy will cover physical damage to or destruction of, the related
Property caused by fire, lightning, explosion, smoke, windstorm, hail, riot,
strike and civil commotion, subject to the conditions and exclusions
particularized in each policy. Because the standard hazard insurance policies
relating to the Loans will be underwritten by different hazard insurers and will
cover Properties located in various states, such policies will not contain
identical terms and conditions. The basic terms, however, generally will be
determined by state law and generally will be similar. Most such policies
typically will not cover any physical damage resulting from war, revolution,
governmental actions, floods and other water-related causes, earth movement
(including earthquakes, landslides and mudflows), nuclear reaction, 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. Uninsured risks not covered by a
special hazard insurance policy or other form of Credit Enhancement will
adversely affect distributions to Holders. When a Property securing a Loan is
located in a flood area identified by HUD pursuant to the Flood Disaster
Protection Act of 1973, as amended, the Servicer will be required to cause flood
insurance to be maintained with respect to such Property, to the extent
available.

         The standard hazard insurance policies covering Properties securing
Loans typically will contain a "coinsurance" clause which, in effect, will
require the insured at all times to carry hazard insurance of a specified
percentage (generally 80% to 90%) of the full replacement value of the Property,
including the improvements on any Property, in order to recover the full amount
of any partial loss. If the insured's coverage falls below this specified
percentage, such clause will provide that the hazard insurer's liability in the
event of partial loss will not exceed the greater of (i) the actual cash value
(the replacement cost less physical depreciation) of the Property, 



                                       32
<PAGE>


including the improvements, if any, damaged or destroyed or (ii) such proportion
of the loss, without deduction for depreciation, as the amount of insurance
carried bears to the specified percentage of the full replacement cost of such
Property and improvements. Since the amount of hazard insurance to be maintained
on the improvements securing the Loans declines as the principal balances owing
thereon decrease, and since the value of the Properties will fluctuate in value
over time, the effect of this requirement in the event of partial loss may be
that hazard insurance proceeds will be insufficient to restore fully the damage
to the affected Property.

         Unless otherwise specified in the related Prospectus Supplement,
coverage will be in an amount at least equal to the greater of (i) the amount
necessary to avoid the enforcement of any co-insurance clause contained in the
policy or (ii) the outstanding principal balance of the related Loan. Unless
otherwise specified in the related Prospectus Supplement, the Servicer will also
maintain on REO Property that secured a defaulted Loan and that has been
acquired upon foreclosure, deed in lieu of foreclosure, or repossession, a
standard hazard insurance policy in an amount that is at least equal to the
maximum insurable value of such REO Property. No earthquake or other additional
insurance will be required of any obligor or will be maintained on REO Property
acquired in respect of a defaulted Loan, other than pursuant to such applicable
laws and regulations as shall at any time be in force and shall require such
additional insurance.

         Any amounts collected by the Servicer under any such policies of
insurance (other than amounts to be applied to the restoration or repair of the
Property, released to the obligor in accordance with normal servicing procedures
or used to reimburse the Servicer for amounts to which it is entitled to
reimbursement) will be deposited in the Collection Account. In the event that
the Servicer obtains and maintains a blanket policy insuring against hazard
losses on all of the Loans, written by an insurer then acceptable to each Rating
Agency which assigns a rating to such Series, it will conclusively be deemed to
have satisfied its obligations to cause to be maintained a standard hazard
insurance policy for each Loan or related REO Property. This blanket policy may
contain a deductible clause, in which case the Servicer will be required, in the
event that there has been a loss that would have been covered by such policy
absent such deductible clause, to deposit in the Collection Account the amount
not otherwise payable under the blanket policy because of the application of
such deductible clause.

REALIZATION UPON DEFAULTED LOANS

         The Servicer will use its reasonable best efforts to foreclose upon,
repossess or otherwise comparably convert the ownership of the Properties
securing the related Loans as come into and continue in default and as to which
no satisfactory arrangements can be made for collection of delinquent payments.
In connection with such foreclosure or other conversion, the Servicer will
follow such practices and procedures as it deems necessary or advisable and as
are normal and usual in its servicing activities with respect to comparable
loans serviced by it. However, the Servicer will not be required to expend its
own funds in connection with any foreclosure or towards the restoration of the
Property unless it determines that (i) such restoration or foreclosure will
increase the Liquidation Proceeds in respect of the related Loan available to
the Holders after reimbursement to itself for such expenses and (ii) such
expenses will be recoverable by it either through Liquidation Proceeds or the
proceeds of insurance. Notwithstanding anything to the contrary herein, in the
case of a Trust Fund for which a REMIC election has been made, the Servicer will
be required to liquidate any Property acquired through foreclosure within two
years after the acquisition of the beneficial ownership of such Property. While
the holder of a Property acquired through foreclosure can often maximize its
recovery by providing financing to a new purchaser, the Trust Fund, if
applicable, will have no ability to do so and neither the Servicer nor the
Depositor will be required to do so.

         The Servicer may arrange with the obligor on a defaulted Loan a
modification of such Loan (a "Modification") to the extent provided in the
related Prospectus Supplement. Such Modifications may only be entered into if
they meet the underwriting policies and procedures employed by the Servicer in
servicing receivables for its own account and meet the other conditions set
forth in the related Prospectus Supplement.

ENFORCEMENT OF DUE-ON-SALE CLAUSES

         Unless otherwise specified in the related Prospectus Supplement for a
Series, when any Property is about to be conveyed by the obligor, the Servicer
will, to the extent it has knowledge of such prospective conveyance and prior to
the time of the consummation of such conveyance, exercise its rights to
accelerate the maturity of the related Loan under the applicable "due-on-sale"
clause, if any, unless it reasonably believes that such clause is not




                                       33
<PAGE>


enforceable under applicable law or if the enforcement of such clause would
result in loss of coverage under any primary mortgage insurance policy. In such
event, the Servicer is authorized to accept from or enter into an assumption
agreement with the person to whom such property has been or is about to be
conveyed, pursuant to which such person becomes liable under the Loan and
pursuant to which the original obligor is released from liability and such
person is substituted as the obligor and becomes liable under the Loan. Any fee
collected in connection with an assumption will be retained by the Servicer as
additional servicing compensation. The terms of a Loan may not be changed in
connection with an assumption.

SERVICING COMPENSATION AND PAYMENT OF EXPENSES

         Except as otherwise provided in the related Prospectus Supplement, the
Servicer will be entitled to a periodic fee as servicing compensation (the
"Servicing Fee") in an amount to be determined as specified in the related
Prospectus Supplement. The Servicing Fee may be fixed or variable, as specified
in the related Prospectus Supplement. In addition, unless otherwise specified in
the related Prospectus Supplement, the Servicer will be entitled to servicing
compensation in the form of assumption fees, late payment charges and similar
items, or excess proceeds following disposition of Property in connection with
defaulted Loans.

         Unless otherwise specified in the related Prospectus Supplement, the
Servicer will pay certain expenses incurred in connection with the servicing of
the Loans, including, without limitation, the payment of the fees and expenses
of the Trustee and independent accountants, payment of insurance policy premiums
and the cost of credit support, if any, and payment of expenses incurred in
preparation of reports to Holders.

         When an obligor makes a principal prepayment in full between Due Dates
on the related Loan, the obligor will generally be required to pay interest on
the amount prepaid only to the date of prepayment. If and to the extent provided
in the related Prospectus Supplement in order that one or more Classes of the
Holders of a Series will not be adversely affected by any resulting shortfall in
interest, the amount of the Servicing Fee may be reduced to the extent necessary
to include in the Servicer's remittance to the Trustee for deposit into the
Distribution Account an amount equal to one month's interest on the related Loan
(less the Servicing Fee). If the aggregate amount of such shortfalls in a month
exceeds the Servicing Fee for such month, a shortfall to Holders may occur.

         Unless otherwise specified in the related Prospectus Supplement, the
Servicer will be entitled to reimbursement for certain expenses incurred by it
in connection with the liquidation of defaulted Loans. The related Holders will
suffer no loss by reason of such expenses to the extent expenses are covered
under related insurance policies or from excess Liquidation Proceeds. If claims
are either not made or paid under the applicable insurance policies or if
coverage thereunder has been exhausted, the related Holders will suffer a loss
to the extent that Liquidation Proceeds, after reimbursement of the Servicer's
expenses, are less than the outstanding principal balance of and unpaid interest
on the related Loan which would be distributable to Holders. In addition, the
Servicer will be entitled to reimbursement of expenditures incurred by it in
connection with the restoration of property securing a defaulted Loan, such
right of reimbursement being prior to the rights of the Holders to receive any
related proceeds of insurance policies, Liquidation Proceeds or amounts derived
from other Credit Enhancement. The Servicer is generally also entitled to
reimbursement from the Collection Account for Advances.

         Unless otherwise specified in the related Prospectus Supplement, the
rights of the Servicer to receive funds from the Collection Account for a
Series, whether as the Servicing Fee or other compensation, or for the
reimbursement of Advances, expenses or otherwise, are not subordinate to the
rights of Holders of such Series.

EVIDENCE AS TO COMPLIANCE

         If so specified in the related Prospectus Supplement, the applicable
Agreement for each Series will provide that each year, a firm of independent
public accountants will furnish a statement to the Trustee to the effect that
such firm has examined certain documents and records relating to the servicing
of the Loans by the Servicer and that, on the basis of such examination, such
firm is of the opinion that the servicing has been conducted in compliance with
such Agreement, except for (i) such exceptions as such firm believes to be
immaterial and (ii) such other exceptions as are set forth in such statement.



                                       34
<PAGE>


         If so specified in the related Prospectus Supplement, the applicable
Agreement for each Series will also provide for delivery to the Trustee for such
Series of an annual statement signed by an officer of the Servicer to the effect
that the Servicer has fulfilled its obligations under such Agreement throughout
the preceding calendar year.

CERTAIN MATTERS REGARDING THE SERVICER

         The Servicer for each Series will be identified in the related
Prospectus Supplement. The Servicer may be an affiliate of the Depositor and may
have other business relationships with the Depositor and its affiliates.

         If an Event of Default occurs under either a Servicing Agreement or a
Pooling and Servicing Agreement, the Servicer may be replaced by the Trustee or
a successor Servicer. Unless otherwise specified in the related Prospectus
Supplement, such Events of Default and the rights of the Trustee upon such a
default under the Agreement for the related Series will be substantially similar
to those described under "THE AGREEMENTS-- Events of Default; Rights Upon Events
of Default--Pooling and Servicing Agreement; Servicing Agreement" herein.

         Unless otherwise specified in the related Prospectus Supplement, the
Servicer does not have the right to assign its rights and delegate its duties
and obligations under the related Agreement for each Series unless the successor
Servicer accepting such assignment or delegation (i) services similar loans in
the ordinary course of its business, (ii) is reasonably satisfactory to the
Trustee for the related Series, (iii) has a net worth of not less than the
amount specified in the related Prospectus Supplement, (iv) would not cause any
Rating Agency's rating of the Securities for such Series in effect immediately
prior to such assignment, sale or transfer to be qualified, downgraded or
withdrawn as a result of such assignment, sale or transfer and (v) executes and
delivers to the Trustee an agreement, in form and substance reasonably
satisfactory to the Trustee, which contains an assumption by such Servicer of
the due and punctual performance and observance of each covenant and condition
to be performed or observed by the Servicer under the related Agreement from and
after the date of such agreement. No such assignment will become effective until
the Trustee or a successor Servicer has assumed the servicer's obligations and
duties under the related Agreement. To the extent that the Servicer transfers
its obligations to a wholly-owned subsidiary or affiliate, such subsidiary or
affiliate need not satisfy the criteria set forth above; however, in such
instance, the assigning Servicer will remain liable for the servicing
obligations under the related Agreement. Any entity into which the Servicer is
merged or consolidated or any successor corporation resulting from any merger,
conversion or consolidation will succeed to the Servicer's obligations under the
related Agreement provided that such successor or surviving entity meets the
requirements for a successor Servicer set forth above.

         Except to the extent otherwise provided therein, each Agreement will
provide that neither the Servicer, nor any director, officer, employee or agent
of the Servicer, will be under any liability to the related Trust Fund, the
Depositor or the Holders for any action taken or for failing to take any action
in good faith pursuant to the related Agreement, or for errors in judgment;
provided, however, that neither the Servicer nor any such person will be
protected against any breach of warranty or representations made under such
Agreement or the failure to perform its obligations in compliance with any
standard of care set forth in such Agreement, or liability which would otherwise
be imposed by reason of willful misfeasance, bad faith or negligence in the
performance of their duties or by reason of reckless disregard of their
obligations and duties thereunder. Each Agreement will further provide that the
Servicer and any director, officer, employee or agent of the Servicer is
entitled to indemnification from the related Trust Fund and will be held
harmless against any loss, liability or expense incurred in connection with any
legal action relating to the Agreement or the Securities, other than any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
negligence in the performance of duties thereunder or by reason of reckless
disregard of obligations and duties thereunder. In addition, the related
Agreement will provide that the Servicer is not under any obligation to appear
in, prosecute or defend any legal action which is not incidental to its
servicing responsibilities under such Agreement which, in its opinion, may
involve it in any expense or liability. The Servicer may, in its discretion,
undertake any such action which it may deem necessary or desirable with respect
to the related Agreement and the rights and duties of the parties thereto and
the interests of the Holders thereunder. In such event the legal expenses and
costs of such action and any liability resulting therefrom may be expenses,
costs, and liabilities of the Trust Fund and the Servicer may be entitled to be
reimbursed therefor out of the Collection Account.


                                       35
<PAGE>


                                 THE AGREEMENTS

         The following summaries describe certain provisions of the Agreements.
The summaries do not purport to be complete and are subject to, and qualified in
their entirety by reference to, the provisions of the Agreements. Where
particular provisions or terms used in the Agreements are referred to, such
provisions or terms are as specified in the related Agreements.

ASSIGNMENT OF PRIMARY ASSETS

         GENERAL. At the time of issuance of the Securities of a Series, the
Depositor will transfer, convey and assign to the Trust Fund all right, title
and interest of the Depositor in the Primary Assets and other property to be
transferred to the Trust Fund for a Series. Such assignment will include all
principal and interest due on or with respect to the Primary Assets after the
Cut-off Date specified in the related Prospectus Supplement (except for any
Retained Interests). The Trustee will, concurrently with such assignment,
execute and deliver the Securities.

         ASSIGNMENT OF LOANS. Unless otherwise specified in the related
Prospectus Supplement, the Depositor will, as to each Loan, deliver or cause to
be delivered to the Trustee, or, as specified in the related Prospectus
Supplement a custodian on behalf of the Trustee (the "Custodian"), the Mortgage
Note endorsed without recourse to the order of the Trustee or in blank, the
original Mortgage with evidence of recording indicated thereon (except for any
Mortgage not returned from the public recording office, in which case a copy of
such Mortgage will be delivered, together with a certificate that the original
of such Mortgage was delivered to such recording office) and an assignment of
the Mortgage in recordable form. The Trustee, or, if so specified in the related
Prospectus Supplement, the Custodian, will hold such documents in trust for the
benefit of the Holders.

         Unless otherwise specified in the related Prospectus Supplement, the
Depositor will as to each Home Improvement Contract deliver or cause to be
delivered to the Trustee (or the Custodian) the original Home Improvement
Contract and copies of documents and instruments related to each Home
Improvement Contract and, other than in the case of unsecured Home Improvement
Contracts, the security interest in the property securing such Home Improvement
Contract. In order to give notice of the right, title and interest of
Securityholders to the Home Improvement Contracts, the Depositor will cause a
UCC-1 financing statement to be executed by the Depositor or the Seller
identifying the Trustee as the secured party and identifying all Home
Improvement Contracts as collateral. Unless otherwise specified in the related
Prospectus Supplement, the Home Improvement Contracts will not be stamped or
otherwise marked to reflect their assignment to the Trust. Therefore, if,
through negligence, fraud or otherwise, a subsequent purchaser were able to take
physical possession of the Home Improvement Contracts without notice of such
assignment, the interest of Securityholders in the Home Improvement Contracts
could be defeated. See "CERTAIN LEGAL ASPECTS OF THE LOANS--The Home Improvement
Contracts."

         With respect to Loans secured by Mortgages, if so specified in the
related Prospectus Supplement, the Depositor will, at the time of issuance of
the Securities, cause assignments to the Trustee of the Mortgages relating to
the Loans for a Series to 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 interest
in the related Loans. If specified in the related Prospectus Supplement, the
Depositor will cause such assignments to be so recorded within the time after
issuance of the Securities as is specified in the related Prospectus Supplement,
in which event, the Agreement may, as specified in the related Prospectus
Supplement, require the Depositor to repurchase from the Trustee any Loan the
related Mortgage of which is not recorded within such time, at the price
described below with respect to repurchases by reason of defective
documentation. Unless otherwise provided in the related Prospectus Supplement,
the enforcement of the repurchase obligation would constitute the sole remedy
available to the Holders or the Trustee for the failure of a Mortgage to be
recorded.

         Each Loan will be identified in a schedule appearing as an exhibit to
the related Agreement (the "Loan Schedule"). Such Loan Schedule will specify
with respect to each Loan: the original principal amount and unpaid principal
balance as of the Cut-off Date; the current interest rate; the current Scheduled
Payment of principal and interest; the maturity date, if any, of the related
Mortgage Note; if the Loan is an adjustable rate Loan, the Lifetime Rate Cap, if
any, and the current index.


                                       36
<PAGE>


         ASSIGNMENT OF PRIVATE SECURITIES. The Depositor will cause Private
Securities to be registered in the name of the Trustee (or its nominee or
correspondent). The Trustee (or its nominee or correspondent) will have
possession of any certificated Private Securities. Unless otherwise specified in
the related Prospectus Supplement, the Trustee will not be in possession of or
be assignee of record of any underlying assets for a Private Security. See "THE
TRUST FUNDS--Private Securities" herein. Each Private Security will be
identified in a schedule appearing as an exhibit to the related Agreement (the
"Certificate Schedule"), which will specify the original principal amount,
outstanding principal balance as of the Cut-off Date, annual pass-through rate
or interest rate and maturity date for each Private Security conveyed to the
Trust Fund. In the Agreement, the Depositor will represent and warrant to the
Trustee regarding the Private Securities: (i) that the information contained in
the Certificate Schedule is true and correct in all material respects; (ii)
that, immediately prior to the conveyance of the Private Securities, the
Depositor had good title thereto, and was the sole owner thereof (subject to any
Retained Interest); (iii) that there has been no other sale by it of such
Private Securities; and (iv) that there is no existing lien, charge, security
interest or other encumbrance (other than any Retained Interest) on such Private
Securities.

         REPURCHASE AND SUBSTITUTION OF NON-CONFORMING PRIMARY ASSETS. Unless
otherwise provided in the related Prospectus Supplement, if any document in the
file relating to the Primary Assets delivered by the Depositor to the Trustee
(or Custodian) is found by the Trustee within 90 days of the execution of the
related Agreement (or promptly after the Trustee's receipt of any document
permitted to be delivered after the Closing Date) to be defective in any
material respect and the Depositor or Seller does not cure such defect within 90
days, or within such other period specified in the related Prospectus
Supplement, the Depositor or Seller will, not later than 90 days or within such
other period specified in the related Prospectus Supplement, after the Trustee's
notice to the Depositor or the Seller, as the case may be, of the defect,
repurchase the related Primary Asset or any property acquired in respect thereof
from the Trustee at a price equal to, unless otherwise specified in the related
Prospectus Supplement, (a) the lesser of (i) the outstanding principal balance
of such Primary Asset and (ii) the Trust Fund's federal income tax basis in the
Primary Asset and (b) accrued and unpaid interest to the date of the next
scheduled payment on such Primary Asset at the rate set forth in the related
Agreement, provided, however, the purchase price shall not be limited in (i)
above to the Trust Fund's federal income tax basis if the repurchase at a price
equal to the outstanding principal balance of such Primary Asset will not result
in any prohibited transaction tax under Section 860F(a) of the Code.

         If provided in the related Prospectus Supplement, the Depositor or
Seller, as the case may be, may, rather than repurchase the Primary Asset as
described above, remove such Primary Asset from the Trust Fund (the "Deleted
Primary Asset") and substitute in its place one or more other Primary Assets
(each, a "Qualifying Substitute Primary Asset") provided, however, that (i) with
respect to a Trust Fund for which no REMIC election is made, such substitution
must be effected within 120 days of the date of initial issuance of the
Securities and (ii) with respect to a Trust Fund for which a REMIC election is
made, after a specified time period, the Trustee must have received a
satisfactory opinion of counsel that such substitution will not cause the Trust
Fund to lose its status as a REMIC or otherwise subject the Trust Fund to a
prohibited transaction tax.

         Unless otherwise specified in the related Prospectus Supplement, any
Qualifying Substitute Primary Asset will have, on the date of substitution, (i)
an outstanding principal balance, after deduction of all Scheduled Payments due
in the month of substitution, not in excess of the outstanding principal balance
of the Deleted Primary Asset (the amount of any shortfall to be deposited to the
Collection Account in the month of substitution for distribution to Holders),
(ii) an interest rate not less than (and not more than 2% greater than) the
interest rate of the Deleted Primary Asset, (iii) a remaining term-to-stated
maturity not greater than (and not more than two years less than) that of the
Deleted Primary Asset, and will comply with all of the representations and
warranties set forth in the applicable Agreement as of the date of substitution.

         Unless otherwise provided in the related Prospectus Supplement, the
above-described cure, repurchase or substitution obligations constitute the sole
remedies available to the Holders or the Trustee for a material defect in a
document for a Primary Asset.

         The Depositor or another entity will make representations and
warranties with respect to Primary Assets for a Series. If the Depositor or such
entity cannot cure a breach of any such representations and warranties in all
material respects within the time period specified in the related Prospectus
Supplement after notification by the Trustee of such breach, and if such breach
is of a nature that materially and adversely affects the value of such 



                                       37
<PAGE>


Primary Asset, the Depositor or such entity is obligated to repurchase the
affected Primary Asset or, if provided in the related Prospectus Supplement,
provide a Qualifying Substitute Primary Asset therefor, subject to the same
conditions and limitations on purchases and substitutions as described above.

         The Depositor's only source of funds to effect any cure, repurchase or
substitution will be through the enforcement of the corresponding obligations,
if any, of the responsible originator or Seller of such Primary Assets. See
"SPECIAL CONSIDERATIONS--Limited Assets."

         No Holder of Securities of a Series, solely by virtue of such Holder's
status as a Holder, will have any right under the applicable Agreement for such
Series to institute any proceeding with respect to such Agreement, unless such
Holder previously has given to the Trustee for such Series written notice of
default and unless the Holders of Securities evidencing not less than 51% of the
aggregate voting rights of the Securities for such Series have made written
request upon the Trustee to institute such proceeding in its own name as Trustee
thereunder and have offered to the Trustee reasonable indemnity, and the Trustee
for 60 days has neglected or refused to institute any such proceeding.

REPORTS TO HOLDERS

         The Trustee or other entity specified in the related Prospectus
Supplement will prepare and forward to each Holder on each Distribution Date, or
as soon thereafter as is practicable, a statement setting forth, to the extent
applicable to any Series, among other things:

                  (i) the amount of principal distributed to Holders of the
         related Securities and the outstanding principal balance of such
         Securities following such distribution;

                  (ii) the amount of interest distributed to Holders of the
         related Securities and the current interest on such Securities;

                  (iii) the amounts of (a) any overdue accrued interest included
         in such distribution, (b) any remaining overdue accrued interest with
         respect to such Securities or (c) any current shortfall in amounts to
         be distributed as accrued interest to Holders of such Securities;

                  (iv) the amounts of (a) any overdue payments of scheduled
         principal included in such distribution, (b) any remaining overdue
         principal amounts with respect to such Securities, (c) any current
         shortfall in receipt of scheduled principal payments on the related
         Primary Assets or (d) any realized losses or Liquidation Proceeds to be
         allocated as reductions in the outstanding principal balances of such
         Securities;

                  (v) the amount received under any related Credit Enhancement,
         and the remaining amount available under such Credit Enhancement;

                  (vi) the amount of any delinquencies with respect to payments
         on the related Primary Assets;

                  (vii) the book value of any REO Property acquired by the
         related Trust Fund; and

                  (viii) such other information as specified in the related
Agreement.

         In addition, within a reasonable period of time after the end of each
calendar year the Trustee, unless otherwise specified in the related Prospectus
Supplement, will furnish to each Holder of record at any time during such
calendar year (a) the aggregate of amounts reported pursuant to (i), (ii), and
(iv)(d) above for such calendar year and (b) such information specified in the
related Agreement to enable Holders to prepare their tax returns including,
without limitation, the amount of original issue discount accrued on the
Securities, if applicable. Information in the Distribution Date and annual
statements provided to the Holders will not have been examined and reported upon
by an independent public accountant. However, the Servicer will provide to the
Trustee a report by 




                                       38
<PAGE>


independent public accountants with respect to the Servicer's servicing of the
Loans. See "SERVICING OF LOANS--Evidence as to Compliance" herein.

         If so specified in the Prospectus Supplement for a Series of
Securities, such Series or one or more Classes of such Series will be issued in
book-entry form. In such event, owners of beneficial interests in such
Securities will not be considered Holders and will not receive such reports
directly from the Trustee. The Trustee will forward such reports only to the
entity or its nominee which is the registered holder of the global certificate
which evidences such book-entry securities. Beneficial owners will receive such
reports from the participants and indirect participants of the applicable
book-entry system in accordance with the practices and procedures of such
entities.

EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT

         POOLING AND SERVICING AGREEMENT; SERVICING AGREEMENT. Unless otherwise
specified in the related Prospectus Supplement, Events of Default under the
Pooling and Servicing Agreement for each Series of Certificates relating to
Loans include (i) any failure by the Servicer to deposit amounts in the
Collection Account and Distribution Account to enable the Trustee to distribute
to Holders of such Series any required payment, which failure continues
unremedied for the number of days specified in the related Prospectus Supplement
after the giving of written notice of such failure to the Servicer by the
Trustee for such Series, or to the Servicer and the Trustee by the Holders of
such Series evidencing not less than 25% of the aggregate voting rights of the
Securities for such Series, (ii) any failure by the Servicer duly to observe or
perform in any material respect any other of its covenants or agreements in the
applicable Agreement which continues unremedied for the number of days specified
in the related Prospectus Supplement after the giving of written notice of such
failure to the Servicer by the Trustee, or to the Servicer and the Trustee by
the Holders of such Series evidencing not less than 25% of the aggregate voting
rights of the Securities 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 Servicer indicating its
insolvency, reorganization or inability to pay its obligations.

         So long as an Event of Default remains unremedied under the applicable
Agreement for a Series of Securities relating to the servicing of Loans, unless
otherwise specified in the related Prospectus Supplement, the Trustee for such
Series or Holders of Securities of such Series evidencing not less than 51% of
the aggregate voting rights of the Securities for such Series may terminate all
of the rights and obligations of the Servicer as servicer under the applicable
Agreement (other than its right to recovery of other expenses and amounts
advanced pursuant to the terms of such Agreement which rights the Servicer will
retain under all circumstances), whereupon the Trustee will succeed to all the
responsibilities, duties and liabilities of the Servicer under such Agreement
and will be entitled to reasonable servicing compensation not to exceed the
applicable servicing fee, together with other servicing compensation in the form
of assumption fees, late payment charges or otherwise as provided in such
Agreement.

         In the event that the Trustee is unwilling or unable so to act, it may
select, or petition a court of competent jurisdiction to appoint, a finance
institution, bank or loan servicing institution with a net worth specified in
the related Prospectus Supplement to act as successor Servicer under the
provisions of the applicable Agreement. The successor Servicer would be entitled
to reasonable servicing compensation in an amount not to exceed the Servicing
Fee as set forth in the related Prospectus Supplement, together with the other
servicing compensation in the form of assumption fees, late payment charges or
otherwise, as provided in such Agreement.

         During the continuance of any Event of Default of a Servicer under an
Agreement for a Series of Securities, the Trustee for such Series will have the
right to take action to enforce its rights and remedies and to protect and
enforce the rights and remedies of the Holders of such Series, and, unless
otherwise specified in the related Prospectus Supplement, Holders of Securities
evidencing not less than 51% of the aggregate voting rights of the Securities
for such Series may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred upon that Trustee. However, the Trustee will not be under any
obligation to pursue any such remedy or to exercise any of such trusts or powers
unless such Holders have offered the Trustee reasonable security or indemnity
against the cost, expenses and liabilities which may be incurred by the Trustee
therein or thereby. The Trustee may decline to follow any such direction if the
Trustee determines that the action or proceeding so directed may not lawfully be
taken or would involve it in personal liability or be unjustly prejudicial to
the nonassenting Holders.



                                       39
<PAGE>


         INDENTURE. Unless otherwise specified in the related Prospectus
Supplement, Events of Default under the Indenture for each Series of Notes
include: (i) a default for thirty (30) days or more in the payment of any
principal of or interest on any Note of such Series; (ii) failure to perform any
other covenant of the Depositor or the Trust Fund in the Indenture which
continues for a period of sixty (60) days after notice thereof is given in
accordance with the procedures described in the related Prospectus Supplement;
(iii) any representation or warranty made by the Depositor or the Trust Fund in
the Indenture or in any certificate or other writing delivered pursuant thereto
or in connection therewith with respect to or affecting such Series having been
incorrect in a material respect as of the time made, and such breach is not
cured within sixty (60) days after notice thereof is given in accordance with
the procedures described in the related Prospectus Supplement; (iv) certain
events of bankruptcy, insolvency, receivership or liquidation of the Depositor
or the Trust Fund; or (v) any other Event of Default provided with respect to
Notes of that Series.

         If an Event of Default with respect to the Notes of any Series at the
time outstanding occurs and is continuing, either the Trustee or the Holders of
a majority of the then aggregate outstanding amount of the Notes of such Series
may declare the principal amount (or, if the Notes of that Series are Zero
Coupon Securities, such portion of the principal amount as may be specified in
the terms of that Series, as provided in the related Prospectus Supplement) of
all the Notes of such Series to be due and payable immediately. Such declaration
may, under certain circumstances, be rescinded and annulled by the Holders of a
majority in aggregate outstanding amount of the Notes of such Series.

         If, following an Event of Default with respect to any Series of Notes,
the Notes of such Series have been declared to be due and payable, the Trustee
may, in its discretion, notwithstanding such acceleration, elect to maintain
possession of the collateral securing the Notes of such Series and to continue
to apply distributions on such collateral as if there had been no declaration of
acceleration if such collateral continues to provide sufficient funds for the
payment of principal of and interest on the Notes of such Series as they would
have become due if there had not been such a declaration. In addition, the
Trustee may not sell or otherwise liquidate the collateral securing the Notes of
a Series following an Event of Default other than a default in the payment of
any principal or interest on any Note of such Series for thirty (30) days or
more, unless (a) the Holders of 100% of the then aggregate outstanding amount of
the Notes of such Series consent to such sale, (b) the proceeds of such sale or
liquidation are sufficient to pay in full the principal of and accrued interest
due and unpaid on the outstanding Notes of such Series at the date of such sale
or (c) the Trustee determines that such collateral would not be sufficient on an
ongoing basis to make all payments on such Notes as such payments would have
become due if such Notes had not been declared due and payable, and the Trustee
obtains the consent of the Holders of 66 2/3% of the then aggregate outstanding
amount of the Notes of such Series.

         In the event that the Trustee liquidates the collateral in connection
with an Event of Default involving a default for thirty (30) days or more in the
payment of principal of or interest on the Notes of a Series, the Indenture
provides that the Trustee will have a prior lien on the proceeds of any such
liquidation for unpaid fees and expenses. As a result, upon the occurrence of
such an Event of Default, the amount available for distribution to the
Noteholders may be less than would otherwise be the case. However, the Trustee
may not institute a proceeding for the enforcement of its lien except in
connection with a proceeding for the enforcement of the lien of the Indenture
for the benefit of the Noteholders after the occurrence of such an Event of
Default.

         Unless otherwise specified in the related Prospectus Supplement, in the
event the principal of the Notes of a Series is declared due and payable, as
described above, the Holders of any such Notes issued at a discount from par may
be entitled to receive no more than an amount equal to the unpaid principal
amount thereof less the amount of such discount which is unamortized.

         Subject to the provisions of the Indenture relating to the duties of
the Trustee, in case an Event of Default shall occur and be continuing with
respect to a Series of Notes, the Trustee will be under no obligation to
exercise any of the rights or powers under the Indenture at the request or
direction of any of the Holders of Notes of such Series, unless such Holders
offered to the Trustee security or indemnity satisfactory to it against the
costs, expenses and liabilities which might be incurred by it in complying with
such request or direction. Subject to such provisions for indemnification and
certain limitations contained in the Indenture, the Holders of a majority of the
then aggregate outstanding amount of the Notes of such Series shall have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the 




                                       40
<PAGE>


Trustee with respect to the Notes of such Series, and the Holders of a majority
of the then aggregate outstanding amount of the Notes of such Series may, in
certain cases, waive any default with respect thereto, except a default in the
payment of principal or interest or a default in respect of a covenant or
provision of the Indenture that cannot be modified without the waiver or consent
of all the Holders of the outstanding Notes of such Series affected thereby.

THE TRUSTEE

         The identity of the commercial bank, savings and loan association or
trust company named as the Trustee for each Series of Securities will be set
forth in the related Prospectus Supplement. The entity serving as Trustee may
have normal banking relationships with the Depositor or the Servicer. In
addition, for the purpose of meeting the legal requirements of certain local
jurisdictions, the Trustee will have the power to appoint co-trustees or
separate trustees of all or any part of the Trust Fund relating to a Series of
Securities. In the event of such appointment, all rights, powers, duties and
obligations conferred or imposed upon the Trustee by the Agreement relating to
such Series will be conferred or imposed upon the Trustee and each such separate
trustee or co-trustee jointly, or, in any jurisdiction in which the Trustee
shall be incompetent or unqualified to perform certain acts, singly upon such
separate trustee or co-trustee who will exercise and perform such rights,
powers, duties and obligations solely at the direction of the Trustee. The
Trustee may also appoint agents to perform any of the responsibilities of the
Trustee, which agents will have any or all of the rights, powers, duties and
obligations of the Trustee conferred on them by such appointment; provided that
the Trustee will continue to be responsible for its duties and obligations under
the Agreement.

DUTIES OF THE TRUSTEE

         The Trustee will not make any representations as to the validity or
sufficiency of the Agreement, the Securities or of any Primary Asset or related
documents. If no Event of Default (as defined in the related Agreement) has
occurred, the Trustee is required to perform only those duties specifically
required of it under the Agreement. Upon receipt of the various certificates,
statements, reports or other instruments required to be furnished to it, the
Trustee is required to examine them to determine whether they are in the form
required by the related Agreement. However, the Trustee will not be responsible
for the accuracy or content of any such documents furnished to it by the Holders
or the Servicer under the Agreement.

         The Trustee may be held liable for its own negligent action or failure
to act, or for its own misconduct; provided, however, that the Trustee will not
be personally liable with respect to any action taken, suffered or omitted to be
taken by it in good faith in accordance with the direction of the Holders in an
Event of Default. The Trustee is not required to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
under the Agreement, or in the exercise of any of its rights or powers, if it
has reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.

RESIGNATION OF TRUSTEE

         The Trustee may, upon written notice to the Depositor, resign at any
time, in which event the Depositor will be obligated to use its best efforts to
appoint a successor Trustee. If no successor Trustee has been appointed and has
accepted the appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for appointment of a successor Trustee. The Trustee may also be
removed at any time (i) if the Trustee ceases to be eligible to continue as such
under the Agreement, (ii) if the Trustee becomes insolvent or (iii) by the
Holders of Securities evidencing over 50% of the aggregate voting rights of the
Securities in the Trust Fund upon written notice to the Trustee and to the
Depositor. Any resignation or removal of the Trustee and appointment of a
successor Trustee will not become effective until acceptance of the appointment
by the successor Trustee.

AMENDMENT OF AGREEMENT

         Unless otherwise specified in the Prospectus Supplement, the Agreement
for each Series of Securities may be amended by the Depositor, the Servicer
(with respect to a Series relating to Loans), and the Trustee with respect 



                                       41
<PAGE>


to such Series, without notice to or consent of the Holders (i) to cure any
ambiguity, (ii) to correct any defective provisions or to correct or supplement
any provision therein, (iii) to add to the duties of the Depositor, the Trust
Fund or Servicer, (iv) to add any other provisions with respect to matters or
questions arising under such Agreement or related Credit Enhancement, (v) to add
or amend any provisions of such Agreement as required by a Rating Agency in
order to maintain or improve the rating of the Securities (it being understood
that none of the Depositor, the Seller, the Servicer or Trustee is obligated to
maintain or improve such rating), or (vi) to comply with any requirements
imposed by the Code; provided that any such amendment except pursuant to clause
(vi) above will not adversely affect in any material respect the interests of
any Holders of such Series, as evidenced by an opinion of counsel. Any such
amendment except pursuant to clause (vi) of the preceding sentence shall be
deemed not to adversely affect in any material respect the interests of any
Holder if the Trustee receives written confirmation from each Rating Agency
rating such Securities that such amendment will not cause such Rating Agency to
reduce the then current rating thereof. Unless otherwise specified in the
Prospectus Supplement, the Agreement for each Series may also be amended by the
Trustee, the Servicer, if applicable, and the Depositor with respect to such
Series with the consent of the Holders possessing not less than 66 2/3% of the
aggregate outstanding principal amount of the Securities of such Series or, if
only certain Classes of such Series are affected by such amendment, 66 2/3% of
the aggregate outstanding principal amount of the Securities of each Class of
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 Agreement or
modifying in any manner the rights of Holders of such Series; provided, however,
that no such amendment may (a) reduce the amount or delay the timing of payments
on any Security without the consent of the Holder of such Security; or (b)
reduce the aforesaid percentage of the aggregate outstanding principal amount of
Securities of each Class, the Holders of which are required to consent to any
such amendment without the consent of the Holders of 100% of the aggregate
outstanding principal amount of each Class of Securities affected thereby.

VOTING RIGHTS

         The related Prospectus Supplement will set forth the method of
determining allocation of voting rights with respect to a Series.

LIST OF HOLDERS

         Upon written request of three or more Holders of record of a Series for
purposes of communicating with other Holders with respect to their rights under
the Agreement, which request is accompanied by a copy of the communication which
such Holders propose to transmit, the Trustee will afford such Holders access
during business hours to the most recent list of Holders of that Series held by
the Trustee.

         No Agreement will provide for the holding of any annual or other
meeting of Holders.

BOOK-ENTRY SECURITIES

         If specified in the Prospectus Supplement for a Series of Securities,
such Series or one or more Classes of such Series may be issued in book-entry
form. In such event, beneficial owners of such Securities will not be considered
"Holders" under the Agreements and may exercise the rights of Holders only
indirectly through the participants in the applicable book-entry system.

REMIC ADMINISTRATOR

         For any Series with respect to which a REMIC election is made,
preparation of certain reports and certain other administrative duties with
respect to the Trust Fund may be performed by a REMIC administrator, who may be
an affiliate of the Depositor.

TERMINATION

         POOLING AND SERVICING AGREEMENT; TRUST AGREEMENT. The obligations
created by the Pooling and Servicing Agreement or Trust Agreement for a Series
will terminate upon the distribution to Holders of all amounts distributable to
them pursuant to such Agreement after the earlier of (i) the later of (a) the
final payment or other 




                                       42
<PAGE>


liquidation of the last Primary Asset remaining in the Trust Fund for such
Series and (b) the disposition of all property acquired upon foreclosure or deed
in lieu of foreclosure or repossession in respect of any Primary Asset or (ii)
the repurchase, as described below, by the Servicer or other entity specified in
the related Prospectus Supplement from the Trustee for such Series of all
Primary Assets and other property at that time subject to such Agreement. The
Agreement for each Series permits, but does not require, the Servicer or other
entity specified in the related Prospectus Supplement to purchase from the Trust
Fund for such Series all remaining Primary Assets at a price equal to, unless
otherwise specified in the related Prospectus Supplement, 100% of the aggregate
Principal Balance of such Primary Assets plus, with respect to any property
acquired in respect of a Primary Asset, if any, the outstanding Principal
Balance of the related Primary Asset at the time of foreclosure, less, in either
case, related unreimbursed Advances (in the case of the Primary Assets, only to
the extent not already reflected in the computation of the aggregate Principal
Balance of such Primary Assets) and unreimbursed expenses (that are reimbursable
pursuant to the terms of the Pooling and Servicing Agreement) plus, in either
case, accrued interest thereon at the weighted average rate on the related
Primary Assets through the last day of the Due Period in which such repurchase
occurs; provided, however, that if an election is made for treatment as a REMIC
under the Code, the repurchase price may equal the greater of (a) 100% of the
aggregate Principal Balance of such Primary Assets, plus accrued interest
thereon at the applicable net rates on the Primary Assets through the last day
of the month of such repurchase and (b) the aggregate fair market value of such
Primary Assets plus the fair market value of any property acquired in respect of
a Primary Asset and remaining in the Trust Fund. The exercise of such right will
effect early retirement of the Securities of such Series, but such entity's
right to so purchase is subject to the aggregate Principal Balance of the
Primary Assets at the time of repurchase being less than a fixed percentage, to
be set forth in the related Prospectus Supplement, of the aggregate Principal
Balance of the Primary Assets as of the Cut-off Date. In no event, however, will
the trust created by the Agreement continue beyond the expiration of 21 years
from the death of the last survivor of certain persons identified therein. For
each Series, the Servicer or the Trustee, as applicable, will give written
notice of termination of the Agreement to each Holder, and the final
distribution will be made only upon surrender and cancellation of the Securities
at an office or agency specified in the notice of termination. If so provided in
the related Prospectus Supplement for a Series, the Depositor or another entity
may effect an optional termination of the Trust Fund under the circumstances
described in such Prospectus Supplement. See "DESCRIPTION OF THE
SECURITIES--Optional Redemption, Purchase or Termination" herein.

         INDENTURE. The Indenture will be discharged with respect to a Series of
Notes (except with respect to certain continuing rights specified in the
Indenture) upon the delivery to the Trustee for cancellation of all the Notes of
such Series or, with certain limitations, upon deposit with the Trustee of funds
sufficient for the payment in full of all of the Notes of such Series.

         In addition to such discharge with certain limitations, the Indenture
will provide that, if so specified with respect to the Notes of any Series, the
related Trust Fund will be discharged from any and all obligations in respect of
the Notes of such Series (except for certain obligations relating to temporary
Notes and exchange of Notes, to register the transfer of or exchange Notes of
such Series, to replace stolen, lost or mutilated Notes of such Series, to
maintain paying agencies and to hold monies for payment in trust) upon the
deposit with the Trustee, in trust, of money and/or direct obligations of or
obligations guaranteed by the United States of America which, through the
payment of interest and principal in respect thereof in accordance with their
terms, will provide money in an amount sufficient to pay the principal of and
each installment of interest on the Notes of such Series on the Final Scheduled
Distribution Date for such Notes and any installment of interest on such Notes
in accordance with the terms of the Indenture and the Notes of such Series. In
the event of any such defeasance and discharge of Notes of such Series, holders
of Notes of such Series would be able to look only to such money and/or direct
obligations for payment of principal and interest, if any, on their Notes until
maturity.

                         CERTAIN LEGAL ASPECTS OF LOANS

         The following discussion contains summaries of certain legal aspects of
mortgage loans, home improvement installment sales contracts and home
improvement installment loan agreements which are general in nature. Because
certain of such legal aspects are governed by applicable state law (which laws
may differ substantially), the summaries do not purport to be complete nor
reflect the laws of any particular state, nor encompass the laws of all states
in which the properties securing the Loans are situated.



                                       43
<PAGE>


MORTGAGES

         The Loans for a Series will, and certain Home Improvement Contracts for
a Series may, be secured by either mortgages or deeds of trust or deeds to
secure debt (such Mortgage Loans and Home Improvement Contracts are hereinafter
referred to in this section as "mortgage loans"), depending upon the prevailing
practice in the state in which the property subject to a mortgage loan is
located. The filing of a mortgage, deed of trust or deed to secure debt creates
a lien or title interest upon the real property covered by such instrument and
represents the security for the repayment of an obligation that is customarily
evidenced by a promissory note. It is not prior to the lien for real estate
taxes and assessments or other charges imposed under governmental police powers
and may also be subject to other liens pursuant to the laws of the jurisdiction
in which the Mortgaged Property is located. Priority with respect to such
instruments depends on their terms, the knowledge of the parties to the mortgage
and generally on the order of recording with the applicable state, county or
municipal office. There are two parties to a mortgage, the mortgagor, who is the
borrower/property owner or the land trustee (as described below), and the
mortgagee, who is the lender. Under the mortgage instrument, the mortgagor
delivers to the mortgagee a note or bond and the mortgage. In the case of a land
trust, there are three parties because title to the property is held by a land
trustee under a land trust agreement of which the borrower/property owner is the
beneficiary; at origination of a mortgage loan, the borrower executes a separate
undertaking to make payments on the mortgage note. A deed of trust transaction
normally has three parties: the trustor, who is the borrower/property owner; the
beneficiary, who is the lender; and the trustee, a third-party grantee. Under a
deed of trust, the trustor grants the property, irrevocably until the debt is
paid, in trust, generally with a power of sale, to the trustee to secure payment
of the obligation. The mortgagee's authority under a mortgage and the trustee's
authority under a deed of trust are governed by the law of the state in which
the real property is located, the express provisions of the mortgage or deed of
trust, and, in some cases, in deed of trust transactions, the directions of the
beneficiary.

FORECLOSURE ON MORTGAGES

         Foreclosure of a mortgage is generally accomplished by judicial action.
Generally, the action is initiated by the service of legal pleadings upon all
parties having an interest of record in the real property. Delays in completion
of the foreclosure occasionally may result from difficulties in locating
necessary parties defendant. When the mortgagee's right to foreclosure is
contested, the legal proceedings necessary to resolve the issue can be
time-consuming and expensive. After the completion of a judicial foreclosure
proceeding, the court may issue a judgment of foreclosure and appoint a receiver
or other officer to conduct the sale of the property. In some states, mortgages
may also be foreclosed by advertisement, pursuant to a power of sale provided in
the mortgage. Foreclosure of a mortgage by advertisement is essentially similar
to foreclosure of a deed of trust by nonjudicial power of sale.

         Foreclosure of a deed of trust is generally accomplished by a
nonjudicial trustee's sale under a specific provision in the deed of trust which
authorizes the trustee to sell the property 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, the trustee must record a notice
of default and send a copy to the borrower-trustor and to any person who has
recorded a request for a copy of a notice of default and notice of sale. In
addition, the trustee in some states must provide notice to any other individual
having an interest 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, published for a
specified 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 of record in the property. The trustor, borrower,
or any 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. Generally,
state law controls the amount of foreclosure expenses and costs, including
attorney's fees, which may be recovered by a lender. 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 specified 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, recorded and sent to all parties having an interest in the real
property.

         An action to foreclose a mortgage is an action to recover the mortgage
debt by enforcing the mortgagee's rights under the mortgage. It is regulated by
statutes and rules and subject throughout to the court's equitable 



                                       44
<PAGE>


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

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

         In the case of foreclosure under either a mortgage or a deed of trust,
the sale by the referee or other designated officer or by the trustee is a
public sale. However, because of the difficulty potential third party purchasers
at the sale have in determining the exact status of title and because the
physical condition of the property may have deteriorated during the foreclosure
proceedings, it is uncommon for a third party to purchase the property at a
foreclosure sale. Rather, it is common for the lender to purchase the property
from the trustee or referee for an amount which may be equal to the unpaid
principal amount of the mortgage note secured by the mortgage or deed of trust
plus accrued and unpaid interest and the expenses of foreclosure, in which event
the mortgagor's debt will be extinguished or the lender may purchase for a
lesser amount in order to preserve its right against a borrower to seek a
deficiency judgment in states where such a judgment is available. Thereafter,
subject to the right of the borrower in some states to remain in possession
during the redemption period, the lender will assume the burdens of ownership,
including obtaining hazard insurance, paying taxes 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. Any loss may be reduced by the
receipt of any mortgage guaranty insurance proceeds.

RIGHTS OF REDEMPTION

         In some states, after sale pursuant to a deed of trust or foreclosure
of a mortgage, the trustor or mortgagor and foreclosed junior lienors are given
a statutory period in which to redeem the property from the foreclosure sale.
The right of redemption should be distinguished from the equity of redemption,
which is a non-statutory right that must be exercised prior to the foreclosure
sale. In some states, redemption may occur only upon payment of the entire
principal balance of the loan, accrued interest and expenses of foreclosure. In
other states, redemption may be authorized if the former borrower pays only a
portion of the sums due. The effect of a statutory right of redemption is to
diminish the ability of the lender to sell the foreclosed property. The exercise
of a right of redemption would defeat the title of any purchaser at a
foreclosure sale, or of any purchaser from the lender subsequent to foreclosure
or sale under a deed of trust. Consequently the practical effect of a right of
redemption is to force the lender to retain the property and pay the expenses of
ownership until the redemption period has run. In some states, there is no right
to redeem property after a trustee's sale under a deed of trust.

JUNIOR MORTGAGES; RIGHTS OF SENIOR MORTGAGES

         The mortgage loans comprising or underlying the Primary Assets included
in the Trust Fund for a Series will be secured by mortgages or deeds of trust
which may be second or more junior mortgages to other mortgages held by other
lenders or institutional investors. The rights of the Trust Fund (and therefore
the Holders), as mortgagee under a junior mortgage, are subordinate to those of
the mortgagee under the senior mortgage, including the prior rights of the
senior mortgagee to receive hazard insurance and condemnation proceeds and to
cause the property securing the mortgage loan to be sold upon default of the
mortgagor, thereby extinguishing the junior 




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mortgagee's lien unless the junior mortgagee asserts its subordinate interest in
the property in foreclosure litigation and, possibly, satisfies the defaulted
senior mortgage. A junior mortgagee may satisfy a defaulted senior loan in full
and, in some states, may cure such default and bring the senior loan current, in
either event adding the amounts expended to the balance due on the junior loan.
In most states, absent a provision in the mortgage or deed of trust, no notice
of default is required to be given to a junior mortgagee.

         The standard form of the mortgage used by most institutional lenders
confers on the mortgagee the right both to receive all proceeds collected under
any hazard insurance policy and all awards made in connection with condemnation
proceedings, and to apply such proceeds and awards to any indebtedness secured
by the mortgage, in such order as the mortgagee may determine. Thus, in the
event improvements on the property are damaged or destroyed by fire or other
casualty, or in the event the property is taken by condemnation, the mortgagee
or beneficiary under underlying senior mortgages will have the prior right to
collect any insurance proceeds payable under a hazard insurance policy and any
award of damages in connection with the condemnation and to apply the same to
the indebtedness secured by the senior mortgages. Proceeds in excess of the
amount of senior mortgage indebtedness, in most cases, may be applied to the
indebtedness of a junior mortgage.

         Another provision sometimes found in the form of the mortgage or deed
of trust used by institutional lenders obligates the mortgagor to pay before
delinquency all taxes and assessments on the property and, when due, all
encumbrances, charges and liens on the property which appear prior to the
mortgage or deed of trust, to provide and maintain fire insurance on the
property, to maintain and repair the property and not to commit or permit any
waste thereof, and to appear in and defend any action or proceeding purporting
to affect the property or the rights of the mortgagee under the mortgage. Upon a
failure of the mortgagor to perform any of these obligations, the mortgagee is
given the right under certain mortgages to perform the obligation itself, at its
election, with the mortgagor agreeing to reimburse the mortgagee for any sums
expended by the mortgagee on behalf of the mortgagor. All sums so expended by
the mortgagee become part of the indebtedness secured by the mortgage.

ANTI-DEFICIENCY LEGISLATION AND OTHER LIMITATIONS ON LENDERS

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

         In addition to laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including the federal bankruptcy laws, the
Federal Soldiers' and Sailors' Relief Act and state laws affording relief to
debtors, may interfere with or affect the ability of the secured lender to
realize upon collateral and/or enforce a deficiency judgment. For example, with
respect to federal bankruptcy law, the filing of a petition acts as a stay
against the enforcement of remedies for collection of a debt. Moreover, a court
with federal bankruptcy jurisdiction may permit a debtor through a Chapter 13
Bankruptcy Code rehabilitative plan to cure a monetary default with respect to a
loan on a debtor's residence by paying arrearages within a reasonable time
period and reinstating the original loan payment schedule even though the lender
accelerated the loan and the lender has taken all steps to realize upon his
security (provided no sale of the property has yet occurred) prior to the filing
of the debtor's Chapter 13 petition. Some courts with federal bankruptcy
jurisdiction have approved plans, based on the particular 



                                       46
<PAGE>


facts of the reorganization case, that effected the curing of a loan default by
permitting the obligor to pay arrearages over a number of years.

         Courts with federal bankruptcy jurisdiction have also indicated that
the terms of a mortgage loan may be modified if the borrower has filed a
petition under Chapter 13. These courts have suggested that such modifications
may include reducing the amount of each monthly payment, changing the rate of
interest, altering the repayment schedule and reducing the lender's security
interest to the value of the residence, thus leaving the lender a general
unsecured creditor for the difference between the value of the residence and the
outstanding balance of the loan. Federal bankruptcy law and limited case law
indicate that the foregoing modifications could not be applied to the terms of a
loan secured by property that is the principal residence of the debtor. In all
cases, the secured creditor is entitled to the value of its security plus
post-petition interest, attorney's fees and costs to the extent the value of the
security exceeds the debt.

         In a Chapter 11 case under the Bankruptcy Code, the lender is precluded
from foreclosing without authorization from the bankruptcy court. The lender's
lien may be transferred to other collateral and/or be limited in amount to the
value of the lender's interest in the collateral as of the date of the
bankruptcy. The loan term may be extended, the interest rate may be adjusted to
market rates and the priority of the loan may be subordinated to bankruptcy
court-approved financing. The bankruptcy court can, in effect, invalidate
due-on-sale clauses through confirmed Chapter 11 plans of reorganization.

         The Bankruptcy Code provides priority to certain tax liens over the
lender's security. This may delay or interfere with the enforcement of rights in
respect of a defaulted Loan. In addition, substantive requirements are imposed
upon lenders in connection with the origination and the servicing of mortgage
loans by numerous federal and some state consumer protection laws. The laws
include the federal Truth-in-Lending Act, Real Estate Settlement Procedures Act,
Equal Credit Opportunity Act, Fair Credit Billing Act, Fair Credit Reporting Act
and related statutes and regulations. These federal laws impose specific
statutory liabilities upon lenders who originate loans and who fail to comply
with the provisions of the law. In some cases, this liability may affect
assignees of the loans.

DUE-ON-SALE CLAUSES IN MORTGAGE LOANS

         Due-on-sale clauses permit the lender to accelerate the maturity of the
loan if the borrower sells or transfers, whether voluntarily or involuntarily,
all or part of the real property securing the loan without the lender's prior
written consent. The enforceability of these clauses has been the subject of
legislation or litigation in many states, and in some cases, typically involving
single family residential mortgage transactions, their enforceability has been
limited or denied. In any event, the Garn-St. Germain Depository Institutions
Act of 1982 (the "Garn-St. Germain Act") preempts state constitutional,
statutory and case law that prohibits the enforcement of due-on-sale clauses and
permits lenders to enforce these clauses in accordance with their terms, subject
to certain exceptions. As a result, due-on-sale clauses have become generally
enforceable except in those states whose legislatures exercised their authority
to regulate the enforceability of such clauses with respect to mortgage loans
that were (i) originated or assumed during the "window period" under the
Garn-St. Germain Act which ended in all cases not later than October 15, 1982,
and (ii) originated by lenders other than national banks, federal savings
institutions and federal credit unions. FHLMC has taken the position in its
published mortgage servicing standards that, out of a total of eleven "window
period states," five states (Arizona, Michigan, Minnesota, New Mexico and Utah)
have enacted statutes extending, on various terms and for varying periods, the
prohibition on enforcement of due-on-sale clauses with respect to certain
categories of window period loans. Also, the Garn-St. Germain Act does
"encourage" lenders to permit assumption of loans at the original rate of
interest or at some other rate less than the average of the original rate and
the market rate.

         In addition, under federal bankruptcy law, due-on-sale clauses may not
be enforceable in bankruptcy proceedings and may, under certain circumstances,
be eliminated in any modified mortgage resulting from such bankruptcy
proceeding.



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<PAGE>


ENFORCEABILITY OF PREPAYMENT AND LATE PAYMENT FEES

         Forms of notes, mortgages and deeds of trust used by lenders may
contain provisions obligating the borrower to pay a late charge if payments are
not timely made, and in some circumstances may provide for prepayment fees or
penalties if the obligation is paid prior to maturity. In certain states, there
are or may be specific limitations, upon the late charges which a lender may
collect from a borrower for delinquent payments. Certain states also limit the
amounts that a lender may collect from a borrower as an additional charge if the
loan is prepaid. Late charges and prepayment fees are typically retained by
servicers as additional servicing compensation.

EQUITABLE LIMITATIONS ON REMEDIES

         In connection with lenders' attempts to realize upon their security,
courts have invoked general equitable principles. The equitable principles are
generally designed to relieve the borrower from the legal effect of his defaults
under the loan documents. Examples of judicial remedies that have been fashioned
include judicial requirements that the lender undertake affirmative and
expensive actions to determine the causes of the borrower's default and the
likelihood that the borrower will be able to reinstate the loan. In some cases,
courts have substituted their judgment for the lender's judgment and have
required that lenders reinstate loans or recast payment schedules in order to
accommodate borrowers who are suffering from temporary financial disability. In
other cases, courts have limited the right of a lender to realize upon his
security if the default under the security agreement is not monetary, such as
the borrower's failure to adequately maintain the property or the borrower's
execution of secondary financing affecting the property. Finally, some courts
have been faced with the issue of whether or not federal or state constitutional
provisions reflecting due process concerns for adequate notice require that
borrowers under security agreements receive notices in addition to the
statutorily-prescribed minimums. For the most part, these cases have upheld the
notice provisions as being reasonable or have found that, in cases involving the
sale by a trustee under a deed of trust or by a mortgagee under a mortgage
having a power of sale, there is insufficient state action to afford
constitutional protections to the borrower.

         Most conventional single-family mortgage loans may be prepaid in full
or in part without penalty. The regulations of the Office of Thrift Supervision
(the "OTS") prohibit the imposition of a prepayment penalty or equivalent fee
for or in connection with the acceleration of a loan by exercise of a
due-on-sale clause. A mortgagee to whom a prepayment in full has been tendered
may be compelled to give either a release of the mortgage or an instrument
assigning the existing mortgage. The absence of a restraint on prepayment,
particularly with respect to mortgage loans having higher mortgage rates, may
increase the likelihood of refinancing or other early retirements of such
mortgage loans.

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. Similar federal
statutes were in effect with respect to mortgage loans made during the first
three months of 1980. The OTS, as successor to the Federal Home Loan Bank Board,
is authorized to issue rules and regulations and to publish interpretations
governing implementation of Tide V. Tide V authorizes any state to reimpose
interest rate limits by adopting, before April 1, 1983, a state law, or by
certifying that the voters of such state have voted in favor of any provision,
constitutional or otherwise, which expressly rejects an application of the
federal law. Fifteen states adopted such a law prior to the April 1, 1983
deadline. 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.

THE HOME IMPROVEMENT CONTRACTS

         GENERAL. The Home Improvement Contracts, other than those Home
Improvement Contracts that are unsecured or secured by mortgages on real estate
(such Home Improvement Contracts are hereinafter referred to in this section as
"contracts") generally are "chattel paper" or constitute "purchase money
security interests" each as defined in the Uniform Commercial Code (the "UCC").
Pursuant to the UCC, the sale of chattel paper is treated in a manner similar to
perfection of a security interest in chattel paper. Under the related Agreement,
the Depositor will transfer physical possession of the contracts to the Trustee
or a designated custodian or may retain possession of the 



                                       48
<PAGE>



contracts as custodian for the Trustee. In addition, the Depositor will make an
appropriate filing of a UCC-1 financing statement in the appropriate states to
give notice of the Trustee's ownership of the contracts. Unless otherwise
specified in the related Prospectus Supplement, the contracts will not be
stamped or otherwise marked to reflect their assignment from the Depositor to
the Trustee. Therefore, if through negligence, fraud or otherwise, a subsequent
purchaser were able to take physical possession of the contracts without notice
of such assignment, the Trustee's interest in the contracts could be defeated.

         SECURITY INTERESTS IN HOME IMPROVEMENTS. The contracts that are secured
by the Home Improvements financed thereby grant to the originator of such
contracts a purchase money security interest in such Home Improvements to secure
all or part of the purchase price of such Home Improvements and related
services. A financing statement generally is not required to be filed to perfect
a purchase money security interest in consumer goods. Such purchase money
security interests are assignable. In general, a purchase money security
interest grants to the holder a security interest that has priority over a
conflicting security interest in the same collateral and the proceeds of such
collateral. However, to the extent that the collateral subject to a purchase
money security interest becomes a fixture, in order for the related purchase
money security interest to take priority over a conflicting interest in the
fixture, the holder's interest in such Home Improvement must generally be
perfected by a timely fixture filing. In general, under the UCC, a security
interest does not exist under the UCC in ordinary building material incorporated
into an improvement on land. Home Improvement Contracts that finance lumber,
bricks, other types of ordinary building material or other goods that are deemed
to lose such characterization, upon incorporation of such materials into the
related property, will not be secured by a purchase money security interest in
the Home Improvement being financed.

         ENFORCEMENT OF SECURITY INTEREST IN HOME IMPROVEMENTS. So long as the
Home Improvement has not become subject to the real estate law, a creditor can
repossess a Home Improvement securing a contract by voluntary surrender, by
"self-help" repossession that is "peaceful" (i.e., without breach of the peace)
or, in the absence of voluntary surrender and the ability to repossess without
breach of the peace, by judicial process. The holder of a contract must give the
debtor a number of days' notice, which varies from 10 to 30 days depending on
the state, prior to commencement of any repossession. The UCC and consumer
protection laws in most states place restrictions on repossession sales,
including requiring prior notice to the debtor and commercial reasonableness in
effecting such a sale. The law in most states also requires that the debtor be
given notice of any sale prior to resale of the unit that the debtor may redeem
it at or before such resale.

         Under the laws applicable in most states, a creditor is entitled to
obtain a deficiency judgement from a debtor for any deficiency on repossession
and resale of the property securing the debtor's loan. However, some states
impose prohibitions or limitations on deficiency judgements, and in many cases
the defaulting borrower would have no assets with which to pay a judgement.

         Certain other statutory provisions, including federal and state
bankruptcy and insolvency laws and general equitable principles, may limit or
delay the ability of a lender to repossess and resell collateral or enforce a
deficiency judgement.

         CONSUMER PROTECTION LAWS. The so-called "Holder-in-Due-Course" rule of
the Federal Trade Commission is intended to defeat the ability of the transferor
of a consumer credit contract which is the seller of goods which gave rise to
the transaction (and certain related lenders and assignees) to transfer such
contract free of notice of claims by the debtor thereunder. The effect of this
rule is to subject the assignee of such a contract to all claims and defenses
which the debtor could assert against the seller of goods. Liability under this
rule is limited to amounts paid under a contract; however, the obligor also may
be able to assert the rule to set off remaining amounts due as a defense against
a claim brought by the Trustee against such obligor. Numerous other federal and
state consumer protection laws impose requirements applicable to the origination
and lending pursuant to the contracts, including the Truth in Lending Act, the
Federal Trade Commission Act, the Fair Credit Billing Act, the Fair Credit
Reporting Act, the Equal Credit Opportunity Act, the Fair Debt Collection
Practices Act and the Uniform Consumer Credit Code. In the case of some of these
laws, the failure to comply with their provisions may affect the enforceability
of the related contract.

         APPLICABILITY OF USURY LAWS. Title V provides that, subject to the
following conditions, state usury limitations shall not apply to any contract
which is secured by a first lien on certain kinds of consumer goods. The


                                       49
<PAGE>



contracts would be covered if they satisfy certain conditions, among other
things, governing the terms of any prepayments, late charges and deferral fees
and requiring a 30-day notice period prior to instituting any action leading to
repossession of the related unit.

         Title V authorized any state to reimpose limitations on interest rates
and finance charges by adopting before April 1, 1983 a law or constitutional
provision which expressly rejects application of the federal law. Fifteen states
adopted such a law prior to the April 1, 1983 deadline. In addition, even where
Title V was not so rejected, any state is authorized by the law to adopt a
provision limiting discount points or other charges on loans covered by Title V.

INSTALLMENT SALES CONTRACTS

         The Loans may also consist of installment sales contracts. Under an
installment sales contract ("Installment Sales Contract") the seller
(hereinafter referred to in this section as the "lender") retains legal title to
the property and enters into an agreement with the purchaser (hereinafter
referred to in this section as the "borrower") for the payment of the purchase
price, plus interest, over the term of such contract. Only after full
performance by the borrower of the contract is the lender obligated to convey
title to the property to the purchaser. As with mortgage or deed of trust
financing, during the effective period of the Installment Sales Contract, the
borrower is generally responsible for maintaining the property in good condition
and for paying real estate taxes, assessments and hazard insurance premiums
associated with the property.

         The method of enforcing the rights of the lender under an Installment
Sales Contract varies on a state-by-state basis depending upon the extent to
which state courts are willing, or able pursuant to state statute, to enforce
the contract strictly according to the terms. The terms of Installment Sales
Contracts generally provide that upon a default by the borrower, the borrower
loses his or her right to occupy the property, the entire indebtedness is
accelerated, and the buyer's equitable interest in the property is forfeited.
The lender in such a situation does not have to foreclose in order to obtain
title to the property, although in some cases a quiet title action is in order
if the borrower has filed the Installment Sales Contract in local land records
and an ejectment action may be necessary to recover possession. In a few states,
particularly in cases of borrower default during the early years of an
Installment Sales Contract, the courts will permit ejectment of the buyer and a
forfeiture of his or her interest in the property. However, most state
legislatures have enacted provisions by analogy to mortgage law protecting
borrowers under Installment Sales Contracts from the harsh consequences of
forfeiture. Under such statutes, a judicial or nonjudicial foreclosure may be
required, the lender may be required to give notice of default and the borrower
may be granted some grace period during which the Installment Sales Contract may
be reinstated upon full payment of the default amount and the borrower may have
a post-foreclosure statutory redemption right. In other states, courts in equity
may permit a borrower with significant investment in the property under an
Installment Sales Contract for the sale of real estate to share in the proceeds
of sale of the property after the indebtedness is repaid or may otherwise refuse
to enforce the forfeiture clause. Nevertheless, generally speaking, the lender's
procedures for obtaining possession and clear title under an Installment Sales
Contract in a given state are simpler and less time-consuming and costly than
are the procedures for foreclosing and obtaining clear title to a property
subject to one or more liens.

SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940

         Under the Soldiers' and Sailors' Civil Relief Act of 1940, members of
all branches of the military on active duty, including draftees and reservists
in military service, (i) are entitled to have interest rates reduced and capped
at 6% per annum, on obligations (including Loans) incurred prior to the
commencement of military service for the duration of military service, (ii) may
be entitled to a stay of proceedings on any kind of foreclosure or repossession
action in the case of defaults on such obligations entered into prior to
military service for the duration of military service and (iii) may have the
maturity of such obligations incurred prior to military service extended, the
payments lowered and the payment schedule readjusted for a period of time after
the completion of military service. However, the benefits of (i), (ii), or (iii)
above are subject to challenge by creditors and if, in the opinion of the court,
the ability of a person to comply with such obligations is not materially
impaired by military service, the court may apply equitable principles
accordingly. If a borrower's obligation to repay amounts otherwise due on a Loan
included in a Trust Fund for a Series is relieved pursuant to the Soldiers' and
Sailors' Civil Relief Act of 1940, none of the Trust Fund, the Servicer, the
Depositor nor the Trustee will be required to advance such amounts, and any loss
in respect thereof may reduce the amounts available to be paid to the Holders of
the Securities of such Series. Unless otherwise specified in the related
Prospectus Supplement, any shortfalls in interest collections on Loans or



                                       50
<PAGE>


Underlying Loans relating to the Private Securities, as applicable, included in
a Trust Fund for a Series resulting from application of the Soldiers' and
Sailors' Civil Relief Act of 1940 will be allocated to each Class of Securities
of such Series that is entitled to receive interest in respect of such Loans or
Underlying Loans in proportion to the interest that each such Class of
Securities would have otherwise been entitled to receive in respect of such
Loans or Underlying Loans had such interest shortfall not occurred.

                                  THE DEPOSITOR

GENERAL

         The Depositor was incorporated in the State of North Carolina. in
December 1997, and is a wholly-owned subsidiary of First Union National Bank, a
national banking association with its headquarters in Charlotte, North Carolina.
The Depositor's principal executive offices are located at One First Union
Center, 301 S. College Street, Charlotte, North Carolina 28288-0630. Its
telephone number is (704) 373-6611.

         The Depositor will not engage in any activities other than to
authorize, issue, sell, deliver, purchase and invest in (and enter into
agreements in connection with), and/or to engage in the establishment of one or
more trusts which will issue and sell, bonds, notes, debt or equity securities,
obligations and other securities and instruments ("Depositor Securities")
collateralized or otherwise secured or backed by, or otherwise representing an
interest in, among other things, receivables or pass-through certificates, or
participations or certificates of participation or beneficial ownership in one
or more pools of receivables, and the proceeds of the foregoing, that arise in
connection with loans secured by certain first or junior mortgages on real
estate or manufactured housing and any and all other commercial transactions and
commercial, sovereign, student or consumer loans or indebtedness and, in
connection therewith or otherwise, purchasing, acquiring, owning, holding,
transferring, conveying, servicing, selling, pledging, assigning, financing and
otherwise dealing with such receivables, pass-through certificates, or
participations or certificates of participation or beneficial ownership. Article
Third of the Depositor's Certificate of Incorporation limits the Depositor's
activities to the above activities and certain related activities, such as
credit enhancement with respect to such Depositor Securities, and to any
activities incidental to and necessary or convenient for the accomplishment of
such purposes.

                                 USE OF PROCEEDS

         The Depositor will apply all or substantially all of the net proceeds
from the sale of each Series of Securities for one or more of the following
purposes: (i) to purchase the related Primary Assets, (ii) to repay indebtedness
which has been incurred to obtain funds to acquire such Primary Assets, (iii) to
establish any Reserve Funds described in the related Prospectus Supplement and
(iv) to pay costs of structuring and issuing such Securities, including the
costs of obtaining Credit Enhancement, if any. If so specified in the related
Prospectus Supplement, the purchase of the Primary Assets for a Series may be
effected by an exchange of Securities with the Seller of such Primary Assets.



                    MATERIAL FEDERAL INCOME TAX CONSEQUENCES

GENERAL

         The following is a general discussion of the material anticipated
federal income tax consequences to investors of the purchase, ownership and
disposition of the Securities offered hereby. The discussion is based upon laws,
regulations, rulings and decisions now in effect, all of which are subject to
change. The discussion below does not purport to deal with all federal tax
consequences applicable to all categories of investors, some of which may be
subject to special rules. Investors should consult their own tax advisors in
determining the federal, state, local and any other tax consequences to them of
the purchase, ownership and disposition of the Securities. For purposes of this
discussion, references to a "Securityholder" or a "Holder" are to the beneficial
owner of a Security.



                                       51
<PAGE>


         The following discussion addresses securities of three general types:
(i) securities ("Grantor Trust Securities") representing interests in a Trust (a
"Grantor Trust") which the Company will covenant not to elect to have treated as
a real estate mortgage investment conduit (REMIC); (ii) securities ("REMIC
Securities") representing interests in a Trust, or a portion thereof, which the
Company will covenant to elect to have treated as a REMIC under sections 860A
through 860G of the Internal Revenue Code of 1986, as amended (the "Code"); and
(iii) securities ("Debt Securities") that are intended to be treated for federal
income tax purposes as indebtedness secured by the underlying Loans. This
Prospectus does not address the tax treatment of partnership interests or
interests in a FASIT. Such a discussion will be set forth in the related
Prospectus Supplement for any Trust issuing Securities characterized as
partnership interests or interests in a FASIT. The Prospectus Supplement for
each series of Securities will indicate whether a REMIC or FASIT election (or
elections) will be made for the related Trust and, if a REMIC or FASIT election
is to be made, will identify all "regular interests" and "residual interests" in
the REMIC or all "regular interests," "high-yield interests" or "ownership
interest" in the FASIT. Pursuant to the Small Business Job Protection Act of
1996, a FASIT election can be made on or after September 1, 1997.

         The Taxpayer Relief Act of 1997 adds provisions to the Code that
require the recognition of gain upon the "constructive sale of an appreciated
financial position." A constructive sale of an appreciated financial position
occurs if a taxpayer enters into certain transactions or series of such
transactions with respect to a financial instrument that have the effect of
substantially eliminating the taxpayer's risk of loss and opportunity for gain
with respect to the financial instrument. These provisions apply only to Classes
of Securities that do not have a principal balance.

GRANTOR TRUST SECURITIES

         With respect to each series of Grantor Trust Securities, Dewey
Ballantine LLP, special tax counsel to the Company, will deliver its opinion to
the Company that (unless otherwise limited in the related Prospectus Supplement)
the related Grantor Trust will be classified as a grantor trust and not as a
partnership or an association taxable as a corporation. Accordingly, each Holder
of a Grantor Trust Security will generally be treated as the owner of an
interest in the Loans included in the Grantor Trust.

         For purposes of the following discussion, a Grantor Trust Security
representing an undivided equitable ownership interest in the principal of the
Loans constituting the related Grantor Trust, together with interest thereon at
a pass-through rate, will be referred to as a "Grantor Trust Fractional Interest
Security." A Grantor Trust Security representing ownership of all or a portion
of the difference between interest paid on the Loans constituting the related
Grantor Trust and interest paid to the Holders of Grantor Trust Fractional
Interest Securities issued with respect to such Grantor Trust will be referred
to as a "Grantor Trust Strip Security."

Special Tax Attributes
         Unless otherwise disclosed in a related Prospectus Supplement, Dewey
Ballantine LLP, special tax counsel to the Company, will deliver its opinion to
the Company that (a) Grantor Trust Fractional Interest Securities will represent
interests in (i) "loans . . . secured by an interest in real property" within
the meaning of section 7701(a)(19)(C)(v) of the Code; and (ii) "obligations
(including any participation or certificate of beneficial ownership therein)
which . . . are principally secured by an interest in real property" within the
meaning of section 860G(a)(3)(A) of the Code; and (b) interest on Grantor Trust
Fractional Interest Securities will be considered "interest on obligations
secured by mortgages on real property or on interests in real property" within
the meaning of section 856(c)(3)(B) of the Code. In addition, the Grantor Trust
Strip Securities will be "obligations (including any participation or
certificate of beneficial ownership therein) . . . principally secured by an
interest in real property" within the meaning of section 860G(a)(3)(A) of the
Code.

Taxation of Holders of Grantor Trust Securities
         Holders of Grantor Trust Fractional Interest Securities generally will
be required to report on their federal income tax returns their respective
shares of the income from the Loans (including amounts used to pay reasonable
servicing fees and other expenses but excluding amounts payable to Holders of
any corresponding Grantor Trust Strip Securities) and, subject to the
limitations described below, will be entitled to deduct their shares of any such
reasonable servicing fees and other expenses. If a Holder acquires a Grantor
Trust Fractional Interest Security for an amount that differs from its
outstanding principal amount, the amount includible in income on a Grantor Trust
Fractional Interest Security may differ from the amount of interest
distributable thereon. See "Discount and 



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<PAGE>


Premium," below. Individuals holding a Grantor Trust Fractional Interest
Security directly or through certain pass-through entities will be allowed a
deduction for such reasonable servicing fees and expenses only to the extent
that the aggregate of such Holder's miscellaneous itemized deductions exceeds 2%
of such Holder's adjusted gross income. Further, Holders (other than
corporations) subject to the alternative minimum tax may not deduct
miscellaneous itemized deductions in determining alternative minimum taxable
income.

         Holders of Grantor Trust Strip Securities generally will be required to
treat such Securities as "stripped coupons" under section 1286 of the Code.
Accordingly, such a Holder will be required to treat the excess of the total
amount of payments on such a Security over the amount paid for such Security as
original issue discount and to include such discount in income as it accrues
over the life of such Security. See "--Discount and Premium," below.

         Grantor Trust Fractional Interest Securities may also be subject to the
coupon stripping rules if a class of Grantor Trust Strip Securities is issued as
part of the same series of Securities. The consequences of the application of
the coupon stripping rules would appear to be that any discount arising upon the
purchase of such a Security (and perhaps all stated interest thereon) would be
classified as original issue discount and includible in the Holder's income as
it accrues (regardless of the Holder's method of accounting), as described below
under "--Discount and Premium." The coupon stripping rules will not apply,
however, if (i) the pass-through rate is no more than 100 basis points lower
than the gross rate of interest payable on the underlying Loans and (ii) the
difference between the outstanding principal balance on the Security and the
amount paid for such Security is less than 0.25% of such principal balance times
the weighted average remaining maturity of the Security.

Sales of Grantor Trust Securities
         Any gain or loss recognized on the sale of a Grantor Trust Security
(equal to the difference between the amount realized on the sale and the
adjusted basis of such Grantor Trust Security) will be capital gain or loss,
except to the extent of accrued and unrecognized market discount, which will be
treated as ordinary income, and in the case of banks and other financial
institutions except as provided under section 582(c) of the Code. The adjusted
basis of a Grantor Trust Security will generally equal its cost, increased by
any income reported by the seller (including original issue discount and market
discount income) and reduced (but not below zero) by any previously reported
losses, any amortized premium and by any distributions of principal.

Grantor Trust Reporting
         The Trustee will furnish to each Holder of a Grantor Trust Fractional
Interest Security with each distribution a statement setting forth the amount of
such distribution allocable to principal on the underlying Loans and to interest
thereon at the related Pass-Through Rate. In addition, within a reasonable time
after the end of each calendar year, based on information provided by the Master
Servicer, the Trustee will furnish to each Holder during such year such
customary factual information as the Master Servicer deems necessary or
desirable to enable Holders of Grantor Trust Securities to prepare their tax
returns and will furnish comparable information to the Internal Revenue Service
(the "IRS") as and when required to do so by law.

REMIC SECURITIES

         If provided in a related Prospectus Supplement, an election will be
made to treat a Trust as a REMIC under the Code. Qualification as a REMIC
requires ongoing compliance with certain conditions. With respect to each series
of Securities for which such an election is made, Dewey Ballantine LLP, special
tax counsel to the Company, will deliver its opinion to the Company that (unless
otherwise limited in the related Prospectus Supplement), assuming compliance
with the Pooling and Servicing Agreement, the Trust will be treated as a REMIC
for federal income tax purposes. A Trust for which a REMIC election is made will
be referred to herein as a "REMIC Trust." The Securities of each class will be
designated as "regular interests" in the REMIC Trust except that a separate
class will be designated as the "residual interest" in the REMIC Trust. The
Prospectus Supplement for each series of Securities will state whether
Securities of each class will constitute a regular interest (a REMIC Regular
Security) or a residual interest (a REMIC Residual Security).

         A REMIC Trust will not be subject to federal income tax except with
respect to income from prohibited transactions and in certain other instances
described below. See "--Taxes on a REMIC Trust." Generally, the total income
from the Loans in a REMIC Trust will be taxable to the Holders of the Securities
of that series, as described below.



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<PAGE>


         Regulations issued by the Treasury Department on December 23, 1992 (the
"REMIC Regulations") provide some guidance regarding the federal income tax
consequences associated with the purchase, ownership and disposition of REMIC
Securities. While certain material provisions of the REMIC Regulations are
discussed below, investors should consult their own tax advisors regarding the
possible application of the REMIC Regulations in their specific circumstances.

SPECIAL TAX ATTRIBUTES

         REMIC Regular Securities and REMIC Residual Securities will be "regular
or residual interests in a REMIC" within the meaning of section
7701(a)(19)(C)(xi) of the Code and "real estate assets" within the meaning of
section 856(c)(5)(A) of the Code. If at any time during a calendar year less
than 95% of the assets of a REMIC Trust consist of "qualified mortgages" (within
the meaning of section 860G(a)(3) of the Code) then the portion of the REMIC
Regular Securities and REMIC Residual Securities that are qualifying assets
under those sections during such calendar year may be limited to the portion of
the assets of such REMIC Trust that are qualified mortgages. Similarly, income
on the REMIC Regular Securities and REMIC Residual Securities 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, subject to the same limitation as
set forth in the preceding sentence. For purposes of applying this limitation, a
REMIC Trust should be treated as owning the assets represented by the qualified
mortgages. The assets of the Trust Estate will include, in addition to the
Mortgage Loans, payments on the Mortgage Loans held pending distribution on the
REMIC Regular Securities and REMIC Residual Securities and any reinvestment
income thereon. REMIC Regular Securities and REMIC Residual Securities held by a
financial institution to which section 585, 586 or 593 of the Code applies will
be treated as evidences of indebtedness for purposes of section 582(c)(1) of the
Code. REMIC Regular Securities will also be qualified mortgages with respect to
other REMICs.

Taxation of Holders of REMIC Regular Securities
         Except as indicated below in this federal income tax discussion, the
REMIC Regular Securities will be treated for federal income tax purposes as debt
instruments issued by the REMIC Trust on the date such Securities are first sold
to the public (the "Settlement Date") and not as ownership interests in the
REMIC Trust or its assets. Holders of REMIC Regular Securities that otherwise
report income under a cash method of accounting will be required to report
income with respect to such Securities under an accrual method. For additional
tax consequences relating to REMIC Regular Securities purchased at a discount or
with premium, see "--Discount and Premium," below.

Taxation of Holders of REMIC Residual Securities
         DAILY PORTIONS. Except as indicated below, a Holder of a REMIC Residual
Security for a REMIC Trust generally will be required to report its daily
portion of the taxable income or net loss of the REMIC Trust for each day during
a calendar quarter that the Holder owned such REMIC Residual Security. For this
purpose, the daily portion shall be determined by allocating to each day in the
calendar quarter its ratable portion of the taxable income or net loss of the
REMIC Trust for such quarter and by allocating the amount so allocated among the
Residual Holders (on such day) in accordance with their percentage interests on
such day. Any amount included in the gross income or allowed as a loss of any
Residual Holder by virtue of this paragraph will be treated as ordinary income
or loss.

         The requirement that each Holder of a REMIC Residual Security report
its daily portion of the taxable income or net loss of the REMIC Trust will
continue until there are no Securities of any class outstanding, even though the
Holder of the REMIC Residual Security may have received full payment of the
stated interest and principal on its REMIC Residual Security.

         The Trustee will provide to Holders of REMIC Residual Securities of
each series of Securities (i) such information as is necessary to enable them to
prepare their federal income tax returns and (ii) any reports regarding the
Securities of such series that may be required under the Code.

         TAXABLE INCOME OR NET LOSS OF A REMIC TRUST. The taxable income or net
loss of a REMIC Trust will be the income from the qualified mortgages it holds
and any reinvestment earnings less deductions allowed to the REMIC Trust. Such
taxable income or net loss for a given calendar quarter will be determined in
the same manner as for an individual having the calendar year as the taxable
year and using the accrual method of accounting, with 




                                       54
<PAGE>


certain modifications. The first modification is that a deduction will be
allowed for accruals of interest (including any original issue discount, but
without regard to the investment interest limitation in section 163(d) of the
Code) on the REMIC Regular Securities (but not the REMIC Residual Securities),
even though REMIC Regular Securities are for non-tax purposes evidences of
beneficial ownership rather than indebtedness of a REMIC Trust. Second, market
discount or premium equal to the difference between the total stated principal
balances of the qualified mortgages and the basis to the REMIC Trust therein
generally will be included in income (in the case of discount) or deductible (in
the case of premium) by the REMIC Trust as it accrues under a constant yield
method, taking into account the "Prepayment Assumption" (as defined in the
Related Prospectus Supplement, see "--Discount and Premium--Original Issue
Discount," below). The basis to a REMIC Trust in the qualified mortgages is the
aggregate of the issue prices of all the REMIC Regular Securities and REMIC
Residual Securities in the REMIC Trust on the Settlement Date. If, however, a
substantial amount of a class of REMIC Regular Securities or REMIC Residual
Securities has not been sold to the public, then the fair market value of all
the REMIC Regular Securities or REMIC Residual Securities in that class as of
the date of the Prospectus Supplement should be substituted for the issue price.

         Third, no item of income, gain, loss or deduction allocable to a
prohibited transaction (see "--Taxes on a REMIC Trust--Prohibited Transactions"
below) will be taken into account. Fourth, a REMIC Trust generally may not
deduct any item that would not be allowed in calculating the taxable income of a
partnership by virtue of section 703(a)(2) of the Code. Finally, the limitation
on miscellaneous itemized deductions imposed on individuals by section 67 of the
Code will not be applied at the REMIC Trust level to any servicing and guaranty
fees. (See, however, "--Pass-Through of Servicing and Guaranty Fees to
Individuals" below.) In addition, under the REMIC Regulations, any expenses that
are incurred in connection with the formation of a REMIC Trust and the issuance
of the REMIC Regular Securities and REMIC Residual Securities are not treated as
expenses of the REMIC Trust for which a deduction is allowed. If the deductions
allowed to a REMIC Trust exceed its gross income for a calendar quarter, such
excess will be a net loss for the REMIC Trust for that calendar quarter. The
REMIC Regulations also provide that any gain or loss to a REMIC Trust from the
disposition of any asset, including a qualified mortgage or "permitted
investment" (as defined in section 860G(a)(5) of the Code) will be treated as
ordinary gain or loss.

         A Holder of a REMIC Residual Security may be required to recognize
taxable income without being entitled to receive a corresponding amount of cash.
This could occur, for example, if the qualified mortgages are considered to be
purchased by the REMIC Trust at a discount, some or all of the REMIC Regular
Securities are issued at a discount, and the discount included as a result of a
prepayment on a Mortgage Loan that is used to pay principal on the REMIC Regular
Securities exceeds the REMIC Trust's deduction for unaccrued original issue
discount relating to such REMIC Regular Securities. Taxable income may also be
greater in earlier years because interest expense deductions, expressed as a
percentage of the outstanding principal amount of the REMIC Regular Securities,
may increase over time as the earlier classes of REMIC Regular Securities are
paid, whereas interest income with respect to any given Mortgage Loan expressed
as a percentage of the outstanding principal amount of that Mortgage Loan, will
remain constant over time.

         BASIS RULES AND DISTRIBUTIONS. A Holder of a REMIC Residual Security
has an initial basis in its Security equal to the amount paid for such REMIC
Residual Security. Such basis is increased by amounts included in the income of
the Holder and decreased by distributions and by any net loss taken into account
with respect to such REMIC Residual Security. A distribution on a REMIC Residual
Security to a Holder is not included in gross income to the extent it does not
exceed such Holder's basis in the REMIC Residual Security (adjusted as described
above) and, to the extent it exceeds the adjusted basis of the REMIC Residual
Security, shall be treated as gain from the sale of the REMIC Residual Security.

         A Holder of a REMIC Residual Security is not allowed to take into
account any net loss for any calendar quarter to the extent such net loss
exceeds such Holder's adjusted basis in its REMIC Residual Security as of the
close of such calendar quarter (determined without regard to such net loss). Any
loss disallowed by reason of this limitation may be carried forward indefinitely
to future calendar quarters and, subject to the same limitation, may be used
only to offset income from the REMIC Residual Security.

         EXCESS INCLUSIONS. Any excess inclusions with respect to a REMIC
Residual Security are subject to certain special tax rules. With respect to a
Holder of a REMIC Residual Security, the excess inclusion for any calendar
quarter is defined as the excess (if any) of the daily portions of taxable
income over the sum of the "daily accruals" for each day during such quarter
that such REMIC Residual Security was held by such Holder. The daily accruals



                                       55
<PAGE>



are determined by allocating to each day during a calendar quarter its ratable
portion of the product of the "adjusted issue price" of the REMIC Residual
Security at the beginning of the calendar quarter and 120% of the "federal
long-term rate" in effect on the Settlement Date, based on quarterly
compounding, and properly adjusted for the length of such quarter. For this
purpose, the adjusted issue price of a REMIC Residual Security as of the
beginning of any calendar quarter is equal to the issue price of the REMIC
Residual Security, increased by the amount of daily accruals for all prior
quarters and decreased by any distributions made with respect to such REMIC
Residual Security before the beginning of such quarter. The issue price of a
REMIC Residual Security is the initial offering price to the public (excluding
bond houses and brokers) at which a substantial number of the REMIC Residual
Securities was sold. The federal long-term rate is a blend of current yields on
Treasury securities having a maturity of more than nine years, computed and
published monthly by the IRS.

         In general, Holders of REMIC Residual Securities with excess inclusion
income cannot offset such income by losses from other activities. For Holders
that are subject to tax only on unrelated business taxable income (as defined in
section 511 of the Code), an excess inclusion of such Holder is treated as
unrelated business taxable income. With respect to variable contracts (within
the meaning of section 817 of the Code), a life insurance company cannot adjust
its reserve to the extent of any excess inclusion, except as provided in
regulations. The REMIC Regulations indicate that if a Holder of a REMIC Residual
Security is a member of an affiliated group filing a consolidated income tax
return, the taxable income of the affiliated group cannot be less than the sum
of the excess inclusions attributable to all residual interests in REMICs held
by members of the affiliated group. For a discussion of the effect of excess
inclusions on certain foreign investors that own REMIC Residual Securities, see
"--Foreign Investors" below.

         The Treasury Department also has the authority to issue regulations
that would treat all taxable income of a REMIC Trust as excess inclusions if the
REMIC Residual Security does not have "significant value." Although the Treasury
Department did not exercise this authority in the REMIC Regulations, future
regulations may contain such a rule. If such a rule were adopted, it is unclear
how significant value would be determined for these purposes. If no such rule is
applicable, excess inclusions should be calculated as discussed above.

         In the case of any REMIC Residual Securities that are held by a real
estate investment trust, the aggregate excess inclusions with respect to such
REMIC Residual Securities reduced (but not below zero) by the real estate
investment trust taxable income (within the meaning of section 857(b)(2) of the
Code, 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 REMIC Residual Security as if held directly by such
shareholder. Similar rules will apply in the case of regulated investment
companies, common trust funds and certain cooperatives that hold a REMIC
Residual Security.

         PASS-THROUGH OF SERVICING AND GUARANTY FEES TO INDIVIDUALS. A Holder of
a REMIC Residual Security who is an individual will be required to include in
income a share of any servicing and guaranty fees. A deduction for such fees
will be allowed to such Holder only to the extent that such fees, along with
certain of such Holder's other miscellaneous itemized deductions exceed 2% of
such Holder's adjusted gross income. In addition, a Holder of a REMIC Residual
Security may not be able to deduct any portion of such fees in computing such
Holder's alternative minimum tax liability. A Holder's share of such fees will
generally be determined by (i) allocating the amount of such expenses for each
calendar quarter on a pro rata basis to each day in the calendar quarter, and
(ii) allocating the daily amount among the Holders in proportion to their
respective holdings on such day.

Taxes on a REMIC Trust
         PROHIBITED TRANSACTIONS. The Code imposes a tax on a REMIC equal to
100% of the net income derived from "prohibited transactions." In general, a
prohibited transaction means the disposition of a qualified mortgage 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, the
receipt of compensation for services, or the disposition of an asset purchased
with the payments on the qualified mortgages for temporary investment pending
distribution on the regular and residual interests.

         CONTRIBUTIONS TO A REMIC AFTER THE STARTUP DAY. The Code imposes a tax
on a REMIC equal to 100% of the value of any property contributed to the REMIC
after the "startup day" (generally the same as the Settlement Date). Exceptions
are provided for cash contributions to a REMIC (i) during the three month period
beginning on 



                                       56
<PAGE>



the startup day, (ii) made to a qualified reserve fund by a Holder of a residual
interest, (iii) in the nature of a guarantee, (iv) made to facilitate a
qualified liquidation or clean-up call, and (v) as otherwise permitted by
Treasury regulations.

         NET INCOME FROM FORECLOSURE PROPERTY. The Code imposes a tax on a REMIC
equal to the highest corporate rate on "net income from foreclosure property."
The terms "foreclosure property" (which includes property acquired by deed in
lieu of foreclosure) and "net income from foreclosure property" are defined by
reference to the rules applicable to real estate investment trusts. Generally,
foreclosure property would be treated as such for a period of three years, with
a possible extension. Net income from foreclosure property generally means gain
from the sale of foreclosure property that is inventory property and gross
income from foreclosure property other than qualifying rents and other
qualifying income for a real estate investment trust.

Sales of REMIC Securities
         GENERAL. Except as provided below, if a Regular or REMIC Residual
Security is sold, the seller will recognize gain or loss equal to the difference
between the amount realized in the sale and its adjusted basis in the Security.
The adjusted basis of a REMIC Regular Security generally will equal the cost of
such Security to the seller, increased by any original issue discount or market
discount included in the seller's gross income with respect to such Security and
reduced by distributions on such Security previously received by the seller of
amounts included in the stated redemption price at maturity and by any premium
that has reduced the seller's interest income with respect to such Security. See
"--Discount and Premium." The adjusted basis of a REMIC Residual Security is
determined as described above under "--Taxation of Holders of REMIC Residual
Securities--Basis Rules and Distributions." Except as provided in the following
paragraph or under section 582(c) of the Code, any such gain or loss will be
capital gain or loss, provided such Security is held as a "capital asset"
(generally, property held for investment) within the meaning of section 1221 of
the Code.

         Gain from the sale of a REMIC Regular Security 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 the income of the Holder of a REMIC Regular Security had income
accrued at a rate equal to 110% of the "applicable federal rate" (generally, an
average of current yields on Treasury securities) as of the date of purchase
over (ii) the amount actually includible in such Holder's income. In addition,
gain recognized on such a sale by a Holder of a REMIC Regular Security who
purchased such a Security at a market discount would also be taxable as ordinary
income in an amount not exceeding the portion of such discount that accrued
during the period such Security was held by such Holder, reduced by any market
discount includible in income under the rules described below under "--Discount
and Premium."

         If a Holder of a REMIC Residual Security sells its REMIC Residual
Security at a loss, the loss will not be recognized if, within six months before
or after the sale of the REMIC Residual Security, such Holder purchases another
residual interest in any REMIC or any interest in a taxable mortgage pool (as
defined in section 7701(i) of the Code) comparable to a residual interest in a
REMIC. Such disallowed loss would be allowed upon the sale of the other residual
interest (or comparable interest) if the rule referred to in the preceding
sentence does not apply to that sale. While this rule may be modified by
Treasury regulations, no such regulations have yet been published.

         TRANSFERS OF REMIC RESIDUAL SECURITIES. Section 860E(e) of the Code
imposes a substantial tax, payable by the transferor (or, if a transfer is
through a broker, nominee, or other middleman as the transferee's agent, payable
by that agent) upon any transfer of a REMIC Residual Security to a disqualified
organization and upon a pass-through entity (including regulated investment
companies, real estate investment trusts, common trust funds, partnerships,
trusts, estates, certain cooperatives, and nominees) that owns a REMIC Residual
Security if such pass-through entity has a disqualified organization as a
record-holder. For purposes of the preceding sentence, a transfer includes any
transfer of record or beneficial ownership, whether pursuant to a purchase, a
default under a secured lending agreement or otherwise.

         The term "disqualified organization" includes the United States, any
state or political subdivision thereof, any foreign government, any
international organization, or any agency or instrumentality of the foregoing
(other than certain taxable instrumentalities), any cooperative organization
furnishing electric energy or providing telephone service to persons in rural
areas, or any organization (other than a farmers' cooperative) that is exempt
from federal income tax, unless such organization is subject to the tax on
unrelated business income. Moreover, an 



                                       57
<PAGE>


entity will not qualify as a REMIC unless there are reasonable arrangements
designed to ensure that (i) residual interests in such entity are not held by
disqualified organizations and (ii) information necessary for the application of
the tax described herein will be made available. Restrictions on the transfer of
a REMIC Residual Security and certain other provisions that are intended to meet
this requirement are described in the Pooling and Servicing Agreement, and will
be discussed more fully in the related Prospectus Supplement relating to the
offering of any REMIC Residual Security. In addition, a pass-through entity
(including a nominee) that holds a REMIC Residual Security may be subject to
additional taxes if a disqualified organization is a record-holder therein. A
transferor of a REMIC Residual Security (or an agent of a transferee of a REMIC
Residual Security, as the case may be) will be relieved of such tax liability if
(i) the transferee furnishes to the transferor (or the transferee's agent) an
affidavit that the transferee is not a disqualified organization, and (ii) the
transferor (or the transferee's agent) does not have actual knowledge that the
affidavit is false at the time of the transfer. Similarly, no such tax will be
imposed on a pass-through entity for a period with respect to an interest
therein owned by a disqualified organization if (i) the record-holder of such
interest furnishes to the pass-through entity an affidavit that it is not a
disqualified organization, and (ii) during such period, the pass-through entity
has no actual knowledge that the affidavit is false.

         The Taxpayer Relief Act of 1997 adds provisions to the Code that will
apply to an "electing large partnership." If an electing large partnership holds
a Residual Certificate, all interests in the electing large partnership are
treated as held by disqualified organizations for purposes of the tax imposed
upon a pass-through entity by section 860E(e) of the Code. An exception to this
tax, otherwise available to a pass-through entity that is furnished certain
affidavits by record holders of interests in the entity and that does not know
such affidavits are false, is not available to an electing large partnership.

         Under the REMIC Regulations, a transfer of a "noneconomic residual
interest" to a U.S. Person (as defined below in "--Foreign Investors--Grantor
Trust Securities and REMIC Regular Securities") will be disregarded for all
federal tax purposes unless no significant purpose of the transfer is to impede
the assessment or collection of tax. A REMIC Residual Security would be treated
as constituting a noneconomic residual interest unless, at the time of the
transfer, (i) the present value of the expected future distributions on the
REMIC Residual Security is no less than the product of the present value of the
"anticipated excess inclusions" with respect to such Security and the highest
corporate rate of tax for the year in which the transfer occurs, and (ii) the
transferor reasonably expects that the transferee will receive distributions
from the applicable REMIC Trust in an amount sufficient to satisfy the liability
for income tax on any "excess inclusions" at or after the time when such
liability accrues. Anticipated excess inclusions are the excess inclusions that
are anticipated to be allocated to each calendar quarter (or portion thereof)
following the transfer of a REMIC Residual Security, determined as of the date
such Security is transferred and based on events that have occurred as of that
date and on the Prepayment Assumption. See "--Discount and Premium" and
"--Taxation of Holders of REMIC Residual Securities--Excess Inclusions."

         The REMIC Regulations provide that a significant purpose to impede the
assessment or collection of tax exists if, at the time of the transfer, a
transferor of a REMIC Residual Security has "improper knowledge" (i.e., 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 Trust). A
transferor is presumed not to have improper knowledge if (i) the transferor
conducts, at the time of a transfer, a reasonable investigation of the financial
condition of the transferee and, as a result of the investigation, the
transferor finds that the transferee has historically paid its debts as they
come due and finds no significant evidence to indicate that the transferee will
not continue to pay its debts as they come due in the future; and (ii) the
transferee makes certain representations to the transferor in the affidavit
relating to disqualified organizations discussed above. Transferors of a REMIC
Residual Security should consult with their own tax advisors for further
information regarding such transfers.

         REPORTING AND OTHER ADMINISTRATIVE MATTERS. For purposes of the
administrative provisions of the Code, each REMIC Trust will be treated as a
partnership and the Holders of REMIC Residual Securities will be treated as
partners. The Trustee will prepare, sign and file federal income tax returns for
each REMIC Trust, which returns are subject to audit by the IRS. Moreover,
within a reasonable time after the end of each calendar year, the Trustee will
furnish to each Holder that received a distribution during such year a statement
setting forth the portions of any such distributions that constitute interest
distributions, original issue discount, and such other information as is
required by Treasury regulations and, with respect to Holders of REMIC Residual
Securities in a REMIC Trust, information necessary to compute the daily portions
of the taxable income (or net loss) of such REMIC Trust for each day during such
year. The Trustee will also act as the tax matters partner for each REMIC Trust,
either in its capacity as a 



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Holder of a REMIC Residual Security or in a fiduciary capacity. Each Holder of a
REMIC Residual Security, by the acceptance of its REMIC Residual Security,
agrees that the Trustee will act as its fiduciary in the performance of any
duties required of it in the event that it is the tax matters partner.

         Each Holder of a REMIC Residual Security is required to treat items on
its return consistently with the treatment on the return of the REMIC Trust,
unless the Holder either files a statement identifying the inconsistency or
establishes that the inconsistency resulted from incorrect information received
from the REMIC Trust. The IRS may assert a deficiency resulting from a failure
to comply with the consistency requirement without instituting an administrative
proceeding at the REMIC Trust level. Unless otherwise specified in the related
Prospectus Supplement, the Trustee does not intend to register any REMIC Trust
as a tax shelter pursuant to section 6111 of the Code.

Termination
         In general, no special tax consequences will apply to a Holder of a
REMIC Regular Security upon the termination of a REMIC Trust by virtue of the
final payment or liquidation of the last Mortgage Loan remaining in the Trust
Estate. If a Holder of a REMIC Residual Security's adjusted basis in its REMIC
Residual Security at the time such termination occurs exceeds the amount of cash
distributed to such Holder in liquidation of its interest, although the matter
is not entirely free from doubt, it would appear that the Holder of the REMIC
Residual Security is entitled to a loss equal to the amount of such excess.

DEBT SECURITIES

General
         With respect to each series of Debt Securities, Dewey Ballantine LLP,
special tax counsel to the Company, will deliver its opinion to the Company that
(unless otherwise limited in the related Prospectus Supplement) the Securities
will be classified as debt of the Company secured by the related Loans.
Consequently, the Debt Securities will not be treated as ownership interests in
the Loans or the Trust. Holders will be required to report income received with
respect to the Debt Securities in accordance with their normal method of
accounting. For additional tax consequences relating to Debt Securities
purchased at a discount or with premium, see "--Discount and Premium," below.

Special Tax Attributes
         As described above, Grantor Trust Securities will possess certain
special tax attributes by virtue of their being ownership interests in the
underlying Mortgage Loans. Similarly, REMIC Securities will possess similar
attributes by virtue of the REMIC provisions of the Code. In general, Debt
Securities will not possess such special tax attributes. Investors to whom such
attributes are important should consult their own tax advisors regarding
investment in Debt Securities.

Sale or Exchange
         If a Holder of a Debt Security sells or exchanges such Security, the
Holder will recognize gain or loss equal to the difference, if any, between the
amount received and the Holder's adjusted basis in the Security. The adjusted
basis in the Security generally will equal its initial cost, increased by any
original issue discount or market discount previously included in the seller's
gross income with respect to the Security and reduced by the payments previously
received on the Security, other than payments of qualified stated interest, and
by any amortized premium.

         In general (except as described in "--Discount and Premium--Market
Discount," below), except for certain financial institutions subject to section
582(c) of the Code, any gain or loss on the sale or exchange of a Debt Security
recognized by an investor who holds the Security as a capital asset (within the
meaning of section 1221 of the Code), will be capital gain or loss and will be
long-term or short-term depending on whether the Security has been held for more
than one year.

DISCOUNT AND PREMIUM

         A Security purchased for an amount other than its outstanding principal
amount will be subject to the rules governing original issue discount, market
discount or premium. In addition, all Grantor Trust Strip Securities and 



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certain Grantor Trust Fractional Interest Securities will be treated as having
original issue discount by virtue of the coupon stripping rules in section 1286
of the Code. In very general terms, (i) original issue discount is treated as a
form of interest and must be included in a Holder's income as it accrues
(regardless of the Holder's regular method of accounting) using a constant yield
method; (ii) market discount is treated as ordinary income and must be included
in a Holder's income as principal payments are made on the Security (or upon a
sale of a Security); and (iii) if a Holder so elects, premium may be amortized
over the life of the Security and offset against inclusions of interest income.
These tax consequences are discussed in greater detail below.

Original Issue Discount
         In general, a Security will be considered to be issued with original
issue discount equal to the excess, if any, of its "stated redemption price at
maturity" over its "issue price." The issue price of a Security is the initial
offering price to the public (excluding bond houses and brokers) at which a
substantial number of the Securities was sold. The issue price also includes any
accrued interest attributable to the period between the beginning of the first
Remittance Period and the Settlement Date. The stated redemption price at
maturity of a Security that has a notional principal amount or receives
principal only or that is or may be an Accrual Security is equal to the sum of
all distributions to be made under such Security. The stated redemption price at
maturity of any other Security is its stated principal amount, plus an amount
equal to the excess (if any) of the interest payable on the first Payment Date
over the interest that accrues for the period from the Settlement Date to the
first Payment Date.

         Notwithstanding the general definition, original issue discount will be
treated as zero if such discount is less than 0.25% of the stated redemption
price at maturity multiplied by its weighted average life. The weighted average
life of a Security is apparently computed for this purpose as the sum, for all
distributions included in the stated redemption price at maturity of the amounts
determined by multiplying (i) the number of complete years (rounding down for
partial years) from the Settlement Date until the date on which each such
distribution is expected to be made under the assumption that the Mortgage Loans
prepay at the rate specified in the related Prospectus Supplement (the
"Prepayment Assumption") by (ii) a fraction, the numerator of which is the
amount of such distribution and the denominator of which is the Security's
stated redemption price at maturity. If original issue discount is treated as
zero under this rule, the actual amount of original issue discount must be
allocated to the principal distributions on the Security and, when each such
distribution is received, gain equal to the discount allocated to such
distribution will be recognized.

         Section 1272(a)(6) of the Code contains special original issue discount
rules directly applicable to REMIC Securities and Debt Securities. The Taxpayer
Relief Act of 1997 extends application of Section 1272(a)(6) to the Grantor
Trust Securities for tax years beginning after August 5, 1997. Under these rules
(described in greater detail below), (i) the amount and rate of accrual of
original issue discount on each series of Securities will be based on (x) the
Prepayment Assumption, and (y) in the case of a Security calling for a variable
rate of interest, an assumption that the value of the index upon which such
variable rate is based remains equal to the value of that rate on the Settlement
Date, and (ii) adjustments will be made in the amount of discount accruing in
each taxable year in which the actual prepayment rate differs from the
Prepayment Assumption.

         Section 1272(a)(6)(B)(iii) of the Code requires that the prepayment
assumption used to calculate original issue discount be determined in the manner
prescribed in Treasury regulations. To date, no such regulations have been
promulgated. The legislative history of this Code provision indicates that the
assumed prepayment rate must be the rate used by the parties in pricing the
particular transaction. The Sponsor anticipates that the Prepayment Assumption
for each series of Securities will be consistent with this standard. The Sponsor
makes no representation, however, that the Mortgage Loans for a given series
will prepay at the rate reflected in the Prepayment Assumption for that series
or at any other rate. Each investor must make its own decision as to the
appropriate prepayment assumption to be used in deciding whether or not to
purchase any of the Securities.

         Each Securityholder must include in gross income the sum of the "daily
portions" of original issue discount on its Security for each day during its
taxable year on which it held such Security. For this purpose, in the case of an
original Holder, the daily portions of original issue discount will be
determined as follows. A calculation will first be made of the portion of the
original issue discount that accrued during each "accrual period." The Trustee
will supply, at the time and in the manner required by the IRS, to
Securityholders, brokers and middlemen information with respect to the original
issue discount accruing on the Securities. Unless otherwise disclosed in the
related Prospectus Supplement, the Trustee will report original issue discount
based on accrual periods of one month, each beginning 




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<PAGE>


on a payment date (or, in the case of the first such period, the Settlement
Date) and ending on the day before the next payment date.

         Under section 1272(a)(6) of the Code, the portion of original issue
discount treated as accruing for any accrual period will equal the excess, if
any, of (i) the sum of (A) the present values of all the distributions remaining
to be made on the Security, if any, as of the end of the accrual period and (B)
the distribution made on such Security during the accrual period of amounts
included in the stated redemption price at maturity, over (ii) the adjusted
issue price of such Security at the beginning of the accrual period. The present
value of the remaining distributions referred to in the preceding sentence will
be calculated based on (i) the yield to maturity of the Security, calculated as
of the Settlement Date, giving effect to the Prepayment Assumption, (ii) events
(including actual prepayments) that have occurred prior to the end of the
accrual period, (iii) the Prepayment Assumption, and (iv) in the case of a
Security calling for a variable rate of interest, an assumption that the value
of the index upon which such variable rate is based remains the same as its
value on the Settlement Date over the entire life of such Security. The adjusted
issue price of a Security at any time will equal the issue price of such
Security, increased by the aggregate amount of previously accrued original issue
discount with respect to such Security, and reduced by the amount of any
distributions made on such Security as of that time of amounts included in the
stated redemption price at maturity. The original issue discount accruing during
any accrual period will then be allocated ratably to each day during the period
to determine the daily portion of original issue discount.

         In the case of Grantor Trust Strip Securities and certain REMIC
Securities, the calculation described in the preceding paragraph may produce a
negative amount of original issue discount for one or more accrual periods. No
definitive guidance has been issued regarding the treatment of such negative
amounts. The legislative history to section 1272(a)(6) indicates that such
negative amounts may be used to offset subsequent positive accruals but may not
offset prior accruals and may not be allowed as a deduction item in a taxable
year in which negative accruals exceed positive accruals. Holders of such
Securities should consult their own tax advisors concerning the treatment of
such negative accruals.

         A subsequent purchaser of a Security that purchases such Security at a
cost less than its remaining stated redemption price at maturity also will be
required to include in gross income for each day on which it holds such
Security, the daily portion of original issue discount with respect to such
Security (but reduced, if the cost of such Security to such purchaser exceeds
its adjusted issue price, by an amount equal to the product of (i) such daily
portion and (ii) a constant fraction, the numerator of which is such excess and
the denominator of which is the sum of the daily portions of original issue
discount on such Security for all days on or after the day of purchase).

Market Discount
         A Holder that purchases a Security at a market discount, that is, at a
purchase price less than the remaining stated redemption price at maturity of
such Security (or, in the case of a Security with original issue discount, its
adjusted issue price), will be required to allocate each principal distribution
first to accrued market discount on the Security, and recognize ordinary income
to the extent such distribution does not exceed the aggregate amount of accrued
market discount on such Security not previously included in income. With respect
to Securities that have unaccrued original issue discount, such market discount
must be included in income in addition to any original issue discount. A Holder
that incurs or continues indebtedness to acquire a Security at a market discount
may also be required to defer the deduction of all or a portion of the interest
on such indebtedness until the corresponding amount of market discount is
included in income. In general terms, market discount on a Security may be
treated as accruing either (i) under a constant yield method or (ii) in
proportion to remaining accruals of original issue discount, if any, or if none,
in proportion to remaining distributions of interest on the Security, in any
case taking into account the Prepayment Assumption. The Trustee will make
available, as required by the IRS, to Holders of Securities information
necessary to compute the accrual of market discount.

         Notwithstanding the above rules, market discount on a Security will be
considered to be zero if such discount is less than 0.25% of the remaining
stated redemption price at maturity of such Security multiplied by its weighted
average remaining life. Weighted average remaining life presumably would be
calculated in a manner similar to weighted average life, taking into account
payments (including prepayments) prior to the date of acquisition of the
Security by the subsequent purchaser. If market discount on a Security is
treated as zero under this rule, the actual amount of market discount must be
allocated to the remaining principal distributions on the Security 




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<PAGE>


and, when each such distribution is received, gain equal to the discount
allocated to such distribution will be recognized.

Securities Purchased at a Premium
         A purchaser of a Security that purchases such Security at a cost
greater than its remaining stated redemption price at maturity will be
considered to have purchased such Security (a "Premium Security") at a premium.
Such a purchaser need not include in income any remaining original issue
discount and may elect, under section 171(c)(2) of the Code, to treat such
premium as "amortizable bond premium." If a Holder makes such an election, the
amount of any interest payment that must be included in such Holder's income for
each period ending on a Payment Date will be reduced by the portion of the
premium allocable to such period based on the Premium Security's yield to
maturity. The legislative history of the Tax Reform Act of 1986 states that such
premium amortization should be made under principles analogous to those
governing the accrual of market discount (as discussed above under "--Market
Discount"). If such election is made by the Holder, the election will also apply
to all bonds the interest on which is not excludible from gross income ("fully
taxable bonds") held by the Holder at the beginning of the first taxable year to
which the election applies and to all such fully taxable bonds thereafter
acquired by it, and is irrevocable without the consent of the IRS. If such an
election is not made, (i) such a Holder must include the full amount of each
interest payment in income as it accrues, and (ii) the premium must be allocated
to the principal distributions on the Premium Security and, when each such
distribution is received, a loss equal to the premium allocated to such
distribution will be recognized. Any tax benefit from the premium not previously
recognized will be taken into account in computing gain or loss upon the sale or
disposition of the Premium Security.

         Some Securities may provide for only nominal distributions of principal
in comparison to the distributions of interest thereon. It is possible that the
IRS or the Treasury Department may issue guidance excluding such Securities from
the rules generally applicable to debt instruments issued at a premium. In
particular, it is possible that such a Security will be treated as having
original issue discount equal to the excess of the total payments to be received
thereon over its issue price. In such event, section 1272(a)(6) of the Code
would govern the accrual of such original issue discount, but a Holder would
recognize substantially the same income in any given period as would be
recognized if an election were made under section 171(c)(2) of the Code. Unless
and until the Treasury Department or the IRS publishes specific guidance
relating to the tax treatment of such Securities, the Trustee intends to furnish
tax information to Holders of such Securities in accordance with the rules
described in the preceding paragraph.

Special Election
         For any Security acquired on or after April 4, 1994, a Holder may elect
to include in gross income all "interest" that accrues on the Security by using
a constant yield method. For purposes of the election, the term "interest"
includes stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount and
unstated interest as adjusted by any amortizable bond premium or acquisition
premium. A Holder should consult its own tax advisor regarding the time and
manner of making and the scope of the election and the implementation of the
constant yield method.

BACKUP WITHHOLDING

         Distributions of interest and principal, as well as distributions of
proceeds from the sale of Securities, may be subject to the "backup withholding
tax" under section 3406 of the Code at a rate of 31% if recipients of such
distributions fail to furnish to the payor certain information, including their
taxpayer identification numbers, or otherwise fail to establish an exemption
from such tax. Any amounts deducted and withheld from a distribution to a
recipient would be allowed as a credit against such recipient's federal income
tax. Furthermore, certain penalties may be imposed by the IRS on a recipient of
distributions that is required to supply information but that does not do so in
the proper manner.

FOREIGN INVESTORS

Grantor Trust Securities and REMIC Regular Securities
         Distributions made on a Grantor Trust Security, Debt Security or a
REMIC Regular Security to, or on behalf of, a Holder that is not a U.S. Person
generally will be exempt from U.S. federal income and withholding taxes. The
term "U.S. Person" means a citizen or resident of the United States, a
corporation, partnership or other 



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<PAGE>


entity created or organized in or under the laws of the United States or any
political subdivision thereof, an estate that is subject to U.S. federal income
tax regardless of the source of its income, or a trust if a court within the
United States can exercise primary supervision over its administration and at
least one United States fiduciary has the authority to control all substantial
decisions of the trust. This exemption is applicable provided (a) the Holder is
not subject to U.S. tax as a result of a connection to the United States other
than ownership of the Security, (b) the Holder signs a statement under penalties
of perjury that certifies that such Holder is not a U.S. Person, and provides
the name and address of such Holder, and (c) the last U.S. Person in the chain
of payment to the Holder receives such statement from such Holder or a financial
institution holding on its behalf and does not have actual knowledge that such
statement is false. Holders should be aware that the IRS might take the position
that this exemption does not apply to a Holder that also owns 10% or more of the
REMIC Residual Securities of any REMIC trust, or to a Holder that is a
"controlled foreign corporation" described in section 881(c)(3)(C) of the Code.

REMIC Residual Securities
         Amounts distributed to a Holder of a REMIC Residual Security that is a
not a U.S. Person generally will be treated as interest for purposes of applying
the 30% (or lower treaty rate) withholding tax on income that is not effectively
connected with a U.S. trade or business. Temporary Treasury Regulations clarify
that amounts not constituting excess inclusions that are distributed on a REMIC
Residual Security to a Holder that is not a U.S. Person generally will be exempt
from U.S. federal income and withholding tax, subject to the same conditions
applicable to distributions on Grantor Trust Securities, Debt Securities and
REMIC Regular Securities, as described above, but only to the extent that the
obligations directly underlying the REMIC Trust that issued the REMIC Residual
Security (e.g., Loans or regular interests in another REMIC) were issued after
July 18, 1984. In no case will any portion of REMIC income that constitutes an
excess inclusion be entitled to any exemption from the withholding tax or a
reduced treaty rate for withholding. See "--REMIC Securities--Taxation of
Holders of REMIC Residual Securities--Excess Inclusions."

                            STATE TAX CONSIDERATIONS

         In addition to the federal income tax consequences described in
"Material Federal Income Tax Consequences," potential investors should consider
the state and local income tax consequences of the acquisition, ownership, and
disposition of the Securities. State and local 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 or locality.
Therefore, potential investors should consult their own tax advisors with
respect to the various state and local tax consequences of an investment in the
Securities.

                              ERISA CONSIDERATIONS

GENERAL

         Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit sharing or other employee benefit plan (a "Plan") and certain individual
retirement arrangements from engaging in certain transactions involving "plan
assets" with persons that are "parties in interest" under ERISA or "disqualified
persons" under the Code with respect to the Plan, unless a statutory or
administrative exemption applies to the transaction. ERISA and the Code also
prohibit generally certain actions involving conflicts of interest by persons
who are fiduciaries of such Plans or arrangements. A violation of these
"prohibited transaction" rules may generate excise tax and other liabilities
under ERISA and the Code for such persons. In addition, investments by Plans are
subject to ERISA's general fiduciary requirements, including the requirement of
investment prudence and diversification and the requirement that a Plan's
investments be made in accordance with the documents governing the Plan.
Employee benefit plans that 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 ERISA requirements. Accordingly, assets of such plans may be
invested in Securities without regard to the ERISA considerations discussed
below, subject to the provisions of other applicable federal, state and local
law. Any such plan which is qualified and exempt from taxation under Section
401(a) and 501(a) of the Code, however, is subject to the prohibited transaction
rules set forth in Section 503 of the Code.

         Certain transactions involving the Trust might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Plan
(including an individual retirement arrangement) that purchased 




                                       63
<PAGE>


Securities, if the assets of the Trust were deemed to be assets of the Plan.
Under a regulation (the "Plan Assets Regulation") issued by the United States
Department of Labor (the "DOL"), the assets of the Trust would be treated as
plan assets of a Plan for the purposes of ERISA and the Code only if the Plan
acquired an equity interest in the Trust and none of the exceptions contained in
the Plan Assets Regulation were applicable. An "equity interest" is defined
under the Plan Assets Regulation as an interest other than an instrument which
is treated as indebtedness under applicable local law and which has no
substantial equity features. In addition, in John Hancock Mutual Life Insurance
Co. v. Harris Trust and Savings Bank, 510 U.S. 86 (1993), the United States
Supreme Court ruled that assets held in an insurance company's general account
may be deemed to be "plan assets" for ERISA purposes under certain
circumstances. Therefore, in the absence of an exemption, the purchase, sale or
holding of a Security by a Plan (including certain individual retirement
arrangements) subject to Section 406 of ERISA or Section 4975 of the Code might
result in prohibited transactions and the imposition of excise taxes and civil
penalties.

CERTIFICATES

         The DOL has issued to various underwriters individual prohibited
transaction exemptions (the "Underwriter Exemptions"), which generally exempt
from the application of the prohibited transaction provisions of Section 406(a),
Section 406(b)(1), Section 406(b)(2) and Section 407(a) of ERISA and the excise
taxes imposed pursuant to Sections 4975(a) and (b) of the Code, certain
transactions with respect to the initial purchase, the holding and the
subsequent resale by Plans of certificates in pass-through trusts that consist
of secured receivables, secured loans and other secured obligations that meet
the conditions and requirements of the Underwriter Exemptions. The Underwriter
Exemptions will only be available for Securities that are Certificates.

         Among the conditions that must be satisfied in order for the
Underwriter Exemptions to apply to offered certificates are 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;

         (3)      the certificates acquired 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,
                  Moody's, Duff & Phelps Credit Rating Co. ("D&P") or Fitch;

         (4)      the Trustee is not an affiliate of any other member of the 
                  Restricted Group (as defined below);

         (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 originators and the sponsor
                  pursuant to the assignment of the loans to the trust estate
                  represents not more than the fair market value of such loans;
                  the sum of all payments made to and retained by any servicer
                  represents not more than reasonable compensation for such
                  person's services under the pooling and servicing agreement
                  and reimbursement of such person's reasonable expenses in
                  connection therewith;

         (6)      the Plan investing in the certificates is an "accredited
                  investor" as defined in Rule 501(a)(1) of Regulation D of the
                  Commission under the Securities Act of 1933; and

         (7)      in the event that all of the obligations used to fund the
                  trust have not been transferred to the trust on the closing
                  date, additional obligations of the types specified in the
                  prospectus supplement and/or pooling and servicing agreement
                  having an aggregate value equal to no more than 25% of the
                  total principal amount of the certificates being offered by
                  the trust may be transferred to the trust, in exchange for
                  amounts credited to the account funding the additional
                  obligations, within a funding period of no longer than 90 days
                  or 3 months following the closing date.




                                       64
<PAGE>


         The trust estate must also meet the following requirements:


         (i)      the corpus of the trust estate 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
                  Standard & Poor's, 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 the Plan's acquisition of
                  certificates.

         Moreover, the Underwriter Exemptions 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 in 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 of
each class of certificates in which Plans have invested is acquired by persons
independent of the Restricted Group and at least fifty percent of the aggregate
interest in the trust is acquired by persons independent of the Restricted
Group; (ii) such fiduciary (or its affiliate) is an obligor with respect to five
percent 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 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 of the assets of the Plan with respect to which such
person is a fiduciary are invested in certificates representing an interest in
one or more trusts containing assets sold or serviced by the same entity. The
Underwriter Exemptions do not apply to Plans sponsored by the Sponsor, the
Underwriters, the Trustee, the Master Servicer, any other servicer, any obligor
with respect to Mortgage Loans included in the Trust Estate constituting more
than five percent of the aggregate unamortized principal balance of the assets
in the Trust Estate, or any affiliate of such parties (the "Restricted Group").

         In addition to the Underwriter Exemptions, the DOL has issued
Prohibited Transaction Class Exemption ("PTCE") 83-1 which provides an exemption
for certain transactions involving the sale or exchange of certain residential
mortgage pool pass-through certificates by Plans and for transactions in
connection with the servicing and operation of the mortgage pool.

NOTES

         The Underwriter Exemptions will not be available for Securities which
are Notes. However, if the Notes are treated as indebtedness without substantial
equity features, the Trust's assets would not be deemed assets of a Plan. If the
Notes are treated as having substantial equity features, the purchase, holding
and resale of the Notes could result in a transaction that is prohibited under
ERISA or the Code. The acquisition or holding of the Notes by or on behalf of a
Plan could nevertheless give rise to a prohibited transaction, if such
acquisition and holding of Notes by or on behalf of a Plan were deemed to be a
prohibited loan to a party in interest with respect to such Plan. Certain
exemptions from such prohibited transaction rules could be applicable to the
purchase and holding of Notes by a Plan, depending on the type and circumstances
of the plan fiduciary making the decision to acquire such Notes. Included among
these exemptions are: PTCE 84-14, regarding certain transactions effected by
"qualified professional asset managers"; PTCE 90-1, regarding certain
transactions entered into by insurance company pooled separate accounts; PTCE
91-38, regarding certain transactions entered into by bank collective investment
funds; PTCE 95-60, regarding certain transactions entered into by insurance
company general accounts; and PTCE 96-23, regarding certain transactions
effected by "in-house asset managers". Each purchaser and each transferee of a
Note that is treated as debt for purposes of the Plan Assets Regulation may be
required to represent and warrant that its purchase and holding of such Note
will be covered by one of the exemptions listed above or by another Department
of Labor Class Exemption.

CONSULTATION WITH COUNSEL



                                       65
<PAGE>


         The Prospectus Supplement for each series of Securities will provide
further information which Plans should consider before purchasing the offered
Securities. A Plan fiduciary considering the purchase of Securities should
consult its tax and/or legal advisors regarding whether the assets of the Trust
would be considered plan assets, the possibility of exemptive relief from the
prohibited transaction rules and other ERISA issues and their potential
consequences. Moreover, each Plan fiduciary should determine whether under the
general fiduciary standards of investment prudence and diversification, an
investment in the Securities is appropriate for the Plan, taking into account
the overall investment policy of the Plan and the composition of the Plan's
investment portfolio. The sale of Securities to a Plan is in no respect a
representation by the Sponsor or the Underwriters that this investment meets all
relevant requirements with respect to investments by Plans generally or any
particular Plan or that this investment is appropriate for Plans generally or
any particular Plan.

                                LEGAL INVESTMENT

         Unless otherwise specified in the related Prospectus Supplement, the
Securities will not constitute "mortgage-related securities" within the meaning
of SMMEA. Accordingly, investors whose investment authority is subject to legal
restrictions should consult their own legal advisors to determine whether and to
what extent the Securities constitute legal investments for them.

                              PLAN OF DISTRIBUTION

         The Depositor may offer each Series of Securities through First Union
Capital Markets Corp. ("First Union") or one or more other firms that may be
designated at the time of each offering of such Securities. The participation of
First Union in any offering will comply with Schedule E to the bylaws of the
National Association of Securities Dealers, Inc. The Prospectus Supplement
relating to each Series of Securities will set forth the specific terms of the
offering of such Series of Securities and of each Class within such Series, the
names of the underwriters, the purchase price of the Securities, the proceeds to
the Depositor from such sale, any securities exchange on which the Securities
may be listed, and, if applicable, the initial public offering prices, the
discounts and commissions to the underwriters and any discounts and concessions
allowed or reallowed to certain dealers. The place and time of delivery of each
Series of Securities will also be set forth in the Prospectus Supplement
relating to such Series. First Union is an affiliate of the Depositor.

                                  LEGAL MATTERS

         Unless otherwise specified in the related Prospectus Supplement,
certain legal matters in connection with the Securities will be passed upon for
the Depositor by Dewey Ballantine LLP, New York, New York.




                                       66
<PAGE>


                                GLOSSARY OF TERMS

         The following are abbreviated definitions of certain capitalized terms
used in this Prospectus. Unless otherwise provided in a "supplemental Glossary"
in the Prospectus Supplement for a Series, such definitions shall apply to
capitalized terms used in such Prospectus Supplement. The definitions may vary
from those in the related Agreement for a Series and the related Agreement for a
Series generally provides a more complete definition of certain of the terms.
Reference should be made to the related Agreement for a Series for a more
compete definition of such terms.

         "Accrual Termination Date" means, with respect to a Class of Compound
Interest Securities, the Distribution Date specified in the related Prospectus
Supplement.

         "Advance" means cash advanced by the Servicer in respect of delinquent
payments of principal of and interest on a Loan, and for any other purposes
specified in the related Prospectus Supplement.

         "Agreement" means, with respect to a Series of Certificates, the
Pooling and Servicing Agreement or Trust Agreement, and, with respect to a
Series of Notes, the Indenture and the Servicing Agreement, as the context
requires.

         "Appraised Value" means, with respect to property securing a Loan, the
lesser of the appraised value determined in an appraisal obtained at origination
of the Loan or sales price of such property at such time.

         "Asset Group" means, with respect to the Primary Assets and other
assets comprising the Trust Fund of a Series, a group of such Primary Assets and
other assets having the characteristics described in the related Prospectus
Supplement.

         "Assumed Reinvestment Rate" means, with respect to a Series, the per
annum rate or rates specified in the related Prospectus Supplement for a
particular period or periods as the "Assumed Reinvestment Rate" for funds held
in any fund or account for the Series.

         "Available Distribution Amount" means the amount in the Distribution
Account (including amounts deposited therein from any reserve fund or other fund
or account) eligible for distribution to Holders on a Distribution Date.

         "Bankruptcy Code" means the federal bankruptcy code, 11 United States
Code 101 et seq., and related rules and regulations promulgated thereunder.

         "Business Day" means a day that, in the City of New York or in the city
or cities in which the corporate trust office of the Trustee are located, is
neither a legal holiday nor a day on which banking institutions are authorized
or obligated by law, regulations or executive order to be closed.

         "Certificate" means the Asset-Backed Certificates.

         "Class" means a Class of Securities of a Series.

         "Closing Date" means, with respect to a Series, the date specified in
the related Prospectus Supplement as the date on which Securities of such Series
are first issued.

         "Code" means the Internal Revenue Code of 1986, as amended, and
regulations (including proposed regulations) or other pronouncements of the
Internal Revenue Service promulgated thereunder.

         "Collection Account" means, with respect to a Series, the account
established in the name of the Servicer for the deposit by the Servicer of
payments received from the Primary Assets.



                                       67
<PAGE>


         "Combined Loan-to-Value Ratio" means, with respect to a Loan, the ratio
determined as set forth in the related Prospectus Supplement taking into account
the amounts of any related senior mortgage loans on the related Mortgaged
Property.

         "Commission" means the Securities and Exchange Commission.

         "Compound Interest Security" means any Security of a Series on which
all or a portion of the interest accrued thereon is added to the principal
balance of such Security on each Distribution Date, through the Accrual
Termination Date, and with respect to which no interest shall be payable until
such Accrual Termination Date, after which interest payments will be made on the
Compound Value thereof.

         "Compound Value" means, with respect to a Class of Compound Interest
Securities, the original principal balance of such Class, plus all accrued and
unpaid interest, if any, previously added to the principal balance thereof and
reduced by any payments of principal previously made on such Class of Compound
Interest Securities.

         "Condominium" means a form of ownership of real property wherein each
owner is entitled to the exclusive ownership and possession of his or her
individual Condominium Unit and also owns a proportionate undivided interest in
all parts of the Condominium Building (other than the individual Condominium
Units) and all areas or facilities, if any, for the common use of the
Condominium Units.

         "Condominium Association" means the person(s) appointed or elected by
the Condominium Unit owners to govern the affairs of the Condominium.

         "Condominium Building" means a multi-unit building or buildings, or a
group of buildings whether or not attached to each other, located on property
subject to Condominium ownership.

         "Condominium Loan" means a Loan secured by a Mortgage on a Condominium
Unit (together with its appurtenant interest in the common elements).

         "Condominium Unit" means an individual housing unit in a Condominium
Building.

         "Cooperative" means a corporation owned by tenant-stockholders who,
through the ownership of stock, shares or membership securities in the
corporation, receive proprietary leases or occupancy agreements which confer
exclusive rights to occupy specific units and which is described in Section 216
of the Code.

         "Cooperative Dwelling" means an individual housing unit in a building
owned by a Cooperative.

         "Cooperative Loan" means a housing loan made with respect to a
Cooperative Dwelling and secured by an assignment by the borrower
(tenant-stockholder) or security interest in shares issued by the applicable
Cooperative.

         "Credit Enhancement" means the credit enhancement for a Series, if any,
specified in the related Prospectus Supplement.

         "Cut-off Date" means the date designated as such in the related
Prospectus Supplement for a Series.

         "Debt Securities" means Securities characterized as indebtedness for
federal income tax purposes, and Regular Interest Securities.

         "Deferred Interest" means the excess of the interest accrued on the
outstanding principal balance of a Loan during a specified period over the
amount of interest required to be paid by an obligor on such Loan on the related
Due Date.

         "Deposit Agreement" means a guaranteed investment contract or
reinvestment agreement providing for the investment of funds held in a fund or
account, guaranteeing a minimum or a fixed rate of return on the investment of
moneys deposited therein.


                                       68
<PAGE>


         "Depositor" means Home Equity Securitization Corp.

         "Disqualified Organization" means the United States, any State or
political subdivision thereof, any possession of the United States, any foreign
government, any international organization, or any agency or instrumentality of
any of the foregoing, a rural electric or telephone cooperative described in
section 1381(a)(2)(C) of the Code, or any entity exempt from the tax imposed by
sections 1-1399 of the Code, if such entity is not subject to tax on its
unrelated business income.

         "Distribution Account" means, with respect to a Series, the account
established in the name of the Trustee for the deposit of remittances received
from the Servicer with respect to the Primary Assets.

         "Distribution Date" means, with respect to a Series or Class of
Securities, each date specified as a distribution date for such Series or Class
in the related Prospectus Supplement.

         "Due Date" means each date, as specified in the related Prospectus
Supplement for a Series, on which any payment of principal or interest is due
and payable by the obligor on any Primary Asset pursuant to the terms thereof.

         "Eligible Investments" means any one or more of the obligations or
securities described as such in the related Agreement.

          "Credit Enhancer" means the provider of the Credit Enhancement for a
Series specified in the related Prospectus Supplement.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.

         "Escrow Account" means an account, established and maintained by the
Servicer for a Loan, into which payments by borrowers to pay taxes, assessments,
mortgage and hazard insurance premiums and other comparable items required to be
paid to the mortgagee are deposited.

         "FHLMC" means the Federal Home Loan Mortgage Corporation.

         "Final Scheduled Distribution Date" means, with respect to a Class of
Notes of a Series, the date no later than which principal thereof will be fully
paid and with respect to a Class of Certificates of a Series, the date after
which no Certificates of such Class will remain outstanding, in each case based
on the assumptions set forth in the related Prospectus Supplement.

         "FNMA" means the Federal National Mortgage Association.

         "Holder" means the person or entity in whose name a Security is 
registered.

         "Home Improvements" means the home improvements financed by a Home
Improvement Contract.

         "Home Improvement Contract" means any home improvement installment
sales contracts and installment loan agreement which may be unsecured or secured
by purchase money security interest in the Home Improvement financed thereby.

         "HUD" means the United States Department of Housing and Urban 
Development.

         "Indenture" means the indenture relating to a Series of Notes between
the Trust Fund and the Trustee.

         "Insurance Policies" means certain mortgage insurance, hazard insurance
and other insurance policies required to be maintained with respect to Loans.



                                       69
<PAGE>


         "Insurance Proceeds" means amount paid by the insurer under any of the
Insurance Policies covering any Loan or Mortgaged Property.

         "Interest Only Securities" means a Class of Securities entitled solely
or primarily to distributions of interest and which is identified as such in the
related Prospectus Supplement.

         "IRS" means the Internal Revenue Service.

         "Lifetime Rate Cap" means the lifetime limit if any, on the Loan Rate
during the life of each adjustable rate Loan.

         "Liquidation Proceeds" means amounts received by the Servicer in
connection with the liquidation of a Loan, net of liquidation expenses.

         "Loan Rate" means, unless otherwise indicated herein or in the
Prospectus Supplement, the interest rate borne by a Loan.

         "Loans" mean Mortgage Loans and/or Home Improvement Contracts,
collectively. A Loan refers to a specific Mortgage Loan or Home Improvement
Contract, as the context requires.

         "Loan-to-Value Ratio" means, with respect to a Loan, the ratio
determined as set forth in the related Prospectus Supplement.

         "Minimum Rate" means the lifetime minimum Loan Rate during the life of
each adjustable rate Loan.

         "Minimum Principal Payment Agreement" means a minimum principal payment
agreement with an entity meeting the criteria of the Rating Agencies.

         "Modification" means a change in any term of a Loan.

         "Mortgage" means the mortgage, deed of trust or other similar security
instrument securing a Mortgage Note.

         "Mortgage Loan" means a closed-end home equity loan secured by a
Mortgaged Property.

         "Mortgage Note" means the note or other evidence of indebtedness of a
Mortgagor under the Loan.

         "Mortgagor" means the obligor on a Mortgage Note.

         "1986 Act" means the Tax Reform Act of 1986.

         "Notes" means the Asset-Backed Notes.

         "Notional Amount" means the amount set forth in the related Prospectus
Supplement for a Class of Interest Only Securities.

         "PAC" ("Planned Amortization Class Securities") means a Class of
Securities of a Series on which payments of principal are made in accordance
with a schedule specified in the related Prospectus Supplement, based on certain
assumptions stated therein.

         "Participating Securities" means Securities entitled to receive
payments of principal and interest and an additional return on investment as
described in the related Prospectus Supplement.

         "Pass-Through Security" means a security representing an undivided
beneficial interest in a pool of assets, including the right to receive a
portion of all principal and interest payments relating to those assets.


                                       70
<PAGE>


         "Pay Through Security" means Regular Interest Securities and certain
Debt Securities that are subject to acceleration due to prepayment on the
underlying Primary Assets.

         "Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust (including any beneficiary thereof),
unincorporated organization, or government or any agency or political
subdivision thereof.

         "Pooling and Servicing Agreement" means the pooling and servicing
agreement relating to a Series of Certificates among the Depositor, the Servicer
(if such Series relates to Loans) and the Trustee.

         "Primary Assets" means the Private Securities and/or Loans, as the case
may be, which are included in the Trust Fund for such Series. A Primary Asset
refers to a specific Private Security or Loan, as the case may be.

         "Principal Balance" means, with respect to a Primary Asset and as of a
Due Date, the original principal amount of the Primary Asset, plus the amount of
any Deferred Interest added to such principal amount, reduced by all payments,
both scheduled or otherwise, received on such Primary Asset prior to such Due
Date and applied to principal in accordance with the terms of the Primary Asset.

         "Principal Only Securities" means a Class of Securities entitled solely
or primarily to distributions of principal and identified as such in the
Prospectus Supplement.

         "Private Security" means a participation or pass-through certificate
representing a fractional, undivided interest in Underlying Loans or
collateralized obligations secured by Underlying Loans.

         "Property" means either a Home Improvement or a Mortgaged Property
securing a Loan, as the context requires.

         "PS Agreement" means the pooling and servicing agreement, indenture,
trust agreement or similar agreement pursuant to which a Private Security is
issued.

         "PS Servicer" means the servicer of the Underlying Loans.

         "PS Sponsor" means, with respect to Private Securities, the sponsor or
depositor under a PS Agreement.

         "PS Trustee" means the trustee designated under a PS Agreement.

         "Qualified Insurer" means a mortgage guarantee or insurance company
duly qualified as such under the laws of the states in which the Mortgaged
Properties are located duly authorized and licensed in such states to transact
the applicable insurance business and to write the insurance provided.

         "Rating Agency" means the nationally recognized statistical rating
organization (or organizations) which was (or were) requested by the Depositor
to rate the Securities upon the original issuance thereof.

         "Regular Interest" means a regular interest in a REMIC.

         "REMIC" means a real estate mortgage investment conduit.

         "REMIC Administrator" means the Person, if any, specified in the
related Prospectus Supplement for a Series for which a REMIC election is made,
to serve as administrator of the Series.

         "REMIC Provisions" means the provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at sections
860A through 860G of Subchapter M of Chapter 1 of the Code, and related
provisions, and regulations, including proposed regulations and rulings, and
administrative pronouncements promulgated thereunder, as the foregoing may be in
effect from time to time.



                                       71
<PAGE>


         "REO Property" means real property which secured a defaulted Loan,
beneficial ownership of which has been acquired upon foreclosure, deed in lieu
of foreclosure, repossession or otherwise.

         "Reserve Fund" means, with respect to a Series, any Reserve Fund
established pursuant to the related Agreement.

         "Residual Interest" means a residual interest in a REMIC.

         "Retained Interest" means, with respect to a Primary Asset, the amount
or percentage specified in the related Prospectus Supplement which is not
included in the Trust Fund for the related Series.

         "Scheduled Payments" means the scheduled payments of principal and
interest to be made by the borrower on a Primary Asset.

         "Securities" means the Notes or the Certificates.

         "Seller" means the seller of the Primary Assets to the Depositor
identified in the related Prospectus Supplement for a Series.

         "Senior Securityholder" means a holder of a Senior Security.

         "Senior Securities" means a Class of Securities as to which the
holders' rights to receive distributions of principal and interest are senior to
the rights of holders of Subordinate Securities, to the extent specified in the
related Prospectus Supplement.

         "Series" means a separate series of Securities sold pursuant to this
Prospectus and the related Prospectus Supplement.

         "Servicer" means, with respect to a Series relating to Loans, the
Person if any, designated in the related Prospectus Supplement to service Loans
for that Series, or the successors or assigns of such Person.

         "Single Family Property" means property securing a Loan consisting of
one-to four-family attached or detached residential housing, including
Cooperative Dwellings.

         "Stripped Securities" means Pass-Through Securities representing
interests in Primary Assets with respect to which all or a portion of the
principal payments have been separated from all or a portion of the interest
payments.

         "Subordinate Securityholder" means a Holder of a Subordinate Security.

         "Subordinated Securities" means a Class of Securities as to which the
rights of holders to receive distributions of principal, interest or both is
subordinated to the rights of holders of Senior Securities, and may be allocated
losses and shortfalls prior to the allocation thereof to other Classes of
Securities, to the extent and under the circumstances specified in the related
Prospectus Supplement.

         "Trustee" means the trustee under the applicable Agreement and its
successors.

         "Trust Fund" means, with respect to any Series of Securities, the trust
holding all money, instruments, securities and other property, including all
proceeds thereof, which are, with respect to a Series of Certificates, held for
the benefit of the Holders by the Trustee under the Pooling and Servicing
Agreement or Trust Agreement or, with respect to a Series of Notes, pledged to
the Trustee under the Indenture as a security for such Notes, including, without
limitation, the Primary Assets (except any Retained Interests), all amounts in
the Distribution Account Collection Account or Reserve Funds, distributions on
the Primary Assets (net of servicing fees), and reinvestment earnings on such
net distributions and any Credit Enhancement and all other property and interest
held by or pledged to the Trustee pursuant to the related Agreement for such
Series.



                                       72
<PAGE>


         "UCC" means the Uniform Commercial Code.

         "Underlying Loans" means loans of the type eligible to be Loans
underlying or securing Private Securities.

         "Variable Interest Security" means a Security on which interest accrues
at a rate that is adjusted, based upon a predetermined index, at fixed periodic
intervals, all as set forth in the related Prospectus Supplement.

         "Zero Coupon Security" means a Security entitled to receive payments of
principal only.






                                       73
<PAGE>



                                TABLE OF CONTENTS


                                                   Page



<PAGE>


SUMMARY OF PROSPECTUS ..............................5
RISK FACTORS
PROSPECTUS SUPPLEMENT...............................3
REPORTS TO HOLDERS..................................3
AVAILABLE INFORMATION...............................3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.....4
SUMMARY OF PROSPECTUS...............................5
RISK FACTORS.......................................15
   NO SECONDARY MARKET.............................15
   PRIMARY ASSETS ARE ONLY SOURCE OF REPAYMENT.....15
   LIMITED PROTECTION AGAINST LOSSES...............15
   YIELD MAY VARY..................................16
   PROPERTY VALUES MAY BE INSUFFICIENT.............16
   PRE-FUNDING MAY ADVERSELY AFFECT INVESTMENT.....16
   POTENTIAL LIABILITY FOR ENVIRONMENTAL
   CONDITIONS......................................17
   CONSUMER PROTECTION LAWS MAY AFFECT LOANS.......17
   CONTRACTS WILL NOT BE STAMPED...................18
   RATINGS ARE NOT RECOMMENDATIONS.................18
DESCRIPTION OF THE SECURITIES......................18
   GENERAL.........................................18
   VALUATION OF THE PRIMARY ASSETS.................19
   PAYMENTS OF INTEREST............................19
   PAYMENTS OF PRINCIPAL...........................20
   FINAL SCHEDULED DISTRIBUTION DATE...............20
   SPECIAL REDEMPTION..............................20
   OPTIONAL REDEMPTION, PURCHASE OR TERMINATION....20
   WEIGHTED AVERAGE LIFE OF THE SECURITIES.........21
THE TRUST FUNDS....................................22
   GENERAL.........................................22
   THE LOANS.......................................22
   PRIVATE SECURITIES..............................25
   COLLECTION AND DISTRIBUTION ACCOUNTS............27
CREDIT ENHANCEMENT.................................27
   SUBORDINATE SECURITIES..........................28
   INSURANCE.......................................28
   RESERVE FUNDS...................................29
   MINIMUM PRINCIPAL PAYMENT AGREEMENT.............29
   DEPOSIT AGREEMENT...............................29
SERVICING OF LOANS.................................30
   GENERAL.........................................30
   COLLECTION PROCEDURES; ESCROW ACCOUNTS..........30
   DEPOSITS TO AND WITHDRAWALS FROM THE 
   COLLECTION ACCOUNT .............................30
   ADVANCES AND LIMITATIONS THEREON................32
   MAINTENANCE OF INSURANCE POLICIES AND 
   OTHER SERVICING PROCEDURES .....................32
   REALIZATION UPON DEFAULTED LOANS................33
   ENFORCEMENT OF DUE-ON-SALE CLAUSES..............33
   SERVICING COMPENSATION AND PAYMENT OF EXPENSES..34
   EVIDENCE AS TO COMPLIANCE.......................34
   CERTAIN MATTERS REGARDING THE SERVICER..........35
THE AGREEMENTS.....................................36
   ASSIGNMENT OF PRIMARY ASSETS....................36
   REPORTS TO HOLDERS..............................38
   EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT.39
   THE TRUSTEE.....................................41
   DUTIES OF THE TRUSTEE...........................41
   RESIGNATION OF TRUSTEE..........................41
   AMENDMENT OF AGREEMENT..........................41
   VOTING RIGHTS...................................42
   LIST OF HOLDERS.................................42
   BOOK-ENTRY SECURITIES...........................42
   REMIC ADMINISTRATOR.............................42
   TERMINATION.....................................42
CERTAIN LEGAL ASPECTS OF LOANS.....................43
   MORTGAGES.......................................44
   FORECLOSURE ON MORTGAGES........................44
   RIGHTS OF REDEMPTION............................45
   JUNIOR MORTGAGES; RIGHTS OF SENIOR MORTGAGES....45
   ANTI-DEFICIENCY LEGISLATION AND OTHER 
   LIMITATIONS ON LENDERS .........................46
   DUE-ON-SALE CLAUSES IN MORTGAGE LOANS...........47
   ENFORCEABILITY OF PREPAYMENT AND LATE 
   PAYMENT FEES ...................................48
   EQUITABLE LIMITATIONS ON REMEDIES...............48
   APPLICABILITY OF USURY LAWS.....................48
   THE HOME IMPROVEMENT CONTRACTS..................48
   INSTALLMENT SALES CONTRACTS.....................50
   SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 
   1940............................................50
THE DEPOSITOR......................................51
   GENERAL.........................................51
USE OF PROCEEDS....................................51
MATERIAL FEDERAL INCOME TAX CONSEQUENCES...........51
   GENERAL.........................................51
   GRANTOR TRUST SECURITIES........................52
   REMIC SECURITIES................................53
   SPECIAL TAX ATTRIBUTES..........................54
   DEBT SECURITIES.................................59
   DISCOUNT AND PREMIUM............................59
   BACKUP WITHHOLDING..............................62
   FOREIGN INVESTORS...............................62
STATE TAX CONSIDERATIONS...........................63
ERISA CONSIDERATIONS...............................63



                                       i



<PAGE>


LEGAL INVESTMENT...................................66
PLAN OF DISTRIBUTION...............................66
LEGAL MATTERS......................................66
GLOSSARY OF TERMS..................................67



                                       ii


<PAGE>


                                    PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

     The Registrant estimates that expenses in connection with the offering
described in this registration statement will be as follows:

<TABLE>
<CAPTION>
<S>                                                            <C>

Securities and Exchange Commission registration fee ..........    $295
Printing expenses ............................................  35,000
Accounting fees and expenses .................................  30,000
Legal fees and expenses ...................................... 200,000
Fees and expenses (including legal fees) for
qualifications under state securities laws ...................  10,000
Trustee's fees and expenses ..................................   5,000
Rating Agency fees and expenses ..............................  40,000
Miscellaneous ................................................ 200,000
                                                               -------
Total ......................................................   $520,295
                                                              =========

All amounts except the Securities and Exchange Commission registration fee are estimated.

</TABLE>



ITEM 15. INDEMNFICATION OF DIRECTORS AND OFFICERS

    Sections 55-8-50 through 55-8-58 of the revised North Carolina Business
Corporation Act (the "NCBCA") contain specific provisions relating to
indemnification of directors and officers of North Carolina corporations. In
general, the statute provides that (i) a corporation must indemnify a director
or officer who is wholly successful in his defense of a proceeding to which he
is a party because of his status as such, unless limited by the articles of
incorporation, and (ii) a corporation may indemnify a director or officer if he
is not wholly successful in such defense, if it is determined as provided in the
statute that the director or officer meets a certain standard of conduct,
provided when a director or officer is liable to the corporation, the
corporation may not indemnify him. The statute also permits a director or
officer of a corporation  who is a party to a proceeding to apply to the courts
for indemnification, unless the articles of incorporation provide otherwise, and
the court may order indemnification under certain circumstances set forth in the
statute. The statute further provides that a corporation may in its articles of
incorporation, by contract or by resolution provide indemnification in addition
to that provided by the statute, subject to certain conditions set forth in the
statute.

     The Articles of Incorporation of the Registrant provide that the personal
liability of each director of the corporation is eliminated to the fullest
extent permitted by the provisions of the NCBCA, as presently in effect or as
amended. No amendment, modification or repeal of this provision of the Articles
of Incorporation shall adversely affect any right or protection of a director
that exists at the time of such amendment, modification or repeal.

     First Union Corporation maintains directors and officers liability
insurance for the benefit of its subsidiaries, which provides coverage of up to
$80,000,000, subject to certain deductible amounts. In general, the policy
insures (i) the Registrant's directors and, in certain cases, its officers
against loss by reason of any of their wrongful acts, and/or (ii) the Registrant
against loss arising from claims against the


                                       4
<PAGE>

directors and officers by reason of their wrongful acts, all subject to the
terms and conditions contained in the policy.

    In connection with an agreement between the Registrant and Peter H.
Sorensen, an independent director of the Registrant, the Registrant has agreed
to indemnify and hold harmless Peter H. Sorensen from any and all loss, claim,
damage or cause of action, including reasonable attorneys' fees related thereto
(collectively, "Claims"), incurred by Peter H. Sorensen in the performance of
his duties as a director; provided, however, that Peter H. Sorensen shall not be
so indemnified for such Claims if they arise from his own negligence or willful
misconduct.

    Under agreements which may be entered into by the Registrant, certain
controlling persons, directors and officers of the Registrant may be entitled to
indemnification by underwriters and agents who participate in the distribution
of Securities covered by the Registration Statement against certain liabilities,
including liabilities under the Securities Act.



ITEM 16. EXHIBIT SCHEDULE

EXHIBIT
NUMBER                         DESCRIPTION OF EXHIBIT

(a)         Any required financial statements of a provider of credit
            enhancement will be included as an appendix to the related
            Prospectus Supplement
1.1         Form of Underwriting Agreement between the Registrant and
            the Underwiter named therein, relating to the distribution
            of the Securities**
3.1         Certificate of Incorporation of Home Equity Securitization
            Corp.**
3.2         By-laws of Home Equity Securitization Corp.**
4.1         Form of Pooling and Servicing Agreement**
4.2         Form of Indenture**
4.3         Form of Sale and Servicing Agreement**
4.4         Form of Mortgage Loan Purchase Agreement**
4.5         Form of Trust Agreement**
5.1         Opinion of Dewey Ballantine LLP as to legality
            of Certificates being issued**
5.2         Opinion of Dewey Ballantine LLP as to legality of Notes being
            issued**
8.1         Opinion of Dewey Ballantine LLP with respect to tax matters**
23.3        Consent of Dewey Ballantine LLP
            (contained in Exhibits 5.1, 5.2 and 8.1)
24.1        Power of Attorney (included on signature page
            of Registration Statement)
99.1        Form of Prospectus Supplement**
99.2        Form of Prospectus Supplement**


*     Filed herewith
**    To come in a subsequent filing

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:

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                    (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;

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

                provided, however, that paragraphs (i) and (ii) do not apply if
                the information required to be included in the post-effective
                amendment is contained in periodic reports filed by the
                registrant pursuant to Section 13 or Section 15(d) of the
                Securities Exchange Act of 1934 that are incorporated by
                reference 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 to provide to the
Underwriter at the closing specified in the Underwriting Agreement certificates
in such denominations and registered in such names as required by the
Underwriter to permit prompt delivery to each purchaser.

    (c)   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 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.




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      (d)    The undersigned registrant hereby undertakes that:


          (1)    For purposes of determining any liability under the Securities
                 Act of 1933, the information omitted from the form of
                 prospectus filed as part of this registration statement in
                 reliance upon Rule 430A and contained in a form of prospectus
                 filed by the registrant pursuant to Rule 424(b)(1) or (4) or
                 497(h) under the Securities Act shall be deemed to be part of
                 this registration statement as of the time it was declared
                 effective.

          (2)    For the purpose of determining any liability under the
                 Securities Act of 1933, each post-effective amendment that
                 contains a form of prospectus 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.

    (e)    The undersigned registrant hereby undertakes to file an application
    for the purpose of determining the eligibility of the trustee to act under
    subsection (a) of section 310 of the Trust Indenture Act ("Act") in
    accordance with the rules and regulations prescribed by the Commission under
    section 305(b)(2) of the Act.



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                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in December 1997, North Carolina, on
January 16, 1998.





                                   HOME EQUITY SECURITIZATION CORP.

                                   By: Wallace Saunders
                                     -------------------------------
                                     NAME: Wallace Saunders
                                     TITLE: Assistant Vice President

    Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the capacity
indicated on January 16, 1998.


              SIGNATURE                      TITLE

By: /s/ Brian E. Simpson                     Chairman and President
   ---------------------------
   NAME: Brian E. Simpson

By: /s/ Carolyn Eskridge                     Senior Vice President
   ---------------------------
   NAME: Carolyn Eskridge

By: Peter H. Sorensen                        Independent Director
   ---------------------------
   NAME: Peter H. Sorensen


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