PRUDENTIAL SECURITIES SECURED FINANCING CORP, 424B5, 1996-10-02

PRUDENTIAL SECURITIES SECURED FINANCING CORP
424B5, 1996-10-02
ASSET-BACKED SECURITIES

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PROSPECTUS SUPPLEMENT
(To Prospectus dated August 4, 1995)
- --------------------------------------------------------------------------------

ABFS MORTGAGE LOAN TRUST 1996-2

$38,799,000.00 7.525% CLASS A CERTIFICATES

[ABC LOGO]
(Servicer)

PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
(Depositor)

MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1996-2
- --------------------------------------------------------------------------------

The Series 1996-2 Mortgage Pass-Through Certificates (the "Certificates")
will consist of one class of senior Certificates (the "Class A Certificates")
and one class of subordinated Certificates (the "Class R Certificates"). Only
the Class A Certificates are being offered hereby. The Class A Pass-Through
Rate is 7.525% per annum, payable monthly at one-twelfth the annual rate.

The Certificates will evidence in the aggregate all of the beneficial
ownership interests in a trust fund (the "Trust Fund") consisting primarily of a
pool of fixed-rate, closed-end, conventional, monthly pay, generally fully
amortizing, business and consumer purpose residential home equity loans secured
by first or second lien mortgages or deeds of trust on real properties (the
"Mortgage Loans") held by ABFS Mortgage Loan Trust 1996-2 (the "Trust").
Approximately 33.82% and 47.23% of the Mortgage Loans by aggregate principal
balance as of the Statistical Calculation Date (as defined herein) are secured
by Mortgaged Properties (as defined herein) located in New Jersey and
Pennsylvania, respectively. See "Risk Factors -- Geographic Concentration" in
this Prospectus Supplement.

The Trust will be created pursuant to a Pooling and Servicing Agreement
(the "Pooling and Servicing Agreement") among American Business Credit, Inc., as
servicer (the "Servicer"), Prudential Securities Secured Financing Corporation,
as depositor (the "Depositor") and The Chase Manhattan Bank, as trustee (the
"Trustee"). On the Closing Date (as defined herein) Mortgage Loans (the
"Initial Mortgage Loans") having an aggregate Principal Balance (determined as
of the Cut-Off Date, defined herein) of approximately $26,915,932.68 will be
transferred to the Trust Fund (as defined herein). The Pooling and Servicing
Agreement provides that additional mortgage loans (the "Subsequent Mortgage
Loans") having an aggregate Principal Balance of up to $13,084,067.32 (the
"Original Pre-Funded Amount") may be purchased by the Trust from the Depositor
from time to time on or before December 27, 1996 from funds deposited in the
Pre-Funding Account (as defined herein) on the Closing Date from proceeds of the
sale of the Class A Certificates.

The Depositor will cause Financial Security Assurance Inc. (the
"Certificate Insurer") to issue a certificate guaranty insurance policy (the
"Certificate Insurance Policy") for the benefit of the Class A
Certificateholders pursuant to which it will guarantee certain payments to the
Class A Certificateholders as described herein.

[FSA Logo]

FOR A DISCUSSION OF SIGNIFICANT MATTERS AFFECTING INVESTMENT IN THE
CERTIFICATES, SEE "RISK FACTORS" BEGINNING ON PAGE S-16 HEREIN AND BEGINNING ON
PAGE 12 IN THE PROSPECTUS.

The Class A Certificates are entitled to a certain priority, relative to
the Class R Certificates, in right of distributions on the Mortgage Loans. See
"Description of the Certificates -- Flow of Funds."

(COVER CONTINUED ON NEXT PAGE)

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THESE SECURITIES DO NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE
DEPOSITOR, THE ORIGINATORS, THE SELLER,THE SERVICER, THE
CERTIFICATE INSURER, THE TRUSTEE OR ANY OF THEIR RESPECTIVE
AFFILIATES. NEITHER THESE SECURITIES NOR THE UNDERLYING
MORTGAGE LOANS WILL BE INSURED OR GUARANTEED BY ANY
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.

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

The Class A Certificates will be purchased by Prudential Securities
Incorporated (the "Underwriter") from the Depositor and will be offered by the
Underwriter from time to time to the public in negotiated transactions or
otherwise at varying prices to be determined at the time of sale.

The Class A Certificates will be sold to the public at a price of
99.953125% plus interest from September 1, 1996. Proceeds to the Depositor from
the sale of the Class A Certificates will be approximately $38,587,000.00,
before deducting expenses payable by the Depositor estimated to be approximately
$230,000.00 in the aggregate, and before adding accrued interest. See "Plan of
Distribution" in this Prospectus Supplement.

The Class A Certificates are offered by the Underwriter when, as and if
issued, subject to delivery by the Depositor and acceptance by the Underwriter,
to prior sale and to withdrawal, cancellation or modification of the offer
without notice. It is expected that the Class A Certificates will be available
for delivery through the facilities of The Depository Trust Company, CEDEL S.A.
and Euroclear on or about September 27, 1996.

PRUDENTIAL SECURITIES INCORPORATED

September 12, 1996

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(COVER CONTINUED FROM PREVIOUS PAGE)

Distributions in respect of principal and interest will be made on the 15th
day of each month or, if the 15th day is not a Business Day, on the next
succeeding Business Day, commencing on October 15, 1996 (each, a "Distribution
Date"), to the holders of Certificates to the extent described herein. On each
Distribution Date, the amount of interest distributed in respect of the Class A
Certificates will equal the interest accrued at the Class A Pass-Through Rate on
the Class A Principal Balance during the prior calendar month, and will be
calculated based on a 360-day year consisting of twelve 30-day months.

IF PURCHASED AT A PRICE OTHER THAN PAR, A CLASS A CERTIFICATE'S YIELD TO
MATURITY WILL BE SENSITIVE TO THE RATE AND TIMING OF PRINCIPAL PAYMENTS
(INCLUDING PREPAYMENTS) ON THE MORTGAGE LOANS, SOME OF WHICH MAY BE PREPAID AT
ANY TIME WITHOUT PENALTY. INVESTORS IN THE CLASS A CERTIFICATES SHOULD CONSIDER
THE ASSOCIATED RISKS, INCLUDING, IN THE CASE OF CLASS A CERTIFICATES PURCHASED
AT A DISCOUNT (OR PREMIUM), THE RISK THAT A SLOWER (OR FASTER) THAN ANTICIPATED
RATE OF PAYMENTS IN RESPECT OF PRINCIPAL (INCLUDING PREPAYMENTS) ON THE MORTGAGE
LOANS COULD RESULT IN AN ACTUAL YIELD THAT IS LOWER THAN ANTICIPATED. SEE
"DESCRIPTION OF THE CERTIFICATES -- FLOW OF FUNDS" IN THIS PROSPECTUS SUPPLEMENT
AND "PREPAYMENT AND YIELD CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT AND IN
THE PROSPECTUS.

There is currently no secondary market for the Class A Certificates and
there can be no assurance that a secondary market will develop or, if it does
develop, that it will provide Certificateholders with liquidity of investment at
any particular time or for the life of the Certificates.

An election will be made to treat the Trust as a real estate mortgage
investment conduit (a "REMIC") for federal income tax purposes. As described
more fully herein and in the Prospectus, the Class A Certificates will
constitute "regular interests" in the REMIC and the Class R Certificates will
constitute a "residual interest" in the REMIC. See "Summary Terms of the
Certificates -- Federal Income Tax Status" and "Certain Federal Income Tax
Considerations" in this Prospectus Supplement and "Certain Federal Income Tax
Consequences -- REMIC Certificates" in the Prospectus.

The Class A Certificates described herein represent a class of a separate
series of Certificates being offered by the Depositor from time to time pursuant
to the Prospectus dated August 4, 1995 accompanying this Prospectus Supplement.
The Prospectus shall not be considered complete without this Prospectus
Supplement. Any prospective investor should not purchase any Class A
Certificates described herein unless it shall have received the Prospectus and
this Prospectus Supplement. The Prospectus contains important information
regarding this offering which is not contained herein, and prospective investors
are urged to read the Prospectus and this Prospectus Supplement in full.

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

UNTIL NINETY DAYS FROM THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE CLASS A CERTIFICATES, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

In addition to the documents described in the Prospectus under
"Incorporation of Certain Information by Reference," the financial statements of
the Certificate Insurer included in, or as exhibits to, the following documents
which have been filed with the Commission by Financial Security Assurance
Holdings Ltd. ("Holdings"), are hereby incorporated by reference in the
Registration Statement of which this Prospectus Supplement and the Prospectus
form a part:

(a) Annual Report on Form 10-K for the year ended December 31, 1995, and

(b) Quarterly Reports on Form 10-Q for the periods ended March 31, 1996 and June
30, 1996.

All financial statements of the Certificate Insurer included in documents
filed by Holdings pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") subsequent to
the date of this Prospectus Supplement and prior to the termination of the
offering of the Certificates shall be deemed to be incorporated by reference
into this Prospectus Supplement and to be a part hereof from the respective
dates of filing of such documents.

The Seller on behalf of the Trust hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Trust's annual report pursuant to section 13(a) or section 15(d) of the Exchange
Act and each filing of the financial statements of the Certificate Insurer
included in or as an exhibit to the annual report of Holdings filed pursuant to
section 13(a) or section 15(d) of the Exchange Act that is incorporated by
reference in the Registration Statement (as defined in the accompanying
Prospectus) shall be deemed to be a new registration statement relating to the
Certificates offered hereby, and the offering of such Certificates at that time
shall be deemed to be the initial bona fide offering thereof.

S-2

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SUMMARY TERMS OF THE CERTIFICATES

THE FOLLOWING IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT AND IN THE
PROSPECTUS. CAPITALIZED TERMS USED HEREIN AND NOT OTHERWISE DEFINED HEREIN HAVE
THE MEANINGS ASSIGNED IN THE PROSPECTUS. SEE "INDEX OF SIGNIFICANT PROSPECTUS
SUPPLEMENT DEFINITIONS" HEREIN AND "INDEX OF SIGNIFICANT DEFINITIONS" IN THE
PROSPECTUS.

Title of Securities . . . . . . ABFS Mortgage Loan Trust 1996-2, Mortgage Pass-
Through Certificates, Series 1996-2 (the
"Certificates").

Trust . . . . . . . . . . . . . ABFS Mortgage Loan Trust 1996-2, a trust to be
formed under the laws of the State of New
York.

Depositor . . . . . . . . . . . Prudential Securities Secured Financing
Corporation (the "Depositor"). See "The
Depositor" in the Prospectus.

Seller. . . . . . . . . . . . . ABFS 1996-2, Inc. (the "Seller").

Originators, Servicer
and Subservicer . . . . . . . American Business Credit, Inc. ("ABC") and
HomeAmerican Credit, Inc., d/b/a Upland
Mortgage ("Upland") originated or purchased
the Mortgage Loans (in such capacity, the
"Originators"). The Originators will sell
and assign the Mortgage Loans to the Seller,
and the Seller will sell and assign the
Mortgage Loans to the Depositor. ABC will
act as servicer of the Mortgage Loans (in
such capacity, the "Servicer") and Upland
will act as subservicer (in such capacity,
the "Subservicer") with respect to a portion
of the Mortgage Loans. The principal office
of ABC is at Balapointe Office Centre, 111
Presidential Boulevard, Suite 215, Bala
Cynwyd, PA 19004. The obligations of the
Servicer with respect to the Certificates
will be limited to its contractual servicing
obligations. See "The Originators, the Seller
and the Servicer" in this Prospectus
Supplement.

Trustee . . . . . . . . . . . . The Chase Manhattan Bank

Certificates Offered. . . . . . The Certificates will consist of the Class A
Certificates (the "Class A Certificates") and
one class of subordinate Certificates (the
"Class R Certificates"), each a "Class".
Only the Class A Certificates are offered
hereby.

Cut-Off Date. . . . . . . . . . The close of business on August 30, 1996 or,
with respect to Initial Mortgage Loans
originated after August 30, 1996, the date of
origination of such Initial Mortgage Loans
(the "Cut-Off Date").

Statistical
Calculation Date. . . . . . . . August 30, 1996.

Issue Date. . . . . . . . . . . On or about September 27, 1996 (the "Issue
Date").

First Distribution Date . . . . October 15, 1996. Distributions on the
Certificates will be made on the 15th day of
each month (or, if such 15th day is not a
Business Day, on the next succeeding Business
Day) (each, a "Distribution Date").

S-3

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Record Date . . . . . . . . . . All distributions, other than the final
distribution on the Certificates, will be
made by or on behalf of the Trustee to the
persons in whose names the Certificates are
registered at the close of business on the
last business day of the month preceding the
month in which the related Distribution Date
occurs (such date, the "Record Date").

Description of Certificates . . The Certificates will represent the entire
beneficial ownership interest in a trust fund
("Trust Fund"). The assets of the Trust Fund
will consist primarily of a pool of Mortgage
Loans (the "Mortgage Pool"). The Mortgage
Loans transferred to the Trust on the Closing
Date are referred to as the "Initial Mortgage
Loans" and the Mortgage Loans transferred on
a date subsequent to the Closing Date but
prior to December 27, 1996 are referred to as
the "Subsequent Mortgage Loans." See "The
Mortgage Pool" in this Prospectus Supplement.
In addition, the Depositor will cause
Financial Security Assurance Inc. (the
"Certificate Insurer") to issue a certificate
guaranty insurance policy (the "Certificate
Insurance Policy") relating to the Class A
Certificates for the benefit of the Class A
Certificateholders, pursuant to which it will
guarantee certain payments to the Class A
Certificateholders as described herein. The
Trust will be formed, the Trust Fund will be
transferred to the Trust, and the
Certificates will be issued pursuant to the
Pooling and Servicing Agreement.

BOOK-ENTRY FORM. The Class A Certificates are
sometimes referred to in this Prospectus
Supplement as "Book-Entry Certificates." No
person acquiring an interest in the
Book-Entry Certificates (a "Beneficial
Owner") will be entitled to receive a
definitive certificate representing such
person's interest in the Trust Fund, except
under the limited circumstances described
herein. The Book-Entry Certificates
initially will be represented by a single
certificate registered in the name of Cede &
Co. ("Cede"), which will be the "Holder" or
"Certificateholder" of such Certificates, as
the nominee of The Depository Trust Company
("DTC"), as such terms are used herein. The
rights of Beneficial Holders may only be
exercised through DTC and its participating
organizations, except as otherwise specified
herein. See "Description of the
Certificates -- Book-Entry Registration" and
" -- Definitive Certificates" in this
Prospectus Supplement.

Denominations . . . . . . . . . The Class A Certificates initially will be
issued in book-entry form, in denominations
of $1,000 initial principal balance and
integral multiples of $1,000 in excess
thereof (except for one Certificate which may
be issued in a lesser amount).

The Mortgage Pool . . . . . . . The Mortgage Loans to be included in the
Trust Fund will be primarily fixed-rate,
closed-end, conventional, monthly pay,
generally fully amortizing, business and
consumer purpose residential home equity
loans secured by first or second mortgages or
deeds of trust (the "Mortgages") on real
properties (the "Mortgaged Properties"). The
Mortgage Loans have original terms to stated
maturity ranging from 36 months to 360 months
and have an aggregate Principal Balance as of
the Statistical Calculation Date of
approximately $23,482,032.68 (the
"Statistical Calculation Date Aggregate
Principal Balance"). Unless otherwise noted,
all statistical percentages in this
Prospectus Supplement are approximate and
measured by the aggregate Principal Balances
of the related Mortgage Loans in relation to
the Statistical

S-4

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Calculation Date Aggregate Principal Balance,
in each case as of the Statistical
Calculation Date.

The monthly payments for the Mortgage Loans
occur throughout a month, although most due
dates occur on the first day of each month
(each, a "Due Date"). See "The Mortgage
Pool" herein. The majority of the business
purpose loans have a prepayment fee clause.
Such prepayment fee clauses generally provide
that the mortgagor pay one or more of the
following (i) a fee equal to a percentage of
the outstanding principal balance of the
Mortgage Loan, such percentage having been
negotiated at the time of origination, (ii) a
fee which is designed to allow the holder of
the Mortgage Note to earn interest on the
Mortgage Loan as if the Mortgage Loan
remained outstanding until a designated point
in time, or (iii) a fee equal to the amount
of interest on the outstanding principal of
the Mortgage Loan calculated pursuant to a
Rule of 78's calculation, which has the
effect of requiring the mortgagor to pay a
greater amount of interest than would be
required to be paid if the actuarial method
of calculating interest was utilized. See
"Certain Legal Aspects of the Mortgage Loans
and Contracts -- The Mortgage Loans" in the
Prospectus.

The Mortgage Loans were underwritten in
accordance with the underwriting standards
described in this Prospectus Supplement under
"The Originators, the Seller and the
Servicer." Approximately 33.82% and 47.23%
of the Mortgage Loans by Cut-Off Date
Aggregate Principal Balance are secured by
Mortgaged Properties located in New Jersey
and Pennsylvania, respectively. See "Risk
Factors -- Geographic Concentration" in this
Prospectus Supplement.

The Subsequent Mortgage Loans to be purchased
by the Trust, if available, will be
originated or purchased by the Originators,
sold by the Originators to the Seller, sold
by the Seller to the Depositor and then sold
by the Depositor to the Trust. The Pooling
and Servicing Agreement will provide that the
Subsequent Mortgage Loans, as well as all
Mortgage Loans following the conveyance of
such Subsequent Mortgage Loans to the Trust,
must conform to certain specified
characteristics. See "The Mortgage Pool --
Conveyance of Subsequent Mortgage Loans" in
this Prospectus Supplement.

The Trust will be obligated to purchase the
Subsequent Mortgage Loans from time to time
on or before December 27, 1996 subject to the
availability thereof. In connection with
each purchase of Subsequent Mortgage Loans,
the Trust will be required to pay to the
Depositor a cash purchase price of no more
than 100% of the principal amount thereof
from the Pre-Funding Account. Under the
Pooling and Servicing Agreement, the
Depositor will be obligated to sell
Subsequent Mortgage Loans to the Trust and
the Trust will be obligated, subject to the
satisfaction of certain conditions described
herein, to purchase such Subsequent Mortgage
Loans. The Depositor will designate as a
cut-off date (each a "Subsequent Cut-Off
Date") the first day of the month in which
Subsequent Mortgage Loans will be conveyed by
the Depositor to the Trust (each a
"Subsequent Transfer Date") occurring during
the Pre-Funding Period (as defined herein).
The Trust may purchase the Subsequent
Mortgage Loans only from the Depositor and
not from any other

S-5

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person. See "The Mortgage Pool -- Conveyance
of Subsequent Mortgage Loans" in this
Prospectus Supplement.

Original Class A
Principal Balance . . . . . . $38,799,000.00

Class A Pass-Through Rate . . . 7.525% per annum, plus with respect to any
Distribution Date after the Clean-up Call
Date (defined herein), 0.75% (the "Class A
Pass-Through Rate").

Interest. . . . . . . . . . . . Interest will accrue on the Class A
Certificates at the Class A Pass-Through Rate
on the Class A Principal Balance during each
calendar month, and will be calculated on the
basis of a 360-day year consisting of twelve
30-day months (such interest, the "Current
Interest"). The amount of interest payable
will generally be equal to the applicable
Current Interest, reduced in each case by an
amount equal to the aggregate of the
Prepayment Interest Shortfalls (as defined
herein) and the Civil Relief Act Interest
Shortfalls (as defined herein) (together, the
"Mortgage Loan Interest Shortfalls"), if any,
for such Distribution Date to the extent not
covered by the Servicing Fee described
herein. The amount of interest (as described
above) payable with respect to the Class A
Certificates on any Distribution Date, plus
the interest portion of any Carry-Forward
Amount (as defined herein) for such
Distribution Date constitutes the "Class A
Interest Distribution Amount" and shall be
distributable, to the extent of available
funds, on the 15th day of each month, or if
such day is not a Business Day, the following
Business Day, commencing October 15, 1996
(each, a "Distribution Date"). Mortgage Loan
Interest Shortfalls will not be covered by or
under the Certificate Insurance Policy. See
"Description of the Certificates" in this
Prospectus Supplement.

Principal . . . . . . . . . . . The Original Class A Principal Balance (as
defined herein) represents the maximum
specified dollar amount of principal to which
the Holders (as defined herein) of the Class
A Certificates are entitled from the future
cash flow on the assets in the Trust Fund.
The "Class A Principal Balance" at any time
is equal to the Original Class A Principal
Balance minus the aggregate, cumulative
amounts actually distributed as principal to
the Class A Certificateholders. See
"Description of the Certificates -- Flow of
Funds," "The Certificate Insurance Policy"
and "The Certificate Insurer" in this
Prospectus Supplement.

The Holders of Class A Certificates are
entitled to receive certain monthly
distributions of principal on each
Distribution Date which generally reflect
collections of principal during the prior
month.

The subordination provisions of the Trust
result in a limited acceleration of the
principal payments to the Holders of the
Class A Certificates; such subordination
provisions are more fully described under
"Description of the Certificates --
Overcollateralization Provisions" herein.
Such subordination provisions have the effect
of shortening the weighted average life of
the Class A Certificates by increasing the
rate at which principal is distributed to the
Class A Certificateholders. See "Prepayment
and Yield Considerations" in this Prospectus
Supplement and in the Prospectus. In
addition, the following discussion makes use
of a number of terms which are

S-6

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defined under "Description of the
Certificates -- Overcollateralization
Provisions" herein.

The "Class A Principal Distribution Amount"
for any Distribution Date will be the lesser
of:

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

(b) the sum, without duplication, of:

(i) the Carry-Forward Amount (to the
extent such Carry-Forward Amount
relates to principal),

(ii) all principal in respect of the
Mortgage Loans actually collected
during the calendar month preceding
the Distribution Date (the "Due
Period"),

(iii) the Principal Balance of each
Mortgage Loan that either was
repurchased by the Seller or by the
Depositor or purchased by the
Servicer on the related
Distribution Date, to the extent
such Principal Balance is actually
received by the Trustee,

(iv) any Substitution Adjustments
delivered by the Depositor on the
related Distribution Date in
connection with a substitution of a
Mortgage Loan, to the extent such
Substitution Adjustments are
actually received by the Trustee,

(v) the Net Liquidation Proceeds
actually collected by the Servicer
of all Mortgage Loans during the
prior calendar month (to the extent
such Net Liquidation Proceeds
relate to principal),

(vi) any moneys released from the Pre-
Funding Account as a prepayment of
the Class A Certificates on the
Distribution Date which immediately
follows the end of the Pre-Funding
Period,

(vii) the amount of any Subordination
Deficit for such Distribution Date,

(viii) the proceeds received by the
Trustee of any termination of the
Trust (to the extent such proceeds
relate to principal), and

(ix) the amount of any Subordination
Increase Amount for such
Distribution Date, to the extent of
any Net Monthly Excess Cashflow
available for such purpose;

MINUS

(x) the amount of any Subordination
Reduction Amount for such
Distribution Date.

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In no event will the Class A Principal
Distribution Amount with respect to any
Distribution Date be (x) less than zero or
(y) greater than the then outstanding Class A
Principal Balance.

With respect to any Distribution Date, the sum
of the Class A Interest Distribution Amount
and the Class A Principal Distribution Amount
with respect to such Distribution Date is the
"Class A Distribution Amount" for such
Distribution Date.

With respect to any Distribution Date, the sum
of the Class A Interest Distribution Amount
and the amount of the Subordination Deficit,
if any, with respect to such Distribution
Date is the "Insured Distribution Amount" for
such Distribution Date.

The "Carry-Forward Amount" as of any
Distribution Date equals the sum of (a) the
amount, if any, by which (i) the Class A
Distribution Amount as of the immediately
preceding Distribution Date exceeded (ii) the
amount actually distributed to the Class A
Certificateholders on such Distribution Date
and (b) 30 days' interest on such amount at
the Class A Pass-Through Rate applicable to
such Distribution Date. See "Description of
Certificates -- Distributions" in this
Prospectus Supplement.

A "Liquidated Mortgage Loan" is, in general, a
defaulted Mortgage Loan as to which the
Servicer has determined that all amounts that
it expects to recover on such Mortgage Loan
have been recovered (exclusive of any
possibility of a deficiency judgment). Any
loss on a Liquidated Mortgage Loan (a
"Liquidated Loan Loss") may or may not be
recovered by the Holders of the Class A
Certificates on the Distribution Date which
immediately follows the event of loss.
However, the Holders of the Class A
Certificates are entitled to receive ultimate
recovery with respect to any Liquidated Loan
Losses which occur, receipt of which will be
no later than the Distribution Date occurring
after such Liquidated Loan Loss creates a
Subordination Deficit (as described below).
Such payment will be in the form of an
Insured Payment if not covered through Net
Monthly Excess Cashflow.

Insured Payments do not include Liquidated Loan
Losses until such time as such aggregate,
cumulative Liquidated Loan Losses have
created a Subordination Deficit.

A "Subordination Deficit" as of any
Distribution Date, is the amount, if any, by
which (a) the Class A Principal Balance,
after taking into account the payment of the
Class A Principal Distribution Amount on such
date (except for any payment to be made as to
principal from the proceeds of the
Certificate Insurance Policy) exceeds (b) the
aggregate Principal Balance of the Mortgage
Loans determined as of the end of the
immediately preceding Due Period.

The "Principal Balance" of any Mortgage Loan as
of any date of determination is the
outstanding principal balance of such
Mortgage Loan as of such date of
determination after giving effect to
prepayments received prior to the end of the
related Due Period and Deficient Valuations
incurred prior to the related Due Date. The
Principal Balance of a Mortgage Loan which

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becomes a Liquidated Mortgage Loan on or
prior to the related Due Date shall be zero.

Pre-Funding Account . . . . . . On the Closing Date the Trustee will deposit
the Original Pre-Funded Amount in the Pre-
Funding Account. Such amount will be funded
from the sale of the Class A Certificates,
and may be used to acquire Subsequent
Mortgage Loans during the period (the "Pre-
Funding Period") from the Closing Date until
the earliest of (i) the date on which the
amount on deposit in the Pre-Funding Account
is less than $100,000, (ii) the date on which
an Event of Default occurs under the Pooling
and Servicing Agreement, or (iii) December
27, 1996. The amount on deposit in the Pre-
Funding Account will be reduced during the
Pre-Funding Period by the amount thereof used
to purchase Subsequent Mortgage Loans in
accordance with the Pooling and Servicing
Agreement. The Depositor expects that the
Original Pre-Funded Amount will be reduced to
less than $100,000 by December 27, 1996. Any
amount remaining in the Pre-Funding Account
at the end of the Pre-Funding Period will be
used to prepay the Class A Certificates.

Capitalized Interest
Account . . . . . . . . . . . On the Closing Date the Trustee will be
required to deposit a portion of the proceeds
of the sale of the Class A Certificates in an
account (the "Capitalized Interest Account")
in the name of the Trustee on behalf of the
Trust. The amount deposited therein will be
used, as necessary, by the Trustee during the
Pre-Funding Period to fund the aggregate
amount of interest accruing during the
related Due Period at the Class A Pass-
Through Rate on the amount by which the Class
A Principal Balance exceeds the aggregate
Loan Balance of the Initial Mortgage Loans.
Any amounts remaining in the Capitalized
Interest Account on the Distribution Date
which follows the end of the Pre-Funding
Period and not used for such purposes are
required to be paid directly to the Holders
of the Class R Certificates on such
Distribution Date.

Credit Enhancement. . . . . . . The credit enhancement provided for the benefit
of the Class A Certificateholders consists
solely of (a) overcollateralization and (b)
the Certificate Insurance Policy.

OVERCOLLATERALIZATION.

On the Closing Date, the Trust will issue Class
A Certificates with an original Class A
Principal Balance which is approximately 3%
less than the sum of the aggregate Principal
Balance of the Initial Mortgage Loans and the
Original Pre-Funded Amount resulting in
initial overcollateralization.
Overcollateralization is increased in the
early months of the transaction pursuant to
the subordination provisions of the Trust
which cause a limited acceleration of the
Class A Certificates relative to the
amortization of the Mortgage Loans. The
accelerated amortization results from the
application of certain excess interest to the
payment of the Class A Certificates. Once
the required level of overcollateralization
is reached, and subject to the provisions
described in the next paragraph, the
acceleration feature will cease, unless
necessary to maintain the required level of
overcollateralization.

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The Pooling and Servicing Agreement provides
that, subject to certain trigger tests, the
required level of overcollateralization may
increase or decrease over time. An increase
would result in a temporary period of
accelerated amortization of the Class A
Certificates to increase the actual level of
overcollateralization to its required level;
a decrease would result in a temporary period
of decelerated amortization to reduce the
actual level of overcollateralization to its
required level. See "Description of the
Certificates -- Overcollateralization
Provisions" in this Prospectus Supplement.

THE CERTIFICATE INSURANCE POLICY.

The Class A Certificateholders will have the
benefit of the Certificate Insurance Policy,
discussed more fully below. The Certificate
Insurance Policy does not insure the payment
of Mortgage Loan Interest Shortfalls. See
"The Certificate Insurance Policy" and "The
Certificate Insurer" herein and "Credit
Support -- Other Credit Enhancement" in the
Prospectus.

The Certificate Insurer . . . . Financial Security Assurance Inc. (the
"Certificate Insurer") is a New York monoline
insurance company engaged in the business of
writing financial guaranty insurance,
principally in respect of securities offered
in domestic and foreign markets. The
Certificate Insurer's claims-paying ability
is rated "Aaa" by Moody's Investors Service,
Inc. ("Moody's") and "AAA" by Standard and
Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. ("Standard &
Poor's"), Nippon Investors Service, Inc. and
Standard & Poor's (Australia) Pty. Ltd. See
"The Certificate Insurance Policy" and "The
Certificate Insurer" in this Prospectus
Supplement.

Certificate Insurance
Policy. . . . . . . . . . . . The Certificate Insurer will issue a Financial
Guaranty Insurance Policy (the "Certificate
Insurance Policy") with respect to the Class
A Certificates, pursuant to which it will
irrevocably and unconditionally guaranty
payment on each Distribution Date of Insured
Payments to the Trustee for the benefit of
the Holders of the Class A Certificates. On
any Distribution Date, the Certificate
Insurer will generally be required to make
available to the Trustee the amount, if any,
by which the Insured Distribution Amount
exceeds the Available Amount (in each case as
of the related Distribution Date). See
"Description of the Certificates --
Overcollateralization Provisions" in this
Prospectus Supplement. The Certificate
Insurance Policy does not guarantee the Class
A Certificates any specified rate of
prepayments. Mortgage Loan Interest
Shortfalls will not be covered under the
Certificate Insurance Policy. A payment by
the Certificate Insurer under the Certificate
Insurance Policy is referred to herein as an
"Insured Payment."

So long as there does not exist a failure by
the Certificate Insurer to make a required
payment under the Certificate Insurance
Policy (such event, a "Certificate Insurer
Default"), the Certificate Insurer shall have
the right to exercise all rights of the
Holders of the Class A Certificates under the
Pooling and Servicing Agreement without any
consent of such Holders, and such Holders may
exercise such rights only with the prior
written consent of the Certificate Insurer
except as provided in the Pooling and
Servicing

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<PAGE>

Agreement. In addition, the Certificate
Insurer will be entitled to reimbursement for
all Insured Payments.

Servicing of the Mortgage
Loans . . . . . . . . . . . . The Servicer will be obligated to service and
administer the Mortgage Loans in accordance
with the Pooling and Servicing Agreement and
to cause the Mortgage Loans to be serviced
with the same care as it customarily employs
in servicing and administering mortgage loans
for its own account, in accordance with
accepted mortgage servicing practices of
prudent lending institutions, and giving due
consideration to the Certificate Insurer's
and the Certificateholders' reliance on the
Servicer.

Periodic Advances . . . . . . . Subject to the Servicer's determination that
such action would not constitute a
Nonrecoverable Advance (as defined herein),
the Servicer is required to make advances
("Periodic Advances") with respect to
delinquent payments of interest (at a rate
equal to the Mortgage Interest Rate, less the
Servicing Fee). Such Periodic Advances by
the Servicer are reimbursable to the Servicer
subject to certain conditions and
restrictions, and are intended to provide
both sufficient funds for the payment of
interest to the Holders of the Class A
Certificates, plus an additional amount
intended to maintain a specified level of
overcollateralization and to pay the premium
due the Certificate Insurer. In the event
that, notwithstanding the Servicer's good
faith determination at the time such Periodic
Advance was made, that it would not be a
Nonrecoverable Advance, in the event such
Periodic Advance becomes a Nonrecoverable
Advance, the Servicer will be entitled to
reimbursement therefor from the Trust Fund.
See "Description of the Certificates --
Payments on the Mortgage Loans" in this
Prospectus Supplement.

Prepayment Interest
Shortfalls. . . . . . . . . . Not later than the close of business on each
Servicer Distribution Date (as defined
herein) prior to the related Distribution
Date, the Servicer is required to remit to
the Trustee, an amount equal to the lesser of
(a) the aggregate of the Prepayment Interest
Shortfalls for the related Distribution Date
resulting from principal prepayments in full
during the related Due Period and (b) its
aggregate Servicing Fees received in the
related Due Period and shall not have the
right to reimbursement therefor (the
"Compensating Interest"). With respect to
any Distribution Date, the "Prepayment
Interest Shortfall" will be an amount equal
to the excess, if any, of (a) 30 days'
interest on the outstanding principal balance
of such Mortgage Loans at a per annum rate
equal to the related Mortgage Interest Rate
(or at such lower rate as may be in effect
for such Mortgage Loan because of application
of the Soldiers' and Sailors' Civil Relief
Act of 1940, as amended (the "Civil Relief
Act"), any reduction as a result of a
bankruptcy proceeding (a "Deficient
Valuation") and/or any reduction by a court
of the monthly payment due on such Mortgage
Loan (a "Debt Service Reduction")), minus the
rate at which the Servicing Fee is
calculated, over (b) the amount of interest
actually remitted by the Mortgagor (as
defined herein) in connection with such
principal prepayment in full less the
Servicing Fee for such Mortgage Loan in such
month. Insured Payments do not cover
Prepayment Interest Shortfalls.

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<PAGE>

Civil Relief Act Interest
Shortfalls. . . . . . . . . . The reduction, if any, in interest payable on
the Mortgage Loans attributable to Civil
Relief Act Interest Shortfalls will be borne
by the Class A Certificateholders and will
not be covered by payments from the Servicer,
the Certificate Insurance Policy or
otherwise. See "Risk Factors -- Limitations
on Interest Payments and Foreclosures."

Servicing Advances. . . . . . . Subject to the Servicer's determination that
such action would not constitute a
Nonrecoverable Advance (as defined herein)
and that a prudent mortgage lender would make
a like advance if it or an affiliate owned
the related Mortgage Loan, the Servicer is
required to advance amounts with respect to
the Mortgage Loans ("Servicing Advances")
constituting "out-of-pocket" costs and
expenses relating to (a) the preservation and
restoration of the Mortgaged Property, (b)
enforcement proceedings, including
foreclosures, (c) expenditures relating to
the purchase or maintenance of a first lien
not included in the Trust Fund on the
Mortgaged Property, and (d) certain other
customary amounts described in the Pooling
and Servicing Agreement. Such Servicing
Advances by the Servicer are reimbursable to
the Servicer subject to certain conditions
and restrictions. In the event that,
notwithstanding the Servicer's good faith
determination at the time such Servicing
Advance was made, that it would not be a
Nonrecoverable Advance, in the event such
Servicing Advance becomes a Nonrecoverable
Advance, the Servicer will be entitled to
reimbursement therefor from the Trust Fund.

Servicing Fee . . . . . . . . . The Servicer is entitled to a servicing fee of
0.50% per annum of the Principal Balance of
each Mortgage Loan (the "Servicing Fee"),
calculated and payable monthly from the
interest portion of scheduled monthly
payments, liquidation proceeds and certain
other proceeds.

Optional Termination by the
Servicer. . . . . . . . . . . The Servicer may, at its option, terminate the
Trust on any date (the first date on which
such event occurs, the "Clean-up Call Date")
on which the aggregate Principal Balance of
the Mortgage Loans is less than 10% of the
sum of (a) the aggregate Principal Balance of
the Mortgage Loans as of the Cut-Off Date
(the "Cut-Off Date Aggregate Principal
Balance") and (b) the Original Pre-Funded
Amount, by purchasing from the Trust, on the
next succeeding Distribution Date, all of the
Mortgage Loans and REO Properties (as defined
herein) at a price equal to the sum of (a)
100% of the aggregate Principal Balance of
each outstanding Mortgage Loan and each REO
Property and (b) the greater of (i) the
aggregate amount of accrued and unpaid
interest on the Mortgage Loans through the
related Due Period and (ii) 30 days' accrued
interest thereon computed at a rate equal to
the related Mortgage Interest Rate, in each
case net of the Servicing Fee, and (c) any
unreimbursed amounts due to the Certificate
Insurer under the Pooling and Servicing
Agreement and any accrued and unpaid Insured
Payments. No such termination is permitted
without the prior written consent of the
Certificate Insurer if it would result in a
draw on the Certificate Insurance Policy. If
the Servicer fails to exercise its option to
terminate the Trust, the Class A Pass-Through
Rate will be increased by 0.75% per annum for
each Distribution Date after the Clean-up
Call Date. See "Servicing of the Mortgage
Loans -- Termination; Purchase of Mortgage
Loans" in this Prospectus Supplement.

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<PAGE>

Optional Purchase of Defaulted
Mortgage Loans. . . . . . . . ABC or any affiliate of ABC has the option, but
is not obligated, to purchase from the Trust
Fund any Mortgage Loan 90 days or more
delinquent at a purchase price equal to the
outstanding Principal Balance thereof as of
the date of purchase, plus the greater of (a)
all accrued and unpaid interest on such
Principal Balance and (b) 30 days' interest
on such Principal Balance, computed at the
related Mortgage Interest Rate (net of the
related Servicing Fee if ABC is the Servicer)
plus the amount of any unreimbursed Servicing
Advances made by the Servicer with respect to
such Mortgage Loan.

Notwithstanding the foregoing, unless the
Certificate Insurer consents, ABC or any such
affiliate of ABC may only exercise its option
with respect to the Mortgage Loan or Mortgage
Loans that have been delinquent for the
longest period at the time of such
repurchase. If the Certificate Insurer fails
to respond to ABC's or such affiliate's
request for consent within 10 Business Days
after receipt thereof, ABC or such affiliate
may repurchase the Mortgage Loan or Mortgage
Loans proposed to be repurchased without the
consent of, or any further action by, the
Certificate Insurer. See "Servicing of the
Mortgage Loans -- Optional Purchase of
Defaulted Mortgage Loans" herein.

Book Entry Form of
Certificates . . . . . . . . The Class A Certificates are sometimes referred
to in this Prospectus Supplement as
"Book-Entry Certificates." No person
acquiring an interest in the Book-Entry
Certificates (a "Beneficial Certificate
Owner") will be entitled to receive a
definitive certificate representing such
person's interest in the Trust Fund, except
under the limited circumstances described
herein. Beneficial Certificate Owners may
elect to hold their interests through The
Depository Trust Company ("DTC" or the
"Depository"), in the United States, or
Centrale de Livraison de Valeurs Mobiliers,
S.A. ("CEDEL") or the Euroclear System
("Euroclear"), in Europe. Transfers within
DTC, CEDEL or Euroclear, as the case may be,
will be in accordance with the usual rules
and operating procedures of the relevant
system. So long as the Class A Certificates
are book-entry certificates, such Class A
Certificates will be evidenced by one or more
Class A Certificates registered in the name
of Cede & Co. ("Cede"), which will be the
"Holder" or "Certificateholder" of such
Certificates, as the nominee of DTC or one of
the relevant depositaries (collectively, the
"European Depositaries"). Cross-market
transfers between persons holding directly or
indirectly through DTC, on the one hand, and
counterparties holding directly or indirectly
through CEDEL or Euroclear, on the other,
will be effected in DTC through The Chase
Manhattan Bank ("Chase"), the relevant
depositories of CEDEL or Euroclear,
respectively, and each a participating member
of DTC. The Class A Certificates will
initially be registered in the name of Cede.
The interests of the Owners of such Class A
Certificates will be represented by
book-entries on the records of DTC and
participating members thereof. No Beneficial
Certificate Owner will be entitled to receive
a definitive certificate representing such
person's interest, except in the event that
Definitive Certificates (as defined herein)
are issued under the limited circumstances
described herein. All references herein to
any Class A Certificates reflect the rights
of Beneficial Certificate Owners only as such
rights may be exercised through DTC and its
participating organizations for so long as
such Class A Certificates are held by DTC.
See "Description of

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<PAGE>

the Certificates -- Book-Entry Registration"
and " -- Definitive Certificates" in this
Prospectus Supplement.

ERISA Considerations. . . . . . A fiduciary of any employee benefit plan or
other retirement arrangement subject to the
Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or the Code (as
defined herein) should carefully review with
its legal advisors whether the purchase or
holding of Class A Certificates could give
rise to a transaction prohibited or not
otherwise permissible under ERISA or the
Code. The U.S. Department of Labor has
issued an individual exemption, Prohibited
Transaction Exemption 90-32, to the
Underwriter (the "Exemption"). The Exemption
generally exempts from the application of
certain of the prohibited transaction
provisions of ERISA, and the excise taxes
imposed on such prohibited transactions by
Section 4975(a) and (b) of the Code and
Section 502(i) of ERISA, transactions
relating to the purchase, sale and holding of
pass-through certificates such as the Class A
Certificates and the servicing and operation
of asset pools such as the Trust Fund,
provided that certain conditions are
satisfied. The Class A Certificates may not
be purchased by Plans (as defined below)
until the earlier of the (i) the end of the
Pre-Funding Period or (ii) the date on which
the U.S. Department of Labor amends the
Exemption to permit the use of pre-funding
accounts thereunder. On or after the earlier
to occur of such dates, a fiduciary of any
Plan should carefully review with its legal
advisors whether the purchase or holding of
Class A Certificates could give rise to a
transaction prohibited or not otherwise
permissible under ERISA or the Code. See
"ERISA Considerations" in this Prospectus
Supplement.

Legal Investment. . . . . . . . The Class A Certificates will not constitute
"mortgage related securities" for purposes of
the Secondary Mortgage Market Enhancement Act
of 1984.

Federal Income Tax
Status. . . . . . . . . . . . An election will be made to treat the Trust
Fund as a real estate mortgage investment
conduit (a "REMIC") for federal income tax
purposes. The Class A Certificates will be
designated as the regular interests in the
REMIC, and the Class R Certificates will be
designated as the residual interest in the
REMIC.

The Class A Certificates generally will be
treated as newly originated debt instruments
for federal income tax purposes. Beneficial
Holders of the Class A Certificates will be
required to report income thereon in
accordance with the accrual method of
accounting.

See "Certain Federal Income Tax Considerations"
in this Prospectus Supplement and "Certain
Federal Income Tax Consequences -- REMIC
Certificates" in the Prospectus.

Certificate Ratings . . . . . . It is a condition to the issuance of Class A
Certificates that the Class A Certificates
shall have been rated not lower than AAA by
Standard & Poor's and Aaa by Moody's (each a
"Rating Agency," and together, the "Rating
Agencies") taking into account the
Certificate Insurance Policy issued with
respect to such Certificates. A security
rating is not a recommendation to buy, sell
or hold securities and may be subject to
revision or withdrawal at any time by the
assigning rating organization. The ratings
do not address the possibility that Class A
Certificateholders may suffer a lower than

S-14

<PAGE>

anticipated yield. See "Ratings" in this
Prospectus Supplement and "Prepayment and
Yield Considerations" in the Prospectus.

S-15

<PAGE>

RISK FACTORS

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

PREPAYMENT AND MATURITY CONSIDERATIONS

Borrowers may prepay their loans at any time and may be required to pay a
prepayment fee if permitted by applicable law and if so provided in the
applicable mortgage note. The majority of the business purpose Mortgage Loans
contain substantial prepayment fees. The consumer purpose Mortgage Loans
generally do not contain prepayment fees. The rate of prepayments of the
Mortgage Loans cannot be predicted and may be affected by a wide variety of
economic, social and other factors, including state and federal income tax
policies, interest rates and the availability of alternative financing.
Therefore, no assurance can be given as to the level of prepayments that the
Trust will experience. The Seller is not aware of any publicly available
studies on the effects of changes in interest rates on prepayment rates for
loans such as the business purpose Mortgage Loans.

A number of factors, in addition to the prepayment fees, may impact on the
prepayment behavior of a pool of loans such as the Mortgage Loans. One such
factor is that the principal balance of the Mortgage Loans is relatively small.
A small principal balance may be easier for a borrower to prepay than a large
balance and therefore a higher prepayment rate may result for a loan pool such
as the Mortgage Loans. In addition, in order to refinance a first priority
mortgage loan, the borrower must generally repay any subordinate mortgage loans.
However, a small principal balance may make refinancing a Mortgage Loan at a
lower interest rate less attractive to the borrower as the perceived impact to
the borrower of lower interest rates on the size of the monthly payment may not
be significant. Other factors that might be expected to affect the prepayment
rate include general economic conditions and the general interest rate
environment, possible future changes affecting the deductibility for federal
income tax purposes of interest payments on home equity loans, the amounts of,
and interest rates on, the underlying senior mortgage loans, and the tendency of
borrowers to use first priority mortgage loans as long-term financing for home
purchase and junior mortgage loans as shorter-term financing for a variety of
purposes, including home improvement, education expenses and purchases of
consumer durables such as automobiles. Accordingly, the Mortgage Loans may
experience a higher rate of prepayment than traditional fixed rate mortgage
loans.

Prepayments may result from voluntary early payments by borrowers
(including payments in connection with refinancings of the related senior
mortgage loan or loans), sales of Mortgaged Properties subject to
"due-on-sale" clauses and liquidations due to default, as well as the receipt
of proceeds from physical damage. In addition, repurchases from the Trust of
Mortgage Loans required to be made by the Seller under the Pooling and
Servicing Agreement will have the same effect on the Class A
Certificateholders as a prepayment of the related Mortgage Loans.
Prepayments and such repurchases will also accelerate the Class A Termination
Date. All of the Mortgage Loans contain "due-on-sale" provisions, and the
Servicer will enforce such provisions to the extent permitted by applicable
law. In addition, if the Seller is unable to cure documentation defects or
provide Qualified Replacement Mortgages for the affected Mortgage Loans,
affected Mortgage Loans will be repurchased, and the Class A
Certificateholders will experience a principal prepayment. Unused
Pre-Funding Account moneys, if any, will be used no later than the January
15, 1997 Distribution Date to make a mandatory prepayment to the Holders of
the Class A Certificates. See "Certain Legal Aspects of the Mortgage Loans
and Contracts --The Mortgage Loans."

In general, if prevailing interest rates fall significantly below the
interest rates for similar loans at the time of origination, fixed rate mortgage
loans may be subject to higher prepayment rates than if prevailing rates remain
at or above those at the time such Mortgage Loans were originated. Should
prepayments on the Mortgage Loans increase because of such interest rate
reductions, the average life and final maturity of the Class A Certificates may
be shortened. See "Prepayment and Yield Considerations."

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<PAGE>

The weighted average life of a pool of loans is the average amount of time
that will elapse from the date such pool is formed until each dollar of
principal is scheduled to be repaid to the investors in such pool. Because it
is expected that there will be prepayments and defaults on the Mortgage Loans,
the actual weighted average life of the Class A Certificates is expected to vary
substantially from the weighted average remaining term to stated maturity of the
Mortgage Loans as set forth herein under "The Mortgage Pool -- General."
Certain information, based on specified prepayment assumptions, as to the
possible weighted average life of the Class A Certificates is set forth herein
under "Prepayment and Yield Considerations."

The Originators maintain only limited records of the historical
prepayment experience of its portfolio of loans which the Originators believe
do not provide meaningful information with respect to the Mortgage Loans.
The Originators are not aware of any publicly available reliable information
regarding prepayment experience of mortgage loans such as the business
purpose Mortgage Loans. In any event, no assurance can be given that
prepayments on the Mortgage Loans will conform to any historical experience
and no prediction can be made as to the actual prepayment experience on the
Mortgage Loans.

THE SUBSEQUENT MORTGAGE LOANS AND THE PRE-FUNDING ACCOUNT

If the principal amount of eligible Mortgage Loans available during the
Pre-Funding Period and sold to the Trust is less than 100% of the Original
Pre-Funded Amount, the Depositor will have insufficient Mortgage Loans to
sell to the Trust, thereby resulting in a prepayment of principal to Holders
of the Class A Certificates as described herein. In addition, any conveyance
of Subsequent Mortgage Loans is subject to the following conditions, among
others: (i) each such Subsequent Mortgage Loan must satisfy the
representations and warranties specified in the Purchase Agreement and the
Pooling and Servicing Agreement; (ii) the Depositor will not select such
Subsequent Mortgage Loans in a manner that it believes is adverse to the
interests of the Holders of the Class A Certificates and the Certificate
Insurer; (iii) the Depositor will deliver certain opinions of counsel with
respect to the validity of the conveyance of such Subsequent Mortgage Loans;
and (iv) as of the Subsequent Cut-Off Date, the Mortgage Loans at that time,
including the Subsequent Mortgage Loans to be conveyed by the Depositor as of
such Subsequent Cut-Off Date, will satisfy the criteria set forth in the
Pooling and Servicing Agreement, as described herein under "The Mortgage Pool
- -- Conveyance of Subsequent Mortgage Loans."

To the extent that amounts on deposit in the Pre-Funding Account have not
been fully applied to the purchase of Subsequent Mortgage Loans by the Trust by
the end of the Pre-Funding Period, such remaining amount will be applied as a
prepayment of principal paid to the Holders of the Class A Certificates on the
Distribution Date following the end of the Pre-Funding Period (in no event later
than the January 15, 1997 Distribution Date). The amount of any such prepayment
will be applied to the Class A Certificates. Although no assurances can be
given, it is anticipated by the Depositor that the principal amount of
Subsequent Mortgage Loans sold to the Trust will require the application of
substantially all amounts on deposit in the Pre-Funding Account and that there
will be no material principal prepayment to the Holders of the Class A
Certificates.

Each Subsequent Mortgage Loan must satisfy the eligibility criteria
referred to above at the time of its addition. However, Subsequent Mortgage
Loans may have been originated by the Originators, purchased by the Seller, and
purchased by the Depositor using credit criteria different from those which were
applied to the Initial Mortgage Loans and may be of a different credit quality.
Therefore, following the transfer of Subsequent Mortgage Loans to the Trust, the
aggregate characteristics of the Mortgage Loans then held in the Trust may vary
from those of the Initial Mortgage Loans included in Trust Fund. See "The
Mortgage Pool -- Conveyance of Subsequent Mortgage Loans."

UNDERWRITING STANDARDS, LIMITED OPERATING HISTORY AND POTENTIAL DELINQUENCIES

The Originators market loans, in part, to borrowers who, for one reason or
another, are not able, or do not wish, to obtain financing from traditional
sources such as commercial banks. To the extent that such loans may be
considered to be of a riskier nature than loans made by traditional sources of
financing, the holders of the Certificates may be deemed to be at greater risk
than if the Mortgage Loans were made to other types of borrowers.

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<PAGE>

As described herein, the Originators underwriting standards generally are
less stringent than those of the Federal National Mortgage Association ("FNMA")
or the Federal Home Mortgage Corporation ("FHLMC") with respect to a borrower's
credit history and in certain other respects. A borrower's non-perfect credit
history may not preclude the Originators from making a loan. As a result of
this approach to underwriting, the Mortgage Loans in the Mortgage Pool may
experience higher rates of delinquencies, defaults and foreclosures than
mortgage loans underwritten in a manner which is more similar to the FNMA and
FHLMC guidelines.

GEOGRAPHIC CONCENTRATION

Certain geographic regions of the United States from time to time will
experience weaker regional economic conditions and housing markets, and,
consequently, will experience higher rates of loss and delinquency on loans
generally. Any concentration of the Mortgage Loans in such a region may present
risk considerations in addition to those generally present for similar mortgage
backed securities without such concentration. The Originators originate or
purchase their loans primarily on the eastern seaboard of the United States.
This practice may subject the Mortgage Pool to the risk that a downturn in the
economy in this area of the country would more greatly affect the Mortgage Pool
than if the Mortgage Pool were more diversified. In particular, approximately
33.82% and 47.23% of the Mortgage Loans by Statistical Calculation Date
Aggregate Principal Balance are secured by Mortgaged Properties located in New
Jersey and Pennsylvania, respectively. Because of the relative geographic
concentration of the Mortgage Loans within New Jersey and Pennsylvania, losses
on the Mortgage Loans may be higher than would be the case if the Mortgage Loans
were more geographically diversified. For example, certain of the Mortgaged
Properties may be more susceptible to certain types of special hazards, such as
earthquakes and other natural disasters and major civil disturbances, than
residential properties located in other parts of the country. In addition, the
economies of New Jersey and Pennsylvania may be adversely affected to a greater
degree than the economies of other areas of the country by certain regional
developments. Property values of residential real estate generally have
declined in New Jersey and Pennsylvania. If the New Jersey and Pennsylvania
residential real estate markets experience an overall decline in property values
after the dates of origination of the respective Mortgage Loans, then the rates
of delinquencies, foreclosures and losses on the Mortgage Loans may be expected
to increase and such increase may be substantial.

BALLOON PAYMENTS

The Initial Mortgage Loans have been originated at fixed interest rates for
fixed terms ranging from 36 to 360 months. As of the Statistical Calculation
Date, approximately 17.15% of the Mortgage Loans are not fully amortized over
their terms and instead require substantial balloon payments on their maturity
dates. See "The Mortgage Pool." Because the principal balance of such Mortgage
Loans does not fully amortize over the term of the Mortgage Loan, such Mortgage
Loans may involve greater risks of default than Mortgage Loans whose principal
balance is fully amortized over the term of the Mortgage Loan. The borrower's
ability to pay the balloon amount due at maturity of such a Mortgage Loan will
depend on the borrower's ability to obtain adequate refinancing or funds from
other sources to repay the Mortgage Loan.

The Originators believe that the Mortgage Loans are or will be adequately
collateralized and that in light of the collateralization and the relatively
small average size of the Mortgage Loans the borrowers will have the ability to
obtain adequate refinancing or secure funds from other sources. See "The
Mortgage Pool." However, the Originators have had only a very limited historical
default experience with respect to its portfolio when loans with balloon
payments come due and the Originators do not believe that the experience
provides meaningful information with respect to the Mortgage Loans.

S-18

<PAGE>

NATURE OF COLLATERAL; SECOND LIEN MORTGAGE LOANS

As of the Statistical Calculation Date, approximately 34.74% of the
Mortgage Loans are secured by junior (second) liens which are subordinate to the
rights of the mortgagee under related senior mortgages. See "The Mortgage
Pool." As a result, the proceeds from any liquidation, insurance or
condemnation proceedings will be available to satisfy the principal balance of
such a junior Mortgage Loan only to the extent that the claims, if any, of each
such senior mortgagee are satisfied in full, including any related foreclosure
costs. In addition, a mortgagee of a junior mortgage may not foreclose on the
Mortgaged Property securing such mortgage unless it forecloses subject to the
related senior mortgage(s), in which case it must either pay the entire amount
of each senior mortgage to the applicable mortgagee at or prior to the
foreclosure sale or undertake the obligation to make payments on each senior
mortgage in the event of default thereunder. In servicing business and consumer
purpose home equity loans in its portfolio, it is the Servicer's practice to
satisfy or reinstate each such senior mortgage at or prior to the foreclosure
sale only to the extent that it determines any amount so paid will be
recoverable from future payments and collections on the related loans or
otherwise. The Trust will have no source of funds to satisfy any senior
mortgage or make payments due to any senior mortgagee.

General economic conditions have an impact on the ability of borrowers to
repay loans. Loss of earnings, illness and other similar factors may lead to an
increase in delinquencies and bankruptcy filings by borrowers. In the event of
bankruptcy of a mortgagor, it is possible that the Trust could experience a loss
with respect to such mortgagor's Mortgage Loan. In conjunction with a
mortgagor's bankruptcy, a bankruptcy court may suspend or reduce the payments of
principal and interest to be paid with respect to such Mortgage Loan or
permanently reduce the principal balance of such Mortgage Loan, thus either
delaying or permanently limiting the amount received by the Trust with respect
to such Mortgage Loan. Moreover, in the event a bankruptcy court prevents the
transfer of the related Mortgaged Property to the Trust, any remaining balance
on such Mortgage Loan may not be recoverable.

An overall decline in the residential real estate market could adversely
affect the values of the Mortgaged Properties such that the outstanding
principal balances, together with the primary senior financing thereon, equals
or exceeds the value of the Mortgaged Properties. Such a decline would
adversely affect the position of a second mortgagee before having such an effect
on that of the related first mortgagee. A rise in interest rates over a period
of time and the general condition of the Mortgaged Property as well as other
factors may have the effect of reducing the value of the Mortgaged Property from
the appraised value at the time the Mortgage Loan was originated. If there is a
reduction in value of the Mortgaged Property, the ratio of the amount of the
Mortgage Loan to the value of the Mortgaged Property may increase over what it
was at the time the Mortgage Loan was originated. Such an increase may reduce
the likelihood of liquidation or other proceeds being sufficient to satisfy the
Mortgage Loan after satisfaction of any senior liens.

Even assuming that the Mortgaged Properties provide adequate security for
the Mortgage Loans, substantial delays could be encountered in connection with
the liquidation of defaulted Mortgage Loans and corresponding delays in the
receipt of related proceeds by Class A Certificateholders. An action to
foreclose on the Mortgaged Property securing a Mortgage Loan is regulated by
state statutes and rules and is subject to many of the delays and expenses of
other lawsuits if defenses or counterclaims are interposed, sometimes requiring
several years to complete. Furthermore, in some states an action to obtain a
deficiency judgment is not permitted following a nonjudicial sale of a Mortgaged
Property. In the event of a default by a Mortgagor, these restrictions, among
other things, may impede the ability of the Servicer to foreclose on or sell the
Mortgaged Property or to obtain Net Liquidation Proceeds sufficient to repay all
amounts due on the related Mortgage Loan. In addition, the Servicer will be
entitled to deduct from collections received during the preceding Due Period all
expenses reasonably incurred in attempting to recover amounts due on Liquidated
Mortgage Loans and not yet repaid, including payments to senior lienholders,
legal fees and costs of legal action, real estate taxes and maintenance and
preservation expenses, thereby reducing collections available to Class A
Certificateholders. See "The Originators, the Seller and the Servicer --
Delinquency and Loan Loss Experience" and "Description of the Certificates."

S-19

<PAGE>

Liquidation expenses with respect to defaulted loans do not vary directly
with the outstanding principal balance of the loan at the time of default.
Therefore, assuming that a servicer took the same steps in realizing upon a
defaulted loan having a small remaining principal balance as it would in the
case of a defaulted loan having a large remaining principal balance, the amount
realized after expenses of liquidation would be smaller as a percentage of the
outstanding principal balance of the small loan than would be the case with the
defaulted loan having a large remaining principal balance. Because the average
outstanding principal balance of the Mortgage Loans is relatively small, Net
Liquidation Proceeds on Liquidated Mortgage Loans may be small as a percentage
of the principal balance of a Mortgage Loan.

DECLINE IN REAL ESTATE VALUES

No assurance can be given that the values of the Mortgaged Properties have
remained or will remain at their levels as of the dates of origination of the
related Mortgage Loans. If the residential real estate market should experience
an overall decline in property values such that the outstanding balances of the
Mortgage Loans become equal to or greater than the value of the Mortgaged
Properties, the actual rates of delinquencies, foreclosures and losses on these
Mortgaged Properties could be higher than losses now generally experienced in
the mortgage lending industry.

PAYMENTS ON THE MORTGAGE LOANS

The scheduled monthly payment dates with respect to the Mortgage Loans
occur throughout a month. When a principal prepayment in full is made on a
Mortgage Loan, the Mortgagor is charged interest only up to the date of such
prepayment, instead of for a full month. However, such principal receipts will
only be passed through to the Certificateholders once a month, on the
Distribution Date which follows the calendar month in which such prepayment was
received by the Servicer. The Servicer is obligated to pay, without any right
of reimbursement, those shortfalls in interest collections payable on the Class
A Certificates that are attributable to the difference between the interest paid
by a mortgagor in connection with a prepayment in full and 30 days' interest (in
such case at the related Mortgage Interest Rate, less the Servicing Fee, such
shortfalls being "Prepayment Interest Shortfalls"), but only to the extent of
the Servicing Fee for the related Due Period (any such payment, "Compensating
Interest"). Prepayment Interest Shortfalls and Civil Relief Act Interest
Shortfalls will not be covered by payments under the Certificate Insurance
Policy.

Prepayment Interest Shortfalls that are not covered by application of the
Servicing Fee, together with Civil Relief Act Interest Shortfalls, will be
allocated among the Holders of Class A Certificates on a pro rata basis to
reduce the interest otherwise payable on the Class A Certificates. See
"Description of the Certificates -- Flow of Funds" in this Prospectus
Supplement.

LEGAL CONSIDERATIONS

Applicable state laws generally regulate interest rates and other charges,
require certain disclosures, and may require licensing of the Originators. In
addition, many states have other laws, such as consumer protection laws, unfair
and deceptive practices acts and debt collection practices acts which may apply
to the origination or collection of the Mortgage Loans. Depending on the
provisions of the applicable law, violations of these laws may limit the ability
of the Servicer to collect all or part of the principal of or interest on the
Mortgage Loans, may entitle the borrower to a refund of amounts previously paid
and, in addition, could subject the Trust to damages and administrative
enforcement. See "Certain Legal Aspects of the Mortgage Loans and Contracts" in
the Prospectus.

The Mortgage Loans are also subject to federal laws, including: (i) the
Federal Truth in Lending Act and Regulation Z promulgated thereunder as to
consumer purpose Mortgage Loans, which require certain disclosures to the
borrowers regarding the terms of such Mortgage Loans; (ii) the Equal Credit
Opportunity Act and Regulation B promulgated thereunder as to the business and
consumer purpose Mortgage Loans, 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;

S-20

<PAGE>

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

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 Mortgage Loans and in addition could subject the Trust to damages and
administrative enforcement. In addition, under the terms of the Soldiers' and
Sailors' Civil Relief Act of 1940, as amended (the "Civil Relief Act") or
similar state legislation, the interest charged and the ability of the Servicer
to foreclose on loans to certain Mortgagors may be limited. Generally, under
the Civil Relief Act, a mortgagor who enters military service after the
origination of such mortgagor's mortgage loan (including a mortgagor who was in
reserve status and is called to active duty after origination of the mortgage
loan), shall not be charged interest (including fees and charges) above an
annual rate of 6% during the period of such mortgagor's active duty status,
unless a court orders otherwise upon application of the lender. The Civil
Relief Act applies to mortgagors who are members of the Army, Navy, Air Force,
Marines, National Guard, Reserves, Coast Guard and officers of the U.S. Public
Health Service assigned to duty with the military. Because the Civil Relief Act
applies to mortgagors who enter military service (including reservists who are
called to active duty) after origination of the related mortgage loan, no
information can be provided as to the number of loans that may be affected by
the Civil Relief Act. Application of the Civil Relief Act would adversely
affect, for an indeterminate period of time until cessation of active duty
status, the ability of the Servicer to collect full amounts of interest on
certain of the Mortgage Loans to which it applies, if any. Any shortfall (such
shortfall, a "Civil Relief Act Interest Shortfall") in interest collections on
any Mortgage Loan resulting from the application of the Civil Relief Act will
result in a reduction of the amounts distributable to the Class A
Certificateholders, and would not be covered by Periodic Advances or the
Certificate Insurance Policy. The Servicer is not obligated to offset any of
the Servicing Fee against, or to provide any other funds to cover, any Civil
Relief Act Interest Shortfall. In addition, the Civil Relief Act imposes
limitations which would impair the ability of the Servicer to foreclose on an
affected Mortgage Loan during the Mortgagor's period of active duty status and,
under certain circumstances, during an additional period thereafter. See
"Certain Legal Aspects of the Mortgage Loans."

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

S-21

<PAGE>

THE MORTGAGE POOL

DIFFERENCE BETWEEN STATISTICAL CALCULATION DATE AND CLOSING DATE POOLS.

The statistical information presented in this Prospectus Supplement
concerning the pools of Mortgage Loans is based on the pools as of August 30,
1996 (such date, the "Statistical Calculation Date"). The pool aggregated
$23,482,032.68 as of the Statistical Calculation Date. The Depositor expects
that the actual pool as of the Closing Date will represent approximately
$26,915,932.68 in Mortgage Loans. The additional Mortgage Loans will represent
Mortgage Loans acquired or to be acquired by the Depositor on or prior to the
Closing Date. In addition, with respect to the pool as of the Statistical
Calculation Date as to which statistical information is presented herein, some
amortization of the pool will occur prior to the Closing Date. Moreover,
certain loans included in the pool as of the Statistical Calculation Date may
prepay in full, or may be determined not to meet the eligibility requirements
for the final pool, and may not be included in the final pool. As a result of
the foregoing, the statistical distribution of characteristics as of the Closing
Date for the final Mortgage Loan pool will vary somewhat from the statistical
distribution of such characteristics as of the Statistical Calculation Date as
presented in this Prospectus Supplement, although such variance will not be
material. In the event that the Depositor does not, as of the Closing Date,
have the full amount of Mortgage Loans which the Depositor expects to sell to
the Trust on such date the Seller will increase the size of the Pre-Funding
Account and the Capitalized Interest Account. Unless otherwise noted, all
statistical percentages in this Prospectus Supplement are measured by the
aggregate principal balance of the related Mortgage Pool as of the Statistical
Calculation Date.

GENERAL

Additional mortgage loans (the "Subsequent Mortgage Loans") are intended to
be purchased by the Trust from the Depositor from time to time on or before
December 27, 1996 from funds on deposit in the Pre-Funding Account. The Initial
Mortgage Loans and the Subsequent Mortgage Loans are referred to herein
collectively as the "Mortgage Loans." The Subsequent Mortgage Loans to be
purchased by the Trust, if available, will be originated or purchased by the
Seller, sold by the Seller to the Depositor and then sold by the Depositor to
the Trust. The Pooling and Servicing Agreement will provide that the Mortgage
Loans, following the conveyance of the Subsequent Mortgage Loans, must in the
aggregate conform to certain specified characteristics described below under
" -- Conveyance of Subsequent Mortgage Loans."

Unless otherwise noted, all statistical percentages in this Prospectus
Supplement are approximate and are measured by the aggregate Principal Balance
of the related Mortgage Loans in relation to the Statistical Calculation Date
Aggregate Principal Balance, in each case, as of the Statistical Calculation
Date.

The Mortgage Loans will be predominantly business or consumer purpose
residential home equity loans used (x) to refinance an existing mortgage loan,
(y) to consolidate debt, or (z) to obtain cash proceeds by borrowing against the
Mortgagor's equity in the related Mortgaged Property in order to provide funds
for (i) working capital for business, (ii) business expansion, (iii) equipment
acquisition, or (iv) personal acquisitions. The Mortgaged Properties securing
the Mortgage Loans consist primarily of single-family residences (which may be
detached, part of a two-to four-family dwelling, a condominium unit or a unit in
a planned unit development). The Mortgaged Properties may be owner-occupied
(which includes second and vacation homes) and non-owner occupied investment
properties. As of the Statistical Calculation Date, the pool of Mortgage Loans
consists of 65.26% of loans secured by first lien mortgages on the related
Mortgaged Properties and 34.74% of loans secured by second lien mortgages on the
related Mortgaged Properties (in each case as a percentage of the aggregate
principal balance as of the Cut-Off Date).

As of the Statistical Calculation Date, the Mortgage Loans had remaining
terms to maturity of no greater than 360 months, were not 30 or more days
delinquent and had a Mortgage Rate as of the Cut-Off Date of at least 6.99%.

S-22

<PAGE>

The Combined Loan-to-Value Ratio's ("CLTV's") described herein were
calculated based upon the appraised values of the related Mortgaged Properties
at the time of origination (the "Appraised Values"). No assurance can be given
that such appraised values of the Mortgaged Properties have remained or will
remain at their levels on the dates of origination of the related Mortgage
Loans. If property values decline such that the outstanding balances of the
Mortgage Loans, together with the outstanding balances of any Senior Liens,
become equal to or greater than the value of the Mortgaged Properties, the
actual rates of delinquencies, foreclosures and losses could be higher than
those heretofore experienced by the Servicer, as set forth below under "The
Originators, the Seller and the Servicer -- Delinquency and Loan Loss
Experience," and in the mortgage lending industry.

As of the Statistical Calculation Date, the Mortgage Loans consist of 426
loans under which the related Mortgaged Properties are located in 6 states, as
set forth herein. As of the Statistical Calculation Date, the Mortgage Loans
had an aggregate principal balance of $23,482,032.68, the minimum principal
balance of any of the Mortgage Loans was $9,482.28, the maximum principal
balance thereof was $325,000.00 and the average principal balance of the
Mortgage Loans was $55,122.14. As of the Statistical Calculation Date, Mortgage
Loan rates on the Mortgage Loans ranged from 6.99% to 18.00% per annum, and the
weighted average Mortgage Loan rate of the Mortgage Loans was 12.91% per annum.
As of the Statistical Calculation Date, the original term to stated maturity of
the Mortgage Loans ranged from 36 months to 360 months, the remaining term to
stated maturity ranged from 33 months to 360 months, the weighted average
original term to stated maturity was 184 months and the weighted average
remaining term to stated maturity was 183 months. No Mortgage Loan had a stated
maturity later than August 15, 2026. 82.85% of the aggregate principal balance
of the Mortgage Loans as of the Statistical Calculation Date require monthly
payments of principal that will fully amortize the Mortgage Loans by their
respective maturity dates, and 17.15% of the aggregate principal balance of the
Mortgage Loans are Balloon Loans. The weighted average CLTV of the Mortgage
Loans as of the Statistical Calculation Date was 67.63%. Mortgage Loans as of
the Statistical Calculation Date representing, in the aggregate, approximately
65.26% of the aggregate principal balance of all Mortgage Loans were secured by
first lien mortgages and 34.74% by second lien mortgages.

S-23

<PAGE>

GEOGRAPHIC DISTRIBUTION
<TABLE>
<CAPTION>

AGGREGATE % OF AGGREGATE
NUMBER OF PRINCIPAL BALANCE AS OF THE PRINCIPAL BALANCE AS OF
STATE MORTGAGE LOANS STATISTICAL CALCULATION DATE THE STATISTICAL CALCULATION DATE
----- -------------- ---------------------------- --------------------------------
<S> <C> <C> <C>
Delaware . . . . . 15 $ 864,853.73 3.68%
Maryland . . . . . 22 877,860.34 3.74
New Jersey . . . . 145 7,941,987.28 33.82
New York . . . . . 18 1,811,286.07 7.71
Pennsylvania . . . 206 11,091,352.16 47.23
Virginia . . . . . 20 894,693.10 3.81
--- --------------- ------
TOTAL. . . . . . 426 $ 23,482,032.68 100.00%
--- --------------- -------
--- --------------- -------

</TABLE>

DISTRIBUTION OF CLTV'S

<TABLE>
<CAPTION>
AGGREGATE % OF AGGREGATE
RANGE OF NUMBER OF PRINCIPAL BALANCE AS OF THE PRINCIPAL BALANCE AS OF
CLTV RATIOS MORTGAGE LOANS STATISTICAL CALCULATION DATE THE STATISTICAL CALCULATION DATE
----------- -------------- ---------------------------- --------------------------------
<S> <C> <C> <C>

5.01 - 10.00% . . 1 $ 9,482.28 0.04%
10.01 - 15.00. . . 4 129,628.77 0.55
15.01 - 20.00. . . 5 99,325.88 0.42
20.01 - 25.00. . . 8 424,097.17 1.81
25.01 - 30.00. . . 7 199,627.74 0.85
30.01 - 35.00. . . 5 179,877.36 0.77
35.01 - 40.00. . . 12 452,563.65 1.93
40.01 - 45.00. . . 12 623,586.92 2.66
45.01 - 50.00. . . 14 955,352.98 4.07
50.01 - 55.00. . . 18 1,353,723.24 5.76
55.01 - 60.00. . . 28 1,991,403.20 8.48
60.01 - 65.00. . . 46 2,949,452.04 12.56
65.01 - 70.00. . . 59 3,216,239.31 13.70
70.01 - 75.00. . . 51 2,590,085.38 11.03
75.01 - 80.00. . . 79 4,132,221.74 17.60
80.01 - 85.00. . . 58 2,377,199.45 10.12
85.01 - 90.00. . . 19 1,798,165.57 7.66
--- -------------- ------
TOTAL . . . . 426 $23,482,032.68 100.00%
--- -------------- ------
--- -------------- ------
</TABLE>

S-24

<PAGE>

DISTRIBUTION OF MORTGAGE RATES
<TABLE>
<CAPTION>

AGGREGATE % OF AGGREGATE
RANGE OF NUMBER OF PRINCIPAL BALANCE AS OF PRINCIPAL BALANCE AS OF
MORTGAGE RATES MORTGAGE LOANS THE STATISTICAL CALCULATION DATE THE STATISTICAL CALCULATION DATE
-------------- -------------- -------------------------------- ---------------------------------
<S> <C> <C> <C>
6.51 - 7.00% . . 2 $ 36,076.00 0.15%
8.51 - 9.00. . . 7 552,865.88 2.35
9.01 - 9.50. . . 13 629,377.78 2.68
9.51 - 10.00. . . 39 2,159,034.16 9.19
10.01 - 10.50. . . 35 1,873,211.82 7.98
10.51 - 11.00. . . 47 2,551,589.07 10.87
11.01 - 11.50. . . 38 1,934,618.98 8.24
11.51 - 12.00. . . 43 1,822,420.63 7.76
12.01 - 12.50. . . 37 1,526,990.71 6.50
12.51 - 13.00. . . 16 797,086.11 3.39
13.01 - 13.50. . . 14 700,381.45 2.98
13.51 - 14.00. . . 8 297,188.56 1.27
14.01 - 14.50. . . 6 189,456.56 0.81
14.51 - 15.00. . . 6 308,384.29 1.31
15.01 - 15.50. . . 5 136,313.91 0.58
15.51 - 16.00. . . 99 7,105,579.87 30.26
16.01 - 16.50. . . 8 724,097.99 3.08
17.51 - 18.00. . . 3 137,358.91 0.58
--- -------------- ------
TOTAL. . . . . 426 $23,482,032.68 100.00%
--- -------------- -------
--- -------------- -------

</TABLE>
DISTRIBUTION OF ORIGINAL TERMS TO MATURITY
(in months)

RANGE OF AGGREGATE % OF AGGREGATE
ORIGINAL TERMS NUMBER OF PRINCIPAL BALANCE AS OF PRINCIPAL BALANCE AS OF
(IN MONTHS) MORTGAGE LOANS THE STATISTICAL CALCULATION DATE THE STATISTICAL CALCULATION DATE
-------------- -------------- -------------------------------- ---------------------------------
<S> <C> <C> <C>
25 - 36 . . . . . 4 $ 96,147.68 0.41%
49 - 60 . . . . . 24 565,418.78 2.41
61 - 72 . . . . . 1 24,505.53 0.10
73 - 84 . . . . . 18 497,371.91 2.12
85 - 96 . . . . . 4 108,673.73 0.46
109 - 120. . . . . 69 2,236,169.97 9.52
145 - 156. . . . . 1 45,711.38 0.19
169 - 180. . . . . 221 14,523,194.34 61.85
181 - 192. . . . . 1 56,673.67 0.24
229 - 240. . . . . 78 4,899,196.72 20.86
325 - 336. . . . . 1 129,898.83 0.55
349 - 360. . . . . 4 299,070.14 1.27
--- -------------- ------
TOTAL. . . . . 426 $23,482,032.68 100.00%
--- -------------- -------
--- -------------- -------

</TABLE>

S-25

<PAGE>
DISTRIBUTION OF REMAINING TERMS TO MATURITY
(in months)

RANGE OF REMAINING AGGREGATE % OF AGGREGATE
TERMS TO MATURITY NUMBER OF PRINCIPAL BALANCE AS OF PRINCIPAL BALANCE AS OF
(IN MONTHS) MORTGAGE LOANS THE STATISTICAL CALCULATION DATE THE STATISTICAL CALCULATION DATE
- ------------------ -------------- -------------------------------- ---------------------------------
<S> <C> <C> <C>
25 - 36 . . . . . 4 $ 96,147.68 0.41%
49 - 60 . . . . . 24 565,418.78 2.41
61 - 72 . . . . . 1 24,505.53 0.10
73 - 84 . . . . . 18 497,371.91 2.12
85 - 96 . . . . . 4 108,673.73 0.46
109 - 120. . . . . 69 2,236,169.97 9.52
145 - 156. . . . . 1 45,711.38 0.19
169 - 180. . . . . 221 14,523,194.34 61.85
181 - 192. . . . . 1 56,673.67 0.24
229 - 240. . . . . 78 4,899,196.72 20.86
325 - 336. . . . . 1 129,898.83 0.55
349 - 360. . . . . 4 299,070.14 1.27
--- -------------- ------
TOTAL . . . . . 426 $23,482,032.68 100.00%
--- -------------- -------
--- -------------- -------

</TABLE>

S-26

<PAGE>

DISTRIBUTION OF ORIGINAL PRINCIPAL BALANCES

<TABLE>
<CAPTION>
RANGE OF
ORIGINAL AGGREGATE % OF AGGREGATE
PRINCIPAL NUMBER OF PRINCIPAL BALANCE AS OF PRINCIPAL BALANCE AS OF
BALANCES MORTGAGE LOANS THE STATISTICAL CALCULATION DATE THE STATISTICAL CALCULATION DATE
--------- -------------- -------------------------------- ---------------------------------
<S> <C> <C> <C>
$ 5,001 - 10,000. 6 $ 58,693.31 0.25%
10,001 - 15,000. 18 230,475.76 0.98
15,001 - 20,000. 36 664,264.13 2.83
20,001 - 25,000. 46 1,048,261.88 4.46
25,001 - 30,000. 38 1,074,989.79 4.58
30,001 - 35,000. 40 1,311,017.97 5.58
35,001 - 40,000. 24 918,313.58 3.91
40,001 - 45,000. 28 1,213,266.84 5.17
45,001 - 50,000. 17 808,938.99 3.44
50,001 - 55,000. 26 1,376,380.95 5.86
55,001 - 60,000. 16 941,078.75 4.01
60,001 - 65,000. 12 757,499.27 3.23
65,001 - 70,000. 11 752,928.02 3.21
70,001 - 75,000. 10 733,910.46 3.13
75,001 - 80,000. 14 1,099,720.13 4.68
80,001 - 85,000. 7 581,964.50 2.48
85,001 - 90,000. 11 968,157.22 4.12
90,001 - 95,000. 4 370,432.96 1.58
95,001 - 100,000 10 982,621.70 4.18
100,001 - 105,000 4 410,819.92 1.75
105,001 - 110,000 3 326,957.09 1.39
110,001 - 115,000 7 789,041.79 3.36
115,001 - 120,000 9 1,060,456.96 4.52
120,001 - 125,000 3 366,150.21 1.56
125,001 - 130,000 2 257,500.00 1.10
130,001 - 135,000 2 261,646.08 1.11
135,001 - 140,000 4 554,081.37 2.36
140,001 - 145,000 2 285,764.74 1.22
145,001 - 150,000 5 744,162.84 3.17
150,001 - 200,000 5 885,819.66 3.77
200,001 - 250,000 2 435,000.00 1.85
250,001 - 300,000 1 265,000.00 1.13
300,001 - 350,000 3 946,715.81 4.03
--- -------------- ------
TOTAL. . . . . 426 $23,482,032.68 100.00%
--- -------------- -------
--- -------------- -------

</TABLE>

S-27

<PAGE>

DISTRIBUTION OF CURRENT PRINCIPAL BALANCES
<TABLE>
<CAPTION>

AGGREGATE % OF AGGREGATE
RANGE OF CURRENT NUMBER OF PRINCIPAL BALANCE AS OF PRINCIPAL BALANCE AS OF
PRINCIPAL BALANCES MORTGAGE LOANS THE STATISTICAL CALCULATION DATE THE STATISTICAL CALCULATION DATE
- ------------------ -------------- -------------------------------- ---------------------------------
<S> <C> <C> <C>
$ 5,001 - 10,000. 6 $ 58,693.31 0.25%
10,001 - 15,000. 18 230,475.76 0.98
15,001 - 20,000. 37 683,201.28 2.91
20,001 - 25,000. 45 1,029,324.73 4.38
25,001 - 30,000. 39 1,104,794.68 4.70
30,001 - 35,000. 39 1,281,213.08 5.46
35,001 - 40,000. 25 957,925.94 4.08
40,001 - 45,000. 28 1,213,266.84 5.17
45,001 - 50,000. 16 769,326.63 3.28
50,001 - 55,000. 26 1,376,380.95 5.86
55,001 - 60,000. 16 941,078.75 4.01
60,001 - 65,000. 12 757,499.27 3.23
65,001 - 70,000. 11 752,928.02 3.21
70,001 - 75,000. 10 733,910.46 3.13
75,001 - 80,000. 14 1,099,720.13 4.68
80,001 - 85,000. 7 581,964.50 2.48
85,001 - 90,000. 11 968,157.22 4.12
90,001 - 95,000. 4 370,432.96 1.58
95,001 - 100,000 10 982,621.70 4.18
100,001 - 105,000 4 410,819.92 1.75
105,001 - 110,000 3 326,957.09 1.39
110,001 - 115,000 8 903,862.35 3.85
115,001 - 120,000 8 945,636.40 4.03
120,001 - 125,000 3 366,150.21 1.56
125,001 - 130,000 3 387,398.83 1.65
130,001 - 135,000 1 131,747.25 0.56
135,001 - 140,000 4 554,081.37 2.36
140,001 - 145,000 2 285,764.74 1.22
145,001 - 150,000 5 744,162.84 3.17
150,001 - 200,000 5 885,819.66 3.77
200,001 - 250,000 2 435,000.00 1.85
250,001 - 300,000 1 265,000.00 1.13
300,001 - 350,000 3 946,715.81 4.03
--- -------------- ------
TOTAL. . . . . 426 $23,482,032.68 100.00%
--- -------------- -------
--- -------------- -------

</TABLE>

DISTRIBUTION BY LIEN STATUS

AGGREGATE % OF AGGREGATE
NUMBER OF PRINCIPAL BALANCE AS OF PRINCIPAL BALANCE AS OF
LIEN STATUS MORTGAGE LOANS THE STATISTICAL CALCULATION DATE THE STATISTICAL CALCULATION DATE
----------- -------------- -------------------------------- ---------------------------------
<S> <C> <C> <C>

First. . . . . . . 208 $15,323,434.51 65.26%
Second . . . . . . 218 8,158,598.17 34.74
--- -------------- ------
TOTAL. . . . . 426 $23,482,032.68 100.00%
--- -------------- -------
--- -------------- -------

</TABLE>

S-28
<PAGE>

DISTRIBUTION BY AMORTIZATION TYPE

AGGREGATE % OF AGGREGATE
NUMBER OF PRINCIPAL BALANCE AS OF PRINCIPAL BALANCE AS OF
AMORTIZATION TYPE MORTGAGE LOANS THE STATISTICAL CALCULATION DATE THE STATISTICAL CALCULATION DATE
----------------- -------------- -------------------------------- ---------------------------------
<S> <C> <C> <C>

Fully Amortizing . . . 383 $19,454,956.03 82.85%
Partially Amortizing . 43 4,027,076.65 17.15
--- -------------- ------
TOTAL . . . . . . 426 $23,482,032.68 100.00%
--- -------------- ------
--- -------------- ------

</TABLE>

DISTRIBUTION OF OCCUPANCY STATUS

AGGREGATE % OF AGGREGATE
NUMBER OF PRINCIPAL BALANCE AS OF PRINCIPAL BALANCE AS OF
OCCUPANCY STATUS MORTGAGE LOANS THE STATISTICAL CALCULATION DATE THE STATISTICAL CALCULATION DATE
----------------- -------------- -------------------------------- ---------------------------------
<S> <C> <C> <C>
Owner Occupied . . . . 384 $20,032,169.52 85.31%
Investor . . . . . . . 18 1,011,615.21 4.31
Vacation/Second Home . 3 110,000.00 0.47
Corporate. . . . . . . 12 1,252,866.04 5.34
Multiple Properties. . 9 1,075,381.91 4.58
--- -------------- ------
TOTAL 426 $23,482,032.68 100.00%
--- -------------- ------
--- -------------- ------

</TABLE>

DISTRIBUTION OF PROPERTY TYPES

NUMBER OF AGGREGATE % OF AGGREGATE
MORTGAGE PRINCIPAL BALANCE AS OF PRINCIPAL BALANCE AS OF
PROPERTY TYPE LOANS THE STATISTICAL CALCULATION DATE THE STATISTICAL CALCULATION DATE
-------------- -------------- -------------------------------- ---------------------------------
<S> <C> <C> <C>
Planned Unit Development . 2 $ 58,791.05 0.25%
Single Family Detached . . 292 14,927,849.79 63.57
2-6 Residential Leasehold . 9 565,974.41 2.41
7+ Family . . . . . . . . . 1 60,000.00 0.26
Townhouses. . . . . . . . . 81 3,328,464.18 14.17
Condominiums. . . . . . . . 5 144,555.74 0.62
Commercial. . . . . . . . . 5 555,151.76 2.36
Mixed Use Property. . . . . 22 2,765,863.84 11.78
Multiple Properties . . . . 9 1,075,381.91 4.58
--- -------------- ------
TOTAL 426 $23,482,032.68 100.00%
--- -------------- ------
--- -------------- ------

</TABLE>

CONVEYANCE OF SUBSEQUENT MORTGAGE LOANS

The Pooling and Servicing Agreement permits the Trust to acquire
$13,084,067.32 aggregate principal balance of Subsequent Mortgage Loans.
Accordingly, the statistical characteristics of the Mortgage Pool will vary as
of any Subsequent Cut-Off Date upon the acquisition of Subsequent Mortgage
Loans.

The obligation of the Trust to purchase the Subsequent Mortgage Loans on a
Subsequent Transfer Date is subject to the following requirements: (i) such
Subsequent Mortgage Loan may not be 30 or more days contractually delinquent as
of the related Subsequent Cut-Off Date; (ii) the original term to maturity of
such

S-29
<PAGE>

Subsequent Mortgage Loan may not exceed 360 months; (iii) such Subsequent
Mortgage Loan has a Mortgage Rate of at least 8.75%; (iv) the purchase of the
Subsequent Mortgage Loans is consented to by the Certificate Insurer and the
Rating Agencies; (v) the principal balance of any such Subsequent Mortgage Loan
may not exceed $350,000.00; (vi) no more than 35% of such Subsequent Mortgage
Loans may be second liens; (vii) no such Subsequent Mortgage Loan shall have a
CLTV of more than, (a) for consumer purpose loans, 85%, and (b) for business
purpose loans, 75%; (viii) no more than 20% of such Subsequent Mortgage Loans
may be Balloon Loans; (ix) no more than 20% of such Subsequent Mortgage Loans
may be secured by mixed-use properties, commercial properties, or four or more
unit multifamily properties; (x) no more than 5% of such Subsequent Mortgage
Loans can be secured by commercial properties; and (xi) following the purchase
of such Subsequent Mortgage Loans by the Trust, the Mortgage Loans (including
the Subsequent Mortgage Loans) (a) will have a weighted average Mortgage Rate,
(I) for consumer purpose loans, of at least 11.35% and (II) for business purpose
loans, of at least 15.75%; and (b) will have a weighted average LTV of not more
than 72%. The Pooling and Servicing Agreement will provide that any of such
requirements may be waived or modified in any respect upon prior written consent
of the Certificate Insurer.

THE ORIGINATORS, THE SELLER AND THE SERVICER
GENERAL

American Business Credit, Inc., a Pennsylvania corporation, the Servicer
and an Originator, is a wholly-owned direct subsidiary of American Business
Financial Services, Inc. ("ABFS"). HomeAmerican Credit, Inc. d/b/a Upland
Mortgage, a Pennsylvania corporation, an Originator and Subservicer, is a
wholly-owned subsidiary of ABC. The Seller, ABFS 1996-2, Inc., a Delaware
corporation, is owned by ABC and Upland.

ABFS is a financial services holding company which, through its operating
subsidiaries, originates, services and sells business loans collateralized by
real estate, first and second lien business and consumer purpose home equity
loans, conforming and non-conforming purchase money and other first mortgage
loans, secured and unsecured small consumer loans and business equipment leases.

ABFS was incorporated in Delaware in 1985. ABFS is a publicly traded
company and its common stock is listed on the Philadelphia Stock Exchange under
the symbol "AFX." The principal executive offices of ABFS and its operating
entities are located at Balapointe Office Centre, 111 Presidential Boulevard,
Suite 215, Bala Cynwyd, PA 19004. Its telephone number at such address is (610)
668-2440.

THE ORIGINATORS

The Mortgage Loans were or will be originated or purchased by the
Originators directly in the ordinary course of their business. The Originators'
primary source of loan product is retail marketing, directly targeting small
businesses and consumers through various advertising mediums.

The business purpose Mortgage Loans were or will be originated or purchased
by ABC (except for Mortgage Loans which are secured by properties located in
states where the originating or purchasing of mortgage loans requires a mortgage
banking license, in which case Upland has or will originate or purchase such
Mortgage Loans). The consumer purpose Mortgage Loans were or will be originated
or purchased by Upland.

Neither ABC nor Upland will insure or guarantee the Class A Certificates.

AMERICAN BUSINESS CREDIT, INC. ABC originates, services and sells business
purpose loans collateralized by real estate. ABC's operating subsidiaries
include: (i) Upland, a consumer purpose mortgage company; (ii) Process
Servicing Center, Inc., a loan processor for bank-generated home equity loans;
(iii) HomeAmerican Consumer Discount Company, a consumer loan company; (iv)
American Business Leasing, Inc., a small equipment leasing company; and (iv) ABC
Holdings Corporation, a holder of foreclosed real estate. ABC was incorporated
in 1988 pursuant to the laws of the Commonwealth of Pennsylvania and maintains
its corporate headquarters in the metropolitan Philadelphia area.

S-30
<PAGE>

ABC currently markets its financial services and originates or purchases
business loans throughout eastern Pennsylvania, Delaware, Maryland, New Jersey,
New York and Virginia. ABC is investigating expanding its market by offering
business loans in North Carolina, South Carolina, Georgia and Florida. ABC's
origination program is primarily a retail marketing program utilizing various
forms of advertising and a direct sales force. ABC's marketing effort is
principally undertaken by its commissioned sales staff, which consists of full
time professional sales persons who are responsible for converting advertising
leads into loan applications. ABC advertises through newspapers and radio as
well as by conducting large direct mail campaigns targeted at owners of small
businesses located in ABC's market area.

ABC makes business purpose mortgage loans to corporations, partnerships,
other business entities and sole proprietors. ABC primarily makes loans to
borrowers with non-perfect credit histories. As a result, ABC typically
requires lower loan-to-value ratios than are generally required of borrowers
with unblemished credit histories. All such loans are collateralized by a first
or second mortgage lien on a principal residence or some other parcel of real
property, such as office and apartment buildings and mixed use buildings owned
by the borrower, a principal of the borrower, or a guarantor of the borrower.
ABC, generally, further collateralizes its loans by obtaining a lien on the
borrower's other tangible and intangible assets and by filing appropriate UCC
financing statements.

ABC makes loans for various business purposes including, but not limited
to, working capital, business expansion, equipment acquisition and debt-
consolidation. ABC does not target any particular industries or trade groups.
See "The Mortgage Pool."

Loans made by ABC generally range from $20,000 to $350,000 and average
approximately $60,000. See "The Mortgage Pool."

HOMEAMERICAN CREDIT, INC. d/b/a UPLAND MORTGAGE. Upland, ABC's home equity
lending subsidiary, is a Pennsylvania corporation and was incorporated in May
1991. Upland primarily originates residential mortgages and consumer home
equity loans. Upland is licensed to act and currently operates a first and
second mortgage banker/lender in Pennsylvania, New Jersey, Delaware, Maryland
and Virginia. Upland has recently been granted licenses to act as a mortgage
lender and has commenced or anticipates lending in Georgia, North Carolina,
Connecticut and Florida.

Upland originates business loans on behalf of ABC in the instances where
state licensing laws require a mortgage license in order to make such loans. In
such circumstances, the credit criteria and collateral requirements utilized by
Upland are identical to those utilized by ABC. As such, ABC's lending
procedures and policies govern Upland when it is originating business purpose
Mortgage Loans.

Upland primarily markets its residential mortgage and consumer home equity
loans through print advertisement in various newspapers, radio advertisements
and through direct mail campaigns in the states where it originates or purchases
mortgage loans. Beginning in September 1996, Upland will begin marketing
through television advertisement. Upland takes applications from potential
borrowers over the phone and in person. The loan request is then processed and
closed. Upland attempts to provide its home equity borrowers with a loan
approval within 24 hours and to close its home equity loans within five days of
obtaining a loan approval.

Upland's growth strategy includes not only geographic expansion into the
markets where it has recently been granted mortgage licenses, but also the
acquisition of other mortgage bankers and brokers which compliment Upland's
market. Toward this goal, HomeAmerican Credit, Inc., in February 1996, acquired
all of the assets of Upland Mortgage Corp., a New Jersey and Pennsylvania
licensed mortgage broker and commenced doing business as "Upland Mortgage" in
August, 1996.

Historically, each of the non-business residential mortgages and home
equity consumer loans originated and funded by Upland was sold to one of several
third party lenders, at a premium. Upland presently accumulates portfolios of
such non-business loans for the purpose of retaining such loans, selling such
loans in bulk or engaging in securitizations. The business loans made by Upland
are either retained in Upland's portfolio,

S-31
<PAGE>

securitized or sold to third parties. Upland's residential mortgages and home
equity loans are currently made in accordance with loan-to-value standards set
forth in the underlying credit manual. The loan-to-value ratios and terms and
conditions utilized for its business loans are identical to those utilized by
ABC.

UNDERWRITING GUIDELINES

LENDING POLICIES AND PRACTICES FOR BUSINESS PURPOSE MORTGAGE LOANS.
Summarized below are the current lending policies and practices with respect to
the business purpose loans originated or purchased by the Originators.

The Originators endeavor at all times to keep their interest and other
charges competitive with the lending rates of other finance companies.
Generally, loans are made at fixed rates for fixed terms ranging from 5 to 15
years. Generally, the Originators compute interest due on their outstanding
loans by the simple interest method. The Originators require that title
insurance be obtained in connection with their loans.

Generally, the Originators will not make loans collateralized by
residential real estate where the overall loan-to-value ratio (based on
independent appraised fair market value) on the properties collateralizing the
loans is equal to or greater than 70%. Generally, the Originators will not make
loans collateralized by commercial real estate where the overall loan-to-value
ratio (based on independent appraised fair market value) is equal to or greater
than 60%. When the loan-to-value ratio is equal to 75% or greater, the
Originators will not make a second mortgage loan when the second mortgage loan
amount is less than 15% of the first existing mortgage loan amount. When the
fair market value of a property exceeds $450,000 the Originators will only lend
50% of the property's value exceeding $450,000. Occasionally, exceptions to
these maximum levels are made if other collateral is available.

LENDING POLICIES AND PRACTICES FOR CONSUMER PURPOSE MORTGAGE LOANS. Upland
attempts to maintain its interest and other charges competitive with the lending
rates of other finance companies and banks. Generally, its consumer home equity
loans are made at fixed rates for fixed terms and may extend for a term of up to
thirty (30) years. Its residential mortgage loans are offered in varied forms.
In all instances, Upland permits borrowers to prepay such loans. Where
permitted by applicable law, Upland may impose a prepayment fee. Whether a
prepayment fee is imposed and the amount of such penalty, if any, is negotiated
between Upland and the individual borrower prior to closing the loan. In the
majority of cases, Upland does not impose a prepayment fee.

UNDERWRITING PROCEDURES. The Originators' underwriting standards are
applied to evaluate a prospective borrower's credit standing and repayment
ability and the value and adequacy of the Mortgaged Property as collateral.
Initially, the borrower is required to fill out a detailed application providing
pertinent credit information. As part of the description of the borrower's
financial condition, the borrower is required to provide information concerning
assets, liabilities, income, credit, employment history and other demographic
and personal information. If the application demonstrates the existence of
sufficient income and equity, the Originator obtains and reviews an independent
credit bureau report on the credit history of the borrower and verification of
the borrower's income by obtaining and reviewing one or more of the borrower's
pay stubs, income tax returns, checking account statements, W-2 tax forms or
verification of business or employment forms.

In determining the adequacy of the Mortgaged Property as collateral, an
appraisal is made of each property considered for financing. The appraisal is
completed by a qualified appraiser on a FNMA form including pictures of
comparable properties and, generally, pictures of the subject property's
interior.

Once all applicable employment, credit and property information is
obtained, a determination is made as to whether sufficient unencumbered equity
in the property exists and whether the prospective borrower has sufficient
monthly income available to meet the borrower's monthly obligations.

TERMS OF THE MORTGAGE LOANS. The principal amount of loans outstanding
bears interest at a fixed rate as indicated on the Mortgage Notes. Interest
with respect to a majority of the Mortgage Loans included or to

S-32
<PAGE>

be included in the Mortgage Pool accrues on a simple interest method. The
simple interest method provides for the amortization of the amount of such loan
over a series of monthly payments. Each monthly interest payment is calculated
by multiplying the outstanding principal balance of such loan by the stated
interest rate. Such product is then multiplied by a fraction, the numerator of
which is the number of days elapsed since the preceding payment of interest was
made and the denominator of which is 360. The remainder of the Mortgage Loans
are not fully amortized over their terms and instead require substantial balloon
payments on their maturity dates. Payments received on a Mortgage Loan are
applied first to interest accrued to the date of payment, then to late fees and
other charges and then to reduce the unpaid principal balance of the related
loan.

The Mortgage Notes provide the holder with the right to require the
borrower to make immediate payment of the entire principal balance plus all
accrued but unpaid interest under the loan agreement if, among other things, the
borrower fails to make any payment under the loan agreement when due (subject to
a grace period or right to cure a default required by state law), or if the
borrower transfers any interest in the property securing the loan agreement.

In the event of default on a mortgage that is senior to a Mortgage Loan,
the junior mortgagee has the right in many states to satisfy the defaulted
senior mortgage in full, or to cure such default and make the defaulted senior
mortgage current as to payment, in either event adding any amounts expended in
connection with such satisfaction or cure to the then current principal balance
for such Mortgage Loan. In such an event of default, the Servicer will either
take the actions described above, take other appropriate actions, or refrain
from taking any action based upon the Servicer's practices in connection with
servicing loans for itself and others. See "Certain Legal Aspects of the
Mortgage Loans and Contracts -- The Mortgage Loans" in the Prospectus.

THE SERVICER

ABC will be responsible for servicing the Mortgage Loans in accordance with
its established servicing procedures and the terms of the Pooling and Servicing
Agreement. ABC will contract with Upland to act as subservicer with respect to
the servicing of the consumer purpose Mortgage Loans. Upland follows the same
servicing procedures as ABC described below with respect to ABC.

ABC begins the collection process 20 days prior to the payment date by
sending an invoice to the mortgagor. ABC initiates the telephone collection
process one day after a borrower misses a monthly due date. ABC's daily
automated collection system identifies delinquent mortgage loans and places them
on a collector's delinquency file. A collector then attempts to call the
delinquent borrower. The collector attempts to contact the delinquent borrower
every day until either a promise to pay has been made by such borrower or such
borrower makes all delinquent payments. When a delinquent borrower makes a
promise to pay, the collector attempts to contact the borrower by phone on the
due date. If telephone contact is not made, the collector sends a computer
generated reminder notice to the borrower. During any period of delinquency,
ABC generates a payment reminder letter to the borrower three (3) days after a
missed monthly due date, a late notice is sent to the borrower seven (7) days
after the due date and if no payment or arrangement for payment has been made
fifteen (15) days after the borrower's due date, an attorney referral letter is
sent. When a mortgage loan is 15 days past due and no contact has been made
with the borrower, a supervisor reviews the account of the borrower to ensure
that all procedures and contacts have been made. At this time, new contact
letters are sent to the delinquent borrower. With respect to second mortgage
loans, the servicer of the first mortgage loan is contacted to determine if the
borrower is also delinquent on the first mortgage loan. When a mortgage loan
becomes forty-five (45) to sixty (60) days delinquent, it is transferred to
ABC's loan work-out department.

When a mortgage loan is received in the work-out department, telephone
contact continues, a new default notice is sent to the borrower, an updated
property value report is ordered for the collateral, the tax status of the
mortgage loan is determined, and the first lien holder (if applicable) is
contacted to determine the status of its loan. If a senior mortgage is in
default, ABC may advance funds to keep the senior mortgage current or may choose
to pay off the senior mortgage.

S-33
<PAGE>

If the borrower has declared bankruptcy or the first mortgagor is
foreclosing, the matter is immediately referred to outside counsel. The
work-out department will attempt to reinstate the loan, seek a payoff, or enter
into a loan modification agreement with the borrower to avoid foreclosure.

Supporting ABC's collection and accounting functions is a network of
computer hardware and software. ABC's current computer system produces mortgage
loan invoices, payment reminders and late notices. In addition to these
collection functions, the computer provides an in-depth customer contact system
which enables ABC's collectors to manage each borrower's loan history by
individually logging all correspondence into the system's data base. The system
also generates numerous management reports detailing collection activity and
accounting information.

ABC recently completed a conversion to a mid-range based commercial banking
system, providing loan origination, loan accounting, loan servicing and
asset/liability management functions. The system provides increased levels of
fault tolerance and recoverability, fully integrated customer information file
and optical imaging support. In addition, the system provides more detailed
reports based on such factors as demographics and loan history, generating
management information from initial pipeline to current loan performance. The
system is currently running parallel with ABC's previous system and will
continue to do so for at least 6 months.

DELINQUENCY AND LOAN LOSS EXPERIENCE

The following tables set forth information relating to the delinquency and
loan loss experience on the mortgage loans included in ABC's and Upland's
servicing portfolio for the periods shown. The delinquency and loan loss
experience represents the historical experience of the Originators, and there
can be no assurance that the future experience on the Mortgage Loans in the
Trust will be the same as, or more favorable than, that of the total mortgage
loans in ABC's and Upland's servicing portfolio.

DELINQUENCY AND FORECLOSURE EXPERIENCE
(DOLLARS IN THOUSANDS)

At June 30, 1996
----------------
Number
of Loans % of Loans % of Amount
Serviced Serviced Amount Serviced Serviced
-------- -------- --------------- --------
<S> <C> <C> <C> <C>

Servicing portfolio. . . . . . . . . . . 887 100.00% $55,173,802 100.00%

Past due loans (1):
60-89 days . . . . . . . . . . . . . . . 2 0.23% 86,227 0.16%
90 days or more. . . . . . . . . . . . . 11 1.24% 516,713 0.94%
--- ------ ---------- -------

Total past due loans . . . . . . . . . . 13 1.47% 602,940 1.09%

Foreclosures pending (2) . . . . . . . . 7 0.79% 620,431 1.12%
REO Properties (3) . . . . . . . . . . . 5 0.56% 444,270 0.81%
--- ------ ---------- -------
Total past due loans,
foreclosures pending
and REO Properties(3). . . . . . . . . . 25 2.82% $1,667,641 3.02%

</TABLE>

(1) The past due period is based on the actual number of days that a payment is
contractually past due. A loan as to which a monthly payment was due 60-89
days prior to the reporting period is considered 60-89 days past due, etc.

S-34
<PAGE>

(2) Includes bankruptcies which preclude foreclosure.

(3) An "REO Property" is a property acquired and held as a result of
foreclosure or deed in lieu of foreclosure.

LOAN CHARGE-OFF EXPERIENCE
(DOLLARS IN THOUSANDS)
----------------------

Quarter Ending
June 30, 1996
-------------

Servicing portfolio at period end. . . . . . . . . . . . . . $54,574,239
Average outstanding(1) . . . . . . . . . . . . . . . . . . . $34,376,432
Number of loans outstanding . . . . . . . . . . . . . . . . 887
Gross losses(2) . . . . . . . . . . . . . . . . . . . . . . $ 91,691
Loan recoveries . . . . . . . . . . . . . . . . . . . . . . $ 0

Net loan charge-offs. . . . . . . . . . . . . . . . . . . . $ 91,691

Net loan charge-offs as a percentage
of average outstanding. . . . . . . . . . . . . . . . . . . 0.27%
Net loan charge-offs as a percentage
of servicing portfolio at period end. . . . . . . . . . . . 0.17%

(1) "Average outstanding" presented is the arithmetic average of the principal
balances of the loans in the Originator's servicing portfolio outstanding
at the close of business for such period.

(2) "Gross losses" means the outstanding principal balance plus accrued but
unpaid interest on liquidated mortgage loans.

While the above delinquency and foreclosure and loan charge-off experiences
are typical of the Originators' experiences at the date for the period
indicated, there can be no assurance that the delinquency and foreclosure and
loan charge-off experiences on the Mortgage Loans will be similar. Accordingly,
the information should not be considered to reflect the credit quality of the
Mortgage Loans included in the Trust, or as a basis of assessing the likelihood,
amount or severity of losses on the Mortgage Loans. The statistical data in the
tables is based on all of the loans in the Originators' servicing portfolio.
The Mortgage Loans, in general, are likely to have characteristics which
distinguish them from the majority of the loans in the Originators' servicing
portfolio.

PREPAYMENT AND YIELD CONSIDERATIONS

The weighted average life of, and, if purchased at other than par, the
yield to maturity on, a Class A Certificate will be directly related to the rate
of payment of principal of the Mortgage Loans, including for this purpose
voluntary payment in full of Mortgage Loans prior to stated maturity,
liquidations due to defaults, casualties and condemnations, and repurchases of
or substitutions for Mortgage Loans by ABC or an affiliate of ABC as required or
permitted under the Pooling and Servicing Agreement or the Unaffiliated Seller's
Agreement.

The actual rate of principal prepayments on pools of mortgage loans is
influenced by a variety of economic, tax, geographic, demographic, social, legal
and other factors and has fluctuated considerably in recent years. In addition,
the rate of principal prepayments may differ among pools of mortgage loans at
any time because of specific factors relating to the mortgage loans in the
particular pool, including, among other things, the age of the mortgage loans,
the geographic locations of the properties securing the loans and the extent of
the mortgagors' equity in such properties, and changes in the mortgagors'
housing needs, job transfers and unemployment.

S-35
<PAGE>

The rate of prepayments with respect to conventional mortgage loans has
fluctuated significantly in recent years. In general, if prevailing interest
rates fall significantly below the interest rates at the time of origination,
mortgage loans may be subject to higher prepayment rates than if prevailing
rates remain at or above those at the time such mortgage loans were originated.
Conversely, if prevailing interest rates rise appreciably above the interest
rates at the time of origination, mortgage loans may experience a lower
prepayment rate than if prevailing rates remain at or below those at the time
such mortgage loans were originated. However, there can be no assurance that
the Mortgage Loans will conform to the prepayment experience of conventional
mortgage loans or to any past prepayment experience or any published prepayment
forecast. No assurance can be given as to the level of prepayments on Mortgage
Loans that the Trust Fund will experience.

As indicated above, if purchased at other than par, the yield to maturity
on a Class A Certificate will be affected by the rate of the payment of
principal on the Mortgage Loans. If the actual rate of payments on the Mortgage
Loans is slower than the rate anticipated by an investor who purchases a Class A
Certificate at a discount, the actual yield to such investor will be lower than
such investor's anticipated yield. If the actual rate of payments on the
Mortgage Loans is faster than the rate anticipated by an investor who purchases
a Class A Certificate at a premium, the actual yield to such investor will be
lower than such investor's anticipated yield.

The final distribution date for the Class A Certificates is expected to be
February 15, 2028 (the "Final Scheduled Maturity Date"), which is 13 months
after the final stated maturity date of the Mortgage Loan having the latest
maturity date. The weighted average life of the Class A Certificates is likely
to be shorter than would be the case if payments actually made on the Mortgage
Loans conformed to the foregoing assumption, and the final Distribution Date
with respect to any Class of the Class A Certificates could occur significantly
earlier than the Final Scheduled Maturity Date because (i) prepayments
(including, for this purpose, prepayments attributable to foreclosure,
liquidation, repurchase and the like) on Mortgage Loans are likely to occur,
(ii) thirteen months have been added to obtain the Final Scheduled Maturity Date
above, and (iii) the Servicer may cause a liquidation of the Trust Fund when the
aggregate outstanding principal amount of the Mortgage Loans is less than 10% of
the sum of (a) the Cut-Off Date Aggregate Principal Balance and (b) the Original
Pre-Funded Amount.

"Weighted average life" refers to the average amount of time that will
elapse from the date of issuance of a security until each dollar of principal of
such security is scheduled to be repaid to an investor. The weighted average
life of the Class A Certificates will be influenced by the rate at which
principal of the Mortgage Loans is paid, which may be in the form of scheduled
amortization or prepayments (for this purpose, the term "prepayment" includes
liquidations due to default).

Prepayments on mortgage loans are commonly measured relative to a
prepayment model or standard. The model used in this Prospectus Supplement
("Home Equity Prepayment" or "HEP") is a prepayment assumption (the "Prepayment
Assumption") which represents an assumed rate of prepayment each month relative
to the then outstanding principal balance of a pool mortgage loans for the life
of such mortgage loans. 22% HEP assumes prepayment rates of 2.2% per annum of
the then outstanding principal balance of the Mortgage Loans in the first month
of life of the Mortgage Loans and an additional 2.2% per annum in each month
thereafter up to and including the tenth month. Beginning in the eleventh month
and in each month thereafter during the life of the Mortgage Loans, 22% HEP
assumes a constant prepayment rate of 22% per annum. As used in the table
below, 0% Prepayment Assumption assumes prepayment rates equal to 0% of the
Prepayment Assumption, I.E., no prepayments on the mortgage loans having the
characteristics described below. The Prepayment Assumption does not purport to
be a historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of mortgage loans, including the
related Mortgage Loans.

The following table has been prepared on the basis of the following
assumptions (collectively the "Modeling Assumptions"):

(i) The Mortgage Loans prepay at the indicated percentage of the Prepayment
Assumption, (ii) distributions on the Certificates are received in cash on the
15th day of each month commencing in October 1996, (iii) no defaults or
delinquencies in, or modifications, waivers or amendments respecting the payment
by the mortgagors of principal and interest on the Mortgage Loans occur, (iv)
scheduled payments are assumed to

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be received on the first day of each month commencing in October 1996 (or as set
forth in the following table) and prepayments represent payments in full of
individual Mortgage Loans and are assumed to be received on the last day of each
month, commencing in September 1996 (or as set forth in the following table) and
include 30 days' interest thereon, (v) the Class A Pass-Through Rate remains
constant at 7.525% per annum, (vi) the Certificates are purchased on September
27, 1996, (vii) all calculations are made on the basis of a 360 day year
consisting of twelve 30 day months, (viii) the Specified Subordinated Amount is
as set forth in the Pooling and Servicing Agreement and (ix) the Mortgage Pool
consists of six Mortgage Loans having the following characteristics:

Original Remaining Remaining
Mortgage Term to Term to Amortizing
Principal Interest Maturity Maturity Term
Balance($) Rate(%) (in months) (in months) (in months)
---------- -------- ----------- ----------- -----------

4,373,498.22 12.469 102 101 101
19,933,580.29 12.985 199 198 198
548,038.97 11.717 353 351 351
5,144,882.52 13.092 356 177 355
8,285,039.16 (1) 12.866 (2) 185 184 184
1,714,960.84 (1) 13.092 (2) 356 177 355

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

(1) Assumes transfer to the Trust in October 1996 with the characteristics set
forth above. Scheduled payments are assumed to be received on the first
day of each month commencing in November 1996. Prepayments are assumed to
be received on the last day of each month commencing in October 1996 and
include 30 days' interest thereon.

(2) During the first Due Period, interest is assumed to be available for
payment to the Class A Certificates at a rate of 7.865% per annum.

Based upon the foregoing Modeling Assumptions, the tables below indicate
the weighted average life and earliest retirement date of the Class A
Certificates assuming that the Mortgage Loans prepay according to the indicated
percentages of the Prepayment Assumption.

WEIGHTED AVERAGE LIVES

Class A Certificates

Percentage of Prepayment Weighted Average Earliest Retirement
Assumption Life (1)(2) Date (3)
------------------------ ---------------- -------------------
0% 9.66 1/15/2012
18% 3.84 5/15/2006
20% 3.55 8/15/2005
22% 3.30 12/15/2004
26% 2.87 10/15/2003
30% 2.53 12/15/2002

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

(1) The weighted average life of each Class of Class A Certificates is
determined by (a) multiplying the amount of each principal payment by the
number of years from the Closing Date to the related Distribution Date; (b)
adding the results; and (c) dividing the sum by the Original Class A
Principal Balance.

(2) Determined assuming no early termination of the Trust Fund occurs.

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(3) Determined assuming early termination of the Trust Fund occurs on the
Clean-up Call Date as described herein.

______________________

There is no assurance that prepayments will occur or, if they do occur,
that they will occur at any percentage of HEP.

The Pooling and Servicing Agreement provides that none of the Certificate
Insurer, the Trust, the Trustee, the Seller, the Depositor or the Servicer will
be liable to any Certificateholder or Holder for any loss or damage incurred by
such Certificateholder or Holder as a result of any difference in the rate of
return received by such Certificateholder or Holder as compared to the Class A
Pass-Through Rate, with respect to any Holder of Class A Certificates upon
reinvestments of the funds received in connection with any premature repayment
of principal on the Certificates, including any such repayment resulting from
any prepayment by the Mortgagor, any liquidation of such Mortgage Loan, or any
repurchase of or substitution for any Mortgage Loan by the Seller or the
Servicer.

DESCRIPTION OF THE CERTIFICATES

GENERAL

The Class A Certificates will be issued by the Trust. In addition to the
Class A Certificates, the Trust will also issue the Class R Certificates. The
Class R Certificates have been designated as the single "residual interest" for
purposes of the Code. The Class R Certificates are not being offered hereby.

Each Class A Certificate represents a certain fractional undivided
ownership interest in the Trust Fund created and held pursuant to the Pooling
and Servicing Agreement, subject to the limits and the priority of distribution
described therein. The Trust Fund consists of (a) the Mortgage Loans, together
with the mortgage files relating thereto and all collections thereon and
proceeds thereof collected after the Cut-Off Date (other than Monthly Payments
due on each Mortgage Loan up to and including any Due Date occurring on or prior
to August 30, 1996), (b) such assets as from time to time are identified as REO
Property and collections thereon and proceeds thereof, (c) assets that are
deposited in the Accounts (as defined herein), including amounts on deposit in
the Accounts and invested in accordance with the Pooling and Servicing Agreement
("Permitted Investments"), (d) the Trustee's rights with respect to the Mortgage
Loans under all insurance policies required to be maintained pursuant to the
Pooling and Servicing Agreement and any insurance proceeds, (e) liquidation
proceeds and (f) released mortgaged property proceeds. In addition, the
Depositor will cause the Certificate Insurer to issue the Certificate Insurance
Policy under which it will guarantee payments to the Class A Certificateholders
as described herein.

BOOK-ENTRY REGISTRATION

The Class A Certificates will be issued only in book-entry form, in
denominations of $1,000 initial principal balance and integral multiples of
$1,000 in excess thereof, except that one Class A Certificate may be issued in a
different amount.

The Beneficial Certificate Owners may elect to hold their Class A
Certificates through DTC in the United States, or CEDEL or Euroclear (in Europe)
if they are participants of such systems ("Participants"), or indirectly through
organizations which are Participants in such systems. The Book-Entry
Certificates will be issued in one or more certificates per class of Class A
Certificates which in the aggregate equal the principal balance of such Class A
Certificates and will initially be registered in the name of Cede, the nominee
of DTC. CEDEL and Euroclear will hold omnibus positions on behalf of their
Participants through customers' securities accounts in CEDEL's and Euroclear's
names on the books of their respective depositaries which in turn will hold

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such positions in customers' securities accounts in the depositaries' names on
the books of DTC. Chase will act as depositary for CEDEL and Morgan will act as
depositary for Euroclear (in such capacities, individually the "Relevant
Depositary" and collectively the "European Depositaries"). Investors may hold
such beneficial interests in the Book-Entry Certificates in minimum
denominations representing principal amounts of $1,000. Except as described
below, no Beneficial Certificate Owner will be entitled to receive a physical
certificate representing such Certificate (a "Definitive Certificate"). Unless
and until Definitive Certificates are issued, it is anticipated that the only
"Owner" of such Class A Certificates will be Cede, as nominee of DTC.
Beneficial Certificate Owners will not be Owners as that term is used in the
Pooling Agreement. Beneficial Certificate Owners are only permitted to exercise
their rights indirectly through Participants and DTC.

The Beneficial Certificate Owner's ownership of a Book-Entry Certificate
will be recorded on the records of the brokerage firm, bank, thrift institution
or other financial intermediary (each, a "Financial Intermediary") that
maintains the Beneficial Certificate Owner's account for such purpose. In turn,
the Financial Intermediary's Ownership of such Book-Entry Certificate will be
recorded on the records of DTC (or of a participating firm that acts as agent
for the Financial Intermediary, whose interest will in turn be recorded on the
records of DTC, if the Beneficial Certificate Owner's Financial Intermediary is
not a DTC Participant and on the records of CEDEL or Euroclear, as appropriate).

DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York UCC and a "clearing agency"
registered pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended. DTC was created to hold securities for its participating organizations
("Participants") and to facilitate the clearance and settlement of securities
transactions between Participants through electronic book-entries, thereby
eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers (including the Underwriter), banks, trust
companies and clearing corporations. Indirect access to the DTC system also is
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly ("Indirect Participants").

Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Book-Entry Certificates, such as the Class A Certificates, among Participants on
whose behalf it acts with respect to the Book-Entry Certificates and to receive
and transmit distributions of principal of and interest on the Book-Entry
Certificates. Participants and Indirect Participants with which Beneficial
Certificate Owners have accounts with respect to the Book-Entry Certificates
similarly are required to make book-entry transfers and receive and transmit
such payments on behalf of their respective Beneficial Certificate Owners.

Beneficial Certificate Owners that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, Book-Entry Certificates may do so only through Participants
and Indirect Participants. In addition, Beneficial Certificate Owners will
receive all distributions of principal and interest from the Trustee, or a
paying agent on behalf of the Trustee, through DTC Participants. DTC will
forward such distributions to its Participants, which thereafter will forward
them to Indirect Participants or Beneficial Certificate Owners. Beneficial
Certificate Owners will not be recognized by the Trustee, the Servicer or any
paying agent as Certificateholders, as such term is used in the Pooling and
Servicing Agreement, and Beneficial Certificate Owners will be permitted to
exercise the rights of Certificateholders only indirectly through DTC and its
Participants.

Because of time zone differences, credits of securities received in CEDEL
or Euroclear as a result of a transaction with a Participant will be made during
subsequent securities settlement processing and dated the business day following
the DTC settlement date. Such credits or any transactions in such securities
settled during such processing will be reported to the relevant Euroclear or
CEDEL Participants on such business day. Cash received in CEDEL or Euroclear as
a result of sales of securities by or through a CEDEL Participant (as defined
below) or Euroclear Participant (as defined below) to a DTC Participant will be
received with value on the DTC settlement date but will be available in the
relevant CEDEL or Euroclear cash account only as of the business

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day following settlements in DTC. For information with respect to tax
documentation procedures relating to the Certificates, see "Certain Federal
Income Tax Consequences -- REMIC Certificates" in the Prospectus.

Transfers between Participants will occur in accordance with DTC rules.
Transfers between CEDEL Participants and Euroclear Participants will occur in
accordance with their respective rules and operating procedures.

Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by the Relevant Depositary; however, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in accordance
with its rules and procedures and within its established deadlines (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to the
Relevant Depositary to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or receiving payment in
accordance with normal procedures for same day funds settlement applicable to
DTC. CEDEL Participants and Euroclear Participants may not deliver instructions
directly to the European Depositaries.

CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participant organizations ("CEDEL
Participants") and facilitates the clearance and settlement of securities
transactions between CEDEL Participants through electronic book-entry changes in
accounts of CEDEL Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in CEDEL in any of 28
currencies, including United States dollars. CEDEL provides to its CEDEL
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. CEDEL interfaces with domestic markets in several
countries. As a professional depository, CEDEL is subject to regulation by the
Luxembourg Monetary Institute. CEDEL Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to CEDEL is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a CEDEL Participant, either directly or indirectly.

Euroclear was created in 1968 to hold securities for participants of
Euroclear ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in any of 31 currencies, including United
States dollars. Euroclear includes various other services, including securities
lending and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. Euroclear is operated by the Brussels, Belgium office of
Morgan Guaranty Trust Company of New York (the "Euroclear Operator"), under
contract with Euroclear Clearance Systems S.C., a Belgian cooperative
corporation (the "Cooperative"). All operations are conducted by the Euroclear
Operator, and all Euroclear Securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear operator, not the Cooperative. The
Cooperative establishes policy for Euroclear on behalf of Euroclear
Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries.
Indirect access to Euroclear is also available to other firms that clear through
or maintain a custodial relationship with a Euroclear Participant, either
directly or indirectly.

The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian Banking
Commission.

Securities clearance accounts and cash accounts with the Euroclear operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and

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applicable Belgian law (collectively, the "Terms and Conditions"). The Terms
and Conditions govern transfers of securities and cash within Euroclear,
withdrawals of securities and cash from Euroclear, and receipts of payments with
respect to securities in Euroclear. All securities in Euroclear are held on a
fungible basis without attribution of specific certificates to specific
securities clearance accounts. The Euroclear Operator acts under the Terms and
Conditions only on behalf of Euroclear Participants, and has no record of or
relationship with persons holding through Euroclear Participants.

Distributions on the Book-Entry Certificates will be made on each
Distribution Date by the Trustee to Cede, as nominee of DTC. DTC will be
responsible for crediting the amount of such payments to the accounts of the
applicable DTC Participants in accordance with DTC's normal procedures. Each
DTC Participant will be responsible for disbursing such payment to the
Beneficial Certificate Owners of the Book-Entry Certificates that it represents
and to each Financial Intermediary for which it acts as agent. Each such
Financial Intermediary will be responsible for disbursing funds to the
Beneficial Certificate Owners of the Book-Entry Certificates that it represents.

Under a book-entry format, Beneficial Certificate Owners of the Book-Entry
Certificates may experience some delay in their receipt of payments, since such
payments will be forwarded by the Trustee to Cede, as nominee of DTC.
Distributions with respect to Class A Certificates held through CEDEL or
Euroclear will be credited to the cash accounts of CEDEL Participants or
Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by the Relevant Depositary. Such
distributions will be subject to tax reporting in accordance with relevant
United States tax laws and regulations. Because DTC can only act on behalf of
Financial Intermediaries, the ability of a Beneficial Certificate Owner to
pledge Book-Entry Certificates to persons or entities that do not participate in
the Depository system, or otherwise take actions in respect of such Book-Entry
Certificates, may be limited due to the lack of physical certificates for such
Book-Entry Certificates. In addition, issuance of the Book-Entry Certificates
in book-entry form may reduce the liquidity of such Certificates in the
secondary market since certain potential investors may be unwilling to purchase
Certificates for which they cannot obtain physical certificates.

Monthly and annual reports on the Trust provided by the Trustee to Cede, as
nominee of DTC, may be made available to Beneficial Certificate Owners upon
request, in accordance with the rules, regulations and procedures creating and
affecting the Depository, and to the Financial Intermediaries to whose DTC
accounts the Book-Entry Certificates of such Beneficial Certificate Owners are
credited.

Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Beneficial
Certificate Owner to pledge Book-Entry Certificates to persons or entities that
do not participate in the DTC system, or to otherwise act with respect to such
Book-Entry Certificates, may be limited due to the lack of a physical
certificate for such Book-Entry Certificates. In addition, under a book-entry
format, Beneficial Certificate Owners may experience delays in their receipt of
payments, since distributions will be made by the Trustee, to Cede, as nominee
for DTC.

DTC has advised the Depositor and the Servicer that it will take any action
permitted to be taken by a Certificateholder under the Pooling and Servicing
Agreement only at the direction of one or more Participants to whose accounts
with DTC the Book-Entry Certificates are credited. Additionally, DTC has
advised the Depositor that it will take such actions with respect to specified
percentages of voting rights only at the direction of and on behalf of
Participants whose holdings of Book-Entry Certificates evidence such specified
percentages of voting rights. DTC may take conflicting actions with respect to
percentages of voting rights to the extent that Participants whose holdings of
Book-Entry Certificates evidence such percentages of voting rights authorize
divergent action.

None of the Depositor, the Servicer or the Trustee will have any
responsibility for any aspect of the records relating to or payments made on
account of beneficial ownership interests of the Book-Entry Certificates held by
Cede, as nominee for DTC, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.

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Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of Certificates among Participants of DTC,
CEDEL and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.

DEFINITIVE CERTIFICATES

The Class A Certificates, which will be issued initially as Book-Entry
Certificates, will be converted to Definitive Certificates and reissued to
Beneficial Owners or their nominees, rather than to DTC or its nominee, only if
(a) the Depository or the Servicer advises the Trustee in writing that DTC is no
longer willing or able to discharge properly its responsibilities as depository
with respect to the Book-Entry Certificates and the Depository or the Servicer
is unable to locate a qualified successor or (b) the Trustee, at its option,
elects to terminate the book-entry system through DTC.

Upon the occurrence of any event described in the immediately preceding
paragraph, DTC will be required to notify all Participants of the availability
through DTC of Definitive Certificates. Upon delivery of Definitive
Certificates, the Trustee will reissue the Book-Entry Certificates as Definitive
Certificates to Beneficial Owners. Distributions of principal of, and interest
on, the Book-Entry Certificates will thereafter be made by the Trustee, or a
paying agent on behalf of the Trustee, directly to holders of Definitive
Certificates in accordance with the procedures set forth in the Pooling and
Servicing Agreement.

Definitive Certificates will be transferable and exchangeable at the
offices of the Trustee or the certificate registrar. No service charge will be
imposed for any registration of transfer or exchange, but the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge imposed in connection therewith.

ASSIGNMENT OF MORTGAGE LOANS

Pursuant to an Unaffiliated Seller's Agreement among the Originators, the
Depositor and the Seller (the "Unaffiliated Seller's Agreement"), the
Originators will sell, transfer, assign, set over and otherwise convey the
Mortgage Loans without recourse to the Seller and the Seller will sell,
transfer, assign, set over and otherwise convey the Mortgage Loans without
recourse to the Depositor on the Issue Date. Pursuant to the Pooling and
Servicing Agreement, the Depositor will sell, transfer, assign, set over and
otherwise convey without recourse to the Trustee in trust for the benefit of the
Certificateholders and the Certificate Insurer all right, title and interest in
and to each Mortgage Loan. Each such transfer will convey all right, title and
interest in and to (a) principal due and (b) interest accruing on each such
Mortgage Loan after the Cut-Off Date; provided, however, that the Seller will
not convey, and the Seller reserves and retains all its right, title and
interest in and to, (i) principal (including principal prepayments in full and
curtailments (I.E., partial prepayments)) received on each such Mortgage Loan on
or prior to the Cut-Off Date and (ii) interest accrued on each Mortgage Loan on
or prior to the Due Date immediately preceding the Cut-Off Date.

In connection with such transfer and assignment, the Depositor will cause
to be delivered to the Trustee on the Closing Date the following documents
(collectively, with respect to each Mortgage Loan, the "Trustee's Mortgage
File") with respect to each Mortgage Loan:

(a) The original Mortgage Note, endorsed without recourse in blank by
the Seller, including all intervening endorsements showing a complete chain
of endorsement;

(b) The related original Mortgage with evidence of recording
indicated thereon or a copy thereof certified by the applicable recording
office;

(c) The recorded mortgage assignment(s), or copies thereof certified
by the applicable recording office, if any, showing a complete chain of
assignment from the originator of the related Mortgage Loan to the Seller
(which assignment may, at the Seller's option, be combined with the
assignment referred to in clause (d) below);

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(d) A mortgage assignment in recordable form (which, if acceptable
for recording in the relevant jurisdiction, may be included in a blanket
assignment or assignments) of each Mortgage from the Seller to the Trustee;

(e) Originals of all assumption, modification and substitution
agreements in those instances where the terms or provisions of a Mortgage
or Mortgage Note have been modified or such Mortgage or Mortgage Note has
been assumed; and

(f) Evidence of title insurance (which may consist of (A) a copy of
the title insurance policy, or (B) a binder thereof or copy of such binder)
together with a certificate from the Seller that the original Mortgage has
been delivered to the title insurance company that issued such binder for
recordation.

Pursuant to the Pooling and Servicing Agreement, the Trustee agrees to
execute and deliver on or prior to the Closing Date an acknowledgment of receipt
of the Certificate Insurance Policy and, for each Mortgage Loan, the original
Mortgage Note, item (a) above, with respect to the Mortgage Loans (with any
exceptions noted). The Trustee agrees, for the benefit of the
Certificateholders and the Certificate Insurer, to review (or cause to be
reviewed) each Trustee's Mortgage File within 30 days after the Closing Date
(or, with respect to any Qualified Substitute Mortgage Loan, within 30 days
after the receipt by the Trustee thereof) and to deliver a certification
generally to the effect that, as to each Mortgage Loan listed in the Mortgage
Loan Schedule, (a) all documents required to be delivered to it pursuant to the
Mortgage Purchase Agreement are in its possession, (b) each such document has
been reviewed by it and has not been mutilated, damaged, torn or otherwise
physically altered, appears regular on its face and relates to such Mortgage
Loan, and (c) based on its examination and only as to the foregoing documents,
certain information set forth on the Mortgage Loan Schedule accurately reflects
the information set forth in the Trustee's Mortgage File delivered on such date.

If the Trustee, during the process of reviewing the Trustee's Mortgage
Files, finds any document constituting a part of a Trustee's Mortgage File which
is not executed, has not been received or is unrelated to the Mortgage Loans, or
that any Mortgage Loan does not conform to the requirements above or to the
description thereof as set forth in the Mortgage Loan Schedule, the Trustee
shall promptly so notify the Trustee, the Servicer, the Seller and the
Certificate Insurer in writing with details thereof. The Seller agrees to use
reasonable efforts to cause to be remedied a material defect in a document
constituting part of a Trustee's Mortgage File of which it is so notified by the
Trustee. If, however, within 60 days after the Trustee's notice to it
respecting such defect the Seller has not caused to be remedied the defect and
the defect materially and adversely affects the interest of the Holders in the
Mortgage Loan or the interests of the Certificate Insurer, the Seller or the
related Originator will either (a) substitute in lieu of such Mortgage Loan a
Qualified Substitute Mortgage Loan and, if the then outstanding principal
balance of such Qualified Substitute Mortgage Loan is less than the principal
balance of such Mortgage Loan as of the date of such substitution plus accrued
and unpaid interest thereon, deliver to the Servicer as part of the related
monthly remittance remitted by the Servicer the amount of any such shortfall
(the "Substitution Adjustment") or (b) purchase such Mortgage Loan at a price
equal to the outstanding principal balance of such Mortgage Loan as of the date
of purchase, plus the greater of (i) all accrued and unpaid interest thereon and
(ii) 30 days' interest thereon, computed at the related Mortgage Interest Rate,
net of the Servicing Fee if the Servicer is effecting the repurchase, plus the
amount of any unreimbursed Servicing Advances made by the Servicer, which
purchase price shall be deposited in the Certificate Account on the next
succeeding Servicer Distribution Date after deducting therefrom any amounts
received in respect of such repurchased Mortgage Loan or Loans and being held in
the Certificate Account for future distribution to the extent such amounts have
not yet been applied to principal or interest on such Mortgage Loan (see
" -- Flow of Funds" below); provided, however, that the Seller may not purchase
any Mortgage Loan that is not in default or as to which no default is imminent
pursuant to clause (ii) preceding unless the Seller has theretofore caused to be
delivered to the Trustee an opinion of counsel knowledgeable in federal income
tax matters which states that such a purchase would not constitute a prohibited
transaction under the Code.

A "Qualified Substitute Mortgage Loan" is defined in the Pooling and
Servicing Agreement as any mortgage loan or mortgage loans substituted for a
deleted Mortgage Loan and which, among other things, (i)

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relates or relate to a detached one-family residence or to the same type of
residential dwelling as the deleted Mortgage Loan and in each case has or have
the same or a better lien priority as the deleted Mortgage Loan and has the same
occupancy status or is an owner-occupied Mortgaged Property, (ii) matures or
mature no later than (and not more than one year earlier than) the deleted
Mortgage Loan, (iii) has or have a Loan-to-Value Ratio ("LTV") or LTV's at the
time of such substitution no higher than the LTV of the deleted Mortgage Loan,
(iv) has or have a CLTV or CLTV's at the time of such substitution no higher
than the CLTV of the deleted Mortgage Loan, (v) has or have a principal balance
or principal balances (after application of all payments received on or prior to
the date of substitution) not substantially less and not more than the principal
balance of the deleted Mortgage Loan as of such date, (vi) satisfies or satisfy
the criteria set forth from time to time in the definition of "qualified
replacement mortgage" at Section 860G(a)(4) of the Code (or any successor
statute thereto), (vii) has a mortgage interest rate of at least the same
interest rate as the deleted Mortgage Loan and (viii) complies or comply as of
the date of substitution with each representation and warranty set forth in the
Mortgage Purchase Agreement.

REPRESENTATIONS AND WARRANTIES OF THE SELLER

The Seller will represent, among other things, with respect to each
Mortgage Loan, as of the Issue Date, the following:

1. The information set forth in the Mortgage Loan Schedule with
respect to each Mortgage Loan is true and correct;

2. All of the original or certified documentation constituting the
Trustee's Mortgage Files (including all material documents related thereto)
has been or will be delivered to the Trustee on the Issue Date or as
otherwise provided in the Mortgage Purchase Agreement;

3. The Mortgaged Property consists of a single parcel of real
property separately assessed for tax purposes, upon which is erected a
detached or an attached one-family residence or a detached two-to-six
family dwelling, or an individual condominium unit in a low-rise
condominium, or an individual unit in a planned unit development, or a
commercial property, or a mixed use or multiple purpose property. Such
residence, dwelling or unit is not (i) a unit in a cooperative apartment,
(ii) a property constituting part of a syndication, (iii) a time share
unit, (iv) a property held in trust, (v) a mobile home, (vi) a manufactured
dwelling, (vii) a log-constructed home, or (viii) a recreational vehicle;

4. Each Mortgage is a valid first or second lien on a fee simple (or
its equivalent under applicable state law) estate in the real property
securing the amount owed by the Mortgagor under the Mortgage Note subject
only to (i) the lien of current real property taxes and assessments which
are not delinquent, (ii) any related first mortgage loan, (iii) covenants,
conditions and restrictions, rights of way, easements and other matters of
public record as of the date of recording of such Mortgage, such exceptions
appearing of record being acceptable to mortgage lending institutions
generally in the area wherein the property subject to the Mortgage is
located or specifically reflected in the appraisal obtained in connection
with the origination of the related Mortgage Loan obtained by the
Unaffiliated Seller and (iv) other matters to which like properties are
commonly subject which do not materially interfere with the benefits of the
security intended to be provided by such Mortgage;

5. Immediately prior to the transfer and assignment by the Seller to
the Depositor, the Seller had good title to, and was the sole owner of each
Mortgage Loan, free of any interest of any other person, and the Seller has
transferred all right, title and interest in each Mortgage Loan to the
Depositor;

6. Each Mortgage Loan conforms, and all such Mortgage Loans in the
aggregate conform, to the description thereof set forth in this Prospectus
Supplement; and

7. All of the Mortgage Loans were originated in accordance with the
underwriting criteria set forth in this Prospectus Supplement.

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Pursuant to the Agreement, upon the discovery by any of the
Certificateholders, the Seller, the Servicer, any Subservicer, the Certificate
Insurer, or the Trustee that any of the representations and warranties contained
in the Mortgage Purchase Agreement have been breached in any material respect as
of the Closing Date, with the result that the interests of the
Certificateholders in the related Mortgage Loan or the interests of the
Certificate Insurer were materially and adversely affected (notwithstanding that
such representation and warranty was made to the Seller's best knowledge and the
Seller lacked knowledge of such breach), the party discovering such breach is
required to give prompt written notice to the other parties. Subject to certain
provisions of the Mortgage Purchase Agreement, within 60 days of the earlier to
occur of the Seller's or the applicable Originator's discovery or its receipt of
notice of any such breach, the Seller or the related Originator will (a)
promptly cure such breach in all material respects, (b) remove each Mortgage
Loan which has given rise to the requirement for action by the Seller or the
related Originator, substitute one or more Qualified Substitute Mortgage Loans
and, if the outstanding principal amount of such Qualified Substitute Mortgage
Loans as of the date of such substitution is less than the outstanding principal
balance, plus accrued and unpaid interest thereon of the replaced Mortgage Loans
as of the date of substitution, deliver to the Trust Fund as part of the amounts
remitted by the Servicer on such Distribution Date the amount of such shortfall,
or (c) purchase such Mortgage Loan at a price equal to the principal balance of
such Mortgage Loan as of the date of purchase plus the greater of (i) all
accrued and unpaid interest thereon and (ii) 30 days' interest thereon computed
at the Mortgage Interest Rate, net of the Servicing Fee if ABC is the Servicer,
plus the amount of any unreimbursed Servicing Advances made by the Servicer, and
deposit such purchase price into the Certificate Account on the next succeeding
Servicer Distribution Date after deducting therefrom any amounts received in
respect of such repurchased Mortgage Loan or Loans and being held in the
Certificate Account for future distribution to the extent such amounts have not
yet been applied to principal or interest on such Mortgage Loan; provided,
however, that any substitution of one or more Qualified Substitute Mortgage
Loans pursuant to clause (b) preceding must be effected not later than two years
after the Issue Date unless the Trustee and the Certificate Insurer receive an
opinion of counsel that such substitution would not constitute a prohibited
transaction for purposes of the REMIC provisions of the Code and, provided,
further, that the Seller or the related Originator may not purchase such
Mortgage Loan that is not in default or as to which no default is imminent
pursuant to clause (c) preceding unless the Seller or the related Originator has
theretofore caused to be delivered to the Trustee and the Certificate Insurer an
opinion of counsel knowledgeable in federal income tax matters in form and
substance satisfactory to the Trustee and the Certificate Insurer to the effect
that such a purchase would not constitute a prohibited transaction for purposes
of the REMIC provisions of the Code or cause the Trust Fund to fail to qualify
as a REMIC at any time any Certificates are outstanding. In addition, the
Seller and the related Originator shall be obligated to indemnify the Trustee,
the Certificateholders and the Certificate Insurer for any third-party claims
arising out of a breach by the Seller of representations or warranties regarding
the Mortgage Loans. The obligation of the Seller and the related Originator to
cure such breach or to substitute or purchase any Mortgage Loan and to indemnify
constitute the sole remedies respecting a material breach of any such
representation or warranty to the Certificateholders, the Trustee and the
Certificate Insurer.

PAYMENTS ON THE MORTGAGE LOANS

The Pooling and Servicing Agreement provides that the Servicer for the
benefit of the Certificateholders shall establish and maintain a Collection
Account (the "Collection Account"), which will generally be (i) an account
maintained with a depository institution or trust company whose long term
unsecured debt obligations are rated by each Rating Agency in one of its two
highest rating categories at the time of any deposit therein or (ii) trust
accounts maintained with a depository institution acceptable to each Rating
Agency (any such account, an "Eligible Account"). The Pooling and Servicing
Agreement permits the Servicer to direct any depository institution maintaining
the Collection Account to invest the funds in the Collection Account in one or
more Permitted Investments, as defined below, that mature, unless payable on
demand, no later than the Business Day preceding the date on which the Servicer
is required to transfer the Servicer Remittance Amount from the Collection
Account to the Certificate Account described below.

The Servicer is obligated to deposit or cause to be deposited in the
Collection Account on a daily basis, amounts representing the following payments
received and collections made by it after the Cut-Off Date (other than in
respect of Monthly Payments on the Mortgage Loans due on each Mortgage Loan up
to and including

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any Due Date occurring on or prior to August 30, 1996): (i) all payments on
account of principal, including prepayments of principal ("Principal
Prepayments"); (ii) all payments on account of interest on the Mortgage Loans,
(iii) all Liquidation Proceeds and all Insurance Proceeds to the extent such
proceeds are not to be applied to the restoration of the related Mortgaged
Property or released to the related borrower in accordance with the express
requirements of law or in accordance with prudent and customary servicing
practices; (v) all Net REO Proceeds; (vi) all other amounts required to be
deposited in the Collection Account pursuant to the Pooling and Servicing
Agreement including prepayment fees; and (vii) any amounts required to be
deposited in connection with net losses realized on investments of funds in the
Collection Account.

The Trustee will be obligated to set up an account (the "Certificate
Account", and together with the Collection Account, the "Accounts"), which is
required to be an Eligible Account, into which the Servicer will deposit or
cause to be deposited the Servicer Remittance Amount on the 10th day of each
month (the "Servicer Distribution Date").

The "Servicer Remittance Amount" for a Servicer Distribution Date is
equal to the sum of (i) all unscheduled collections of principal and interest on
the Mortgage Loans (including Principal Prepayments, Net REO Proceeds and
Liquidation Proceeds, if any) collected by the Servicer during the prior
calendar month and all Scheduled Monthly Payments due during the preceding
month, (ii) all Periodic Advances made by the Servicer with respect to payments
due to be received on the Mortgage Loans on the related Due Date and (iii) any
other amounts required to be placed in the Collection Account by the Servicer
pursuant to the Pooling and Servicing Agreement but excluding the following:

(a) amounts received on particular Mortgage Loans as late payments of
principal or interest, or as Net Liquidation Proceeds, with respect to
which the Servicer has previously made an unreimbursed Periodic Advance;

(b) amounts received on a particular Mortgage Loan with respect to
which the Servicer has previously made an unreimbursed Servicing Advance;

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

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

(f) Net Foreclosure Profits; and

(g) certain other amounts which are reimbursable to the Servicer, as
provided in the Pooling and Servicing Agreement.

The amounts described in clauses (a) through (g) above may be withdrawn by
the Servicer from the Collection Account on or prior to each Servicer
Distribution Date.

"Foreclosure Profits" as to any Servicer Distribution Date, are the excess,
if any, of (i) Net Liquidation Proceeds in respect of each Mortgage Loan that
became a Liquidated Mortgage Loan during the month immediately preceding the
month of such Servicer Distribution Date over (ii) the sum of such unpaid
principal balance of each such Liquidated Mortgage Loan plus accrued and unpaid
interest on the unpaid principal balance from the Due Date to which interest was
last paid by the Mortgagor.

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

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"Liquidation Expenses" as to any Liquidated Mortgage Loan are all expenses
incurred by the Servicer in connection with the liquidation of such Mortgage
Loan, including, without duplication, unreimbursed expenses for real property
taxes and unreimbursed Servicing Advances. In no event may Liquidation Expenses
with respect to a Liquidated Mortgage Loan exceed the related Liquidation
Proceeds.

"Liquidated Loan Loss" as to any Liquidated Mortgage Loan is the excess, if
any, of (i) the unpaid principal balance of such Liquidated Mortgage Loan plus
accrued and unpaid interest on such unpaid principal balance from the Due Date
to which interest was last paid by the Mortgagor over (ii) Net Liquidation
Proceeds plus the amount of any previously unreimbursed Periodic Advances in
respect of such Mortgage Loan.

"Liquidation Proceeds" are amounts (other than Insurance Proceeds) received
by the Servicer in connection with (i) the taking of all or a part of a
Mortgaged Property by exercise of the power of eminent domain or condemnation or
(ii) the liquidation of a defaulted Mortgage Loan through a trustee's sale,
foreclosure sale, REO Disposition or otherwise.

"Net Foreclosure Proceeds" as to any Servicer Distribution Date, are the
excess, if any, of (i) the aggregate Foreclosure Profits with respect to such
Servicer Distribution Date over (ii) Liquidated Loan Losses with respect to such
Servicer Distribution Date.

"Net Liquidation Proceeds" as to any Liquidated Mortgage Loan, are
Liquidation Proceeds net of Liquidation Expenses and net of any unreimbursed
Periodic Advances made by the Servicer.

"Net REO Proceeds" as to any REO Property, are REO Proceeds net of any
related expenses of the Servicer.

"REO Proceeds" are monies received in respect of any REO Property
(including, without limitation, proceeds from the rental of the related
Mortgaged Property).

SERVICING FEES AND OTHER COMPENSATION AND PAYMENT OF EXPENSES

As compensation for its activities as Servicer under the Pooling and
Servicing Agreement, the Servicer shall be entitled with respect to each
Mortgage Loan to the Servicing Fee, which shall be payable monthly from amounts
on deposit in the Collection Account. The "Servicing Fee" shall be an amount
equal to interest at 1/12th of the Servicing Fee Rate for such Mortgage Loan on
the outstanding Principal Balance on such Mortgage Loan (the "Scheduled
Principal Balance"). The "Servicing Fee Rate" with respect to each Mortgage
Loan will be 0.50% per annum. In addition, the Servicer shall be entitled to
receive, as additional servicing compensation, to the extent permitted by
applicable law and the related Mortgage Notes, any late payment charges,
assumption fees or similar items. The Servicer shall also be entitled to
withdraw from the Collection Account any net interest or other income earned on
deposits therein. The Servicer shall pay all expenses incurred by it in
connection with its servicing activities under the Pooling and Servicing
Agreement and shall not be entitled to reimbursement therefor except as
specifically provided in the Pooling and Servicing Agreement.

The Servicer may recover Periodic Advances and Servicing Advances to the
extent permitted by the Mortgage Loans or, if not recovered from the Mortgagor
on whose behalf such Servicing Advance or Periodic Advance was made, from late
collections on the related Mortgage Loan, including Liquidation Proceeds,
Insurance Proceeds and such other amounts as may be collected by the Servicer
from the Mortgagor or otherwise relating to the Mortgage Loan. In the event a
Periodic Advance or a Servicing Advance becomes a Nonrecoverable Advance, the
Servicer may be reimbursed for such advance from the Certificate Account.

The Servicer shall not be required to make any Periodic Advance or
Servicing Advance which it determines would be a nonrecoverable Periodic Advance
or nonrecoverable Servicing Advance (a "Nonrecoverable Advance"). A Periodic
Advance or Servicing Advance is "nonrecoverable" if in the good faith judgment
of the Servicer, such Periodic Advance or Servicing Advance is not ultimately
recoverable.

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OVERCOLLATERALIZATION PROVISIONS

OVERCOLLATERALIZATION RESULTING FROM CASH FLOW STRUCTURE. The Pooling and
Servicing Agreement requires that, on each Distribution Date, the "Net Monthly
Excess Cashflow," if any, be applied on such Distribution Date as an accelerated
payment of principal on the Class A Certificates, but only to the limited extent
hereafter described. The Net Monthly Excess Cashflow for a Distribution Date is
equal to the excess of (x) the amount on deposit in the Certificate Account
(exclusive of the amount of any Insured Payment) on such Distribution Date (such
amount being the "Available Amount" for such Distribution Date) over (y) the sum
of (i) the Class A Distribution Amount (calculated for this purpose without
regard to any Subordination Increase Amount or portion thereof included therein)
and (ii) any Reimbursement Amount (as defined herein) or other amount owed to
the Certificate Insurer.

This application has the effect of accelerating the amortization of the
Class A Certificates relative to the amortization of the Mortgage Loans. To the
extent that any Net Monthly Excess Cashflow is not so used, the Pooling and
Servicing Agreement provides that it will be used to reimburse the Servicer with
respect to any amounts owing to it or paid to the Holders of the Class R
Certificates.

With respect to any Distribution Date, the excess, if any, of (x) the sum
of the aggregate principal balances of the Mortgage Loans as of the close of
business on the last day of the preceding calendar month over (y) the Class A
Principal Balance as of such Distribution Date (and following the making of all
distributions on such Distribution Date (other than with respect to any
Subordination Increase Amount for such Distribution Date)) is the "Subordinated
Amount" as of such Distribution Date. The Pooling and Servicing Agreement
requires that the Net Monthly Excess Cashflow will be applied as an accelerated
payment of principal on the Class A Certificates until the Subordinated Amount
has increased to the level required by the Pooling and Servicing Agreement. Any
amount of Net Monthly Excess Cashflow actually applied as an accelerated payment
of principal is a "Subordination Increase Amount." The required level of the
Subordinated Amount with respect to a Distribution Date is the "Specified
Subordinated Amount" with respect to such Distribution Date. Initially, the
Subordinated Amount will be an amount equal to 3% of the sum of the Cut-Off Date
Aggregate Principal Balance and the Original Pre-Funded Amount.

In the event that the required level of the Specified Subordinated Amount
is permitted to decrease or "step down" on a Distribution Date in the future,
the Pooling and Servicing Agreement provides that a portion of the principal
which would otherwise be distributed to the Holders of the related Class A
Certificates on such Distribution Date shall be distributed to the Holders of
the Class R Certificates on such Distribution Date. This has the effect of
decelerating the amortization of the Class A Certificates relative to the
amortization of the Mortgage Loans, and of reducing the Subordinated Amount.
With respect to any Distribution Date, the difference, if any, between (a) the
Subordinated Amount that would apply on such Distribution Date after taking into
account all distributions to be made on such Distribution Date (except for any
distributions of related Subordination Reduction Amounts as described in this
sentence) and (b) the Specified Subordinated Amount is the "Excess Subordinated
Amount" with respect to such Distribution Date. If, on any Distribution Date,
the Excess Subordinated Amount is, or, after taking into account all other
distributions to be made on such Distribution Date would be, greater than zero
(I.E., the Subordinated Amount is or would be greater than the related Specified
Subordinated Amount), then any amounts relating to principal which would
otherwise be distributed to the Holders of the related Class A Certificates on
such Distribution Date shall instead be distributed to the Holders of the
Class R Certificates, in an amount equal to the lesser of (x) the Excess
Subordinated Amount and (y) the amount available for distribution on account of
principal with respect to the related Class A Certificates on such Distribution
Date; such amount being the "Subordination Reduction Amount" for such
Distribution Date. As a technical matter regarding the cash flow structure of
the Trust, Subordination Reduction Amounts may result even prior to the
occurrence of any decrease or "step down" in the related Specified Subordinated
Amount because the Holders of the related Class A Certificates will generally be
entitled to receive 100% of collected principal, even though the related Class A
Principal Balance will, following the accelerated amortization resulting from
the application of the Net Monthly Excess Cashflow, represent less than 100% of
the related Mortgage Loan's aggregate principal balance. In the absence of the
provisions relating to Subordination

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Reduction Amounts, the foregoing may otherwise increase the Subordinated Amounts
above their Specified Subordinated Amount requirements even without the further
application of any Net Monthly Excess Cashflow.

The Pooling and Servicing Agreement provides that, on any Distribution
Date, all amounts collected on account of principal (other than any such amount
applied to the payment of a Subordination Reduction Amount) during the prior
Remittance Period will be distributed to the Holders of the Class A Certificates
on such Distribution Date. If any Mortgage Loan became a Liquidated Mortgage
Loan during such prior Remittance Period, the Net Liquidation Proceeds related
thereto and allocated to principal may be less than the principal balance of the
related Mortgage Loan; the amount of any such insufficiency is a "Liquidated
Loan Loss." In addition, the Pooling and Servicing Agreement provides that the
principal balance of any Mortgage Loan which becomes a Liquidated Mortgage Loan
shall thenceforth equal zero. The Pooling and Servicing Agreement does not
contain any rule which requires that the amount of any Liquidated Loan Loss be
distributed to the Holders of the related Class A Certificates on the
Distribution Date which immediately follows the event of loss; I.E., the Pooling
and Servicing Agreement does not require the current recovery of losses.
However, the occurrence of a Liquidated Loan Loss will reduce the Subordinated
Amount, which, to the extent that such reduction causes the Subordinated Amount
to be less than the related Specified Subordinated Amount applicable to the
related Distribution Date, will require the payment of a Subordination Increase
Amount on such Distribution Date (or, if insufficient funds are available on
such Distribution Date, on subsequent Distribution Dates, until the Subordinated
Amount equals the related Specified Subordinated Amount). The effect of the
foregoing is to allocate losses to the Holders of the Class R Certificates by
reducing, or eliminating entirely, payments of Monthly Excess Cashflow and of
Subordination Reduction Amounts which such Holders would otherwise receive.

OVERCOLLATERALIZATION AND THE CERTIFICATE INSURANCE POLICY. The Pooling
and Servicing Agreement defines a "Subordination Deficit" with respect to a
Distribution Date to be the amount, if any, by which (x) the aggregate Class A
Principal Balance as of such Distribution Date, and following the making of all
distributions to be made on such Distribution Date (except for any payment to be
made as to principal from proceeds of the Certificate Insurance Policy), exceeds
(y) the aggregate Principal Balances of the Mortgage Loans as of the close of
business on the last day of the related Due Period. The Pooling and Servicing
Agreement requires the Trustee to make a claim for an Insured Payment under the
Certificate Insurance Policy not later than the third Business Day prior to any
Distribution Date as to which the Trustee has determined that a Subordination
Deficit will occur for the purpose of applying the proceeds of such Insured
Payment as a payment of principal to the Holders of the Class A Certificates on
such Distribution Date. Additionally, under the terms of the Pooling and
Servicing Agreement, the Certificate Insurer will have the option to cause Net
Monthly Excess Cashflow to be applied without regard to any limitation upon the
occurrence of certain trigger events, or in the event of an event of default
under the Insurance Agreement. However, investors in the Class A Certificates
should realize that, under extreme loss or delinquency scenarios, they may
temporarily receive no distributions of principal.

FLOW OF FUNDS

On each Distribution Date, the Trustee shall distribute, to the extent of
funds on deposit in the Certificate Account and Insured Payments on deposit in
the Certificate Account as follows:

(a) to the Trustee, an amount equal to the Trustee's Fees then due to
it;

(b) from amounts then on deposit in the Certificate Account
(excluding any Insured Payments) to the Certificate Insurer the
lesser of (x) the excess of (i) the amount then on deposit in the
Certificate Account over (ii) the Insured Distribution Amount for
such Distribution Date and (y) the amount of all Insured Payments
and other amounts due to the Certificate Insurer pursuant to the
Insurance Agreement (including the premium amount) which have not
been previously repaid (the "Reimbursement Amount") as of such
Distribution Date;

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(c) from amounts then on deposit in the Certificate Account
(including any Insured Payments), to the Class A
Certificateholders an amount equal to the Class A Interest
Distribution Amount;

(d) from amounts then on deposit in the Certificate Account
(including any Insured Payments), to the Class A
Certificateholders an amount equal to the Class A Principal
Distribution Amount; and

(e) following the making by the Trustee of all allocations, transfers
and disbursements described above, from amounts then on deposit
in the Certificate Account, the Trustee shall distribute to the
Holders of the Class R Certificates, the amount remaining on such
Distribution Date, if any.

REPORT TO CERTIFICATEHOLDERS

Pursuant to the Pooling and Servicing Agreement, on each Distribution Date
the Trustee will deliver to the Servicer, the Certificate Insurer, each
Certificateholder and the Depositor a written report containing information
including, without limitation, the amount of the distribution on such
Distribution Date, the amount of such distribution allocable to principal and
allocable to interest, the aggregate outstanding principal balance of the Class
A Certificates as of such Distribution Date, the amount of any Insured Payment
included in such distributions on such Distribution Date and such other
information as required by the Pooling and Servicing Agreement.

AMENDMENT

The Pooling and Servicing Agreement may be amended from time to time by the
Depositor, the Servicer and the Trustee by written agreement, upon the prior
written consent of the Certificate Insurer, without notice to, or consent of,
the Certificateholders, to cure any ambiguity, to correct or supplement any
provisions herein, to comply with any changes in the Code, or to make any other
provisions with respect to matters or questions arising under the Pooling and
Servicing Agreement which shall not be inconsistent with the provisions of the
Pooling and Servicing Agreement, provided that such action shall not, as
evidenced by an Opinion of Counsel delivered to, but not obtained at the expense
of, the Trustee, adversely affect in any material respect the interests of any
Certificateholder; and provided, further, that no such amendment shall reduce in
any manner the amount of, or delay the timing of, payments received on Mortgage
Loans which are required to be distributed on any Certificate without the
consent of the Holder of such Certificate, or change the rights or obligations
of any other party to the Pooling and Servicing Agreement without the consent of
such party.

The Pooling and Servicing Agreement may be amended from time to time by the
Depositor, the Servicer and the Trustee with the consent of the Certificate
Insurer, and the Holders of the majority of the Percentage Interest in the Class
A and Class R Certificates for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the Pooling and
Servicing Agreement or of modifying in any manner the rights of the Holders;
provided, however, that no such amendment shall be made unless the Trustee
receives an Opinion of Counsel, at the expense of the party requesting the
change, that such change will not adversely affect the status of the Trust as a
REMIC or cause a tax to be imposed on the REMIC, and provided further, that no
such amendment shall reduce in any manner the amount of, or delay the timing of,
payments received on Mortgage Loans which are required to be distributed on any
Certificate without the consent of the Holder of such Certificate or reduce the
percentage for each Class whose Holders are required to consent to any such
amendment without the consent of the Holders of 100% of each Class of
Certificates affected thereby.

The Mortgage Purchase Agreement contains substantially similar restrictions
regarding amendment.

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SERVICING OF THE MORTGAGE LOANS

THE SERVICER

American Business Credit, Inc. will act as the Servicer of the Mortgage
Pool. HomeAmerican Credit Inc., d/b/a Upland Mortgage will act as subservicer
with respect to a portion of the Mortgage Loans. See "The Originators, the
Seller, the Servicer and the Subservicer."

SERVICER REPORTS

The Servicer is required to deliver to the Certificate Insurer, the
Trustee, Standard & Poor's and Moody's, not later than April 30th of each year
an Officer's Certificate stating that (i) the Servicer has fully complied with
the servicing provisions of the Pooling and Servicing Agreement, (ii) a review
of the activities of the Servicer during the preceding calendar year and of
performance under the Pooling and Servicing Agreement has been made under such
officers' supervision, and (iii) to the best of such officers' knowledge, based
on such review, the Servicer has fulfilled all its obligations under the Pooling
and Servicing Agreement for such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officers and the nature and status thereof including the steps being taken by
the Servicer to remedy such default. The first such Officer's Certificate shall
be delivered by the Servicer in 1997.

Not later than April 30th of each year, the Servicer, at its expense, is
required to cause to be delivered to the Certificate Insurer, the Trustee,
Standard & Poor's and Moody's from a firm of independent certified public
accountants (who may also render other services to the Servicer) a statement to
the effect that such firm has examined certain documents and records relating to
the servicing of the Mortgage Loans during the preceding calendar year (or such
longer period from the Closing Date to the end of the following calendar year)
and that, on the basis of such examination conducted substantially in compliance
with generally accepted auditing standards and the requirements of the Uniform
Single Attestation Program for Mortgage Bankers or the Audit Program for
Mortgages serviced for FHLMC, such servicing has been conducted in compliance
with the Pooling and Servicing Agreement except for such significant exceptions
or errors in records that, in the opinion of such firm, generally accepted
auditing standards and the Uniform Single Attestation Program for Mortgage
Bankers or the Audit Program for Mortgages serviced for FHLMC require it to
report, in which case such exceptions and errors shall be so reported.

COLLECTION AND OTHER SERVICING PROCEDURES

The Servicer will be responsible for making reasonable efforts to collect
all payments called for under the Mortgage Loans and will, consistent with the
Pooling and Servicing Agreement, follow such collection procedures as it follows
with respect to loans which are comparable to the Mortgage Loans. Consistent
with the above, the Servicer may, in its discretion, (i) waive any late payment
charge and (ii) arrange with a mortgagor a schedule for the liquidation of
delinquencies, subject to the provisions of the Pooling and Servicing Agreement.

If a Mortgaged Property has been or is about to be conveyed by the
Mortgagor, the Servicer will be obligated to accelerate the maturity of the
Mortgage Loan, unless it reasonably believes it is unable to enforce that
Mortgage Loan's "due-on-sale" clause under applicable law. If it reasonably
believes it may be restricted for any reason from enforcing such a "due-on-sale"
clause, the Servicer may enter into an assumption and modification agreement
with the person to whom such property has been or is about to be conveyed,
pursuant to which such person becomes liable under the Mortgage Note.

Any fee collected by the Servicer for entering into an assumption agreement
will be retained by the Servicer as additional servicing compensation. For a
description of circumstances in which the Servicer may be unable to enforce
"due-on-sale" clauses, see "Certain Legal Aspects of the Mortgage Loans and
Contracts -- The Mortgage Loans -- 'Due-on-Sale' Clauses" in the Prospectus. In
connection with any such assumption, the interest rate ("Loan Rate") borne by
the mortgage note relating to each Mortgage Loan ("Mortgage Note") may not be
decreased.

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HAZARD INSURANCE

The Servicer is required to cause to be maintained for each Mortgaged
Property a hazard insurance policy with coverage which contains a standard
mortgagee's clause in an amount equal to the lesser of (a) the maximum insurable
value of such Mortgaged Property or (b) the principal balance of such Mortgage
Loan plus the outstanding balance of any mortgage loan senior to such Mortgage
Loan, but in no event may such amount be less than is necessary to prevent the
borrower from becoming a coinsurer thereunder. As set forth above, all amounts
collected by the Servicer under any hazard policy (except for amounts to be
applied to the restoration or repair of the Mortgaged Property or released to
the borrower in accordance with the Servicer's normal servicing procedures), to
the extent they constitute Net Liquidation Proceeds or Insurance Proceeds, will
ultimately be deposited in the Certificate Account. The ability of the Servicer
to assure that hazard insurance proceeds are appropriately applied may be
dependent on its being named as an additional insured under any hazard insurance
policy, or upon the extent to which information in this regard is furnished to
the Servicer by a borrower. The Pooling and Servicing Agreement provides that
the Servicer may satisfy its obligation to cause hazard policies to be
maintained by maintaining a blanket policy issued by an insurer acceptable to
the Rating Agencies insuring against losses on the Mortgage Loans. If such
blanket policy contains a deductible clause, the Servicer is obligated to
deposit in the Certificate Account the sums which would have been deposited
therein but for such clause.

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

The hazard insurance policies covering the Mortgaged Properties typically
contain a co-insurance clause which in effect requires the insured at all times
to carry insurance of a specified percentage (generally 80% to 90%) of the full
replacement value of the improvements on the property in order to recover the
full amount of any partial loss. If the insured's coverage falls below this
specified percentage, such clause generally provides that the insurer's
liability in the event of partial loss does not exceed the greater of (i) the
replacement cost of the improvements less physical depreciation or (ii) such
proportion of the loss as the amount of insurance carried bears to the specified
percentage of the full replacement cost of such improvements.

Since residential properties, generally, have historically appreciated in
value over time, if the amount of hazard insurance maintained on the
improvements securing the Mortgage Loans were to decline as the principal
balances owing thereon decreased, hazard insurance proceeds could be
insufficient to restore fully the damaged property in the event of a partial
loss.

REALIZATION UPON DEFAULTED MORTGAGE LOANS

The Servicer will foreclose upon or otherwise comparably convert to
ownership Mortgaged Properties securing such of the Mortgage Loans as come into
default when, in the opinion of the Servicer, no satisfactory arrangements can
be made for the collection of delinquent payments. In connection with such
foreclosure or other conversion, the Servicer will follow such practices as it
deems necessary or advisable and as are in keeping with the Servicer's general
loan servicing activities and the Pooling and Servicing Agreement, provided the
Servicer will not expend its own funds in connection with foreclosure or other
conversion, correction of a default on a senior mortgage or restoration of any
property unless such foreclosure, correction or restoration is determined to
increase Net Liquidation Proceeds. Any Mortgaged Property so acquired by the
Trust is required

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to be disposed of in accordance with applicable federal income tax regulations
and consistent with the status of the Trust as a REMIC.

The Seller at its option, and without any obligation to do so, may elect by
written notice to the Servicer and the Trustee to replace any Mortgage Loan that
is 90 or more days delinquent as of the end of the related Due Period.

REMOVAL AND RESIGNATION OF THE SERVICER

The Certificate Insurer may, pursuant to the Pooling and Servicing
Agreement, remove the Servicer upon the occurrence and continuation beyond the
applicable cure period of an event described in clause (g) or (h) below and the
Trustee, only at the direction of the Certificate Insurer or the majority
certificateholders, with the consent of the Certificate Insurer (in the case of
any direction of the majority certificateholders), may remove the Servicer upon
the occurrence and continuation beyond the applicable cure period of an event
described in clause (a), (b), (c), (d), (e) or (f) below:

(a) any failure by the Servicer to remit to the Trustee any payment
required to be made by the Servicer under the terms of the Pooling and
Servicing Agreement which continues unremedied for one (1) Business Day
after the date upon which written notice of such failure, requiring the
same to be remedied, shall have been given to the Servicer and the
Certificate Insurer by the Trustee or to the Servicer and the Trustee by
the Certificate Insurer or Certificateholders of Class A Certificates
evidencing Percentage Interests of at least 25%; or

(b) the failure by the Servicer to make any required Servicing
Advance which failure continues unremedied for a period of one (1) Business
Day after the date on which written notice of such failure, requiring the
same to be remedied, shall have been given to the Servicer by the Trustee
or to the Servicer and the Trustee by any Certificateholder or the
Certificate Insurer; or

(c) any failure on the part of the Servicer duly to observe or
perform in any material respect any other of the covenants or agreements on
the part of the Servicer contained in this Agreement, or the failure of any
representation and warranty set forth in the Pooling and Servicing
Agreement, which continues unremedied for a period of 30 days after the
date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by the Depositor or the
Trustee, or to the Servicer and the Trustee by any Certificateholder or the
Certificate Insurer;

(d) a decree or order of a court or agency or supervisory authority
having jurisdiction in an involuntary case under any present or future
federal or state bankruptcy, insolvency or similar law or for the
appointment of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall
have been entered against the Servicer and such decree or order shall have
remained in force, undischarged or unstayed for a period of 60 days; or

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

(f) the Servicer shall admit in writing its inability to pay its
debts as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for the
benefit of its creditors, or voluntarily suspend payment of its
obligations;

(g) the delinquency or loss experience of the Mortgage Loan pool
exceeds certain levels specified in the Pooling and Servicing Agreement; or

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(h) The Certificate Insurer shall notify the Trustee of any event of
default under the Insurance Agreement.

The Servicer may not assign its obligations under the Pooling and Servicing
Agreement nor resign from the obligations and duties thereby imposed on it
except by mutual consent of the Servicer, ABC (if ABC is not the Servicer), the
Certificate Insurer and the Trustee, or upon the determination that the
Servicer's duties thereunder are no longer permissible under applicable law and
such incapacity cannot be cured by the Servicer without the incurrence, in the
reasonable judgment of the Certificate Insurer, of unreasonable expense. No
such resignation shall become effective until a successor has assumed the
Servicer's responsibilities and obligations in accordance with the Pooling and
Servicing Agreement.

Upon removal or resignation of the Servicer, the Trustee will be the
Successor Servicer (the "Successor Servicer"). The Trustee, as Successor
Servicer, will be obligated to make Periodic Advances and Servicing Advances and
certain other advances unless it determines reasonably and in good faith that
such advances would not be recoverable. If, however, the Trustee is unwilling
or unable to act as Successor Servicer, or if the majority certificateholders
(with the consent of the Certificate Insurer) or the Certificate Insurer so
requests, the Trustee shall appoint, or petition a court of competent
jurisdiction to appoint, in accordance with the provisions of the Pooling and
Servicing Agreement and subject to the approval of the Certificate Insurer, any
established mortgage loan servicing institution acceptable to the Certificate
Insurer having a net worth of not less than $15,000,000 as the Successor
Servicer in the assumption of all or any part of the responsibilities, duties or
liabilities of the Servicer.

Pursuant to the Pooling and Servicing Agreement, the Servicer covenants and
agrees to act as the Servicer for an initial term from the Issue Date to
December 27, 1996, which term will be extendable by the Certificate Insurer by
notice to the Trustee for successive terms of three (3) calendar months each,
until the termination of the Trust Fund. The Servicer will, upon its receipt of
each such notice of extension (a "Servicer Extension Notice") become bound for
the duration of the term covered by such Servicer Extension Notice to continue
as the Servicer subject to and in accordance with the other provisions of the
Pooling and Servicing Agreement. If as of the fifteenth (15th) day prior to the
last day of any term of the Servicer the Trustee shall not have received any
Servicer Extension Notice from the Certificate Insurer, the Trustee will, within
five (5) days thereafter, give written notice of such non-receipt to the
Certificate Insurer and the Servicer. The Certificate Insurer has agreed to
extend each three month term of the Servicer, in the absence of an Event of
Default under the Pooling and Servicing Agreement.

The Trustee and any other Successor Servicer in such capacity is entitled
to the same reimbursement for advances and no more than the same servicing
compensation as the Servicer. See " -- Servicing and Other Compensation and
Payment of Expenses" above.

TERMINATION; PURCHASE OF MORTGAGE LOANS

The Pooling and Servicing Agreement will terminate upon notice to the
Trustee of either: (a) the later of the distribution to Certificateholders of
the final payment or collection with respect to the last Mortgage Loan (or
Periodic Advances of same by the Servicer), or the disposition of all funds with
respect to the last Mortgage Loan and the remittance of all funds due under the
Pooling and Servicing Agreement and the payment of all amounts due and payable
to the Certificate Insurer and the Trustee or (b) mutual consent of the
Servicer, the Certificate Insurer and all Certificateholders in writing;
provided, however, that in no event will the Trust established by the Pooling
and Servicing Agreement terminate later than twenty-one years after the death of
the last surviving lineal descendant of the person named in the Pooling and
Servicing Agreement.

Subject to provisions in the Pooling and Servicing Agreement concerning
adopting a plan of complete liquidation, the Servicer may, at its option and at
its sole cost and expense, terminate the Pooling and Servicing Agreement on any
date on which the aggregate Principal Balance of the Mortgage Loans is less than
10% of the sum of (a) the Cut-Off Date Aggregate Principal Balance and (b) the
Original Pre-Funded Amount, by purchasing, on the next succeeding Distribution
Date, all of the outstanding Mortgage Loans and REO Properties

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at a price equal to the sum of (a) 100% of the Principal Balance of each
outstanding Mortgage Loan and each REO Property, (b) the greater of (i) the
aggregate amount of accrued and unpaid interest on the Mortgage Loans through
the related Due Period and (ii) 30 days' accrued interest thereon computed at a
rate equal to the Mortgage Interest Rate, in each case net of the Servicing Fee,
and (c) any unreimbursed amounts due to the Certificate Insurer under the
Pooling and Servicing Agreement, the Insurance Agreement and, without
duplication, accrued and unpaid Insured Payments. Any such purchase shall be
accomplished by deposit into the Certificate Account of the purchase price
specified above. No such termination is permitted without the prior written
consent of the Certificate Insurer if it would result in a draw on the
Certificate Insurance Policy.

OPTIONAL PURCHASE OF DEFAULTED MORTGAGE LOANS

ABC or any affiliate of ABC has the option to purchase from the Trust Fund
any Mortgage Loan 90 days or more delinquent at a purchase price equal to the
outstanding principal balance of such Mortgage Loan as of the date of purchase,
plus the greater of (a) all accrued and unpaid interest on such principal
balance and (b) 30 days' interest on such principal balance, computed at the
Mortgage Interest Rate, plus the amount of any unreimbursed Servicing Advances
made by the Servicer with respect to such Mortgage Loan.

Notwithstanding the foregoing, unless the Certificate Insurer consents, any
such affiliate of ABC may only exercise its option with respect to the Mortgage
Loan or Mortgage Loans that have been delinquent for the longest period at the
time of such repurchase. If the Certificate Insurer fails to respond to such
affiliate's request for consent within ten (10) Business Days after receipt
thereof, such affiliate may repurchase the Mortgage Loan or Mortgage Loans
proposed to be repurchased without the consent of, or any further action by, the
Certificate Insurer.

THE CERTIFICATE INSURANCE POLICY

The following summary of the terms of the Certificate Insurance Policy does
not purport to be complete and is qualified in its entirety by reference to the
Certificate Insurance Policy. A form of the Certificate Insurance Policy may be
obtained, upon request, from the Depositor.

Simultaneously with the issuance of the Certificates, the Certificate
Insurer will deliver the Certificate Insurance Policy to the Trustee for the
benefit of the Class A Certificateholders. Under the Certificate Insurance
Policy, the Certificate Insurer will irrevocably and unconditionally guarantee
payment on each Distribution Date to the Trustee for the benefit of the Holders
of the Class A Certificates, as applicable, of the Insured Distribution Amounts
with respect to the Class A Certificates calculated in accordance with the
original terms of the Class A Certificates when issued and without regard to any
amendment or modification of the Class A Certificates or the Pooling and
Servicing Agreement except amendments or modifications to which the Certificate
Insurer has given its prior written consent. The Insured Distribution Amounts
for each Distribution Date will be the sum of (i) the Class A Interest
Distribution Amount with respect to such Distribution Date, (ii) the
Subordination Deficit, if any, for such Distribution Date, and (iii) with
respect to the Distribution Date which is the Final Scheduled Maturity Date, the
outstanding Class A Principal Balance (without duplication to the amount
specified in clause (ii)). In addition, with respect to any Distribution Date
occurring on a date when an event of default under the Insurance Agreement
(described below) has occurred and is continuing or a date on or after the first
date on which a claim is made under the Certificate Insurance Policy, the
Certificate Insurer at its sole option, may pay any or all of the outstanding
Class A Principal Balance. Mortgage Loan Interest Shortfalls will not be
covered by payments under the Certificate Insurance Policy.

Payment of claims under the Certificate Insurance Policy will be made by
the Certificate Insurer following Receipt by the Certificate Insurer of the
appropriate notice for payment on the later to occur of (a) 12:00 noon, New York
City time, on the second Business Day following Receipt of such notice for
payment, and (b) 12:00 noon, New York City time, on the relevant Distribution
Date.

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If any payment of an amount guaranteed by the Certificate Insurer pursuant
to the Certificate Insurance Policy is avoided as a preference payment under
applicable bankruptcy, insolvency, receivership or similar law the Certificate
Insurer will pay such amount out of the funds of the Certificate Insurer on the
later of (a) the date when due to be paid pursuant to the Order referred to
below or (b) the first to occur of (i) the fourth Business Day following Receipt
by the Certificate Insurer from the Trustee of (A) a certified copy of the order
of the court or other governmental body which exercised jurisdiction to the
effect that a Class A Certificateholder is required to return principal or
interest distributed with respect to a Class A Certificate during the term of
the Certificate Insurance Policy because such distributions were avoidable
preferences under applicable bankruptcy law (the "Order"), (B) a certificate of
the Class A Certificateholder(s) that the Order has been entered and is not
subject to any stay, and (C) an assignment duly executed and delivered by the
Class A Certificateholder(s), in such form as is reasonably required by the
Certificate Insurer and provided to the Class A Certificateholder(s) by the
Certificate Insurer, irrevocably assigning to the Certificate Insurer all rights
and claims of the Class A Certificateholder(s) relating to or arising under the
Class A Certificates against the debtor which made such preference payment or
otherwise with respect to such preference payment, or (ii) the date of Receipt
by the Certificate Insurer from the Trustee of the items referred to in clauses
(A), (B) and (C) above if, at least four Business Days prior to such date of
Receipt, the Certificate Insurer shall have Received written notice from the
Trustee that such items were to be delivered on such date and such date was
specified in such notice. Such payment shall be disbursed to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the Order
and not to the Trustee or any Class A Certificateholder directly (unless a Class
A Certificateholder has previously paid such amount to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the Order,
in which case such payment shall be disbursed to the Trustee for distribution to
such Class A Certificateholder upon proof of such payment reasonably
satisfactory to the Certificate Insurer).

The terms "Receipt" and "Received," with respect to the Certificate
Insurance Policy, means actual delivery to the Certificate Insurer and to its
fiscal agent appointed by the Certificate Insurer at its option, if any, prior
to 12:00 p.m., New York City time, on a Business Day; delivery either on a day
that is not a Business Day or after 12:00 p.m., New York City time, shall be
deemed to be Receipt on the next succeeding Business Day. If any notice or
certificate given under the Certificate Insurance Policy by the Trustee is not
in proper form or is not properly completed, executed or delivered, it shall be
deemed not to have been Received, and the Certificate Insurer or the fiscal
agent shall promptly so advise the Trustee and the Trustee may submit an amended
notice.

Under the Certificate Insurance Policy, "Business Day" means any day other
than (i) a Saturday or Sunday or (ii) a day on which banking institutions in the
City of New York, New York or the State of New York, are authorized or obligated
by law or executive order to be closed. The Certificate Insurer's obligations
under the Certificate Insurance Policy to make Insured Payments shall be
discharged to the extent funds are transferred to the Trustee as provided in the
Certificate Insurance Policy, whether or not such funds are properly applied by
the Trustee.

The Certificate Insurer shall be subrogated to the rights of each Class A
Certificateholder to receive payments of principal and interest, as applicable,
with respect to distributions on the Class A Certificates to the extent of any
payment by the Certificate Insurer under the Certificate Insurance Policy. To
the extent the Certificate Insurer makes Insured Payments, either directly or
indirectly (as by paying through the Trustee), to the Class A
Certificateholders, the Certificate Insurer will be subrogated to the rights of
the Class A Certificateholders, as applicable, with respect to such Insured
Payment and shall be deemed to the extent of the payments so made to be a
registered Class A Certificateholder for purposes of payment.

Claims under the Certificate Insurance Policy will rank equally with any
other unsecured debt and unsubordinated obligations of the Certificate Insurer
except for certain obligations in respect of tax and other payments to which
preference is or may become afforded by statute. Claims against the Certificate
Insurer under the Certificate Insurance Policy constitute pari passu claims
against the general assets of the Certificate Insurer. The terms of the
Certificate Insurance Policy cannot be modified or altered by any other
agreement or instrument, or by the merger, consolidation or dissolution of the
Depositor. The Certificate Insurance Policy may not be cancelled or revoked
prior to payment in full of the Class A Certificates. The Certificate Insurance
Policy is

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governed by the laws of the State of New York. The Certificate Insurance Policy
is not covered by the Property/Casualty Insurance Security Fund specified in
Article 76 of the New York Insurance Law.

To the fullest extent permitted by applicable law, the Certificate Insurer
agrees under the Certificate Insurance Policy not to assert, and waives, for the
benefit of each Class A Certificateholder, all its rights (whether by
counterclaim, setoff or otherwise) and defense (including, without limitation,
the defense of fraud), whether acquired by subrogation, assignment or otherwise,
to the extent that such rights and defenses may be available to the Certificate
Insurer to avoid payment of its obligations under the Certificate Insurance
Policy in accordance with the express provisions of the Certificate Insurance
Policy.

Pursuant to the terms of the Pooling and Servicing Agreement, unless a
Certificate Insurer Default exists, the Certificate Insurer shall be deemed to
be the Certificateholders for all purposes (other than with respect to payment
on the Certificates), will be entitled to exercise all rights of the Class A
Certificateholders thereunder, without the consent of such Certificateholders,
and the Class A Certificateholders may exercise such rights only with the prior
written consent of the Certificate Insurer. In addition, the Certificate
Insurer will, as a third party beneficiary to the Pooling and Servicing
Agreement and the Mortgage Purchase Agreement, have, among others, the following
rights: (i) the right to give notices of breach or to terminate the rights and
obligations of the Servicer under the Pooling and Servicing Agreement in the
event of an Event of Default by the Servicer and to institute proceedings
against the Servicer; (ii) the right to consent to or direct any waivers of
defaults by the Servicer; (iii) the right to remove the Trustee pursuant to the
Pooling and Servicing Agreement; (iv) the right to direct the actions of the
Trustee during the continuation of a Servicer default; (v) the right to require
the Seller to repurchase Mortgage Loans for breach of representation and
warranty or defect in documentation; (vi) the right to direct foreclosures upon
the failure of the Servicer to do so in accordance with the Pooling and
Servicing Agreement; (vii) the right to direct all matters relating to a
bankruptcy or other insolvency proceeding involving the Seller; and (viii) the
right to direct the Trustee to investigate certain matters. The Certificate
Insurer's consent will be required prior to, among other things, (i) the removal
of the Trustee, (ii) the appointment of any successor Trustee or Servicer or
(iii) any amendment to the Pooling and Servicing Agreement.

The Depositor, the Seller, the Servicer and the Certificate Insurer will
enter into an Insurance and Indemnity Agreement (the "Insurance Agreement")
pursuant to which the Servicer will agree to reimburse, with interest, the
Certificate Insurer for amounts paid pursuant to claims under the Certificate
Insurance Policy. The Servicer will further agree to pay the Certificate
Insurer all reasonable charges and expenses which the Certificate Insurer may
pay or incur relative to any amounts paid under the Certificate Insurance Policy
or otherwise in connection with the transaction and to indemnify the Certificate
Insurer against certain liabilities. Except to the extent provided therein,
amounts owing under the Insurance Agreement will be payable solely from the
Trust Fund. An "event of default" under the Insurance Agreement will constitute
an Event of Default under the Pooling and Servicing Agreement and allow the
Certificate Insurer, among other things, to direct the Trustee to terminate the
Servicer. See "Servicing of the Mortgage Loans -- Removal and Resignation of
the Servicer" herein. An "event of default" under the Insurance Agreement
includes (i) the Originators', the Seller's, the Depositor's or the Servicer's
failure to pay when due any amount owed under the Insurance Agreement or certain
other documents, (ii) the inaccuracy or incompleteness in any material respect
of any representation or warranty of the Originators, the Seller, the Depositor
or the Servicer in the Insurance Agreement, the Pooling and Servicing Agreement
or certain other documents, (iii) the Originators', the Seller's, the
Depositor's or the Servicer's failure to perform or to comply with any covenant
or agreement in the Insurance Agreement, the Pooling and Servicing Agreement and
certain other documents, (iv) a finding or ruling by a governmental authority or
agency that the Insurance Agreement, the Pooling and Servicing Agreement or
certain other documents are not binding on the Originators, the Seller, the
Depositor or the Servicer, (v) the Originators', the Seller's, the Depositor's
or the Servicer's failure to pay its debts in general or the occurrence of
certain events of insolvency or bankruptcy with respect to the Seller or the
Servicer, and (vi) the occurrence of certain "performance test violations"
designed to measure the performance of the Mortgage Loans.

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THE CERTIFICATE INSURER

The following information has been obtained from Financial Security
Assurance, Inc. (hereinafter in this section, "Certificate Insurer" or
"Financial Security") and has not been verified by the Seller, ABC, Upland or
the Underwriter. No representation or warranty is made by the Seller, ABC,
Upland or the Underwriter with respect thereto.

GENERAL

Financial Security is a monoline insurance company incorporated in 1984
under the laws of the State of New York. Financial Security is licensed to
engage in the financial guaranty insurance business in all 50 states, the
District of Columbia and Puerto Rico.

Financial Security and its subsidiaries are engaged in the business of
writing financial guaranty insurance, principally in respect of securities
offered in domestic and foreign markets. In general, financial guaranty
insurance consists of the issuance of a guaranty of scheduled payments of an
issuer's securities -- thereby enhancing the credit rating of those
securities -- in consideration for the payment of a premium to the insurer.
Financial Security and its subsidiaries principally insure asset-backed,
collateralized and municipal securities. Asset-backed securities are generally
supported by residential mortgage loans, consumer or trade receivables,
securities or other assets having an ascertainable cash flow or market value.
Collateralized securities include public utility first mortgage bonds and
sale/leaseback obligation bonds. Municipal securities consist largely of
general obligation bonds, special revenue bonds and other special obligations of
state and local governments. Financial Security insures both newly issued
securities sold in the primary market and outstanding securities sold in the
secondary market that satisfy Financial Security's underwriting criteria.

Financial Security is a wholly owned subsidiary of Financial Security
Assurance Holdings Ltd. ("Holdings"), a New York Stock Exchange listed company.
Major shareholders of Holdings include Fund American Enterprises Holdings, Inc.,
U S WEST Capital Corporation and The Tokio Marine and Fire Insurance Co., Ltd.
No shareholder of Holdings is obligated to pay any debt of Financial Security or
any claim under any insurance policy issued by Financial Security or to make any
additional contribution to the capital of Financial Security.

The principal executive offices of Financial Security are located at 350
Park Avenue, New York, New York 10022, and its telephone number at that location
is (212) 826-0100.

REINSURANCE

Pursuant to an intercompany agreement, liabilities on financial guaranty
insurance written or reinsured from third parties by Financial Security or any
of its domestic operating insurance company subsidiaries are reinsured among
such companies on an agreed-upon percentage substantially proportional to their
respective capital, surplus and reserves, subject to applicable statutory risk
limitations. In addition, Financial Security reinsures a portion of its
liabilities under certain of its financial guaranty insurance policies with
other reinsurers under various quota share treaties and on a transaction-by-
transaction basis. Such reinsurance is utilized by Financial Security as a risk
management device and to comply with certain statutory and rating agency
requirements; it does not alter or limit Financial Security's obligations under
any financial guaranty insurance policy.

RATING OF CLAIMS-PAYING ABILITY

Financial Security's claims-paying ability is rated "Aaa" by Moody's
Investors Service, Inc. and "AAA" by Standard & Poor's Ratings Services, Nippon
Investors Service Inc. and Standard & Poor's (Australia) Pty. Ltd. Such ratings
reflect only the views of the respective rating agencies, are not
recommendations to buy, sell or hold securities and are subject to revision or
withdrawal at any time by such rating agencies. See "Ratings."

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CAPITALIZATION

The following table sets forth the capitalization of Financial Security and
its wholly owned subsidiaries on the basis of generally accepted accounting
principles as of June 30, 1996 (in thousands):

June 30,
1996
(unaudited)
-----------

Deferred Premium Revenue (net of prepaid reinsurance
premiums). . . . . . . . . . . . . . . . . . . . . . . . . . . $ 351,180
----------
Shareholder's Equity:
Common Stock . . . . . . . . . . . . . . . . . . . . . . . 15,000
Additional Paid-In Capital. . . . . . . . . . . . . . . . . 681,470
Unrealized Loss on Investments (net of
deferred income taxes). . . . . . . . . . . . . . . . . . (5,685)
Accumulated Earnings. . . . . . . . . . . . . . . . . . . . 94,287
----------
Total Shareholder's Equity . . . . . . . . . . . . . . . . . . . $ 785,072
----------
Total Deferred Premium Revenue and Shareholder's Equity. . . . . $1,136,252
----------
----------

For further information concerning Financial Security, see the Consolidated
Financial Statements of Financial Security and Subsidiaries, and the notes
thereto, incorporated by reference herein. Copies of the statutory quarterly
and annual statements filed with the State of New York Insurance Department by
Financial Security are available upon request to the State of New York Insurance
Department.

INSURANCE REGULATION

Financial Security is licensed and subject to regulation as a financial
guaranty insurance corporation under the laws of the State of New York, its
state of domicile. In addition, Financial Security and its insurance
subsidiaries are subject to regulation by insurance laws of the various other
jurisdictions in which they are licensed to do business. As a financial
guaranty insurance corporation licensed to do business in the State of New York,
Financial Security is subject to Article 69 of the New York Insurance Law which,
among other things, limits the business of each such insurer to financial
guaranty insurance and related lines, requires that each such insurer maintain a
minimum surplus to policyholders, establishes contingency, loss and unearned
premium reserve requirements for each such insurer, and limits the size of
individual transactions ("single risks") and the volume of transactions
("aggregate risks") that may be underwritten by each such insurer. Other
provisions of the New York Insurance Law, applicable to non-life insurance
companies such as Financial Security, regulate, among other things, permitted
investments, payment of dividends, transactions with affiliates, mergers,
consolidations, acquisitions or sales of assets and incurrence of liability for
borrowings.

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

An election will be made to treat the Trust as a REMIC for federal income
tax purposes. Dewey Ballantine, special tax counsel to the Depositor, will
deliver its opinion that, assuming compliance with the Pooling and Servicing
Agreement, the Trust will be treated as a REMIC for federal income tax purposes.
The Class A Certificates will be designated as the regular interests in the
REMIC, and the Class R Certificates will be designated as the residual interest
in the REMIC. The Class R Certificates are "Residual Certificates" for purposes
of the Prospectus.

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The Certificates possess certain special tax attributes by virtue of the
REMIC provisions of the Code. See "Certain Federal Income Tax Consequences --
REMIC Certificates" in the Prospectus. The Small Business Job Protection Act of
1996 repeals the bad debt reserve method of accounting for mutual savings banks
and domestic building and loan associations for tax years beginning after
December 31, 1995. As a result, section 593(d) of the Code is no longer
applicable to treat REMIC regular interests, including the Certificates, as
"qualifying real property loans."

The Class A Certificates generally will be treated as debt instruments for
federal income tax purposes. Beneficial owners (or registered holders, in the
case of Definitive Certificates) of the Class A Certificates will be required to
report income on such Certificates in accordance with the accrual method of
accounting.

The Trust may be treated as a "single-class REMIC." If so, Class A
Certificateholders who are individuals, trusts, estates or pass-through entities
may be required to recognize certain amounts of income in addition to interest
and discount income. Under temporary Treasury regulations, each owner of a
regular or residual interest in a single-class REMIC is allocated (i) the
owner's proportionate share of the REMIC's allocable investment expenses and
(ii) a corresponding amount of additional income. A deduction for the amounts
of allocable investment expenses will be allowed the owners of such certificates
only to the extent such amounts exceed 2 percent of such owner's adjusted gross
income. In addition, a non-corporate owner may not be able to deduct any
portion of such expenses in computing such owner's alternative minimum tax
liability. Class A Certificateholders 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 Class A Certificates. See also
"Certain Federal Income Tax Consequences -- REMIC Certificates" in the
Prospectus.

ERISA CONSIDERATIONS

The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code impose certain restrictions on (a) employee benefit plans (as
defined in Section 3(3) of ERISA), (b) plans described in section 4975(e)(1) of
the Code, including individual retirement accounts or Keogh plans, (c) any
entities whose underlying assets include plan assets by reason of a plan's
investment in such entities (each a "Plan") and (d) persons who have certain
specified relationships to such Plans ("Parties-in-Interest" under ERISA and
"Disqualified Persons" under the Code). Section 406 of ERISA prohibits Plans
from engaging in certain transactions involving the assets of such Plans with
Parties in Interest with respect to such Plans, unless a statutory or
administrative exemption is applicable to the transaction. Excise taxes under
Section 4975 of the Code, penalties under Section 502 of ERISA and other
penalties may be imposed on Plan fiduciaries and Parties-in-Interest (or
Disqualified Persons) that engage in "prohibited transactions" involving assets
of a Plan. Individual retirement arrangements and other plans that are not
subject to ERISA, but are subject to Section 4975 of the Code, and Disqualified
Persons with respect to such arrangements and plans, also may be subject to
excise taxes and other penalties if they engage in prohibited transactions.
Moreover, based on the reasoning of the United States Supreme Court in JOHN
HANCOCK LIFE INS. CO. V. HARRIS TRUST AND SAV. BANK, 114 S. Ct. 517 (1993), an
insurance company's general account may be deemed to include assets of the Plans
investing in the general account (E.G., through the purchase of an annuity
contract). ERISA also imposes certain duties on persons who are fiduciaries of
Plans subject to ERISA.

The Department of Labor (the "DOL") has issued a regulation (the "Plan
Asset Regulation") describing what constitutes the assets of a Plan when the
Plan acquires an equity interest in another entity. The Plan Asset Regulation
states that, unless an exemption described in the regulation is applicable, the
underlying assets of an entity in which a Plan makes an equity investment will
be considered, for purposes of ERISA, to be the assets of the investing Plan.
Pursuant to the Plan Asset Regulation, if the assets of the Trust were deemed to
be plan assets by reason of a Plan's investment in any Class A Certificates,
such plan assets would include an undivided interest in any assets held in such
Trust. Therefore, in the absence of an exemption, the purchase, sale or holding
of any Class A Certificate by a Plan 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.

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On June 6, 1990, the DOL issued to Prudential Securities Incorporated an
individual administrative exemption, Prohibited Transaction Exemption 90-32 (the
"Exemption"), from certain of the prohibited transaction rules of ERISA with
respect to the initial purchase, the holding and the subsequent resale by a Plan
of certificates in pass-through trusts that meet the conditions and requirements
of the Exemption. Among the conditions that must be satisfied for the Exemption
to apply are the following:

1. The Acquisition of the Class A Certificates by a Plan is on terms
(including the price for the Class A 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 Class A Certificates
acquired by the Plan are not subordinated to the rights and interests
evidenced by other certificates of the Trust Fund;

3. The Class A Certificates acquired by the Plan have received a
rating at the time of such acquisition that is in one of the three highest
generic rating categories from either Standard & Poor's, Moody's, Duff &
Phelps Credit Rating Co. ("D&P") or Fitch Investors Service, L.P.
("Fitch");

4. The sum of all payments made to the Underwriter in connection with
the distribution of the Class A Certificates represents not more than
reasonable compensation for underwriting the Class A Certificates. The sum
of all payments made to and retained by the Servicer represents not more
than reasonable compensation for the Servicer's services under the Pooling
and Servicing Agreement and reimbursement of the Servicer's reasonable
expenses in connection therewith;

5. The Trustee is not an affiliate of any other member of the
Restricted Group (as defined below); and

6. The Plan investing in the Class A Certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the Securities
and Exchange Commission under the Securities Act of 1933.

The Trust Fund also must meet the following requirements:

a. The corpus of the Trust Fund must consist solely of assets of the
type which have been included in other investment pools;

b. certificates in such other investment pools must have been rated
in one of the three highest rating categories of S&P, Moody's, D&P or Fitch
for at least one year prior to the Plan's acquisition of certificates; and

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

In order for the Exemption to apply to certain self-dealing/conflict of
interest prohibited transactions that may occur when a Plan fiduciary causes the
Plan to acquire Class A Certificates, the Exemption requires, among other
matters, that: (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 Fund is acquired by persons independent of the Restricted Group (as
defined below); (ii) such fiduciary (or its affiliate) is an obligor with
respect to 5 percent or less of the fair market value of the obligations
contained in the Trust Fund; (iii) the Plan's investment in Class A Certificates
does not exceed twenty-five percent (25%) of all of the certificates outstanding
at the time of the acquisition and (iv) immediately after the acquisition, no
more than twenty-five percent (25%) of the assets of the Plan are invested in
certificates representing an interest in one or more trusts containing assets
sold or serviced by the same entity.

S-61
<PAGE>

The Exemption does not apply to certain prohibited transactions in the case
of Plans sponsored by the Underwriter, the Trustee, the Servicer, any obligor
with respect to more than 5% of the fair market value of the Mortgage Loans
included in the Trust Fund, any entity deemed to be a "sponsor" of the Trust
Fund as such term is defined in the Exemption, or any affiliate of any such
party (the "Restricted Group").

Prior to the earlier of (i) the date on which the Pre-Funding Period
expires and (ii) the date on which the DOL amends the Exemption to permit the
use of pre-funding accounts thereunder, Plans will not be permitted to purchase
the Class A Certificates. On or after the earlier to occur of such dates, the
Exemption may be available for the purchase of Class A Certificates by Plans.
Before purchasing a Class A Certificate, a fiduciary of an ERISA Plan should
make its own determination as to the availability of the exemptive relief
provided in the Exemption and whether the conditions of any such exemption will
be applicable to the Class A Certificates. Any fiduciary of an ERISA Plan
considering whether to purchase a Class A Certificate should also carefully
review with its own legal advisors the applicability of the fiduciary duty and
prohibited transaction provisions of ERISA and the Code to such investment.

A governmental plan as defined in Section 3(32) of ERISA is not subject to
ERISA, or Code Section 4975. However, such a governmental plan may be subject
to a federal, state, or local law, which is, to a material extent, similar to
the provisions of ERISA or Code Section 4975 ("Similar Law"). A fiduciary of a
governmental plan should make its own determination as to the need for and the
availability of any exemptive relief under Similar Law.

The sale of Certificates to a Plan is in no respect a representation by the
Depositor or the Underwriter that this investment meets all relevant legal
requirements with respect to investments by Plans generally or any particular
Plan, or that this investment is appropriate for Plans generally or any
particular ERISA Plan.

LEGAL INVESTMENT

The Class A Certificates will not constitute "mortgage related securities"
for purposes of the Secondary Mortgage Market Enhancement Act of 1984 ("SMMEA").

PLAN OF DISTRIBUTION

Subject to the terms and conditions of the Underwriting Agreement dated as
of September 12, 1996 (the "Underwriting Agreement") between the Depositor and
Prudential Securities Incorporated (the "Underwriter"), the Depositor has agreed
to sell to the Underwriter and the Underwriter has agreed to purchase from the
Depositor the Class A Certificates.

The Depositor is obligated to sell, and the Underwriter is obligated to
purchase, all of the Class A Certificates offered hereby if any are purchased.

The Underwriter has advised the Depositor that it proposes to offer the
Class A Certificates purchased by the Underwriter for sale from time to time in
one or more negotiated transactions or otherwise, at market prices prevailing at
the time of sale, at prices related to such market prices or at negotiated
prices. The Underwriter may effect such transactions by selling such
Certificates to or through dealers, and such dealers may receive compensation in
the form of underwriting discounts, concessions or commissions from the
Underwriter or purchasers of the Class A Certificates for whom they may act as
agent. Any dealers that participate with the Underwriter in the distribution of
the Class A Certificates purchased by the Underwriter may be deemed to be
underwriters, and any discounts or commissions received by them or the
Underwriter and any profit on the resale of Class A Certificates by them or the
Underwriter may be deemed to be underwriting discounts or commissions under the
Securities Act.

S-62
<PAGE>

For further information regarding any offer or sale of the Class A
Certificates pursuant to this Prospectus Supplement and the Prospectus, see
"Plan of Distribution" in the Prospectus.

The Underwriting Agreement provides that the Depositor will indemnify the
Underwriter or contribute to losses arising out of certain liabilities,
including liabilities under the Act.

Prudential Securities Incorporated is an affiliate of the Depositor.

EXPERTS

The consolidated balance sheets of Financial Security Assurance Inc. and
subsidiaries as of December 31, 1995 and 1994 and the related consolidated
statements of income, changes in shareholder's equity, and cash flows for each
of the three years in the period ended December 31, 1995, incorporated by
reference in this Prospectus Supplement, have been incorporated herein in
reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.

RATINGS

It is a condition to the original issuance of the Class A Certificates that
they will receive ratings of AAA by Standard & Poor's and Aaa by Moody's. The
ratings assigned to the Class A Certificates will take into account the
claims-paying ability of the Certificate Insurer. Explanations of the
significance of such ratings may be obtained from Moody's Investors Service,
Inc., 99 Church Street, New York, New York 10007 and Standard & Poor's Rating
Services, 25 Broadway, New York, New York 10004. Such ratings will be the views
only of such rating agencies. There is no assurance that any such ratings will
continue for any period of time or that such ratings will not be revised or
withdrawn. Any such revision or withdrawal of such ratings may have an adverse
effect on the market price of the Class A Certificates.

LEGAL MATTERS

Certain legal matters in connection with the Class A Certificates will be
passed upon for the Seller and the Servicer by Blank Rome Comisky & McCauley,
Philadelphia, Pennsylvania, and for the Depositor and the Underwriter by Dewey
Ballantine, New York, New York.

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<PAGE>

INDEX OF SIGNIFICANT PROSPECTUS
SUPPLEMENT DEFINITIONS

TERM PAGE
- ---- ----

ABC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ABFS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
Accredited investor. . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
Aggregate risks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
Appraised Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Available Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
Average outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Beneficial Certificate Owner . . . . . . . . . . . . . . . . . . . . . . . .13
Beneficial Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Book-Entry Certificates. . . . . . . . . . . . . . . . . . . . . . . . . 4, 13
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
Capitalized Interest Account . . . . . . . . . . . . . . . . . . . . . . . . 9
Carry-Forward Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Cede . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 13
CEDEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
CEDEL Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Certificate Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
Certificate Insurance Policy . . . . . . . . . . . . . . . . . . . . .1, 4, 10
Certificate Insurer. . . . . . . . . . . . . . . . . . . . . . . .1, 4, 10, 58
Certificate Insurer Default. . . . . . . . . . . . . . . . . . . . . . . . .10
Certificateholder. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 13
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1, 3
Chase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Civil Relief Act . . . . . . . . . . . . . . . . . . . . . . . . . . . .11, 21
Civil Relief Act Interest Shortfall. . . . . . . . . . . . . . . . . . . . .21
Class. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Class A Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . .1, 3
Class A Distribution Amount. . . . . . . . . . . . . . . . . . . . . . . . . 8
Class A Interest Distribution Amount . . . . . . . . . . . . . . . . . . . . 6
Class A Pass-Through Rate. . . . . . . . . . . . . . . . . . . . . . . . . . 6
Class A Principal Balance. . . . . . . . . . . . . . . . . . . . . . . . . . 6
Class A Principal Distribution Amount. . . . . . . . . . . . . . . . . . . . 7
Class R Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . .1, 3
Clean-up Call Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
CLTV's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Collection Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
Compensating Interest. . . . . . . . . . . . . . . . . . . . . . . . . .11, 20
Cooperative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Current Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Cut-Off Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Cut-Off Date Aggregate Principal Balance . . . . . . . . . . . . . . . . . .12
D&P. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
Debt Service Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Deficient Valuation. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Definitive Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Depositor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1, 3
Depository . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Disqualified Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . .60

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<PAGE>

Distribution Date. . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 3, 6
DOL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60, 61
DTC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 13
Due Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Due Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Eligible Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14, 60
Euroclear. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Euroclear Operator . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Euroclear Participants . . . . . . . . . . . . . . . . . . . . . . . . . . .40
European Depositaries. . . . . . . . . . . . . . . . . . . . . . . . . .13, 39
Excess Subordinated Amount . . . . . . . . . . . . . . . . . . . . . . . . .48
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Exemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14, 61
FHLMC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Final Scheduled Maturity Date. . . . . . . . . . . . . . . . . . . . . . . .36
Financial Intermediary . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Financial Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
Fitch. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
FNMA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Foreclosure Profits. . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
Gross losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
HEP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 13
Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 58
Home Equity Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Indirect Participants. . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Initial Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . .1, 4
Insurance Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
Insured Distribution Amount. . . . . . . . . . . . . . . . . . . . . . . . . 8
Insured Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Issue Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Liquidated Loan Loss . . . . . . . . . . . . . . . . . . . . . . . . 8, 47, 49
Liquidated Mortgage Loan . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Liquidation Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
Liquidation Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
Loan Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
LTV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
Modeling Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Moody's. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Mortgage Loan Interest Shortfalls. . . . . . . . . . . . . . . . . . . . . . 6
Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 22
Mortgage Note. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
Mortgage Pool. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Mortgaged Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Mortgages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Net Foreclosure Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . .47
Net Liquidation Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . .47
Net Monthly Excess Cashflow, . . . . . . . . . . . . . . . . . . . . . . . .48
Net REO Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
Nonrecoverable Advance . . . . . . . . . . . . . . . . . . . . . . . . . . .47
Order. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56

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<PAGE>

Original Class A Principal Balance . . . . . . . . . . . . . . . . . . . . . 6
Original Pre-Funded Amount . . . . . . . . . . . . . . . . . . . . . . . . . 1
Originators. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38, 39
Parties-in-Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . .60
Periodic Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Permitted Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . .38
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60
Plan Asset Regulation. . . . . . . . . . . . . . . . . . . . . . . . . . . .60
Pooling and Servicing Agreement. . . . . . . . . . . . . . . . . . . . . . . 1
Pre-Funding Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Prepayment Assumption. . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Prepayment Interest Shortfall. . . . . . . . . . . . . . . . . . . . . .11, 20
Principal Balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Principal Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . . . .46
Qualified Substitute Mortgage Loan . . . . . . . . . . . . . . . . . . . . .43
Rating Agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Receipt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
Received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
Record Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Regular interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Reimbursement Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
Relevant Depositary. . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
REMIC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 14
REO Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
REO Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Residual Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . .59
Restricted Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
Riegle Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Scheduled Principal Balance. . . . . . . . . . . . . . . . . . . . . . . . .47
Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1, 3
Servicer Distribution Date . . . . . . . . . . . . . . . . . . . . . . . . .46
Servicer Extension Notice. . . . . . . . . . . . . . . . . . . . . . . . . .54
Servicer Remittance Amount . . . . . . . . . . . . . . . . . . . . . . . . .46
Servicing Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Servicing Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12, 47
Servicing Fee Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
Similar Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
Single risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
SMMEA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
Specified Subordinated Amount. . . . . . . . . . . . . . . . . . . . . . . .48
Standard & Poor's. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Statistic Calculation Date . . . . . . . . . . . . . . . . . . . . . . . . .22
Statistical Calculation Date Aggregate Principal Balance . . . . . . . . . . 4
Subordinated Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
Subordination Deficit. . . . . . . . . . . . . . . . . . . . . . . . . . 8, 49
Subordination Increase Amount. . . . . . . . . . . . . . . . . . . . . . . .48
Subordination Reduction Amount . . . . . . . . . . . . . . . . . . . . . . .48
Subsequent Cut-Off Date. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Subsequent Mortgage Loans. . . . . . . . . . . . . . . . . . . . . . .1, 4, 22
Subsequent Transfer Date . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Subservicer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

S-66
<PAGE>

Substitution Adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . .43
Successor Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
Terms and Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
The Mortgage Pool. . . . . . . . . . . . . . . . . . . . . . . . . . . . .4, 5
Title of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1, 3
Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1, 4
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Trustee's Mortgage File. . . . . . . . . . . . . . . . . . . . . . . . . . .42
Unaffiliated Seller's Agreement. . . . . . . . . . . . . . . . . . . . . . .42
Underwriter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 62
Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . .62
Upland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Weighted average life. . . . . . . . . . . . . . . . . . . . . . . . . . . .36

S-67

<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS

<TABLE>
<CAPTION>
Page
-----------
<S> <C>
A. 1995 YEAR END FINANCIAL STATEMENTS
Report of Independent Accountants............................................................... A-1
Consolidated Balance Sheets as of December 31, 1995 and 1994.................................... A-2
Consolidated Statements of Income for the Years Ended December 31, 1995, 1994 and 1993.......... A-3
Consolidated Statements of Changes in Shareholder's Equity for the Years Ended December 31,
1995, 1994 and 1993............................................................................ A-4
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993....... A-5
Notes to Consolidated Financial Statements for the Years Ended December 31, 1995, 1994 and
1993........................................................................................... A-6-A-27
B. 1996 QUARTERLY FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of June 30, 1996 (unaudited) and December 31, 1995...... A-28
Condensed Consolidated Statements of Income for the Six Months Ended June 30, 1996 and 1995
(unaudited).................................................................................... A-29
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1996 and 1995
(unaudited).................................................................................... A-30
Notes to Condensed Consolidated Financial Statements for the Six Months Ended June 30, 1996 and
1995 (unaudited)................................................................................. A-31

</TABLE>

The New York State Insurance Department recognizes only statutory
accounting practices for determining and reporting the financial condition and
results of operations of an insurance company, for determining its solvency
under the New York Insurance Law, and for determining whether its financial
condition warrants the payment of a dividend to its stockholders. No
consideration is given by the New York State Insurance Department to financial
statements prepared in accordance with generally accepted accounting principles
in making such determinations.

<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholder and Board of Directors
of FINANCIAL SECURITY ASSURANCE INC.:

We have audited the accompanying consolidated balance sheets of Financial
Security Assurance Inc. and Subsidiaries as of December 31, 1995 and 1994 and
the related consolidated statements of income, changes in shareholder's equity,
and cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Financial
Security Assurance Inc. and Subsidiaries at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.

As discussed in Note 2 to the consolidated financial statements, the
Company, in 1993, adopted the method of accounting and reporting for certain
investments in debt and equity securities prescribed by Statement of Financial
Accounting Standards No. 115.

COOPERS & LYBRAND L.L.P.

New York, New York
January 17, 1996

A-1

<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)

December 31,
----------------------------
1995 1994
------------- -------------
<S> <C> <C>
ASSETS
Bonds at market value (amortized cost of $1,006,084 and $659,894)................... $ 1,036,382 $ 627,026
Short-term investments.............................................................. 14,568 88,951
Cash equivalents.................................................................... 35,277 13,457
------------- -------------
Total investments................................................................. 1,086,227 729,434
Cash................................................................................ 555 2,663
Deferred acquisition costs.......................................................... 132,951 91,839
Prepaid reinsurance premiums........................................................ 133,548 121,668
Reinsurance recoverable on unpaid losses............................................ 61,532 55,491
Receivable for securities sold...................................................... 2,326 17,592
Other assets........................................................................ 59,499 36,222
------------- -------------
TOTAL ASSETS................................................................. $ 1,476,638 $ 1,054,909
------------- -------------
------------- -------------

LIABILITIES AND SHAREHOLDER'S EQUITY
Unearned premiums................................................................... $ 463,897 $ 334,569
Losses and loss adjustment expenses................................................. 111,759 91,130
Deferred federal income taxes....................................................... 43,205 10,222
Ceded reinsurance balances payable.................................................. 13,664 5,676
Payable for securities purchased.................................................... 9,516 56,112
Amounts withheld on account for others.............................................. 1,004 974
Accrued expenses and other liabilities.............................................. 43,607 27,250
------------- -------------
TOTAL LIABILITIES............................................................ 686,652 525,933
------------- -------------

COMMITMENTS AND CONTINGENCIES
Common stock (1,000 shares authorized; 750 and 800 shares issued and outstanding;
par value of $20,000 and $18,750 per share)......................................... 15,000 15,000
Additional paid-in capital.......................................................... 681,470 497,506
Unrealized gain (loss) on investments (net of deferred income tax provision
(benefit) of $10,604 and ($11,504))................................................. 19,694 (21,364)
Accumulated earnings................................................................ 73,822 37,834
------------- -------------
TOTAL SHAREHOLDER'S EQUITY................................................... 789,986 528,976
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY.......................................... $ 1,476,638 $ 1,054,909
------------- -------------
------------- -------------
</TABLE>

The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.

A-2

<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)

Year Ended December 31,
--------------------------------------
1995 1994 1993
----------- ----------- ------------
<S> <C> <C> <C>
Revenues:
Net premiums written (net of premiums ceded of $33,166, $28,692 and
$62,403, of which $20,582, $15,999 and $42,541 were ceded to
affiliates)....................................................... $ 77,576 $ 77,757 $ 65,006
Increase in unearned premiums........................................... (8,229) (12,003) (1,629)
----------- ----------- ------------
Premiums earned (net of premiums ceded of $38,013, $35,051 and
$32,736)............................................................. 69,347 65,754 63,377
Net investment income................................................... 47,083 45,282 47,547
Net realized gains (losses)............................................. 5,032 (3,829) 18,352
Other income............................................................ 4,722 732 (2,057)
----------- ----------- ------------
TOTAL REVENUES..................................................... 126,184 107,939 127,219
----------- ----------- ------------
Expenses:
Losses and loss adjustment expenses:
Related to merger.................................................... 15,400
Other (net of reinsurance recoveries of $9,101, $56,895 and $18,628,
of which $7,111, $50,839 and $12,632 were ceded to affiliates)..... 6,258 3,024 84,054
Amortization and write-off of goodwill.................................. 81,598
Restructuring charge.................................................... 85,409
Policy acquisition costs................................................ 16,888 15,057 15,575
Other operating expenses................................................ 12,352 11,574 23,768
----------- ----------- ------------
TOTAL EXPENSES..................................................... 50,898 29,655 290,404
----------- ----------- ------------
INCOME (LOSS) BEFORE INCOME TAXES......................................... 75,286 78,284 (163,185)
----------- ----------- ------------
Provision (benefit) for income taxes:
Current................................................................. 23,353 13,338 (9,991)
Deferred................................................................ (3,055) 4,682 (28,806)
----------- ----------- ------------
Total provision (benefit)............................................... 20,298 18,020 (38,797)
----------- ----------- ------------
NET INCOME (LOSS).................................................. $ 54,988 $ 60,264 $ (124,388)
----------- ----------- ------------
----------- ----------- ------------
</TABLE>

The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.

A-3

<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
(Dollars in thousands)

Additional Unrealized
Common Paid-In Gains on Retained
Stock Capital Investments Earnings Total
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1992....................... $ 15,000 $ 475,171 $ 119,458 $ 609,629
Net loss for the year............................ (124,388) (124,388)
Net change in unrealized gains on investments
(net of deferred income taxes of $18,788)...... $ 34,892 34,892
Capital contribution (net of $11,960 which was
subsequently written off)........................ 100,835 100,835
Stock repurchase................................. (78,500) (78,500)
--------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1993....................... 15,000 497,506 34,892 (4,930) 542,468
Net income for the year.......................... 60,264 60,264
Dividends paid on common stock................... (17,500) (17,500)
Net change in unrealized losses on investments
(net of deferred income tax benefit of
$30,292)......................................... (56,256) (56,256)
--------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1994....................... 15,000 497,506 (21,364) 37,834 528,976
Net income....................................... 54,988 54,988
Dividends paid on common stock................... (19,000) (19,000)
Net change on unrealized gains on investments
(net of deferred income taxes of $22,108)...... 41,058 41,058
Capital contribution of CGIC..................... 233,964 233,964
Stock repurchase................................. (50,000) (50,000)
--------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1995....................... $ 15,000 $ 681,470 $ 19,694 $ 73,822 $ 789,986
--------- ----------- ----------- ----------- -----------
--------- ----------- ----------- ----------- -----------

</TABLE>

The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.

A-4

<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)

<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Premiums received, net................................................ $ 85,481 $ 58,191 $ 79,166
Policy acquisition and other operating expenses paid, net............. (40,243) (29,623) (26,257)
Restructuring charge.................................................. (85,409)
Recoverable advances received (paid).................................. (9,419) (939) 953
Losses and loss adjustment expenses paid.............................. (4,954) (5,124) (43,345)
Net investment income received........................................ 40,160 41,429 43,627
Federal income taxes received (paid).................................. (17,295) (14,358) 1,738
Interest and liquidity fees paid...................................... (1,525) (2,145) (4,766)
Other................................................................. 2,552 (4,314) 4,627
------------ ------------ ------------
Net cash provided by (used for) operating activities............... 54,757 43,117 (29,666)
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from sales of bonds.......................................... 603,545 790,517 522,261
Proceeds from maturities of bonds..................................... 606 55 3,700
Purchases of bonds.................................................... (685,984) (758,254) (448,997)
Purchases of property and equipment................................... (958) (937) (749)
Cash and cash equivalents of contributed subsidiary................... 39,215
Net decrease (increase) in short-term investments..................... 77,531 (56,648) (24,802)
------------ ------------ ------------
Net cash provided by (used for) investing activities............... 33,955 (25,267) 51,413
------------ ------------ ------------
Cash flows from financing activities:
Stock repurchase...................................................... (50,000) (78,500)
Dividends paid........................................................ (19,000) (17,500)
Capital contribution.................................................. 59,040
------------ ------------ ------------
Net cash used for financing activities............................. (69,000) (17,500) (19,460)
------------ ------------ ------------
Net increase in cash.................................................. 19,712 350 2,287
Cash and cash equivalents at beginning of year........................ 16,120 15,770 13,483
------------ ------------ ------------
Cash and cash equivalents at end of year.............................. $ 35,832 $ 16,120 $ 15,770
------------ ------------ ------------
------------ ------------ ------------
In addition to the cash and cash equivalents received from the contribution of the subsidiary, the Company also
received net assets of $194,749.
Reconciliation of net income (loss) to net cash flows from operating
activities:
Net income (loss)....................................................... $ 54,988 $ 60,264 $ (124,388)
Losses paid by U S WEST............................................... 63,326
Decrease (increase) in accrued investment income...................... 14 1,773 (121)
Increase in unearned premiums and related foreign exchange
adjustment.............................................................. 8,141 12,585 1,468
Decrease (increase) in deferred acquisition costs..................... (10,305) (9,847) 3,092
Increase (decrease) in current federal income taxes payable........... 6,057 (1,020) (8,253)
Increase (decrease) in unpaid losses and loss adjustment expenses..... 14,587 (376) (22,665)
Increase (decrease) in amounts withheld for others.................... 30 (24,675) 24,012
Provision (benefit) for deferred income taxes......................... (3,055) 4,682 (28,806)
Net realized losses (gains) on investments............................ (5,032) 3,829 (18,352)
Amortization and write-off of goodwill................................ 81,598
Depreciation and accretion of bond discount........................... (5,564) (4,082) (3,835)
Change in other assets and liabilities................................ (5,104) (16) 3,258
------------ ------------ ------------
Cash provided by (used for) operating activities........................ $ 54,757 $ 43,117 $ (29,666)
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.

A-5
<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

1. ORGANIZATION AND OWNERSHIP

Financial Security Assurance Inc. (the Company), a wholly owned subsidiary
of Financial Security Assurance Holdings Ltd. (the Parent), is an insurance
company domiciled in the State of New York. The Company is engaged in providing
financial guaranty insurance on asset-backed financings and municipal
obligations. The Company's underwriting policy is to insure asset-backed and
municipal obligations that would otherwise be investment grade without the
benefit of the Company's insurance. The asset-backed obligations insured by the
Company are generally issued in structured transactions and are backed by pools
of assets such as residential mortgage loans, consumer or trade receivables,
securities or other assets having an ascertainable cash flow or market value.
The municipal obligations insured by the Company consist primarily of general
obligation bonds that are supported by the issuers' taxing power and special
revenue bonds and other special obligations of the states and local governments
that are supported by the issuers' ability to impose and collect fees and
charges for public services or specific projects. Financial guaranty insurance
written by the Company guarantees payment when due of scheduled payments on an
issuer's obligation. In the case of a payment default on an insured obligation,
the Company is generally required to pay the principal, interest or other
amounts due in accordance with the obligation's original payment schedule or, at
its option, to pay such amounts on an accelerated basis.

The Company expects to continue to emphasize a diversified insured
portfolio characterized by insurance of both asset-backed and municipal
obligations, with a broad geographic distribution and a variety of revenue
sources and transaction structures. The Company's insured portfolio consists
primarily of asset-backed and municipal obligations originated in the United
States, but the Company has also written and continues to pursue business in
Europe and the Pacific Rim.

At December 31, 1993, the Parent was owned 92.5% by U S WEST and 7.5% by
Tokio Marine. The Parent completed an initial public offering of common shares
on May 13, 1994. In connection with the initial public offering, the Parent, U S
WEST and Fund American Enterprises Holdings, Inc. (Fund American) entered into
certain agreements providing, among other things, certain rights of Fund
American to acquire additional shares of the Parent from the Parent and U S
WEST. At December 31, 1994, the Parent was owned 60.9% by U S WEST, 7.7% by Fund
American, 7.4% by Tokio Marine and 24.0% by the public and employees.

On December 20, 1995, a subsidiary of the Parent merged (the Merger) with
Capital Guaranty Corporation (CGC). The Merger provided for each CGC share to be
exchanged for 0.6716 share of the Parent's common stock and cash of $5.69. The
Parent issued in the aggregate 6,051,661 common shares and aggregate cash
consideration of $51,300,000. In conjunction with the Merger, the Parent
contributed (the Contribution) the common stock of Capital Guaranty Insurance
Company (CGIC), a subsidiary of CGC, to the Company. As a result of the
Contribution, the Company's net assets increased by $233,964,000. Net premiums
written by CGIC in 1995 prior to the Contribution were $26,070,000. At December
31, 1995, the Parent was owned 50.3% by U S WEST, 7.8% by Fund American, 6.1% by
Tokio Marine and 35.8% by the public and employees.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles (GAAP), which differ in certain
material respects from the accounting practices

A-6

<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(Continued)

prescribed or permitted by insurance regulatory authorities (see Note 6). The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities in the Company's consolidated balance sheets
at December 31, 1995 and 1994, and the reported amounts of revenues and expenses
in the consolidated statements of income during the years ended December 31,
1995, 1994 and 1993. Such estimates and assumptions include, but are not limited
to, losses and loss adjustment expenses and the deferral and amortization of
deferred policy acquisition costs. Actual results may differ from those
estimates. Significant accounting policies under GAAP are as follows:

BASIS OF PRESENTATION

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, Financial Security Assurance of Maryland Inc.
(which was named Capital Guaranty Insurance Corporation until the Merger),
Financial Security Assurance International Inc., Financial Security Assurance of
Oklahoma, Inc. and Financial Security Assurance (U.K.) Limited (collectively,
the Subsidiaries). All intercompany accounts and transactions have been
eliminated. Certain prior-year balances have been reclassified to conform with
the 1995 presentation. The Merger, and the related Contribution to the Company,
were accounted for on a purchase accounting basis. In view of the short period
between the date of the Contribution, December 20, 1995, and the year-end, the
date of the Contribution for accounting purposes is considered to be December
31, 1995. As a result, the accounting for the Contribution has no effect on the
Company's consolidated statement of income for the year ended December 31, 1995,
except for the recording of $15,400,000 in losses and loss adjustment expenses
to increase the Company's general reserve to provide for the insured portfolio
assumed by the Company as a result of the Contribution (see Note 17).

INVESTMENTS

In 1993, the Company adopted Financial Accounting Standards Board Statement
of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Pursuant to SFAS 115, investments in
debt securities designated as available for sale are carried at market value
rather than the previous method, which was at the lower of amortized cost or
market value. Any resulting unrealized gain or loss is reflected as a separate
component of shareholders' equity, net of applicable deferred income taxes. All
of the Company's long-term investments are classified as available for sale.

Investments in debt securities designated as available for sale are carried
at market value. Any resulting unrealized gain or loss is reflected as a
separate component of shareholder's equity, net of applicable deferred income
taxes. All of the Company's long-term investments are classified as available
for sale.

Bond discounts and premiums are amortized on the effective yield method
over the remaining terms of the securities acquired. For mortgage-backed
securities, and any other holdings for which prepayment risk may be significant,
assumptions regarding prepayments are evaluated periodically and revised as
necessary. Any adjustments required due to the resultant change in effective
yields are recognized in current income. Short-term investments, which are those
investments with a maturity of

A-7

<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(Continued)

more than three months but less than one year at time of purchase, are carried
at market value, which approximates cost. Realized gains or losses on sale of
investments are determined on the basis of specific identification. Investment
income is recorded as earned.

Cash equivalents represent amounts deposited in money market funds and
investments with a maturity at time of purchase of three months or less.

PREMIUM REVENUE RECOGNITION

Gross and ceded premiums are earned in proportion to the amount of risk
outstanding over the expected period of coverage. Unearned premiums and prepaid
reinsurance premiums represent that portion of premium which is applicable to
coverage of risk to be provided in the future on policies in force. When an
insured issue is retired or defeased prior to the end of the expected period of
coverage, the remaining unearned premium and prepaid reinsurance premium, less
any amount credited to a refunding issue insured by the Company, are recognized.

LOSSES AND LOSS ADJUSTMENT EXPENSES

A case basis reserve for unpaid losses and loss adjustment expenses is
recorded at the present value of the estimated loss when, in management's
opinion, the likelihood of a future loss is probable and determinable at the
balance sheet date. The estimated loss on a transaction is discounted using
current risk-free rates.

The general reserve is calculated by applying a loss factor to the total
net par amount outstanding of the Company's insured obligations outstanding over
the term of such insured obligations and discounting the result at risk-free
rates. The loss factor used for this purpose has been determined based upon an
independent rating agency study of bond defaults and the Company's portfolio
characteristics and history. The general reserve is available to be applied
against future additions or accretions to existing case basis reserves or to new
case basis reserves to be established in the future.

Management of the Company periodically evaluates its estimates for losses
and loss adjustment expenses and establishes reserves that management believes
are adequate to cover the ultimate net cost of claims; the reserves are
necessarily based on estimates, and there can be no assurance that the ultimate
liability will not differ from such estimates. The Company will, on an ongoing
basis, monitor these reserves and may periodically adjust such reserves based on
the Company's actual loss experience, its future mix of business, and future
economic conditions.

DEFERRED ACQUISITION COSTS

Deferred acquisition costs comprise those expenses that vary with and are
primarily related to the production of business, including commissions paid on
reinsurance assumed, compensation and related costs of underwriting and
marketing personnel, certain rating agency fees, premium taxes and certain other
underwriting expenses, reduced by ceding commission income on premiums ceded to
reinsurers. Deferred acquisition costs and the cost of acquired business are
amortized over the period in which the related premiums are earned.
Recoverability of deferred acquisition costs is determined by considering
anticipated losses and loss adjustment expenses.

A-8
<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(Continued)

FEDERAL INCOME TAXES

The provision for income taxes consists of an amount for taxes currently
payable and a provision for tax consequences deferred to future periods
reflected at current income tax rates.

Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting
for Income Taxes." The new standard did not materially affect the Company's
financial position or results of operations as federal income taxes were
previously accounted for in accordance with SFAS No. 96.

GOODWILL

At the time of the acquisition of the Parent by U S WEST in December 1989,
the commercial real estate portion of the Company's business was a major factor
in valuing the Company's franchise and determining the purchase price for the
Parent. Since that time, weaknesses in the general commercial real estate market
caused the Company to withdraw from that market and, through December 31, 1993,
it incurred approximately $113,000,000 of losses. These losses had a negative
impact on the Company's performance in the marketplace and have impaired the
Company's franchise value. In connection with U S WEST's intention, announced in
1993 (see Note 15), to divest its ownership of the Parent, U S WEST wrote off
the remaining goodwill recorded in connection with its acquisition of the Parent
to reflect its investment in the Parent at net realizable value. Accordingly,
the Company's financial statements reflect the write-off of goodwill that had
represented the excess of the purchase price paid by U S WEST over the Parent's
net tangible and identifiable intangible assets at the time of the acquisition
by U S WEST. Goodwill was previously being amortized on a straight line basis
over 25 years.

3. INVESTMENTS

Bonds at amortized cost of $11,969,000 and $41,893,000 at December 31, 1995
and 1994, respectively, were on deposit with state regulatory authorities as
required by insurance regulations.

Consolidated net investment income consisted of the following (in
thousands):

Year Ended December 31,
-------------------------------
1995 1994 1993
--------- --------- ---------

<S> <C> <C> <C>
Long-term bonds................................................................ $ 43,114 $ 46,517 $ 48,620
Equity securities.............................................................. 20
Short-term investments and cash equivalents.................................... 5,705 778 769
Investment expenses............................................................ (1,736) (2,013) (1,862)
--------- --------- ---------
Net investment income.......................................................... $ 47,083 $ 45,282 $ 47,547
--------- --------- ---------
--------- --------- ---------

</TABLE>

A-9
<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

3. INVESTMENTS--(Continued)
The credit quality of the investment portfolio at December 31, 1995, was as
follows:

Percent of
Rating Investment Portfolio
--------- ---------------------
AAA 71.2%
AA 22.3
A 5.7
BBB 0.8

The amortized cost and estimated market value of long-term bonds were as
follows (in thousands):

Gross Gross Estimated
Amortized Unrealized Unrealized Market
December 31, 1995 Cost Gains Losses Value
- ----------------------------------------------------------- ------------- ----------- ----------- -------------
<S> <C> <C> <C>
U.S. Treasury securities and obligations of U.S. government
corporations and agencies................................. $ 44,873 $ 2,231 $ -- $ 47,104
Obligations of states and political subdivisions........... 635,872 20,112 (330) 655,654
Foreign securities......................................... 28,691 1,909 (17) 30,583
Mortgage-backed securities................................. 262,936 5,949 (51) 268,834
Corporate securities....................................... 1,254 51 1,305
Asset-backed securities.................................... 32,458 444 32,902
------------- ----------- ----------- -------------
Total............................................... $ 1,006,084 $ 30,696 $ (398) $ 1,036,382
------------- ----------- ----------- -------------
------------- ----------- ----------- -------------
</TABLE>

<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
December 31, 1994 Cost Gains Losses Value
- -------------------------------------------------------------- ----------- ----------- ---------- -----------
<S> <C> <C> <C>
U.S. Treasury securities and obligations of U.S. government
corporations and agencies.................................... $ 6,734 $ 85 $ (35) $ 6,784
Obligations of states and political subdivisions.............. 380,178 1,950 (24,778) 357,350
Foreign securities............................................ 16,536 (519) 16,017
Mortgage-backed securities.................................... 176,978 88 (9,153) 167,913
Asset-backed securities....................................... 79,468 (506) 78,962
----------- ----------- ---------- -----------
Total.................................................. $ 659,894 $ 2,123 $ (34,991) $ 627,026
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
</TABLE>

Unrealized gains (losses) consisted of (in thousands):

<TABLE>
<CAPTION>
December 31,
---------------------
1995 1994
--------- ----------
<S> <C> <C>
Long-term bonds:
Gains................................................................................... $ 30,696 $ 2,123
Losses.................................................................................. (398) (34,991)
--------- ----------
Unrealized gains (losses), net....................................................... $ 30,298 $ (32,868)
--------- ----------
--------- ----------
</TABLE>

A-10

<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

3. INVESTMENTS--(Continued)
The change in net unrealized gains (losses) consisted of (in thousands):

<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1995 1994 1993
--------- ---------- ---------
<S> <C> <C> <C>
Long-term bonds............................................................... $ 63,166 $ (86,564) $ 32,937
Short-term investments........................................................ 16 (16)
--------- ---------- ---------
Change in net unrealized gains (losses)..................................... $ 63,166 $ (86,548) $ 32,921
--------- ---------- ---------
--------- ---------- ---------
</TABLE>

The amortized cost and estimated market value of long-term bonds at
December 31, 1995 and 1994, by contractual maturity, are shown below (in
thousands). Actual maturities could differ from contractual maturities because
borrowers have the right to call or prepay certain obligations with or without
call or prepayment penalties.

December 31, 1995 December 31, 1994
---------------------------- ------------------------
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
------------- ------------- ----------- -----------
<S> <C> <C> <C>
Due in one year or less.................................. $ 2,776 $ 2,778 $ 1,501 $ 1,493
Due after one year through five years.................... 25,735 26,075 19,701 19,232
Due after five years through ten years................... 157,161 162,573 36,140 36,453
Due after ten years...................................... 525,018 543,220 346,106 322,973
Mortgage-backed securities (stated maturities of 16 to 30
years)................................................... 262,936 268,834 176,978 167,913
Asset-backed securities (stated maturities of
2 to 5 years).......................................... 32,458 32,902 79,468 78,962
------------- ------------- ----------- -----------
Total............................................. $ 1,006,084 $ 1,036,382 $ 659,894 $ 627,026
------------- ------------- ----------- -----------
------------- ------------- ----------- -----------
</TABLE>

Proceeds from sales of long-term bonds during 1995, 1994 and 1993 were
$587,516,000, $808,143,000 and $522,248,000, respectively. Gross gains of
$12,346,000, $13,919,000 and $19,211,000 and gross losses of $7,314,000,
$17,748,000 and $859,000 were realized on sales in 1995, 1994 and 1993,
respectively.

A-11

<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

4. DEFERRED ACQUISITION COSTS

Acquisition costs deferred for amortization against future income and the
related amortization charged to expenses are as follows (in thousands):

<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------
1995 1994 1993
----------- --------- ---------
<S> <C> <C> <C>
Balance, beginning of period.................................................. $ 91,839 $ 81,992 $ 85,084
----------- --------- ---------
Costs deferred during the period:
Ceding commission income.................................................... (9,836) (8,476) (18,567)
Assumed commission expense.................................................. 55 84 82
Premium taxes............................................................... 2,537 2,589 2,963
Compensation and other acquisition costs.................................... 34,437 30,707 28,005
----------- --------- ---------
Total.................................................................. 27,193 24,904 12,483
----------- --------- ---------
Costs amortized during the period............................................. (16,888) (15,057) (15,575)
----------- --------- ---------
Balance of contributed subsidiary............................................. 30,807
-----------
Balance, end of period........................................................ $ 132,951 $ 91,839 $ 81,992
----------- --------- ---------
----------- --------- ---------
</TABLE>

5. OTHER OPERATING EXPENSES

As a result of certain events that occurred in the fourth quarter of 1993,
the Company recognized non-recurring charges of approximately $7,158,000. These
charges were: (i) the acceleration of the amortization of deferred general
liquidity facility fees of $2,105,000 and legal fees of $203,000; (ii) a
$2,900,000 accrual for salary and related benefits primarily due to a settlement
for terminated employees in the Company's Profit Participation Plan; and (iii)
$1,950,000 primarily relating to the acceleration of deferred acquisition
expenses (net of amortization) as a result of the non-recurring charges.

Total salary expense and related benefits included in other operating
expenses were $10,976,000, $9,187,000 and $14,953,000 for the years ended
December 31, 1995, 1994 and 1993, respectively.

6. STATUTORY ACCOUNTING PRACTICES

GAAP for the Company differs in certain significant respects from
accounting practices prescribed or permitted by insurance regulatory
authorities. The principal differences result from the following statutory
accounting practices:

-- Upfront premiums on municipal business are recognized as earned
when related risk has expired rather than over the expected coverage
period;

-- Acquisition costs are charged to operations as incurred rather than
as related premiums are earned;

A-12

<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

6. STATUTORY ACCOUNTING PRACTICES--(CONTINUED)

-- A contingency reserve is computed based on the following statutory
requirements (rather than establishing a general loss reserve):

a. For all policies written prior to July 1, 1989, an amount
equal to 50% of cumulative earned premiums less permitted reductions,
plus;

b. For all policies written on or after July 1, 1989, an amount
equal to the greater of 50% of premiums written for each category of
insured obligation or a designated percent of principal guaranteed for
that category. These amounts are provided each quarter as either
1/60th or 1/80th of the total required for each category, less
permitted reductions;

-- Certain assets designated as "non-admitted assets" are charged
directly to statutory surplus but are reflected as assets under GAAP;

-- Federal income taxes are provided only on taxable income for which
income taxes are currently payable;

-- Accruals for deferred compensation are not recognized;

-- Purchase accounting adjustments are not recognized;

-- Incurred losses are reduced by recoveries under the U S WEST LOC
(see Note 14);

-- Bonds are carried at amortized cost.

A-13
<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

6. STATUTORY ACCOUNTING PRACTICES--(CONTINUED)

A reconciliation of the Company's net income (loss) for the calendar years
1995, 1994 and 1993 and shareholder's equity at December 31, 1995, 1994 and
1993, prepared on a GAAP basis, to the amounts reported on a statutory basis, is
as follows (in thousands):

<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Net Income (Loss):
GAAP BASIS............................................ $ 54,988 $ 60,264 $(124,388)
Premium revenue recognition........................... (4,805) (5,425) (6,229)
Losses and loss adjustment expenses incurred.......... 10,871 (13,908) 83,677
Deferred acquisition costs............................ (10,305) (9,847) 3,092
Deferred income tax provision (benefit)............... (3,055) 4,682 (28,806)
Amortization of bonds................................. 1,195 520 69
Amortization and write-off of goodwill................ 81,598
Accrual of deferred compensation...................... 5,663 (9,062) 2,323
Other................................................. (1,580) (274) 2,251
--------- --------- --------
STATUTORY BASIS....................................... $ 52,972 $ 26,950 $ 13,587
--------- --------- --------
--------- --------- --------
<CAPTION>
December 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Shareholder's Equity:
GAAP BASIS........................................... $ 789,986 $ 528,976 $ 542,468
Premium revenue recognition.......................... (46,248) (29,891) (24,466)
Loss and loss adjustment expense reserves............ 31,798 20,927 34,835
Deferred acquisition costs........................... (132,951) (91,839) (81,992)
Contingency reserve.................................. (183,967) (121,414) (97,098)
Unrealized loss (gain) on investments, net of tax.... (30,298) 32,868 (34,892)
Deferred income taxes................................ 43,205 10,222 17,044
Accrual of deferred compensation..................... 5,653 9,062
Other................................................ (16,492) (5,475) (8,011)
--------- --------- ---------
STATUTORY BASIS (SURPLUS)............................ $ 460,686 $ 344,374 $ 356,950
--------- --------- ---------
--------- --------- ---------
SURPLUS PLUS CONTINGENCY RESERVE..................... $ 644,653 $ 465,788 $ 454,048
--------- --------- ---------
--------- --------- ---------
</TABLE>

7. FEDERAL INCOME TAXES

For periods prior to May 13, 1994, the date of initial public offering when
the Parent became less than 80% owned by U S WEST, the Parent, the Company and
its Subsidiaries joined with U S WEST and its subsidiaries in filing a
consolidated federal income tax return. For the Company, under a written tax
sharing agreement with U S WEST, the allocation of income taxes was based upon
separate return calculations which provided that benefits or liabilities created
by the Company will be allocated to the Company regardless of whether the
benefits were usable or additional liabilities were incurred in the U S WEST tax
returns. For periods subsequent to May 12, 1994, the Parent and all members of
its group elected to file consolidated federal tax returns. The calculation of
each member's tax benefit or

A-14
<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

7. FEDERAL INCOME TAXES--(Continued)

liability by the Company will be controlled by a tax sharing agreement that will
base the allocation of such benefit or liability upon a separate return
calculation.

The cumulative balance sheet effects of deferred tax consequences are (in
thousands):
December 31,
--------------------
1995 1994
--------- ---------
Deferred acquisition costs........................ $ 46,533 $ 32,144
Unearned premium adjustments...................... 2,905 1,964
Contingency reserve............................... 11,542
Unrealized capital gains.......................... 14,950
Market discounts.................................. 900 1,991
--------- ---------
Total deferred tax liabilities.................... 76,830 36,099
--------- ---------

Loss and loss adjustment expense reserves......... (11,129) (7,195)
Deferred compensation............................. (5,529) (2,791)
Tax credits....................................... (3,795) (1,135)
Tax and loss bonds................................ (11,116)
Unrealized capital losses......................... (11,504)
Capital loss carryforward......................... (1,878)
Other, net........................................ (2,056) (1,374)
--------- ---------
Total deferred tax assets.................... (33,625) (25,877)
--------- ---------
Total deferred income taxes....................... $ 43,205 $ 10,222
--------- ---------
--------- ---------

No valuation allowance was necessary at December 31, 1995 or 1994. On
August 10, 1993, federal legislation was enacted that increased the corporate
tax rate from 34% to 35% effective January 1, 1993. The higher tax rate
increased the Company's deferred tax liability by $715,000 at the date of
enactment.

A reconciliation of the effective tax rate with the federal statutory rate
follows:

<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Tax at statutory rate................................. 35.0% 35.0% 35.0%
Tax-exempt interest................................... (8.3) (12.0) 6.7
Amortization and write-off of goodwill................ (17.5)
Other................................................. 0.3 (0.5)
--------- --------- ---------
Provision for income taxes............................ 27.0% 23.0% 23.7%
--------- --------- ---------
--------- --------- ---------
</TABLE>

A-15
<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

8. DIVIDENDS AND CAPITAL REQUIREMENTS

Under New York Insurance Law, the Company may pay a dividend without the
prior approval of the Superintendent of the New York State Insurance Department
only from earned surplus subject to the maintenance of a minimum capital
requirement, and the dividend, which together with all dividends declared or
distributed by it during the preceding twelve months, may not exceed the lesser
of 10% of its policyholders' surplus shown on its last filed statement, or
adjusted net investment income, as defined, for such twelve-month period. As of
December 31, 1995, the Company had $46,779,000 available for the payment of
dividends over the next twelve months. However, as a customary condition for
approving the application of Fund American for a change in control of the
Company, the prior approval of the Superintendent of the New York State
Insurance Department is required for any payment of dividends by the Company to
the Parent for a period of two years following such changed control. Such
approval was provided for the payment of dividends by the Company to the Parent
in 1995 and 1994 in the ordinary course of business.

9. CREDIT ARRANGEMENTS AND ADDITIONAL CLAIMS-PAYING RESOURCES

The Company has a credit arrangement aggregating $150,000,000 at December
31, 1995, which is provided by commercial banks and intended for general
application to transactions insured by the Company and the Subsidiaries. At
December 31, 1995, there have been no borrowings under this arrangement. In
addition, there are credit arrangements assigned to specific insured
transactions. In August 1994, the Company entered into a facility agreement with
Canadian Global Funding Corporation and Hambros Bank Limited. Under the
agreement, the Company can arrange financing for transactions subject to certain
conditions. The amount of this facility was $186,911,000, of which $100,911,000
was unutilized at December 31, 1995.

10. EMPLOYEE BENEFIT PLANS

The Company maintains both a qualified and a non-qualified non-contributory
defined contribution pension plan for the benefit of all eligible employees. The
Company's contributions are based upon a fixed percentage of employee
compensation. Pension expense, which is funded as accrued, amounted to
$1,784,000, $1,888,000 and $2,108,000 for the years ended December 31, 1995,
1994 and 1993, respectively. Of these amounts, $1,144,000, $1,266,000 and
$1,449,000 have been deferred as policy acquisition costs during the respective
periods.

The Company has an employee retirement savings plan for the benefit of all
eligible employees. The plan permits employees to contribute a percentage of
their salaries up to limits prescribed by the Internal Revenue Service (IRS
Code, Section 401(k)). The Company's contributions are discretionary, and none
have been made.

During 1991, the Company established the Profit Participation Plan as a
long-term incentive compensation plan for the benefit of certain of its
employees. Prior to the closing of the Initial Public Offering (see Note 15),
the Parent adopted a Supplemental Restricted Stock Plan. Pursuant to this plan,
awards of outstanding units to existing employees under the Profit Participation
Plan were valued at $0.20 per dollar of award ($0.70 per dollar of award in the
case of 1994 regular units granted thereunder) and, at the election of each
outstanding employee, were exchanged for restricted shares of

A-16
<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

10. EMPLOYEE BENEFIT PLANS--(CONTINUED)

the Parent's common stock valued at the initial public offering price of $20.00
per share. All employees of the Company, including all senior executives,
exchanged their outstanding interests in the Profit Participation Plan for
restricted shares of the Parent's common stock at the public offering price
under the Supplemental Restricted Stock Plan. In settlement of an accrued
balance of $7,126,000 in such Profit Participation Plan, the Company purchased
356,345 shares of restricted stock from the Parent and awarded the shares to
employees. The stock is restricted because ownership of the shares by employees
requires continued employment; the shares vest ratably over a three-year period
on July 1, 1994, 1995 and 1996.

Pursuant to the 1993 Equity Participation Plan adopted prior to the Initial
Public Offering, 1,810,780 shares of the Parent's common stock, subject to
anti-dilutive adjustment, were reserved for awards of options and restricted
shares of common stock to employees for the purpose of providing, through the
grant of long-term incentives, a means to attract and retain key personnel and
to provide to participating officers and other key employees long-term
incentives for sustained high levels of performance. Shares available under the
1993 Equity Participation Plan were increased from 1,810,780 to 2,110,780 in May
1995. The 1993 Equity Participation Plan also contains provisions that permit
the Compensation Committee to pay all or a portion of an employee's bonuses in
the form of shares of the Parent's common stock credited to the employees at a
15% discount from current market value and paid to employees five years from the
date of award. Up to an aggregate of 10,000,000 shares may be allocated to such
equity bonuses. Common stock to pay equity bonus awards will be acquired by the
Parent through open-market purchases by a trust established for such purpose.

During 1994, the Parent granted to officers and employees, in respect of
future performance, non-qualified options to purchase an aggregate of 1,099,000
shares of the Parent's common stock, of which 39,000 were forfeited and
1,060,000 were still outstanding at December 31, 1994, substantially all of
which have an exercise price of $20.00 per share. (As described below, 1,025,500
of these options will be converted to performance plan shares.) The foregoing
options will vest, subject to continuation of employment and other terms of the
option grants, at the rate of 20% per year, for five one-year periods, with the
first period ending on July 1, 1994. Such options expire ten years after the
effective dates of their grant. In the fourth quarter of 1994, holders of
outstanding stock options under the 1993 Equity Participation Plan were offered
the right to exchange such stock options for an equal number of performance
shares under such Plan. Giving effect to such exchange, at December 31, 1995,
there would have been outstanding 1,111,000 performance shares and options to
purchase 67,000 shares of common stock.

The Company estimates the final cost of these performance shares at their
payout date and accrues for this expense over the performance period. In tandem
with this accrual, the Parent records the pre-tax amount in stockholders' equity
as deferred compensation.

On November 10, 1994, the Parent announced the appointment of an
independent trustee authorized to purchase shares of the Parent's common stock
in open market transactions, at times and prices determined by the trustee.
These purchases are intended to fund future obligations relating to equity
bonuses, performance shares and stock options under the 1993 Equity
Participation Plan. The Parent also repurchased stock from its employees in
satisfaction of withholding taxes on shares distributed under its restricted
stock plan. During 1995, the total number of shares acquired by the

A-17
<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

10. EMPLOYEE BENEFIT PLANS--(CONTINUED)

Parent were 591,714 at a cost of $14,444,000 compared with 182,562 shares at a
cost of $3,730,000 in 1994.

The Company does not currently provide post-retirement benefits, other than
pensions to its employees, nor does it provide post-employment benefits to
former employees.

11. COMMITMENTS AND CONTINGENCIES

The Company leases office space and equipment under non-cancelable
operating leases, which expire at various dates through 2005.

Future minimum rental payments are as follows (in thousands):

Year Ended December 31,
- -----------------------
1996......................................... $ 1,651
1997......................................... 1,907
1998......................................... 1,907
1999......................................... 1,907
2000......................................... 1,918
Thereafter................................... 8,741
---------
Total...................................... $ 18,031
---------
---------

Rent expense for the years ended December 31, 1995, 1994 and 1993 was
$3,493,000, $3,430,000 and $3,743,000, respectively (net of sublease income of
$0, $0 and $16,000 for the respective periods).

During the ordinary course of business, the Company and its Subsidiaries
have become parties to certain litigation. Management believes that these
matters will be resolved with no material financial impact on the Company.

12. REINSURANCE

The Company reinsures portions of its risks with affiliated (see Note 14)
and unaffiliated reinsurers under quota share treaties and on a facultative
basis. The Company's principal ceded reinsurance program consists of three quota
share treaties. One treaty covers all of the Company's approved regular lines of
business, except municipal obligation insurance. Under this treaty in 1995, the
Company ceded 14.5% of each covered policy, up to a maximum of $29,000,000
insured principal per policy. At its sole option, the Company could have
increased, and in certain instances did increase, the ceding percentage to
21.75% up to $43,500,000 of each covered policy. A second treaty covers the
Company's municipal obligation insurance business. Under this treaty in 1995,
the Company ceded 14% of each covered policy that is classified by the Company
as providing municipal bond insurance as defined by Article 69 of the New York
Insurance Law up to a limit of $37,333,000 per single risk, which is defined by
revenue source. At its sole option, the Company could have increased, and in
certain instances did increase, the ceding percentage to 30% up to $80,000,000
per single risk. Under the third treaty in 1995, the Company ceded 5% or 15%
(depending on the type of obligation) of its retention (i.e., after cessions of
policies under the municipal obligation insurance treaty) covering substantially
all teaching hospital

A-18
<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

12. REINSURANCE--(CONTINUED)

and higher education risks, up to limits that range from $7,500,000 to
$30,000,000 per single risk. At its sole option, the Company could have
increased, and in certain instances did increase, the ceding percentage from 5%
to 15% or from 15% to 30% (depending on the type of obligation) of its
retention, subject to the same limits. Each of the three treaties allows the
Company to withhold a ceding commission to defray their expenses.

In the event (which management considers to be highly unlikely) that any or
all of the reinsuring companies were unable to meet their obligations to the
Company, the Company would be liable for such defaulted amounts. The Company has
also assumed reinsurance of municipal obligations from unaffiliated insurers.

Amounts reinsured were as follows (in thousands):

<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Written premiums ceded.................................. $ 33,166 $ 28,692 $ 62,403
Written premiums assumed................................ 1,684 1,973 401
Earned premiums ceded................................... 38,013 35,051 32,736
Earned premiums assumed................................. 2,759 7,059 1,546
Loss and loss adjustment expense payments ceded......... 3,060 1,483 32,299
Loss and loss adjustment expense payments assumed....... 3 3 3
Incurred losses and loss adjustment expenses ceded...... 9,101 56,895 18,628
Incurred losses and loss adjustment expenses assumed.... 81 137 47

<CAPTION>
December 31,
------------------------
1995 1994
----------- -----------
<S> <C> <C>
Principal outstanding ceded............................. $14,355,664 $12,116,420
Principal outstanding assumed........................... 2,347,122 824,296
Unearned premium reserve ceded.......................... 133,548 121,668
Unearned premium reserve assumed........................ 5,027 6,050
Loss and loss adjustment expense reserves ceded......... 61,532 55,491
Loss and loss adjustment expense reserves assumed....... 670 593
</TABLE>

13. OUTSTANDING EXPOSURE AND COLLATERAL

The Company's policies insure the scheduled payments of principal and
interest on asset-backed and municipal obligations. The principal amount insured
(in millions) as of December 31, 1995 and

A-19
<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

13. OUTSTANDING EXPOSURE AND COLLATERAL--(CONTINUED)

1994 (net of amounts ceded to other insurers of $6,093 and $5,975 of
asset-backed and $8,263 and $6,141 of municipal, respectively) and the terms to
maturity are as follows:

<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
------------------------ -------------------------
Terms to Maturity Asset-Backed Municipal Asset-Backed Municipal
- ---------------------------------- ------------ --------- ------------ ---------
<S> <C> <C> <C> <C>
0 to 5 Years...................... $ 5,931 $ 3,293 $ 5,510 $ 2,308
5 to 10 Years..................... 3,679 4,713 2,129 3,071
10 to 15 Years.................... 1,183 4,299 1,070 2,711
15 to 20 Years.................... 423 6,986 386 2,770
20 Years and Above................ 5,847 9,625 3,780 4,488
----------- --------- ------------ ---------
Total................... $ 17,063 $ 28,916 $ 12,875 $ 15,348
----------- --------- ------------ ---------
----------- --------- ------------ ---------
</TABLE>

The principal amount ceded as of December 31, 1995 and 1994 and the terms
to maturity are as follows (in millions):

<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
------------------------ ------------------------
Terms to Maturity Asset-Backed Municipal Asset-Backed Municipal
- ---------------------------------- ------------ --------- ------------ ---------
<S> <C> <C> <C> <C>
0 to 5 Years...................... $ 2,297 $ 1,103 $ 2,470 $ 794
5 to 10 Years..................... 1,503 1,775 1,640 1,203
10 to 15 Years.................... 403 1,020 446 906
15 to 20 Years.................... 126 1,514 104 1,044
20 Years and Above................ 1,764 2,851 1,315 2,194
----------- --------- ----------- ---------
Total................... $ 6,093 $ 8,263 $ 5,975 $ 6,141
----------- --------- ----------- ---------
----------- --------- ----------- ---------
</TABLE>

The Company limits its exposure to losses from writing financial guarantees
by underwriting investment-grade obligations, by diversifying its portfolio and
by maintaining rigorous collateral requirements on asset-backed obligations. The
principal amounts of insured obligations in the asset-backed insured portfolio,
net of amounts ceded, are collateralized by the following types of collateral
(in millions):

<TABLE>
<CAPTION>
Net of Amounts Ceded
Ceded
December 31, December 31,
-------------------- --------------------
Types of Collateral 1995 1994 1995 1994
- -------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Residential mortgages............................. $ 6,740 $ 4,836 $ 1,909 $ 1,736
Consumer receivables.............................. 5,105 2,479 1,320 658
Government securities............................. 1,651 2,017 263 500
Pooled corporate obligations...................... 1,819 1,686 732 701
Commercial mortgage portfolio:
Commercial real estate.......................... 148 156 640 734
Corporate secured............................... 98 118 801 1,118
Investor-owned utility obligations................ 821 786 292 331
Other asset-backed obligations.................... 681 797 136 197
--------- --------- --------- ---------
Total asset-backed obligations.......... $ 17,063 $ 12,875 $ 6,093 $ 5,975
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>

A-20
<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

13. OUTSTANDING EXPOSURE AND COLLATERAL--(CONTINUED)

The asset-backed insured portfolio, which aggregated $23.2 billion
principal before reinsurance at December 31, 1995, was collateralized by assets
with an estimated fair value of $28.0 billion. At December 31, 1994, it
aggregated $18.9 billion principal before reinsurance and was collateralized by
assets with an estimated fair value of $23.4 billion. Such estimates of the
collateral's fair value, which is reduced as exposure expires, are based upon
information at the inception of the insurance policy. At December 31, 1995, the
estimated fair value of collateral and reserves over the principal insured
averaged from 100% for commercial real estate to 164% for corporate secured
obligations. At December 31, 1994, the estimated fair value of collateral and
reserves over the principal insured averaged from 100% for commercial real
estate to 168% for corporate secured obligations. Collateral for specific
transactions is generally not available to pay claims related to other
transactions. The amounts of losses ceded to reinsurers is determined net of
collateral.

The principal amount of insured obligations in the municipal insured
portfolio, net of amounts ceded, included the following types of issues (in
millions):

<TABLE>
<CAPTION>
Net of Amounts Ceded
Ceded
December 31, December 31,
-------------------- --------------------
Types of Issues 1995 1994 1995 1994
- -------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
General obligation bonds.......................... $ 8,738 $ 3,809 $ 1,764 $ 1,252
Housing revenue bonds............................. 1,674 1,622 685 606
Municipal utility revenue bonds................... 3,873 2,169 1,107 794
Health care revenue bonds......................... 2,587 1,594 1,718 1,359
Tax-supported bonds (non-general obligation)...... 7,090 3,482 1,741 1,201
Transportation revenue bonds...................... 1,365 720 293 253
Other municipal bonds............................. 3,589 1,952 955 676
--------- --------- --------- ---------
Total municipal obligations............. $ 28,916 $ 15,348 $ 8,263 $ 6,141
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>

In its asset-backed business, the Company considers geographic
concentration as a factor in underwriting insurance covering securitizations of
pools of such assets as residential mortgages or consumer receivables. However,
after the initial issuance of an insurance policy relating to such
securitization, the geographic concentration of the underlying assets may not
remain fixed over the life of the policy. In addition, in writing insurance for
other types of asset-backed obligations, such as securities primarily backed by
government or corporate debt, geographic concentration is not deemed by the
Company to be significant given other more relevant measures of diversification
such as issuer or industry.

The Company seeks to maintain a diversified portfolio of insured municipal
obligations designed to spread its risk across a number of geographic areas. The
following table sets forth, by state, those states

A-21
<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

13. OUTSTANDING EXPOSURE AND COLLATERAL--(CONTINUED)

in which municipalities located therein issued an aggregate of 2% or more of the
Company's net par amount outstanding of insured municipal securities as of
December 31, 1995:

<TABLE>
<CAPTION>
Net Par Percent of Total Ceded Par
Number Amount Municipal Net Par Amount
State of Issues Outstanding Amount Outstanding Outstanding
- ---------------------------------------------------- ----------- ------------- --------------------- -------------
(in millions) (in millions)
<S> <C> <C> <C> <C>
California.......................................... 437 $ 4,692 16.2% $ 762
Florida............................................. 167 1,981 6.8 779
New York............................................ 245 2,743 9.5 1,197
Pennsylvania........................................ 212 1,641 5.7 511
New Jersey.......................................... 228 1,345 4.7 370
Louisiana........................................... 116 882 3.1 395
Michigan............................................ 139 897 3.1 330
Minnesota........................................... 131 866 3.0 33
Massachusetts....................................... 98 777 2.7 280
Illinois............................................ 209 775 2.7 100
Texas............................................... 276 1,449 5.0 329
All Other States.................................... 1,344 8,722 30.1 2,095
Non-U.S............................................. 38 2,146 7.4 1,082
----------- ------------- ------- -------------
Total..................................... 3,640 $ 28,916 100.0% $ 8,263
----------- ------------- ------- -------------
----------- ------------- ------- -------------
</TABLE>

14. RELATED PARTY TRANSACTIONS

Allocable expenses are shared by the Company and its Parent on a basis
determined principally by estimates of respective usage as stated in an expense
sharing agreement. The agreement is subject to the provisions of the New York
Insurance Law. Amounts included in other assets at December 31, 1995 and 1994
are $3,322,000 and $2,750,000, respectively, for unsettled expense allocations
due from the Parent.

The Company ceded premiums of $13,061,000, $6,609,000 and $14,152,000 to
Tokio Marine for the years ended December 31, 1995, 1994 and 1993, respectively.
The amounts included in prepaid reinsurance premiums at December 31, 1995 and
1994, for reinsurance ceded to Tokio Marine were $33,382,000 and $29,920,000,
respectively. Reinsurance recoverable on unpaid losses ceded to Tokio Marine was
$323,000 and $86,000 at December 31, 1995 and 1994, respectively.

The Company ceded premiums of $7,522,000, $9,390,000 and $28,389,000 on a
quota share basis to affiliates of U S WEST for the years ended December 31,
1995, 1994 and 1993, respectively, of which $629,000, $1,838,000 and
$18,360,000, respectively, were ceded to Commercial Reinsurance Company
(Commercial Re) (see Note 15). The amounts included in prepaid reinsurance
premiums for reinsurance ceded to these affiliates were $39,918,000 and
$46,215,000 at December 31, 1995 and 1994, respectively, of which $10,720,000
and $14,382,000, respectively, were ceded to Commercial Re. The amounts of
reinsurance recoverable on unpaid losses ceded to these affiliates at December
31, 1995 and 1994 were $55,024,000 and $49,953,000, respectively, of which
$42,918,000 and $39,725,000, respectively, were ceded to Commercial Re. The
Commercial Re reinsurance agreement was subject to, and

A-22
<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

14. RELATED PARTY TRANSACTIONS--(CONTINUED)

received, the non-disapproval of the State of New York Insurance Department due
to its nature as an affiliate transaction. The Company has taken credit for the
reinsurance ceded to Commercial Re.

On November 25, 1992, U S WEST executed a $100,000,000 ten-year irrevocable
letter of credit (the LOC) in favor of the Company. To the extent that losses
and loss adjustment expenses incurred by the Company after December 31, 1992,
exceeded by $25,000,000 in the aggregate the case basis reserves, if any,
established as of December 31, 1992, for any insurance policies covered by the
terms of the letter of credit, the Company could draw under the LOC to cover
such excess losses and loss adjustment expenses.

In the second quarter of 1993, the LOC was amended to eliminate the
$25,000,000 deductible and to provide for the reinstatement of the initial
$38,000,000 of drawings thereunder. The LOC could be drawn upon when losses and
loss adjustment expenses paid by the Company on commercial mortgage transactions
exceeded the case basis reserves at December 31, 1992.

In the second quarter of 1993, the Company incurred losses of approximately
$63,000,000 for claims on certain commercial mortgage transactions insured by
the Company. In the third quarter of 1993, the Company increased its general
reserve by $18,400,000 to reflect the potential for loss in the commercial
mortgage portfolio and recorded a reinsurance recoverable due to the protection
against loss provided by the LOC. While these losses were charged to the
Company's results of operations, the Company's capital position was unaffected
since such losses were covered by the LOC, drawings against which have been
accounted for as a capital contribution and a non-cash financing activity, net
of the related tax effect, under generally accepted accounting principles. In
late June and early July 1993, the insured commercial mortgage transactions for
which case basis reserves had been established were refinanced with
Company-insured obligations. In connection with such refinancings, the Company
paid losses of approximately $34,800,000 and U S WEST paid losses of
approximately $63,000,000 through drawings under the LOC. After giving effect to
such drawings, the amount available for future drawings under the LOC was
reinstated to $75,000,000. In December 1993, the Company completed the
Restructuring (see Note 15) and terminated the LOC; therefore, the $18,400,000
reinsurance recoverable, recorded to offset the $18,400,000 increase in the
general reserve at such date, and the related capital contribution ($11,960,000
net of tax) were written off.

15. INITIAL PUBLIC OFFERING AND RESTRUCTURING

In the second quarter of 1993, U S WEST announced its intention to divest
itself of its non-telecommunications businesses in order to redeploy its capital
into its telecommunications businesses. U S WEST implemented the initial stage
of the divestiture of its interest in the Parent through the initial public
offering of Parent shares on May 13, 1994.

In December 1993, in anticipation of such initial public offering, the
Parent took certain steps (the Restructuring) to reduce its risk of loss from
commercial mortgage transactions previously insured by the Company. As part of
the Restructuring, in December 1993 U S WEST purchased an additional 3,000,000
shares of the Parent's common stock at $19.68 per share, the GAAP book value per
share as of November 30, 1993, as adjusted for the Restructuring. Pursuant to
the Restructuring, (i) the Company and U S WEST terminated the LOC (see Note
14); (ii) the Company redeemed, for

A-23
<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

15. INITIAL PUBLIC OFFERING AND RESTRUCTURING--(CONTINUED)

approximately $78,500,000, shares of their common stock held by the Parent;
(iii) the Parent contributed the proceeds of the stock redemption to Commercial
Re, a newly formed reinsurance company; (iv) the Parent distributed all of the
outstanding shares of Commercial Re to the existing shareholders of the Parent
in proportion to their ownership interests in the Parent at the time; and (v)
the Company paid approximately $103,308,000, less a ceding commission of
approximately $5,370,000, as a premium to Commercial Re to assume approximately
64.4% of the Company's exposure, on a weighted average basis, on commercial
mortgage transactions previously insured by the Company. In addition, the
Company cedes to Commercial Re a percentage of the future installments (less a
ceding commission) on such transactions.

In connection with the Restructuring, in 1993 the Company recognized a
pre-tax loss of approximately $85,409,000 (approximately $55,516,000 after
taxes) due to the amount by which the reinsurance premium paid to Commercial Re
exceeded the carrying amount of the related unearned premium reserve. The tax
benefit of $29,893,000 was paid by U S WEST to the Company at the date of the
Restructuring. The tax-sharing and tax-deconsolidation agreements require the
Company to repay U S WEST the tax benefit relating to the pre-tax loss as it is
utilized by the Company.

16. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The following estimated fair values have been determined by the Company
using available market information and appropriate valuation methodologies.
However, considerable judgment is necessary to interpret the data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amount the Company could realize in a current
market exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.

Long-term bonds--The carrying amount of long-term bonds represents fair
value. The fair value of long-term bonds is based upon quoted market price.

Short-term investments--The carrying amount is fair value, which
approximates cost due to the short maturity of these instruments.

Cash and cash equivalents, receivable for investments sold and payable for
investments purchased--The carrying amount approximates fair value because of
the short maturity of these instruments.

Unearned premiums, net of prepaid reinsurance premiums--The carrying amount
of unearned premiums, net of prepaid reinsurance premiums, represents the
Company's future premium revenue, net of reinsurance, on policies where the
premium was received at the inception of the insurance contract. The fair value
of unearned premiums net of prepaid reinsurance premiums is an estimate of the
premiums that would be paid under a reinsurance agreement with a third party to
transfer the Company's financial guaranty risk, net of that portion of the
premium retained by the Company to compensate it for originating and servicing
the insurance contract.

Installment premiums--Consistent with industry practice, there is no
carrying amount for installment premiums since the Company will receive premiums
on an installment basis over the term of the

A-24
<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

16. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS--(CONTINUED)

insurance contract. Similar to unearned premiums, the fair value of installment
premiums is the estimated present value of the future contractual premium
revenues that would be paid under a reinsurance agreement with a third party to
transfer the Company's financial guaranty risk, net of that portion of the
premium retained by the Company to compensate it for originating and servicing
the insurance contract.

Losses and loss adjustment expenses, net of reinsurance recoverable on
unpaid losses--The carrying amount is fair value, which is the present value of
the expected cash flows for specifically identified claims and potential losses
in the Company's insured portfolio.

<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
---------------------------- ------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
------------- ------------- ----------- -----------
(in thousands)
<S> <C> <C> <C> <C>
Assets:
Long-term bonds........................................ $ 1,036,382 $ 1,036,382 $ 627,026 $ 627,026
Short-term investments................................. 14,568 14,568 88,951 88,951
Cash and cash equivalents.............................. 35,832 35,832 16,120 16,120
Receivable for securities sold......................... 2,326 2,326 17,592 17,592
Liabilities:
Unearned premiums, net of prepaid reinsurance
premiums............................................. 330,349 263,618 212,901 169,954
Losses and loss adjustment expenses, net of
reinsurance recoverable on unpaid losses............. 50,227 50,227 35,639 35,639
Payable for investments purchased...................... 9,516 9,516 56,112 56,112
Off-balance-sheet instruments:
Installment premiums................................... 82,212 68,952
</TABLE>

A-25
<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

17. LIABILITY FOR LOSSES AND LOSS ADJUSTMENT EXPENSES

The Company's liability for losses and loss adjustment expenses consists of
the case basis and general reserves. Activity in the liability for losses and
loss adjustment expenses is summarized as follows (in thousands):

<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------
1995 1994 1993
----------- --------- ---------
<S> <C> <C> <C>
Balance at January 1................................... $ 91,130 $ 36,094 $ 72,430
Less reinsurance recoverable........................... 55,491 79 13,750
----------- --------- ---------
Net balance at January 1............................... 35,639 36,015 58,680
Incurred losses and loss adjustment expenses:
Current year......................................... 3,000 3,024 2,368
Prior years.......................................... 3,258
Related to contribution.............................. 15,400 18,360
Paid losses and loss adjustment expenses:
Current year......................................... (3,397)
Prior years.......................................... (7,070) (3) (43,393)
----------- --------- ---------
Net balance December 31................................ 50,227 35,639 36,015
Plus reinsurance recoverable........................... 61,532 55,491 79
----------- --------- ---------
Balance at December 31....................... $ 111,759 $ 91,130 $ 36,094
----------- --------- ---------
----------- --------- ---------
</TABLE>

In 1992, the Company set up initial case basis reserves on certain
commercial mortgage transactions and established a general reserve. During 1993,
losses of $84,054,000 were incurred, of which $63,699,000 were incurred in
commercial real estate transactions, $63,326,000 of which were paid directly by
U S WEST under the LOC (see Note 14). During 1993, FSA also increased its
general reserve by $20,355,000 primarily in recognition of the potential for
loss in the commercial mortgage portfolio it retained after the Restructuring
(see Note 15). In 1994, the Company increased its general reserve by $3,024,000
for origination of new business and transferred $16,932,000 of the general
reserve to its case basis reserves for projected losses on certain transactions,
the majority of which are in its discontinued commercial mortgage portfolio.
Giving effect to this transfer, the Company's unallocated general reserve
totaled $20,928,000 at December 31, 1994.

During 1995, the Company increased its general reserve by $6,300,000, of
which $3,000,000 was for originations of new business and $3,300,000 was to
reestablish the general reserve for transfers from general reserves to case
basis reserves. In December 1995, the Company transferred $9,700,000 from its
general reserve to case basis reserves associated predominantly with certain
residential mortgage and timeshare receivables transactions. Also in December
1995, the Company recognized a one-time increase of $15,400,000 to the general
reserve to provide for the insured portfolio it had assumed as a result of the
Contribution in a manner consistent with the Company's reserving methodology.
Prior to the Merger, CGIC did not maintain a general reserve. Giving effect to
all the 1995 events, the unallocated general reserve totaled $31,798,000 at
December 31, 1995.

Reserves for losses and loss adjustment expenses are discounted at
risk-free rates. The amount of discount taken was approximately $15,276,000,
$14,588,000 and $8,963,000 at December 31, 1995, 1994 and 1993, respectively.

A-26
<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

18. NON-RECURRING CHARGES

As a result of certain events that occurred in the fourth quarter of 1993,
the Company recognized a non-recurring charge of approximately $9,970,000 before
taxes ($6,481,000 after taxes) against 1993 fourth quarter operations. This
charge primarily related to (i) a $2,812,000 write-down to net realizable value
of the Company's interest, received as additional consideration in connection
with an insured transaction, in the residual cash flow of the assets
collateralizing the insured transaction; (ii) the acceleration of the
amortization of deferred general liquidity facility fees of $2,105,000 and legal
fees of $203,000; (iii) a $2,900,000 accrual for salary and related benefits
primarily due to a settlement for terminated employees in the Company's Profit
Participation Plan; and (iv) $1,950,000 primarily relating to the acceleration
of deferred acquisition expenses (net of amortization) as a result of the non-
recurring charges.

A-27
<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------- -------------
<S> <C> <C>
ASSETS
Bonds at market value (amortized cost of $1,061,866 and $1,006,084)... $ 1,053,120 $ 1,036,382
Short-term investments................................................ 75,256 49,845
------------- -------------
Total investments................................................... 1,128,376 1,086,227
Cash.................................................................. 5,970 555
Deferred acquisition costs............................................ 133,950 132,951
Prepaid reinsurance premiums.......................................... 144,881 133,548
Reinsurance recoverable on unpaid losses.............................. 35,624 61,532
Receivable for securities sold........................................ 15,871 2,326
Other assets.......................................................... 57,745 59,499
------------- -------------
TOTAL ASSETS................................................... $ 1,522,417 $ 1,476,638
------------- -------------
------------- -------------

LIABILITIES AND SHAREHOLDER'S EQUITY
Deferred premium revenue.............................................. $ 496,061 $ 463,897
Losses and loss adjustment expenses................................... 79,501 111,759
Deferred federal income taxes......................................... 27,414 43,205
Ceded reinsurance balances payable.................................... 14,267 13,664
Payable for securities purchased...................................... 78,646 9,516
Accrued expenses and other liabilities................................ 41,456 44,611
------------- -------------
TOTAL LIABILITIES.............................................. 737,345 686,652
------------- -------------
Common stock (1,000 shares authorized; 750 shares issued and
outstanding; par value of $20,000 per share)........................ 15,000 15,000
Additional paid-in capital............................................ 681,470 681,470
Unrealized gain (loss) on investments (net of deferred income tax
provision (benefit) of ($3,061) and $10,604)........................ (5,685) 19,694
Accumulated earnings.................................................. 94,287 73,822
------------- -------------
TOTAL SHAREHOLDER'S EQUITY..................................... 785,072 789,986
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY............................ $ 1,522,417 $ 1,476,638
------------- -------------
------------- -------------
</TABLE>

See notes to condensed consolidated financial statements.

A-28
<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------
1996 1995
---------- ---------
<S> <C> <C>
Revenues:
Net premiums written (net of premiums ceded of $32,476 and $16,092)... $ 64,865 $ 40,349
Increase in unearned premiums......................................... (22,381) (9,804)
---------- ---------
Premiums earned (net of premiums ceded of $21,167 and $16,426)........ 42,484 30,545
Net investment income................................................. 30,103 23,811
Net realized gains (losses)........................................... 1,457 (2,785)
Other income.......................................................... 163 319
---------- ---------
TOTAL REVENUES................................................ 74,207 51,890
---------- ---------
Expenses:
Losses and loss adjustment expenses (net of reinsurance recoveries of
$1,131 and $2,016).................................................. 3,155 3,305
Policy acquisition costs.............................................. 12,620 7,197
Other operating expenses.............................................. 6,674 5,783
---------- ---------
TOTAL EXPENSES................................................ 22,449 16,285
---------- ---------
INCOME BEFORE INCOME TAXES.............................................. 51,758 35,605
Provision for income taxes.............................................. 13,293 9,676
---------- ---------
NET INCOME.................................................... $ 38,465 $ 25,929
---------- ---------
---------- ---------
</TABLE>

See notes to condensed consolidated financial statements.

A-29
<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Premiums received, net........................................ $ 70,424 $ 40,036
Policy acquisition and other operating expenses paid, net..... (35,304) (17,906)
Recoverable advances received (paid).......................... 7,628 (2,325)
Loss and LAE paid, net........................................ (9,603) (690)
Net investment income received................................ 28,790 19,479
Federal income taxes paid..................................... (15,240) (5,891)
Interest paid................................................. (798) (715)
Other, net.................................................... 1,807 (42)
------------ ------------
Net cash provided by operating activities.................. 47,704 31,946
------------ ------------
Cash flows from investing activities:
Proceeds from sales of bonds.................................. 458,659 219,622
Purchases of bonds............................................ (457,287) (277,487)
Purchases of property and equipment........................... (1,225) (420)
Net decrease (increase) in short-term securities.............. (24,436) 37,677
------------ ------------
Net cash used for investing activities..................... (24,289) (20,608)
------------ ------------
Cash flows from financing activities:
Dividends paid................................................ (18,000) (9,000)
------------ ------------
Net cash used for financing activities..................... (18,000) (9,000)
------------ ------------
Net increase in cash............................................ 5,415 2,338
Cash at beginning of period..................................... 555 2,663
------------ ------------
Cash at end of period........................................... $ 5,970 $ 5,001
------------ ------------
------------ ------------
</TABLE>

See notes to condensed consolidated financial statements.

A-30
<PAGE>

FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995

1. ORGANIZATION AND OWNERSHIP

2. BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements have been
prepared by the Company and are unaudited. In the opinion of management, all
adjustments, which include only normal recurring adjustments, necessary to
present fairly the financial position, results of operations and cash flows at
June 30, 1996 and for all periods presented, have been made.

Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These statements should be read in conjunction
with the Company's December 31, 1995 consolidated financial statements and notes
thereto. The year-end condensed balance sheet was derived from audited financial
statements. The results of operations for the periods ended June 30, 1996 and
1995 are not necessarily indicative of the operating results for the full year.

Certain amounts in the 1995 financial statements have been reclassed to
conform to the 1996 presentation.

In the first quarter of 1996, the Company has recharacterized its cash
equivalents as short-term investments. The amount of cash equivalents
recharacterized were $26.7 million and $35.3 million, as of June 30, 1996 and
December 31, 1995, respectively.

A-31

<PAGE>

PROSPECTUS
________________________________________________________________________________
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
(Depositor)
Pass-Through Certificates
(Issuable in Series)
________________________________________________________________________________

Prudential Securities Secured Financing Corporation (the
"Depositor") may sell from time to time under this Prospectus and related
Prospectus Supplements Pass-Through Certificates or Notes (such Pass-Through
Certificates or such Notes, together the "Certificates"), issuable in series
(each, a "Series") consisting of one or more classes (each, a "Class") of
Certificates on terms to be determined at the time of sale.

The Certificates of a Series will evidence the beneficial ownership
interests in a separate trust formed by the Depositor for the benefit of the
holders of the related Series of Certificates (the "Certificateholders").
Unless otherwise specified in the applicable Prospectus Supplement, the
property of each such trust (for each Series, the "Trust Fund") will consist
of a segregated pool (the "Pool") of (i) promissory notes or other evidences
of indebtedness secured by first, second or more junior liens on fee simple
or leasehold interests in the Mortgaged Properties (as defined herein),
including installment sale contracts with respect to any such properties, or
participation in any of the foregoing (the "Mortgage Loans") or (ii)
manufactured housing conditional sales contracts and installment agreements
(the "Contracts"). The Mortgage Loans or Contracts included in a Trust Fund
will have been acquired from one or more affiliates of the Depositor or from
one or more Unaffiliated Sellers (as defined herein) by the Depositor and
conveyed by the Depositor to such Trust Fund. The Mortgage Loans included in
a Mortgage Pool or the Contracts included in a Contract Pool of a Series will
be serviced by a servicer (the "Servicer") described in the applicable
Prospectus Supplement.

The Certificates of a Series will consist of (i) one or more Classes
of Certificates representing fractional undivided interests in all the
principal payments and the interest payments, to the extent of the related
Net Mortgage Rates (as defined herein) or Net Contract Rates (as defined
herein), on the related Mortgage Loans or Contracts ("Standard
Certificates"), (ii) one or more Classes of Certificates ("Multi-Class
Certificates") each of which will be assigned a principal balance (a "Stated
Amount") based on the value of future cash flows from the related Trust Fund
without distinction as to principal or interest or may have no principal
amount but may instead be assigned a notional amount (a "Notional Amount") on
which interest accrues, and each of which will bear interest on the Stated
Amount or Notional Amount thereof at a fixed rate (which may be zero)
specified in, or a variable rate determined as specified in, the applicable
Prospectus Supplement (the "Interest Rate") or (iii) one or more Classes of
Certificates representing fractional undivided interests in all or specified
portions of the principal payments and/or interest payments, to the extent of
the related Net Mortgage Interest Rate, on the related Mortgage Loans
("Stripped Certificates"). Any Class of Certificates may be divided into two
or more subclasses (each, a "Subclass") and any Class of Standard
Certificates may be divided into two or more Subclasses that consist of
Multi-Class Certificates. In addition, a Series of Certificates for which a
REMIC (as defined herein) election has been made will also include one Class
or one Subclass of Residual Certificates (as defined herein).

(COVER CONTINUED ON NEXT PAGE)
___________________________________

THE ASSETS OF THE RELATED TRUST ARE THE SOLE SOURCE OF PAYMENTS ON THE
RELATED SECURITIES. THE CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR
OBLIGATION OF THE DEPOSITOR, THE SERVICER OR ANY OF THEIR AFFILIATES, EXCEPT
AS SET FORTH HEREIN AND IN THE RELATED PROSPECTUS SUPPLEMENT. NEITHER THE
CERTIFICATES NOR THE UNDERLYING MORTGAGE LOANS WILL BE GUARANTEED OR INSURED
BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY THE SELLER, THE SERVICER
OR ANY OF THEIR AFFILIATES, EXCEPT AS SET FORTH IN THE RELATED PROSPECTUS
SUPPLEMENT. SEE "RISK FACTORS" PAGE 13.

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

The Certificates may be sold from time to time by the Depositor
through dealers or agents designated from time to time, through underwriting
syndicates led by one or more managing underwriters or through one or more
underwriters acting alone. See "Plan of Distribution." Affiliates of the
Depositor may from time to time act as agents or underwriters in connection
with the sale of Certificates. The terms of a particular offering will be
set forth in the Prospectus Supplement related to such offering.

RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE. THIS PROSPECTUS MAY
NOT BE USED TO CONSUMMATE SALES OF CERTIFICATES UNLESS ACCOMPANIED BY THE
PROSPECTUS SUPPLEMENT RELATING TO THE OFFERING OF SUCH CERTIFICATES.

________________________________________________________________________________

The date of this Prospectus is August 4, 1995
<PAGE>

(COVER CONTINUED FROM PREVIOUS PAGE)

Each Series of Certificates will include one or more classes. The
Certificates of any particular class may represent beneficial ownership
interests in the related Mortgage Loans held by the related Trust Fund, or
may represent debt secured by such Mortgage Loans, as described herein and in
the related Prospectus Supplement. Any Series of Certificates may include
one or more Classes or Subclasses of Certificates (the "Subordinated
Certificates") that are subordinate in right of distributions to such rights
of one or more of other Classes or Subclasses of such Series (the "Senior
Certificates"). If specified in the applicable Prospectus Supplement, the
relative interests of the Senior Certificates and the Subordinated
Certificates of a Series in the Trust Fund may be subject to adjustment from
time to time on the basis of distributions received in respect thereof (the
"Shifting Interest Certificates"). If so specified in the applicable
Prospectus Supplement, credit support may also be provided for any Series of
Certificates in the form of a guarantee, letter of credit, mortgage pool
insurance policy or other form of credit enhancement as described herein.

Neither the Mortgage Loans nor the Contracts will be guaranteed or
insured by any governmental agency or instrumentality or, except as specified
in the related Prospectus Supplement, by any other person. The only
obligations of the Depositor with respect to a Series of Certificates will be
pursuant to certain limited representations and warranties made by the
Depositor, to the extent described herein and in the related Prospectus
Supplement. The Servicer with respect to a Series of Certificates relating
to Mortgage Loans or Contracts will be named in the related Prospectus
Supplement. The principal obligations of a Servicer will be limited to
certain obligations pursuant to certain representations and warranties and to
its contractual servicing obligations.

An election may be made to treat each Trust Fund (or one or more
segregated pools of assets therein) underlying a Series which includes
MultiClass Certificates as a "real estate mortgage investment conduit" (a
"REMIC") for federal income tax purposes. Series of Certificates for which a
REMIC election has been made will include one or more Classes or Subclasses
which constitute "regular interests" in the REMIC ("Regular Certificates")
and one Class or Subclass with respect to each REMIC which constitutes the
"residual interest" therein (the "Residual Certificates"). Alternatively, a
Trust Fund may be treated as a grantor trust or as a partnership for federal
income tax purposes, or may be treated for federal income tax purposes as a
mere security device which constitutes a collateral arrangement for the
issuance of debt. See "Certain Federal Income Tax Consequences."

There will have been no public market for the Certificates of any
Series prior to the offering thereof. No assurance can be given that such a
market will develop, or that if such a market does develop, it will provide
Certificateholders with liquidity of investment or will continue for the life
of the Certificates.

<PAGE>

REPORTS

In connection with each distribution and annually,
Certificateholders will be furnished with statements containing information
with respect to principal and interest payments and the related Trust Fund,
as described herein and in the applicable Prospectus Supplement for such
Series. Any financial information contained in such reports will not have
been examined or reported upon by an independent public accountant. See
"Servicing of the Mortgage Loans and Contracts -- Reports to
Certificateholders." The Servicer for each Series relating to Mortgage Loans
or Contracts will furnish periodic statements setting forth certain specified
information to the related Trustee and, in addition, annually will furnish
such Trustee with a statement from a firm of independent public accounts with
respect to the examination of certain documents and records relating to the
servicing of the Mortgage Loans or Contracts in the related Trust Fund. See
"Servicing of the Mortgage Loans and Contracts -- Reports to the Trustee" and
"Evidence as to Compliance." Copies of the monthly and annual statements
provided by the Servicer to the Trustee will be furnished to
Certificateholders of each Series upon request addressed to Prudential
Securities Secured Financing Corporation, One Seaport Plaza, 26th Floor, New
York, New York 10292, Attention: James Fadel (212) 214-1000.

AVAILABLE INFORMATION

The Depositor has filed a Registration Statement (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), with the Securities and Exchange Commission (the "Commission") with
respect to the Certificates offered pursuant to this Prospectus. This
Prospectus contains, and the Prospectus Supplement for each Series of
Certificates will contain, a summary of the material terms of the documents
referred to herein and therein, but neither contains nor will contain all of
the information set forth in the Registration Statement of which this
Prospectus is a part. For further information, reference is made to such
Registration Statement and any amendments thereof and to the exhibits
thereto. Copies of the Registration Statement may be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549 upon payment of the prescribed charges, or may be examined free of
charge at the Commission's offices, 450 Fifth Street, N.W., Washington, D.C.
20549 or at the regional offices of the Commission located at Room 1400, 75
Park Place, New York, New York 10007 and Northwestern Atrium Center, 500 West
Madison Street, Suite 400, Chicago, Illinois 60661-2511.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

There are incorporated herein by reference all documents and reports
filed or caused to be filed by the Depositor with respect to a Trust Fund
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to
the termination of any offering of Certificates evidencing interests therein.
The Depositor will provide or cause to be provided without charge to each
person to whom this Prospectus is delivered in connection with the offering
of one or more Classes of Certificates, a list identifying, all filings with
respect to a Trust Fund pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act, since the Depositor's latest fiscal year covered by its annual
report on Form 10-K and a copy of any or all documents or reports
incorporated herein by reference, in each case to the extent such documents
or reports relate to one or more of such Classes of such Certificates, other
than the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Requests to the Depositor
should be directed to: Prudential Securities Secured Financing Corporation,
One Seaport Plaza, 26th Floor, New York, New York 10292, telephone number
(212) 214-1000, Attention: James Fadel.

<PAGE>

SUMMARY OF PROSPECTUS

THE FOLLOWING 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 CERTIFICATES CONTAINED IN
THE RELATED PROSPECTUS SUPPLEMENT. CERTAIN CAPITALIZED TERMS USED AND NOT
OTHERWISE DEFINED HEREIN SHALL HAVE THE MEANINGS GIVEN ELSEWHERE IN THIS
PROSPECTUS. AN INDEX INDICATING WHERE CERTAIN TERMS USED HEREIN ARE DEFINED
APPEAR AT THE END OF THIS PROSPECTUS.

Title of Securities . . . . . . . . . Pass-Through Certificates (Issuable in
Series).

Depositor . . . . . . . . . . . . . . Prudential Securities Secured
Financing Corporation, formerly
known as P-B Secured Financing
Corporation (the "Depositor"), a
Delaware corporation, is a
whollyowned limited purpose
finance subsidiary of Prudential
Securities Group Inc. The
Depositor's principal executive
offices are located at One Seaport
Plaza, 26th Floor, New York, New
York 10292, and its telephone
number is (212) 214-1000. See
"The Depositor."

Unaffiliated Sellers. . . . . . . . . The Depositor will acquire the
Mortgage Loans and Contracts from
one or more institutions
unaffiliated with the Depositor
("Unaffiliated Sellers").

Trustee . . . . . . . . . . . . . . . The Trustee with respect to a
Series will be specified in the
related Prospectus Supplement.

Servicer. . . . . . . . . . . . . . . The Servicer for each Series
relating to Mortgage Loans or
Contracts will be specified in the
applicable Prospectus Supplement.
The Servicer will service the
Mortgage Loans or Contracts
comprising each Trust Fund and
administer each Trust Fund pursuant
to a separate Pooling and Servicing
Agreement (each, a "Pooling and
Servicing Agreement"). The
Servicer may subcontract all or any
portion of its obligations as
Servicer under each Pooling and
Servicing Agreement to qualified
subservicers (each, a
"Sub-Servicer") but the Servicer
will not be relieved thereby of its
liability with respect thereto. See
"Servicing of the Mortgage Loans
and Contracts."

The Trust Funds . . . . . . . . . . . The Trust Fund for each Series of
Certificates may consist of any
combination of Mortgage Pool and/or
Contract Pools (each as defined
herein) and certain other related
property, as specified herein and
in the applicable Prospectus
Supplement. Unless otherwise
specified in the applicable
Prospectus Supplement, each
Mortgage Pool will be comprised of
Mortgage Loans or Contracts or
participations therein.

Unless otherwise specified in the
applicable Prospectus Supplement,
each Contract Pool will consist of
fixed or adjustable rate
manufactured housing installment
sale, contracts and installment
loan agreements. Each Contract may
be secured by a new or used
Manufactured Home (as defined
herein).

<PAGE>

Neither the Certificates, the
interest thereon, nor the
underlying Mortgage Loans are
guaranteed by the United States nor
do they constitute debts or
obligations of the United States or
any agency or instrumentality of
the United States.

The particular characteristics of
each Trust Fund will be set forth
in the applicable Prospectus
Supplement.

Description of the Certificates . . . The Certificates issued by any Trust
Fund may represent beneficial
ownership interests in the related
Mortgage Loans held by the related
Trust Fund, or may represent debt
secured by such Mortgage Loans, as
described herein and in the related
Prospectus Supplement. Certificates
which represent beneficial
ownership interests in the related
Trust Fund will be referred to as
"Certificates" in the related
Prospectus Supplement; Certificates
which represent debt issued by the
related Trust Fund will be referred
to as "Notes" in the related
Prospectus Supplement.

With respect to Notes issued by the
related Trust Fund, the related
Trust Fund will enter into an
indenture by and between such Trust
Fund and the trustee named on such
indenture, as set forth in the
related Prospectus Supplement.

Each Series of Certificates will be
recourse to the assets of the
related Trust Fund only. The sole
source of payment for any Series of
Certificates will be the assets of
the related Trust Fund. The
Certificates will not be
obligations, either recourse or
non-recourse (except for certain
non-recourse debt described under
"Certain Federal Income Tax
Consequences"), of the Depositor,
the Servicer or any Person other
than the related Trust Fund. In
the case of Certificates that
represent beneficial ownership
interest in the related Trust Fund,
such Certificates will represent
the ownership of such Trust Fund;
with respect to Certificates which
are Notes, such Notes will be
secured by the related Trust Fund.
Notwithstanding the foregoing, and
as to be described in the related
Prospectus Supplement, certain
types of credit enhancement, such
as a financial guaranty insurance
policy or a letter of credit, may
constitute a full recourse
obligation of the issue of such
credit enhancement.

Each Series will consist of one or
more Classes of Certificates which
may be (i) Standard Certificates,
(ii) Multi-Class Certificates or
(iii) Stripped Certificates. Any
Class of Certificates may be
divided into two or more Subclasses
and any Class of Standard
Certificates may be divided into
Subclasses which consist of
Multi-Class Certificates. The
Depositor will cause each Trust
Fund (or one or more segregated
pools of assets therein) with
respect to a Series which includes
Standard Certificates redeemable on
a random lot basis, Multi-Class
Certificates or Shifting Interest
Certificates to elect to be treated
as a REMIC. In

<PAGE>

addition, any Series with respect
to which an election has been made
to treat the Trust Fund (or one or
more segregated pools of assets
therein) as a REMIC will include
one Class or one Subclass of
Residual Certificates as to each
REMIC. The Residual Certificates of
a Series, if offered hereby, will
represent the right to receive
distributions with respect to the
related Trust Fund as specified in
the related Prospectus Supplement.
Unless otherwise specified in the
applicable Prospectus Supplement,
the Certificates will be offered
only in fully registered form.

A. Standard Certificates . . . . . . Unless otherwise provided in the
applicable Prospectus Supplement,
Standard Certificates of a Series
will each evidence a fractional
undivided beneficial ownership
interest in the related Trust Fund
and will entitle the holder thereof
to its proportionate share of a
percentage of all of the payments
and other receipts with respect to
the principal of and interest (to
the extent of the applicable Net
Mortgage Rate or Net Contract Rate)
on the related Mortgage Loans or
Contracts. If specified in the
applicable Prospectus Supplement,
with respect to any Class of
Standard Certificates of a Series
for which a REMIC election has been
made, distributions of principal
may be allocated among the
Certificateholders of such Class on
a pro rata, random lot or such
other basis as is specified in such
Prospectus Supplement.

B. Multi-Class Certificates. . . . . Multi-Class Certificates of a Series
will consist of Certificates each
of which evidences a beneficial
ownership interest in the related
Trust Fund and will be assigned a
Stated Amount, which may be based
on an amount of principal of the
underlying Mortgage Loans or
Contracts or on the value of future
cash flows from the related Trust
Fund without distinction as to
principal or interest and an
Interest Rate which may be a fixed
rate (which may be zero) or a
variable rate or which will
otherwise accrue interest as
specified in the applicable
Prospectus Supplement. The holder
of a Multi-Class Certificate will
be entitled to receive, to the
extent funds are available
therefor, interest payments on the
outstanding Stated Amount thereof
at the applicable Interest Rate or
as otherwise specified in the
applicable Prospectus Supplement
and distributions in reduction of
such Stated Amount determined in
the manner and applied in the
priority set forth in the
applicable Prospectus Supplement.

C. Stripped Certificates. . . . . . Stripped Certificates will each
evidence an undivided beneficial
ownership interest in the related
Trust Fund and will entitle the
holder thereof to its proportionate
share of a specified portion (which
may be zero) of principal payments
and/or a specified portion (which
may be zero) of interest payments
(to the extent of the applicable
Net Mortgage Interest Rate) on the
related Mortgage Loans.

<PAGE>

Pooling and Servicing
Agreement . . . . . . . . . . . . . . The Certificates of each Series
will be issued pursuant to a
Pooling and Servicing Agreement
among the Depositor, the Servicer,
if any, and the Trustee.

Cut-Off Date. . . . . . . . . . . . . The date specified in the applicable
Prospectus Supplement.

Distribution Dates. . . . . . . . . . Unless otherwise specified in the
applicable Prospectus Supplement,
distributions on Standard
Certificates or Stripped
Certificates will be made on the
25th day (or, if such day is not a
business day, the business day
following the 25th day) of each
month, commencing with the month
following the month in which the
applicable Cut-Off Date occurs.
Distributions on Multi-Class
Certificates will be made monthly,
quarterly, or semiannually, on the
dates specified in the applicable
Prospectus Supplement. The dates
upon which such distributions are
made are referred to herein as the
"Distribution Dates."

Record Dates. . . . . . . . . . . . . Distributions will be made on each
Distribution Date set forth in the
Prospectus Supplement to
Certificateholders of record at the
close of business on the last
business day of the month preceding
the month in which such
Distribution Date occurs or such
other date as may be set forth in
the Prospectus Supplement (the
"Record Date").

Interest. . . . . . . . . . . . . . . With respect to a Series of
Certificates consisting of Standard
Certificates or Stripped
Certificates, unless otherwise
specified in the applicable
Prospectus Supplement, interest on
the related Mortgage Loans,
Mortgage Certificates or Contracts
at the applicable pass-through rate
(the "Pass-Through Rate"), as set
forth in the applicable Prospectus
Supplement, will be passed through
monthly on each Distribution Date
to holders thereof, in accordance
with the particular terms of each
such Certificate. Holders of
Multi-Class Certificates will
receive distributions of interest
at the applicable Interest Rate, if
any, on the Stated Amount or
Notional Amount of such
Certificates, or as otherwise
specified in the applicable
Prospectus Supplement, without
regard to the Net Mortgage Rates or
Net Contract Rates on the
underlying Mortgage Loans or
Contracts. Unless otherwise
specified in the applicable
Prospectus Supplement, the "Net
Mortgage Rate" for each Mortgage
Loan in a given period will equal
the Mortgage Rate for such Mortgage
Loan in such period (the "Mortgage
Rate") less any Fixed Retained
Yield, and less the Servicing Fee
(as defined herein). Unless
otherwise specified in the
applicable Prospectus Supplement,
the "Net Contract Rate" for each
Contract in a given period will
equal the Contract Rate for such
Contract in such period (the
"Contract Rate") less any Fixed
Retained Yield, and less the
Servicing Fee. The "Servicing Fee"
with respect to each Mortgage Loan
or Contract is an amount reserved
for servicing such Mortgage Loan or
Contract and administration of the
related Trust Fund.

<PAGE>

Principal (including
prepayments). . . . . . . . . . . . . With respect to a Series of
Certificates consisting of Standard
Certificates or Stripped
Certificates, unless otherwise
specified in the applicable
Prospectus Supplement, principal
payments (including prepayments
received on each related Mortgage
Loan or Contract during the month
preceding the month in which a
Distribution Date occurs) will be
passed through to holders on such
Distribution Date, in accordance
with the particular terms of each
such Certificate.

Distributions in
Reduction of
Stated Amount . . . . . . . . . . . . With respect to each Class and
Subclass of Multi-Class
Certificates, distributions in
reduction of Stated Amount will be
made on each Distribution Date to
the holders of the Certificates of
such Class and Subclass then
entitled to receive such
distributions until the aggregate
amount of such distributions have
reduced the Stated Amount of each
such Class and Subclass of
Certificates to zero. Distributions
in reduction of Stated Amount will
be allocated among the Classes or
Subclasses of such Certificates in
the manner specified in the
applicable Prospectus Supplement.
Distributions in reduction of
Stated Amount with respect to any
Class or Subclass of Multi-Class
Certificates of a Series may be
made on a pro rata or random lot or
such other basis as is specified in
the applicable Prospectus
Supplement. See "Description of
the Certificates -- Distributions
to Multi-Class Certificateholders."

Forward Commitments;
Pre-Funding . . . . . . . . . . . . . A Trust Fund may enter into an
agreement (each, a "Forward
Purchase Agreement") with the
Depositor whereby the Depositor
will agree to transfer additional
Mortgage Loans to such Trust Fund
following the date on which such
Trust Fund is established and the
related Certificates are issued.
Any Forward Purchase Agreement will
require that any Mortgage Loans so
transferred to a Trust Fund conform
to the requirements specified in
such Forward Purchase Agreement.
If a Forward Purchase Agreement is
to be utilized, and unless
otherwise specified in the related
Prospectus Supplement, the related
Trustee will be required to deposit
in a segregated account (each, a
"Pre-Funding Account") all or a
portion of the proceeds received by
the Trustee in connection with the
sale of one or more classes of
Certificates of the related Series;
subsequently, the additional
Mortgage Loans will be transferred
to the related Trust Fund in
exchange for money released to the
Depositor from the related
Pre-Funding Account in one or more
transfers. Each Forward Purchase
Agreement will set a specified
period during which any such
transfers must occur. The Forward
Purchase Agreement or the related
Pooling and Servicing Agreement
will require that, if all moneys
originally deposited to such
Pre-Funding Account are not so used
by the end of such specified
period, then any remaining moneys

<PAGE>

will be applied as a mandatory
prepayment of the related class or
classes of Certificates as
specified in the related Prospectus
Supplement.

Credit Enhancement
A. By Subordination. . . . . . . A Series of Certificates may
include one or more Classes or
Subclasses of Senior Certificates
and one or more Classes or
Subclasses of Subordinated
Certificates. The rights of the
holders of Subordinated
Certificates of a Series to receive
distributions with respect to the
related Mortgage Loans or Contracts
will be subordinated to such rights
of the holders of the Senior
Certificates of the same Series to
the extent (the "Subordinated
Amount") specified herein and in
the applicable Prospectus
Supplement. This subordination is
intended to enhance the likelihood
of the timely receipt by the Senior
Certificateholders of their
proportionate share of scheduled
monthly principal and interest
payments on the related Mortgage
Loans or Contracts and to reduce
the likelihood that the Senior
Certificateholders will experience
losses. The Prospectus Supplement
for Series of Certificates
including a subordination feature
may also specify the allocation of
distributions and priority of
payments of principal, or Stated
Amount, and interest among one or
more Classes or Subclasses of
Senior Certificates of such Series.
The protection afforded to Senior
Certificateholders of a Series will
be effected by a preferential
right, as specified in the
applicable Prospectus Supplement,
of such Senior Certificateholders
to receive, on any Distribution
Date, current distributions on the
related Mortgage Loans or Contracts
and (if so specified in the
applicable Prospectus Supplement)
by the establishment of a reserve
fund (the "Subordination Reserve
Fund") for such Series. Any
Subordination Reserve Fund may be
funded initially with a deposit of
cash, instruments or securities in
an amount specified in the
applicable Prospectus Supplement
and, if so specified in the related
Prospectus Supplement, may be
augmented by the retention of
distributions which otherwise would
have been available for
distribution to the Subordinated
Certificateholders in the manner
and to the extent specified in the
applicable Prospectus Supplement.
The Subordination Reserve Fund for
a Series may be funded and
maintained in such other manner as
is specified in the related
Prospectus Supplement. The
maintenance of any Subordination
Reserve Fund would be intended to
preserve the availability of the
subordination provided by the
Subordinated Certificates and to
provide liquidity, but in certain
circumstances the Subordination
Reserve Fund could be depleted and,
if other amounts available for
distribution are insufficient,
shortfalls in distributions to the
Senior Certificateholders could
result. Unless otherwise specified
in the related Prospectus
Supplement, until the Subordinated
Amount is reduced to zero, Senior
Certificateholders will be entitled
to receive the amount of any such
shortfall, together with interest
at the applicable Pass-Through
Rate, Interest

<PAGE>

Rate, or at such other rate
specified in the applicable
Prospectus Supplement, as the case
may be, on the next Distribution
Date. Senior Certificateholders
will bear their pro rata share of
any losses realized on the related
Mortgage Loans or Contracts in
excess of the applicable
Subordinated Amount. If so
specified in the applicable
Prospectus Supplement, the
protection afforded to holders of
Senior Certificates of a Series by
the subordination of certain rights
of holders of Subordinated
Certificates of such Series to
distributions on the related
Mortgage Loans or Contracts may be
effected by a method other than
that described above, such as, in
the event that the applicable Trust
Fund (or one or more segregated
pools of assets therein) elects to
be treated as a REMIC, the
reallocation from time to time, on
the basis of distributions
previously received, of the
respective percentage interests of
the Senior Certificates and the
Subordinated Certificates in the
related Trust Fund. See
"Description of the Certificates --
Distributions to Percentage
Certificateholders -- Shifting
Interest Certificates."

B. By Other Methods. . . . . . . . . The Certificates of any Series, or any
one or more Classes thereof, may be
entitled to the benefits of a
guarantee, letter of credit,
mortgage pool insurance policy,
surety bond, reserve fund, spread
account, application of excess
interest to principal or other form
of credit enhancement as specified
in the applicable Prospectus
Supplement. See "Description of
the Certificates" and "Credit
Support."

Advances. . . . . . . . . . . . . . . Under the Pooling and Servicing
Agreement for each Series relating
to Mortgage Loans or Contracts,
unless otherwise provided in the
applicable Prospectus Supplement,
the related Servicer will be
obligated to make advances of cash
("Advances") to the Certificate
Account (as defined herein) in the
event of delinquencies in payments
on the Mortgage Loans or Contracts
to the extent described herein and
in the applicable Prospectus
Supplement and only to the extent
that the Servicer determines such
Advances would be recoverable from
future payments and collections on
the Mortgage Loans or Contracts.
Any Advances made by the Servicer
will ultimately be reimbursable to
the Servicer from the Certificate
Account. See "Servicing of the
Mortgage Loans and Contracts
-- Advances and Limitations Thereon."

Early Termination . . . . . . . . . . If so specified in the related
Prospectus Supplement, a Series of
Certificates may be subject to
early termination through the
repurchase of the assets in the
related Trust Fund by the person or
persons, under the circumstances
and in the manner specified in such
Prospectus Supplement. See
"Prepayment and Yield
Considerations."

Legal Investment. . . . . . . . . . . If so specified in the Prospectus
Supplement, one or more classes of
Certificates offered pursuant to this
Prospectus will constitute
"mortgage related securities" under
the Secondary Mortgage Market
Enhancement Act of 1984 ("SMMEA"),
so long as they are rated in one of
the two

<PAGE>

highest rating categories by at
least one "nationally recognized
statistical rating organization.
As "mortgage related securities,"
such Certificates offered pursuant
to this Prospectus will constitute
legal investments for certain types
of institutional investors to the
extent provided in SMMEA subject,
in any case, to any other
regulations which may govern
investments by such institutional
investors. Since certain other
classes of Certificates offered
pursuant to this Prospectus will
not either represent interests in,
or be secured by, qualifying
mortgage loans, such Certificates
will not constitute "mortgage
related securities" under SMMEA.
No representation is made as to the
appropriate characterization of any
Certificates under any laws
relating to investment
restrictions, as to which investors
should consult their legal
advisors. See "Legal Investment".

ERISA Limitations . . . . . . . . . . A fiduciary of any employee benefit
plan subject to the fiduciary
responsibility provisions of the
Employee Retirement Income Security
Act of 1974, as amended ("ERISA"),
including the prohibited
transaction rules thereunder, and
to the corresponding provisions of
the Internal Revenue Code of 1986,
as amended (the "Code"), should
carefully review with its own legal
advisors whether the purchase or
holding of Certificates could give
rise to a transaction prohibited or
otherwise impermissible under ERISA
or the Code. See "ERISA
Considerations."

Federal Income Tax
Status. . . . . . . . . . . . . . . . The federal income tax consequences of
investment in a Certificate of any
Series will vary depending upon the
characteristics of such
Certificate. If so specified in
the applicable Prospectus
Supplement, an election may be made
to have the Trust Fund (or one or
more segregated pools of assets
therein) with respect to a Series
of Certificates treated as a REMIC
for federal income tax purposes.
See "Certain Federal Income Tax
Consequences."

Rating. . . . . . . . . . . . . . . . At the date of issuance of each Series
of Certificates, the Certificates
offered pursuant to the related
Prospectus Supplement will be rated
in one of the four highest rating
categories by at least one
statistical rating organization
that has been requested by the
Depositor to rate such Certificates
(a "Rating Agency"). Such ratings
will address, in the opinion of
such Rating Agency, the likelihood
that the related Trust Fund will be
able to make timely payment of all
amounts due on the related Series
of Certificates in accordance with
the terms thereof. Such ratings
will neither address any prepayment
or yield considerations applicable
to any Certificates nor constitute
a recommendation to buy, sell or
hold any Certificates.

The ratings expected to be received
with respect to any Certificates
will be set forth in the related
Prospectus Supplement.

<PAGE>
RISK FACTORS

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

LIMITED LIQUIDITY. There can be no assurance that a secondary market
for the Certificates of any series or class will develop or, if it does
develop, that it will provide Certificateholders with liquidity of investment
or that it will continue for the life of the Certificates of any series. The
Prospectus Supplement for any series of Certificates may indicate that an
underwriter specified therein intends to establish a secondary market in such
Certificates; however, no underwriter will be obligated to do so. Unless
otherwise specified in the related Prospectus Supplement, the Certificates
will not be listed on any securities exchange.

LIMITED OBLIGATIONS. The Certificates will not represent an interest in
or obligation, either recourse or non-recourse (except for certain
non-recourse debt described under "Certain Federal Income Tax Consequences"),
of the Depositor, the Servicer or any person other than the related Trust.
The only obligations of the foregoing entities with respect to the
Certificates or the Mortgage Loans will be the obligations (if any) of the
Depositor and the Servicer pursuant to certain limited representations and
warranties made with respect to the Mortgage Loans, the Servicer's servicing
obligations under the related Pooling and Servicing Agreement (including its
limited obligation, if any, to make certain advances in the event of
delinquencies on the Mortgage Loans, but only to the extent deemed
recoverable) and, if and to the extent expressly described in the related
Prospectus Supplement, certain limited obligations of the Depositor,
Servicer, applicable Sub-Servicer, or another party in connection with a
purchase obligation ("Purchase Obligation") or an agreement to purchase or
act as remarketing agent with respect to a Convertible Mortgage Loan upon
conversion to a fixed rate. Notwithstanding the foregoing, and as to be
described in the related Prospectus Supplement, certain types of Credit
Enhancement, such as a financial guaranty insurance policy or a letter of
credit, may constitute a full recourse obligation of the issuer of such
Credit Enhancement. Except as described in the related Prospectus Supplement,
neither the Certificates nor the underlying Mortgage Loans will be guaranteed
or insured by any governmental agency or instrumentality, or by the
Depositor, the Servicer, any Sub-Servicer or any of their affiliates.
Proceeds of the assets included in the related Trust Fund for each series of
Certificates (including the Mortgage Loans and any form of Credit
Enhancement) will be the sole source of payments on the Certificates, and
there will be no recourse to the Depositor or any other entity in the event
that such proceeds are insufficient or otherwise unavailable to make all
payments provided for under the Certificates.

LIMITATIONS, REDUCTION AND SUBSTITUTION OF CREDIT ENHANCEMENT. With
respect to each series of Certificates, Credit Enhancement will be provided
in limited amounts to cover certain types of losses on the underlying
Mortgage Loans. Credit Enhancement will be provided in one or more of the
forms referred to herein, including, but not limited to: a letter of credit;
a Purchase Obligation; a mortgage pool insurance policy; a special hazard
insurance policy; a bankruptcy bond; a reserve fund; a financial guaranty
insurance policy or other type of Credit Enhancement to provide partial
coverage for certain defaults and losses relating to the Mortgage Loans.
Credit Enhancement also may be provided in the form of the related class of
Certificates, subordination of one or more classes of Certificates in a
series under which losses in excess of those absorbed by any related class of
Certificates are first allocated to any Subordinate Certificates up to a
specified limit, cross-support among Trust Fund Assets and/or
overcollateralization. See "Credit Support -- Subordination" and "Other
Credit Enhancement." Regardless of the form of Credit Enhancement provided,
the coverage will be limited in amount and in most cases will be subject to
periodic reduction in accordance with a schedule or formula. Furthermore,
such Credit Enhancements may provide only very limited coverage as to certain
types of losses, and may provide no coverage as to certain other types of
losses. Generally, Credit Enhancements do not directly or indirectly
guarantee to the investors any specified rate of prepayments. The Servicer
will generally be permitted to reduce, terminate or substitute all or a
portion of the Credit Enhancement for any series of Certificates, if the
applicable Rating Agency indicates that the then-current rating thereof will
not be adversely affected. To the extent not set forth herein, the amount
and types of coverage, the identification of any entity providing the
coverage, the terms of any subordination and related information will be set
forth in the Prospectus Supplement relating to a series of Certificates. See
"Credit Support -- Subordination" and "Other Credit Enhancement."

12
<PAGE>

RISKS OF THE MORTGAGE LOANS

RISK OF THE LOSSES ASSOCIATED WITH JUNIOR LIENS. Certain of the
Mortgage Loans will be secured by junior Liens subordinate to the rights of
the mortgagee or beneficiary under each related senior mortgage or deed of
trust. As a result, the proceeds from any liquidation, insurance or
condemnation proceedings will be available to satisfy the principal balance
of a mortgage loan only to the extent that the claims, if any, of each such
senior mortgagee or beneficiary are satisfied in full, including any related
foreclosure costs. In addition, a mortgagee secured by a junior Lien may not
foreclose on the related mortgaged property unless it forecloses subject to
the related senior mortgage or mortgages, in which case it must either pay
the entire amount of each senior mortgage to the applicable mortgagee at or
prior to the foreclosure sale or undertake the obligation to make payments on
each senior mortgage in the event of default thereunder. In servicing junior
lien loans in its portfolio, it has been the practice of the Servicer to
satisfy each such senior mortgage at or prior to the foreclosure sale only to
the extent that it determines any amounts so paid will be recoverable from
future payments and collections on such junior Lien loans or otherwise. The
Trusts will not have any source of funds to satisfy any such senior mortgage
or make payments due to any senior mortgagee. See "Certain Legal Aspects of
Mortgage Loans and Contracts -- Foreclosure."

RISK OF LOSSES ASSOCIATED WITH DECLINING REAL ESTATE VALUES. An
investment in securities such as the Certificates that generally represent
beneficial ownership interests in the Mortgage Loans or debt secured by such
Mortgage Loans may be affected by, among other things, a decline in real
estate values and changes in the borrowers' financial condition. No
assurance can be given that values of the Mortgaged Properties have remained
or will remain at their levels on the dates of origination of the related
Mortgage Loans. If the residential real estate market should experience an
overall decline in property values such that the outstanding balances of any
senior Liens, the Mortgage Loans and any secondary financing on the Mortgaged
Properties in a particular Mortgage Pool become equal to or greater than the
value of the Mortgaged Properties, the actual rates of delinquencies,
foreclosures and losses could be higher than those now generally experienced
in the nonconforming credit mortgage lending industry. Such a decline could
extinguish the interest of the related Trust in the Mortgaged Properties
before having any effect on the interest of the related senior mortgagee. In
addition, in the case of Mortgage Loans that are subject to negative
amortization, due to the addition to principal balance of deferred interest
("Deferred Interest"), the principal balances of such Mortgage Loans could be
increased to an amount equal to or in excess of the value of the underlying
Mortgaged Properties, thereby increasing the likelihood of default. To the
extent that such losses are not covered by the applicable Credit Enhancement,
holders of Certificates of the series evidencing interests in the related
Mortgage Pool will bear all risk of loss resulting from default by Mortgagors
and will have to look primarily to the value of the Mortgaged Properties for
recovery of the outstanding principal and unpaid interest on the defaulted
Mortgage Loans.

RISK OF LOSSES ASSOCIATED WITH CERTAIN NON-CONFORMING AND
NON-TRADITIONAL LOANS. The Depositor's underwriting standards consider, among
other things, a mortgagor's credit history, repayment ability and debt
service-to-income ratio, as well as the value of the property; however, the
Depositor's Mortgage Loan program generally provides for the origination of
Mortgage Loans relating to non-conforming credits. Certain of the types of
loans that may be included in the Pools may involve additional uncertainties
not present in traditional types of loans. For example, certain of the
Mortgage Loans may provide for escalating or variable payments by the
borrower under the Mortgage Loan (the "Mortgagor"), as to which the Mortgagor
is generally qualified on the basis of the initial payment amount. In some
instances the Mortgagors' income may not be sufficient to enable them to
continue to make their loan payments as such payments increase and thus the
likelihood of default will increase. For a more detailed discussion, see
"Underwriting Guidelines."

RISK OF LOSSES ASSOCIATED WITH BALLOON LOANS. Certain of the Mortgage
Loans may constitute "Balloon Loans." Balloon Loans are originated with a
stated maturity of less than the period of time of the corresponding
amortization schedule. Consequently, upon the maturity of a Balloon Loan, the
Mortgagor will be required to make a "balloon" payment that will be
significantly larger than such Mortgagor's previous monthly payments. The
ability of such a Mortgagor to repay a Balloon Loan at maturity frequently
will depend on such borrower's ability to refinance the Mortgage Loan. The
ability of a Mortgagor to refinance such a Mortgage Loan will be affected by
a number of factors, including the level of available mortgage rates at the
time, the value of the related Mortgaged Property, the Mortgagor's equity in
the related Mortgaged Property, the financial condition of the Mortgagor, the
tax laws and general economic conditions at the time.

13
<PAGE>

Although a low interest rate environment may facilitate the refinancing
of a balloon payment, the receipt and reinvestment by Certificateholders of
the proceeds in such an environment may produce a lower return than that
previously received in respect of the related Mortgage Loan. Conversely, a
high interest rate environment may make it more difficult for the Mortgagor
to accomplish a refinancing and may result in delinquencies or defaults.
None of the Depositor, the Servicer, any Sub-Servicer or the Trustee will be
obligated to provide funds to refinance any Mortgage Loan, including Balloon
Loans.

RISK OF LOSSES ASSOCIATED WITH ARM LOANS. ARM Loans may be underwritten
on the basis of an assessment that Mortgagors will have the ability to make
payments in higher amounts after relatively short periods of time. In some
instances, Mortgagors' income may not be sufficient to enable them to
continue to make their loan payments as such payments increase and thus the
likelihood of default will increase.

RISK OF LOSSES ASSOCIATED WITH BANKRUPTCY OF MORTGAGORS. General
economic conditions have an impact on the ability of borrowers to repay
Mortgage Loans. Loss of earnings, illness and other similar factors also may
lead to an increase in delinquencies and bankruptcy filings by borrowers. In
the event of personal bankruptcy of a Mortgagor, it is possible that a Trust
could experience a loss with respect to such Mortgagor's Mortgage Loan. In
conjunction with a Mortgagor's bankruptcy, a bankruptcy court may suspend or
reduce the payments of principal and interest to be paid with respect to such
Mortgage Loan or permanently reduce the principal balance of such Mortgage
Loan thereby either delaying or permanently limiting the amount received by
the Trust with respect to such Mortgage Loan. Moreover, in the event a
bankruptcy court prevents the transfer of the related Mortgaged Property to a
Trust, any remaining balance on such Mortgage Loan may not be recoverable.

RISK OF LOSSES ASSOCIATED WITH FORECLOSURE OF MORTGAGED PROPERTIES.
Even assuming that the Mortgaged Properties provide adequate security for the
Mortgage Loans, substantial delays could be encountered in connection with
the liquidation of defaulted Mortgage Loans and corresponding delays in the
receipt of related proceeds by the Certificateholders could occur. An action
to foreclose on a Mortgaged Property securing a Mortgage Loan is regulated by
state statutes, rules and judicial decisions and is subject to many of the
delays and expenses of other lawsuits if defenses or counterclaims are
interposed, sometimes requiring several years to complete. Furthermore, in
some states an action to obtain a deficiency judgment is not permitted
following a nonjudicial sale of a Mortgaged Property. In the event of a
default by a Mortgagor, these restrictions, among other things, may impede
the ability of the Servicer to foreclose on or sell the Mortgaged Property or
to obtain liquidation proceeds (net of expenses) ("Liquidation Proceeds")
sufficient to repay all amounts due on the related Mortgage Loan. The
Servicer will be entitled to deduct from Liquidation Proceeds all expenses
reasonably incurred in attempting to recover amounts due on the related
liquidated Mortgage Loan ("Liquidated Mortgage Loan") and not yet repaid,
including payments to prior lienholders, accrued Servicing Fees, legal fees
and costs of legal action, real estate taxes, and maintenance and
preservation expenses. In the event that any Mortgaged Properties fail to
provide adequate security for the related Mortgage Loans and insufficient
funds are available from any applicable Credit Enhancement,
Certificateholders could experience a loss on their investment.

Liquidation expenses with respect to defaulted mortgage loans do not
vary directly with the outstanding principal balance of the loan at the time
of default. Therefore, assuming that a servicer takes the same steps in
realizing upon a defaulted mortgage loan having a small remaining principal
balance as it would in the case of a defaulted mortgage loan having a larger
principal balance, the amount realized after expenses of liquidation would be
less as a percentage of the outstanding principal balance of the smaller
principal balance mortgage loan than would be the case with a larger
principal balance loan.

Under environmental legislation and judicial decisions applicable in
various states, a secured party that takes a deed in lieu of foreclosure, or
acquires at a foreclosure sale a mortgaged property that, prior to
foreclosure, has been involved in decisions or actions which may lead to
contamination of a property, may be liable for the costs of cleaning up the
purportedly contaminated site. Although such costs could be substantial, it
is unclear whether they would be imposed on a holder of a mortgage note (such
as a Trust) which, under the terms of the Pooling and Servicing Agreement, is
not required to take an active role in operating the Mortgaged Properties.
See "Certain Legal Aspects of Mortgage Loans and Contracts -- Environmental
Risks."
14
<PAGE>

Certain of the Mortgaged Properties relating to Mortgage Loans may not
be owner occupied. It is possible that the rate of delinquencies,
foreclosures and losses on Mortgage Loans secured by nonowner occupied
properties could be higher than for loans secured by the primary residence of
the borrower.

LITIGATION. Any material litigation relating to the Depositor or the
Servicer will be specified in the related Prospectus Supplement.

GEOGRAPHIC CONCENTRATION OF MORTGAGED PROPERTIES. Certain geographic
regions from time to time will experience weaker regional economic conditions
and housing markets than will other regions, and, consequently, will
experience higher rates of loss and delinquency on mortgage loans generally.
The Mortgage Loans underlying certain series of Certificates may be
concentrated in such regions, and such concentrations may present risk
considerations in addition to those generally present for similar mortgage
loan asset-backed securities without such concentrations. Information with
respect to geographic concentration of Mortgaged Properties will be specified
in the related Prospectus Supplement or related current report on Form 8-K.

LEGAL CONSIDERATIONS. Applicable state laws generally regulate interest
rates and other charges, require certain disclosures, and require licensing
of the Depositor and the Servicer and Sub-Servicers. In addition, most
states have other laws, public policy and general principles of equity
relating to the protection of consumers, unfair and deceptive practices and
practices that may apply to the origination, servicing and collection of the
Mortgage 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 Mortgage Loans, may entitle the
borrower to a refund of amounts previously paid and, in addition, could
subject the Servicer to damages and administrative sanctions. See "Certain
Legal Aspects of Mortgage Loans and Contracts."

The Mortgage Loans may also be subject to federal laws, including: (i)
the Federal Truth-in-Lending Act and Regulation Z promulgated thereunder and
the Real Estate Settlement Procedures Act and Regulation X promulgated
thereunder, which require certain disclosures to the borrowers regarding the
terms of the Mortgage 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. Depending on the provisions of the
applicable law and the specific facts and circumstances involved, violations
of these laws, policies and general principles of equity may limit the
ability of the Servicer to collect all or part of the principal of or
interest on the Mortgage Loans, may entitle the borrower to rescind the loan
or to a refund of amounts previously paid and, in addition, could subject the
Servicer to damages and administrative sanctions. If the Servicer is unable
to collect all or part of the principal or interest on the Mortgage Loans
because of a violation of the aforementioned laws, public policies or general
principles of equity then the Trust may be delayed or unable to repay all
amounts owed to Investors. Furthermore, depending upon whether damages and
sanctions are assessed against the Servicer or the Depositor, such violations
may materially impact the financial ability of the Depositor to continue to
act as Servicer or the ability of the Depositor to repurchase or replace
Mortgage Loans if such violation breaches a representation or warranty
contained in a Pooling and Servicing Agreement.

Collections on the Mortgage Loans may vary due to the level of incidence
of delinquent payments and of prepayments. Collections on the Mortgage Loans
may also vary due to seasonal purchasing and payment habits of borrowers.

BOOK-ENTRY REGISTRATION. Issuance of the Certificates in book-entry
form may reduce the liquidity of such Certificates in the secondary trading
market since investors may be unwilling to purchase Certificates for which
they cannot obtain definitive physical securities representing such
Certificateholders' interests, except in certain circumstances described in
the related Prospectus Supplement.

Since transactions in Certificates will, in most cases, be able to be
effected only through DTC, direct or indirect participants in DTC's
book-entry system ("Direct or Indirect Participants") and certain banks, the
ability
15

<PAGE>

of a Certificateholder to pledge a Certificate to persons or entities that do
not participate in the DTC system, or otherwise to take actions in respect of
such Certificates, may be limited due to lack of a physical certificate
representing the Certificates.

Certificateholders may experience some delay in their receipt of
distributions of interest on and principal of the Certificates since
distributions may be required to be forwarded by the Trustee to DTC and, in
such a case, DTC will be required to credit such distributions to the
accounts of its Participants which thereafter will be required to credit them
to the accounts of the applicable class of Certificateholders either directly
or indirectly through Indirect Participants. See "Description of the
Certificates."

THE STATUS OF THE MORTGAGE LOANS IN THE EVENT OF BANKRUPTCY OF THE
DEPOSITOR. In the event of the bankruptcy of the Depositor at a time when it
or any affiliate thereof holds a Certificate, a trustee in bankruptcy of the
Depositor, or its creditors could attempt to recharacterize the sale of the
Mortgage Loans to the related Trust as a borrowing by the Depositor or such
affiliate with the result, if such recharacterization is upheld, that the
Certificateholders would be deemed creditors of the Depositor or such
affiliate, secured by a pledge of the Mortgage Loans. If such an attempt
were successful, it could prevent timely payments of amounts due to the Trust.

LIMITATIONS ON INTEREST PAYMENTS AND FORECLOSURES. Generally, under the
terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as amended (the
"Relief Act"), or similar state legislation, a Mortgagor who enters military
service after the origination of the related Mortgage Loan (including a
Mortgagor who is a member of the National Guard or is in reserve status at
the time of the origination of the Mortgage Loan and is later called to
active duty) may not be charged interest (including fees and charges) above
an annual rate of 6% during the period of such Mortgagor's active duty
status, unless a court orders otherwise upon application of the lender. It
is possible that such action could have an effect, for an indeterminate
period of time, on the ability of the Servicer to collect full amounts of
interest on certain of the Mortgage Loans. In addition, the Relief Act
imposes limitations that would impair the ability of the Servicer to
foreclose on an affected Mortgage Loan during the Mortgagor's period of
active duty status. Thus, in the event that such a Mortgage Loan goes into
default, there may be delays and losses occasioned by the inability to
realize upon the Mortgaged Property in a timely fashion.

CERTIFICATE RATING. The rating of Certificates credit enhanced through
external Credit Enhancement such as a letter of credit, financial guaranty
insurance policy or mortgage pool insurance will depend primarily on the
creditworthiness of the issuer of such external Credit Enhancement device (a
"Credit Enhancer"). Any reduction in the rating assigned to the
claims-paying ability of the related Credit Enhancer below the rating
initially given to the Certificates would likely result in a reduction in the
rating of the Certificates. See "Ratings" in the Prospectus Supplement.

<PAGE>

THE TRUST FUNDS

GENERAL

The Trust Fund for each Series of Certificates will consist
primarily of a Pool of Mortgage Loans (a "Mortgage Pool") and/or Contracts (a
"Contract Pool"). In addition, a Trust Fund will also include (i) amounts
held from time to time in the related Certificate Account, (ii) the
Depositor's interest in any primary mortgage insurance, hazard insurance,
title insurance and/or other insurance policies relating to a Mortgage Loan
or Contract, (iii) any property which initially secured a Mortgage Loan and
which has been acquired by foreclosure or trustee's sale or deed in lieu of
foreclosure or trustee's sale, (iv) any Manufactured Home which initially
secured a Contract and which is acquired by repossession, (v) if applicable,
and to the extent set forth in the applicable Prospectus Supplement, any
Subordination Reserve Fund and/or any other reserve fund, (vi) if applicable,
and to the extent set forth in the applicable Prospectus Supplement, one or
more guarantees, letters of credit, insurance policies, or any other credit
enhancement arrangement, and (vii) such other assets as may be specified in
the related Prospectus Supplement. Unless otherwise specified in the
applicable Prospectus Supplement, the Trust Fund will not include, however,
the portion of interest on the Mortgage Loans or Contracts which constitutes
the Fixed Retained Yield, if any. See "Fixed Retained Yield" below. If
specified in the related Prospectus Supplement, certain Certificates will
evidence the entire fractional undivided ownership interest in the related
Mortgage Loans held by the related Trust Fund or may represent debt secured
by the related Mortgage Loans.

THE MORTGAGE LOANS

Unless otherwise specified in the related Prospectus Supplement,
each Mortgage Pool will consist of Mortgage Loans evidenced by promissory
notes or other evidences of indebtedness (the "Mortgage Notes") that provide
for an original term to maturity of not more than 40 years, for monthly
payments and for interest on the outstanding principal amounts thereof at a
rate that is either fixed or subject to adjustment as described in the
related Prospectus Supplement. If so specified in the applicable Prospectus
Supplement, the adjustable interest rate on certain of the Mortgage Loans
will be convertible into a fixed interest rate at the option of the mortgagor
at the times and upon the conditions specified therein ("Convertible Mortgage
Loans"). The Mortgage Loans may provide for fixed level payments or be GPM
Loans, GEM Loans, Balloon Loans or Buy-Down Loans (each as defined herein) or
Mortgage Loans with other payment characteristics as described in the related
Prospectus Supplement. In addition, the Mortgage Pools may include
participation interests in Mortgage Loans, in which event references herein
to payments on Mortgage Loans underlying, such participations shall mean
payments thereon allocable to such participation interests, and the meaning
of other terms relating to Mortgage Loans will be similarly adjusted.
Similarly, the Mortgage Pools may include Mortgage Loans with respect to
which a Fixed Retained Yield has been retained, in which event references
herein to Mortgage Loans and payments thereon shall mean the Mortgage Loans
exclusive of such Fixed Retained Yield. A "Fixed Retained Yield" in a
Mortgage Loan or Contract represents a specified portion of the interest
payable thereon. The Prospectus Supplement for a Series will specify whether
there will be any Fixed Retained Yield in any Mortgage Loan or Contract and,
if so, the owner thereof. See "Servicing of the Mortgage Loans and Contracts
- -- Fixed Retained Yield." Unless otherwise specified in the related
Prospectus Supplement, the Mortgage Loans will be secured by promissory notes
or other evidences of indebtedness (the "Mortgages") creating first, second
or more junior liens on conventional one-to four-family residential
properties (which may include mixed-use or vacation properties), all of which
will be located in any of the fifty states or the District of Columbia. The
Mortgage Loans may also consist of installment contracts for the sale of real
estate. If so provided in the applicable Prospectus Supplement, a Mortgage
Pool may also contain cooperative apartment loans (the "Cooperative Loans")
evidenced by promissory notes (the "Cooperative Notes") secured by security
interests in shares issued by private, non-profit, cooperative housing
corporations (the "cooperatives") and in the related proprietary leases or
occupancy agreements granting exclusive rights to occupy specific Cooperative
Dwellings in such cooperatives' buildings. In the case of a Cooperative
Loan, the proprietary lease or occupancy agreement securing such Cooperative
Loan is generally subordinate to any blanket mortgage on the related
cooperative apartment building and/or the underlying land. Additionally, the
proprietary lease or occupancy agreement is subject to termination and the
cooperative shares are subject to cancellation by the cooperative if the
tenant-stockholder fails to pay maintenance or other obligations or charges
owed by such tenant-stockholder.

<PAGE>

Mortgage Loans may be entitled to the benefit of external credit
enhancement. Residential Mortgage Loans may be insured by the Federal
Housing Administration or its successors against defaults by the borrower in
the payment of principal and interest thereon, have a portion of principal
and interest payments guaranteed by the Department of Veterans Affairs or its
successors or be subject to other payment guarantees, including guarantees
under the National Housing Act.

Unless otherwise specified in the Prospectus Supplement for a
Series, each Mortgage Loan must have an original term of maturity of not less
than 5 years and not more than 40 years. Unless otherwise specified in the
Prospectus Supplement for a Series, no Mortgage Loan for residential property
will have had, at origination, a principal balance in excess of $5,000,000 or
a Loan-to-Value Ratio in excess of 95%, and Mortgage Loans having
Loan-to-Value Ratios at the time of origination exceeding 80% will be
supported by external credit enhancement or be covered by primary mortgage
insurance providing, coverage on at least the amount of each such mortgage
loan in excess of 75% of the original fair market value of the mortgaged
property and remaining in force until the principal balance of such Mortgage
Loan is reduced to 80% of such original fair market value. The
"Loan-to-Value Ratio" is the ratio, expressed as a percentage, of the
principal amount of the Mortgage Loan outstanding at the origination of such
loan divided by the fair market value of the Mortgaged Property. The fair
market value of the Mortgaged Property securing any Mortgage Loan is, unless
otherwise specified in the applicable Prospectus Supplement, the lesser of
(x) the appraised value of the related Mortgaged Property determined in an
appraisal obtained by the originator at origination (or, in the case of a
refinancing, an appraisal obtained at the origination of the refinanced
mortgage loan) and (y) the sale price for such property.

No assurance can be given that values of the Mortgaged Properties
have remained or will remain at the levels which existed on the dates of
origination of the related Mortgage Loans. If the residential real estate
market should experience an overall decline in property values such that the
outstanding balances of the Mortgage Loans and any secondary financing on the
Mortgaged Properties in a particular Trust Fund become equal to or greater
than the value of the Mortgaged Properties, the actual rates of
delinquencies, foreclosures and losses could be higher than those now
generally experienced in the mortgage lending industry. To the extent that
such losses are not covered by the methods of credit support or the insurance
policies described herein, they will be borne by holders of the Certificates
of the Series evidencing interests in such Trust Fund. Furthermore, in a
declining real estate market a new appraisal could render the Cut-Off Date
Loan-to-Value Ratios as unreliable measures of leverage.

The Prospectus Supplement for each Series will set forth certain
characteristics of the related Mortgage Loans, which may include the
aggregate principal balance of the Mortgage Loans in the Mortgage Pool
underlying such Series as of the Cut-Off Date for such Series (the "Cut-Off
Date Aggregate Principal Balance"), the range of original terms to maturity
of the Mortgage Loans in the Mortgage Pool, the weighted average remaining
term to stated maturity at the Cut-Off Date of such Mortgage Loans, the
earliest and latest origination dates of such Mortgage Loans, the range of
Mortgage Rates and Net Mortgage Rates borne by such Mortgage Loans, the
weighted average Net Mortgage Rate at the Cut-Off Date of such Mortgage
Loans, the percentage of such Mortgage Loans which had Loan-to-Value Ratios
at the time of origination of 80% or less, the percentage of such Mortgage
Loans that had Loan-to-Value Ratios at origination in excess of 80% and the
highest outstanding, principal balance at origination of any such Mortgage
Loan.

Unless otherwise specified in the applicable Prospectus Supplement,
all of the Mortgage Loans in a Trust Fund will have monthly payments due on a
specified day of each month (each, a "Due Date") and will, with respect to
Mortgage Loans secured by residential properties, require at least monthly
payments of interest on any outstanding balance. If so specified in the
applicable Prospectus Supplement, the Mortgage Pools may include adjustable
rate Mortgage Loans that provide for payment adjustments to be made less
frequently than adjustments in the Mortgage Rates. Each adjustment in the
Mortgage Rate which is not made at the time of a corresponding adjustment in
payments (and which adjusted amount of interest is not paid currently on a
voluntary basis by the mortgagor) will result in a decrease (if the Mortgage
Rate rises) or an increase (if the Mortgage Rate declines) in the rate of
amortization of the Mortgage Loan. Moreover, such payment adjustments on the
Mortgage Loans may be subject to certain limitations, as specified in the
Prospectus Supplement, which may also affect the rate of amortization on the
Mortgage Loan. As a result of such provisions, or in accordance with the
payment schedules of certain GPM Loans and other Mortgage Loans, the amount
of interest accrued in any month may equal or exceed

<PAGE>

the scheduled monthly payment on the Mortgage Loan. In any such month, no
principal would be payable on the Mortgage Loan, and if the accrued interest
exceeded the scheduled monthly payment, such excess interest due would become
"Deferred Interest" that is added to the principal balance of the Mortgage
Loan. Deferred Interest will bear interest at the Mortgage Rate until paid.
If such limitations prevent the payments from being sufficient to amortize
fully the Mortgage Loan by its stated maturity dare, a lump sum payment equal
to the remaining unpaid principal balance will be due on such stated maturity
date. See "Prepayment and Yield Considerations."

Unless otherwise specified in the applicable Prospectus Supplement,
the Mortgage Loans in each Mortgage Pool will be permanent loans (as opposed
to construction and land development loans) secured by Mortgages on Mortgaged
Properties. The Mortgaged Properties will consist of residential properties
only, including detached homes, townhouses, units in planned unit
developments, condominium units, mixed-use properties, vacation homes and
small scale multifamily properties, all of which constitute a "dwelling or
mixed residential and commercial structure" within the meaning of Section
3(a)(41)(A)(i) of the Securities Exchange Act of 1934, as amended (the
"Mortgaged Properties"). The Mortgage Loans will be secured by liens on fee
simple or leasehold interests (in those states in which long-term ground
leases are used as an alternative to fee interests) in such Mortgaged
Properties, or liens on shares issued by cooperatives and the related
proprietary leases or occupancy agreements occupy specified units in such
cooperatives' buildings. The geographic distribution of Mortgaged Properties
will be set forth in the Prospectus Supplement. Each Prospectus Supplement
will also set forth the percentage of the Cut-Off Date Aggregate Principal
Balance of the Mortgage Loans in the related Mortgage Pool representing the
refinancing of existing mortgage indebtedness and the types of Mortgaged
Properties.

If so specified in the applicable Prospectus Supplement, a Trust
Fund may contain Mortgage Loans subject to temporary buy-down plans (the
"Buy-Down Loans") pursuant to which the monthly payments made by the
mortgagor during the early years of the Mortgage Loan will be less than the
scheduled monthly payments on the Mortgage Loan. The resulting difference in
payment will be compensated for from an amount contributed by the seller of
the related Mortgaged Property or another source and, if so specified in the
related Prospectus Supplement, placed in a custodial account (the "Buy-Down
Account") by the Servicer. If the mortgagor on a Buy-Down Loan prepays such
Mortgage Loan in its entirety, or defaults on such Mortgage Loan and the
Mortgaged Property is sold in liquidation thereof, during the period when the
mortgagor is not obligated, on account of the buy-down plan, to pay the full
monthly payment otherwise due on such loan, the unpaid principal balance of
such Buy-Down Loan will be reduced by the amounts remaining in the Buy-Down
Account with respect to such Buy-Down Loan, and such amounts shall be
deposited in the Certificate Account (as defined herein), net of any amounts
paid with respect to such Buy-Down Loan by any insurer, guarantor or other
person pursuant to a credit enhancement arrangement described in the
applicable Prospectus Supplement.

If so specified in the applicable Prospectus Supplement, a Trust
Fund may include Mortgage Loans which are amortized over 30 years or some
other term, or which do not provide for amortization prior to maturity, but
which have a shorter term (each such Mortgage Loan, a "Balloon Loan") that
causes the outstanding principal balance of such Mortgage Loan to be due and
payable at the end of a certain specified period (the "Balloon Period"). If
specified in the applicable Prospectus Supplement, the originator of such
Balloon Loan will be obligated to refinance each such Balloon Loan at the end
of its Balloon Period at a new interest rate determined prior to the end of
such Balloon Period by reference to an index plus a margin specified in the
related Mortgage Note. The mortgagor is not, however, obligated to refinance
the Balloon Loan through such originator. In the event a mortgagor
refinances a Balloon Loan, the new loan will not be included in the Trust
Fund. See "Prepayment and Yield Considerations."

If specified in the Prospectus Supplement for any Series, the
Mortgage Loans included in the Trust Fund for such Series may be what are
commonly referred to as "home equity revolving lines of credit" ("Home Equity
Lines"). Home Equity Lines are generally evidenced by a loan agreement
("Loan Agreement") rather than a note. Home Equity Lines generally may be
drawn down from time to time by the borrower writing a check against the
account, or acknowledging the advance in a supplement to the Loan Agreement
(the amount of such drawn down, an "Additional Balance"). A Home Equity Line
will establish a maximum credit limit with respect to the related borrower,
and will permit the borrower to draw down Additional Balances, and repay the
aggregate balance outstanding in each case from time to time in such a manner
so that the aggregate balance outstanding does

<PAGE>

not exceed the maximum credit limit. A Home Equity Line will be secured by
either a senior or a junior lien Mortgage, and will bear interest at either a
fixed or an adjustable rate.

In certain states the borrower must, on the opening of an account,
draw an initial advance of not less than a specified amount. Home Equity
Lines generally amortize according to an amortization basis established at
the time of the initial advance. The "amortization basis" is the length of
time in which the initial advance plus interest will be repaid in full. The
amortization bases of the Home Equity Lines generally range from 60 months (5
years) to 180 months (15 years) depending on the credit limit assigned.
Generally, the amortization basis will be longer the higher the credit limit.
The minimum monthly payment on a Home Equity Line will generally be equal to
the sum of the following: (i) an amount necessary to completely repay the
then-outstanding balance and the applicable finance charge in equal
installments over the assigned amortization basis ("Basic Monthly Amount");
(ii) any monthly escrow charges; (iii) any delinquency or other similar
charges; and (iv) any past due amounts, including past due finance charges.
The Basic Monthly Amount typically is recomputed each time the related
Mortgage Rate adjusts and whenever an Additional Balance is advanced; such
recomputation in the case of an Additional Advance may also reset the
amortization schedule. The effect of each such advance on the related Home
Equity Line is to reset the commencement date of the original maturity term
to the date of the later advance. For example, a Home Equity Line made
originally with a 15-year maturity from date of origination changes at the
time of the next adjustment or advance to a Home Equity Line with a maturity
of 15 years from the date of such advance. For certain Home Equity Lines,
the same type of recomputation exists for adjustments of the related Mortgage
Rate.

Prior to the expiration of a specified period, the reduction of the
account to a zero balance and the closing of a Home Equity Line account may
result in a prepayment penalty. A prepayment penalty also may be assessed
against the borrower if a Home Equity Line account is closed by the Servicer
due to a default by the borrower under the Loan Agreement.

Each Loan Agreement will provide that the Servicer has the right to
require the borrower to pay the entire balance plus all other accrued but
unpaid charges immediately, and to cancel the borrower's credit privileges
under the Loan Agreement if, among other things, the borrower fails to make
any minimum payment when due under the Loan Agreement, if there is a material
change in the borrower's ability to repay the Home Equity Line, or if the
borrower sells any interest in the property securing the Loan Agreement,
thereby causing the "due-on-sale" clause in the trust deed or mortgage to
become effective.

Mortgage Loans which are secured by junior mortgages are
subordinate to the rights of the mortgagees under the related senior mortgage
or mortgages. Accordingly, liquidation, insurance and condemnation proceeds
received with respect to the related mortgaged property will be available to
satisfy the outstanding balance of such a Mortgage Loan only to the extent
that the claims of the senior mortgages have been satisfied in full,
including any related liquidation and foreclosure costs. In addition, a
junior mortgagee foreclosing on its mortage may be required to purchase the
related mortgaged property for a price sufficient to satisfy the claims of
the holders of any senior mortgages which are also being foreclosed. In the
alternative, a junior mortgagee which acquires title to a related mortgaged
property, through foreclosure, deed-in-lieu of foreclosure or otherwise may
take the property subject to any senior mortgages and continue to perform
with respect to any senior mortgages, in which case the junior mortgagee must
comply with the terms of any senior mortgages or risk foreclosure by the
senior mortgagee.

If so specified in the applicable Prospectus Supplement, a loan
pool may include graduated equity mortgage loans ("GEM Loans"). GEM Loans
are fixed rate, fully amortizing mortgage loans which provide for monthly
payments based on a 10-to 30-year amortization schedule, and which provide
for scheduled annual payment increases for a number of years and level
payments thereafter. The full amount of the scheduled payment increases
during the early years is applied to reduce the outstanding principal balance
of such loans.

If so specified in the applicable Prospectus Supplement, a Mortgage
Pool may include graduated payment mortgage loans ("GPM Mortgage Loans").
GPM Mortgage Loans provide for payments of monthly installments which
increase annually in each of a specified number of initial years and level
monthly payments thereafter. Payments during the early years are required in
amounts lower than the amounts which would be payable on a level debt service
basis due to the deferral of a portion of the interest accrued on the
mortgage loan.

<PAGE>

Such deferred interest is added to the principal balance of the mortgage loan
and is paid, together with interest thereon, in the later years of the
obligation. Because the monthly payments during the early years of such a
GPM Mortgage Loan are not sufficient to pay the full interest accruing on the
GPM Mortgage Loan, the interest payments on such GPM Mortgage Loan may not be
sufficient in its early years to meet its proportionate share of the
distributions expected to be made on the related Certificates. Thus, if the
Mortgage Loans include GPM Mortgage Loans, the Servicer will, unless
otherwise specified in the Prospectus Supplement, establish a reserve fund
(the "GPM Fund") which (together with, if specified in the related Prospectus
Supplement, reinvestment income thereon) will be sufficient to cover the
amount by which payments of interest on such GPM Mortgage Loan assumed in
calculating, distributions expected to be made on the Certificates of such
Series exceed scheduled interest payments according to the relevant graduated
payment mortgage plan for the period during which excess occurs.

If so specified in the applicable Prospectus Supplement, a Trust
Fund may contain ARM buy-out loans ("ARM Buy-Outs") which are automatically
repurchased by the Depositor upon the occurrence of either(i) a switch from a
fixed-rate mortgage to an adjustable rate mortgage pursuant to the terms of
the underlying note or (ii) a switch from an adjustable rate to a fixed rate
mortgage pursuant to the terms of the underlying note.

If specific information respecting the Mortgage Loans to be
included in a Trust Fund is not known to the Depositor at the time the
Certificates of a Series are initially offered, more general information of
the nature described above will be provided in the Prospectus Supplement and
final specific information will be set forth in a Current Report on Form 8-K
to be available to investors on the date of issuance thereof and to be filed
with the Commission promptly after the initial issuance of such Certificates.

THE CONTRACTS

Unless otherwise specified in the applicable Prospectus Supplement,
each Contract Pool will consist of conventional manufactured housing
installment sales contracts and installment loan agreements (collectively,
the "Contracts") originated by a manufactured housing dealer in the ordinary
course of business and purchased by the Unaffiliated Seller. Unless
otherwise specified in the applicable Prospectus Supplement, each Contract
will be secured by Manufactured Homes (as defined below), each of which will
be located in any of the fifty states or the District of Columbia. Unless
otherwise specified in the applicable Prospectus Supplement, the Contracts
will be fully amortizing and will bear interest at a fixed or adjustable
annual percentage rate (the "APR" or "Contract Rate"). The Contract Pool may
include Contracts with respect to which a Fixed Retained Yield has been
retained, in which event references herein to Contracts and payments thereon
shall mean the Contracts exclusive of such Fixed Retained Yield. The
Prospectus Supplement for a Series will specify whether there will be any
Fixed Retained Yield in any Contract, and if so, the owner thereof. See
"Fixed Retained Yield" below.

The Unaffiliated Seller of the Contracts will represent that the
Manufactured Homes securing the Contracts consist of manufactured homes
within the meaning of 42 United States Code, Section 5402(6), which defines a
"manufactured home" as "a structure, transportable in one or more sections,
which in the traveling mode, is eight body feet or more in width or forty
body feet or more in length, or, when erected on site, is three hundred
twenty or more square feet, and which is built on a permanent chassis
designed to be used as a dwelling with or without a permanent foundation when
connected to the required utilities, and includes the plumbing, heating,
air-conditioning, and electrical systems contained therein; except that such
term shall include any structure which meets all the requirements of [this]
paragraph except the size requirements and with respect to which the
manufacturer voluntarily files a certification required by the Secretary of
Housing and Urban Development and complies with the standards established
under [this] chapter."

Unless otherwise specified in the Prospectus Supplement for a
Series, each Contract must have an original term to maturity of not less than
1 year and not more than 40 years. Unless otherwise specified in the
Prospectus Supplement for a Series, no Contract will have had, at
origination, a principal balance in excess of $5,000,000 or a Loan-to-Value
Ratio in excess of 95%. The "Loan-to-Value Ratio" is the ratio, expressed as
a percentage, of the principal amount of the Contract outstanding at the
origination of such loan divided by the fair market value of the Manufactured
Home. The fair market value of the Manufactured Home securing any Contract
is, unless otherwise specified in the applicable Prospectus Supplement,
either (x) the appraised value of the related Manufactured Home determined in
an appraisal obtained by the originator at origination and (y) the sale price
for

<PAGE>

such property, plus, in either case, sales and other taxes and, to the extent
financed, filing and recording fees imposed by law, premiums for related
insurance and prepaid finance charges.

Manufactured Homes, unlike site-built homes, generally depreciate
in value. Consequently, at any time after origination it is possible,
especially in the case of Contracts with high Loan-to-Value Ratios at
origination, that the market value of a Manufactured Home may be lower than
the principal amount outstanding under the related Contract.

The Prospectus Supplement for each Series will set forth certain
characteristics of the related Contracts, which may include the aggregate
principal balance of the Contracts in the Contract Pool underlying such
Series as of the Cut-Off Date for such Series (the "Cut-Off Date Aggregate
Principal Balance"), the range of original terms to maturity of the Contracts
in the Contract Pool, the weighted average remaining term to stated maturity
at the Cut-Off Date of such Contracts, the earliest and latest origination
dates of such Contracts, the range of Contract Rates and Net Contract Rates
borne by such Contracts, the weighted average Net Contract Rate at the
Cut-Off Date of such Contracts, the percentage of such Contracts which had
Loan-to-Value Ratios at the time of origination of 80% or less, the
percentage of such Contracts that had Loan-to-Value Ratios at origination in
excess of 80% and the highest outstanding principal balance at origination of
any such Contract.

Unless otherwise specified in the applicable Prospectus Supplement,
all of the Contracts in a Trust Fund will have monthly payments due on the
first of each month (each, a "Due Date") and will be fully-amortizing
Contracts. If so specified in the applicable Prospectus Supplement,
Contracts may have Due Dates which occur on a date other than the first of
each month. If so specified in the applicable Prospectus Supplement, the
Contract Pools may include adjustable rate Contracts that provide for payment
adjustments to be made less frequently than adjustments in the Contract
Rates. Each adjustment in the Contract Rate which is not made at the time of
a corresponding adjustment in payments (and which adjusted amount of interest
is not paid currently on a voluntary basis by the obligor) will result in a
decrease (if the Contract Rate rises) or an increase (if the Contract Rate
declines) in the rate of amortization of the Contract. Moreover, such
payment adjustments on the Contracts may be subject to certain limitations,
as specified in the Prospectus Supplement, which may also affect the rate of
amortization on the Contract. As a result of such provisions, the amount of
interest accrued in any month may equal or exceed the scheduled monthly
payment on the Contract. In any such month, no principal would be payable on
the Contract, and if the accrued interest exceeded the scheduled monthly
payment, such excess interest due would become "Deferred Interest" that is
added to the principal balance of the Contract. Deferred Interest will bear
interest at the Contract Rate until paid. If such limitations prevent the
payments from being sufficient to amortize fully the Contract by its stated
maturity date, a lump sum payment equal to the remaining unpaid principal
balance will be due on such stated maturity date. See "Prepayment and Yield
Considerations."

The geographic distribution of Manufactured Homes will be set forth
in the Prospectus Supplement. Each Prospectus Supplement will set forth the
percentage of the Cut-Off Date Aggregate Principal Balance of any Contracts
in the Contract Pool which are secured by Manufactured Homes which have
become permanently affixed to real estate. Each Prospectus Supplement will
also set forth the percentage of the Cut-Off Date Aggregate Principal Balance
of the Contracts in the related Contract Pool representing the refinancing of
existing mortgage indebtedness. Unless otherwise specified in a Prospectus
Supplement, no Contract in the Contract Pool will be more than 30 days past
due as of the Cut-Off Date.

If specific information respecting the Contracts to be included in
a Trust Fund is not known to the Depositor at the time the Certificates of a
Series are initially offered, more general information of the nature
described above will be provided in the Prospectus Supplement and final
specific information will be set forth in a Current Report on Form 8-K to be
available to investors on the date of issuance thereof and to be filed with
the Commission promptly after the initial issuance of such Certificates.

FIXED RETAINED YIELD

Fixed Retained Yield with respect to any Mortgage Loan or Contract
is that portion, if any, of interest at the Mortgage Rate or Contract Rate
that is retained by the Depositor or other owner thereof and not included in
the related Trust Fund. The Prospectus Supplement for a Series will specify
whether a Fixed Retained

<PAGE>

Yield has been retained with respect to the Mortgage Loans or Contracts of
such Series, and, if so, the owner thereof. If so, the Fixed Retained Yield
will be established on a loan-by-loan basis with respect to the Mortgage
Loans or Contracts and will be specified in the schedule of Mortgage Loans or
Contracts attached as an exhibit to the applicable Pooling and Servicing
Agreement. The Servicer, with respect to Mortgage Loans or Contracts, may
deduct the Fixed Retained Yield from payments as received and prior to
deposit of such payments in the Certificate Account for such Series or may
(unless an election has been made to treat the Trust Fund (or one or more
segregated pools of assets therein) as a REMIC) withdraw the Fixed Retained
Yield from the Certificate Account after the entire payment has been
deposited in the Certificate Account. Notwithstanding the foregoing, any
partial payment or recovery of interest received by the Servicer relating to
a Mortgage Loan or Contract (whether paid by the mortgagor or obligor or
received as Liquidation Proceeds, Insurance Proceeds or otherwise), after
deduction of all applicable servicing fees, will be allocated between Fixed
Retained Yield (if any) and interest at the Net Mortgage Rate or Net Contract
Rate on a pari passu basis.

INSURANCE POLICIES

Unless otherwise specified in the applicable Prospectus Supplement,
the Pooling and Servicing Agreement will require the Servicer to cause to be
maintained for each Mortgage Loan or Contract an insurance policy issued by a
generally acceptable insurer insuring the Mortgaged Property underlying such
Mortgage Loan or the Manufactured Home underlying such Contract against loss
by fire, with extended coverage (a "Standard Hazard Insurance Policy").
Unless otherwise specified in the applicable Prospectus Supplement, the
Pooling and Servicing Agreement will require that such Standard Hazard
Insurance Policy be in an amount at least equal to the lesser of 100% of the
insurable value of the improvements which are a part of such Mortgaged
Property or Manufactured Home or the principal balance of such Mortgage Loan
or Contract; provided, however, that such insurance may not be less than the
minimum amount required to fully compensate for any damage or loss on a
replacement cost basis. The Servicer will also maintain on property acquired
upon foreclosure, or deed in lieu of foreclosure, of any Mortgage Loan, and
on any Manufactured Home acquired by repossession a Standard Hazard Insurance
Policy in an amount that is at least equal to the lesser of 100% of the
insurable value of the improvements which are a part of such property or the
insurable value of such Manufactured Home or the principal balance of the
related Mortgage Loan or Contract plus, if required by the applicable Pooling
and Servicing Agreement, accrued interest and liquidation expenses; provided,
however, that such insurance may not be less than the minimum amount required
to fully compensate for any damage or loss on a replacement cost basis. Any
amounts collected under any such policies (other than amounts to be applied
to the restoration or repair of the Mortgaged Property or Manufactured Home
or released to the borrower in accordance with normal servicing procedures)
will be deposited in the Certificate Account.

The Standard Hazard Insurance Policies covering the Mortgaged
Properties generally will cover physical damage to, or destruction of, the
improvements on the Mortgaged 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 such Mortgage Loans will be
underwritten by different insurers and will cover Mortgaged Properties
located in various states, such policies will not contain identical terms and
conditions. The most significant terms thereof, 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 the following:
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,
hazardous wastes or hazardous substances, 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.

The Standard Hazard Insurance Policies covering the Contracts will
provide, at a minimum, the same coverage as a standard form fire and extended
coverage insurance policy that is customary for manufactured housing in the
state in which the Manufactured Home is located.

The Servicer may maintain a blanket policy insuring against hazard
losses on all of the Mortgaged Properties or Manufactured Homes in lieu of
maintaining the required Standard Hazard Insurance Policies. The Servicer
will be liable for the amount of any deductible under a blanket policy if
such amount would have been covered by a required Standard Hazard Insurance
Policy, had it been maintained.

<PAGE>

In general, if a Mortgaged Property or Manufactured Home is located
in an area identified in the Federal Register by the Federal Emergency
Management Agency as having special flood hazards (and such flood insurance
has been made available) the Pooling and Servicing Agreement will require the
Servicer to cause to be maintained a flood insurance policy meeting the
requirements of the current guidelines of the Federal Insurance
Administration with a generally acceptable insurance carrier. Generally, the
Pooling and Servicing Agreement will require that such flood insurance be in
an amount not less than the lesser of (i) the amount required to compensate
for any loss or damage to the Mortgaged Property on a replacement cost basis
and (ii) the maximum amount of insurance which is available under the federal
flood insurance program.

Any losses incurred with respect to Mortgage Loans or Contracts due
to uninsured risks (including earthquakes, mudflows, floods, hazardous wastes
and hazardous substances) or insufficient hazard insurance proceeds could
affect distributions to the Certificateholders.

The Servicer will maintain or cause to be maintained with respect
to each Mortgage Loan a primary mortgage insurance policy in accordance with
the standards described in the "Mortgage Loans" above.

The Servicer shall obtain and maintain at its own expense and keep
in full force and effect a blanket fidelity bond and an error and omissions
insurance policy covering the Servicer's officers and employees as well as
office persons acting on behalf of the Servicer in connection with the
servicing of the Mortgage Loans.

Although the terms and conditions of primary mortgage insurance
policies differ, each primary mortgage insurance policy will generally cover
losses up to an amount equal to the excess of the unpaid principal amount of
a defaulted Mortgage Loan (plus accrued and unpaid interest thereon and
certain approved expenses) over a specified percentage of the value of the
related Mortgage Property.

As conditions precedent to the filing or payment of a claim under a
primary mortgage insurance policy, the insured will typically be required, in
the event of default by the mortgagor, among other things, to: (i) advance or
discharge (a) hazard insurance premiums and (b) as necessary and approved in
advance by the insurer, real estate taxes, protection and preservation
expenses and foreclosure and related costs; (ii) in the event of any physical
loss or damage to the Mortgaged Property, have the Mortgaged Property
restored to at least its condition at the effective date of the primary
mortgage insurance policy (ordinary wear and tear excepted); and (iii) if the
insurer pays the entire amount of the loss or damage, tender to the insurer
good and merchantable title to, and possession of, the Mortgaged Property.

Any mortgage insurance relating to the Contracts underlying a
Series of Certificates will be described in the related Prospectus Supplement.

ACQUISITION OF THE MORTGAGE LOANS AND CONTRACTS FROM UNAFFILIATED SELLERS

The Mortgage Loans or Contracts underlying a Series of Certificates
will be purchased by the Depositor, either directly or through affiliates,
from Unaffiliated Sellers pursuant to a separate agreement (a "Loan Sale
Agreement") between the Depositor or such affiliate and each such
Unaffiliated Seller. The Depositor expects that, unless otherwise specified
in the applicable Prospectus Supplement, each Mortgage Loan or Contract so
acquired will have been originated by the originator thereof in accordance
with the underwriting criteria specified under "Underwriting Guidelines."
Unless otherwise specified in the applicable Prospectus Supplement, each
Unaffiliated Seller must be an institution experienced in originating and
servicing conventional mortgage loans or manufactured housing contracts in
accordance with accepted practices and prudent guidelines, and must maintain
facilities to originate and service those loans satisfactory to the
Depositor. In addition, each Unaffiliated Seller must satisfy certain
criteria as to financial stability evaluated on a case by case basis by the
Depositor. Unless otherwise provided in the applicable Prospectus
Supplement, each Unaffiliated Seller pursuant to the related Loan Sale
Agreement will make certain representations and warranties to the Depositor
in respect of the Mortgage Loans or Contracts sold by such Unaffiliated
Seller to the Depositor as described herein under "Representations and
Warranties" below. Unless otherwise provided in the applicable Prospectus
Supplement with respect to each Series, the Depositor will assign all of its
rights (except certain rights of indemnification) and interest in the related
Loan Sale Agreement to the related Trustee for the benefit of the
Certificateholders of such Series, and the Unaffiliated

<PAGE>

Seller shall thereupon be liable to the Trustee for defective Mortgage Loan
or Contract documents or an uncured breach of such Unaffiliated Seller's
representations or warranties, to the extent described below under
"Assignment of the Mortgage Loans and Contracts" and "Representations and
Warranties."

ASSIGNMENT OF THE MORTGAGE LOANS AND CONTRACTS

At the time of the issuance of the Certificates of a Series, the
Depositor will cause the Mortgage Loans comprising the Mortgage Pool
(including any related rights to, or security interests in, leases, rents and
personal property) or the Contracts comprising the Contract Pool included in
the related Trust Fund to be assigned to the Trustee, together with all
principal and interest received by or on behalf of the Depositor on or with
respect to such Mortgage Loans or Contracts after the Cut-Off Date, other
than principal and interest due on or before the Cut-Off Date and other than
any Fixed Retained Yield. The Trustee or its accent will, concurrently with
such assignment, authenticate and deliver the Certificates evidencing such
Series to the Depositor in exchange for the Mortgage Loans or Contracts.
Each Mortgage Loan or Contract will be identified in a schedule appearing as
an exhibit to the applicable Pooling and Servicing, Agreement. Each such
schedule will include, among other things, the unpaid principal balance as of
the close of business on the applicable Cut-Off Date, the scheduled monthly
payment of principal, if any, and interest, the maturity date and the
Mortgage Rate or Contract Rate for each Mortgage Loan or Contract in the
related Trust Fund.

With respect to each Mortgage Loan in a Trust Fund, the mortgage or
other promissory note, any assumption, modification or conversion to fixed
interest rate agreement, a copy of any recorded UCC-1 financing statements
and related continuation statements, together with original executed UCC-2 or
UCC-3 financing statements disclosing an assignment of a security interest in
any personal property constituting security for repayment of the Mortgage
Loan to the Trustee, an executed re-assignment of assignment of leases, rents
and profits to the Trustee if the assignment of leases, rents and profits is
separate from the Mortgage, a mortgage assignment in recordable form and the
recorded Mortgage (or other documents as are required under applicable law to
create a perfected security interest in the Mortgaged Property in favor of
the Trustee) will be delivered to the Trustee (or to a designated custodian);
provided that, in instances where recorded documents cannot be delivered due
to delays in connection with recording, copies thereof, certified by the
Depositor to be true and complete copies of such documents, sent for
recording, may be delivered and the original recorded documents will be
delivered promptly upon receipt. As to each Mortgage Loan for which there is
primary mortgage insurance, the certificate of primary mortgage insurance
will be delivered to the Trustee. The assignment of each Mortgage will be
recorded promptly after the initial issuance of Certificates for the related
Trust Fund, 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 Mortgage Loan against the claim of any subsequent transferee or any
successor to or creditor of the Depositor, any affiliate of the Depositor or
the originator of such Mortgage Loan.

With respect to any Mortgage Loans which are Cooperative Loans, the
Depositor will cause to be delivered to the Trustee (or to a designated
custodian) the related original Cooperative Note, the security agreement, the
proprietary lease or occupancy agreement, the recognition agreement, an
executed financing agreement and the relevant stock certificate and related
blank stock powers. The Depositor will cause to be filed in the appropriate
office an assignment and a refinancing statement evidencing the Trustee's
security interest in each Cooperative Loan.

With respect to each Contract, there will be delivered to the
Trustee (or to a designated Custodian) the original Contract and copies of
documents and instruments related to each Contract and the security interest
in the property securing each Contract. In order to give notice of the
right, title and interest of Certificateholders to the Contracts, the
Depositor will cause a UCC-1 financing statement to be executed by the
Depositor or the Unaffiliated Seller identifying the Trustee as the secured
party and identifying all Contracts as collateral. Unless otherwise
specified in the related Prospectus Supplement, the Contracts will not be
stamped or otherwise marked to reflect their assignment to the Trust.
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 interest of Certificateholders in the Contracts could be
defeated. See "Certain Legal Aspects of the Mortgage Loans and Contracts."

<PAGE>

The Trustee (or the custodian hereinafter referred to) will hold
such documents relating to Mortgage Loans or Contracts in trust for the
benefit of Certificateholders of the related Series and will review such
documents within 45 days of the date of the applicable Pooling and Servicing
Agreement. Unless otherwise provided in the applicable Prospectus
Supplement, if any document is not delivered or is found to be defective in
any material respect or has not been recorded as required by the applicable
Loan Sale Agreement, the Trustee (or such custodian) shall immediately notify
the Servicer and the Depositor, and the Servicer shall immediately notify the
related Unaffiliated Seller. If the Unaffiliated Seller cannot cure such
omission or defect within 60 days after receipt of such notice, the
Unaffiliated Seller will be obligated, pursuant to the related Loan Sale
Agreement, either to repurchase the related Mortgage Loan or Contract from
the Trustee within 60 days after receipt of such notice, at a price (the
"Purchase Price") equal to the then unpaid principal balance thereof, plus
accrued and unpaid interest at the applicable Mortgage Rate or Contract Rate
(less any Fixed Retained Yield with respect to such Mortgage Loan or Contract
and less the rate, if any, of servicing compensation payable to the
Unaffiliated Seller with respect to such Mortgage Loan or Contract) through
the last day of the month in which such repurchase takes place or to
substitute one or more new Mortgage Loans or Contracts for such Mortgage Loan
or Contract. In the case of a Mortgage Loan or Contract so repurchased by an
Unaffiliated Seller, the Purchase Price will be deposited in the related
Certificate Account. In the case of a substitution, such substitution will
be made in accordance with the standards described in "Representations and
Warranties" below.

There can be no assurance that an Unaffiliated Seller will fulfill
this repurchase or substitution obligation. The Servicer will be obligated
to enforce such obligation to the same extent as it must enforce the
obligation of an Unaffiliated Seller for a breach of representation or
warranty as described below under "Representations and Warranties." However,
as in the case of an uncured breach of such a representation or warranty,
neither the Servicer (unless the Servicer is the Unaffiliated Seller) nor the
Depositor will be obligated to purchase or substitute for such Mortgage Loan
or Contract if the Unaffiliated Seller defaults on its repurchase or
substitution obligation, unless such breach also constitutes a breach of the
representations or warranties of the Servicer or the Depositor, as the case
may be. Unless otherwise specified in the related Prospectus Supplement,
this repurchase or substitution obligation constitutes the sole remedy
available to the Certificateholders or the Trustee for omission of, or a
material defect in, a constituent document.

The Trustee will be authorized to appoint a custodian to maintain
possession of the documents relating to the Mortgage Loans or Contracts. The
custodian will keep such documents as the Trustee's agent under a custodial
agreement.

REPRESENTATIONS AND WARRANTIES

Each Unaffiliated Seller, pursuant to the related Loan Sale
Agreement, will have made representations and warranties in respect of the
Mortgage Loans sold by such Unaffiliated Seller. Unless otherwise specified
in the related Prospectus Supplement, each Unaffiliated Seller of Mortgage
Loans will have represented, among other things, substantially to the effect
that (i) immediately prior to the sale and transfer of such Mortgage Loans,
the Unaffiliated Seller had good title to, and was the sole owner of, each
such Mortgage Loan and there had been no other assignment or pledge thereof,
(ii) as of the date of such transfer, such Mortgage Loans are subject to no
offsets, defenses or counterclaims, (iii) each Mortgage Loan at the tune it
was made complied in all material respects with applicable state and federal
laws, including, usury, equal credit opportunity and disclosure laws, (iv) a
lender's policy of title insurance was issued on the date of the origination
of each Mortgage Loan and each such policy is valid and remains in full force
and effect, (v) as of the date of such transfer, each related Mortgage is a
valid lien on the related Mortgaged Property (subject only to (a) the lien of
current real property taxes and assessments, (b) covenants, conditions and
restrictions, rights of way, easements and other matters of public record as
of the date of the recording of such Mortgage, such exceptions appearing of
record and either being acceptable to mortgage lending institutions generally
or specifically reflected in the lender's policy of title insurance issued on
the date of origination and either (A) specifically referred to in the
appraisal made in connection with the origination of the related Mortgage
Loan or (B) which do not adversely affect the appraised value of the
Mortgaged Property as set forth in such appraisal, (c) other matters to which
like properties are commonly subject which do not materially interfere with
the benefits of the security intended to be provided by the Mortgage and (d)
in the case of second or more junior loans any senior loans of record as of
the date of recording of the Equity Loan) and such property is free of
material damage and is in good repair, (vi) as of the date of such transfer,
no Mortgage Loan

<PAGE>

is 30 days or more delinquent in payment and there are no delinquent tax or
assessment liens against the related Mortgaged Property that would permit
taxing authority to initiate foreclosure proceedings, and (vii) with respect
to each Mortgage Loan, if the Mortgaged Property is located in an area
identified by the Federal Emergency Management Agency as having special flood
hazards and subject in certain circumstances to the availability of flood
insurance under the federal flood insurance program, such Mortgaged Property
is covered by flood insurance meeting the requirements of the applicable
Pooling and Servicing Agreement.

Each Unaffiliated Seller, pursuant to the related Loan Sale
Agreement, will have made representations and warranties in respect of the
Contracts sold by such Unaffiliated Seller. Unless otherwise specified in
the related Prospectus Supplement, each Unaffiliated Seller of Contracts will
have represented, among other digs, substantially to the effect that (i)
immediately prior to the sale and transfer of such Contracts, the
Unaffiliated Seller had good title to, and was the sole owner of, each such
Contract and there had been no other assignment or pledge thereof, (ii) as of
the date of such transfer, such Contracts are subject to no offsets, defenses
or counterclaims, (iii) each Contract at the time it was made complied in all
material respects with applicable state and federal laws, including usury,
equal credit opportunity and disclosure laws, (iv) as of the date of such
transfer, each related Contract is a valid first lien on the related
Manufactured Home and such Manufactured Home is free of material damage and
is in good repair, (v) as of the date of such transfer, no Contract is 30
days or more delinquent in payment and there are no delinquent tax or
assessment liens against the related Manufactured Home, and (vi) with respect
to each Contract, the Manufactured Home securing the Contract is covered by a
Standard Hazard Insurance Policy in the amount required by the Pooling and
Servicing Agreement and all premiums then due on such insurance have been
paid in full.

All of the representations and warranties of an Unaffiliated Seller
in respect of a Mortgage Loan or Contract will have been made as of the date
on which such Unaffiliated Seller sold the Mortgage Loan or Contract to the
Depositor. A substantial period of time may have elapsed between the date as
of which the representations and warranties were made and the later date of
initial issuance of the related Series of Certificates. Since the
representations and warranties referred to in the preceding paragraphs are
the only representations and warranties that will be made by an Unaffiliated
Seller, the Unaffiliated Seller's repurchase obligation described below will
not arise if, during the period commencing on the date of sale of a Mortgage
Loan or Contract by the Unaffiliated Seller to the Depositor, the relevant
event occurs that would have given rise to such an obligation had the event
occurred prior to sale of the affected Mortgage Loan or Contract. However,
the Depositor will not include any Mortgage Loan or Contract in the Trust
Fund for any series of Certificates if anything has come to the Depositor's
attention that would cause it to believe that the representations and
warranties of an Unaffiliated Seller will not be accurate and complete in all
material respects in respect of such Mortgage Loan or Contract as of the date
of initial issuance of the related Series of Certificates.

The Depositor will, unless otherwise provided in the applicable
Prospectus Supplement, assign all of its rights (except certain rights to
indemnification) with respect to such representations and warranties pursuant
to any related Loan Sale Agreement to the Trustee for the benefit of the
Certificateholders of the related Series. The Servicer, or the Trustee if
the Servicer is the Unaffiliated Seller, will promptly notify the relevant
Unaffiliated Seller of any breach of any representation or warranty made by
it in respect of a Mortgage Loan or Contract which materially and adversely
affects the interests of the Certificateholders in such Mortgage Loan or
Contract. Unless otherwise specified in the related Prospectus Supplement,
if such Unaffiliated Seller cannot cure such breach within 60 days after
notice from the Servicer or the Trustee, as the case may be, then such
Unaffiliated Seller will be obligated either (i) to repurchase such Mortgage
Loan or Contract from the Trust Fund at the applicable Purchase Price or (ii)
subject to the Trustee's approval and to the extent permitted by the Pooling
and Servicing Agreement, to substitute for such Mortgage Loan or Contract (a
"Deleted Loan") one or more Mortgage Loans or Contracts, as the case may be
(each, a "Substitute Loan"), but only if (i) with respect to a Trust Fund (or
one or more segregated pools of assets therein) for which a REMIC election is
to be made, such substitution is effected within two years of the date of
initial issuance of the Certificates or (ii) with respect to a Trust Fund for
which no REMIC election is to be made, such substitution is effected within
120 days of the date of initial issuance of the Certificates. Except as
otherwise provided in the related Prospectus Supplement, any Substitute Loan
will, on the date of substitution, (i) have a Loan-to-Value Ratio no greater
than that of the Deleted Loan, (ii) have a Mortgage Rate or Contract Rate not
less than (and not more than 1% greater than) the Mortgage Rate or Contract
Rate of the Deleted Loan, (iii) have a Net Mortgage Rate or Net Contract Rate
not less than (and not more than 1% greater than) the

<PAGE>

Net Mortgage Rate or Net Contract Rate of the Deleted Loan, (iv) have a
remaining term to maturity not greater than (and not more than one year less
than) that of the Deleted Loan and (v) comply with all of the representations
and warranties set forth in the related Loan Sale Agreement as of the date of
substitution. If substitution is to be made for a Deleted Loan with an
adjustable Mortgage Rate or Contract Rate, the Substitute Loan will also bear
interest based on the same index, margin, frequency and month of adjustment
as the Deleted Loan. In the event that one Substitute Loan is substituted
for more than one Deleted Loan, or more than one Substitute Loan is
substituted for one or more Deleted Loans, then the amount described in
clause (i) will be determined on the basis of aggregate principal balances
(provided that in all events the tests for a "qualified mortgage" as
described in the second paragraph under the heading "Certain Federal Income
Tax Consequences -- Federal Income Tax Consequences for REMIC Certificates
- --Qualification as a REMIC" are met as to each Substituted Loan), the rates
described in clauses (ii) and (iii) with respect to Deleted Loans will be
determined on the basis of weighted average Mortgage Rates and Net Mortgage
Rates or Contract Rates and Net Contract Rates, as the case may be, and the
terms described in clause (iv) will be determined on the basis of weighted
average remaining terms to maturity. In the case of a Substitute Loan, the
mortgage file relating, thereto will be delivered to the Trustee (or the
custodian) and the Unaffiliated Seller will pay an amount equal to the excess
of (i) the unpaid principal balance of the Deleted Loan, over (ii) the unpaid
principal balance of the Substitute Loan or Loans, together with interest on
such excess at the Mortgage Rate or Contract Rate to the next scheduled Due
Date of the Deleted Loan. Such amount will be deposited in the Certificate
Account for distribution to Certificateholders. Except in those cases in
which the Servicer is the Unaffiliated Seller, the Servicer will be required
under the applicable Pooling and Servicing Agreement to enforce this
repurchase or substitution obligation for the benefit of the Trustee and the
holders of the Certificates, following the practices it would employ in its
good faith business judgment were it the owner of such Mortgage Loan or
Contract. This repurchase or substitution obligation will constitute the
sole remedy available to holders of Certificates or the Trustee for a breach
of representation by an Unaffiliated Seller.

Neither the Depositor nor the Servicer (unless the Servicer is the
Unaffiliated Seller) will be obligated to purchase or substitute for a
Mortgage Loan or Contract if an Unaffiliated Seller defaults on its
obligation to do so, and no assurance can be given that Unaffiliated Sellers
will carry out their respective repurchase obligations with respect to
Mortgage Loans or Contracts.

If so specified in the applicable Prospectus Supplement, the
Depositor, the Servicer or another entity specified in the applicable
Prospectus Supplement, will make such representations and warranties as to
the types and geographical concentration of the Mortgage Loans or Contracts
in the related Mortgage Pool or Contract Pool and as to such other matters
concerning such Mortgage Loans or Contracts as may be described therein.
Upon a breach of any such representation or warranty which materially and
adversely affects the interests of the Certificateholders in a Mortgage Loan
or Contract, the entity making such representation or warranty will be
obligated either to cure the breach in all material respects, repurchase the
Mortgage Loan or Contract at the Purchase Price or substitute for such
Mortgage Loan or Contract in the manner, and subject to the conditions,
described above regarding the obligations of Unaffiliated Sellers with
respect to missing or defective loan documents or the breach of such
Unaffiliated Sellers' representations and warranties. This repurchase or
substitution obligation constitutes the sole remedy available to the
Certificateholders or the Trustee for a breach of a representation or
warranty by the Depositor, the Servicer or such other party, respectively.

DESCRIPTION OF THE CERTIFICATES

GENERAL

Each Series of Certificates will be issued pursuant to a Pooling
and Servicing Agreement among the Depositor, the Servicer, if the Series
relates to Mortgage Loans or Contracts, and the Trustee named in the related
Prospectus Supplement. The provisions of each Pooling and Servicing
Agreement will vary depending upon the nature of the Certificates to be
issued thereunder and the nature of the related Trust Fund. Forms of the
Pooling and Servicing Agreements have been filed as exhibits to the
Registration Statement of which this Prospectus is a part. The following
summaries describe certain provisions of the Certificates and the Pooling and
Servicing Agreements; however, the summaries do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all
of the provisions of the Pooling and Servicing Agreement for each Series of
Certificates

<PAGE>

and the applicable Prospectus Supplement. Each Pooling and Servicing
Agreement executed and delivered with respect to each Series will be filed
with the Commission as an exhibit to a Current Report on Form 8-K promptly
after issuance of the Certificates of such Series. The Depositor will
provide a copy of the Pooling and Servicing Agreement (without exhibits)
relating to any Series without charge upon written request of a holder of a
Certificate of such Series addressed to Prudential Securities Secured
Financing Corporation, One Seaport Plaza, 26th Floor, New York, New York
10292, Attention: James Fadel.

Each Series of Certificates will evidence the beneficial ownership
interest in the related Trust Fund created by the Depositor pursuant to the
related Pooling and Servicing Agreement. Each Series of Certificates will
consist of one or more Classes of Standard Certificates, Stripped
Certificates or Multi-Class Certificates. Any Class of Certificates may be
divided into two or more Subclasses and any Class of Standard Certificates
may be divided into two or more Subclasses that consist of Multi-Class
Certificates. Any Class or Subclass of Multi-Class Certificates may be
Compound Interest Certificates. In addition, each Series for which the
Depositor has caused the related Trust Fund (or one or more segregated pools
of assets therein) to elect to be treated as a REMIC will include one Class
or one Subclass of Residual Certificates with respect to each such REMIC
which, if offered hereby, will represent the right to receive distributions
with respect to such Trust Fund as specified in the related Prospectus
Supplement.

Each Series of Certificates may include one or more Classes or
Subclasses of Certificates (the "Subordinated Certificates") that are
subordinate in right of distributions to one or more other Classes or
Subclasses of Certificates (the "Senior Certificates"). Two types of
subordination arrangements for a Series which consists of two Classes of
Standard Certificates are described herein. See "Distributions to Standard
Certificateholders." Any other type of subordination arrangement for
Standard Certificates, or any subordination arrangement for any Class of
Multi-Class Certificates or Stripped Certificates, will be described in the
applicable Prospectus Supplement. Certain Series or Classes of Certificates
may be covered by insurance policies or other forms of credit enhancement, in
each case as described herein and in the related Prospectus Supplement.

Except as described in the related Prospectus Supplement, the
Mortgage Loans or Contracts included in a Trust Fund will not be guaranteed
or insured by any governmental agency or instrumentality or any other insurer.

The Depositor will cause each Trust Fund (or one or more segregated
pools of assets therein) with respect to a Series which includes Standard
Certificates redeemable on a random lot basis, Multi-Class Certificates or
Shifting Interest Certificates to elect to be treated as a REMIC. The
Depositor may cause any other Trust Fund (or segregated pool of assets
therein) to elect to be treated as a REMIC. If such an election is made, such
Series will consist of one or more Classes or Subclasses of Certificates that
will represent "regular interests" within the meaning of Code Section
860G(a)(1) (such Certificates collectively referred to as the "Regular
Certificates") and one Class or one Subclass of Certificates that will be
designated as the "residual interest" with respect to each REMIC within the
meaning of Code Section 860G(a)(2) (the "Residual Certificates") representing
the right to receive distributions as specified in the Prospectus Supplement
for such Series. See "Certain Federal Income Tax Consequences" herein. The
related Prospectus Supplement will specify whether one or more REMIC
elections are to be made. Alternatively, the Pooling and Servicing Agreement
for a Series may provide that a REMIC election is to be made at the
discretion of the Depositor or the Servicer and may only be made if certain
conditions are satisfied. As to each Series with respect to which a REMIC
election is to be made, the Servicer and the Trustee will be obligated to
take certain actions in order to comply with applicable REMIC laws and
regulations, and no Certificateholder other than a holder of a Residual
Certificate will be liable for any prohibited transaction taxes under
applicable REMIC laws and regulations.

The Depositor may sell certain Classes or Subclasses of the
Certificates of a Series, including one or more Classes or Subclasses of
Subordinated Certificates or one Class or one Subclass of Residual
Certificates, in privately negotiated transactions exempt from registration
under the Securities Act. Alternatively, if so specified in the applicable
Prospectus Supplement, the Depositor may offer one or more Classes or
Subclasses of the Subordinated Certificates or the one Class or one Subclass
of Residual Certificates of a Series by means of this Prospectus and such
Prospectus Supplement.

<PAGE>

Unless otherwise specified in the applicable Prospectus Supplement
with respect to a Series of Certificates, each Certificate offered hereby and
by the applicable Prospectus Supplement will be issued in fully registered
form (each, a "Definitive Certificate") and will be issued in the authorized
denominations as specified in the applicable Prospectus Supplement. The
Certificates of a Series offered hereby and by means of the applicable
Prospectus Supplement will be transferable and exchangeable at the office or
agency maintained by the Trustee or such other entity for such purpose set
forth in the related Prospectus Supplement. No service charge will be made
for any transfer or exchange of Certificates, but the Trustee or such other
entity may require payment of a sum sufficient to cover any tax or other
governmental charge in connection with such transfer or exchange. In the
event that an election is made to treat the Trust Fund (or one or more
segregated pools of assets therein) as a REMIC, no legal or beneficial
interest in all or any portion of the "Residual Certificates" thereof may be
transferred without the receipt by the transferor of any affidavit signed by
the transferee stating that the transferee is not a "Disqualified
Organization" within the meaning of Code Section 860E(e)(5) or an agent
(including a broker, nominee, or other middleman) thereof. The Prospectus
Supplement with respect to a Series may specify additional transfer
restrictions with respect to the Residual Certificates. See "Certain Federal
Income Tax Consequences -- Federal Income Tax Consequences for REMIC
Certificates --Taxation of Residual Certificates -- Tax-Related Restrictions
on Transfer of Residual Certificates." If so specified in the related
Prospectus Supplement, the Certificates of specified Classes or Subclasses of
a Series may be issued in the form of book entries on the records of The
Depository Trust Company ("DTC") and participating members thereof.

Distributions will be made on each of the Distribution Dates
specified in the applicable Prospectus Supplement for a Series to persons in
whose name the Certificates of such Series are registered at the close of
business on the related Record Date. Unless otherwise specified in the
applicable Prospectus Supplement, distributions to Certificateholders of all
Series (other than the final distribution in retirement of the Certificates)
will be made by check mailed to the address of the person entitled thereto as
it appears on the certificate register, except that, with respect to any
holder of a Certificate evidencing not less than the specified fractional
undivided interest, notional amount or Stated Amount set forth in such
Prospectus Supplement, distributions will be made by wire transfer in
immediately available funds, provided that the Trustee shall have been
furnished with appropriate wiring instructions not less than three business
days (or such longer period as may be specified in the related Prospectus
Supplement) prior to the related Distribution Date. The final distribution
in retirement of Certificates will be made only upon presentation and
surrender of the Certificates at the office or agency maintained by the
Trustee or such other entity for such purpose, as specified in the final
distribution notice to Certificateholders.

A Series of Certificates will consist of one or more Classes of
Standard Certificates or Stripped Certificates (referred to hereinafter
sometimes collectively as "Percentage Certificates") or two or more Classes
of Multi-Class Certificates (each as described below).

PERCENTAGE CERTIFICATES

Each Series of Percentage Certificates may include one or more
Classes of Standard Certificates or Stripped Certificates, any Class of which
may be divided into two or more Subclasses. The Standard Certificates of
each Class will evidence fractional undivided interests in all of the
principal and interest (to the extent of the Net Mortgage Interest Rate)
payments on the Mortgage Loans comprising the Trust Fund related to such
Series. Each holder of a Standard Certificate of a Class will be entitled to
receive its Certificate's percentage interest of the portion of the Pool
Distribution Amount (as defined below) allocated to such Class. The
percentage interest of each Standard Certificate will be equal to the
percentage obtained by dividing the aggregate unpaid principal balance of the
Mortgage Loans represented by such Standard Certificate as of the Cut-Off
Date by the aggregate unpaid principal balance of the Mortgage Loans
represented by all the Standard Certificates of the same Class as of the
Cut-Off Date.

The Stripped Certificates of each Class will evidence fractional
undivided interests in specified portions of the principal and/or interest
payments on the Mortgage Loans comprising the Trust Fund related to such
Series. The holders of the Stripped Certificates of each Class will be
entitled to receive a portion (which may be zero) as specified in the
applicable Prospectus Supplement of the principal distributions comprising
the Pool Distribution Amount, and a portion (which may be zero) as specified
in the applicable Prospectus Supplement of the interest distributions
comprising the Pool Distribution Amount on each Distribution Date.

<PAGE>

In the case of Classes of Stripped Certificates representing interests
in interest distributions on the Mortgage Loans and not in principal
distributions on the Mortgage Loans, such Certificates will be denominated in
notional amounts. The aggregate original notional amount for a Class of such
Certificates will be equal to the aggregate unpaid principal balance (or a
specified portion thereof) of the Mortgage Loans as of the Cut-Off Date
specified in the applicable Prospectus Supplement. The notional amount of
each such Stripped Certificate will be used to calculate the holder's pro
rata share of the interest distributions on the Mortgage Loans allocated to
that Class and for the determination of certain other rights of holders of
such Class of Stripped Certificates and will not represent an interest in, or
entitle any such holder to any distribution with respect to, any principal
distributions on the Mortgage Loans. Each such Certificate's pro rata share
of the interest distribution on the Mortgage Loans on each Distribution Date
will be calculated by multiplying the interest distributions on the Mortgage
Loans allocated to its Class by a fraction, the numerator of which is the
original notional amount of such Stripped Certificates and the denominator of
which is the aggregate original notional amount of all the Stripped
Certificates of its Class.

The interest of a Class of Percentage Certificates representing an
interest in a Trust Fund (or a segregated pool of assets therein) with
respect to which an election to be treated as a REMIC has been made may be
fixed as described above or may vary over time as a result of prepayments
received and losses realized on the underlying Mortgage Loans. A Series of
Percentage Certificates comprised of Classes whose percentage interests in
the Trust Fund may vary is referred to herein as a Series of "Shifting
Interest Certificates." Distributions on, and subordination arrangements
with respect to, Shifting Interest Certificates are discussed below under the
headings "Description of the Certificates -- Distributions to Percentage
Certificateholders -- Shifting Interest Certificates" and "Credit Support
- --Subordination -- Shifting Interest Certificates."

MULTI-CLASS CERTIFICATES

Each Series may include one or more Classes or Subclasses of
Multi-Class Certificates. Each Multi-Class Certificate will be assigned a
Stated Amount or Notional Amount. The Stated Amount may be based on an
amount of principal of the underlying Mortgage Loans or Contracts or on the
value of future cash flows from the related Trust Fund, without distinction
as to principal and interest received on the Mortgage Loans or Contracts.
Interest on the Classes or Subclasses of Multi-Class Certificates will be
paid at rates specified in or determined as specified in the applicable
Prospectus Supplement, and will accrue in the manner specified therein. Any
Class or Subclass of Multi-Class Certificates may consist of Certificates on
which interest accrues but is not payable until such time as specified in the
applicable Prospectus Supplement ("Compound Interest Certificates"), and
interest accrued on any such Certificate will be added to the Stated Amount
thereof in the manner described therein.

The Stated Amount of a Multi-Class Certificate of a Series at any
time will represent the maximum specified dollar amount (exclusive of
interest at the related Interest Rate, if any) to which the holder thereof is
entitled from the cash flow on the Mortgage Loans or Contracts and other
assets in the Trust Fund for such Series and will decline to the extent
distributions in reduction of Stated Amount are received by such holder. The
initial Stated Amount of each Class within a Series of Multi-Class
Certificates will be specified in the applicable Prospectus Supplement.

FORWARD COMMITMENTS; PRE-FUNDING

A Trust Fund may enter into an agreement (each, a "Forward Purchase
Agreement") with the Depositor whereby the Depositor will agree to transfer
additional Mortgage Loans to such Trust Fund following the date on which such
Trust Fund is established and the related Certificates are issued. The Trust
Fund may enter into Forward Purchase Agreements to permit the acquisition of
additional Mortgage Loans that could not be delivered by the Depositor or
have not formally completed the origination process, in each case prior to
the date on which the Certificates are delivered to the Certificateholders
(the "Closing Date"). Any Forward Purchase Agreement will require that any
Mortgage Loans so transferred to the Trust Fund conform to the requirements
specified in such Forward Purchase Agreement.

If a Forward Purchase Agreement is to be utilized, and unless
otherwise specified in the related Prospectus Supplement, the related Trustee
will be required to deposit in a segregated account (each, a "Pre-Funding
Account") up to 100% of the net proceeds received by the Trustee in
connection with the sale of one or more

<PAGE>

classes of Certificates of the related Series; the additional Mortgage Loans
will be transferred to the related Trust Fund in exchange for money released
to the Depositor from the related Pre-Funding Account. Each Forward Purchase
Agreement will set a specified period (the "Funding Period") during which any
such transfers must occur; for a Trust Fund which elects federal income
treatment as REMIC or as a grantor trust, the related Funding Period will be
limited to three months from the date such Trust Fund is established; for a
Trust Fund which is treated as a mere security device for federal income tax
purposes, the related Funding Period will be limited to nine months from the
date such Trust Fund is established. The Forward Purchase Agreement or the
related Pooling and Servicing Agreement will require that, if all moneys
originally deposited to such Pre-Funding Account are not so used by the end
of the related Funding Period, then any remaining moneys will be applied as a
mandatory prepayment of the related class or classes of Certificates as
specified in the related Prospectus Supplement.

During the Funding Period the moneys deposited to the Pre-Funding
Account will either (i) be held uninvested or (ii) will be invested in
cash-equivalent investments rated in one of the four highest rating
categories by at least one nationally recognized statistical rating
orgnaization and which will either mature prior to the end of the Funding
Period, or will be drawable on demand and in any event, will not constitute
the type of investment which would require registration of the related Trust
Funds as an "investment company" under the Investment Company Act of 1940, as
amended.

DISTRIBUTIONS TO PERCENTAGE CERTIFICATEHOLDERS

Except as otherwise specified in the applicable Prospectus
Supplement, on or about the 15th day of each month in which a Distribution
Date occurs (the "Determination Date"), the Servicer will determine the
amount of the payments or other receipts on account of principal and interest
on the Mortgage Loans or Contracts which have been received and which will be
distributable to holders of Certificates on the next Distribution Date (as
further described below, the "Pool Distribution Amount"). The Pool
Distribution Amount will be allocated among the Classes or Subclasses of
Percentage Certificates of such Series in the manner described herein under
"Description of the Certificates -- Standard Certificates"; however, if such
Certificates are also composed of Senior Certificates and Subordinated
Certificates, then the Pool Distribution Amount will be allocated in
accordance with the terms of the applicable subordination arrangement. Two
types of subordination arrangements are described below for a Series which
consists of two Classes of Standard Certificates. Any other type of
subordination arrangement employed for Certificates of a Series will be
described in the related Prospectus Supplement.

Unless otherwise specified in the applicable Prospectus Supplement,
the "Pool Distribution Amount" for a Distribution Date with respect to a
Series of Certificates as to which the relevant Trust Fund consists of
Mortgage Loans or Contracts will be the sum of all previously undistributed
payments or other receipts on account of principal (including principal
prepayments, Net Liquidation Proceeds (as defined herein), and Net Insurance
Proceeds (as defined herein), if any) and interest on the related Mortgage
Loans or Contracts received by the Servicer after the related Cut-Off Date
(except for amounts due on or prior to such Cut-Off Date), or received by the
Servicer on or prior to the Cut-Off Date but due after the Cut-Off Date, in
either case received on or prior to the Determination Date in the month in
which such Distribution Date occurs, plus (i) all Advances made by the
Servicer, (ii) all withdrawals from any Buy-Down Fund or other fund described
in the related Prospectus Supplement, if applicable, and (iii) all proceeds
of Mortgage Loans or Contracts or property acquired in respect thereof
purchased or repurchased from the Trust Fund as provided in the Pooling and
Servicing Agreement ("Repurchase Proceeds"), but excluding the following:

(a) amounts received as late payments of principal or interest
respecting which the Servicer previously has made one or more
unreimbursed Advances;

(b) any unreimbursed Advances with respect to Liquidated Mortgage
Loans (as defined herein) or Liquidated Contracts (as defined herein);

(c) those portions of each payment of interest on a particular
Mortgage Loan or Contract which represents (i) the Fixed Retained
Yield, if any, and (ii) the applicable Servicing Fee, as adjusted in
respect of Prepayment Interest Shortfalls as described in "Servicing of
the Mortgage Loans and Contracts -

<PAGE>

- Adjustment to Servicing Compensation in Connection with Prepaid and
Liquidated Mortgage Loans and Contracts";

(d) all amounts representing scheduled payments of principal and
interest due after the Due Date occurring in the month in which such
Distribution Date occurs;

(e) all principal prepayments and all proceeds (including
Liquidation Proceeds, Insurance Proceeds and Repurchase Proceeds) of
any Mortgage Loans or Contracts, or property acquired in respect
thereof, liquidated, foreclosed, purchased or repurchased pursuant to
the applicable Pooling and Servicing Agreement, received on or after
the Due Date occurring in the month in which such Distribution Date
occurs, and all related payments of interest on such amounts;

(f) where permitted by the related Pooling and Servicing
Agreement, that portion of Liquidation Proceeds or Insurance Proceeds
which represents Fixed Retained Yield, if any, or any unpaid Servicing
Fee to which the Servicer is entitled;

(g) all amounts representing certain expenses reimbursable to the
Servicer and other amounts pertained to be withdrawn by the Servicer
from the Certificate Account, in each case pursuant to the applicable
Pooling and Servicing Agreement;

(h) all amounts in the nature of late fees, assumption fees,
prepayment fees and similar fees which the Servicer is entitled to
retain pursuant to the applicable Pooling and Servicing Agreement; and

(i) where permitted by the applicable Pooling and Servicing
Agreement, reinvestment earnings on payments received in respect of the
Mortgage Loans or Contracts.

CERTIFICATES OTHER THAN SHIFTING INTEREST CERTIFICATES

With respect to a Series of Certificates which is comprised of one
Class of Standard Certificates which are Senior Certificates and one Class of
Standard Certificates which are Subordinated Certificates, the Servicer shall
determine the aggregate amount which would have been distributable to such
Class of Senior Certificates (the "Senior Class Distributable Amount") and
the aggregate amount which would have been distributable to such Class of
Subordinated Certificates (the "Subordinated Class Distributable Amount")
assuming, among other things, no delinquencies or losses on the Mortgage
Loans or Contracts preceding such Distribution Date and, based on the Pool
Distribution Amount and such Distributable Amounts, will determine the amount
actually to be distributed to each Class and Subclass.

CALCULATION OF DISTRIBUTABLE AMOUNTS. If a Series of Certificates
includes one Class of Standard Certificates which are Senior Certificates and
one Class of Standard Certificates which are Subordinated Certificates,
unless otherwise specified in the applicable Prospectus Supplement, the
Senior Class Distributable Amount with respect to such Senior Certificates on
a Distribution Date will be an amount equal to the sum of:

(i) the aggregate undivided interest, expressed as a percentage
and specified in the applicable Prospectus Supplement, evidenced by
such Class of Senior Certificates (the "Senior Class Principal
Portion") of:

(a) all scheduled payments of principal on each outstanding
Mortgage Loan or Contract that became due on the Due Date
immediately preceding such Distribution Date in accordance with
the amortization schedules of the related Mortgage Loans or
Contracts (as adjusted to give effect to any previous
prepayments), whether or not such payments were actually received
by the Servicer (the aggregate of such scheduled payments due on
any such Due Date being referred to herein as "Scheduled
Principal");

(b) all principal prepayments received by the Servicer in the
month preceding the month in which such Distribution Date occurs;

<PAGE>

(c) the Scheduled Principal Balance (as defined herein) of
each Mortgage Loan or Contract which was purchased from the Trust
Fund as provided in the Pooling and Servicing Agreement (as
described in "The Trust Funds" and "The Pooling and Servicing
Agreement"), and of each Mortgage Loan or Contract as to which the
Servicer has determined that all recoveries of Liquidation Proceeds
and Insurance Proceeds have been received (a "Liquidated Mortgage
Loan" or "Liquidated Contract"), in each case during the month
preceding the month in which such Distribution Date occurs,
calculated as of the date each such Mortgage Loan or Contract was
purchased or calculated as of the date each such Mortgage Loan or
Contract became a Liquidated Mortgage Loan or Liquidated Contract,
as the case may be; and

(d) with respect to (1) the disposition of the Mortgaged
Property or Manufactured Home in connection with any Liquidated
Mortgage Loan or Contract, the amount by which Net Liquidation
Proceeds and Net Insurance Proceeds exceed the unpaid principal
balance of such Mortgage Loan or Contract and accrued but unpaid
interest on such Mortgage Loan or Contract at the Mortgage Rate or
Contract Rate to the Due Date next succeeding the last date of
receipt of the Liquidation Proceeds and Insurance Proceeds, and (2)
the repurchase of Mortgage Loans or Contracts in connection with an
early termination of the Trust Fund (see "The Pooling and Servicing
Agreement -- Termination; Purchase of Mortgage Loans and
Contracts"), the amount by which the repurchase price exceeds the
aggregate unpaid principal balances of the Mortgage Loans or
Contracts in the related Trust Fund and accrued but unpaid interest
at the weighted average Mortgage Rate or Contract Rate through the
end of the month in which such repurchase occurs (collectively,
"Gain From Acquired Property"); and

(ii) interest at the Pass-Through Rate for the Class of Senior
Certificates from the second preceding Due Date (or the Cut-Off Date in
the case of the first Distribution Date) to the Due Date immediately
preceding such Distribution Date on the Senior Class Principal Portion
of the aggregate Scheduled Principal Balance of the Mortgage Loans or
Contracts as of the second preceding Due Date (or as of the Cut-Off
Date in the case of the first Distribution Date) whether or not such
interest was actually received by the Servicer; provided that
Prepayment Interest Shortfall is included only to the extent that funds
for such purposes are available out of Servicing Compensation; less

(iii) the Senior Class Principal Portion of any indemnification
payments made to the Servicer, the Depositor, or any officer, director,
employee or agent of either the Servicer or the Depositor since the
preceding Distribution Date as described under "Servicing of the
Mortgage Loans and Contracts -- Certain Matters Regarding the Servicer
and the Depositor" below (the "Indemnification Payments").

Unless otherwise specified in the applicable Prospectus Supplement,
the Subordinated Class Distributable Amount with respect to a Distribution
Date for Percentage Certificates which are Subordinated Certificates will be
an amount equal to the sum of:

(i) the aggregate undivided interest, expressed as a percentage
and specified in the applicable Prospectus Supplement, evidenced by
such Subordinated Certificates (the "Subordinated Class Principal
Portion") of:

(a) all Scheduled Principal;

(b) all principal prepayments received by the Servicer during
the month preceding the month in which such Distribution Date occurs;

(c) the Scheduled Principal Balance of each Mortgage Loan or
Contract which was purchased from the Trust Fund as provided in the
Pooling and Servicing Agreement (as described in "The Trust Funds"
and "The Pooling and Servicing Agreement"), and of each Mortgage
Loan or Contract which became a Liquidated Mortgage Loan or
Liquidated Contract, in each case during the month preceding the
month in which such Distribution Date occurs, determined as of the
date each such Mortgage Loan or Contract was purchased, or as of
the date each such

<PAGE>

Mortgage Loan or Contract became a Liquidated Mortgage Loan or
Liquidated Contract, as the case may be; and

(d) Gain From Acquired Property; and

(ii) interest at the Pass-Through Rate for the Class of
Subordinated Certificates from the second preceding Due Date (or from
the Cut-Off Date in the case of the first Distribution Date) to the Due
Date immediately preceding such Distribution Date on the Subordinated
Class Principal Portion of the Scheduled Principal Balance of the
Mortgage Loans or Contracts as of the second preceding Due Date (or as
of the Cut-Off Date in the case of the first Distribution Date),
whether or not such interest was actually received with respect to the
Mortgage Loans or Contracts; provided that Prepayment Interest
Shortfall is included only to the extent that funds for such purposes
are available out of Servicing Compensation; less

(iii) the Subordinated Class Principal Portion of any
Indemnification Payments.

The foregoing is subject to the proviso that if one or more REMIC
elections are made with respect to a Series of Certificates, any Gain From
Acquired Property will not be included in the Distributable Amount of the
Class of such Series which consist of Regular Interests, but shall instead be
paid in full to the holders of the Residual Certificates of such Series.

CALCULATION OF AMOUNTS TO BE DISTRIBUTED. The Servicer will
calculate, on the related Determination Date, the portion of the
Distributable Amount for each Class of the Series that is actually available
to be paid out of the Pool Distribution Amount on the Distribution Date prior
to any adjustments with respect to subordination. The portion so available
on a Distribution Date to the Senior Certificateholders and to the
Subordinated Certificateholders (respectively, the "Senior Class Pro Rata
Share" and the "Subordinated Class Pro Rata Share") will, unless otherwise
specified in the applicable Prospectus Supplement, be the amount equal to the
product of the Pool Distribution Amount for such Distribution Date and a
fraction, the numerator of which is the Distributable Amount for such Class
on such Distribution Date and the denominator of which is the sum of the
Distributable Amounts for such Series on such Distribution Date.

So long as the Subordinated Amount is greater than zero, the
holders of Senior Certificates will be entitled to receive on any
Distribution Date the lesser of (a) the sum of the Senior Class Distributable
Amount and the Senior Class Carryover Shortfall (as defined below) and (b)
the Senior Class Pro Rata Share on such Distribution Date (the "Basic Senior
Class Distribution"). In addition, to the extent Senior Class Credit
Enhancement is available, the holders of Senior Certificates will be entitled
to receive the amount, if any, by which the Senior Class Distributable Amount
plus any Senior Class Carryover Shortfall (as defined below) on such
Distribution Date exceeds the Basic Senior Class Distribution on such
Distribution Date (such excess being referred to herein as the "Senior Class
Shortfall"). "Senior Class Credit Enhancement" includes: (a) amounts
otherwise distributable to the holders of Subordinated Certificates on such
Distribution Date and amounts available for such purpose in any Subordination
Reserve Fund pursuant to any subordination of the rights of any holders of
Subordinated Certificates as described below; and (b) any other credit
enhancement arrangement which shall be specified in the related Prospectus
Supplement. See "Credit Support". The "Senior Class Carryover Shortfall" on
any Distribution Date means the amount the holders of Senior Certificates
were entitled to receive on the prior Distribution Date over the amount the
holders of Senior Certificates actually received on such prior Distribution
Date, together with interest on the difference at Pass-Through Rate for the
Senior Certificates from such prior Distribution Date through the current
Distribution Date.

At the time the Subordinated Amount, if any, is reduced to zero,
Senior Certificateholders will be entitled to the Senior Class Pro Rata Share
on each Distribution Date. In such event any remaining Senior Class
Shortfall will cease to be payable from available sources of credit
enhancement, except that the portion of such Senior Class Shortfall which is
attributable to the account of interest on any previous Senior Class
Carryover Shortfall (the "Senior Class Shortfall Accruals") shall continue to
bear interest at the Pass-Through Rate for the Senior Certificates, and the
holders of Senior Certificates shall continue to have a preferential right to
be paid such amount from distributions otherwise available for distribution
to any holders of Subordinated Certificates, until such

<PAGE>

amount (including interest thereon at the Pass-Through Rate for the Senior
Certificates) is paid in full. See "Credit Support -- Subordination."

So long as the Subordinated Amount is greater than zero, the
holders of Subordinated Certificates will be entitled to receive on any
Distribution Date an amount equal to the excess of (a) the sum of (i) the
Pool Distribution Amount and (ii) all amounts released from the Subordination
Reserve Fund for distribution to the holders of Subordinated Certificates on
such Distribution Date over (b) the sum of (i) the Basic Senior Class
Distribution, (ii) any amounts required to be distributed to the holders of
Senior Certificates pursuant to the subordination of the rights of the
holders of Subordinated Certificates and (iii) amounts required to be
deposited in the Subordination Reserve Fund. See "Credit Support." At the
time the Subordinated Amount, if any, is reduced to zero, Subordinated
Certificateholders will be entitled to the Subordinated Class Pro Rata Share
on each Distribution Date; PROVIDED, HOWEVER, that such amount to be
distributed to the holders of Subordinated Certificates shall be decreased to
give effect to the preferential right of the holders of Senior Certificates
to receive Senior Class Shortfall Accruals as provided herein.

The foregoing is subject to the proviso that if a REMIC election
has been made with respect to a Trust Fund (or a segregated pool of assets
therein), the Subordinated Certificateholders of the related Series will be
entitled to the sum of (a) the Subordinated Class Pro Rata Share, (b) all
amounts in the Subordination Reserve Fund (net of any amount required to be
maintained as liquidity for Advances) and (c) such other amounts, if any, as
may be specified in the related Prospectus Supplement (including, if such
Certificates are Residual Certificates, any Gain From Acquired Property).

SHIFTING INTEREST CERTIFICATES

On each Distribution Date for a Series which is comprised of two
Classes of Standard Certificates which are Shifting Interest Certificates,
the holders of record on the Record Date of the Senior Certificates thereof
will be entitled to receive, to the extent of the Pool Distribution Amount
with respect to such Distribution Date and prior to any distribution being
made on the related Subordinated Certificates, an amount equal to the Senior
Class Distribution Amount. The Senior Class Distribution Amount will (except
as otherwise set forth in the applicable Prospectus Supplement) be calculated
for any Distribution Date as the lesser of (x) the Pool Distribution Amount
for such Distribution Date and (y) the sum of:

(i) one month's interest at the applicable Pass-Through Rate on
such Class's outstanding principal balance (less, if specified in the
applicable Prospectus Supplement, (a) the amount of such interest
constituting Deferred Interest, if any, not then payable on the
Mortgage Loans or Contracts and (b) the amount by which the Prepayment
Interest Shortfall with respect to the preceding month exceeds the
aggregate Servicing Fees relating to mortgagor or obligor payments or
other recoveries distributed on such Distribution Date, in each case
allocated to such Class on the basis set forth in the related
Prospectus Supplement);

(ii) if distribution of the amount of interest calculated pursuant
to clause (i) above on prior Distribution Dates was not made in full on
such prior Distribution Dates, an amount equal to (a) the difference
between (x) the amount of interest which the holders of such
Certificates would have received on such prior Distribution Dates if
there had been sufficient funds available in the Certificate Account
and (y) the amount of interest actually distributed to such holders on
such prior Distribution Dates, together with interest on such
difference (to the extent permitted by applicable law) at the
applicable Pass-Through Rate of such Class (the "Unpaid Interest
Shortfall") less (b) the aggregate amount distributed on Distribution
Dates subsequent to such prior Distribution Dates with respect to the
Unpaid Interest Shortfall;

(iii) such Class's percentage, calculated as provided in the
related Prospectus Supplement, of (a) all scheduled payments of
principal due on each outstanding Mortgage Loan or Contract that became
due on the Due Date occurring in the month in which such Distribution
Date occurs, (b) all partial principal prepayments received in the
month preceding the month in which such Distribution Date occurs and
(c) except for Special Hazard Mortgage Loans or Special Hazard
Contracts covered by clause (iv) below, the Scheduled Principal Balance
of each Mortgage Loan or Contract which, during the month preceding the

<PAGE>

month in which such Distribution Date occurs, (i) was the subject of a
principal prepayment in full, (ii) became a Liquidated Mortgage Loan or
Liquidated Contract or (iii) was purchased from the Trust Fund as
provided in the Pooling and Servicing Agreement (as described in "The
Trust Funds" and "The Pooling and Servicing Agreement"); and

(iv) if the Special Hazard Termination Date (as defined below) has
occurred as a result of cumulative net losses on Special Hazard
Mortgage Loans or Special Hazard Contracts exceeding the applicable
Special Hazard Loss Amount (as defined below), such Class's specified
percentage of the Net Liquidation Proceeds and Net Insurance Proceeds
from any Mortgage Loan or Contract that became a Special Hazard
Mortgage Loan or Special Hazard Contract during the month preceding the
month in which such Distribution Date occurs, less the total amount of
delinquent installments of principal in respect of such Special Hazard
Mortgage Loan or Special Hazard Contract that were previously the
subject of distributions to the holders of such Class of Certificates
out of amounts otherwise distributable to the holders of the related
Subordinated Certificates and less the portion of such Net Liquidation
Proceeds and Net Insurance Proceeds allocable to interest on the Senior
Certificates;

provided that, if such Distribution Date falls on or after the Cross-Over
Date (i.e., the date on which the amount of principal payments on the
Mortgage Loans or Contracts to which the holders of the related Subordinated
Certificates are entitled has been reduced to zero as a result of the
allocation of losses to the Subordinated Certificates), then the Senior Class
Distribution Amount will instead equal the lesser of (x) the Pool
Distribution Amount and (y) the sum of the items referred to above plus the
amount by which such Senior Certificates' outstanding principal balance as of
such Distribution Date exceeds the Pool Scheduled Principal Balance as of
such Distribution Date. The "Scheduled Principal Balance" of a Mortgage Loan
or Contract for any Distribution Date is the unpaid principal balance of such
Mortgage Loan or Contract as specified in the amortization schedule at the
time relating thereto (before any adjustment to such schedule by reason of
bankruptcy, moratorium or similar waiver or grace period) as of the first day
of the month preceding the month in which such Distribution Date occurs after
giving effect to the payment of principal due on such first day of the month,
any partial prepayments applied on or prior to such first day of the month,
the addition to the principal of such Mortgage Loan or Contract on or prior
to such first day of the month of any Deferred Interest, and irrespective of
any delinquency in payment by the mortgagor or obligor. The "Pool Scheduled
Principal Balance" as of any Distribution Date is the aggregate of the
Scheduled Principal Balances of all Mortgage Loans or Contracts in a Trust
Fund for such Distribution Date.

If so provided in the applicable Prospectus Supplement, the Class
of Senior Certificates will also be entitled to receive its specified
percentage, referred to in clauses (y)(iii)(b) and (y)(iii)(c)(i) above, of
all partial principal prepayments and all principal prepayments in full on
the Mortgage Loans or Contracts in the related Trust Fund under the
circumstances or for the period of time specified therein, which will have
the effect of accelerating the amortization of the Class of Senior
Certificates while increasing the respective interest evidenced by the Class
of Subordinated Certificates in the related Trust Fund. Increasing the
respective interest of the Subordinated Certificates relative to that of the
Senior Certificates is intended to preserve the availability of the
subordination provided by the Subordinated Certificates.

If the Special Hazard Termination Date would occur on any
Distribution Date under the circumstances referred to in "Credit Support --
Subordination," the Senior Class Distribution Amount for each Class and
Subclass of Senior Certificates of such Series calculated as set forth in the
two preceding paragraphs will be modified to the extent described in such
section.

Amounts distributed to the Class of Senior Certificates on a
Distribution Date will be deemed to be applied first to the payment of
current interest, if any, due on such Certificates (i.e., the amount
calculated pursuant to clause (y)(i) of the third preceding paragraph),
second to the payment of any Unpaid Interest Shortfall (i.e., the amount
calculated pursuant to clause (y)(ii) of such paragraph) and third to the
payment of principal, if any, due on such Certificates (i.e., the aggregate
of the amounts calculated pursuant to clauses (y)(iii) and (y)(iv) of such
paragraph).

As indicated above, in the event that the Pool Distribution Amount
on any Distribution Date is not sufficient to make the full distribution of
current interest to the holders of Senior Certificates entitled to payments

<PAGE>

of interest, the difference between the amount of current interest which the
holders of such Certificates would have received on such Distribution Date if
there had been sufficient funds available and the amount actually distributed
will be added to the amount of interest which the holders of such
Certificates are entitled to receive on the next Distribution Date. Unless
otherwise specified in the related Prospectus Supplement, the amount of any
such interest shortfall so carried forward will bear interest (to the extent
permitted by applicable law) at the Pass-Through Rate applicable to such
Certificates or at such other rate as specified in the applicable Prospectus
Supplement.

If the Pool Distribution Amount is insufficient on any Distribution
Date to make the full distribution of principal due to the holders of Senior
Certificates, the percentage of principal payments to which the holders of
the Senior Certificates would be entitled on the immediately succeeding
Distribution Date will be increased, as more fully described below under
"Credit Support -- Subordination -- Shifting Interest Certificates." This
increase will have the effect of reducing, as a relative matter, the
respective interest of the holders of the related Subordinated Certificates
in future payments of principal on the related Mortgage Loans or Contracts.
If the Pool Distribution Amount is not sufficient to make full distribution
described above to the holders of the Class of Senior Certificates on any
Distribution Date, unless otherwise provided in the applicable Prospectus
Supplement, the holders of such Class will share in the funds actually
available in proportion to the respective amounts that such Class would have
received had the Pool Distribution Amount been sufficient to make the full
distribution of interest and principal due to such Class.

Unless otherwise provided in the related Prospectus Supplement, on
each Distribution Date the holders of the related Class of Subordinated
Certificates of a Series will be entitled to receive, out of the Pool
Distribution Amount, all amounts remaining and available for distribution to
them after deduction of the amounts required to be distributed to the holders
of all Senior Certificates of such Series.

EXAMPLE OF DISTRIBUTION TO STANDARD CERTIFICATEHOLDERS

The following chart sets forth an example of the application of the
foregoing provisions to the first two months of the related Trust Fund's
existence, assuming the Certificates are issued in the month of January, with
a Distribution Date on the 25th of each month and a Determination Date on the
15th of each month:

January 1(A). . . . . . . . . . . . . . . . .Cut-Off Date.
January 2 -- January 31(B). . . . . . . . . .The Servicer receives any
principal prepayments, Net
Liquidation Proceeds, Net Insurance
Proceeds and Repurchase Proceeds.
January 31(C) . . . . . . . . . . . . . . . .Record Date.
February 1 -- February 15(D). . . . . . . . .The Servicer receives
scheduled payments of principal and
interest due on February 1.
February 15(E). . . . . . . . . . . . . . . .Determination Date.
February 25(F). . . . . . . . . . . . . . . .Distribution Date.

Succeeding monthly periods follow the pattern of (B) through (F), except that
the period in (B) begins on the first of the month.

(A) The initial unpaid principal balance of the Mortgage Loans or Contracts
in a Trust Fund would be the aggregate unpaid principal balance of the
Mortgage Loans or Contracts at the close of business on January 1,
after deducting principal payments due on or before such date. Those
principal payments due on or before January 1 and the related interest
payments would not be part of the Trust Fund and would be remitted by
the Servicer to the Depositor when received.

(B) Principal prepayments, Net Liquidation Proceeds, Net Insurance Proceeds
and Repurchase Proceeds received during this period would be credited to
the Certificate Account for distribution to Certificateholders on the
February 25 Distribution Date. To the extent funds are available from
the aggregate Servicing Fees relating to mortgagor payments or other
recoveries distributed on the related

<PAGE>

Distribution Date, the Servicer would make an additional payment to
Certificateholders with respect to any Prepayment Interest Shortfall
realized during this period.

(C) Distributions in the month of February will be made to
Certificateholders of record at the close of business on this date.

(D) Scheduled monthly payments on the Mortgage Loans or Contracts due on
February 1 will be deposited in the Certificate Account as received by
the Servicer. Principal prepayments, Net Liquidation Proceeds, Net
Insurance Proceeds and Repurchase Proceeds received during this period,
will be deposited in the Certificate Account but will not be distributed
to Certificateholders on the February 25 Distribution Date. Instead,
such amounts will be credited to the Certificate Account for
distribution to Certificateholders on the March 25 Distribution Date.

(E) As of the close of business on February 15, a determination will be made
of the amounts of Advances and the amounts of principal and interest
which will be distributed to the Certificateholders. Those scheduled
payments due on or before February 1 which have been received on or
before February 15 and those principal prepayments, Net Liquidation
Proceeds, Net Insurance Proceeds and Repurchase Proceeds received during
the period commencing January 2 and ending on January 31 will be
distributed to Certificateholders on the February 25 Distribution Date.
In addition, the amounts payable in respect of any form of credit
enhancement will be calculated in accordance with the related Pooling
and Servicing Agreement.

(F) Unless otherwise so specified in the related Prospectus Supplement, the
Servicer or the Paying Agent, will make distributions to
Certificateholders on the 25th day of each month, or if such 25th day is
not a business day, on the next business day.

DISTRIBUTIONS TO MULTI-CLASS CERTIFICATEHOLDERS

VALUATION OF MORTGAGE LOANS AND CONTRACTS

If specified in the Prospectus Supplement relating to a Series of
Certificates having one or more Classes or Subclasses of Multi-Class
Certificates, for purposes of establishing the principal amount of Mortgage
Loans or Contracts that will be included in a Trust Fund for such Series,
each Mortgage Loan or Contract to be included in such Trust Fund will be
assigned an initial "Pool Value." Unless otherwise specified in the
applicable Prospectus Supplement, the Pool Value of each Mortgage Loan or
Contract in the Trust Fund for such Series will be the Stated Amount of
Certificates of such Series which, based upon certain assumptions and
regardless of any prepayments on such Mortgage Loans or Contracts, can be
supported by the scheduled payments of principal and interest on such
Mortgage Loans or Contracts (net of the Fixed Retained Yield on such Mortgage
Loans or Contracts, if any, and the applicable Servicing Fee), together with
reinvestment earnings thereon, if any, at the Assumed Reinvestment Rate for
the period specified in the related Prospectus Supplement and amounts
available to be withdrawn (if applicable) from any reserve fund for such
Series, all as specified in the applicable Prospectus Supplement. In
calculating the Pool Value of a Mortgage Loan or Contract included in the
Trust Fund, future distributions on such Mortgage Loan or Contract will be
determined based on scheduled payments on such Mortgage Loan or Contract.
Any similar Mortgage Loans or Contracts may be aggregated into one or more
groups (each, a "Pool Value Group") each of which will be assigned an
aggregate Pool Value calculated as if all such Mortgage Loans or Contracts in
the Pool Value Group constituted a single loan having the highest interest
rate and the longest maturity of any such loan for such Pool Value Group.
There are a number of alternative means of determining the Pool Value of a
Mortgage Loan, Contract or Pool Value Group, including determinations based
on the discounted present value of the remaining scheduled payments of
principal and interest thereon and determinations based on the relationship
between the Mortgage Rates or Contract Rates borne thereby and the Interest
Rates of the Multi-Class Certificates of the related Series. The Prospectus
Supplement for each Series will describe the method or methods (and related
assumptions) used to determine the Pool Values of the Mortgage Loans or
Contracts or the Pool Value Groups for such Series.

<PAGE>

The "Assumed Reinvestment Rate" for a Series of Multi-Class
Certificates will be the highest rate permitted by the nationally recognized
statistical rating agency or agencies rating such Series of Multi-Class
Certificates or a rate insured by means of a surety bond, guaranteed
investment contract or similar arrangement satisfactory to such rating agency
or agencies. If the Assumed Reinvestment Rate is so insured, the related
Prospectus Supplement will set forth the terms of such arrangement.

DISTRIBUTIONS OF INTEREST

The Trustee will make distributions of interest on each Class of
the Multi-Class Certificates from the date and at the rates per annum
(calculated on the Stated Amount or Notional Amount of such Class) specified
in, or as otherwise determined in the manner set forth in, the related
Prospectus Supplement (and unless otherwise specified in such Prospectus
Supplement, calculated on the basis of a 360-day year of twelve 30-day
months) and in accordance with the priorities set forth in the related
Prospectus Supplement. Interest on all Classes of Multi-Class Certificates
of a Series, other than Compound Interest Certificates, will be distributed
on the Distribution Dates for such Series specified in the related Prospectus
Supplement. Unless otherwise specified in the related Prospectus Supplement,
distributions of interest on each Class of Compound Interest Certificates
will be made on each Distribution Date after the Stated Amount of all
Multi-Class Certificates of such Series having a Last Scheduled Distribution
Date prior to the Last Scheduled Distribution Date of such Class of Compound
Interest Certificates has been reduced to zero. Prior to that time, interest
on such Class of Compound Interest Certificates will be added to the Stated
Amount thereof on each Distribution Date. Such Class of Compound Interest
Certificates will thereafter receive distributions of interest on the Stated
Amount thereof as so adjusted.

DISTRIBUTIONS IN REDUCTION OF STATED AMOUNT FOR A SERIES OF MULTI-CLASS
CERTIFICATES NOT INCLUDING A SUBORDINATION FEATURE

The Stated Amount of a Multi-Class Certificate of a Series at any
time will represent the maximum specified dollar amount (excluding interest
distributions, but including, in the case of Compound Interest Certificates,
interest which has not been distributed and which has been added to the
Stated Amount thereof) to which the holder thereof is entitled from the cash
flow on the assets included in the Trust Fund for such Series and will
decline to the extent distributions in reduction of Stated Amount are
received by such holder. The initial Stated Amount of each Class of
Multi-Class Certificates will be specified in the applicable Prospectus
Supplement. On each Distribution Date, distributions in reduction of Stated
Amount of the Classes of Multi-Class Certificates will be made, to the extent
funds are available, to the holders of the Multi-Class Certificates of such
Series then entitled to receive such distributions, in the order and in the
amounts specified in the related Prospectus Supplement. Distributions in
reduction of Stated Amount may be allocated among Classes of Multi-Class
Certificates in order to provide limited protection to certain Classes
against an increase in the weighted average life of such Classes as a result
of a slower than expected or scheduled rate of principal prepayments on the
Mortgage Loans ("extension protection"). In addition, distributions in
reduction of Stated Amount may be allocated among Classes of Multi-Class
Certificates in order to provide limited protection to certain Classes
against a reduction in the weighted average life of such Classes as a result
of a faster than expected or scheduled rate or principal prepayments on the
Mortgage Loans ("call protection"). By virtue of such allocations of
distributions in reduction of Stated Amount to provide extension protection
and call protection to some Classes, the weighted average lives of certain
other Classes may be more greatly affected by a faster or slower than
expected or scheduled rate of principal prepayments on the Mortgage Loans.
See "Prepayment and Yield Considerations -- Weighted Average Life of
Certificates." Distributions in reduction of Stated Amount with respect to
any Class or Subclass of Multi-Class Certificates will be made on a pro rata
or random lot or such other basis as is specified in the applicable
Prospectus Supplement.

Unless otherwise specified in the Prospectus Supplement relating to
a Series of Certificates, the aggregate amount that will be distributed in
reduction of Stated Amount to holders of Multi-Class Certificates of a Series
then entitled thereto on any Distribution Date for such Series will equal, to
the extent funds are available, the sum of (i) the Multi-Class Certificate
Distribution Amount (as defined herein) and (ii) if and to the extent
specified in the related Prospectus Supplement, the applicable percentage of
the Spread specified in such Prospectus Supplement.

<PAGE>

Unless otherwise specified in the applicable Prospectus Supplement,
the "Multi-Class Certificate Distribution Amount" with respect to a
Distribution Date for a Series of Multi-Class Certificates will equal the
amount, if any, by which the Stated Amount of the Multi-Class Certificates of
such Series (after taking into account the amount of interest to be added to
the Stated Amount of any Class of Compound Interest Certificates on such
Distribution Date and before giving effect to any distributions in reduction
of Stated Amount on such Distribution Date) exceeds the Pool Value (as
defined herein) of the Mortgage Loans or Contracts included in the Trust Fund
for such Series as of the end of the period (a "Due Period") specified in the
related Prospectus Supplement. For purposes of determining the Multi-Class
Certificate Distribution Amount with respect to a Distribution Date for a
Series of Certificates having one or more Classes of Multi-Class
Certificates, the Pool Value of the Mortgage Loans or Contracts included in
the Trust Fund for such Certificates will be reduced to take into account all
distributions thereon received by the Trustee during the applicable Due
Period.

Unless otherwise specified in the applicable Prospectus Supplement,
"Spread" with respect to a Distribution Date for a Series of Multi-Class
Certificates will be the excess of (a) the sum of (i) all payments of
principal and interest received on the related Mortgage Loans or Contracts
(net of the Fixed Retained Yield, if any, and the applicable Servicing Fee,
if any, with respect to such Mortgage Loans or Contracts) in the Due Period
applicable to such Distribution Date and, in the case of the first Due
Period, any amount deposited by the Depositor in the Certificate Account on
the Closing Date, (ii) income from reinvestment thereof, if any, and (iii) to
the extent specified in the applicable Prospectus Supplement, the amount of
cash withdrawn from any reserve fund or available under any other form of
credit enhancement for such Series since the prior Distribution Date (or
since the Closing Date, in the case of the first Distribution Date) and
required to be deposited in the Certificate Account for such Series, over (b)
the sum of (i) all required to be deposited on the Multi-Class Certificates
of such Series on such Distribution Date, (ii) the Multi-Class Certificate
Distribution Amount for such Distribution Date, (iii) if applicable, any
Special Distributions (as described below) in reduction of the Stated Amount
of the Multi-Class Certificates of such Series made since the preceding
Distribution Date (or since the Closing Date in the case of the first
Distribution Date), including any accrued interest distributed with such
Special Distributions, (iv) all administrative and other expenses relating to
the Trust Fund payable during the Due Period preceding such Distribution
Date, other than such expenses which are payable by the Servicer, if any, and
(v) any amount required to be deposited into any reserve fund. Reinvestment
income on any reserve fund will not be included in Spread except to the
extent that reinvestment income is taken into account in calculating the
initial amount required to be deposited in such reserve fund, if any.

SUBORDINATION

The Prospectus Supplement relating to a Series which includes one
or more Classes or Subclasses of Multi-Class Certificates may specify that
the rights of one or more of such Classes or Subclasses (or the related
Residual Certificates of such Series) will be Senior to, or subordinated to,
the rights of one or more other Classes of Certificates of such Series.

If a Series which includes one or more Classes or Subclasses of
Multi-Class Certificates includes a subordination feature, on each
Distribution Date, distributions of interest, if any, will be made in
accordance with the preferential priorities specified in the related
Prospectus Supplement and from the date and at the Interest Rates specified
therein or as otherwise specified therein and distributions in reduction of
Stated Amount, if any, will be made to the holders of the Multi-Class
Certificates in the amount and in the manner specified in and in accordance
with the preferential distribution provisions described in the related
Prospectus Supplement. If so specified in the related Prospectus Supplement
the Subordinated Amount will be reduced as the pool experiences losses, as
well as through seasoning and prepayment of the Mortgage Loans or Contracts
included in the Trust Fund.

SPECIAL DISTRIBUTIONS

To the extent specified in the Prospectus Supplement relating to a
Series which includes Multi-Class Certificates which have less frequent than
monthly Distribution Dates, any such Class or Subclass having Stated Amounts
may receive special distributions in reduction of Stated Amount, together
with accrued interest on the amount of such reduction ("Special
Distributions") in any month, other than a month in which a Distribution Date
occurs, if, as a result of principal prepayments on the Mortgage Loans or
Contracts, the Trustee determines,

<PAGE>

based on assumptions specified in the applicable Pooling and Servicing
Agreement, that the amount of cash anticipated to be available on the next
Distribution Date for such Series to be distributed to the holders of such
Multi-Class Certificates may be less than the sum of (i) the interest
scheduled to be distributed to such holders and (ii) the amount to be
distributed in reduction of Stated Amount of such Multi-Class Certificates on
such Distribution Date. Any such Special Distributions will be made in the
same priority and manner as distributions in reduction of Stated Amount would
be made on the next Distribution Date.

To the extent specified in the related Prospectus Supplement, one
or more Classes of Certificates of a Series may be subject to special
distributions in reduction of the Stated Amount thereof at the option of the
holders of such Certificates, or to mandatory distributions by the Servicer.
Any such distributions with respect to a Series will be described in the
applicable Prospectus Supplement and will be on such terms and conditions as
described therein and specified in the Pooling and Servicing Agreement for
such Series.

LAST SCHEDULED DISTRIBUTION DATE

The "Last Scheduled Distribution Date" for each Class of
Multi-Class Certificates of a Series having a Stated Amount, to the extent
Last Scheduled Distribution Dates are specified in the applicable Prospectus
Supplement, is the latest date on which (based upon the assumptions set forth
in the applicable Prospectus Supplement) the Stated Amount of such Class is
expected to be reduced to zero. Since the rate of distributions in reduction
of Stated Amount of each such Class of Multi-Class Certificates will depend
upon, among other things, the rate of payment (including prepayments) of the
principal of the Mortgage Loans or Contracts, the actual last Distribution
Date for any such Class may occur significantly earlier than its Last
Scheduled Distribution Date. To the extent of any delays in receipt of any
payments, insurance proceeds or liquidation proceeds with respect to the
Mortgage Loans or Contracts included in any Trust Fund, the last Distribution
Date for any such Class may occur later than its Last Scheduled Distribution
Date. The rate of payments on the Mortgage Loans or Contracts in the Trust
Fund for any Series of Certificates will depend upon their particular
characteristics, as well as on the prevailing level of Interest Rates from
time to time and other economic factors, and no assurance can be given as to
the actual prepayment experience of the Mortgage Loans or Contracts. See
"Prepayment and Yield Considerations."

<PAGE>

CREDIT SUPPORT

SUBORDINATION

CERTIFICATES OTHER THAN SHIFTING INTEREST CERTIFICATES

If so specified in the Prospectus Supplement relating to a Series
of Certificates as to which the related Trust Fund consists of Mortgage Loans
or Contracts, other than a Series of Shifting Interest Certificates, the
rights of the holders of a Class of Subordinated Certificates to receive
distributions will be subordinated to the rights of the holders of a Class of
Senior Certificates, to the extent of the Subordinated Amount specified in
such Prospectus Supplement. The Subordinated Amount will be reduced by an
amount equal to Aggregate Losses and will be further reduced in accordance
with a schedule described in the applicable Prospectus Supplement. Aggregate
Losses as defined in the applicable Pooling and Servicing Agreement for any
given period will equal the aggregate amount of delinquencies, losses and
other deficiencies in the amounts due to the Senior Certificateholders paid
or borne by the Subordinated Certificateholders (but excluding any payments
of Senior Class Shortfall Accruals or interest thereon) ("Payment
Deficiencies") during such period, whether such aggregate amount results by
way of withdrawals from the Subordination Reserve Fund (including, prior to
the time that the Subordinated Amount is reduced to zero, any such withdrawal
of amounts attributable to the Initial Deposit, if any), reductions in
amounts that would otherwise have been distributable to the Subordinated
Certificateholders on any Distribution Date, or otherwise; less the aggregate
amount of previous Payment Deficiencies recovered by the related Trust Fund
during such period in respect of the Mortgage Loans or Contracts giving rise
to such Previous Payment Deficiencies, including, without limitation, such
recoveries resulting from the receipt of delinquent principal or interest
payments, Liquidation Proceeds and insurance proceeds (net, in each case, of
any applicable Fixed Retained Yield and any unpaid Servicing Fee to which the
Servicer is entitled, foreclosure costs and other servicing costs, expenses
and advances relating to such Mortgage Loans or Contracts).

The protection afforded to the Senior Certificateholders by the
subordination feature described above will be effected both by the
preferential right, to the extent specified in the applicable Prospectus
Supplement, of such Senior Certificateholders to receive current
distributions on the related Mortgage Loans or Contracts that, but for such
subordination, would otherwise have been distributable to the Subordinated
Certificateholders from the related Trust Fund (to the extent of the
Subordinated Amount for such Series) and (unless otherwise specified in the
applicable Prospectus Supplement) by the establishment and maintenance of a
Subordination Reserve Fund for such Series. Unless otherwise specified in
the applicable Prospectus Supplement, the Subordination Reserve Fund will not
be a part of the Trust Fund. The Subordination Reserve Fund may be funded
initially with an initial deposit by the Depositor (the "Initial Deposit") in
an amount set forth in the applicable Prospectus Supplement. Following the
initial issuance of the Certificates of a Series and until the balance of the
Subordination Reserve Fund (without taking into account the amount of any
Initial Deposit) first equals or exceeds the Specified Subordination Reserve
Fund Balance set forth in the applicable Prospectus Supplement, the Servicer
will withhold all amounts that would otherwise have been distributable to the
Subordinated Certificateholders and deposit such amounts (less any portions
thereof required to be distributed to Senior Certificateholders as described
below) in the Subordination Reserve Fund. The time necessary for the
Subordination Reserve Fund of a Series to reach the applicable Specified
Subordination Reserve Fund Balance for such Series after the initial issuance
of the Certificates, and the period for which such balance is maintained,
will be affected by the prepayment, delinquency and foreclosure or
repossession experience of the Mortgage Loans or Contracts in the related
Trust Fund and cannot be accurately predicted. Unless otherwise specified in
the applicable Prospectus Supplement, after the amount in the Subordination
Reserve Fund (without taking into account the amount of any Initial Deposit)
for a Series first equals or exceeds the applicable Specified Subordination
Reserve Fund Balance, the Servicer will withhold from the Subordinated
Certificateholders and will deposit in the Subordination Reserve Fund such
portion of the principal payments on the Mortgage Loans or Contracts
otherwise distributable to the Subordinated Certificateholders as may be
necessary to maintain the Subordination Reserve Fund (without taking into
account the amount of any Initial Deposit) at the Specified Subordination
Reserve Fund Balance. The Prospectus Supplement for each Series will set
forth the amount of the Specified Subordination Reserve Fund Balance
applicable from time to time and the extent, if any, to which the Specified
Subordination Reserve Fund Balance may be reduced. Unless otherwise specified
in the applicable Prospectus Supplement, the Specified Subordination Reserve
Fund Balance for a Series will not be required to exceed the Subordinated
Amount.

<PAGE>

If on any Distribution Date while the Subordinated Amount exceeds
zero, there is a Senior Class Shortfall, the Senior Class Certificateholders
will be entitled to receive from current payments on the Mortgage Loans or
Contracts that would otherwise have been distributable to Subordinated
Certificateholders the amount of such Senior Class Shortfall. If such
current payments are insufficient, an amount equal to the lesser of: (i) the
entire amount on deposit in the Subordination Reserve Fund available for such
purpose; or (ii) the amount necessary to cover the Senior Class Shortfall
will be withdrawn from the Subordination Reserve Fund. Amounts representing
investment earnings on amounts held in the Subordination Reserve Fund will
not be available to make payments to the Senior Certificateholders. If
current payments on the Mortgage Loans or Contracts and amounts available in
the Subordination Reserve Fund are insufficient to pay the entire Senior
Class Shortfall, then amounts held in the Certificate Account for future
distributions will be distributed as necessary to the Senior
Certificateholders.

In the event the Subordination Reserve Fund is depleted before the
Subordinated Amount is reduced to zero, the Senior Certificateholders will
continue to have a preferential right, to the extent specified in the
applicable Prospectus Supplement, to receive current distributions of amounts
that would otherwise have been distributable to the Subordinated
Certificateholders to the extent of the then Subordinated Amount.

After the Subordinated Amount is reduced to zero, the Senior
Certificateholders of a Series will, unless otherwise specified in the
applicable Prospectus Supplement, nonetheless have a preferential right to
receive payment of Senior Class Shortfall Accruals and interest which has
accrued thereon from amounts that would otherwise have been distributable to
the Subordinated Certificateholders. The Senior Certificateholders will
otherwise bear their proportionate share of any losses realized on the Trust
Fund in excess of the Subordinated Amount.

Unless otherwise specified in the related Prospectus Supplement,
amounts held from time to time in the Subordination Reserve Fund for a Series
will be held for the benefit of the Senior Certificateholders and
Subordinated Certificateholders of such Series until withdrawn from the
Subordination Reserve Fund as described below; PROVIDED, HOWEVER, that the
portion of the Initial Deposit, if any, which has not been recovered by the
Servicer and any undistributed investment earnings attributable thereto will
continue to be the property of the Servicer and will ultimately be
recoverable by the Servicer.

Amounts withdrawn from the Subordination Reserve Fund for a Series
and deposited in the Certificate Account for such Series will be charged
first against amounts in the Subordination Reserve Fund other than the
Initial Deposit, if any, for such Series, and thereafter against such Initial
Deposit.

If so specified in the related Prospectus Supplement, if the
Subordinated Amount for a Series is reduced to zero and funds remain in the
Subordination Reserve Fund, an amount (the "Advance Reserve") equal to the
lesser of (i) the amount of the Initial Deposit and (ii) such funds remaining
in the Subordination Reserve Fund at the time the Subordinated Amount is
reduced to zero, will remain in the Subordination Reserve Fund and be
available in certain circumstances for withdrawal to make Advances.

Any amounts in the Subordination Reserve Fund for a Series on a
Distribution Date in excess of the Specified Subordination Reserve Fund
Balance on such date prior to the time the Subordinated Amount for such
Series is reduced to zero, and any amounts remaining in the Subordination
Reserve Fund for such Series upon termination of the trust created by the
applicable Pooling and Servicing Agreement, will be paid, unless otherwise
specified in the applicable Prospectus Supplement, to the Subordinated
Certificateholders of such Series in accordance with their pro rata ownership
thereof, or, in the case of a Series with respect to which an election has
been made to treat the Trust Fund as a REMIC, first to the Residual
Certificateholders (to the extent of any portion of the Initial Deposit, if
any, and undistributed reinvestment earnings attributable thereto), and
second to the Subordinated Certificateholders of such Series, in each case in
accordance with their pro rata ownership thereof. Amounts permitted to be
distributed from the Subordination Reserve Fund for a Series will no longer
be subject to any claims or rights of the Senior Certificateholders of such
Series.

Funds in the Subordination Reserve Fund for a Series will be
invested as provided in the applicable Pooling and Servicing Agreement in
certain types of eligible investments ("Eligible Investments"). If an
election has been made to treat the Trust Fund (or one or more pools of
segregated assets therein) as a REMIC, no more

<PAGE>

than 30% of the income or gain of the Subordination Reserve Fund in any
taxable year may be derived from the sale or other disposition of investments
held for less than three months in the Subordination Reserve Fund. The
earnings on such investments will be withdrawn and paid to the Subordinated
Certificateholders of such Series or to the holders of the Residual
Certificates, in the event that an election has been made to treat the Trust
Fund (or a pool of segregated assets therein) with respect to such Series as
a REMIC, in accordance with their respective interests. Investment income
earned on amounts held in the Subordination Reserve Fund will not be
available for distribution to the Senior Certificateholders or otherwise
subject to any claims or rights of the Senior Certificateholders.

Eligible Investments for monies deposited in the Subordination
Reserve Fund will be specified in the applicable Pooling and Servicing
Agreement and, unless otherwise provided in the applicable Prospectus
Supplement, will mature no later than the next Distribution Date.

Holders of Subordinated Certificates of a Series will not be
required to refund any amounts which have been properly distributed to them,
regardless of whether there are sufficient funds to distribute to Senior
Certificateholders the amounts to which they are entitled.

If specified in the related Prospectus Supplement, the
Subordination Reserve Fund may be funded in any other manner acceptable to
each Rating Agency and consistent with an election, if any, to treat the
Trust Fund (or one or more pools of segregated assets therein) for such
Series as a REMIC, as will be more fully described in such Prospectus
Supplement.

SHIFTING INTEREST CERTIFICATES

If specified in the applicable Prospectus Supplement, the rights of
the holders of the Subordinated Certificates of a Series of Shifting Interest
Certificates to receive distributions with respect to the Mortgage Loans or
Contracts in the related Trust Fund will be subordinated to such rights of
the holders of the Senior Certificates of such Series to the extent described
below, except as otherwise set forth in such Prospectus Supplement. This
subordination is intended to enhance the likelihood of regular receipt by
holders of Senior Certificates of the full amount of scheduled monthly
payments of principal and interest due them and to provide limited protection
to the holders of the Senior Certificates against losses due to mortgagor or
obligor defaults.

The protection afforded to the holders of Senior Certificates of
such a Series by the subordination feature described above will be effected
by the preferential right of such holders to receive, prior to any
distribution being made in respect of the related Subordinated Certificates,
current distributions on the related Mortgage Loans or Contracts of principal
and interest due them on each Distribution Date out of the funds available
for distribution on such date in the related Certificate Account and, to the
extent described below, by the right of such holders to receive future
distributions on the Mortgage Loans or Contracts that would otherwise have
been payable to the holders of Subordinated Certificates.

Losses realized on Liquidated Mortgage Loans or Liquidated
Contracts (other than certain Liquidated Mortgage Loans that are Special
Hazard Mortgage Loans or Liquidated Contracts that are Special Hazard
Contracts as described below) will be allocated to the holders of
Subordinated Certificates through a reduction of the amount of principal
payments on the Mortgage Loans or Contracts to which such holders are
entitled. Prior to the Cross-Over Date, holders of Senior Certificates of
each Class entitled to a percentage of principal payments on the related
Mortgage Loans or Contracts will be entitled to receive, as part of their
respective Senior Class Distribution Amounts payable on each Distribution
Date in respect of each Mortgage Loan or Contract that became a Liquidated
Mortgage Loan or Liquidated Contract in the preceding month (subject to the
additional limitation described below applicable to Liquidated Mortgage Loans
that are Special Hazard Mortgage Loans or Liquidated Contracts that are
Special Hazard Contracts), their respective shares of the Scheduled Principal
Balance of each such Liquidated Mortgage Loan or Liquidated Contract,
together with interest accrued at the Pass-Through Rate for such Class,
irrespective of whether Net Liquidation Proceeds and Net Insurance Proceeds
realized thereon are sufficient to cover such amount. For a description of
the full Senior Class Distribution Amount payable to holders of Senior
Certificates of each Series, see "Description of the Certificates --
Distributions to Standard Certificateholders -- Shifting Interest
Certificates."

<PAGE>

On each Distribution Date occurring on or after the Cross-Over
Date, holders of Senior Certificates of each Class entitled to a percentage
of principal payments will generally receive, as part of their respective
Senior Class Distribution Amounts, only their respective shares of the Net
Liquidation Proceeds and Net Insurance Proceeds actually realized in respect
of the applicable Liquidated Mortgage Loans or Liquidated Contracts after
reimbursement to the Servicer of any previously reimbursed Advances made in
respect of such Liquidated Mortgage Loans or Liquidated Contracts. See
"Description of the Certificates -- Distributions to Standard
Certificateholders -- Shifting Interest Certificates."

In the event that a Mortgage Loan becomes a Liquidated Mortgage
Loan or a Contract becomes a Liquidated Contract as a result of a hazard not
insured against under a Standard Hazard Insurance Policy (a "Special Hazard
Mortgage Loan" or "Special Hazard Contract"), the holders of Senior
Certificates of each Class entitled to a percentage of principal payments on
the related Mortgage Loans or Contracts will be entitled to receive in
respect of each Mortgage Loan or Contract which became a Special Hazard
Mortgage Loan or Special Hazard Contract in the preceding month, as part of
their respective Senior Class Distribution Amounts payable on each
Distribution Date prior to the Special Hazard Termination Date, their
respective shares of the Scheduled Principal Balance of such Mortgage Loan or
Contract, together with interest accrued at the applicable Pass-Through Rate,
rather than their respective shares of Net Liquidation Proceeds and Net
Insurance Proceeds actually realized. The Special Hazard Termination Date
for a Series of Certificates will be the earlier to occur of (i) the date on
which cumulative net losses in respect of Special Hazard Mortgage Loans or
Special Hazard Contracts exceed the Special Hazard Loss Amount specified in
the applicable Prospectus Supplement or (ii) the Cross-Over Date. Since the
amount of the Special Hazard Loss Amount for a Series of Certificates is
expected to be significantly less than the amount of principal payments on
the Mortgage Loans or Contracts to which the holders of the Subordinated
Certificates of such Series are initially entitled (such amount being subject
to reduction, as described above, as a result of allocation of losses on
other Liquidated Mortgage Loans or Liquidated Contracts as well as Special
Hazard Mortgage Loans or Special Hazard Contracts), the holders of
Subordinated Certificates of such Series will bear the risk of losses in the
case of Special Hazard Mortgage Loans or Special Hazard Contracts to a lesser
extent than they will bear losses on other Liquidated Mortgage Loans or
Liquidated Contracts. Once the Special Hazard Termination Date has occurred,
holders of Senior Certificates of each Class entitled to payments of
principal will be entitled to receive, as part of their respective Senior
Class Distribution Amounts, only their respective shares of Net Liquidation
Proceeds and Net Insurance Proceeds realized on Special Hazard Mortgage Loans
or Special Hazard Contracts (less the total amount of delinquent installments
in respect of each Special Hazard Mortgage Loan or Special Hazard Contract
that were previously the subject of distributions to the holders of the
Senior Certificates and less the portion of such Net Liquidation Proceeds and
Net Insurance Proceeds allocable to interest). The outstanding principal
balance or notional amount of each such Class will, however, be reduced by
such Class's specified percentage of the Scheduled Principal Balance of each
such Special Hazard Mortgage Loan or Special Hazard Contract. See
"Description of the Certificates -- Distributions to Standard
Certificateholders -- Shifting Interest Certificates."

If the cumulative net losses on all Mortgage Loans or Contracts in
a Trust Fund that have become Special Hazard Mortgage Loans or Special Hazard
Contracts in the months prior to the month in which a Distribution Date
occurs would exceed the Special Hazard Loss Amount for a Series of
Certificates, that portion of the Senior Class Distribution Amount as of such
Distribution Date for each Class of Senior Certificates of such Series
entitled to a percentage of principal payments on the Mortgage Loans or
Contracts in the related Trust Fund attributable to Mortgage Loans or
Contracts which became Special Hazard Mortgage Loans or Special Hazard
Contracts in the month preceding the month of such Distribution Date will be
calculated not on the basis of the Scheduled Principal Balances of such
Special Hazard Mortgage Loans or Special Hazard Contracts but rather will be
computed as an amount equal to the lesser of (a) such Class's percentage,
calculated as provided in the related Prospectus Supplement, of the Scheduled
Principal Balance of such Special Hazard Mortgage Loans or Special Hazard
Contracts and (b) the sum of (i) the excess of the Special Hazard Loss Amount
over the cumulative net losses on all Mortgage Loans or Contracts that became
Special Hazard Mortgage Loans or Special Hazard Contracts in months prior to
the month of such Distribution Date and (ii) the excess of (a) the product of
the percentage of principal payments to which such Class is entitled
multiplied by the aggregate Net Liquidation Proceeds and Net Insurance
Proceeds (net of the portion of each thereof allocable to interest) of the
Mortgage Loans or Contracts which became Special Hazard Mortgage Loans or
Special Hazard Contracts in the month preceding the month of such
Distribution Date over (b) the total amount of delinquent installments in
respect of such Special Hazard

<PAGE>

Mortgage Loans or Special Hazard Contracts that were previously the subject
of distributions to such Class paid out of amounts otherwise distributable to
the holders of the related Subordinated Certificates.

Although the subordination feature described above is intended to
enhance the likelihood of timely payment of principal and interest to the
holders of Senior Certificates, shortfalls could result in certain
circumstances. For example, a shortfall in the payment of principal
otherwise due the holders of Senior Certificates could occur if losses
realized on the Mortgage Loans or Contracts in a Trust Fund were
exceptionally high and were concentrated in a particular month. See
"Description of the Certificates -- Distributions to Standard
Certificateholders -- Shifting Interest Certificates" for a description of
the consequences of any shortfall of principal or interest.

The holders of Subordinated Certificates will not be required to
refund any amounts previously properly distributed to them, regardless of
whether there are sufficient funds on a subsequent Distribution Date to make
a full distribution to holders of each Class of Senior Certificates of the
same Series.

OTHER CREDIT ENHANCEMENT

In addition to subordination as discussed above, credit enhancement
may be provided with respect to any Series of Certificates in any other
manner which may be described in the applicable Prospectus Supplement,
including, but not limited to, credit enhancement through an alterative form
of subordination and/or one or more of the methods described below.

LIMITED GUARANTEE

If so specified in the Prospectus Supplement with respect to a
Series of Certificates, credit enhancement may be provided in the form of a
limited guarantee issued by a guarantor named therein.

LETTER OF CREDIT

Alternative credit support with respect to a Series of Certificates
may be provided by the issuance of a letter of credit by the bank or
financial institution specified in the applicable Prospectus Supplement. The
coverage, amount and frequency of any reduction in coverage provided by a
letter of credit issued with respect to a Series of Certificates will be set
forth in the Prospectus Supplement relating to such Series.

POOL INSURANCE POLICIES

If so specified in the Prospectus Supplement relating to a Series
of Certificates, the Depositor will obtain a pool insurance policy for the
Mortgage Loans or Contracts 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 to the extent a related Mortgage
Loan or Contract is not covered by any primary mortgage insurance policy.
The amount and terms of any such coverage will be set forth in the Prospectus
Supplement.

SPECIAL HAZARD INSURANCE POLICIES OR OTHER FORMS OF SUPPORT FOR SPECIAL
HAZARD LOSSES

If so specified in the applicable Prospectus Supplement, for each
Series of Certificates as to which a pool insurance policy is provided, the
Depositor will also obtain a special hazard insurance policy for the related
Trust Fund in the amount set forth in such Prospectus Supplement. The
special hazard insurance policy will, subject to the limitations described in
the applicable Prospectus Supplement, protect against loss by reason of
damage to Mortgaged Properties or Manufactured Homes caused by certain
hazards not insured against under the standard form of hazard insurance
policy for the respective states in which the Mortgaged Properties or
Manufactured Homes are located. The amount and terms of any such coverage
will be set forth in the Prospectus Supplement.

<PAGE>

SURETY BONDS

If so specified in the Prospectus Supplement relating to a Series
of Certificates, credit support with respect to one or more Classes of
Certificates of a Series may be provided by the issuance of a surety bond
issued by a financial guarantee insurance company specified in the applicable
Prospectus Supplement. The coverage, amount and frequency of any reduction
in coverage provided by a surety bond will be set forth in the Prospectus
Supplement relating to such Series.

FRAUD COVERAGE

If so specified in the applicable Prospectus Supplement, losses
resulting fraud, dishonesty or misrepresentation in connection with the
origination or sale of the Mortgage Loans or Contracts may be covered to a
limited extent by representations and warranties to the effect that no such
fraud, dishonesty or misrepresentation had occurred, by a reserve fund,
letter of credit, or other method. The amount and terms of any such coverage
will be set forth in the Prospectus Supplement.

MORTGAGOR BANKRUPTCY BOND

If so specified in the applicable Prospectus Supplement, losses
resulting from a bankruptcy proceeding relating to a mortgagor or obligor
affecting the Mortgage Loans or Contracts in a Trust Fund with respect to a
Series of Certificates will be covered under a mortgagor bankruptcy bond (or
any other instrument that will not result in a downgrading of the rating of
the Certificates of a Series by the Rating Agency that rated such Series).
Any mortgagor bankruptcy bond or such other instrument will provide for
coverage in an amount meeting the criteria of the Rating Agency rating the
Certificates of the related Series, which amount will be set forth in the
related Prospectus Supplement. The amount and terms of any such coverage
will be set forth in the Prospectus Supplement.

OTHER INSURANCE, GUARANTEES AND SIMILAR INSTRUMENTS OR AGREEMENTS

If specified in the related Prospectus Supplement, a Trust Fund may
include in lieu of some or all of the foregoing or in addition thereto third
party guarantees, and other arrangements for maintaining timely payments or
providing additional protection against losses on the assets included in such
Trust Fund, paying administrative expenses, or accomplishing such other
purpose as may be described in the Prospectus Supplement. The Trust Fund may
include a guaranteed investment contract or reinvestment agreement pursuant
to which funds held in one or more accounts will be invested at a specified
rate. If any Class of Certificates has a floating interest rate, or if any
of the Mortgage Loans or Contracts in the related Trust Fund has a floating
interest rate, the Trust Fund may include an interest rate swap contract, an
interest rate cap agreement or similar contract providing limited protection
against interest rate risks.

PREPAYMENT AND YIELD CONSIDERATIONS

PASS-THROUGH RATES AND INTEREST RATES

Any Class of Certificates of a Series may have a fixed Pass-Through
Rate or Interest Rate, or a Pass-Through Rate or Interest Rate which varies
based on changes in an index or based on changes with respect to the
underlying Mortgage Loans or Contracts (such as, for example, varying on the
basis of changes in the weighted average Net Mortgage Rate or Net Contract
Rate of the underlying Mortgage Loans or Contracts) or may receive interest
payments with respect to the underlying Mortgage Loans or Contracts in such
other manner specified in the applicable Prospectus Supplement.

The Prospectus Supplement for each Series will specify the range
and the weighted average of the Mortgage Rates or Contract Rates and Net
Mortgage Rates or Net Contract Rates for the Mortgage Loans or Contracts
underlying such Series as of the Cut-Off Date. Unless otherwise specified in
the related Prospectus Supplement, each monthly interest payment on a
Mortgage Loan or Contract will generally be calculated as the product of
one-twelfth of the applicable Mortgage Rate or Contract Rate at the time of
such calculation and the then

<PAGE>

unpaid principal balance on such Mortgage Loan or Contract. The Net Mortgage
Rate or Net Contract Rate with respect to each Mortgage Loan or Contract will
be similarly calculated on a loan-by-loan basis, by subtracting from the
applicable Mortgage Rate or Contract Rate, the Fixed Retained Yield, if any,
payable to the Depositor or other person or entity specified in the
Prospectus Supplement and any Servicing Fee applicable to each Mortgage Loan
or Contract. If the Trust Fund includes adjustable-rate Mortgage Loans or
Contracts or includes Mortgage Loans or Contracts with different Net Mortgage
Rates or Net Contract Rates, the weighted average Net Mortgage Rate or Net
Contract Rate may vary from time to time as set forth below. See "The Trust
Funds." The Prospectus Supplement for a Series will also specify the initial
Pass-Through Rate or Interest Rate for each Class of Certificates of such
Series having a Pass-Through Rate or Interest Rate and will specify whether
each such Pass-Through Rate or Interest Rate is fixed or is variable.

The Net Mortgage Rate or Net Contract Rate for any adjustable rate
Mortgage Loan or Contract will change with any changes in the index specified
in the related Prospectus Supplement on which such Mortgage Rate or Contract
Rate adjustments are based, subject to any applicable periodic or aggregate
caps or floors on the related Mortgage Rate or Contract Rate or other
limitations described in the related Prospectus Supplement. The weighted
average Net Mortgage Rate or Net Contract Rate with respect to any Series may
vary due to changes in the Net Mortgage Rates or Net Contract Rates of
adjustable rate Mortgage Loans or Contracts, to the timing of the Mortgage
Rate or Contract Rate readjustments of such Mortgage Loans or Contracts and
to different rates of payment of principal of fixed or adjustable rate
Mortgage Loans or Contracts bearing different Mortgage Rates or Contract
Rates.

If the Trust Fund for a Series includes adjustable rate Mortgage
Loans or Contracts, any limitations on the periodic changes in a mortgagor's
or obligor's monthly payment, any limitations on the adjustments to the Net
Mortgage Rates or Mortgage Rates or to the Net Contract Rates or Contract
Rates, any provision that could result in Deferred Interest and the effects,
if any, thereof on the yield on Certificates of the related Series will be
discussed in the related Prospectus Supplement.

Unless otherwise specified in the related Prospectus Supplement, no
distribution of principal and only a partial distribution of interest will be
made to Certificateholders with respect to a negatively amortizing Mortgage
Loan or Contract. Distribution of the portion of scheduled interest at the
applicable Net Mortgage Rate or Net Contract Rate representing Deferred
Interest with respect to such Mortgage Loan or Contract will be passed
through to the Certificateholders on the Distribution Date following the Due
Date on which it is received. Such Deferred Interest will bear interest at
the Net Mortgage Rate or Net Contract Rate for such Mortgage Loan or
Contract. For federal income tax purposes, Deferred Interest may constitute
interest income to the Trust Fund and to Certificateholders at the time that
it accrues, rather than at the time that it is paid. See "Certain Federal
Income Tax Consequences -- Federal Income Tax Consequences for Certificates
as to Which No REMIC Election Is Made -- Deferred Interest," "-- Federal
Income Tax Consequences for REMIC Certificates -- Taxation of Regular
Certificates -- Deferred Interest" and "--Taxation of Residual Certificates
- -- Deferred Interest."

SCHEDULED DELAYS IN DISTRIBUTIONS

At the date of initial issuance of the Certificates of each Series
offered hereby, the initial purchasers of a Class of Certificates (other than
certain Classes of Residual Certificates) will be required to pay accrued
interest at the applicable Pass-Through Rate or Interest Rate for such Class
from the Cut-Off Date for such Series to, but not including the date of
issuance. With respect to Standard Certificates, the effective yield to
Certificateholders will be below the yield otherwise produced by the
applicable Pass-Through Rate because while interest will accrue at such
Pass-Through Rate from the first day of each month through the last day of
such month (unless otherwise specified in the related Prospectus Supplement),
principal and interest distributions with respect to such month will not be
made until the 25th day (or if such 25th day is not a business day, the
business day immediately following such 25th day) of the month following the
month of accrual (or until such other Distribution Date specified in the
applicable Prospectus Supplement). If so specified in the related Prospectus
Supplement, a Class of Multi-Class Certificates may be entitled to
distributions on each Distribution Date of interest accrued during a period
(an "Interest Accrual Period" specified in such Prospectus Supplement ending
on such Distribution Date or ending on a date preceding such Distribution
Date. In the latter case the effective yield to such Certificateholders will
be below the yield otherwise produced by the applicable initial public
offering prices and Interest Rates because

<PAGE>

(i) on the first Distribution Date the time period upon which interest
payable is calculated will be less than the time elapsed since the
commencement of accrual of interest, (ii) the interest that accrues during
the Interest Accrual Period will not be paid until a date following such
Interest Accrual Period specified in the related Prospectus Supplement, and
(iii) during each Interest Accrual Period following the first Interest
Accrual Period, in the case of a Class of Multi-Class Certificates currently
receiving distributions in reduction of Stated Amount, interest is based upon
a Stated Amount which is less than the Stated Amount of such Certificates
actually outstanding, since the distribution in reduction of Stated Amount
made on the following Distribution Date is deemed to have been made, for
interest accrual purposes only, at the end of the preceding Interest Accrual
Period. The Prospectus Supplement for each Series of Certificates will set
forth the nature of any scheduled delays in distribution and the impact on
the yield of such Certificates.

INTEREST SHORTFALLS DUE TO PRINCIPAL PREPAYMENTS

When a Mortgage Loan or Contract is prepaid in full, the mortgagor
or obligor pays interest on the amount prepaid only to the date of prepayment
and not thereafter. Similarly, Liquidation Proceeds and Insurance Proceeds
are also likely to include interest only to the time of payment. When a
Mortgage Loan or Contract is prepaid in part, and such prepayment is applied
as of a date other than the Due Date occurring in the month of receipt or the
Due Date occurring in the month following the month of receipt, the mortgagor
or obligor pays interest on the amount prepaid only to the date of prepayment
and not thereafter. The effect of the foregoing is to reduce the aggregate
amount of interest which would otherwise be passed through to
Certificateholders if such Mortgage Loan or Contract were outstanding, or if
such partial prepayment were applied, on the succeeding Due Date. To
mitigate this reduction in yield, the Pooling and Servicing Agreement
relating to a Series will provide, unless otherwise specified in the
applicable Prospectus Supplement, that with respect to any principal
prepayment or liquidation of any Mortgage Loan or Contract underlying the
Certificates of such Series, the Servicer will pay into the Certificate
Account for such Series to the extent funds are available for such purpose
from the related aggregate Servicing Fees (or portion thereof as specified in
the related Prospectus Supplement) which the Servicer is entitled to receive
relating to mortgagor or obligor payments or other recoveries distributed on
the related Distribution Date, such amount, if any, as may be necessary to
assure that the amount paid into the Certificate Account with respect to such
Mortgage Loan or Contract includes an amount equal to interest at the Net
Mortgage Rate or Net Contract Rate for such Mortgage Loan or Contract for the
period from the date of such prepayment or liquidation to but not including
the next Due Date. See "Servicing of the Mortgage Loans and Contracts --
Adjustment to Servicing Compensation in Connection with Prepaid and
Liquidated Mortgage Loans and Contracts."

WEIGHTED AVERAGE LIFE OF CERTIFICATES

Weighted average life of a Certificate refers to the average amount
of time that will elapse from the date of issuance of the Certificate until
each dollar in reduction of the principal amount or Stated Amount of such
Certificate is distributed to the investor. The weighted average life and
the yield to maturity of any Class of the Certificates of a Series will be
influenced by, among other things, the rate at which principal on the
Mortgage Loans or Contracts included in the Mortgage Pool or Contract Pool
for such Certificate is paid, which is determined by scheduled amortization
and prepayments (for this purpose, the term "prepayments" includes
prepayments and liquidations due to default, casualty, condemnation and the
like).

The Mortgage Loans or Contracts may be prepaid in full or in part
at any time. Unless otherwise specified in the applicable Prospectus
Supplement or as described in the following paragraph, no Mortgage Loan or
Contract will provide for a prepayment penalty and all fixed rate Mortgage
Loans or Contracts will contain due-on-sale clauses permitting the holder to
accelerate the maturity of the Mortgage Loan or Contract upon conveyance of
the Mortgaged Property or Manufactured Home.

Some of the Mortgage Loans may call for Balloon Payments. Balloon
Payments involve a greater degree of risk than fully amortizing loans because
the ability of the borrower to make a Balloon Payment typically will depend
upon its ability either to refinance the loan or to sell the related
Mortgaged Property. The ability of a borrower to accomplish either of these
goals will be affected by a number of factors, including the level of
available mortgage rates at the time of the attempted sale or refinancing,
the borrower's equity in the related Mortgaged Property, the financial
condition of the borrower and operating history of the related Mortgaged

<PAGE>

Property, tax laws, prevailing economic conditions and the
availability of credit for commercial real estate projects generally.

Some of the Mortgage Loans included in the Trust Fund may, in the
event one or more are required to be repurchased or otherwise removed from
the Trust Fund, require the payment of a release premium.

Prepayments on mortgage loans are commonly measured relative to a
prepayment standard or model. The Prospectus Supplement for each Series
which includes more than one Class or Subclass of Multi-Class Certificates
will describe one or more such prepayment standards or models and will
contain tables setting forth the weighted average life of each such Class or
Subclass and the percentage of the original aggregate Stated Amount of each
such Class or Subclass 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 Mortgage Loans or
Contracts are made at rates corresponding to various percentages of the
prepayment standard or model specified in the related Prospectus Supplement.

There is, however, no assurance that prepayment of the Mortgage
Loans or Contracts underlying a Series of Certificates will conform to any
level of the prepayment standard or model specified in the related Prospectus
Supplement. A number of economic, geographic, social and other factors may
affect prepayment experience. These factors may include homeowner mobility,
economic conditions, changes in mortgagor's or obligor's housing needs, job
transfers, unemployment, mortgagor's or obligor's net equity in the
properties securing the mortgages or contracts, servicing decisions,
enforceability of due-on-sale clauses , market interest rates, the magnitude
of related taxes, and the availability of funds for refinancing. In general,
however, if prevailing interest rates fall significantly below the Mortgage
Rates or Contract Rates on the Mortgage Loans or Contracts underlying a
Series of Certificates, the prepayment rates of such Mortgage Loans or
Contracts are likely to be higher than if prevailing rates remain at or above
the rates borne by such Mortgage Loans or Contracts. It should be noted that
Certificates of a Series may evidence an interest in a Trust Fund with
different Mortgage Rates or Contract Rates. Accordingly, the prepayment
experience of such Certificates will to some extent be a function of the mix
of Mortgage Rates or Contract Rates of the Mortgage Loans or Contracts. In
addition, the terms of the Pooling and Servicing Agreement will require the
Servicer to enforce any due-on-sale clause to the extent specified therein.
See "Servicing of the Mortgage Loans and Contracts -- Enforcement of
Due-on-Sale Clauses; Realization Upon Defaulted Mortgage Loans and Contracts"
and "Certain Legal Aspects of the Mortgage Loans and Contracts -- Due-On-Sale
Clauses" for a description of certain provisions of each Pooling and
Servicing Agreement and certain legal developments that may affect the
prepayment experience on the Mortgage Loans or Contracts.

A lower rate of principal prepayments than anticipated would
negatively affect the total return to investors in any Certificates of a
Series that are offered at a discount to their principal amount or, if
applicable, their parity price, and a higher rate of principal prepayments
than anticipated would negatively affect the total return to investors in the
Certificates of a Series that are offered at a premium to their principal
amount or, if applicable, their parity price. Parity price is the price at
which a Certificate will yield its coupon, after giving effect to any payment
delay. In addition, the yield to investors in a Class of Certificates which
bears interest at a variable Interest Rate or at a variable Pass-Through
Rate, will also be affected by changes in the index on which any such
variable Interest Rate, or variable Pass-Through Rate is based. Changes in
the index may not correlate with changes in prevailing mortgage interest
rates or financing rates for manufactured housing, and the effect, if any,
thereof on the yield of the Certificates will be discussed in the related
Prospectus Supplement. The yield on certain types of Certificates may be
particularly sensitive to prepayment rates, and further information with
respect to yield on such Certificates will be included in the applicable
Prospectus Supplement.

At the request of the mortgagor or obligor, the Servicer may
refinance the Mortgage Loans or Contracts in any Trust Fund by accepting
prepayments thereon and making new loans secured by a Mortgage on the same
property or a security interest in the same Manufactured Home. Upon such
refinancing, the new loans will not be included in the Trust Fund. A
mortgagor or obligor may be legally entitled to require the Servicer to allow
such a refinancing. Any such refinancing will have the same effect as a
prepayment in full of the related Mortgage Loan or Contract.

51
<PAGE>

The Depositor may be obligated and the applicable Unaffiliated
Seller will be obligated, under certain circumstances, to repurchase certain
of the Mortgage Loans or Contracts. In addition, the terms of certain
insurance policies relating to the Mortgage Loans or Contracts may permit the
applicable insurer to purchase delinquent Mortgage Loans or Contracts. The
proceeds of any such repurchase will be deposited in the related Certificate
Account and such repurchase will have the same effect as a prepayment in full
of the related Mortgage Loan or Contract. See "The Trust Funds -- Assignment
of the Mortgage Loans and Contracts." In addition, if so specified in the
applicable Prospectus Supplement, the Servicer will have the option to
purchase all, but not less than all, of the Mortgage Loans or Contracts in
any Trust Fund under the limited conditions specified in such Prospectus
Supplement. For any Series of Certificates for which an election has been
made to treat the Trust Fund (or one or more segregated pools of assets
therein) as a REMIC, any such purchase may be effected only pursuant to a
"qualified liquidation," as defined in Code Section 86OF(a)(4)(A). See "The
Pooling and Servicing Agreement -- Termination; Purchase or other Disposition
of Mortgage Loans and Contracts."

USE OF PROCEEDS

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

THE DEPOSITOR

Prudential Securities Secured Financing Corporation, formerly known
as P-B Secured Financing Corporation (the "Depositor"), was incorporated in
the State of Delaware on August 26, 1988 as a wholly-owned, limited purpose
finance subsidiary of Prudential Securities Group Inc. (a wholly-owned
indirect subsidiary of The Prudential Insurance Company of America). The
Depositor's principal executive offices are located at 199 Water Street, New
York, New York 10292. Its telephone number is (212) 214-7435.

As described herein under "The Trust Funds -- Assignment of the
Mortgage Loans and Contracts" and "-- Representations and Warranties", the
only obligations, if any, of the Depositor with respect to a Series of
Certificates may be pursuant to certain limited representations and
warranties and limited undertakings to repurchase or substitute Mortgage
Loans or Contracts under certain circumstances. Unless otherwise specified
in the applicable Prospectus Supplement, the Depositor will have no servicing
obligations or responsibilities with respect to any Mortgage Pool, Contract
Pool or Trust Fund. The Depositor does not have, nor is it expected in the
future to have, any significant assets.

As specified in the related Prospectus Supplement the Servicer with
respect to any Series of Certificates relating to Mortgage Loans or Contracts
may be an affiliate of the Depositor. As described under "The Trust Funds,"
the Depositor anticipates that it may acquire Mortgage Loans and Contracts
through or from an affiliate.

Neither the Depositor nor Prudential Securities Group Inc. nor any
of its affiliates, including The Prudential Insurance Company of America,
will insure or guarantee the Certificates of any Series.

UNDERWRITING GUIDELINES

MORTGAGE LOANS SECURED BY RESIDENTIAL PROPERTIES

The Depositor expects that all Mortgage Loans included in a
Mortgage Pool will have been originated in accordance with the underwriting
procedures described herein, subject to such variations as are specified in
the related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement,

<PAGE>

all or a representative sample of the Mortgage Loans comprising the Mortgage
Pool for a Series will be reviewed by or on behalf of the Depositor to
determine compliance with such underwriting procedures and standards and
compliance with other requirements for inclusion in the related Mortgage Pool.

Except as otherwise set forth in the related Prospectus Supplement,
it is expected that each originator of Mortgage Loans will have applied, in a
standard procedure which complies with applicable federal and state law and
regulations, underwriting procedures that are intended to evaluate the
mortgagor's credit standing and repayment ability, and the value and adequacy
of the Mortgaged Property as collateral. A prospective mortgagor will have
been required to fill out an application designed to provide to the original
lender pertinent credit information. As part of the description of the
mortgagor's financial condition, the mortgagor will have been required to
provide a current balance sheet describing assets and liabilities and a
statement of income and expenses, as well as an authorization to apply for a
credit report which summarizes the mortgagor's credit history with local
merchants and lenders and any record of bankruptcy. In addition, an
employment verification will have been obtained in the case of individual
borrowers which reports the mortgagor's current salary, length of such
employment and whether it was expected that the mortgagor will continue such
employment in the future. If a prospective borrower was self-employed, the
mortgagor will have been required to submit copies of signed tax returns.
The mortgagor may also have been required to authorize verification of
deposits at financial institutions where the mortgagor has demand or savings
accounts.

In determining the adequacy of the Mortgaged Property as
collateral, except in the instance of certain small second loan applications,
an appraisal will have been made of each Mortgaged Property considered for
financing. Each appraiser will have been selected in accordance with
predetermined guidelines established by or acceptable to the Unaffiliated
Seller for appraisers. The appraiser will have been required to inspect the
Mortgaged Property and verify that it was in good condition and that
construction, if new, has been completed. The appraisal is based on the
market value of the comparable properties, the estimated rental income (if
considered applicable by the appraiser) and the cost of replacing the
Mortgaged Property.

In determining the adequacy of the Mortgaged Property as
collateral, the originator shall, in the case of second or more junior loans,
look at the combined Loan-to-Value Ratio in determining whether the Mortgage
Loan exceeds lending guidelines. Furthermore, when considering such second
or more junior loans, confirm that payment has been timely made on the senior
liens.

Once all applicable employment, credit and property information was
received, a determination would have been made as to whether the prospective
mortgagor had sufficient monthly income available (i) to meet its monthly
obligations on the Mortgage Loan (determined on the basis of the monthly
payments due in the year of origination and taking into consideration,
payments due on any senior liens) and other expenses related to the Mortgaged
Property (such as property taxes and hazard insurance) and (ii) in the case
of individual mortgagors, to meet monthly housing expenses and other
financial obligations and monthly living expenses. When two individuals
cosign loan documents, the income and expenses of both individuals may be
included in the computation. Underwriting guidelines generally similar to
traditional underwriting guidelines used by FNMA and FHLMC which were in
effect at the time of origination of each Mortgage Loan will generally have
been used, except that the ratios at origination of the amounts described in
clauses (i) and (ii) above to the applicant's stable monthly gross income may
exceed in certain cases the then applicable FNMA and FHLMC guidelines. With
respect to a vacation or second home, no income derived from the property
will have been considered for underwriting purposes.

Other credit considerations may cause departure from the
traditional guidelines. If the Loan-to-Value Ratio and/or term of the
Mortgage Loan is less than a percentage specified in the related Prospectus
Supplement, certain aspects of review relating to monthly income assets may
be foregone and standard ratios of monthly or total expenses to gross income
may not be applied. The Depositor may permit an Unaffiliated Seller's
underwriting standards to otherwise vary in certain cases to the extent
specified in the related Prospectus Supplement.

The Mortgaged Properties may be located in states where, in
general, a lender providing credit on a single-family property may not seek a
deficiency judgment against the mortgagor but rather must look solely to the
property for repayment in the event of foreclosure. The Depositor will
require that the Unaffiliated Sellers

<PAGE>

represent and warrant that underwriting standards applied to each Mortgage
Loan purchased by the Depositor from such Unaffiliated Seller (including
Mortgage Loans secured by Mortgaged Properties located in anti-deficiency
states) require that the value of the property being financed, as indicated
by the appraisal, currently supports and is anticipated to support in the
future the outstanding principal balance of such Mortgage Loan.

Certain of the types of loans which may be included in the Mortgage
Pools are recently developed and may involve additional uncertainties not
present in traditional types of loans. For example, certain of such Mortgage
Loans may provide for escalating or variable payments by the mortgagor.
These types of Mortgage Loans are underwritten on the basis of a judgment
that mortgagors will have the ability to make larger monthly payments in
subsequent years. In some instances, however, a mortgagor's income may not
be sufficient to make loan payments as such payments increase.

No assurance can be given that values of the Mortgaged Properties
have remained or will remain at their levels on the dates of origination of
the related Mortgage Loans. If the real estate market should experience an
overall decline in property values such that the outstanding principal
balances of the Mortgage Loans, and any secondary financing on the Mortgaged
Properties, in a particular Mortgage Pool become equal to or greater than the
value of the Mortgaged Properties, the actual rates of delinquencies,
foreclosures and losses could be higher than those now generally experienced
in the mortgage lending industry. In addition, adverse economic conditions
(which may or may not affect real property values) may affect the timely
payment by mortgagors of scheduled payments of principal and interest on the
Mortgage Loans and, accordingly, the actual rates of delinquencies,
foreclosures and losses with respect to any Mortgage Pool. To the extent
that such losses are not covered by subordination provisions, insurance
policies or other credit support, such losses will be borne, at least in
part, by the holders of the Certificates of the related series.

CONTRACTS

The underwriting guidelines utilized in connection with the
origination of the Contracts underlying a Series of Certificates will be
described in the related Prospectus Supplement.

SERVICING OF THE MORTGAGE LOANS AND CONTRACTS

The following summaries describe certain provisions of the Pooling
and Servicing Agreements which relate to Trust Funds comprised of Mortgage
Loans or Contracts. The summaries do not purport to be complete and are
subject to and are qualified in their entirety by reference to, all the
provisions of the Pooling and Servicing Agreement for each Series and the
related Prospectus Supplement, which may further modify the provisions
summarized below. The provisions of each Pooling and Servicing Agreement
will vary depending upon the nature of the Certificates to be issued
thereunder and the nature of the related Trust Fund. Each Pooling and
Servicing Agreement executed and delivered with respect to each Series will
be filed with the Commission as an exhibit to a Current Report on Form 8-K
promptly after issuance of the Certificates of such Series.

THE SERVICER

The Servicer under each Pooling and Servicing Agreement will be
named in the related Prospectus Supplement. The entity serving as Servicer
may be an affiliate of the Depositor and may have other normal business
relationships with the Depositor or the Depositor's affiliates. The Servicer
with respect to each Series will service the Mortgage Loans or Contracts
contained in the Trust Fund for such Series. For Trust Funds comprised of
Mortgage Loans, the Servicer will be a seller/servicer approved by FNMA or
FHLMC. Any Servicer may delegate its servicing responsibilities to one or
more sub-servicers (each a "Sub-Servicer"), but will not be relieved of its
liabilities with respect thereto.

The Servicer will make certain representations and warranties
regarding its authority to enter into, and its ability to perform its
obligations under, the related Pooling and Servicing Agreement. An uncured
breach of such a representation or warranty that in any respect materially
and adversely affects the interests of the Certificateholders will constitute
an Event of Default by the Servicer under the related Pooling and Servicing

<PAGE>

Agreement. See "The Pooling and Servicing Agreement -- Events of Default --
Mortgage Loans or Contracts" and " -- Rights Upon Event of Default --
Mortgage Loans or Contracts."

PAYMENTS ON MORTGAGE LOANS AND CONTRACTS

The Servicer or the Trustee will, as to each Series of
Certificates, establish and maintain, or cause to be established and
maintained, a separate trust account or accounts in the name of the Trustee
(collectively, the "Certificate Account"), which must be maintained with a
depository institution (the "Certificate Account Depository") acceptable to
the Rating Agency rating the Certificates of such Series. Such account or
accounts will be maintained with a Certificate Account Depository (i) whose
long-term debt obligations at the time of any deposit therein are rated not
lower than the rating on the related Series of Certificates at the time of
the initial issuance thereof, (ii) the deposits in which are insured by the
Federal Deposit Insurance Corporation (the "FDIC") through either the Bank
Insurance Fund or the Savings Association Insurance Fund (to the limit
established by the FDIC) and the uninsured deposits in which accounts are
otherwise secured such that, as evidenced by an opinion of counsel, the
Trustee for the benefit of the Certificateholders of the related Series has a
claim with respect to funds in the Certificate Account for such Series, or a
perfected security interest in any collateral (which shall be limited to
Eligible Investments) securing such funds, that is superior to the claims of
any other depositor or general creditor of the Certificate Account Depository
with which the Certificate Account is maintained or (iii) which is otherwise
acceptable to the Rating Agency or Agencies.

A Certificate Account may be maintained as an interest bearing or a
non-interest bearing account, or the funds held therein may be invested
pending each succeeding Distribution Date in certain Eligible Investments.
Any such Eligible Investments shall mature not later than the business day
preceding the next Distribution Date and no such investment shall be sold or
disposed of prior to the maturity date of such Eligible Investment; however,
in the event that an election has been made to treat the Trust Fund (or a
segregated pool of assets therein) with respect to a Series as a REMIC, no
such Eligible Investments will be sold or disposed of at a gain prior to
maturity unless the Servicer has received an opinion of counsel or other
evidence satisfactory to it that such sale or disposition will not cause the
Trust Fund (or segregated pool of assets) to be subject to the tax on
"prohibited transactions" imposed by Code Section 860F(a)(1), otherwise
subject the Trust Fund (or segregated pool of assets) to tax, or cause the
Trust Fund (or segregated pool of assets) to fail to qualify as a REMIC.
Unless otherwise provided in the related Prospectus Supplement, any interest
or other income earned on funds in the Certificate Account will be paid to
the Servicer or its designee as additional servicing compensation. All
losses from any such investment will be deposited by the Servicer into the
Certificate Account immediately as realized. If permitted by the Rating
Agency or Agencies and so specified in the related Prospectus Supplement, a
Certificate Account may contain funds relating to more than one Series of
Certificates.

Each Sub-Servicer servicing a Mortgage Loan or Contract will be
required by the Servicer to establish and maintain one or more separate
accounts which may be interest bearing and which comply with the standards
with respect to Certificate Accounts set forth above (collectively, the
"Sub-Servicing Account"). Each Sub-Servicer will be required to credit to
the related Sub-Servicing Account on a daily basis the amount of all proceeds
of Mortgage Loans or Contracts received by the Sub-Servicer, less its
servicing compensation. The Sub-Servicer shall remit to the Servicer by wire
transfer of immediately available funds all funds held in the Sub-Servicing
Account with respect to each Mortgage Loan or Contract on a monthly
remittance date which shall occur on or before two business days preceding
the Determination Date occurring in such month.

The Servicer will deposit in the Certificate Account for each
Series of Certificates any amounts representing scheduled payments of
principal and interest on the Mortgage Loans or Contracts due after the
applicable Cut-Off Date but received prior thereto, and, on a dally basis,
the following payments and collections received or made by it with respect to
the Mortgage Loans or Contracts subsequent to the applicable Cut-Off Date
(other than payments due on or before the Cut-Off Date):

(i) all payments on account of principal, including prepayments, and
interest, net of any portion thereof retained by a Sub-Servicer as its
servicing compensation and net of any Fixed Retained Yield;

<PAGE>

(ii) all amounts received by the Servicer in connection with the
liquidation of defaulted Mortgage Loans or Contracts or property acquired
in respect thereof, whether through foreclosure sale or otherwise,
including payments in connection with defaulted Mortgage Loans or
Contracts received from the mortgagor or obligor other than amounts
required to be paid to the mortgagor or obligor pursuant to the terms of
the applicable Mortgage Loan or Contract or otherwise pursuant to law
("Liquidation Proceeds"), and further reduced by expenses incurred in
connection with such liquidation, other reimbursed servicing costs
associated with such liquidation, certain amounts applied to the
restoration, preservation or repair of the Mortgaged Property or
Manufactured Home, any unreimbursed Advances with respect to such Mortgage
Loan or Contract and, in the discretion of the Servicer, but only to the
extent of the amount permitted to be withdrawn from the Certificate
Account, any unpaid Servicing Fees, in respect of the related Mortgage
Loans or Contracts or the related Mortgaged Properties or Manufactured
Homes ("Net Liquidation Proceeds");

(iii) all proceeds received by the Servicer under any title,
hazard or other insurance policy covering any such Mortgage Loan or
Contract ("Insurance Proceeds"), other than proceeds to be applied to
the restoration or repair of the related Mortgaged Property or
Manufactured Home or released to the mortgagor or obligor in accordance
with the applicable Pooling and Servicing Agreement, and further
reduced by expenses incurred in connection with collecting on related
insurance policies, any unreimbursed Advances with respect to such
Mortgage Loan or Contract and in the discretion of the Servicer, but
only to the extent of the amount permitted to be withdrawn from the
Certificate Account, any unpaid Servicing Fees, in respect of such
Mortgage Loan or Contract ("Net Insurance Proceeds");

(iv) all amounts required to be deposited therein from any related
reserve fund, and amounts available under any other form of credit
enhancement pplicable to such Series;

(v) all Advances made by the Servicer;

(vi) all amounts withdrawn from Buy-Down Funds or other funds
described in the related Prospectus Supplement, if any, with respect to
the Mortgage Loans or Contracts, in accordance with the terms of the
respective agreements applicable thereto;

(vii) all Repurchase Proceeds; and

(viii) all other amounts required to be deposited therein pursuant
to the applicable Pooling and Servicing Agreement.

Notwithstanding the foregoing, the Servicer will be entitled, at
its election, either (a) to withhold and pay itself the applicable Servicing
Fee and/or to withhold and pay to the owner thereof any Fixed Retained Yield
from any payment or other recovery on account of interest as received and
prior to deposit in the Certificate Account or (b) to withdraw the applicable
Servicing Fee and/or any Fixed Retained Yield from the Certificate Account
after the entire payment or recovery has been deposited therein; however,
with respect to each Trust Fund (or a segregated pool of assets therein) as
to which a REMIC election has been made, the Servicer will, in each instance,
withhold and pay to the owner thereof the Fixed Retained Yield prior to
deposit of the related payment or recovery in the Certificate Account.

Advances, amounts withdrawn from any reserve fund, and amounts
available under any other form of credit enhancement will be deposited in the
Certificate Account not later than the business day preceding the
Distribution Date on which such amounts are required to be distributed. All
other amounts will be deposited in the Certificate Account not later than the
business day next following the day of receipt and posting by the Servicer.

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

The Servicer is permitted, from time to time, to make withdrawals
from the Certificate Account for the following purposes, to the extent
permitted in the applicable Pooling and Servicing Agreement:

<PAGE>

(i) to reimburse itself for Advances;

(ii) to reimburse itself from Liquidation Proceeds for expenses
incurred by the Servicer in connection with the liquidation of any
defaulted Mortgage Loan or Contract or property acquired in respect
thereof and for amounts expended in good faith in connection with the
restoration of damaged property, to reimburse itself from Insurance
Proceeds for expenses incurred by the Servicer in connection with the
restoration, preservation or repair of the related Mortgage Properties
or Manufactured Homes and expenses incurred in connection with
collecting on the related insurance policies and, to the extent that
Liquidation Proceeds or Insurance Proceeds after such reimbursement are
in excess of the unpaid principal balance of the related Mortgage Loans
or Contracts together with accrued and unpaid interest thereon at the
applicable Net Mortgage Rate or Net Contract Rate through the last day
of the month in which such Liquidation Proceeds or Insurance Proceeds
were received, to pay to itself out of such excess the amount of any
unpaid Servicing Fees and any assumption fees, late payment charges or
other mortgagor or obligor charges on the related Mortgage Loans or
Contracts;

(iii) to pay to itself the applicable Servicing Fee and/or pay the
owner thereof any Fixed Retained Yield, in the event the Servicer is
not required, and has elected not, to withhold such amounts out of any
payment or other recovery with respect to a particular Mortgage Loan or
Contract prior to the deposit of such payment or recovery in the
Certificate Account;

(iv) to reimburse itself and the Depositor for certain expenses
(including taxes paid on behalf of the Trust Fund) incurred by and
recoverable by or reimbursable to it or the Depositor, as the case may
be;

(v) to pay to the Depositor or the Unaffiliated Seller with
respect to each Mortgage Loan or Contract or property acquired in
respect thereof that has been repurchased by the Depositor or the
Unaffiliated Seller, as the case may be, all amounts received thereon
and not distributed as of the date as of which the purchase price of
such Mortgage Loan or Contract was determined;

(vi) to pay itself any interest earned on or investment income
earned with respect to funds in the Certificate Account (all such
interest or income to be withdrawn not later than the next Distribution
Date);

(vii) to make withdrawals from the Certificate Account in order to
make distributions to Certificateholders; and

(viii) to clear and terminate the Certificate Account.

The Servicer will be authorized to appoint a paying agent (the
"Paying Agent") to make distributions, as agent for the Servicer, to
Certificateholders of a Series. If the Paying Agent for a Series is the
Trustee of such Series, such Paying Agent will be authorized to make
withdrawals from the Certificate Account in order to make distributions to
Certificateholders. If the Paying Agent for a Series is not the Trustee for
such Series, the Servicer will, prior to each Distribution Date, deposit in
immediately available funds in an account designated by the Paying Agent the
amount required to be distributed to the Certificateholders on such
Distribution Date.

The Servicer will cause any Paying Agent which is not the Trustee
to execute and deliver to the Trustee an instrument in which such Paying
Agent agrees with the Trustee that such Paying Agent will:

(1) hold all amounts deposited with it by the Servicer for
distribution to Certificateholders in trust for the benefit of
Certificateholders until such amounts are distributed to
Certificateholders or otherwise disposed of as provided in the
applicable Pooling and Servicing Agreement;

(2) give the Trustee notice of any default by the Servicer in the
making of such deposit; and

(3) at any time during the continuance of any such default, upon
written request of the Trustee, forthwith pay to the Trustee all
amounts held in trust by such Paying Agent.

<PAGE>

ADVANCES AND LIMITATIONS THEREON

Unless otherwise provided in the applicable Prospectus Supplement,
the Servicer will advance on or before the business day preceding each
Distribution Date its own funds (an "Advance") or funds held in the
Certificate Account for future distribution or withdrawal and which are not
included in the Pool Distribution Amount for such Distribution Date, in an
amount equal to the aggregate of payments of principal and interest which
were due during the related Due Period, that were delinquent on the
Determination Date and were not advanced by any Sub-Servicer, to the extent
that the Servicer determines that such advances will be reimbursable from
late collections, Insurance Proceeds, Liquidation Proceeds or otherwise.

Advances are intended to maintain a regular flow of scheduled
interest and principal payments to holders of the Class or Classes of
Certificates entitled thereto, rather than to guarantee or insure against
losses. Unless otherwise provided in the applicable Prospectus Supplement,
advances of the Servicer's funds will be reimbursable only out of related
recoveries on the Mortgage Loans or Contracts respecting which such amounts
were advanced, or from any amounts in the Certificate Account to the extent
that the Servicer shall determine that any such advances previously made are
not ultimately recoverable from late collections, Insurance Proceeds,
Liquidation Proceeds or otherwise. If advances have been made by the
Servicer from excess funds in the Certificate Account, the Servicer will
replace such funds in the Certificate Account on any future Distribution Date
to the extent that funds in the Certificate Account on such Distribution Date
are less than payments required to be made to Certificateholders on such date.

ADJUSTMENT TO SERVICING COMPENSATION IN CONNECTION WITH PREPAID AND LIQUIDATED
MORTGAGE LOANS AND CONTRACTS

When a mortgagor or obligor prepays a Mortgage Loan or Contract in
full, the mortgagor or obligor pays interest on the amount prepaid only to
the date on which such principal prepayment is made. Similarly, Liquidation
Proceeds from a Mortgaged Property or Manufactured Home will not include
interest for any period after the date on which the liquidation took place,
and Insurance Proceeds may include interest only to the date of settlement of
the related claims. Further, when a Mortgage Loan or Contract is prepaid in
part, and such prepayment is applied as of a date other than a Due Date, the
mortgagor or obligor pays interest on the amount prepaid only to the date of
prepayment and not thereafter. The effect of the foregoing is to reduce the
aggregate amount of interest which would otherwise be passed through to
Certificateholders if such Mortgage Loan or Contract were outstanding, or if
such partial prepayment were applied, on the succeeding Due Date. Unless
otherwise specified in the applicable Prospectus Supplement, in order to
mitigate the adverse effect to Certificateholders of a Series resulting from
the prepayment or liquidation of a Mortgage Loan or Contract or settlement of
an insurance claim with respect thereto, the amount of the aggregate
Servicing Fees will be reduced by an amount equal to the accrual of interest
on any prepaid or liquidated Mortgage Loan or Contract at the Net Mortgage
Rate for such Mortgage Loan or the Net Contract Rate for such Contract from
the date of its prepayment or liquidation or the date of such insurance
settlement to the next Due Date (the "Prepayment Interest Shortfall"). Such
reductions in the aggregate Servicing Fees will be made by the Servicer with
respect to the Mortgage Loans or Contracts under the applicable Pooling and
Servicing Agreement, but only to the extent that the aggregate Prepayment
Interest Shortfall does not exceed the aggregate Servicing Fees relating to
mortgagor or obligor payments or other recoveries distributed on the related
Distribution Date. The amount of the offset against the aggregate Servicing
Fees will be included in the scheduled distributions to Certificateholders on
the Distribution Date on which the related principal prepayments, Liquidation
Proceeds or Insurance Proceeds are passed through to Certificateholders. See
"Prepayment and Yield Considerations." Payments with respect to any
Prepayment Interest Shortfall will not be obtained by means of any
subordination of the rights of Subordinated Certificateholders or any other
credit enhancement arrangement (except to the extent such credit enhancement
pays interest with respect to a Mortgage Loan or Contract in excess of the
related Net Mortgage Rate or Net Contract Rate and such excess would
otherwise be paid to the Servicer as a Servicing Fee).

<PAGE>

REPORTS TO CERTIFICATEHOLDERS

Unless otherwise specified or modified in the related Pooling and
Servicing Agreement for each Series, a statement setting forth the following
information, if applicable, will be included with each distribution to
Certificateholders of record of such Series:

(i) to each holder of a Certificate other than a Multi-Class
Certificate, the amount of such distribution allocable to principal of
the related Mortgage Loans or Contracts, separately identifying the
aggregate amount of any principal prepayments included therein, the
amount of such distribution allocable to interest on the related
Mortgage Loans or Contracts, and the aggregate unpaid principal balance
of the Mortgage Loans or Contracts after giving effect to the principal
distributions on such Distribution Date;

(ii) to each holder of a Multi-Class Certificate on which an
interest distribution and a distribution in reduction of Stated Amount
are then being made, the amount of such interest distribution and
distribution in reduction of Stated Amount, and the Stated Amount of
each Class after giving effect to the distribution in reduction of
Stated Amount made on such Distribution Date;

(iii) to each holder of a Multi-Class Certificate on which a
distribution of interest only is then being made, the aggregate Stated
Amount of Certificates outstanding of each Class after giving effect to
the distribution in reduction of Stated Amount made on such
Distribution Date and on any Special Distribution Date occurring
subsequent to the last such report and after including in the aggregate
Stated Amount the Stated Amount of the Compound Interest Certificates,
if any, outstanding and the amount of any accrued interest added to the
Stated Amount of such Compound Interest Certificates on such
Distribution Date;

(iv) to each holder of a Multi-Class Certificate which is a
Compound Interest Certificate (but only if such holder shall not have
received a distribution of interest equal to the entire amount of
interest accrued on such Certificate with respect to such Distribution
Date),

(a) the information contained in the report delivered pursuant
to clause (ii) above;

(b) the interest accrued on such Class of Compound Interest
Certificates with respect to such Distribution Date and added to
the Stated Amount of such Compound Interest Certificate; and

(c) the Stated Amount of such Class of Compound Interest
Certificates after giving effect to the addition thereto of all
interest accrued thereon;

(v) to each holder of a Certificate, the aggregate amount of the
Servicing Fees paid with respect to such Distribution Date;

(vi) to each holder of a Certificate, the amount by which the
Servicing Fee has been reduced by the aggregate Prepayment Interest
Shortfall for the related Distribution Date;

(vii) the aggregate amount of any Advances by the Servicer
included in the amounts actually distributed to the Certificateholders;

(viii) to each holder of each Senior Certificate (other than a
Shifting Interest Certificate):

(a) the amount of funds, if any, otherwise distributable to
Subordinated Certificateholders and the amount of any withdrawal
from the Subordination Reserve Fund, if any, included in amounts
actually distributed to Senior Certificateholders;

(b) the Subordinated Amount remaining and the balance in the
Subordination Reserve Fund, if any, following such distribution; and

<PAGE>

(c) the amount of any Senior Class Shortfall with respect to,
and the amount of any Senior Class Carryover Shortfall outstanding
prior to, such Distribution Date;

(ix) to each holder of a Certificate entitled to the benefits of
payments under any form of credit enhancement or from any reserve fund
other than the Subordination Reserve Fund:

(a) the amounts so distributed under any such form of credit
enhancement or from any such reserve fund on the applicable
Distribution Date; and

(b) the amount of coverage remaining under any such form of
credit enhancement and the balance in any such fund, after giving
effect to any payments thereunder and other amounts charged thereto
on the Distribution Date;

(x) in the case of a Series of Certificates with a variable
Pass-Through Rate, such Pass-Through Rate;

(xi) the book value of any collateral acquired by the Trust Fund
through foreclosure or otherwise; and

(xii) the number and aggregate principal amount of Mortgage Loans
or Contracts one month and two or more months delinquent.

In addition, within a reasonable period of time after the end of
each calendar year, a report will be furnished to each Certificateholder of
record at any time during such calendar year (a) as to the aggregate of
amounts reported pursuant to clauses (i) through (xii) above, as applicable,
for such calendar year or, in the event such person was a Certificateholder
of record during a portion of such calendar year, for the applicable portion
of such year and (b) such other information as required to enable
Certificateholders to prepare their tax returns. In the event that an
election has been made to treat the Trust Fund (or one or more segregated
pools of assets therein) as a REMIC, the Trustee with respect to a Series
will be required to sign the federal income tax returns with respect to such
REMIC. See "Certain Federal Income Tax Consequences -- Federal Income Tax
Consequences for REMIC Certificates -- Administrative Matters."

REPORTS TO THE TRUSTEE

No later than 15 days after each Distribution Date for a Series,
the Servicer will provide the Trustee of such Series with a report setting
forth the status of the related Certificate Account and the related
Subordination Reserve Fund, if any, and any other reserve fund as of the
close of business on such Distribution Date, stating that all distributions
required to be made by the Servicer under the applicable Pooling and
Servicing Agreement have been made (or if any required distribution has not
been made by the Servicer, specifying the nature and status thereof) and
showing, for the period covered by such statement, the aggregate of deposits
to and withdrawals from the Certificate Account for each category of deposits
and withdrawals specified in the Pooling and Servicing Agreement. Such
statement shall also include information as to (i) the aggregate unpaid
principal balances of all the Mortgage Loans or Contracts as of the close of
business on the last day of the month preceding the month in which such
Distribution Date occurs (or such other day as may be specified in the
applicable Pooling and Servicing Agreement); and (ii) the amount of any
Subordination Reserve Fund and any other reserve fund, as of such
Distribution Date (after giving effect to the distributions on such
Distribution Date). Copies of such reports may be obtained by
Certificateholders upon request in writing addressed to the related Trustee
at its mailing address provided in the related Prospectus Supplement.

<PAGE>

COLLECTION AND OTHER SERVICING PROCEDURES

The Servicer, directly or through Sub-Servicers, will make
reasonable efforts to collect all payments called for under the Mortgage
Loans or Contracts and will, consistent with the applicable Pooling and
Servicing Agreement and any applicable agreement governing any form of credit
enhancement, follow such collection procedures as it follows with respect to
mortgage loans or manufactured housing contracts serviced by it that are
comparable to the Mortgage Loans or Contracts, as the case may be.
Consistent with the above, the Servicer may, in its discretion, (i) waive any
prepayment charge, assumption fee, late payment charge or any other charge in
connection with the prepayment of a Mortgage Loan or Contract and (ii)
arrange with a mortgagor or obligor a schedule for the liquidation of
deficiencies running for not more than six months after the applicable Due
Date.

Pursuant to the Pooling and Servicing Agreement, the Servicer, to
the extent permitted by law, will establish and maintain or will cause to be
established and maintained one or more escrow accounts (collectively, the
"Servicing Account") in which the Servicer will be required to deposit or
cause to be deposited payments by mortgagors or obligors, as applicable, for
taxes, assessments, mortgage and hazard insurance premiums and other
comparable items. Withdrawals from the Servicing Account may be made to
effect timely payment of taxes, assessments, mortgage and hazard insurance,
to refund to mortgagors or obligors amounts determined to be overages, to pay
interest to mortgagors or obligors on balances in the Servicing Account, if
required, to repair or otherwise protect the Mortgaged Properties or
Manufactured Homes and to clear and terminate such account. The Servicer
will be responsible for the administration of each Servicing Account. The
Servicer will be obligated to advance certain amounts which are not timely
paid by mortgagors or obligors, to the extent that the Servicer determines
that such amounts will be recoverable out of Insurance Proceeds, Liquidation
Proceeds, or otherwise. Alternatively, if specified in the applicable Pooling
and Servicing Agreement, in lieu of establishing a Servicing Account, the
Servicer may procure a performance bond or other form of insurance coverage,
in an amount acceptable to the Rating Agency rating the related Series of
Certificates, covering loss occasioned by the failure to escrow such amounts.

ENFORCEMENT OF DUE-ON-SALE CLAUSES; REALIZATION UPON DEFAULTED MORTGAGE LOANS
AND CONTRACTS

Each Pooling and Servicing Agreement will provide that, when any
Mortgaged Property or Manufactured Home is conveyed by the mortgagor or
obligor, the Servicer will exercise its rights to accelerate the maturity of
such Mortgage Loan or Contract under any "due-on-sale" clause applicable
thereto, if any, unless (a) it is not exercisable under applicable law or (b)
such exercise would result in loss of insurance coverage with respect to such
Mortgage Loan or Contract. In any such case, the Servicer is authorized to
take or enter into an assumption and modification agreement from or with the
person to whom such Mortgaged Property or Manufactured Home has been or is
about to be conveyed, pursuant to which such person becomes liable under the
Mortgage Note or Contract and, unless prohibited by applicable state law, the
mortgagor or obligor remains liable thereon, provided that the Mortgage Loan
or Contract will continue to be covered by any pool insurance policy and any
related primary mortgage insurance policy, and the Mortgage Rate or Contract
Rate with respect to such Mortgage Loan or Contract and the payment terms
shall remain unchanged. The Servicer will also be authorized, with the prior
approval of any pool insurer and any primary mortgage insurer, if any, to
enter into a substitution of liability agreement with such person, pursuant
to which the original mortgagor or obligor is released from liability and
such person is substituted as mortgagor or obligor and becomes liable under
the Mortgage Note or Contract.

The Servicer is obligated under the Pooling and Servicing Agreement
for each Series to realize upon defaulted Mortgage Loans or Contracts to the
extent provided therein. However, in the case of foreclosure or of damage to
a Mortgaged Property or Manufactured Home from an uninsured cause, the
Servicer is not required to expend its own funds to foreclose, repossess or
restore any damaged property, unless it reasonably determines (i) that such
foreclosure, repossession or restoration will increase the proceeds to
Certificateholders of such Series of liquidation of the Mortgage Loan or
Contract after reimbursement of the Servicer for its expenses and (ii) that
such expenses will be recoverable to it through Liquidation Proceeds or
Insurance Proceeds. In the event that the Servicer has expended its own
funds for foreclosure or to restore damaged property, it will be entitled to
charge the Certificate Account for such Series an amount equal to all costs
and expenses incurred by it.

<PAGE>

The Servicer may foreclose against property securing a defaulted
Mortgage Loan either by foreclosure, by sale or by strict foreclosure and in
the event a deficiency judgment is available against the mortgagor or other
person (see "Certain Legal Aspects of the Mortgage Loans and Contracts -- The
Mortgage Loans --Anti-Deficiency Legislation and Other Limitations on
Lenders" for a description of the availability of deficiency judgments), may
proceed for the deficiency. It is anticipated that in most cases the
Servicer will not seek deficiency judgments against any mortgagor or obligor,
and the Servicer is not required under the Pooling and Servicing Agreement to
seek deficiency judgments.

With respect to a Trust Fund (or one or more segregated pools of
assets therein) as to which a REMIC election has been made, if the Trustee
acquires ownership of any Mortgaged Property or Manufactured Home as a result
of a default or imminent default of any Mortgage Loan or Contract secured by
such Mortgaged Property or Manufactured Home, the Trustee generally will be
required to dispose of such property with two years following its acquisition
by the Trust Fund. The Servicer also will be required to administer the
Mortgaged Property or Manufactured Home in a manner which does not cause the
Mortgaged Property or Manufactured Home to fail to qualify as "foreclosure
property" within the meaning of Code Section 860G(a)(8) or result in the
receipt by the Trust Fund of any "net income from foreclosure property"
within the meaning of Code Section 860G(c). In general, this would preclude
the holding of the Mortgaged Property or Manufactured Home as a dealer in
such property or the receipt of rental income based on the profits of the
lessee.

The Servicer may modify, waive or amend the terms of any Mortgage
Loan or Contract without the consent of the Trustee or any Certificateholder.
Such modification, waiver or amendment shall only be given if the Servicer
determines that it is in the best interests of Certificateholders and,
generally, only if the Mortgage Loan is in default or the Service has
determined that default is reasonably foreseeable.

SERVICING COMPENSATION AND PAYMENT OF EXPENSES

For each Series of Certificates, the Servicer will be entitled to
be paid the Servicing Fee on the related Mortgage Loans or Contracts until
termination of the applicable Pooling and Servicing Agreement, subject,
unless otherwise specified in the applicable Prospectus Supplement, to
adjustment as described under "Adjustment to Servicing Compensation in
Connection with Prepaid and Liquidated Mortgage Loans and Contracts" above.
The Servicer, at its election, will pay itself the Servicing Fee for a Series
with respect to each Mortgage Loan or Contract by (a) withholding the
Servicing Fee from any scheduled payment of interest prior to deposit of such
payment in the Certificate Account for such Series or (b) withdrawing the
Servicing Fee from the Certificate Account after the entire interest payment
has been deposited in the Certificate Account. The Servicer may also pay
itself out of the Liquidation Proceeds or Insurance Proceeds with respect to
a Mortgage Loan or Contract, or withdraw from the Certificate Account, the
Servicing Fee in respect of such Mortgage Loan or Contract or other
recoveries with respect thereto to the extent provided in the applicable
Pooling and Servicing Agreement. The Servicing Fee with respect to the
Mortgage Loans or Contracts underlying the Certificates of a Series will be
specified in the applicable Prospectus Supplement. Any additional servicing
compensation in the form of prepayment charges, assumption fees, late payment
charges or otherwise will be retained by the Servicer to the extent not
required to be deposited in the Certificate Account.

In addition to amounts payable to any Sub-Servicer, the Servicer
will pay all expenses incurred in connection with the servicing of the
Mortgage Loans or Contracts underlying a Series, including, without
limitation, payment of the hazard insurance policy premiums and fees or other
amounts payable pursuant to any applicable agreement for the provision of
credit enhancement for such Series, payment of the fees and disbursements of
the Trustee and any custodian, fees due to the independent accountants and
expenses incurred in connection with distributions and reports to
Certificateholders. However, certain of these expenses may be reimbursable
to the Servicer pursuant to the terms of the applicable Pooling and Servicing
Agreement. In addition, the Servicer will be entitled to reimbursement for
certain expenses incurred by it in connection with the liquidation of
defaulted Mortgage Loans or Contracts. In the event that claims are either
not made or are not fully paid from any applicable form of credit
enhancement, the related Trust Fund will suffer a loss to the extent that Net
Liquidation Proceeds and Net Insurance Proceeds are less than the principal
balance of the related Mortgage Loan or Contract, plus accrued interest
thereon at the Net Mortgage Rate or Net Contract Rate. In addition, the
Servicer will be entitled to reimbursement of expenditures incurred by it in
connection with the restoration of any Mortgaged Property or

<PAGE>

Manufactured Home, such right of reimbursement being prior to the rights
of the Certificateholders to receive Liquidation Proceeds and Insurance
Proceeds. The Servicer is also entitled to reimbursement from the
Certificate Account of Advances, of advances made by it to pay taxes or
insurance premiums with respect to any Mortgaged Property or Manufactured
Home and of certain losses against which it is indemnified by the Trust Fund.

EVIDENCE AS TO COMPLIANCE

THE MORTGAGE LOANS

Each Pooling and Servicing Agreement will provide that on or before
a specified date in each year, beginning with the first such date occurring
at least six months after the related Cut-Off Date, a firm of independent
public accountants will furnish a statement to the Trustee to the effect
that, on the basis of the examination by such firm conducted substantially in
compliance with either the Uniform Single Audit Program for Mortgage Bankers
or the Audit Program for Mortgages serviced for FHLMC, the servicing by or on
behalf of the Servicer of mortgage loans under pooling and servicing
agreements substantially similar to each other (including the related Pooling
and Servicing Agreement) was conducted in compliance with the terms of such
agreements other than exceptions that are immaterial and any significant
exceptions of errors in records that, in the opinion of the firm, either the
Audit Program for Mortgages serviced for FHLMC, or paragraph 4 of the Uniform
Single Audit Program for Mortgage Bankers, requires it to report. In
rendering its statement such firm may rely, as to matters relating to the
direct servicing of mortgage loans by Sub-Servicers, upon comparable
statements for examinations conducted substantially in compliance with the
Uniform Single Audit Program for Mortgage Bankers or the Audit Program for
Mortgages serviced for FHLMC (rendered within one year of such statement) of
firms of independent public accountants with respect to the related
Sub-Servicer.

THE CONTRACTS

Each Pooling and Servicing Agreement relating to a Series of
Certificates representing interests in a Contract Pool will provide that on
or before a specified date in each year, beginning with the first such date
after the related Cut-Off Date, a firm of independent public accountants will
furnish a statement to the Trustee to the effect that such firm is of the
opinion that the system of internal accounting controls in effect on the date
of such statement relating to the servicing procedures performed by the
Servicer under the Pooling and Servicing Agreement, taken as a whole, was
sufficient for the prevention and detection of errors and irregularities
which would be material to the assets of the Trust Fund and that nothing has
come to their attention that would cause them to believe that such servicing
has not been conducted in compliance with the provisions of the Pooling and
Servicing Agreement, other than such exceptions as shall be set forth in such
report.

Each Pooling and Servicing Agreement will also provide for delivery
to the Trustee annually on or before the specified date therein, a statement
signed by two officers of the Servicer to the effect that the Servicer has
fulfilled its obligations under the Pooling and Servicing Agreement
throughout the preceding year or, if there has been a default in the
fulfillment of any such obligation, describing each such default.

Copies of the annual accountants' statement and the statement of
officers of the Servicer may be obtained by Certificateholders without charge
upon written request to the Servicer at the address of the Servicer set forth
in the related Prospectus Supplement.

CERTAIN MATTERS REGARDING THE SERVICER AND THE DEPOSITOR

The Servicer may not resign from its obligations and duties under
the Pooling and Servicing Agreement for each Series (other than its duties as
Certificate Registrar for such Series, if it is acting as such), except upon
its determination that its duties thereunder are no longer permissible under
applicable law or are in material conflict by reason of applicable law with
any other activities of a type and nature presently carried on by it. No
such resignation will become effective until the Trustee for such Series or a
successor Servicer has assumed the Servicer's obligations and duties under
the Pooling and Servicing Agreement. If the Servicer resigns for any of the
foregoing reasons and the Trustee is unable or unwilling to assume
responsibility for servicing the Mortgage

<PAGE>

Loans or Contracts, it may appoint another institution as Servicer, as
described under "The Pooling and Servicing Agreement -- Rights Upon Event of
Default --Mortgage Loans or Contracts" below.

The Pooling and Servicing Agreement will provide that neither the
Depositor, the Servicer (if the Series of Certificates relates to Mortgage
Loans or Mortgage Contracts) nor any director, officer, employee or agent of
either of them will be under any liability to the Trust Fund or the
Certificateholders, for the taking of any action or for refraining from the
taking of any action in good faith pursuant to the Pooling and Servicing
Agreement, or for errors in judgment; provided, however, that none of the
Depositor, the Servicer or any director, officer, employee or agent of the
Depositor or Servicer will be protected against any liability that would
otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of his or its duties or by reason of reckless
disregard of his or its obligations and duties thereunder. The Pooling and
Servicing Agreement will further provide that the Depositor, the Servicer and
any director, officer, employee or agent of either of them shall be entitled
to indemnification by the Trust Fund and will be held harmless against any
loss, liability or expense incurred in connection with any legal action
relating to the Pooling and Servicing Agreement or the Certificates other
than any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or gross negligence in the performance of his or its
duties thereunder or by reason of reckless disregard of his or its
obligations and duties thereunder. In addition, the Pooling and Servicing
Agreement will provide that the Depositor and the Servicer will not be under
any obligation to appear in, prosecute or defend any legal action that is not
incidental to its duties under the Pooling and Servicing Agreement and that
in its opinion may involve it in any expense or liability. The Depositor and
the Servicer may, however, in its discretion, undertake any such action
deemed by it necessary or desirable with respect to the Pooling and Servicing
Agreement and the rights and duties of the parties thereto and the interests
of the Certificateholders thereunder. In such event, the legal expenses and
costs of such action and any liability resulting therefrom will be expenses,
costs and liabilities of the Trust Fund, and the Servicer will be entitled to
be reimbursed therefor out of the Certificate Account, and any loss to the
Trust Fund arising from such right of reimbursement will be allocated pro
rata among the various Classes of Certificates unless otherwise specified in
the applicable Pooling and Servicing Agreement.

Any person into which the Servicer may be merged or consolidated,
or any person resulting from any merger, conversion or consolidation to which
the Servicer is a party, or any person succeeding to the business through the
transfer of substantially all of its assets, or otherwise, of the Servicer
will be the successor of the Servicer under the Pooling and Servicing
Agreement for each Series provided that such successor or resulting entity is
qualified to service mortgage loans for FNMA or FHLMC and that the applicable
Rating Agency's rating of any Certificates for such Series in effect
immediately prior to such event is not adversely affected thereby.

The Servicer also has the right to assign its rights and delegate
its duties and obligations under the Pooling and Servicing Agreement for each
Series (A) in connection with a sale or transfer of a substantial portion of
its mortgage or manufactured housing servicing portfolio; provided that (i)
in the case of a transfer by a Servicer of Mortgage Loans, the purchaser or
transferee accepting such assignment or delegation is qualified to service
mortgage loans for FNMA or FHLMC, (ii) the purchaser or transferee is
reasonably satisfactory to the Depositor and the Trustee for such Series and
executes and delivers to the Depositor and the Trustee an agreement, in form
and substance reasonably satisfactory to the Depositor and the Trustee, which
contains an assumption by such purchaser or transferee of the due and
punctual performance and observance of each covenant and condition to be
performed or observed by the Servicer under the Pooling and Servicing
Agreement from and after the date of such agreement; and (iii) the applicable
Rating Agency's rating of any Certificates for such Series in effect
immediately prior to such assignment, sale or transfer is not qualified,
downgraded or withdrawn as a result of such assignment, sale or transfer or
(B) to any affiliate of the Servicer, provided that the conditions contained
in clauses (i) through (iii) above are met. In the case of any such
assignment or delegation, the Servicer will be released from its obligations
under the Pooling and Servicing Agreement except for liabilities and
obligations incurred prior to such assignment and delegation.

<PAGE>
THE POOLING AND SERVICING AGREEMENT

EVENTS OF DEFAULT

MORTGAGE LOANS OR CONTRACTS

Events of Default under the Pooling and Servicing Agreement for
each Series of Certificates relating to Mortgage Loans or Contracts include
(i) any failure by the Servicer to remit to the Trustee or to any Paying
Agent for distribution to Certificateholders any required payment which
continues unremedied for 5 days; (ii) any failure by the Servicer duly to
observe or perform in any material respect any other of its covenants or
agreements in the Pooling and Servicing Agreement which continues unremedied
for 30 days (or 10 days in the case of a failure to maintain any pool
insurance policy required to be maintained pursuant to the Pooling and
Servicing Agreement) after the giving of written notice of such failure to
the Servicer by the Trustee, or to the Servicer and Trustee by the holders of
Certificates of such Series having voting rights allocated to such
Certificates ("Voting Interests") aggregating not less than 25% of the
Voting Interests represented by all Certificates for such Series; (iii) any
breach of representation or warranty of the Servicer relating to such
Servicer's authority to enter into, and its ability to perform its
obligations under, such Pooling and Servicing Agreement; (iv) certain events
of insolvency, readjustments of debt, marshalling of assets and liabilities
or similar proceedings and certain actions by the Servicer indicating its
insolvency, reorganization or inability to any its obligations and (v) if
specified in the applicable Pooling and Servicing Agreement, any failure by
the Servicer to remit to the Trustee the amount of any Advance by the
business day preceding the applicable Distribution Date.

RIGHTS UPON EVENT OF DEFAULT

MORTGAGE LOANS OR CONTRACTS

So long as Event of Default remains unremedied under the Pooling
and Servicing Agreement for a Series of Certificates relating to Mortgage
Loans or Contracts, the Trustee for such Series or holders of Certificates of
such Series evidencing not less than 25% of the Voting Interests in the Trust
Fund for such Series may terminate all of the rights and obligations of the
Servicer under the Pooling and Servicing Agreement and in and to the Mortgage
Loans or Contracts (other than the Servicer's right to recovery of any
Initial Deposit for such Series and other expenses and amounts advanced
pursuant to the terms of the Pooling and Servicing 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 the Pooling and Servicing Agreement and will be entitled to monthly
servicing compensation not to exceed the aggregate Servicing Fees, together
with the other servicing compensation in the form of assumption fees, late
payment charges or otherwise as provided in the Pooling and Servicing
Agreement. In the event that the Trustee is unwilling or unable so to act, it
may select, pursuant to the private or public bid procedure described in the
applicable Pooling and Servicing Agreement, or petition a court of competent
jurisdiction to appoint, (i) in the case of a Servicer of Mortgage Loans, a
housing and home finance institution, bank or mortgage servicing institution
with a net worth of at least $15,000,000 and which is a FNMA- and
FHLMC-approved seller/servicer or (ii) in the case of a Servicer of
Contracts, an institution with a net worth of at least $15,000,000 which has
serviced for at least one year immediately prior thereto a portfolio of
manufactured housing loans of not less than $100,000,000, to act as successor
to the Servicer under the provisions of the Pooling and Servicing Agreement
relating to the servicing of the Mortgage Loans or Contracts. In the event
such public bid procedure is utilized, the successor Servicer would be
entitled to servicing compensation in an amount equal to the aggregate
Servicing Fees, together with the other servicing compensation in the form of
assumption fees, late payment charges or otherwise, as provided in the
Pooling and Servicing Agreement, and the Servicer would be entitled to
receive the net profits, if any, received from the sale of its servicing
rights and obligations under the Pooling and Servicing Agreement.

During the continuance of any Event of Default under the Pooling
and Servicing Agreement for a Series of Certificates relating to Mortgage
Loans or Contracts, 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 Certificateholders of such Series, and holders of
Certificates evidencing not less than 25% of the Voting Interests for such
Series may direct the time, method and place of conducting any proceeding for
any remedy available to

65
<PAGE>

the Trustee or exercising any trust or power conferred upon the 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
Certificateholders have offered the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may be incurred by the
Trustee thereby. Also, 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 be unjustly prejudicial to the nonassenting
Certificateholders or if, under certain circumstances, the Trustee receives
conflicting directions from different groups of Certificateholders.

No Certificateholders of a Series, solely by virtue of such
holder's status as a Certificateholder, will have any right under the Pooling
and Servicing Agreement for such Series to institute any proceeding with
respect to the Pooling and Servicing Agreement, unless such holder previously
has given to the Trustee for such Series written notice of default and unless
the holders of Certificates evidencing not less than 25% of the Voting
Interests 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.

AMENDMENT

Each Pooling and Servicing Agreement may be amended by the
Depositor, the Servicer (with respect to a Series of Certificates relating,
to the Mortgage Loans or Contracts) and the Trustee without the consent of
the Certificateholders, (i) to cure any ambiguity, (ii) to correct or
supplement any provision therein that may be inconsistent with any over
provision therein, (iii) to modify, eliminate or add to any of its provisions
to such extent as shall be necessary to maintain the qualification of the
Trust Fund (or one or more segregated pools of assets therein) as a REMIC at
all times that any Certificates are outstanding or to avoid or modify the
risk of the imposition of any tax on the Trust Fund pursuant to the Code that
would be a claim against the Trust Fund, provided that the Trustee has
received an opinion of counsel to the effect that such action is necessary or
desirable to maintain such qualification or to avoid or minimize the risk of
the imposition of any such tax and such action will not, as evidenced by such
opinion of counsel, adversely affect in any material respect the interests of
any Certificateholder, (iv) to change the timing and/or nature of deposits
into the Certificate Account, provided that such change will not, as
evidenced by an opinion of counsel, adversely affect in any material respect
the interests of any Certificateholder and that such change will not
adversely affect the then current rating assigned to any Certificates, as
evidenced by a letter from each Rating Agency to such effect, (v) to add to,
modify or eliminate any provisions therein restricting transfers of certain
Certificates, which are inserted in response to the Code provisions described
below under "Certain Federal Income Tax Consequences -- Federal Income Tax
Consequences for REMIC Certificates -- Taxation of Residual Certificates --
Tax-Related Restrictions on Transfer of Residual Certificates," or (vi) to
make any other provisions with respect to matters or questions arising under
such Pooling and Servicing Agreement that are not inconsistent with the
provisions thereof, provided that such action will not, as evidenced by an
opinion of counsel, adversely affect in any material respect the interests of
the Certificateholders of the related Series. The Pooling and Servicing
Agreement may also be amended by the Depositor, the Servicer, where
applicable, and the Trustee with the consent of the holders of Certificates
evidencing interests aggregating not less than 66 2/3% of the Voting
Interests evidenced by the Certificates affected thereby, for the purpose of
adding any provisions to or changing in any manner or eliminating, any of the
provisions of such Pooling and Servicing Agreement or of modifying in any
manner the rights of the Certificateholders; provided, however, that no such
amendment may (i) reduce in any manner the amount of, or delay the timing of,
any payments received on or with respect to Mortgage Loans or Contracts that
are required to be distributed on any Certificates, without the consent of
the holder of such Certificate, (ii) adversely affect in any material respect
the interests of the holders of a Class or Subclass of Certificates of a
Series in a manner other than that set forth in clause (i) above without the
consent of the holders of Certificates aggregating not less than 66-2/3% of
the Voting Interests evidenced by such Class or Subclass, or (iii) reduce the
aforesaid percentage of the Certificates, the holders of which are required
to consent to such amendment, without the consent of the holders of all
Certificates of the Class or Subclass affected then outstanding.
Notwithstanding the foregoing, the Pooling and Servicing Agreement may be
amended by the Depositor, the Servicer, where applicable, and the Trustee
provided that such action is approved by holders of Certificates evidencing
100% of the Percentage Interest of each Class that, as evidenced by an
opinion of counsel, is adversely affected in any material respect by such
action. For purposes of giving any such consent (other than a consent to an
action which would adversely affect in any material respect the interests of
the Certificateholders

<PAGE>

of any Class, while the Servicer or any affiliate thereof is the holder of
Certificates aggregating not less than 66-2/3% of the Percentage Interest of
such Class), any Certificates registered in the name of the Servicer or any
affiliate thereof shall be deemed not to be outstanding. Notwithstanding the
foregoing, the Trustee will not consent to any such amendment if such
amendment would subject the Trust Fund to tax or cause the Trust Fund (or one
or more segregated pools of assets therein) to fail to qualify as a REMIC.

TERMINATION; PURCHASE OR OTHER DISPOSITION OF MORTGAGE LOANS AND CONTRACTS

The obligations created by the Pooling and Servicing Agreement for
a Series of Certificates will terminate upon the earlier of (i) the later of
the final payment or other liquidation of the last Mortgage Loan or Contract
subject thereto and the disposition of all property acquired upon foreclosure
of any such Mortgage Loan or Contract and (ii) any purchase or disposition
described in the following paragraph. In no event, however, will the trust
created by the Pooling and Servicing Agreement continue beyond the expiration
of 21 years from the death of the late survivor of certain persons named in
such Pooling and Servicing Agreement. For each Series of Certificates, the
Trustee will give written notice of termination of the Pooling and Servicing
Agreement to each Certificateholder, and the final distribution will be made
only upon surrender and cancellation of the Certificates at an office or
agency appointed by the Depositor and specified in the notice of termination.

If so provided in the related Prospectus Supplement, the Pooling
and Servicing Agreement for each Series of Certificates will permit, but not
require, the person or persons specified in such Prospectus Supplement to
purchase from the Trust Fund for such Series, or will require the Trust Fund
to sell, all remaining Mortgage Loans or Contracts at the time subject to the
Pooling and Servicing Agreement at a price specified in such Prospectus
Supplement. In the event that an election has been made to treat the related
Trust Fund (or one or more segregated pools of assets therein) as a REMIC,
any such purchase or disposition will be effected only upon receipt by the
Trustee of an opinion of counsel that such purchase (i) will be part of a
"qualified liquidation" or other evidence as defined in Code Section
860F(a)(4)(A), (ii) will not otherwise subject the Trust Fund (or segregated
asset pool) to tax, or (iii) will not cause the Trust Fund (or segregated
asset pool) to fail to qualify as a REMIC. The exercise of such right or
such disposition will effect early retirement of the Certificates of that
Series, but the right so to purchase may be exercised, or the obligation to
sell will arise, only after the aggregate principal balance of the Mortgage
Loans or Contracts for such Series at the time of purchase is less than a
specified percentage of the aggregate principal balance at the Cut-Off Date
for the Series, or after the date set forth in the related Prospectus
Supplement. See "Prepayment and Yield Considerations."

THE TRUSTEE

The Trustee under each Pooling and Servicing Agreement will be
named in the applicable Prospectus Supplement. The commercial bank or trust
company serving as Trustee may have normal banking relationships with the
Depositor, the Servicer or any of their respective affiliates.

With respect to a Series of Certificates relating to Mortgage
Loans or Contracts, the Trustee may resign at any time, in which event the
Servicer will be obligated to appoint a successor trustee. The Servicer
(with respect to a Series of Certificates relating to Mortgage Loans or
Contracts) may also remove the Trustee if the Trustee ceases to be eligible
to act as Trustee under the Pooling and Servicing Agreement, if the Trustee
becomes insolvent or in order to change the situs of the Trust Fund for
state-tax reasons. Upon becoming aware of such circumstances, the Servicer
or Depositor, as the case may be, will become obligated to appoint a
successor trustee. The Trustee may also be removed at any time by the
holders of Certificates evidencing not less than 51% of the Voting Interest
in the Trust Fund, except that, any Certificate registered in the name of the
Depositor, the Servicer or any affiliate thereof will not be taken into
account in determining whether the requisite Voting Interest in the Trust
Fund necessary to effect any such removal has been obtained. Any resignation
and removal of the Trustee, and the appointment of a successor trustee, will
not become effective until acceptance of such appointment by the successor
trustee. The Trustee, and any successor trustee, will have a combined
capital and surplus, or shall be a member of a bank holding system with an
aggregate combined capital and surplus, of at least $50,000,000 and will be
subject to supervision or examination by federal or state authorities.

<PAGE>

CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS AND CONTRACTS

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

THE MORTGAGE LOANS

GENERAL

The Mortgage Loans will, in general, be secured by either first,
second or more junior mortgages, deeds of trust, or other similar security
agreements depending upon the prevailing practice in the state in which the
underlying property is located. A mortgage creates a lien upon the real
property described in the mortgage. There are two parties to a mortgage: the
mortgagor, who is the borrower; and the mortgagee, who is the lender. In a
mortgage state instrument, the mortgagor delivers to the mortgagee a note or
bond evidencing the loan and the mortgage. Although a deed of trust is
similar to a mortgage, a deed of trust has three parties: a borrower called
the trustor (similar to a mortgagor), a lender called the beneficiary
(similar to a mortgagee), and a third-party grantee called the trustee.
Under a deed of trust, the borrower grant the property, irrevocably until the
debt is paid,, in trust, generally with a power of sale, to the trustee to
secure payment of the loan. The trustee's authority under a deed of trust and
the mortgage's authority under a mortgage are governed by the express
provisions of the deed of trust or mortgage, applicable law, and, in some
cases, with respect to the deed of trust, the directions of the beneficiary.

The real property covered by a mortgage is most often the fee
estate in land and improvements. However, a mortgage may encumber other
interests in real property such as a tenant's interest in a lease of land or
improvements, or both, and the leasehold estate created by such lease. A
mortgage covering an interest in real property other than the fee estate
requires special provisions in the instrument creating such interest or in
the mortgage to protect the mortgagee against termination of such interest
before the mortgage is paid.

FORECLOSURE

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 of
foreclosure is contested, the legal proceedings necessary to resolve the
issue can be time-consuming. After the completion of a judicial foreclosure
proceeding, the court 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
non-judicial trustee's sale under a specific provision in the deed of trust
that authorizes the trustee to sell the property to a third party 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 must provide
notice in some states to any other individual having an interest of record in
the real property, including any junior lienholders. If the deed of trust is
not reinstated within any applicable cure period, a notice of sale must be
posted in a public place and, in most states, published for a specified
period of time in one or more newspapers. In addition, some state be 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.

<PAGE>

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

In case of foreclosure under either a mortgage or a deed of trust,
the sale by the receiver or other designated officer, or by the trustee, is a
public sale. However, because of the difficulty a potential buyer at the sale
would 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 the
foreclosure sale. Rather, it is common for the lender to purchase the
property from the trustee or receiver for an amount equal to the unpaid
principal amount of the note, accrued and unpaid interest and the expenses of
foreclosure. 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 and making
such repairs at its own expense as are necessary to render the property
suitable for sale. The lender commonly will obtain the services of a real
estate broker and pay the broker a 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 mortgage insurance proceeds.

FORECLOSURE ON SHARES OF COOPERATIVES

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

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

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

Foreclosure on the cooperative shares is accomplished by a sale in
accordance with the provisions of Article 9 of the Uniform Commercial Code
(the "UCC") and the security agreement relating to those shares. Article 9
of the UCC requires that a sale be conducted in a "commercially reasonable"
manner. Whether a foreclosure sale has been conducted in a "commercially
reasonable" manner will depend on the facts in each case. In determining
commercial reasonableness, a court will look to the notice given the debtor
and the method, manner,

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time, place and terms of the foreclosure. Generally, a sale conducted
according to the usual practice of banks selling similar collateral will be
considered reasonably conducted.

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

RIGHTS OF REDEMPTION

In some states, after sale pursuant to a deed of trust and/or
foreclosure of a mortgage, the borrower and certain foreclosed junior lienors
are given a statutory period in which to redeem the property from the
foreclosure sale. In most states where the right of redemption is available,
statutory redemption may occur upon payment of the foreclosure purchase
price, accrued interest and taxes. In some states, the right to redeem is an
equitable right. The effect of a right of redemption is to diminish the
ability of the lender to sell the foreclosed property. The exercise of a
right of redemption would defeat the title of any purchaser at a foreclosure
sale, or of any purchaser from the lender subsequent to judicial foreclosure
or sale under a deed of trust. Consequently, the practical effect of the
redemption right is to force the lender to maintain the property and pay the
expenses of ownership until the redemption period has run.

JUNIOR MORTGAGES; RIGHTS OF SENIOR MORTGAGES

The Mortgage Loans are secured by mortgages or deeds of trust some
of which are junior to other mortgages or deeds of trust held by other
lenders or institutional investors. The rights of the Trust (and therefore
the Certificateholders), as mortgagee under a junior mortgage or beneficiary
under a junior deed of trust, are subordinate to those of the mortgagee under
the senior mortgage or beneficiary under the senior deed of trust, 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 or trustor, thereby extinguishing the
junior mortgagee's or junior beneficiary's lien unless the junior mortgagee
or junior beneficiary asserts its subordinate interest in the property in
foreclosure litigation and, possibly, satisfies the defaulted senior mortgage
or deed of trust. As discussed more fully below, a junior mortgagee or
junior beneficiary may satisfy a defaulted senior loan in full and, in some
states, may cure such default and loan. In most states, no notice of default
is required to be given to a junior mortgagee or junior beneficiary and
junior mortgagees or junior beneficiaries are seldom given notice of defaults
or senior mortgages. In order for a foreclosure action in some states to be
effective against a junior mortgagee or junior beneficiary, the junior
mortgagee or junior beneficiary must be named in any foreclosure action, thus
giving notice to junior lienors. It is standard practice of the Sellers to
protect their interest by attending any sale of which they have notice or
appearing and bidding for, or redeeming, the property if it is in their best
interest to do so.

The standard form of the mortgage or deed of trust used by most
institutional lenders, (including the sellers) confers on the mortgagee or
beneficiary the right both to receive all proceeds collected under any hazard
insurance policy and all awards made in connection with any condemnation
proceedings, and to apply such proceeds and awards to any indebtedness
secured by the mortgage or deed of trust. 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 any underlying senior mortgages will have the prior right to collect
and apply any insurance proceeds payable under a hazard insurance policy to
restore or repair the property if feasible, and to collect any remaining
insurance proceeds or any award of damages in connection with the
condemnation and to apply the same to the indebtedness secured by the senior
mortgages or deeds of trust. Proceeds in excess of the amount of senior
mortgage indebtedness, in most cases, may be applied to the indebtedness of a
junior mortgage or trust deed.

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The form of mortgage or deed of trust used by most institutional
lenders typically contains a "future advance" clause, which provides, in
essence, that additional amounts advanced to or on behalf of the mortgagor or
trustor by the mortgagee or beneficiary are to be secured by the mortgage or
deed of trust. The priority of any advance made under the clause depends, in
some states, on whether the advance was an "obligatory" or "optional"
advance. If the mortgagee or beneficiary is obligated to advance the
additional amounts, the advance is entitled to receive the same priority as
amounts initially advanced under the mortgage or deed of trust,
notwithstanding the fact that there may be junior mortgages or deeds of trust
and other liens which intervene between the date of recording of the mortgage
or deed of trust and the date of the future advance, and, in some states,
notwithstanding that the mortgagee or beneficiary had actual knowledge of
such intervening junior mortgages or deeds of trust and other liens at the
time of the advance. Where the mortgagee or beneficiary is not obligated to
advance additional amounts or, in some states, has actual knowledge of the
intervening junior mortgages or deeds of trust and other liens, the advance
will be subordinate to such intervening junior mortgages or deeds of trust
and other liens. Priority of advances under a "future advance" cause rests,
in some states, on state statutes giving priority to all advances made under
the loan agreement to a "credit limit" amount stated in the recorded mortgage.

Another provision sometimes included in the form of the mortgage or
deed of trust used by institutional lenders (and included in some of the
forms used by the Sellers) obligates the mortgagor or trustor 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 or
beneficiary under the mortgage or deed of trust. Upon a failure of the
mortgagor or trustor to perform any of these obligations, the mortgagee or
beneficiary is given the right under certain mortgages or deeds of trust to
perform the obligations itself, at its election, with the mortgagor or
trustor agreeing to reimburse the mortgagee or beneficiary for any sums
expended by the mortgagee or beneficiary on behalf of the mortgagor or
trustor. All sums so expended by the mortgagee or beneficiary become part of
the indebtedness secured by the mortgage or deed of trust.

ANTI-DEFICIENCY LEGISLATION AND OTHER LIMITATIONS ON LENDERS

Certain states have imposed statutory restrictions that limit the
remedies of a beneficiary under a deed of trust or a mortgage 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 amount due to the lender and the net amount realized
upon the foreclosure sale.

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

Other statutory provisions may 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
such sale. The purpose of these statutes is 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 some states, exceptions to the anti-deficiency statutes are
provided for in certain instances where the value of the lender's security
has been impaired by acts or omissions of the borrower, for example, in the
event of waste of the property.

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

In addition to anti-deficiency and related legislation, numerous
other federal and state statutory provisions, including the federal
bankruptcy laws, the federal Soldiers' and Sailors' Civil Relief Act of 1940
and state laws affording relief to debtors, may interfere with or affect the
ability of a secured mortgage lender to realize upon its security. For
example, in a Chapter 13 proceeding under the Federal Bankruptcy Code, when a
court determines that the value of a home is less than the principal balance
of the loan, the court may prevent a lender from foreclosing on the home,
and, as part of the rehabilitation plan, reduce the amount of the secured
indebtedness to the value of the home as it exists at the time of the
proceeding, leaving the lender as a general unsecured creditor for the
difference between that value and the amount of outstanding indebtedness. A
bankruptcy court may grant the debtor a reasonable time to cure a payment
default, and in the case of a mortgage loan not secured by the debtor's
principal residence, also may reduce the monthly payments due under such
mortgage loan, change the rate of interest and alter the mortgage loan
repayment schedule. Certain court decisions have applied such relief to
claims secured by the debtor's principal residence.

The Internal Revenue Code of 1986, as amended, provides priority to
certain tax liens over the lien of the mortgage or deed of trust. The laws
of some states provide priority to certain tax liens over the lien of the
mortgage of deed of trust. Certain environmental protection laws may also
impose liability for cleanup expenses on owners by foreclosure on real
property, which liability may exceed the value of the property involved.
Numerous federal and some state consumer protection laws impose substantive
requirements upon mortgage lenders in connection with the origination,
servicing and the enforcement of mortgage loans. These laws include the
federal Truth in Lending Act, Real Estate Settlement Procedures Act, Equal
Credit Opportunity Act, Fair Credit Billing Act, Fair Credit Reporting Act,
and related statutes and regulations. These federal laws and state laws
impose specific statutory liabilities upon lenders who originate or service
mortgage loans and who fail to comply with the provisions of the law. In
some cases, this liability may affect assignees of the mortgage loans.

"DUE-ON-SALE" CLAUSES

The forms of note, mortgage and deed of trust relating to
conventional Mortgage Loans may contain a "due-on-sale" clause permitting
acceleration of the maturity of a loan if the borrower transfers its interest
in the property. In recent years, court decisions and legislative actions
placed substantial restrictions on the right of lenders to enforce such
clauses in many states. However, effective October 15, 1982, Congress
enacted the Garn-St Germain Depository Institutions Act of 1982 (the "Act")
which purports to preempt state laws which prohibit the enforcement of
"due-on-sale" clauses by providing among other matters, that "due-on-sale"
clauses in certain loans (which loans may include the Mortgage Loans) made
after the effective date of the Act are enforceable, within certain
limitations as set forth in the Act and the regulations promulgated
thereunder. "Due-on-sale" clauses contained in mortgage loans originated by
federal savings and loan associations or federal savings banks are fully
enforceable pursuant to regulations of the Office of Thrift Supervision
("OTS"), as successor to the Federal Home Loan Bank Board ("FHLBB"), which
preempt state law restrictions on the enforcement of such clauses.
Similarly, "due-on-sale" clauses in mortgage loans made by national banks and
federal credit unions are now fully enforceable pursuant to preemptive
regulations of the Office of the Comptroller of the Currency and the National
Credit Union Administration, respectively.

The Act created a limited exemption from its general rule of
enforceability for "due-on-sale" clauses in certain mortgage loans ("Window
Period Loans") which were originated by non-federal lenders and made or
assumed in certain states ("Window Period States") during the period, prior
to October 15, 1982, in which that state prohibited the enforcement of
"due-on-sale" clauses by constitutional provision, statute or statewide court
decision (the "Window Period"). Though neither the Act nor the FHLBB
regulations promulgated thereunder actually names the Window Period States,
FHLMC has taken the position, in prescribing mortgage loan servicing
standards with respect to mortgage loans which it has purchased, that the
Window Period States were: Arizona, Arkansas, California, Colorado, Georgia,
Iowa, Michigan, Minnesota, New Mexico, Utah and Washington. Under

<PAGE>

the Act, unless a Window Period State took action by October 15, 1985, the
end of the Window Period, to further regulate enforcement of "due-on-sale"
clauses in Window Period Loans, "due-on-sale" clauses would become
enforceable even in Window Period Loans. Five of the Window Period States
(Arizona, Minnesota, Michigan, New Mexico and Utah) have taken actions which
restrict the enforceability of "due-on-sale" clauses in Window Period Loans
beyond October 15, 1985. The actions taken vary among such states.

By virtue of the Act, the Servicer may generally be permitted to
accelerate any conventional Mortgage Loan which contains a "due-on-sale"
clause upon transfer of an interest in the property subject to the mortgage
or deed of trust. With respect to any Mortgage Loan secured by a residence
occupied or to be occupied by the borrower, this ability to accelerate will
not apply to certain types of transfers, including (i) the granting of a
leasehold interest which has a term of three years or less and which does not
contain an option to purchase, (ii) a transfer to a relative resulting from
the death of a borrower, or a transfer where the spouse or children becomes
an owner of the property in each case where the transferee(s) will occupy the
property, (iii) a number resulting from a decree of dissolution of marriage,
legal separation agreement or from an incidental property settlement
agreement by which the spouse becomes an owner of the property, (iv) the
creation of a lien or other encumbrance subordinate to the lender's security
instrument which does not relate to a transfer of rights of occupancy in the
property (provided that such lien or encumbrance is not created pursuant to a
contract for deed), (v) a transfer by devise, descent or operation of law on
the death of a joint tenant or tenant by the entirety, and (vi) other
transfers as set forth in the Act and the regulations thereunder. The extent
of the effect of the Act on the average lives and delinquency rates of the
Mortgage Loans cannot be predicted. See "Prepayment and Yield
Considerations."

APPLICABILITY OF USURY LAWS

Title V of the Depository Institutions Deregulation and Monetary
Control Act of 1980, as amended ("Title V"), provides that state usury
limitations shall not apply to certain types of residential first mortgage
loans originated by certain lenders after March 31, 1980. The OTS (as
successor to the FHLBB) is authorized to issue rules and regulations and to
publish interpretations governing implementation of Title V. The statute
authorized any state to reimpose Stated Rate limits by adopting before April
1, 1983, a law or constitutional provision which expressly rejects
application of the federal law. Fifteen states have adopted laws reimposing
or reserving the right to impose interest rate limits. In addition, even
where Title V is not so rejected, any state is authorized to adopt a
provision limiting certain other loan charges.

Unless otherwise specified in the applicable Prospectus Supplement,
each Unaffiliated Seller will represent and warrant in the related Loan Sale
Agreement that all Mortgage Loans sold by such Unaffiliated Seller to the
Depositor were originated in full compliance with applicable state laws,
including usury laws. See "The Trust Funds -- Representations and
Warranties."

ADJUSTABLE RATE LOANS

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

ENFORCEABILITY OF CERTAIN PROVISIONS

Standard forms of note, mortgage and deed of trust generally
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 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. Under the Pooling and Servicing Agreement, late
charges and prepayment fees (to the extent permitted by law and not waived by
the Servicer) will be retained by the Servicer as additional servicing
compensation.

<PAGE>

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

THE CONTRACTS

GENERAL

As a result of the assignment of the Contracts to the Trustee, the
Trust Fund will succeed collectively to all of the rights (including the
right to receive payment on the Contracts) and will assume the obligations of
the obligee under the Contracts. Each Contract evidences both (a) the
obligation of the obligor to repay the loan evidenced thereby, and (b) the
grant of a security interest in the Manufactured Home to secure repayment of
such loan. Certain aspects of both features of the Contracts are described
more fully below.

The Contracts generally are "chattel paper" as defined in the
Uniform Commercial Code (the "UCC") in effect in the states in which the
Manufactured Homes initially were registered. 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 Pooling and Servicing Agreement, the
Servicer will transfer physical possession of the Contracts to the Trustee or
a designated custodian or may retain possession of the Contracts as custodian
for the Trustee. In addition, the Servicer 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 marked
otherwise 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 Contracts could be defeated.

SECURITY INTERESTS IN THE MANUFACTURED HOMES

The Manufactured Homes securing the Contracts may be located in all
50 states. Security interests in manufactured homes may be perfected either
by notation of the secured party's lien on the certificate of title or by
delivery of the required documents and payment of a fee to the state motor
vehicle authority, depending on state law. In some non-title states,
perfection pursuant to the provisions of the UCC is required. The Servicer
may effect such notation or delivery of the required documents and fees, and
obtain possession of the certificate of title, as appropriate under the laws
of the state in which any manufactured home securing a manufactured housing
conditional sales contract is registered. In the event the Servicer fails,
due to clerical errors, to effect such notation or delivery, or files the
security interest under the wrong law (for example, under a motor vehicle
title statute rather than under the UCC, in a few states), the
Certificateholders may not have a first priority security interest in the
Manufactured Home securing a Contract. As manufactured homes have become
larger and often have been attached to their sites without any apparent
intention to move them, courts in many states have held that manufactured
homes, under certain circumstances, may become subject to real estate title
and recording laws. As a result, a security interest in a manufactured home
could be rendered subordinate to the interests of other parties claiming an
interest in the home under applicable state real estate law. In order to
perfect a security interest in a manufactured home under real estate laws,
the secured party must file either a "fixture filing" under the provisions of
the UCC or a real estate mortgage under the real estate laws of the state
where the home is located. These filings must be made in

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the real estate records office of the county where the home is located.
Substantially all of the Contracts contain provisions prohibiting the
borrower from permanently attaching the Manufactured Home to its site. So
long as the borrower does not violate this agreement, a security interest in
the Manufactured Home will be governed by the certificate of title laws or
the UCC, and the notation of the security interest on the certificate of
title or the filing of a UCC financing statement will be effective to
maintain the priority of the security interest in the Manufactured Home. If,
however, a Manufactured Home is permanently attached to its site, other
parties could obtain an interest in the Manufactured Home which is prior to
the security interest originally retained by the Unaffiliated Seller and
transferred to the Depositor. With respect to a Series of Certificates and
if so described in the related Prospectus Supplement, the Servicer may be
required to perfect a security interest in the Manufactured Home under
applicable real estate laws. The Servicer will represent that at the date of
the initial issuance of the related Certificates it has obtained a perfected
first priority security interest by proper notation or delivery of the
required documents and fees with respect to substantially all of the
Manufactured Homes securing the Contracts.

The Depositor will cause the security interests in the Manufactured
Homes to be assigned to the Trustee on behalf of the Certificateholders.
Unless otherwise specified in the related Prospectus Supplement, neither the
Depositor nor the Trustee will amend the certificates of title to identify
the Trustee or the Trust Fund as the new secured party, and neither the
Depositor nor the Servicer will deliver the certificates of title to the
Trustee or note thereon the interest of the Trustee. Accordingly, the
Servicer (or the Unaffiliated Seller) which continue to be named as the
secured party on the certificates of title relating to the Manufactured
Homes. In many states, such assignment is an effective conveyance of such
security interest without amendment of any lien noted on the related
certificate of title and the new secured party succeeds to the Depositor's
rights as the secured party. However, in some states there exists a risk
that, in the absence of an amendment to the certificate of title, such
assignment of the security interest in the Manufactured Home might not be
effective or perfected or that, in the absence of such notation or delivery
to the Trustee, the assignment of the security interest in the Manufactured
Home might not be effective against creditors of the Servicer (or the
Unaffiliated Seller) or a trustee in bankruptcy of the Servicer (or the
Unaffiliated Seller).

In the absence of fraud, forgery or permanent affixation of the
Manufactured Home to its site by the Manufactured Home owner, or
administrative error by state recording officials, the notation of the lien
of the Servicer (or the Unaffiliated Seller) on the certificate of title or
delivery of the required documents and fees will be sufficient to protect the
Certificateholders against the rights of subsequent purchasers of a
Manufactured Home or subsequent lenders who take a security interest in the
Manufactured Home. If there are any Manufactured Homes as to which the
security interest assigned to the Trustee is not perfected, such security
interest would be subordinate to, among others, subsequent purchasers for
value of Manufactured Homes and holders of perfected security interests.
There also exists a risk in not identifying the Trustee as the new secured
party on the certificate of title that, through fraud or negligence, the
security interest of the Certificateholders could be released.

In the event that the owner of a Manufactured Home moves it to a
state other than the state in which such Manufactured Home initially is
registered, under the laws of most states the perfected security interest in
the Manufactured Home would continue for four months after such relocation
and thereafter until the owner re-registers the Manufactured Home in such
state. If the owner were to relocate a Manufactured Home to another state
and not re-register the Manufactured Home in such state, and if steps are not
taken to re-perfect the Trustee's security interest in such state, the
security interest in the Manufactured Home would cease to be perfected. A
majority of states generally require surrender of a certificate of title to
re-register a Manufactured Home; accordingly, the Trustee must surrender
possession if it holds the certificate of title to such Manufactured Home or,
in the case of Manufactured Homes registered in states which provide for
notation of lien, the Servicer would receive notice of surrender if the
security interest in the Manufactured Home is noted on the certificate of
title. Accordingly, the Trustee would have the opportunity to re-perfect its
security interest in the Manufactured Home in the state of relocation. In
states which do not require a certificate of title for registration of a
manufactured home, re-registration could defeat perfection. In the ordinary
course of servicing the manufactured housing conditional sales contracts, the
Servicer takes steps to effect such re-perfection upon receipt of notice of
registration or information from the obligor as to relocation. Similarly,
when an obligor under a manufactured housing conditional sales contract sells
a manufactured home, the Trustee (or its custodian) must surrender possession
of the certificate of title or the Servicer will receive notice as a result
of its lien noted thereon and accordingly will have an opportunity to require
satisfaction of the related manufactured housing conditional sales contract
before

<PAGE>

release of the lien. Under the Pooling and Servicing Agreement, the Servicer
is obligated to take steps, at the Servicer's expense, as are necessary to
maintain perfection of security interests in the Manufactured Homes.

Under the laws of most states, liens for repairs performed on a
Manufacturer Home and liens for personal property taxes take priority over a
perfected security interest. The Unaffiliated Seller will represent in the
Pooling and Servicing Agreement that it has no knowledge of any such liens
with respect to any Manufactured Home securing payment on any Contract.
However, such liens could arise at any time during the term of a Contract.
No notice will be given to the Trustee or Certificateholders in the event
such a lien arises.

ENFORCEMENT OF SECURITY INTERESTS IN MANUFACTURED HOMES

The Servicer on behalf of the Trustee, to the extent required by
the related Pooling and Servicing Agreement, may take action to enforce the
Trustee's security interest with respect to Contracts in default by
repossession and resale of the Manufactured Homes securing such defaulted
Contracts. So long as the Manufactured Home has not become subject to the
real estate law, a creditor can repossess a Manufactured Home 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 so that the debtor
may redeem at or before such resale. In the event of such repossession and
resale of a Manufactured Home, the Trustee would be entitled to be paid out
of the sale proceeds before such proceeds could be applied to the payment of
the claims of unsecured creditors or the holders of subsequently perfected
security interests or, thereafter, to the debtor.

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

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 judgment.

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 debted 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 asset 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.

TRANSFERS OF MANUFACTURED HOMES; ENFORCEABILITY OF "DUE-ON-SALE" CLAUSES

The Contracts, in general, prohibit the sale or transfer of the
related Manufactured Homes without the consent of the Servicer and permit the
acceleration of the maturity of the Contracts by the Servicer upon any such
sale or transfer that is not consented to.

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In the case of a transfer of a Manufactured Home after which the
Servicer desires to accelerate the maturity of the related Contract, the
Servicer's ability to do so will depend on the enforceability under state law
of the "due-on-sale" clause. The Garn-St Germain Depository Institutions Act
of 1982 preempts, subject to certain exceptions and conditions, state laws
prohibiting enforcement of "due-on-sale" clauses applicable to the
Manufactured Homes. Consequently, in some states the Servicer may be
prohibited from enforcing a "due-on-sale" clause in respect of certain
Manufactured Homes.

APPLICABILITY OF USURY LAWS

Title V of the Depository Institutions Deregulation and Monetary
Control Act of 1980, as amended ("Title V"), provides that, subject to the
following conditions, state usury limitations shall not apply to any loan
which is secured by a first lien on certain kinds of manufactured housing.
The 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, and state is authorized
by the law to adopt a provision limiting discount points or other charges on
loans covered by Title V. The Unaffiliated Seller will represent that all of
the Contracts comply with applicable usury law.

FORMALDEHYDE LITIGATION WITH RESPECT TO CONTRACTS

A number of lawsuits have been brought in the United States
alleging personal injury from exposure to the chemical formaldehyde, which is
preset in many building materials, including such components of manufactured
housing as plywood flooring and wall paneling. Some of these lawsuits were
brought against manufacturers of manufactured housing, suppliers of component
parts, and related persons in the distribution process. Depositor is aware
of a limited number of cases in which plaintiffs have won judgments in these
lawsuits.

The holder of any Contract secured by a Manufactured Home with
respect to which a formaldehyde claim has been successfully asserted may be
liable to the obligor for the amount paid by the obligor on the related
Contract and may be unable to collect amounts still due under the Contract.
The successful assertion of such claim constitutes a breach of a
representation or warranty of the person specified in the related Prospectus
Supplement, and the Certificateholders would suffer a loss only to the extent
that (i) such person breached its obligation to repurchase the Contract in
the event an obligor is successful in asserting such a claim, and (ii) such
person, the Servicer or the Trustee were unsuccessful in asserting any claim
of contribution or subrogation on behalf of the Certificateholders against
the manufacturer or other persons who were directly liable to the plaintiff
for the damages. Typical products liability insurance policies held by
manufacturers and component suppliers of manufactured homes may not cover
liabilities arising from formaldehyde in manufactured housing, with the
result that recoveries from such manufacturers, suppliers or other persons
may be limited to their corporate assets without the benefit of insurance.

INSTALLMENT CONTRACTS

MORTGAGE LOANS AND CONTRACTS

The Mortgage Loan and Contracts may also consist of Installment
Contracts. Under an Installment 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 real
estate to the purchaser. As with mortgage or deed of trust financing, during
the effective period of the Installment 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.

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The method of enforcing the rights of the lender under an
Installment 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 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
foreclosure 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
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 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 Contracts from
the harsh consequences of forfeiture. Under such statute, 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 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 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 Contract for the
sale of real estate in a given state are simpler and less time-consuming and
costly than are the procedures for foreclosing and obtaining clear title to a
mortgaged property.

ENVIRONMENTAL RISKS

Real property pledged for a Mortgaged Loan or Contract as security
to a lender may be subject to unforeseen environmental risks. Of particular
concern may be those mortgaged properties which have been the site of
manufacturing, industrial or disposal activity. Such environmental risks may
give rise to (a) a diminution in value of property securing any Mortgage Loan
or the inability to foreclose against such property or (b) in certain
circumstances as more fully described below, liability for clean-up costs or
other remedial actions, which liability could exceed the value of such
property or the principal balance of the related Mortgage Loan.

Under the laws of certain states, failure to perform the
remediation required or demanded by the state of any condition or
circumstance that (i) may pose an imminent or substantial endangerment to the
public health or welfare or the environment, (ii) may result in a release or
threatened release of any Hazardous Material, or (iii) may give rise to any
environmental claim or demand (each such condition or circumstance, or
"Environmental Condition") may give rise to a lien on the property to ensure
the reimbursement of remedial costs incurred by the state. In several states
such lien has priority over the lien of an existing mortgage against such
property. The value of a Mortgaged Property as collateral for a Mortgage
Loan could therefore be adversely affected by the existence of any such
Environmental Condition.

The state of the law is currently unclear as to whether and under
what circumstances clean-up costs, or the obligation to take remedial
actions, could be Unposed on a secured lender such as the Trust Fund. Under
the laws of some states and under the federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), a
lender may be liable as an "owner or operator" for costs of addressing
releases or threatened releases of hazardous substances on a mortgaged
property if such lender or its agents or employees have participated in the
management of the operations of the borrower, even though CERCLA's definition
of "owner or operator," however, is a person "who without participating in
the management of the facility, holds indicia of ownership primarily to
protect his security interest" (the "secured-creditor exemption"). This
exemption for holders of a security interest such as a secured lender applies
only when the lender seeks to protect its security interest in the
contaminated facility or property. Thus, if a lender's activities begin to
encroach on the actual management of such facility or property, the lender
faces potential liability as an "owner or operator" under CERCLA. Similarly,
when a lender forecloses and takes title to a contaminated facility or
property (whether it holds the facility or property as an investment or
leases it to a third party), the lender may incur potential CERCLA liability.

A decision in May 1990 of the United States Court of Appeals for
the Eleventh Circuit in UNITED STATES V. FLEET FACTORS CORP. very narrowly
contained CERCLA's secured-creditor exemption. The court held that

<PAGE>

a lender need not have involved itself in the day-to-day operations of the
facility or participated in decisions relating to hazardous waste to be
liable under CERCLA; rather, liability could attach to a lender if its
involvement with the management of the facility is broad enough to support
the inference that the lender had the capacity to influence the borrower's
treatment of hazardous waste. The court added that a lender's capacity to
influence such decisions could be inferred from the extent of its involvement
in the facility's financial management. A subsequent decision by the United
States Court of Appeals for the Ninth Circuit in IN RE BERGSOE METAL CORP.,
disagreeing with the Fleet Factors court, held that a secured lender had no
liability absent "some actual management of the facility" on the part of the
lender. On April 29, 1992, the United States Environmental Protection Agency
(the "EPA") issued a final rule interpreting and delineating CERCLA's
secured-creditor exemption. The final rule defines a specific the range of
permissible actions that may be undertaken by a holder of a contaminated
facility without exceeding the bounds of the secured-creditor exemption.
Issuance of this rule by the EPA under CERCLA would not necessarily affect
the potential for liability in actions by either a state or a private party
under CERCLA or in actions under other federal or state laws which may impose
liability on "owners or operators" but do not incorporate the second-creditor
exemption.

If a lender is or becomes liable for clean-up costs, it may bring
an action for contribution against the current owners or operators, the
owners or operators at the time of on-site disposal activity or any other
party who contributed to the environmental hazard, but such persons or
entities may be bankrupt or otherwise judgment proof. Furthermore, such
action against the borrower may be adversely affected by the limitations on
recourse in the documents in the Mortgage Document File. Similarly, in some
states anti-deficiency legislation and other statues requiring the lender to
exhaust its security before bringing a personal action against the
borrower-trustor (see "Anti-Deficiency Legislation and Other Limitations on
Lenders" below) may curtail the lender's ability to recover from its borrower
the environmental clean-up and other related costs and liabilities by the
lender.

SOLDIERS' AND SAILORS' CIVIL RELIEF ACT

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

TYPE OF MORTGAGED PROPERTY

The lender may be subject to additional risk depending upon the
type and use of the Mortgaged Property in question. For instance, Mortgaged
Properties which are hospitals, nursing homes or convalescent homes may
present special risks to lenders in large part due to significant
governmental regulation of the operation, maintenance, control and financing
of health care institutions. Mortgages on Mortgaged Properties which are
owned by the Borrower under a condominium form of ownership are subject to
the declaration, by-laws and other rules and regulations of the condominium
association. Mortgaged Properties which are hotels or motels may present
additional risk to the lender in that: (i) hotels and motels are typically
operated pursuant to franchise, management and operating agreements which may
be terminable by the operator; and (ii) the transferability of the hotel's
operating, liquor and other licenses to the entity acquiring the hotel either
through purchase or foreclosure is subject to the vagaries of local law
requirements. In addition, Mortgaged Properties which are multifamily
residential properties may be subject to rent control laws, which could
impact the future cash flows of such properties. Finally, Mortgaged
Properties which are financed in the installment sales contract method may
leave the holder of the note

<PAGE>

exposed to tort and other claims as the true owner of the property which
could impact the availability of cash to pass through to investors.

CERTAIN MATTERS RELATING TO INSOLVENCY

The Unaffiliated Seller of the Mortgage Loans or Contracts and the
Depositor intend that the transfer of such Mortgage Loans or Contracts to the
Trust Fund constitute a sale rather for a pledge of the Mortgage Loans or
Contracts to secure indebtedness of the seller of the Mortgage Loans or
Contracts. However, if the Unaffiliated Seller were to become a debtor under
the federal bankruptcy code or be placed in a conservatorship or receivership
under the Financial Institutions Reform, Recovery, and Enforcement Act of
1989 ("FIRREA"), as the case may be, it is possible that a creditor,
receiver, conservator or trustee-in-bankruptcy of such seller may argue that
the sale of the Mortgage Loans or Contracts by the Unaffiliated Seller is a
pledge of the Mortgage Loans or Contracts rather than a sale. This position,
if argued or accepted by a court, could result in a delay in or reduction of
distributions to the related Certificateholders.

Under FIRREA the FDIC as receiver or conservator of a Servicer
subject to its jurisdiction may enforce a contract notwithstanding any
provision of the contract providing for termination thereof by reason of the
insolvency of, or appointment of a receiver or conservator for, the Servicer.
Consequently, provisions in a Pooling and Servicing Agreement providing for
an Event of Default upon certain events of insolvency, receivership or
conservatorship of the Servicer may not be enforceable against the FDIC as
receiver or conservator to the extent that the exercise of such rights is
based solely upon the insolvency of or appointment of a receiver or
conservator for the Servicer. In addition, the FDIC may transfer the assets
and liabilities of an institution in receivership or conservatorship to
another institution.

BANKRUPTCY LAWS

Numerous statutory provisions, including the federal
bankruptcy laws and state laws affording relief to debtors, may interfere
with or affect the ability of the secured mortgage lender to obtain payment
of the loan, to realize upon collateral and/or enforce a deficiency judgment.
For example, under federal bankruptcy law, virtually all actions (including
foreclosure actions and deficiency judgment proceedings) are automatically
stayed upon the filing of the bankruptcy petition, and, often, no interest or
principal payments are made during the course of the bankruptcy proceeding.
The delay and the consequences thereof caused by or on behalf of a junior
lienor may stay the senior lender from taking action to foreclose out such
junior lien. In a case under the Bankruptcy Code, the lender is precluded
from foreclosing without authorization from the bankruptcy court. In
addition, a court with federal bankruptcy jurisdiction may permit a debtor
through his or her Chapter 11 or Chapter 13 rehabilitative plan to cure a
monetary default in respect of a mortgage loan on the debtor's residence by
paying arrearage within a reasonable time period and reinstating the original
mortgage loan payment schedule even though the lender accelerated the
mortgage loan and final judgment of foreclosure had been entered in state
court (provided no sale of the residence had yet occurred) prior to the
filing of the debtor's petition. Some courts with federal bankruptcy
jurisdiction have approved plans, based on the particular facts of the
reorganization case, that effected the curing of a mortgage loan default by
paying arrearages over a number of years.

Courts with federal bankruptcy jurisdiction have also indicated
that the terms of a mortgage loan secured by property of the debtor may be
modified. These courts have suggested that such modifications may include
reducing the amount of each monthly payment, changing the rate of interest,
altering the repayment schedule, and reducing the lender's security interest
to the value of the residence, thus leaving the lender in the position of a
general unsecured creditor for the difference between the value of the
residence and the outstanding balance of the loan.

Federal bankruptcy law may also interfere with or affect the
ability of the secured mortgage lender to enforce an assignment by a
mortgagor of rent and leases related to the Mortgaged Property if the related
mortgagor is in a bankruptcy proceeding. Under Section 362 of the Bankruptcy
Code, the mortgagee will be stayed from enforcing the assignment, and the
legal proceedings necessary to resolve the issue can be time-consuming and
may result in significant delays in the receipt of the rents. Rents may also
escape an assignment thereof (i) if the assignment is not fully perfected
under state law prior to commencement of the bankruptcy proceeding, (ii) to
the

<PAGE>

extent such rents are used by the borrower to maintain the mortgaged
property, or for other court authorized expenses, or (iii) to the extent
other collateral may be substituted for the rents.

To the extent a mortgagor's ability to make payment on a mortgage
loan is dependent on payments under a lease of the related property, such
ability may be impaired by the commencement of a bankruptcy proceeding
relating to a lessee under such lease. Under the federal bankruptcy laws,
the filing of a petition in bankruptcy by or on behalf of a lessee results in
a stay in bankruptcy against the commencement or continuation of any state
court proceeding for past due rent, for accelerated rent, for damages or for
a summary eviction order with respect to a default under the lease that
occurred prior to the filing of the lessee's petition.

In addition, federal bankruptcy law generally provides that a
trustee or debtor in possession in a bankruptcy or reorganization case under
the Bankruptcy Code may, subject to approval of the court (a) assume the
lease and retain it or assign it to a third party or (b) reject the lease.
If the lease is assumed, the trustee or debtor in possession (or assignee, if
applicable) must cure any defaults under the lease, compensate the lessor for
its losses and provide the lessor with "adequate assurance" of future
performance. Such remedies may be insufficient, however, as the lessor may
be forced to continue under the lease with a lessee that is a poor credit
risk or an unfamiliar tenant if the lease was assigned, and any assurances
provided to the lessor may, in fact, be inadequate. Furthermore, there is
likely to be a period of time between the date upon which a lessee files a
bankruptcy petition and the date upon which the lease is assumed or rejected.
Although the lessee is obligated to make all lease payments currently with
respect to the post-petition period, there is a risk that such payments will
not be made due to the lessee's poor financial condition. If the lease is
rejected, the lessor will be treated as an unsecured creditor with respect to
its claim for damages for termination of the lease and the mortgagor must
relet the mortgage property before the flow of lease payments will
recommence. In addition, pursuant to Section 502(b)(6) of the Bankruptcy
Code, a lessor's damages for lease rejection are limited by a formula.

In a bankruptcy or similar proceeding, action may be taken seeking
the recovery as a preferential transfer to the Trust Fund of any payments
made by the mortgagor under the related Mortgage Loan. Moreover, some recent
court decisions suggest that even a non-collusive, regularly conducted
foreclosure sale may be challenged in a bankruptcy proceeding as a
"fraudulent conveyance," regardless of the parties' intent, if a bankruptcy
court determines that the mortgaged property has been sold for less than fair
consideration while the mortgagor was insolvent and within one year (or
within any longer state statutes of limitations if the trustee in bankruptcy
elects to proceed under state fraudulent conveyance law) of the filing of
bankruptcy.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

GENERAL

The following is a general discussion of the anticipated material
federal income consequences of the purchase, ownership, and disposition of
the Certificates. The discussion below does not purport to address all
federal income consequences that may be applicable to particular categories
of investors, some of which may be subject to special rules. The discussion
is based upon laws, regulations, rulings and decisions now in effect all of
which are subject to change. This discussion reflects the applicable
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), as
well as regulations (the "REMIC Regulations") promulgated by the U.S.
Department of the Treasury on December 23, 1992. Investors should consult
their own tax advisors in determining the federal, state, local, and any
other tax consequences to them of the purchase, ownership, and disposition of
the Certificates.

For purposes of this discussion, where the applicable Prospectus
Supplement provides for a Fixed Retained Yield with respect to the Mortgage
Loans or Contracts of a Series of Certificates, references to the Mortgage
Loans or Contracts will be deemed to refer to that portion of the Mortgage
Loans or Contracts held by the Trust Fund, which does not include the Fixed
Retained Yield. For purposes of this discussion, references to the
"principal amount" or "principal balance" of a Certificate will be deemed to
refer to the Stated Amount in the case of Multi-Class Certificates. For
purposes of this discussion, unless otherwise specified, the term "Mortgage

<PAGE>

Loans" will be used to refer to Mortgage Loans and Contracts. References to
a "holder" or "Certificateholder" in this discussion generally mean the
beneficial owner of a Certificate.

The following discussion addresses securities of three general
types: (i) securities ("REMIC Certificates") representing interests in a
Trust Fund, or a portion thereof, which the Depositor will covenant to elect
to have treated as a real estate mortgage investment conduit ("REMIC") under
sections 860A through 860G of the Code; (ii) securities ("Non-REMIC
Certificates") representing interests in a Trust Fund (a "Grantor Trust
Estate") which the Depositor will covenant not to elect to have treated as a
REMIC; and (iii) securities ("Notes") that are intended to be treated for
federal income tax purposes as indebtedness secured by the underlying
Mortgage Loans. This Prospectus does not address the tax treatment of
partnership interests. Such a discussion will be set forth in the applicable
Prospectus Supplement for any trust issuing securities characterized as
partnership interests. The Prospectus Supplement for each series of
securities will indicate whether a REMIC election (or elections) will be made
for the related Trust Estate and, if a REMIC election is to be made, will
identify all "regular interests" and "residual interests" in the REMIC.

REMIC CERTIFICATES

GENERAL

With respect to a particular Series of Certificates, an election
may be made to treat the Trust Fund (or one or more segregated pools of
assets therein) as one or more REMICs within the meaning of Code Section
860D. A Trust Fund or a portion or portions thereof as to which one or more
REMIC elections will be made will be referred to as a "REMIC Pool." For
purposes of this discussion, Certificates of a Series as to which one or more
REMIC elections are made, which will include all Multi-Class Certificates and
may include Standard Certificates or Stripped Certificates or both, are
referred to as "REMIC Certificates" and will consist of one or more Classes
of "Regular Certificates" and one Class of "Residual Certificates" in the
case of each REMIC Pool. Qualification as a REMIC requires ongoing
compliance with certain conditions. With respect to each Series of REMIC
Certificates, the Depositor's Counsel has advised the Depositor that in the
firm's opinion, assuming (i) the making of such an election, (ii) compliance
with the Pooling and Servicing Agreement, and (iii) compliance with any
changes in the law, including any amendments to the Code or applicable
Treasury regulations thereunder, each REMIC Pool will qualify as a REMIC. In
such case, the Regular Certificates will be considered to be "regular
interests" in the REMIC Pool and generally will be treated for federal income
tax purposes as if they were newly originated debt instruments, and the
Residual Certificates will be considered to be "residual interests" in the
REMIC Pool. The Prospectus Supplement for each Series of Certificates will
indicate whether one or more REMIC elections with respect to the related
Trust Fund will be made, in which event references to REMIC or "REMIC Pool"
herein shall be deemed to refer to each such REMIC Pool.

STATUS OF REMIC CERTIFICATES

REMIC Certificates held by a mutual savings bank or a domestic
building and loan association will constitute "qualifying real property
loans" within the meaning of Code Section 593(d)(1) in the same proportion
that the assets of the REMIC Pool would be so treated. REMIC Certificates
held by a domestic building and loan association will constitute either "a
regular or residual interest in a REMIC" within the meaning of Code Section
7701(a)(19)(C)(xi), but only in the same proportion that the assets of the
REMIC Pool would be treated as "loans . . . secured by an interest in real
property which is . . . residential real property" (such as single family or
multifamily properties, but not commercial properties) within the meaning of
Code Section 7701(a)(19)(C)(v) or as other assets described in Code Section
7701(a)(19)(C), and otherwise will not qualify for such treatment. REMIC
Certificates held by a real estate investment trust will constitute "real
estate assets" within the meaning of Code Section 856(C)(5)(A), and interest
on the Regular Certificates and income with respect to Residual Certificates
will be considered "interest on obligations secured by mortgages on real
property or on interests in real property" within the meaning of Code Section
856(C)(3)(B) in the same proportion that, for both purposes, the assets and
income of the REMIC Pool would be so treated. If at all times 95% or more of
the assets of the REMIC Pool qualify for the foregoing respective treatments,
the REMIC Certificates will qualify for the corresponding status in their
entirety. For purposes of Code Sections 593(d)(1) and 856(c)(5)(A), payments
of principal and interest on the Mortgage Loans that are reinvested pending
distribution to holders of Certificates qualify for such treatment. Where

<PAGE>

two REMIC Pools are part of a tiered structure they will be treated as one
REMIC for purposes of the tests described above respecting asset ownership of
more or less than 95%. In addition, if the assets of a REMIC include
Buy-Down Loans, it is possible that the percentage of such assets
constituting "qualifying real property loans" or "loans . . . secured by an
interest in real property" for purposes of Code Section 593(d)(1) and
7701(a)(19)(c)(v), respectively, may be required to be reduced by the amount
of the related Buy-Down Fund. REMIC Certificates held by a regulated
investment company will not constitute "Government securities" within the
meaning of Code Section 851(b)(4)(A)(i). REMIC Certificates held by certain
financial institutions will constitute an "evidence of indebtedness" within
the meaning of Code Section 582(c)(1).

QUALIFICATION AS A REMIC

In order for the REMIC Pool to qualify as a REMIC, there must be
ongoing compliance on the part of the REMIC Pool with the requirements set
forth in the Code. The REMIC Pool must fulfill an asset test, which requires
that no more than a DE MINIMIS portion of the assets of the REMIC Pool, as of
the close of the third calendar month beginning after the "Startup Day"
(which for purposes of this discussion is the date of issuance of the REMIC
Certificates) and at all times thereafter, may consist of assets other than
"qualified mortgages" and "permitted investments." The REMIC Regulations
provide a "safe harbor" pursuant to which the DE MINIMIS requirement is met
if at all times the aggregate adjusted basis of the nonqualified assets in
less than 1 percent of the aggregate adjusted basis of all the REMIC Pool's
assets. An entity that fails to meet the safe harbor may nevertheless
demonstrate that it holds no more than a DE MINIMIS amount of nonqualified
assets. A REMIC also must provide "reasonable arrangements" to prevent its
residual interest from being held by "disqualified organizations" and
applicable tax information to transferors or agents that violate this
requirement. See "Taxation of Residual Certificates -- Tax-Related
Restrictions on Transfers of Residual Certificates -- Disqualified
Organizations."

A qualified mortgage is any obligation that is principally secured
by an interest in real property and that is either transferred to the REMIC
Pool on the Startup Day or is purchased by the REMIC Pool within a
three-month period thereafter pursuant to a fixed-price contract in effect on
the Startup Day. Qualified mortgages include whole mortgage loans, such as
the Mortgage Loans, certificates of beneficial interest in a grantor trust
that holds mortgage loans, regular interests in another REMIC, loans secured
by timeshare interests and loans secured by shares held by a tenant
stockholder in a cooperative housing corporation, provided, in general, (i)
the fair market value of the real property security (including buildings and
structural components thereof) is at least 80% of the principal balance of
the related Mortgage Loan either at origination or as of the Startup Day (an
original loan-to-value ratio of not more than 125% with respect to the real
property security) or (ii) substantially all the proceeds of the Mortgage
Loan or the underlying mortgage loan were used to acquire, improve or protect
an interest in real property that, at the origination date, was the only
security for the Mortgage Loan or underlying mortgage loan. A qualified
mortgage includes a qualified replacement mortgage, which is any property
that would have been treated as a qualified mortgage if it were transferred
to the REMIC Pool on the Startup Day and that is received either (i) in
exchange for any qualified mortgage within a three-month period thereafter or
(ii) in exchange for a "defective obligation" within a two-year period
thereafter. A "defective obligation" includes (i) a mortgage in default or
as to which default is reasonably foreseeable, (ii) a mortgage as to which a
representation or warranty made at the time of transfer to the REMIC Pool has
been breached, (iii) a mortgage that was fraudulently procured by the
mortgagor, and (iv) a mortgage that was not in fact principally secured by
real property (but only if such mortgage is disposed of within 90 days of
discovery). A mortgage loan that is "defective" as described in clause (iv)
that is not sold or, if within two years of the Startup Day, exchanged,
within 90 days of discovery, ceases to be a qualified mortgage after such
90-day period.

The REMIC Regulations provide that obligations secured by interests
in manufactured housing which qualify as "single family residences" within
the meaning of Code Section 25(e)(10) may be treated as "qualified mortgages"
of a REMIC. Under Code Section 25(e)(10), the term "single family residence"
includes any manufactured home which has a minimum of 400 square feet of
living space and a minimum width in excess of 102 inches and which is of a
kind customarily used at a fixed location. The Depositor will represent and
warrant that each of the Manufactured Homes securing the Contracts meets this
definition of "single family residence."

<PAGE>

Permitted investments include cash flow investments, qualified
reserve assets and foreclosure property. A cash flow investment is any
instrument, earning a return in the nature of interest, of amounts received
on or with respect to qualified mortgages for a temporary period, not
exceeding 13 months, until the next scheduled distribution to holders of
interests in the REMIC Pool. A qualified reserve asset is any intangible
property held for investment that is part of any reasonably required reserve
maintained by the REMIC Pool to provide for payments of expenses of the REMIC
Pool or to provide additional security for payments due on the regular or
residual interests that otherwise may be delayed or defaulted upon because of
default (including delinquencies) on the qualified mortgages, lower than
expected reinvestment returns, prepayment interest shortfalls and certain
other contingencies. The reserve fund will be disqualified if more than 30
percent of the gross income from the assets in such fund for the year is
derived from the sale of property held for less than three months, unless
required to prevent a default on the regular interests caused by a default on
one or more qualified mortgages. A reserve fund must be reduced "promptly
and appropriately" as payments on the Mortgage Loans are received.
Foreclosure property is real property acquired by the REMIC Pool in
connection with default or imminent default of a qualified mortgage and
generally held for not more than two years, with extensions granted by the
Internal Revenue Service.

In addition to the foregoing requirements, the various interests in
a REMIC Pool also must meet certain requirements. All of the interests in a
REMIC Pool must be either of the following: (i) one or more classes of
regular interests or (ii) a class of residual interests on which
distributions, if any, are made pro rata. A regular interest is an interest
in a REMIC Pool that is issued on the Startup Day with fixed terms, is
designated as a regular interest, and unconditionally entitles the holder to
receive a specified principal amount (or other similar amount), and provides
that interest payments (or other similar amounts), if any, at or before
maturity either are payable based on a fixed rate or at a qualified variable
rate or consist of a specified, nonvarying portion of the interest payments
on qualified mortgages. The specified principal amount of a regular interest
that provides for interest payments consisting of a specified, nonvarying
portion of interest payments on qualified mortgages may be zero. A residual
interest is an interest in a REMIC Pool other than a regular interest that is
issued on the Startup Day and is designated as a residual interest. An
interest in a REMIC Pool may be treated as a regular interest even if
payments of principal with respect to such interest are subordinated to
payments on other regular interests or the residual interest in the REMIC
Pool, and are dependent on the absence of defaults or delinquencies on
qualified mortgages or permitted investments, lower than reasonably expected
returns on permitted investments, unanticipated expenses incurred by the
REMIC Pool or prepayment interest shortfalls. Accordingly, the Regular
Certificates of a Series will constitute one or more classes of regular
interests, and the Residual Certificates with respect to each REMIC Pool in
that Series will constitute a single class of residual interests on which
distributions are made pro rata.

If an entity, such as the REMIC Pool, fails to comply with one or
more of the ongoing requirements of the Code for REMIC status during any
taxable year, the Code provides that the entity will not be treated as a
REMIC for such year and thereafter. In this event, an entity with multiple
classes of ownership interests may be treated as a separate association
taxable as a corporation under Treasury regulations, and the Regular
Certificates may be treated as equity interests therein. The Code, however,
authorizes the Treasury Department to issue regulations that address
situations where failure to meet one or more of the requirements for REMIC
status occurs inadvertently and in good faith, and disqualification of the
REMIC Pool would occur absent regulatory relief. Investors should be aware,
however, that the Conference Committee Report to the 1986 Act indicates that
the relief may be accompanied by sanctions, such as the imposition of a
corporate tax on all or a portion of the REMIC Pool's income for the period
of time in which the requirements for REMIC status are not satisfied.

TAXATION OF REGULAR CERTIFICATES

GENERAL

In general, interest paid or accrued, original issue discount, and
market discount on a Regular Certificate will be treated as ordinary income
to a holder of the Regular Certificate (the "Regular Certificateholder"), and
principal payments on a Regular Certificate will be treated as a return of
capital to the extent of the Regular Certificateholder's basis in the Regular
Certificate allocable thereto. Regular Certificateholders must use the
accrual method of accounting with regard to Regular Certificates, regardless
of the method of accounting otherwise used by such Regular Certificateholders.

<PAGE>

ORIGINAL ISSUE DISCOUNT

Compound Interest Certificates will be, and certain of the Regular
Certificates of other Classes of a Series may be, issued with "original issue
discount" within the meaning of Code Section 1273(a). Holders of any Class
or Subclass of Regular Certificates having original issue discount generally
must include original issue discount in ordinary income for federal income
purposes as it accrues, in accordance with the constant yield method that
takes into account the compounding of interest. Such accrual may be in
advance of receipt of the cash attributable to such income. The following
discussion is based in part on temporary and final Treasury regulations
issued on February 2, 1994 under Code Sections 1271 through 1273 and 1275
(the "OID Regulations") and in part on the provisions of the 1986 Act.
Regular Certificateholders should be aware, however, that the OID Regulations
do not adequately address certain issues relevant to prepayable securities,
such as the Regular Certificates. To the extent such issues are not
addressed in the OID Regulations, the Depositor intends to apply the
methodology described in the Conference Committee Report to the 1986 Act. No
assurance can be provided that the Internal Revenue Service will not take a
different position as to those matters not currently addressed by the OID
Regulations. Moreover, the OID Regulations include an anti-abuse rule
allowing the Internal Revenue Service to apply or depart from the OID
Regulations where necessary or appropriate to ensure a reasonable result in
light of the applicable statutory provisions. A tax result will not be
considered unreasonable under the anti-abuse rule in the absence of a
substantial effect on the present value of a taxpayer's tax liability.
Investors are advised to consult their own tax advisors as to the discussion
herein and the appropriate method for reporting interest and original issue
discount with respect to the Regular Certificates.

Each Regular Certificate (except to the extent described below with
respect to a Regular Certificate on which principal is distributed in a
single installment or by lots of specified principal amounts upon the request
of a Certificateholder or by random lot (a "Retail Class Certificate")) will
be treated as a single installment obligation for purposes of determining the
original issue discount includible in a Regular Certificateholder's income.
The total amount of original issue discount on a Regular Certificate is the
excess of the "stated redemption price at maturity" of the Regular
Certificate over its "issue price." The issue price of a Regular Certificate
offered pursuant to this Prospectus generally is the first price at which a
substantial amount of Regular Certificates of that Class is sold to the
public (excluding bond houses, brokers and underwriters). Although unclear
under the OID Regulations, the Depositor intends to treat the issue price of
a Class as to which there is no substantial sale as of the issue date or that
is retained by the Depositor as the fair market value of that Class as of the
issue date. The issue price of a Regular Certificate also includes any
amount paid by an initial Regular Certificateholder for accrued interest that
relates to a period prior to the issue date of the Regular Certificate,
unless the Regular Certificateholder elects on its federal income tax return
to exclude such amount from the issue price and to recover it on the first
Distribution Date. The stated redemption price at maturity of a Regular
Certificate always includes the principal amount of the Regular Certificate,
but generally will not include distributions of interest if such interest
distributions constitute "qualified stated interest." Under the OID
Regulations, qualified stated interest generally means interest payable at a
single fixed rate or a qualified variable rate as described below, provided
that such interest payments are unconditionally payable at intervals of one
year or less during the entire term of the Regular Certificate. No
distributions on a Compound Interest Certificate, or on other Regular
Certificates with respect to which interest distributions may be deferred and
added to principal, will constitute qualified stated interest, and,
accordingly, the stated redemption price at maturity of such Regular
Certificates includes not only their principal balances but also all other
distributions (whether denominated as accrued interest or current interest)
to be received thereon. Likewise, the Depositor intends to treat an "interest
only" Class, or a Class on which interest is substantially disproportionate
to its principal amount (a so-called "super-premium") Class as having no
qualified stated interest. Where the interval between the issue date and the
first Distribution Date on a Regular Certificate is shorter than the interval
between subsequent Distribution Dates, the interest attributable to the
additional days will be included in the stated redemption price at maturity.

Under a DE MINIMIS rule, original issue discount on a Regular
Certificate will be considered to be zero if such original issue discount is
less than 0.25% of the stated redemption price at maturity of the Regular
Certificate multiplied by the weighted average maturity of the Regular
Certificate. For this purpose, the weighted average maturity of the Regular
Certificate is computed as the sum of the amounts determined by multiplying
the number of full years (I.E., rounding down partial years) from the issue
date until each distribution is scheduled to be made by a fraction, the
numerator of which is the amount of each distribution included in the stated
redemption

<PAGE>

price at maturity of the Regular Certificate and the denominator of which is
the stated redemption price at maturity of the Regular Certificate. The
Conference Committee Report to the 1986 Act provides that the schedule of
such distributions should be determined in accordance with the assumed rate
of prepayment of the Mortgage Loans (the "Prepayment Assumption") and the
anticipated reinvestment rate, if any, relating to the Regular Certificates.
The Prepayment Assumption with respect of a Series of Regular Certificates
will be set forth in the related Prospectus Supplement. Holders generally
must report DE MINIMIS original issue discount pro rata as principal payments
are received, and such income will be capital gain if the Regular Certificate
is held as a capital asset. However, under the OID Regulations, Regular
Certificateholders may elect to accrue all DE MINIMIS original issue discount
(other than DE MINIMIS issue discount attributable to a "teaser" interest
rate or an initial interest holiday) as well as market discount and market
premium, under the constant yield method. See "Election to Treat All
Interest Under the Constant Yield Method."

A Regular Certificateholder generally must include in gross income
for any taxable year the sum of the "daily portions," as defined below, of
the original issue discount on the Regular Certificate accrued during an
accrual period for each day on which it holds the Regular Certificate,
including the date of purchase but excluding the date of disposition. The
Depositor will treat the monthly period ending on the day before each
Distribution Date as the accrual period. With respect to each Regular
Certificate, a calculation will be made of the original issue discount that
accrues during each successive full accrual period (or shorter period from
the date of original issue) that ends on the day before the related
Distribution Date on the Regular Certificate. The Conference Committee
Report to the 1986 Act states that the rate of accrual of original issue
discount is intended to be based on the Prepayment Assumption. Other than as
discussed below with respect to a Retail Class Certificate, the original
issue discount accruing in a full accruing period would be the excess, if
any, of (i) the sum of (a) the present value of all of the remaining
distributions to be made on the Regular Certificate as of the end of that
accrual period that are included in the Regular Certificate's stated
redemption price at maturity, and (b) the distributions made on the Regular
Certificate during the accrual period that are included in the Regular
Certificate's stated redemption price at maturity, over (ii) the adjusted
issue price of the Regular Certificate at the beginning of the accrual
period. The present value of the remaining distributions referred to in the
preceding sentence is calculated based on (i) the yield to maturity of the
Regular Certificate at the issue date, (ii) events (including actual
prepayments) that have occurred prior to the end of the accrual period, and
(iii) the Prepayment Assumption. For these purposes, the adjusted issued
price of a Regular Certificate at the beginning of any accrual period equals
the issue price of the Regular Certificate, increased by the aggregate amount
of original issue discount with respect to the Regular Certificate that
accrued in all such prior periods, and reduced by the amount of distributions
included in the Regular Certificate's stated redemption price at maturity
that were made on the Regular Certificate in such prior periods. The
original issue discount accruing during any accrual period (as determined in
this paragraph) will then be divided by the number of days in the period to
determine the daily portion of original issue discount for each day in the
period. With respect to an initial accrual period shorter than a full
accrual period, the daily portions of original issue discount must be
determined according to an appropriate allocation under any reasonable method.

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

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

<PAGE>

prepayment" rules of the OID Regulations, but with the rate of accrual of
original issue discount determined based on the Prepayment Assumption for a
Class as a whole. Investors are advised to consult their tax advisors as to
this treatment.

A purchaser of a Regular Certificate at a price greater than its
adjusted issue price but less than its stated redemption price at maturity
will be required to include in gross income the daily portions of the
original issue discount on the Regular Certificate reduced pro rata by a
fraction, the numerator of which is the excess of its purchase price over
such adjusted issue price and the denominator of which is the excess of the
remaining stated redemption price at maturity over the adjusted issue price.
Alternatively, such a subsequent purchaser may elect to treat all such
acquisition premium under the constant yield method, as described below under
the heading "Election to Treat All Interest Under the Constant Yield Method."

VARIABLE RATE REGULAR CERTIFICATES

Regular Certificates may provide for interest based on a variable
rate. Under the OID Regulations, interest is treated as payable at a variable
rate if, generally, (i) the issue price does not exceed the original
principal balance by more than a specified amount, and (ii) the interest
compounds or is payable at least annually at current values of (a) one or
more "qualified floating rates," (b) a single fixed rate followed by one or
more qualified floating rates, (c) a single "objective rate" or (d) a single
fixed rate and a single objective rate that is a "qualified inverse floating
rate." A floating rate is a qualified floating rate if variations in the rate
can reasonably be expected to measure contemporaneous variations in the cost
of newly borrowed funds, where such rate is subject to a multiple of not less
than zero nor more than 1.35. Such rate may also be increased or decreased by
a fixed spread or subject to a fixed cap or floor, or a cap or floor that is
not reasonably expected as of the issue date to affect the yield of the
instrument significantly. An objective rate includes a rate determined using
a single fixed formula and that is based on one or more qualified floating
rates or the yield or changes in the price of actively traded personal
property. A qualified inverse floating rate is a rate equal to a fixed rate
minus a qualified floating rate that inversely reflects the contemporaneous
variations in the cost of newly borrowed funds; an inverse floating rate that
is not a qualified inverse floating rate may nevertheless be an objective
rate. A Class of Regular Certificates may be issued under this Prospectus
that does not have a variable rate under the foregoing rules, for example, a
Class that bears an interest-only or super-premium floating rate, or a fixed
rate for one year or more followed by the inverse of an index multiplied by
more than 1.35. It is possible that such a Class may be considered to bear
"contingent interest," within the meaning of proposed Treasury regulations
issued on December 16, 1994. These proposed regulations under certain
circumstances could result in a deferral of the timing of reporting of such
interest income when compared to the original issue discount rules. However,
the proposed regulations regarding contingent interest have not been adopted
in final form and may not currently by relied upon. Moreover, under the
REMIC Regulations, a Regular Certificate (i) bearing a rate that qualifies as
a variable rate under the OID Regulations that is tied to current values of a
variable rate (or the highest, lowest or average of two or more variable
rates) including a rate based on the average cost of funds of one or more
financial institutions, or a positive or negative multiple of such a rate
(plus or minus a specified number of basis points), or that represents a
weighted average of rates on some or all of the qualified mortgages that bear
either a fixed rate or a variable rate, including such a rate that is subject
to one or more caps or floors, or (ii) bearing one or more such variable
rates for one or more periods, or one or more fixed rates for one or more
periods, and a different variable or fixed rate for other periods, qualifies
as a regular interest in a REMIC. Accordingly, unless otherwise indicated in
the applicable Prospectus Supplement, the Depositor intends to treat Regular
Certificates that qualify as regular interests under this rule in the same
manner as obligations bearing a variable rate for original issue discount
reporting purposes, with regular interests that do not meet the definition of
a variable rate in the OID Regulations being treated as having all
non-qualified stated interest.

The amount of original issue discount with respect to a Regular
Certificate bearing a variable rate of interest will accrue in the manner
described above under "Original Issue Discount," with the yield to maturity
and future payments on such Regular Certificate generally to be determined by
assuming that interest will be payable for the life of the Regular
Certificate based on the initial rate (or, if different, the value of the
applicable variable rate as of the pricing date). Unless otherwise specified
in the applicable Prospectus Supplement, the Depositor intends to treat such
variable interest as qualified stated interest, other than variable interest
on an interest-only Class, which will be treated as non-qualified stated
interest includible in the stated redemption price at maturity.

<PAGE>

Ordinary income reportable for any period will be adjusted based on
subsequent changes in the applicable interest rate index.

DEFERRED INTEREST

Any Deferred Interest that accrues with respect to a Class of
Regular Certificates will constitute income to the holders of such Regular
Certificates prior to the time distributions of cash with respect to such
Deferred Interest are made. The Depositor will treat all interest on a
Regular Certificate as to which there may be Deferred Interest as includible
in the stated redemption price at maturity thereof.

MARKET DISCOUNT

A purchaser of a Regular Certificate also may be subject to the
market discount rules of Code Sections 1276 through 1278. Under these Code
sections and the principles applied by the OID Regulations in the context of
original issue discount, "market discount" is the amount by which the
purchaser's original basis in the Regular Certificate (i) is exceeded by the
then-current principal amount of the Regular Certificate, or (ii) in the case
of a Regular Certificate having original issue discount, is exceeded by the
adjusted issue price of such Regular Certificate at the time of purchase.
Such purchaser generally will be required to recognize ordinary income to the
extent of accrued market discount on such Regular Certificate as
distributions includible in the stated redemption price at maturity thereof
are received, in an amount not exceeding any such distribution. Such market
discount would accrue in a manner to be provided in Treasury regulations and
should take into account the Prepayment Assumption. The Conference Committee
Report to the 1986 Act provides that until such regulations are issued, such
market discount would accrue either (i) on the basis of a constant interest
rate, or (ii) in the ratio of stated interest allocable to the relevant
period to the sum of the interest for such period plus the remaining interest
as of the end of such period, or in the case of a Regular Certificate issued
with original issue discount, in the ratio of original issue discount accrued
for the relevant period to the sum of the original issue discount accrued for
such period plus the remaining original issue discount as of the end of such
period. Such purchaser also generally will be required to treat a portion of
any gain on a sale or exchange of the Regular Certificate as ordinary income
to the extent of the market discount accrued to the date of disposition under
one of the foregoing methods, less any accrued market discount previously
reported as ordinary income as partial distributions in reduction of the
stated redemption price at maturity were received. Such purchaser will be
required to defer deduction of all or a portion of the excess of the interest
paid or accrued on indebtedness incurred or continued to purchase or carry
the Regular Certificate over the interest distributable thereon. The
deferred portion of such interest expense in any taxable year generally will
not exceed the accrued market discount on the Regular Certificate for such
year. Any such deferred interest expense is, in general, allowed as a
deduction not later than the year in which the related market discount income
is recognized or the Regular Certificate is disposed of. As an alternative
to the inclusion of market discount in income on the foregoing basis, the
Regular Certificateholder may elect to include market discount in income
currently as it accrues on all market discount instruments acquired by such
Regular Certificateholder in that taxable year or thereafter, in which case
the interest deferral rule will not apply. See "Election to Treat All
Interest Under the Constant Yield Method" below regarding an alternative
manner in which such election may be deemed to be made.

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

<PAGE>

PREMIUM

A Regular Certificate purchased at a cost greater than its
remaining stated redemption price at maturity generally is considered to be
purchased at a premium. If the Regular Certificateholder holds such Regular
Certificate as a "capital asset" within the meaning of Code Section 1221, the
Regular Certificateholder may elect under Code Section 171 to amortize such
premium under the constant yield method. The Conference Committee Report to
the 1986 Act indicates a Congressional intent that the same rules that will
apply to the accrual of market discount on installment obligations will also
apply to amortizing bond premium under Code Section 171 on installment
obligations such as the Regular Certificates, although it is unclear whether
the alternatives to the constant yield method described above under "Market
Discount" are available. Amortizable bond premium will be treated as an
offset to interest income on the Regular Certificates, rather than a separate
deduction item. See "Election to Treat All Interest Under the Constant Yield
Method" below regarding an alternative manner in which the Code Section 171
election may be deemed to be made.

TREATMENT OF LOSSES

Regular Certificateholders will be required to report income with
respect to Regular Certificates on the accrual method of accounting, without
giving effect to delays or reductions in distributions attributable to
defaults or delinquencies on the Mortgage Loans, except to the extent it can
be established that such losses are uncollectible. Accordingly, the holder
of a Regular Certificate, particularly a Subordinate Certificate, may have
income, or may incur a diminution in cash flow as a result of a default or
delinquency, but may not be able to take a deduction (subject to the
discussion below) for the corresponding loss until a subsequent taxable year.
Although not entirely clear, it appears that Regular Certificateholders that
are corporations should in general be allowed to deduct as an ordinary loss
such loss with respect to principal sustained during the taxable year on
account of any Regular Certificates becoming wholly or partially worthless,
and that, in general, Regular Certificateholders that are not corporations
will be allowed to deduct as a short-term capital loss any loss sustained
during the taxable year on account of a portion of any such Regular
Certificates becoming wholly worthless. Although the matter is not free from
doubt, non-corporate Regular Certificateholders should be allowed a bad debt
deduction at such time as the principal balance of such Regular Certificates
is reduced to reflect losses resulting from any liquidated Mortgage Loans.
The Internal Revenue Service, however, could take the position that
non-corporate holders will be allowed a bad debt deduction to reflect such
losses only after all the Mortgage Loans remaining in the Trust Fund have
been liquidated or the applicable Class of Regular Certificates has been
otherwise retired. The Internal Revenue Service could also assert that
losses on the Regular Certificates are deductible on some other method that
may defer such deductions for all holders, such as reducing future cash flow
for purposes of computing original issue discount. This may have the effect
of creating "negative" original issue discount which would be deductible only
against future positive original issue discount or otherwise upon termination
of the Class. Regular Certificateholders are urged to consult their own tax
advisors regarding the appropriate timing, amount and character of any loss
sustained with respect to such Regular Certificates. Losses attributable to
interest previously reported as income should be deductible as ordinary
losses by both corporate and non-corporate holders. Special loss rules are
applicable to banks and thrift institutions, including rules regarding
reserves for bad debts. Such taxpayers are advised to consult their tax
advisors regarding the treatment of losses on Regular Certificates.

ELECTION TO TREAT ALL INTEREST UNDER THE CONSTANT YIELD METHOD

A holder of a debt instrument such as a Regular Certificate
may elect to treat all interest that accrues on the instrument using the
constant yield method, with none of the interest being treated as qualified
stated interest. For purposes of applying the constant yield method to a
debt instrument subject to such an election, (i) "interest" includes stated
interest, original issue discount, DE MINIMIS original issue discount, market
discount and DE MINIMIS market discount, as adjusted by any amortizable bond
premium or acquisition premium and (ii) the debt instrument is treated as if
the instrument were issued on the holder's acquisition date in the amount of
the holder's adjusted basis immediately after acquisition. A holder
generally may make such an election on an instrument by instrument basis or
for a class or group of debt instruments. However, if the holder makes such
an election with respect to a debt instrument with amortizable bond premium
or with market discount, the holder is deemed to have made elections to
amortize bond premium or to report market discount income currently as it
accrues under the constant yield method, respectively, for all premium bonds
held or market discount bonds acquired by the holder in the same

<PAGE>

taxable year or thereafter. The election is made on the holder's federal
income tax return for the year in which the debt instrument is acquired and
is irrevocable except with the approval of the Internal Revenue Service.
Investors should consult their own tax advisors regarding the advisability of
making such an election.

SALE OR EXCHANGE OF REGULAR CERTIFICATES

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

Except as described above with respect to market discount, and
except as provided in this paragraph, any gain or loss on the sale or
exchange of a Regular Certificate realized by an investor who holds the
Regular Certificate as a capital asset will be capital gain or loss and will
be long-term or short-term depending on whether the Regular Certificate has
been held for the long-term capital gain holding period (currently more than
one year). Such gain will be treated as ordinary income (i) if a Regular
Certificate is held as part of a "conversion transaction" as defined in Code
Section 1258(c), up to the amount of interest that would have accrued on the
Regular Certificateholder's net investment in the conversion transaction at
120% of the appropriate applicable Federal rate under Code Section 1274(d) in
effect at the time the taxpayer entered into the transaction minus any amount
previously treated as ordinary income with respect to any prior disposition
of property that was held as a part of such transaction, (ii) in the case of
a non-corporate taxpayer, to the extent such taxpayer has made an election
under Code Section 163(d)(4) to have net capital gains taxed as investment
income at ordinary income rates, or (iii) to the extent that such gain does
not exceed the excess, if any, of (a) the amount that would have been
includible in the gross income of the holder if his yield on such Regular
Certificate were 110 percent of the applicable Federal rate as of the date of
purchase, over (b) the amount of income actually includible in the gross
income of such holder with respect to the Regular Certificate. In addition,
gain or loss recognized from the sale of a Regular Certificate by certain
banks or thrift institutions will be treated as ordinary income or loss
pursuant to Code Section 582(c). Pursuant to the Revenue Reconciliation Act
of 1993, capital gains of certain non-corporate taxpayers are subject to a
lower maximum tax rate than ordinary income of such taxpayers. The maximum
tax rate for corporations is the same with respect to both ordinary income
and capital gains.

TAXATION OF RESIDUAL CERTIFICATES

TAXATION OF REMIC INCOME

Generally, the "daily portions" of REMIC taxable income or net loss
will be includible as ordinary income or loss in determining the federal
taxable income of holders of Residual Certificates ("Residual Holders"), and
will not be taxed separately to the REMIC Pool. The daily portions of REMIC
taxable income or net loss of a Residual Holder are determined by allocating
the REMIC Pool's taxable income or net loss for each calendar quarter ratably
to each day in such quarter and by allocating such daily portion among the
Residual Holders in proportion to their respective holdings of Residual
Certificates in the REMIC Pool on such day. REMIC taxable income is
generally determined in the same manner as the taxable income of an
individual using the accrual method of accounting except that (i) the
limitation on deductibility of investment interest expense and expenses for
the production of income do not apply, (ii) all bad loans will be deductible
as business bad debts, and (iii) the limitation on the deductibility of
interest and expenses related to tax-exempt income will apply. The REMIC
Pool's gross income includes interest, original issue discount income, and
market discount income, if any, on the Mortgage Loans, reduced by
amortization of any premium on the Mortgage Loans, plus income on
reinvestment of cash flows and reserve assets plus any cancellation of
indebtedness income upon allocation of realized losses to the Regular
Certificates. The REMIC Pool's deductions include interest and original
issue discount expense on the Regular Certificates, servicing fees on the
Mortgage Loans, other administrative expenses of the REMIC Pool and realized
losses on the Mortgage Loans. The requirement that Residual Holders report
their pro rata share of taxable income

<PAGE>

or net loss of the REMIC Pool will continue until there are no Certificates
of any class of the related Series outstanding.

The taxable income recognized by a Residual Holder in any taxable
year will be affected by, among other factors, the relationship between the
timing of recognition of interest and original issue discount or market
discount income or amortization of premium with respect to the Mortgage
Loans, on the one hand, and the timing of deductions for interest (including
original issue discount) on the Regular Certificates, on the other hand. In
the event that an interest in the Mortgage Loans is acquired by the REMIC
Pool at a discount, and one or more of such Mortgage Loans is prepaid, the
Residual Holder may recognize taxable income without being entitled to
receive a corresponding amount of cash because (i) the prepayment may be used
in whole or in part to make distributions in reduction of principal on the
Regular Certificates, and (ii) the discount on the Mortgage Loans which is
includible in income may exceed the deduction allowed upon such distributions
on those Regular Certificates on account of any unaccrued original issue
discount relating to those Regular Certificates. When there is more than one
Class of Regular Certificates that distribute payments in reduction of
principal balance sequentially, this mismatching of income and deductions is
particularly likely to occur in the early years following issuance of the
Regular Certificates when distributions in reduction of principal are being
made in respect of earlier Classes of Regular Certificates to the extent that
such Classes are not issued with substantial discount. If taxable income
attributable to such a mismatching is realized, in general, losses would be
allowed in later years as payments on the later Classes of Regular
Certificates are made. Taxable income may also be greater in earlier years
than in later years as a result of the fact that interest expense deductions,
expressed as a percentage of the outstanding principal amount of such a
Series of Regular Certificates, may increase over time as distributions of
principal are made on the lower yielding Classes of Regular Certificates,
whereas, to the extent the REMIC Pool contains fixed rate Mortgage Loans,
interest income with respect to any given Mortgage Loan will remain constant
over time as a percentage of the outstanding principal amount of that loan.
Consequently, Residual Holders must have sufficient other sources of cash to
pay any federal, state, or local income taxes due as a result of such
mismatching or unrelated deductions against which to offset such income,
subject to the discussion of "excess inclusions" below under "Limitations on
Offset or Exemption of REMIC Income." The timing of such mismatching of
income and deductions described in this paragraph, if present with respect to
a Series of Certificates, may have a significant adverse effect upon a
Residual Holder's after-tax rate of return. In addition, a Residual Holder's
taxable income during certain periods may exceed the income reflected by such
Residual Holder for such periods in accordance with generally accepted
accounting principles. Investors should consult their own accountants
concerning the accounting treatment of their investment in Residual
Certificates.

BASIS AND LOSSES

The amount of any net loss of the REMIC Pool that may be taken into
account by the Residual Holder is limited to the adjusted basis of the
Residual Certificate as of the close of the quarter (or time of disposition
of the Residual Certificate if earlier), determined without taking into
account the net loss for the quarter. The initial adjusted basis of a
purchaser of a Residual Certificate is the amount paid for such Residual
Certificate. Such adjusted basis will be increased by the amount of taxable
income of the REMIC Pool reportable by the Residual Holder and will be
decreased (but not below zero), first, by a cash distribution from the REMIC
Pool and, second, by the amount of loss of the REMIC Pool reportable by the
Residual Holder. Any loss that is disallowed on account of this limitation
may be carried over indefinitely by the Residual Holder for whom such loss
was disallowed and may be used by such Residual Holder only to offset any
income generated by the same REMIC Pool.

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

A Residual Certificate may have a negative value if the net present
value of anticipated tax liabilities exceeds the present value of anticipated
cash flows. The REMIC Regulations appear to treat the issue

<PAGE>

price of such residual interest as zero rather than such negative amount for
purposes of determining the REMIC Pool's basis in its assets. The preamble
to the REMIC Regulations states that the Internal Revenue Service may provide
future guidance on the proper tax treatment of payments made by a transferor
of such a residual interest to induce the transferee to acquire the interest,
and Residual Holders should consult their own tax advisors in this regard.

Further, to the extent the initial adjusted basis of the Residual
Holder (other than the original holder) in the Residual Certificate is
greater than the corresponding portion of the REMIC Pool's basis in the
Mortgage Loans, the Residual Holder will not recover a portion of such basis
until termination of the REMIC Pool unless future Treasury regulations
provide for periodic adjustments to the REMIC income otherwise reportable by
such holder. The REMIC Regulations currently in effect do not so provide.
See "Treatment of Certain Items of REMIC Income and Expense -- Market
Discount" below regarding the basis of Mortgage Loans to the REMIC Pool and
"Sale or Exchange of a Residual Certificate" below regarding possible
treatment of a loss upon termination of the REMIC Pool as a capital loss.

TREATMENT OF CERTAIN ITEMS OF REMIC INCOME AND EXPENSE

Although the Depositor intends to compute REMIC income and expense
in accordance with the Code and applicable regulations, the authorities
regarding the determination of specific items of income and expense are
subject to uncertainty and differing interpretations. The Depositor makes no
representation as to the specific method that it will use for reporting
income with respect to the Mortgage Loans and expenses with respect to the
Regular Certificates and different methods could result in different timing
of reporting of taxable income or net loss to Residual Holders or differences
in capital gain versus ordinary income.

ORIGINAL ISSUE DISCOUNT. Generally, the REMIC Pool's deductions
for original issue discount will be determined in the same manner as original
issue discount income on Regular Certificates as described above under
"Taxation of Regular Certificates -- Original Issue Discount" and "--Variable
Rate Regular Certificates," without regard to the DE MINIMIS rule described
therein.

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

MARKET DISCOUNT. The REMIC Pool will have market discount income
in respect of Mortgage Loans if, in general, the basis of the REMIC Pool
allocable to such Mortgage Loans is exceeded by their unpaid principal
balances. The REMIC Pool's basis in such Mortgage Loans is generally their
fair market value immediately after the transfer thereof to the REMIC Pool.
The REMIC Regulations provide that such basis is equal in the aggregate to
the issue prices of all regular and residual interests in the REMIC Pool (or
the fair market value thereof at the Closing Date in the case of a retained
Class). The accrued portion of such market discount would be recognized
currently as an item of ordinary income in a manner similar to original issue
discount. Market discount income generally should accrue in the manner
described above under "Taxation of Regular Certificates--Market Discount."

PREMIUM. Generally, if the basis of the REMIC Pool in the Mortgage
Loans exceeds the unpaid principal balances thereof, the REMIC Pool will be
considered to have acquired such Mortgage Loans at a premium equal to the
amount of such excess. As stated above, the REMIC Pool's basis in Mortgage
Loans is the fair market value of the Mortgage Loans immediately after the
transfer thereof to the REMIC Pool based on the aggregate of the issue prices
(or the fair market value of retained Classes) of the regular and residual
interests in the REMIC Pool. In a manner analogous to the discussion above
under "Taxation of Regular Certificates -- Premium," a REMIC Pool that holds
a Mortgage Loan as a capital asset under Code Section 1221 may elect under
Code Section 171 to amortize premium on the Mortgage Loans originated after
September 27, 1985 under the constant yield method. Amortizable bond premium
will be treated as an offset to interest income on the Mortgage Loans, rather
than as a separate deduction item. To the extent that mortgagors on the
Mortgage Loans are individuals, Code Section 171 will not be available for
premium on Mortgage Loans originated on or prior to September 27, 1985.

<PAGE>

Premium with respect to such Mortgage Loans may be deductible in accordance
with a reasonable method regularly employed by the holder thereof. The
allocation of such premium pro rata among principal payments should be
considered a reasonable method; however, the Internal Revenue Service may
argue that such premium should be allocated in a different manner, such as
allocating such premium entirely to the final payment of principal.

LIMITATIONS ON OFFSET OR EXEMPTION OF REMIC INCOME

Except in the case of certain thrift institutions, a portion (or
all) of the REMIC taxable income includible in determining the federal income
tax liability of a Residual Holder will be subject to special treatment.
That portion, referred to as the "excess inclusion," is equal to the excess
of REMIC taxable income for the calendar quarter allocable to a Residual
Certificate over the daily accruals for such quarterly period of (i) 120% of
the long-term applicable Federal rate that would have applied to the Residual
Certificate (if it were a debt instrument) on the Startup Day under Code
Section 1274(d), multiplied by (ii) the adjusted issue price of such Residual
Certificate at the beginning of such quarterly period. For this purpose, the
adjusted issue price of a Residual Certificate at the beginning of a quarter
is the issue price of the Residual Certificate, plus the amount of the daily
accruals of REMIC income described in this paragraph for all prior quarters,
decreased by any distributions made with respect to such Residual Certificate
prior to the beginning of such quarterly period. Accordingly, the portion of
the REMIC's taxable income that will be treated as excess inclusions will be
a larger portion of such income as the adjusted issue price of the Residual
Certificates diminishes.

The portion of a Residual Holder's REMIC taxable income consisting
of the "excess inclusion" generally may not be offset by other deductions,
including net operating loss carryforwards, on such Residual Holder's return.
Further, if the Residual Holder is an organization subject to the tax on
unrelated business income imposed by Code Section 511, the Residual Holder's
excess inclusion will be treated as unrelated business taxable income of such
Residual Holder for purposes of Code Section 511. In addition, REMIC taxable
income is subject to 30% withholding tax with respect to certain persons who
are not U.S. Persons (as defined below under "Tax-Related Restrictions on
Transfer of REMIC Residual Certificates -- Foreign Investors"), and the
portion thereof attributable to excess inclusions is not eligible for any
reduction in the rate of withholding tax (by treaty or otherwise). See
"Taxation of Certain Foreign Investors -- Residual Certificates" below.
Finally, if a real estate investment trust or a regulated investment company
owns a Residual Certificate, a portion (allocated under Treasury regulations
yet to be issued) of dividends paid by the real estate investment trust or
regulated investment company could not be offset by net operating losses of
its shareholders, would constitute unrelated business taxable income for
tax-exempt shareholders, and would be ineligible for reduction of withholding
to certain persons who are not U.S. Persons.

An exception to the inability of a Residual Holder to offset excess
inclusions with unrelated deductions and net operating losses applied to Code
Section 593 institutions ("thrift institutions"). For purposes of applying
this rule, all members of an affiliated group filing a consolidated return
are treated as one taxpayer, except that thrift institutions to which Code
Section 593 applies, together with their subsidiaries formed to issue REMICs,
are treated as separate corporations. Furthermore, the Code provides that
regulations may disallow the ability of a thrift institution to use
deductions to offset excess inclusions necessary or appropriate to prevent
avoidance of tax. A thrift institution may not so offset its excess
inclusions unless the Residual Certificates have "significant value," which
requires that (i) the Residual Certificates have an issue price that is at
least equal to 2% of the aggregate of the issue prices of all Residual
Certificates and Regular Certificates with respect to the REMIC Pool, and
(ii) the anticipated weighted average life of the Residual Certificates is at
least 20% of the anticipated weighted average life of the REMIC Pool. The
anticipated weighted average life of the Residual Certificates is based on
all distributions anticipated to be received with respect thereto (using the
Prepayment Assumption). The anticipated weighted average life of the REMIC
Pool is the aggregate weighted average life of all classes of interests
therein (computed using all anticipated distributions on a regular interest
with nominal or no principal). Finally, an ordering rule under the REMIC
Regulations provides that a thrift institution may only offset its excess
inclusion income with deductions after it has first applied its deductions
against income that is not excess inclusion income. If applicable, the
Prospectus Supplement with respect to a Series will set forth whether the
Residual Certificates are expected to have "significant value" within the
meaning of the REMIC Regulations.

<PAGE>

TAX-RELATED RESTRICTIONS ON TRANSFER OF RESIDUAL CERTIFICATES

DISQUALIFIED ORGANIZATIONS. If any legal or beneficial interest in
a Residual Certificate is transferred to a Disqualified Organization (as
defined below), a tax would be imposed in an amount equal to the product of
(i) the present value of the total anticipated excess inclusions with respect
to such Residual Certificate for periods after the transfer and (ii) the
highest marginal federal income tax rate applicable to corporations. The
REMIC Regulations provide that the anticipated excess inclusions are based on
actual prepayment experience to the date of the transfer and that projected
payments are based on the Prepayment Assumption. The present value rate
equals the applicable Federal rate under Code Section 1274(d) as of the date
of the transfer for a term ending with the last calendar quarter in which
excess inclusions are expected to accrue. Such a tax generally would be
imposed on the transferor of the Residual Certificate, except that where such
transfer is through an agent (including a broker, nominee or other middleman)
for a Disqualified Organization, the tax would instead be imposed on such
agent. However, a transferor of a Residual Certificate would in no event be
liable for such tax with respect to a transfer if the transferee furnishes to
the transferor an affidavit that the transferee is not a Disqualified
Organization and, as of the time of the transfer, the transferor does not
have actual knowledge that such affidavit is false. The tax also may be
waived by the Treasury Department if the Disqualified Organization promptly
disposes of the residual interest and the transferor pays income tax at the
highest corporate rate on the excess inclusion for the period the residual
interest is actually held by the Disqualified Organization.

In addition, if a "Pass-Through Entity" (as defined below) has
excess inclusion income with respect to a Residual Certificate during a
taxable year and a Disqualified Organization is the record holder of an
equity interest in such entity, then a tax is imposed on such entity equal to
the product of (i) the amount of excess inclusions on the Residual
Certificate that is allocable to the interest in the Pass-Through Entity
during the period such interest is held by such Disqualified Organization,
and (ii) the highest marginal federal corporate income tax rate. Such tax
would be deductible from the ordinary gross income of the Pass-Through Entity
for the taxable year. The Pass-Through Entity would not be liable for such
tax if it has received an affidavit from such record holder that it is not a
Disqualified Organization or stating such holder's taxpayer identification
number, and during the period such person is the record holder of the
Residual Certificate, the Pass-Through Entity does not have actual knowledge
that such affidavit is false.

For these purposes, (i) "Disqualified Organization" means the
United States, any state or political subdivision thereof, any foreign
government, any international organization, any agency or instrumentality of
any of the foregoing (provided, that such term does not include an
instrumentality if all of its activities are subject to tax and a majority of
its board of directors is not selected by any such governmental entity), any
cooperative organization furnishing electric energy or providing telephone
service to persons in rural areas as described in Code Section 1381(a)(2)(C),
and any organization (other than a farmers' cooperative described in Code
Section 521) that is exempt from taxation under the Code unless such
organization is subject to the tax or unrelated business income imposed by
Code Section 511, and (ii) "Pass-Through Entity" means any regulated
investment company, real estate investment trust, common trust fund,
partnership, trust, or estate and certain corporations operating on a
cooperative basis. Except as may be provided in Treasury regulations, any
person holding an interest in a Pass-Through Entity as a nominee for another
will, with respect to such interest, be treated as a Pass-Through Entity.

The Pooling and Servicing Agreement with respect to a Series will
provide that no legal or beneficial interest in a Residual Certificate may be
transferred unless (i) the proposed transferee provides to the transferor,
the Depositor and the Trustee an affidavit providing its taxpayer
identification number and stating such transferee is the beneficial owner of
the Residual Certificate, is not a Disqualified Organization and is not
purchasing such Residual Certificate on behalf of a Disqualified Organization
(i.e., as a broker, nominee or middleman thereof), and (ii) the transferor
provides a statement in writing to the Depositor and the Trustee that it has
no actual knowledge that such affidavit is false. Moreover, the Pooling and
Servicing Agreement will provide that any attempted or purported transfer in
violation of these transfer restrictions will be null and void and will vest
no rights in any purported Transferee. Each Residual Certificate with
respect to a Series will bear a legend referring to such restrictions on
transfer, and each holder of a Residual Certificate will be deemed to have
agreed, as a condition of ownership thereof, to any amendments to the related
Pooling and Servicing Agreement required under the Code or applicable
Treasury regulations to effectuate the foregoing restrictions. Information
necessary to compute an

<PAGE>

applicable excise tax must be furnished to the Internal Revenue Service and
to the requesting party within 60 days of the request, and the Depositor or
the Trustee may charge a fee for computing and providing such information.

NONECONOMIC RESIDUAL INTERESTS. The REMIC Regulations would
disregard certain transfers of Residual Certificates, in which case the
transferor would continue to be treated as the owner of the Residual
Certificates and thus would continue to be subject to tax on its allocable
portion of the net income of the REMIC Pool. Under the REMIC Regulations, a
transfer of a "noneconomic residual interest" (as defined below) to a
Residual Holder (other than a Residual Holder who is not a U.S. Person, as
defined below under "Foreign Investors") is disregarded for all federal
income tax purposes if a significant purpose of the transferor is to impede
the assessment or collection of tax. A residual interest in a REMIC
(including a residual interest with a positive value at issuance) is a
"noneconomic residual interest" unless, at the time of the transfer, (i) the
present value of the expected future distributions on the residual interest
at least equals the product of the present value of the anticipated excess
inclusions and the highest corporate income tax rate in effect for the year
in which the transfer occurs, and (ii) the transferor reasonably expects that
the transferee will receive distributions from the REMIC at or after the time
at which taxes accrue on the anticipated excess inclusions in an amount
sufficient to satisfy the accrued taxes. The anticipated excess inclusions
and the present value rate are determined in the same manner as set forth
above under "Disqualified Organizations." The REMIC Regulations explain that
a significant purpose of a transfer will be deemed to impede the assessment
or collection of tax if the transferor, at the time of the transfer, either
knew or should have known that the transferee would be unwilling or unable to
pay taxes due on its share of the taxable income of the REMIC. A safe harbor
is provided if (i) the transferor conducted, at the time of the transfer, a
reasonable investigation of the financial condition of the transferee and
found that the transferee historically had paid its debts as they came due
and found no significant evidence to indicate that the transferee would not
continue to pay its debts as they came due in the future, and (ii) the
transferee represents to the transferor that it understands that, as the
holder of the noneconomic residual interest, the transferee may incur tax
liabilities in excess of cash flows generated by the interest and that the
transferee intends to pay taxes associated with holding the residual interest
as they become due. The Pooling and Servicing Agreement with respect to a
Series will require the transferee of a REMIC Residual Certificate to certify
to the matters in the preceding sentence as part of the affidavit described
above under the heading "Disqualified Organizations." The transferor must
have no actual knowledge or reason to know that such statements are false.

FOREIGN INVESTORS. The REMIC Regulations provide that the transfer
of a Residual Certificate that has "tax avoidance potential" to a "foreign
person" will be disregarded for all federal tax purposes. This rule appears
intended to apply to a transferee who is not a "U.S. Person" (as defined
below), unless such transferee's income is effectively connected with the
conduct of a trade or business within the United States. A Residual
Certificate is deemed to have tax avoidance potential unless, at the time of
the transfer, (i) the future value of expected distributions equals at least
30% of the anticipated excess inclusions after the transfer, and (ii) the
transferor reasonably expects that the transferee will receive sufficient
distributions from the REMIC Pool at or after the time at which the excess
inclusions accrue and prior to the end of the succeeding taxable year for the
accumulated withholding tax liability to be paid. If the non-U.S. Person
transfers the Residual Certificate back to the U.S. Person, the transfer will
be disregarded and the foreign transferor will continue to be treated as the
owner unless arrangements are made so that the transfer does not have the
effect of allowing the transferor to avoid tax on accrued excess inclusions.

The Prospectus Supplement relating to the Certificates of a Series
may provide that a Residual Certificate may not be purchased by or
transferred to any person that is not a U.S. Person or may describe the
circumstances and restrictions pursuant to which such a transfer may be made.
The term "U.S. Person" means a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, or an estate
or trust that is subject to U.S. federal income tax regardless of the source
of its income.

<PAGE>

SALE OR EXCHANGE OF A RESIDUAL CERTIFICATE

Upon the sale or exchange of a Residual Certificate, the Residual
Holder will recognize gain or loss equal to the excess, if any, of the amount
realized over the adjusted basis (as described above under "Taxation of
Residual Certificates --Basis and Losses") of such Residual Holder in such
Residual Certificate at the time of the sale or exchange. In addition to
reporting the taxable income of the REMIC Pool, a Residual Holder will have
taxable income to the extent that any cash distribution to it from the REMIC
Pool exceeds such adjusted basis on that Distribution Date. Such income will
be treated as gain from the sale or exchange of the Residual Certificate. It
is possible that the termination of the REMIC Pool may be treated as a sale
or exchange of a Residual Holder's Residual Certificate, in which case, if
the Residual Holder has an adjusted basis in such Residual Holder's Residual
Certificate remaining when its interest in the REMIC Pool terminates, and if
such Residual Holder holds such Residual Certificate as a capital asset under
Code Section 1221, then such Residual Holder will recognize a capital loss at
that time in the amount of such remaining adjusted basis.

Any gain on the sale of a Residual Certificate will be treated as
ordinary income (i) if a Residual Certificate is held as part of a
"conversion transaction" as defined in Code Section 1258(c), up to the amount
of interest that would have accrued on the Residual Certificateholder's net
investment in the conversion transaction at 120% of the appropriate
applicable Federal rate in effect at the time the taxpayer entered into the
transaction minus any amount previously treated as ordinary income with
respect to any prior disposition of property that was held as a part of such
transaction or (ii) in the case of a non-corporate taxpayer, to the extent
such taxpayer has made an election under Code Section 163(d)(4) to have net
capital gains taxed as investment income at ordinary income rates. In
addition, gain or loss recognized from the sale of a Residual Certificate by
certain banks or thrift institutions will be treated as ordinary income or
loss pursuant to Code Section 582(c).

The Conference Committee Report to the 1986 Act provides that,
except as provided in Treasury regulations yet to be issued, the wash sale
rules of Code Section 1091 will apply to dispositions of Residual
Certificates where the seller of the Residual Certificate, during the period
beginning six months before the sale or disposition of the Residual
Certificate and ending six months after such sale or disposition, acquires
(or enters into any other transaction that results in the application of
Section 1091) any residual interest in any REMIC or any interest in a
"taxable mortgage pool" (such as a non-REMIC owner trust) that is
economically comparable to a Residual Certificate.

TAXES THAT MAY BE IMPOSED ON THE REMIC POOL

PROHIBITED TRANSACTIONS

Income from certain transactions entered into by the REMIC Pool,
called prohibited transactions, will not be part of the calculation of income
or loss includible in the federal income tax returns of Residual Holders, but
rather will be taxed directly to the REMIC Pool at a 100% rate. Prohibited
transactions generally include (i) the disposition of a qualified mortgage
other than for (a) substitution within two years of the Startup Day for a
defective, including a defaulted, obligation (or the repurchase in lieu of
substitution of a defective, including a defaulted, obligation at any time),
or for any qualified mortgage within three months of the Startup Day, (b)
foreclosure, default, or reasonably foreseeable default of a qualified
mortgage, (c) bankruptcy or insolvency of the REMIC Pool, or (d) a qualified
(complete) liquidation, (ii) the receipt of income from assets that are not
the type of mortgages or investments that the REMIC Pool is permitted to
hold, (iii) the receipt of compensation for services, or (iv) the receipt of
gain from disposition of cash flow investments other than pursuant to a
qualified liquidation. Notwithstanding (i) and (iv), it is not a prohibited
transaction to sell REMIC Pool property to prevent a default on Regular
Certificates as a result of a default on qualified mortgages or to facilitate
a clean-up call (generally, an optional termination to save administrative
costs when no more than a small percentage of the Certificates is
outstanding). The REMIC Regulations indicate that the modification of a
Mortgage Loan generally will not be treated as a disposition if it is
occasioned by a default or reasonably foreseeable default, an assumption of
the Mortgage Loan, the waiver of a due-on-sale or due-on-encumbrance clause
or the conversion of an interest rate by a mortgagor pursuant to the terms of
a convertible adjustable rate Mortgage Loan.

<PAGE>

CONTRIBUTIONS TO THE REMIC POOL AFTER THE STARTUP DAY

In general, a REMIC Pool will be subject to tax at a 100% rate on
the value of any property contributed to the REMIC Pool after the Startup
Day. Exceptions are provided for cash contributions to a REMIC Pool (i)
during the three months following the Startup Day, (ii) made to a qualified
reserve fund by a Residual Holder, (iii) in the nature of a guarantee, (iv)
made to facilitate a qualified liquidation or clean-up call, and (v) as
otherwise permitted in Treasury regulations yet to be issued.

NET INCOME FROM FORECLOSURE PROPERTY

The REMIC Pool will be subject to federal income tax at the highest
corporate rate on "net income from foreclosure property," determined by
reference to the rules applicable to real estate investment trusts.
Generally, property acquired by deed in lieu of foreclosure would be treated
as "foreclosure property" for a period of two years, with possible
extensions. Net income from foreclosure property generally means gain from
the sale of a 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.

LIQUIDATION OF THE REMIC POOL

If a REMIC Pool adopts a plan of complete liquidation, within the
meaning of Code Section 860F(a)(4)(A)(i), which may be accomplished by
designating in the REMIC Pool's final tax return a date on which such
adoption is deemed to occur, and sells all of its assets (other than cash)
within a 90-day period beginning on the date of the adoption of the plan of
liquidation, then the REMIC Pool will not be subject to the prohibited
transaction rules on the sale of its assets, provided that the REMIC Pool
credits or distributes in liquidation all of the sale proceeds plus its cash
(other than the amounts retained to meet claims) to holders of Regular
Certificates and Residual Holders within the 90-day period.

ADMINISTRATIVE MATTERS

The REMIC Pool will be required to maintain its books on a calendar
year basis and to file tax returns for federal income tax purposes in a
manner similar to a partnership. The form for such income tax return is Form
1066, U.S. Real Estate Mortgage Investment Conduit Income Tax Return.
Treasury regulations provide that, except where there is a single Residual
Holder for an entire taxable year, the REMIC Pool will be subject to the
procedural and administrative rules of the Code applicable to partnerships,
including the determination by the Internal Revenue Service of any
adjustments to, among other things, items of REMIC income, gain, loss,
deduction, or credit in a unified administrative proceeding. The Residual
Holder owning the largest percentage interest in the Residual Certificates
will be obligated to act as the REMIC Pool's "tax matters person," as defined
in applicable Treasury regulations, with respect to the REMIC Pool, and will
be required to irrevocably designate the Trustee as its agent to perform all
of the functions of the tax matters person.

LIMITATIONS ON DEDUCTION OF CERTAIN EXPENSES

An investor who is an individual, estate, or trust will be subject
to limitation with respect to certain itemized deductions described in Code
Section 67, to the extent that such itemized deductions, in the aggregate, do
not exceed two percent of the investor's adjusted gross income. In addition,
Code Section 68 provides that itemized deductions otherwise allowable for a
taxable year of an individual taxpayer will be reduced by the lesser of (i)
3% of the excess, if any, of adjusted gross income over $100,000 ($50,000 in
the case of a married individual filing a separate return) (in each case,
subject to adjustment for inflation), or (ii) 80% of the amount of itemized
deductions otherwise allowable for such year. In the case of a REMIC Pool,
such deductions may include deductions under Code Section 212 for the
Servicing Fee and all administrative and other expenses relating to the REMIC
Pool, or any similar expenses allocated to the REMIC Pool with respect to a
regular interest it holds in another REMIC. Such investors who hold REMIC
Certificates either directly or indirectly through certain pass-through
entities may have their pro rata share of such expenses allocated to them as
additional gross income, but may be subject to such limitation on deductions.
In addition, such expenses are not deductible at all for purposes of
computing the alternative minimum tax and may cause such investors to be
subject to significant

<PAGE>

additional tax liability. Temporary Treasury regulations provide that the
additional gross income and corresponding amount of expenses generally are to
be allocated entirely to the holders of Residual Certificates in the case of
a REMIC Pool that would not qualify as a fixed investment trust in the
absence of a REMIC election. However, such additional income and limitation
on deductions will apply to the allocable portion of such expenses to holders
of Regular Certificates, as well as to holders of Residual Certificates,
where such Regular Certificates are similar to pass-through certificates in a
fixed investment trust. Unless indicated otherwise in the applicable
Prospectus Supplement, all such expenses will be allocable to the Residual
Certificates. In general, such allocable portion will be determined based on
the ratio that a Regular Certificateholder's income, determined on a daily
basis, bears to the income of all holders of Regular Certificates and
Residual Certificates with respect to the REMIC Pool. As a result,
individuals, estates, or trusts holding REMIC Certificates (either directly
or indirectly through a grantor trust, partnership, S corporation, REMIC, or
certain other pass-through entities described in the foregoing temporary
Treasury regulations), may have taxable income in excess of the interest
income at the pass-through rate on Regular Certificates that are issued in a
single Class or otherwise consistently with fixed investment trust status or
in excess of distributions of cash for the related period on Residual
Certificates.

TAXATION OF CERTAIN FOREIGN INVESTORS

REGULAR CERTIFICATES

Interest, including original issue discount, distributable to
Regular Certificateholders who are nonresident aliens, foreign corporations,
or other Non-U.S. Persons (i.e., any persons who are not U.S. Persons, as
defined above), will be considered "portfolio interest" and, therefore,
generally, will not be subject to 30% United States withholding provided that
such Non-U.S. Person (i) is not a "10-percent shareholder" within the meaning
of Code Section 871(h)(3)(B) with respect to the Depositor, or a controlled
foreign corporation described in Code Section 881(c)(3)(C) and (ii) provides
the Trustee, or the person who would otherwise be required to withhold tax
from such distributions under Code Section 1441 or 1442, with an appropriate
statement, signed under penalties of perjury, identifying the beneficial
owner and stating, among other things, that the beneficial owner of the
Regular Certificate is a Non-U.S. Person. If such statement, or any other
required statement, is not provided, 30% withholding will apply unless
reduced or eliminated pursuant to an applicable tax treaty or unless the
interest on the Regular Certificate is effectively connected with the conduct
of a trade or business within the United States by such Non-U.S. Person. In
the latter case, such Non-U.S. Person will be subject to United States
federal income tax at regular rates. Investors who are Non-U.S. Persons
should consult their own tax advisors regarding the specific tax consequences
to them of owning a Regular Certificate.

RESIDUAL CERTIFICATES

The Conference Committee Report to the 1986 Act indicates that
amounts paid to Residual Holders who are Non-U.S. Persons are treated as
interest for purposes of the 30% (or lower treaty rate) United States
withholding tax. Treasury regulations provide that amounts distributed to
Residual Holders may qualify as "portfolio interest," subject to the
conditions described in "Regular Certificates" above, but only to the extent
that (i) the Mortgage Loans were issued after July 18, 1984 and (ii) the
Trust Fund or segregated pool of assets therein (as to which a separate REMIC
election will be made), to which the Residual Certificate relates, consists
of obligations issued in "registered form" within the meaning of Code Section
163(f)(1). Generally, Mortgage Loans will not be, but regular interests in
another REMIC Pool will be, considered obligations issued in registered form.
Furthermore, a Residual Holder will not be entitled to any exemption from
the 30% withholding tax (or lower treaty rate) to the extent of that portion
of REMIC taxable income that constitutes an "excess inclusion." See
"Taxation of Residual Certificates--Limitations on Offset or Exemption of
REMIC Income." If the amounts paid to Residual Holders who are Non-U.S.
Persons are effectively connected with the conduct of a trade or business
within the United States by such Non-U.S. Persons, 30% (or lower treaty rate)
withholding will not apply. Instead, the amounts paid to such Non-U.S.
Persons will be subject to United States federal income tax at regular rates.
If 30% (or lower treaty rate) withholding is applicable, such amounts will
be taken into account for purposes of withholding only when paid or otherwise
distributed (or when the Residual Certificate is disposed of) under rules
similar to withholding upon disposition of debt instruments that have
original issue discount. See "Taxation of Residual Certificates --
Tax-Related Restrictions on Transfer of Residual Certificates -- Foreign
Investor Investors" above concerning the

<PAGE>

disregard of certain transfers having "tax avoidance potential." Investors
who are Non-U.S. Persons should consult their own tax advisors regarding the
specific tax consequences to them of owning a Residual Certificate.

BACKUP WITHHOLDING

Distributions made on the Regular Certificates, and proceeds from
the sale of the Regular Certificates to or through certain brokers, may be
subject to a "backup" withholding tax under Code Section 3406 of 31% on
"reportable payments" (including interest distributions, original issue
discount, and, under certain circumstances, principal distributions) unless
the Regular Certificateholder complies with certain reporting and/or
certification procedures, including the provision of its taxpayer
identification number to the Trustee, its agent, or the broker who effected
the sale of the Regular Certificates, or such Regular Certificateholder is
otherwise an exempt recipient under applicable provisions of the Code. Any
amounts to be withheld from distribution on the Regular Certificates would be
refunded by the Internal Revenue Service or allowed as a credit against the
Regular Certificateholder's federal income tax liability.

REPORTING REQUIREMENTS

Reports of accrued interest, original issue discount and
information necessary to compute the accrual of market discount will be made
annually to the Internal Revenue Service and to individuals, estates,
non-exempt and non-charitable trusts, and partnerships who are either holders
of records of Regular Certificates or beneficial owners who own Regular
Certificates through a broker or middleman as nominee. All brokers, nominees
and all other non-exempt holders of record of Regular Certificates (including
corporations, non-calendar year taxpayers, securities or commodities dealers,
real estate investment trusts, investment companies, common trust funds,
thrift institutions and charitable trusts) may request such information for
any calendar year by telephone or in writing by contacting the person
designated in Internal Revenue Service Publication 938 with respect to a
particular Series of Regular Certificates. Holders through nominees must
request such information from the nominee.

The Internal Revenue Service's Form 1066 has an accompanying
Schedule Q, Quarterly Notice to Residual Interest Holders of REMIC Taxable
Income or Net Loss Allocation. Treasury regulations require that Schedule Q
be furnished by the REMIC Pool to each Residual Holder by the end of the
month following the close of each calendar quarter (41 days after the end of
a quarter under proposed Treasury regulations) in which the REMIC Pool is in
existence.

Treasury regulations require that, in addition to the foregoing
requirements, information must be furnished quarterly to Residual Holders,
furnished annually, if applicable, to holders of Regular Certificates, and
filed annually with the Internal Revenue Service concerning Code Section 67
expenses (see "Limitations on Deduction of Certain Expenses" above) allocable
to such holders. Furthermore, under such regulations, information must be
furnished quarterly to Residual Holders, furnished annually to holders of
Regular Certificates, and filed annually with the Internal Revenue Service
concerning the percentage of the REMIC Pool's assets meeting the qualified
asset tests described above under "Status of REMIC Certificates."

NON-REMIC CERTIFICATES

STANDARD CERTIFICATES

GENERAL

In the event that a Trust Fund (or a segregated pool of assets
therein) with respect to a Series of Standard Certificates does not elect to
be treated as a REMIC, the Trust Fund will be classified as a grantor trust
under subpart E, Part 1 of subchapter J of the Code and not as an association
taxable as a corporation or a "taxable mortgage pool" within the meaning of
Code Section 7701(i). Where there is no Fixed Retained Yield with respect to
the Mortgage Loans underlying such Series of Standard Certificates and where
such Certificates are not designated as Stripped Certificates, as described
below under "Stripped Certificates," the holder of each such

<PAGE>

Certificate will be treated as the owner of a pro rata undivided interest in
the ordinary income and corpus portions of the Trust Fund represented by the
Standard Certificate and will be considered the beneficial owner of a pro
rata undivided interest in each of the Mortgage Loans, subject to the
discussion below under "Recharacterization of Servicing Fees." Accordingly,
the holder of a Standard Certificate of a particular Series (a "Standard
Certificateholder") will be required to report on its federal income tax
return its pro rata share of the entire income from the Mortgage Loans
represented by its Standard Certificate, including interest at the coupon
rate, original issue discount (if any,) prepayment fees, assumption fees, and
late payment charges received by the Servicer, in accordance with such
Standard Certificateholder's method of accounting. A Standard
Certificateholder generally will be able to deduct its share of the Servicing
Fee and all administrative and other expenses of the Trust Fund in accordance
with its method of accounting, provided that such amounts are reasonable
compensation for services rendered to that Trust Fund. However, investors
who are individuals, estates, or trusts who own Standard Certificates, either
directly or indirectly through certain pass-through entities, will be subject
to limitations with respect to certain itemized deductions described in Code
Section 67, including deductions under Code Section 212, for the Servicing
Fee and all such administrative and other expenses of the Trust Fund, to the
extent that such deductions, in the aggregate, do not exceed two percent of
an investor's adjusted gross income. In addition, Code Section 68 provides
that itemized deductions otherwise allowable for a taxable year of an
individual taxpayer will be reduced by the lesser of (i) 3% of the excess, if
any, of adjusted gross income over $100,000 ($50,000 in the case of a married
individual filing a separate return) (in each case, subject to adjustment for
inflation), or (ii) 80% of the amount of itemized deductions otherwise
allowable for such year. As a result, such investors holding Standard
Certificates, directly or indirectly through a pass-through entity, might
have aggregate taxable income in excess of the aggregate amount of cash
received as interest or discount on such Standard Certificates. In addition,
such expenses are not deductible at all for purposes of computing the
alternative minimum tax and may cause such investors to be subject to
significant additional tax liability. Moreover, where there is Fixed
Retained Yield with respect to the Mortgage Loans underlying a Series of
Standard Certificates or where the servicing fees are in excess of reasonable
servicing compensation, the transaction may be subject to the application of
the "stripped bond" and "stripped coupon" rules of the Code, as described
below under "Stripped Certificates" and "Recharacterization of Servicing
Fees," respectively.

TAX STATUS

The Depositor's Counsel has advised the Depositor that, except as
discussed below with respect to Buy-Down Loans:

1. A Standard Certificate owned by a "domestic building and loan
association" within the meaning of Code Section 7701(a)(19) will be
considered to represent "loans ... secured by an interest in real
property" within the meaning of Code Section 7701(a)(19)(C)(v),
provided that the property securing the Mortgage Loans represented by
that Standard Certificate is of the type described in such section of
the Code.

2. A Standard Certificate owned by a financial institution
described in Code Section 593(a) will be considered to represent
"qualifying real property loans" within the meaning of Code Section
593(d)(1), provided that the property securing the Mortgage Loans
represented by that Standard Certificate is of the type described in
such section of the Code.

3. A Standard Certificate owned by a real estate investment trust
will be considered to represent "real estate assets" within the meaning
of Code Section 856(c)(5)(A) to the extent that the assets of the
related Trust Fund consist of qualified assets, and interest income of
such assets will be considered "interest on obligations secured by
mortgages on real property" to such extent within the meaning of Code
Section 856(c)(3)(B).

4. A Standard Certificate owned by a REMIC will be considered to
represent an "obligation (including any participation or certificate of
beneficial ownership therein) which is principally secured by an
interest in real property" within the meaning of Code Section
860G(a)(3)(A) to the extent that the assets of the related trust fund
consist of "qualified mortgages" within the meaning of Code Section
860G(a)(3).

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An issue arises as to whether Buy-Down Loans may be characterized
in their entirety under the Code provisions cited in clauses 1, 2 and 3 of
the immediately preceding paragraph. Code Section 593(d)(1)(C) provides that
the term "qualifying real property loan" does not include a loan "to the
extent secured by a deposit in or share of the taxpayer." The application of
this provision to a Buy-Down Fund is uncertain, but it may require that a
taxpayer's investment in a Buy-Down Loan be reduced by the Buy-Down Fund. As
to the treatment of Buy-Down Loans as "qualifying real property loans" under
Code Section 593(d)(1) if the exception of Code Section 593(d)(1)(C) is
inapplicable, as "loans ... secured by an interest in real property" under
Code Section 7701(a)(19)(C)(v), or as "real estate assets" under Code Section
856(c)(5)(A), there is indirect authority supporting treatment of an
investment in a Buy-Down Loan as entirely secured by real property if the
fair market value of the real property securing the loan exceeds the
principal amount of the loan at the time of issuance or acquisition, as the
case may be. There is no assurance that the treatment described above is
proper. Accordingly, Standard Certificateholders are urged to consult their
own tax advisors concerning the effects of such arrangements on the
characterization of such Standard Certificateholder's investment for federal
income tax purposes.

PREMIUM AND DISCOUNT

Standard Certificateholders are advised to consult with their tax
advisors as to the federal income tax treatment of premium and discount
arising either upon initial acquisition of Standard Certificates or
thereafter.

PREMIUM. The treatment of premium incurred upon the purchase of a
Standard Certificate will be determined generally as described above under
"Federal Income Tax Consequences for REMIC Certificates -- Taxation of
Residual Certificates -- Premium."

ORIGINAL ISSUE DISCOUNT. Original issue discount generally must be
reported as gross income as it accrues under a constant interest method, in
advance of the cash attributable to such income. Unless indicated otherwise
in the applicable Prospectus Supplement, no prepayment assumption will be
assumed for purposes of such accrual. However, Code Section 1272 provides
for a reduction in the amount of original issue discount includible in the
income of an obligation holder that acquires the obligation after its initial
issuance at a price greater than the sum of the original issue price and the
previously accrued original issue discount, less prior payments of principal.
Accordingly, if such Mortgage Loans acquired by a Standard Certificateholder
are purchased at a price equal to the then unpaid principal amount of such
Mortgage Loans, no original issue discount attributable to the difference
between the issue price and the original principal amount of such Mortgage
Loans (I.E., points) will be includible by such holder.

MARKET DISCOUNT. Market discount on the Mortgage Loans will be
determined and will be reported as ordinary income generally in the manner
described above under "Federal Income Tax Consequences for REMIC
Certificates--Taxation of Regular Certificates--Market Discount," except that
the ratable accrual methods described therein will not apply. Rather, the
holder will accrue market discount pro rata over the life of the Mortgage
Loans, unless the constant yield method is elected. Unless indicated
otherwise in the applicable Prospectus Supplement, no prepayment assumption
will be assumed for purposes of such accrual.

DEFERRED INTEREST. Any Deferred Interest that accrues with respect
to a Standard Certificate will constitute income to the holder of such
Standard Certificate prior to the time distributions of cash with respect to
such Deferred Interest are made under the OID Regulations. The Depositor
will treat all interest on a Standard Certificate as to which there may be
Deferred Interest as includible in the stated redemption price at maturity of
the Mortgage Loans.

RECHARACTERIZATION OF SERVICING FEES

If the Servicing Fee paid to the Servicer were deemed to exceed
reasonable servicing compensation, the amount of such excess would represent
neither income nor a deduction to Certificateholders. In this regard, there
are no authoritative guidelines for federal income tax purposes as to either
the maximum amount of servicing compensation that may be considered
reasonable in the context of this or similar transactions or whether, in the
case of the Mortgage Loans, the reasonableness of servicing compensation
should be determined
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on a weighted average or loan-by-loan basis. If a loan-by-loan basis is
appropriate, the likelihood that such amount would exceed reasonable
servicing compensation as to some of the Mortgage Loans would be increased.

Internal Revenue Service guidance indicates that a servicing fee in
excess of reasonable compensation ("excess servicing") will cause the
Mortgage Loans to be treated under the "stripped bond" rules. Such guidance
provides safe harbors for servicing deemed to be reasonable and requires
taxpayers to demonstrate that the value of servicing fees in excess of such
amounts is not greater than the value of the services provided.

Accordingly, if the Internal Revenue Service's approach is upheld,
a Servicer who receives a servicing fee in excess of such amounts would be
viewed as retaining an ownership interest in a portion of the interest
payments on the Mortgage Loans. Under the rules of Code Section 1286, the
separation of ownership of the right to receive some or all of the interest
payments on an obligation from the right to receive some or all of the
principal payments on the obligation would result in treatment of such
Mortgage Loans as "stripped coupons" and "stripped bonds." Subject to the DE
MINIMIS rule discussed below under "--Stripped Certificates," each stripped
bond or stripped coupon could be considered for this purpose as a
non-interest bearing obligation issued on the date of issue of the Standard
Certificates, and the original issue discount rules of the Code would apply
to the holder thereof. While Standard Certificateholders would still be
treated as owners of beneficial interests in a grantor trust for federal
income tax purposes, the corpus of such trust could be viewed as excluding
the portion of the Mortgage Loans the ownership of which is attributed to the
Servicer, or as including such portion as a second class of equitable
interest. Applicable Treasury regulations treat such an arrangement as a
fixed investment trust, since the multiple classes of trust interests should
be treated as merely facilitating direct investments in the trust assets and
the existence of multiple classes of ownership interests is incidental to
that purpose. In general, such a recharacterization should not have any
significant effect upon the timing of amount of income reported by a Standard
Certificateholder, except that the income reported by a cash method holder
may be slightly accelerated. See "Stripped Certificates" below for a further
description of the federal income tax treatment of stripped bonds and
stripped coupons.

SALE OR EXCHANGE OF STANDARD CERTIFICATES

Upon sale or exchange of a Standard Certificate, a Standard
Certificateholder will recognize gain or loss equal to the difference between
the amount realized on the sale and its aggregate adjusted basis in the
Mortgage Loans and other assets represented by the Standard Certificate. In
general, the aggregate adjusted basis will equal the Standard
Certificateholder's cost of the Standard Certificate, increased by the amount
of any income previously reported with respect to the Standard Certificate
and decreased by the amount of any losses previously reported with respect to
the Standard Certificate and the amount of any distributions received
thereon. Except as provided above with respect to market discount on any
Mortgage Loans, and except for certain financial institutions subject to the
provisions of Code Section 582(c), any such gain or loss would be capital
gain or loss if the Standard Certificate was held as a capital asset.
However, gain on the sale of a Standard Certificate will be treated as
ordinary income (i) if a Standard Certificate is held as part of a
"conversion transaction" as defined in Code Section 1258(c), up to the amount
of interest that would have accrued on the Standard Certificateholder's net
investment in the conversion transaction at 120% of the appropriate
applicable Federal rate in effect at the time the taxpayer entered into the
transaction minus any amount previously treated as ordinary income with
respect to any prior disposition of property that was held as a part of such
transaction or (ii) is in the case of a non-corporate taxpayer, to the extent
such taxpayer has made an election under Code Section 163(d)(4) to have net
capital gains tax as investment income at ordinary income rates. Pursuant to
the Revenue Reconciliation Act of 1993, capital gains of certain
non-corporate taxpayers are subject to a lower maximum tax rate than ordinary
income of such taxpayers. The maximum tax rate for corporations is the same
with respect to both ordinary income and capital gains.

STRIPPED CERTIFICATES

GENERAL

Pursuant to Code Section 1286, the separation of ownership of the
right to receive some or all of the principal payments on an obligation from
ownership of the right to receive some or all of the interest payments
results in the creation of "stripped bonds" with respect to principal
payments and "stripped coupons" with respect

102

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to interest payments. For purposes of this discussion, Certificates that are
subject to those rules will be referred to as "Stripped Certificates." The
Certificates will be subject to those rules if (i) the Depositor or any of
its affiliates retains (for its own account or for purposes of resale), in
the form of Fixed Retained Yield or otherwise, an ownership interest in a
portion of the payments on the Mortgage Loans, (ii) the Depositor or any of
its affiliates is treated as having an ownership interest in the Mortgage
Loans to the extent it is paid (or retains) servicing compensation in an
amount greater than arm's length consideration for servicing the Mortgage
Loans (see "Standard Certificates--Recharacterization of Servicing Fees"
above), and (iii) Certificates are issued in two or more Classes or
Subclasses representing the right to non-pro rata percentages of the interest
and principal payments on the Mortgage Loans.

In general, a holder of a Stripped Certificate (a "Stripped
Certificateholder") will be considered to own "stripped bonds" with respect
to its pro rata share of all or a portion of the interest payments on each
Mortgage Loan, including the Stripped Certificate's allocable share of the
servicing fees paid to the Servicer, to the extent that such fees represent
reasonable compensation for services rendered. See the discussion above
under "Standard Certificates--Recharacterization of Servicing Fees." Although
not free from doubt, for purposes of reporting to Stripped
Certificateholders, the servicing fees will be allocated to the Stripped
Certificates in proportion to the respective entitlements to distributions of
each Class (or Subclass) of Stripped Certificates for the related period or
periods. The holder of a Stripped Certificate generally will be entitled to
a deduction each year in respect of the servicing fees, as described above
under "Standard Certificates--General," subject to the limitation described
therein.

Code Section 1286 generally treats a stripped bond or a stripped
coupon as an obligation issued at an original issue discount on the date that
such stripped interest is purchased. Although the treatment of Stripped
Certificates for federal income tax purposes is not clear in certain respects
at this time, particularly where such Stripped Certificates are issued with
respect to a Mortgage Pool containing variable-rate Mortgage Loans, the
Depositor has been advised by counsel that (i) the Trust Fund will be treated
as a grantor trust under subpart E, Part I of subchapter J of the Code and
not as an association taxable as a corporation or a "taxable mortgage pool"
within the meaning of Code Section 7701(i), and (ii) each Stripped
Certificate should be treated as a single installment obligation for purposes
of calculating original issue discount and gain or loss on disposition. This
treatment is based on the interrelationship of Code Section 1286, Code
Sections 1272 through 1275, and the OID Regulations. Although it is possible
that computations with respect to Stripped Certificates could be made in one
of the ways described below under "Taxation of Stripped Certificates --
Possible Alternative Characterizations," the OID Regulations state, in
general, that two or more debt instruments issued by a single issuer to a
single investor in a single transaction should be treated as a single debt
instrument for original issue discount purposes. Accordingly, all payments
on any Stripped Certificates should be aggregated and treated as though they
were made on a single debt instrument. The Pooling and Servicing Agreement
requires that the Trustee make and report all computations described below
using this aggregate approach, unless substantial legal authority requires
otherwise.

Furthermore, Treasury regulations issued December 28, 1992 provide
for treatment of a Stripped Certificate as a single debt instrument issued on
the date it is purchased for purposes of calculating any original issue
discount. In addition, under these regulations, a stripped Certificate that
represents a right to payments of both interest and principal may be viewed
either as issued with original issue discount or market discount (as
described below), at a DE MINIMIS original issue discount, or, presumably, at
a premium. This treatment suggests that the interest component of such a
Stripped Certificate would be treated as qualified stated interest under the
OID Regulations. Further, these final regulations provide that the purchaser
of such a Stripped Certificate will be required to account for any discount
as market discount rather than original issue discount if either (i) the
initial discount with respect to the Stripped Certificates was treated as
zero under the DE MINIMIS rule, or (ii) no more than 100 basis points in
excess of reasonable servicing is stripped off the related Mortgage Loans.
Any such market discount would be reportable as described above under
"Federal Income Tax Consequences for REMIC Certificates--Taxation of Regular
Certificates -- Market Discount," without regard to the DE MINIMIS rule
therein, assuming that a prepayment assumption is employed in such
computation.
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TAXATION OF STRIPPED CERTIFICATES

ORIGINAL ISSUE DISCOUNT. Except as described above under
"General," each Stripped Certificate will be considered to have been issued
at an original issue discount for federal income tax purposes. Original
issue discount with respect to a Stripped Certificate must be included in
ordinary income as it accrues, in accordance with a constant interest method
that takes into account the compounding of interest, which may be prior to
the receipt of the cash attributable to such income. Based in part on the
OID Regulations and the amendments to the original issue discount sections of
the Code made by the 1986 Act, the amount of original issue discount required
to be included in the income of a holder of a Stripped Certificate in any
taxable year likely will be computed generally as described above under
"Federal Income Tax Consequences for REMIC Certificates--Original Issue
Discount" and "--Variable Rate Regular Certificates." However, with the
apparent exception of a Stripped Certificate issued with DE MINIMIS original
issue discount, as described above under "General," the issue price of a
Stripped Certificate will be the purchase price paid by each holder thereof,
and the stated redemption price at maturity will include the aggregate amount
of the payments to be made on the Stripped Certificate to such Stripped
Certificateholder, presumably under the Prepayment Assumption.

If the Mortgage Loans prepay at a rate either faster or slower than
that under the Prepayment Assumption, a Stripped Certificateholder's
recognition of original issue discount will be either accelerated or
decelerated and the amount of such original issue discount will be either
increased or decreased depending on the relative interests in principal and
interest on each Mortgage Loan represented by such Stripped
Certificateholder's Stripped Certificate. While the matter is not free from
doubt, the holder of a Stripped Certificate should be entitled in the year
that it becomes Certain (assuming no further prepayments) that the holder
will not recover a portion of its adjusted basis in such Stripped Certificate
to recognize a loss (which may be a capital loss) equal to such portion of
unrecovered basis.

SALE OR EXCHANGE OF STRIPPED CERTIFICATES. Sale or exchange of a
Stripped Certificate prior to its maturity will result in gain or loss equal
to the difference, if any, between the amount received and the Stripped
Certificateholder's adjusted basis in such Stripped Certificate, as described
above under "Federal Income Tax Consequences for REMIC Certificates --
Taxation of Regular Certificates--Sale or Exchange of Regular Certificates."
To the extent that a subsequent purchaser's purchase price is exceeded by the
remaining payments on the Stripped Certificates, such subsequent purchaser
will be required for federal income tax purposes to accrue and report such
excess as if it were original issue discount in the manner described above.
It is not clear for this purpose whether the assumed prepayment rate that is
to be used in the case of a Stripped Certificateholder other than an original
Stripped Certificateholder should be the Prepayment Assumption or a new rate
based on the circumstances at the date of subsequent purchase.

PURCHASE OF MORE THAN ONE CLASS OF STRIPPED CERTIFICATES. When an
investor purchases more than one Class of Stripped Certificates, it is
currently unclear whether for federal income tax purposes such Classes of
Stripped Certificates should be treated separately or aggregated for purposes
of the rules described above.

POSSIBLE ALTERNATIVE CHARACTERIZATIONS. The characterizations of
the Stripped Certificates discussed above are not the only possible
interpretations of the applicable Code provisions. For example, the Stripped
Certificateholder may be treated as the owner of (i) one installment
obligation consisting of such Stripped Certificate's pro rata share of the
payments attributable to principal on each Mortgage Loan and a second
installment obligation consisting of such Stripped Certificate's pro rata
share of the payments attributable to interest on each Mortgage Loan, (ii) as
many stripped bonds or stripped coupons as there are scheduled payments of
principal and/or interest on each Mortgage Loan, or (iii) a separate
installment obligation for each Mortgage Loan, representing the Stripped
Certificate's pro rata share of payments of principal and/or interest to be
made with respect thereto. Alternatively, the holder of one or more Classes
of Stripped Certificates may be treated as the owner of a pro rata fractional
undivided interest in each Mortgage Loan to the extent that such Stripped
Certificate, or Classes of Stripped Certificates in the aggregate, represent
the same pro rata portion of principal and interest on each such Mortgage
Loan, and a stripped bond or stripped coupon (as the case may be), treated as
an installment obligation or contingent payment obligation, as to the
remainder. Final regulations issued on December 28, 1992 regarding original
issue discount on stripped obligations make the foregoing interpretations
less likely to be applicable. The preamble to those regulations states that
they are premised on the assumption that an aggregation approach is

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appropriate for determining whether original issue discount on a stripped
bond or stripped coupon is DE MINIMIS, and solicits comments on appropriate
rules for aggregating stripped bonds and stripped coupons under Code Section
1286.

REPORTING REQUIREMENTS AND BACKUP WITHHOLDING

The Trustee will furnish, within a reasonable time after the end of
each calendar year, to each Standard Certificateholder or Stripped
Certificateholder at any time during such year, such information (prepared on
the basis described above) as the Trustee deems to be necessary or desirable
to enable such Certificateholders to prepare their federal income tax
returns. Such information will include the amount of original issue discount
accrued on Certificates held by persons other than Certificateholders
exempted from the reporting requirements. The amount required to be reported
by the Trustee may not be equal to the proper amount of original issue
discount required to be reported as taxable income by a Certificateholder,
other than an original Certificateholder that purchased at the issue price.
In particular, in the case of Stripped Certificates, unless provided
otherwise in the applicable Prospectus Supplement, such reporting will be
based upon a representative initial offering price of each Class of Stripped
Certificates. The Trustee will also file such original issue discount
information with the Internal Revenue Service. If a Certificateholder fails
to supply an accurate taxpayer identification number or if the Secretary of
the Treasury determines that a Certificateholder has not reported all
interest and dividend income required to be shown on his federal income tax
return, 31% backup withholding may be required in respect of any payments, as
described above under "Federal Income Tax Consequences for REMIC Certificates
- --Backup Withholding."

TAXATION OF CERTAIN FOREIGN INVESTORS

To the extent that a Standard Certificate or Stripped Certificate
evidences ownership in Mortgage Loans that are issued on or before July 18,
1984, interest or original issue discount paid by the person required to
withhold tax under Code Section 1441 or 1442 to nonresident aliens, foreign
corporations, or other non-U.S. persons ("foreign persons") generally will be
subject to 30% United States withholding tax, or such lower rate as may be
provided for interest by an applicable tax treaty. Accrued original issue
discount or market discount recognized by the Standard Certificateholder or
Stripped Certificateholder on the sale or exchange of such a Certificate also
will be subject to federal income tax at the same rate.

Treasury Regulations provide that interest or original issue
discount paid by the Trustee or other withholding agent to a foreign person
evidencing ownership interest in Mortgage Loans issued after July 18, 1984
will be "portfolio interest" and will be treated in the manner, and such
persons will be subject to the same certification requirements, described
above under "Federal Income Tax Consequences for REMIC Certificates--Taxation
of Certain Foreign Investors--Regular Certificates."

NOTES

GENERAL

With respect to each Series of Notes, the Depositor's Counsel will
deliver its opinion to the Depositor that (unless otherwise limited in the
applicable Prospectus Supplement) such securities will be classified as debt
secured by the related Mortgage Loans. Consequently, Notes will not be
treated as ownership interests in the Mortgage Loans or the Trust Fund.
Holders will be required to report income received with respect to Notes in
accordance with their normal method of accounting. For additional tax
consequences relating to Notes purchased at a discount or with premium, see
"Non-REMIC Certificates -- Premium and Discount."

SPECIAL TAX ATTRIBUTES

As described above, Non-REMIC Certificates will possess certain
special tax attributes by virtue of their being ownership interests in the
underlying Mortgage Loans. Similarly, REMIC Certificates will possess
similar attributes by virtue of the REMIC provisions of the Code. In
general, Notes will not possess such special tax attributes. Investors to
whom such attributes are important should consult their own tax advisors
regarding investment in Notes.

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SALE OR EXCHANGE

If a holder of a Note sells or exchanges such security, the holder
will recognize gain or loss equal to the difference, in 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 "Non-REMIC Certificates --
Premium and Discount -- Market Discount") except for certain financial
institutions subject to section 582(c) of the Code, any gain or loss on the
sale or exchange of a Note 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.

ERISA CONSIDERATIONS

The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and Section 4975 of the Code impose certain requirements on those
employee benefit plans to which they apply ("Plans") and on those persons who
are fiduciaries with respect to such Plans. The following is a general
discussion of such requirements, and certain applicable exceptions to and
administrative exemptions from such requirements.

Before purchasing any Certificates, a Plan fiduciary should
determine whether there exists any prohibition to such purchase under the
requirements of ERISA, whether prohibited transaction exemptions such as PTE
83-1 or any individual administrative exemption (as described below) applies,
including whether the appropriate conditions set forth therein would be met,
or whether any statutory prohibited transaction exemption is applicable, and
further should consult the applicable Prospectus Supplement relating to such
Series of Certificates.

CERTAIN REQUIREMENTS UNDER ERISA

GENERAL

In accordance with ERISA's general fiduciary standards, before
investing in a Certificate a Plan fiduciary should determine whether to do so
is permitted under the governing Plan instruments and is appropriate for the
Plan in view of its overall investment policy and the composition and
diversification of its portfolio. A Plan fiduciary should especially
consider the ERISA requirement of investment prudence and the sensitivity of
the return on the Certificates to the rate of principal repayments (including
prepayments) on the Mortgage Loans or Contracts, as discussed in the related
Prospectus Supplement and in "Prepayment and Yield Considerations" herein.

PARTIES IN INTEREST/DISQUALIFIED PERSONS. Other provisions of
ERISA (and corresponding provisions of the Code) prohibit certain
transactions involving the assets of a Plan and persons who have certain
specified relationships to the Plan (so-called "parties in interest" within
the meaning of ERISA or "disqualified persons" within the meaning of the
Code). The Depositor, the Servicer (if any) or the Trustee or certain
affiliates thereof might be considered or might become "parties in interest"
or "disqualified persons" with respect to a Plan. If so, the acquisition or
holding of Certificates by or on behalf of such Plan could be considered to
give rise to a "prohibited transaction" within the meaning of ERISA and the
Code unless an administrative exemption described below or some other
exemption is available.

Special caution should be exercised before the assets of a Plan are
used to purchase a Certificate if, with respect to such assets, the
Depositor, the Servicer (if any) or the Trustee or an affiliate thereof
either: (a) has investment discretion with respect to the investment of such
assets of such Plan; or (b) has authority or responsibility to give, or
regularly gives investment advice with respect to such assets for a fee and
pursuant to an agreement or understanding that such advice will serve as a
primary basis for investment decisions with respect to such assets and that
such advice will be based on the particular investment needs of the Plan.

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DELEGATION OF FIDUCIARY DUTY

Further, if the assets included in a Trust Fund were deemed to
constitute Plan assets, it is possible that a Plan's investment in the
Certificates might be deemed to constitute a delegation, under ERISA, of the
duty to manage Plan assets by the fiduciary deciding to invest in the
Certificates, and certain transactions involved in the operation of the Trust
Fund might be deemed to constitute prohibited transactions under ERISA and
the Code.

The U.S. Department of Labor (the "Department") has published final
regulations (the "Regulations") concerning whether or not a Plan's assets
would be deemed to include an interest in the underlying assets of an entity
(such as a Trust Fund) for purposes of the reporting and disclosure and
general fiduciary responsibility provisions of ERISA, as well as for the
prohibited transaction provisions of ERISA and the Code, if the Plan acquires
an "equity interest" (such as a Certificate) in such entity.

Certain exceptions are provided in the Regulations whereby an
investing Plan's assets would be deemed merely to include its interest in the
Certificates instead of being deemed to include an interest in the assets of
a Trust Fund. However, it cannot be predicted in advance nor can there be any
continuing assurance whether such exceptions may be met. For example, one of
the exceptions in the Regulations states that the underlying assets of an
entity will not be considered "plan assets" if, immediately after the most
recent acquisition of any equity interest in the entity, whether or not from
the issuer or an underwriter, less than 25% of the value of each class of
equity interest is held by "benefit plan investors," which are defined as
Plans, individual retirement accounts, and employee benefit plans not subject
to ERISA (for example, governmental plans), but this exception is tested
immediately after each acquisition of an equity interest in the entity
whether upon initial issuance or in the secondary market.

ADMINISTRATIVE EXEMPTIONS

INDIVIDUAL ADMINISTRATIVE EXEMPTIONS. Several underwriters of
mortgage-backed securities have applied for and obtained ERISA prohibited
transaction exemptions (each, an "Individual Exemption") which are in some
respects broader than Prohibited Transaction Class Exemption 83-1 (described
below). Such exemptions can only apply to mortgage-backed securities which
among other conditions, are sold in an offering with respect to which such
underwriter serves as the sole or a managing underwriter, or as a selling or
placement agent. If such an Individual Exemption might be applicable to a
Series of Certificates, the related Prospectus Supplement will refer to such
possibility. An Individual Exemption does not apply to Plans sponsored by
the Restricted Group (as defined below) or the Trustee.

Some of the conditions that must be satisfied for an Individual
Exemption to apply are the following:

(1) The rights and interests evidenced by Certificates acquired by
the Plan are not subordinated to the rights and interests evidenced by
other Certificates of the Trust Fund;

(2) 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 either Standard & Poor's Corporation
("S&P"), Moody's Investors Service, Inc. ("Moody's"), Duff & Phelps
Rating Co. ("D&P") or Fitch Investors Service, Inc. ("Fitch");

(3) The Trustee is not an affiliate of any of the Depositor, the
underwriter specified in the applicable Prospectus Supplement, the
Servicer (if any), any obligor with respect to Mortgage Loans included
in the Trust Fund constituting more than five percent of the aggregate
unamortized principal balance of the assets in the Trust Fund, or any
affiliate of such parties (the "Restricted Group"); and

(4) The Plan investing in the Certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the
Securities and Exchange Commission under the Securities Act of 1933.

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If the conditions to an Individual Exemption are met, whether or
not a Plan's assets would be deemed to include an ownership interest in the
Mortgage Loans in a Mortgage Pool, the acquisition, holding and resale of the
Certificates by Plans would be exempt from the prohibited transaction
provisions of ERISA and the Code.

Moreover, an Individual Exemption can provide relief from certain
self-dealing/conflict of interest prohibited transactions, only if, among
other requirements, (i) a 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 (ii) 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
served by the same person.

PTE 83-1. Prohibited Transaction Class Exemption 83-1 for Certain
Transactions Involving Mortgage Pool Investment Trusts ("PTE 83-1") permits
certain transactions involving the creation, maintenance and termination of
certain residential mortgage pools and the acquisition and holding of certain
residential mortgage pool pass-through certificates by Plans, whether or not
the Plan's assets would be deemed to include an ownership interest in the
mortgages in the mortgage pool, and whether or not such transactions would
otherwise be prohibited under ERISA.

The term "mortgage pool pass-through certificate" is defined in PTE
83-1 as "a certificate representing a beneficial undivided fractional
interest in a mortgage pool and entitling the holder of such a certificate to
pass-through payment of principal and interest from the pooled mortgage
loans, less any fees retained by the pool sponsor." It appears that, for
purposes of PTE 83-1, the term "mortgage pool pass-through certificate" would
include Certificates issued in a single Class or in multiple classes that
evidence a beneficial undivided fractional interest in a mortgage pool of
one- to four-family residential mortgage loans and entitle the holder thereof
to both a specified percentage of future interest payments (after permitted
deductions) and a specified percentage of future principal payments.

However, it appears that PTE 83-1 does or might not apply to the
purchase and holding of (a) Certificates that evidence the beneficial
ownership only of a specified percentage of future interest payments (after
permitted deductions) on a Trust Fund or only of a specified percentage of
future principal payments on a Trust Fund, (b) Residual Certificates, (c)
Certificates evidencing ownership interests in a Trust Fund which includes
Mortgage Loans secured by multifamily residential properties or shares issued
by cooperative housing corporations, or (d) Certificates which are
subordinated to other classes of Certificates of such Series. Accordingly,
unless exemptive relief other than PTE 83-1 applies, Plans should not
purchase any such Certificates.

PTE 83-1 sets forth certain "general conditions" and "specific
conditions" to its applicability. Section 11 of PTE 83-1 sets forth the
following general conditions to the application of the exemption: (i) the
maintenance of a system of insurance or other protection for the pooled
mortgage loans or the property securing such loans, and for indemnifying
certificateholders against reductions in pass-through payments due to
property damage or defaults in loan payments; (ii) the existence of a pool
trustee who is not an affiliate of the pool sponsor; and (iii) a requirement
that the sum of all payments made to and retained by the pool sponsor, and
all funds inuring to the benefit of the pool sponsor as a result of the
administration of the mortgage pool, must represent not more than adequate
consideration for selling the mortgage loans plus reasonable compensation for
services provided by the pool sponsor to the pool. The system of insurance
or protection referred to in clause (i) above must provide such protection
and indemnification up to an amount not less than the greater of 1% of the
aggregate unpaid principal balance of the pooled mortgages or the unpaid
principal balance of the largest mortgage in the pool. It should be noted
that in promulgating PTE 83-1 (and a predecessor exemption), the Department
did not have under its consideration interests in pools of the exact nature
as some of the Certificates described herein.

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EXEMPT PLANS

Employee benefit plans which are governmental plans (as defined in
Section 3(32) of ERISA), and certain church plans (as defined in Section
3(33) of ERISA) are not subject to ERISA requirements and assets of such
plans may be invested in Senior Certificates without regard to the ERISA
considerations described above, subject to the provisions of other applicable
federal and state law.

UNRELATED BUSINESS TAXABLE INCOME -- RESIDUAL CERTIFICATES

The purchase of a Residual Certificate by such plans, or by most
varieties of ERISA Plans, may give rise to "unrelated business taxable
income" as described in Code Sections 511-515 and 860E. Further, prior to
the purchase of Residual Certificates, a prospective transferee may be
required to provide an affidavit to a transferor that it is not a
"Disqualified Organization" which term includes certain tax-exempt entities
not subject to Code Section 511, including certain governmental plans, as
discussed herein under the caption "Certain Federal Income Tax
Consequences--Federal Income Tax Consequences for REMIC Certificates--Income
Tax Consequences for REMIC Certificates--Taxation of Residual
Certificates--Tax-Related Restrictions on Transfer of Residual Certificates."

DUE TO THE COMPLEXITY OF THESE RULES AND THE PENALTIES IMPOSED UPON
PERSONS INVOLVED IN PROHIBITED TRANSACTIONS, IT IS PARTICULARLY IMPORTANT
THAT POTENTIAL INVESTORS WHO ARE PLAN FIDUCIARIES CAREFULLY CONSIDER THE
CONSEQUENCES UNDER ERISA OF THEIR ACQUISITION AND OWNERSHIP OF CERTIFICATES.

THE SALE OF CERTIFICATES TO A PLAN IS IN NO RESPECT A
REPRESENTATION BY THE DEPOSITOR OR THE APPLICABLE UNDERWRITER THAT THIS
INVESTMENT MEETS ALL RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS
BY PLAN GENERALLY OR ANY PARTICULAR PLAN, OR THAT THIS INVESTMENT IS
APPROPRIATE FOR PLANS GENERALLY OR ANY PARTICULAR PLAN.

LEGAL INVESTMENT

If specified in the related Prospectus Supplement, the Certificates
of one or more classes offered pursuant to this Prospectus will constitute
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984, as amended ("SMMEA"), so long as they are rated in
one of the two highest rating categories by at least one nationally
recognized statistical rating organization. As "mortgage related
securities," such Certificates will constitute legal investments for persons,
trusts, corporations, partnerships, associations, business trusts and
business entities (including, but not limited to, state-chartered savings
banks, commercial banks, savings and loan associations and insurance
companies, as well as trustees and state government employee retirement
systems) created pursuant to or existing under the laws of the United States
or of any state (including the District of Columbia and Puerto Rico) whose
authorized investments are subject to state regulation to the same extent
that, under applicable law, obligations issued by or guaranteed as to
principal and interest by the United States or any agency or instrumentality
thereof constitute legal investments for such entities. Pursuant to SMMEA, a
number of states enacted legislation, on or before the October 3, 1991 cutoff
for such enactments, limiting to varying extents the ability of certain
entities (in particular, insurance companies) to invest in "mortgage related
securities," in most cases by requiring the affected investors to rely solely
upon existing state law, and not SMMEA. Accordingly, the investors affected
by such legislation will be authorized to invest in the Certificates only to
the extent provided in such legislation.

SMMEA also amended the legal investment authority of federally
chartered depository institutions as follows: federal savings and loan
associations and federal savings banks may invest in, sell or otherwise deal
with mortgage related securities without limitation as to the percentage of
their assets represented thereby, federal credit unions may invest in
mortgage related securities, and national banks may purchase mortgage related
securities for their own account without regard to the limitations generally
applicable to investment securities set forth in 12 U.S.C. Section 24
(Seventh), subject in each case to such regulations as the applicable federal
regulatory authority may prescribe. In this connection, federal credit
unions should review National Credit Union Administration (the "NCUA") Letter
to Credit Unions No. 96, as modified by Letter No. 108, which includes
guidelines to assist federal credit unions in making investment decisions for
mortgage related securities. The NCUA has adopted rules,

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effective December 2, 1991, which prohibit federal credit unions from
investing in certain mortgage related securities (including securities such
as certain series, Classes or Subclasses of Certificates), except under
limited circumstances.

All depository institutions considering an investment in the
Certificates should review the "Supervisory Policy Statement on Securities
Activities" dated January 28, 1992 (the "Policy Statement") of the Federal
Financial Institutions Examination Council. The Policy Statement, which has
been adopted by the Board of Governors of the Federal Reserve System, the
Federal Deposit Insurance Corporation, the Comptroller of the Currency and
the Office of Thrift Supervision, effective February 10, 1992, and by the
NCUA (with certain modifications), effective June 26, 1992, prohibits
depository institutions from investing in certain "high-risk" mortgage
securities (including securities such as certain series, Classes or
Subclasses of Certificates), except under limited circumstances, and sets
forth certain investment practices deemed to be unsuitable for regulated
institutions.

Institutions whose investment activities are subject to regulation
by federal or state authorities should review rules, policies and guidelines
adopted from time to time by such authorities before purchasing any
Certificates, as certain series, Classes or Subclasses may be deemed
unsuitable investments, or may otherwise be restricted, under such rules,
policies or guidelines (in certain instances irrespective of SMMEA).

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

OTHER CLASSES OF CERTIFICATES OFFERED PURSUANT TO THIS PROSPECTUS
WILL NOT CONSTITUTE "MORTGAGE RELATED SECURITIES" UNDER SMMEA BECAUSE THEY
WILL NOT REPRESENT BENEFICIAL OWNERSHIP INTERESTS IN QUALIFYING MORTGAGE
LOANS UNDER SMMEA. THE APPROPRIATE CHARACTERIZATION OF THOSE CERTIFICATES
UNDER VARIOUS LEGAL INVESTMENT RESTRICTIONS, AND THUS THE ABILITY OF
INVESTORS SUBJECT TO THESE RESTRICTIONS TO PURCHASE THE CERTIFICATES, MAY BE
SUBJECT TO SIGNIFICANT INTERPRETIVE UNCERTAINTIES. ALL INVESTORS WHOSE
INVESTMENT AUTHORITY IS SUBJECT TO LEGAL RESTRICTIONS SHOULD CONSULT THEIR
OWN LEGAL ADVISORS TO DETERMINE WHETHER, AND TO WHAT EXTENT, THE CERTIFICATES
WILL CONSTITUTE LEGAL INVESTMENTS FOR THEM.

NO REPRESENTATION IS MADE AS TO THE PROPER CHARACTERIZATION OF THE
CERTIFICATES FOR LEGAL INVESTMENT OR FINANCIAL INSTITUTION REGULATORY
PURPOSES, OR AS TO THE ABILITY OF PARTICULAR INVESTORS TO PURCHASE
CERTIFICATES UNDER APPLICABLE LEGAL INVESTMENT RESTRICTIONS. THE
UNCERTAINTIES DESCRIBED ABOVE MAY (AND ANY UNFAVORABLE FUTURE DETERMINATIONS
CONCERNING LEGAL INVESTMENT OR FINANCIAL INSTITUTION REGULATORY
CHARACTERISTICS OF THE CERTIFICATES ADVERSELY AFFECT THE LIQUIDITY OF THE
NON-SMMEA CERTIFICATES.

INVESTORS SHOULD CONSULT WITH THEIR OWN LEGAL ADVISORS IN
DETERMINING WHETHER AND TO WHAT EXTENT THE CERTIFICATES CONSTITUTE LEGAL
INVESTMENTS FOR SUCH INVESTORS.

PLAN OF DISTRIBUTION

The Depositor may sell the Certificates offered hereby in Series
either directly or through underwriters. The related Prospectus Supplement
or Prospectus Supplements for each Series will describe the terms of the
offering for that Series and will state the public offering or purchase price
of each Class of Certificates of such Series, or the method by which such
price is to be determined, and the net proceeds to the Depositor from such
sale.

If the sale of any Certificates is made pursuant to an underwriting
agreement pursuant to which one or more underwriters agree to act in such
capacity, such Certificates will be acquired by such underwriters for their
own account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices to be determined at the time of sale or at the time

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of commitment therefor. Firm commitment underwriting and public reoffering
by underwriters may be done through underwriting syndicates or through one or
more firms acting alone. The specific managing underwriter or underwriters,
if any, with respect to the offer and sale of a particular Series of
Certificates will be set forth on the cover of the Prospectus Supplement
related to such Series and the members of the underwriting syndicate, if any,
will be named in such Prospectus Supplement. The Prospectus Supplement will
describe any discounts and commissions to be allowed or paid by the Depositor
to the underwriters, any other items constituting underwriting compensation
and any discounts and commissions to be allowed or paid to the dealers. The
obligations of the underwriters will be subject to certain conditions
precedent. Unless otherwise provided in the related Prospectus Supplement,
the underwriters with respect to a sale of any Class of Certificates will be
obligated to purchase all such Certificates if any are purchased. Pursuant
to each such underwriting agreement, the Depositor will indemnity the related
underwriters against certain civil liabilities, including liabilities under
the Securities Act.

If any Certificates are offered other than through underwriters
pursuant to such underwriting agreements, the related Prospectus Supplement
or Prospectus Supplements will contain information regarding the terms of
such offering and any agreements to be entered into in connection with such
offering.

Purchasers of Certificates, including dealers, may, depending on
the facts and circumstances of such purchases, be deemed to be "underwriters"
within the meaning of the Securities Act of 1933 in connection with reoffers
and sales by them of Certificates. Certificateholders should consult with
their legal advisors in this regard prior to any such reoffer and sale.

If specified in the Prospectus Supplement relating to a Series of
Certificates, the Depositor, any affiliate thereof or any other person or
persons specified therein may purchase some or all of one or more Classes of
Certificates of such Series from the underwriter or underwriters or such
other person or persons specified in such Prospectus Supplement. Such
purchaser may thereafter from time to time offer and sell, pursuant to this
Prospectus and the related Prospectus Supplement, some or all of such
Certificates so purchased, directly, through one or more underwriters to be
designated at the time of the offering of such Certificates, through dealers
acting as agent and/or principal as in such other manner as may be specified
in the related Prospectus Supplement. Such offering may be restricted in the
manner specified in such Prospectus Supplement. Such transactions may be
effected at market prices prevailing at the time of sale, at negotiated
prices or at fixed prices. Any underwriters and dealers participating in
such purchaser's offering of such Certificates may receive compensation in
the form of underwriting discounts or commissions from such purchaser and
such dealers may receive commissions from the investors purchasing such
Certificates for whom they may act as agent (which discounts or commissions
will not exceed those customary in those types of transactions involved).
Any dealer that participates in the distribution of such Certificates may be
deemed to be an "underwriter" within the meaning of the Securities Act of
1933, and any commissions and discounts received by such dealer and any
profit on the resale of such Certificates by such dealer might be deemed to
be underwriting discounts and commissions under the Securities Act of 1933.

LEGAL MATTERS

Certain legal matters and certain tax matters will be passed upon
for the Depositor by Dewey Ballantine, New York, New York and/or such other
counsel as will be named on the related Prospectus Supplement.

RATING

At the date of issuance of each Series of Certificates, the
Certificates offered hereby will be rated in one of the four highest
categories by at least one Rating Agency. See "Ratings" in the related
Prospectus Supplement. A securities rating is not a recommendation to buy,
sell or hold securities and may be subject to revision or withdrawal at any
time by the assigning rating agency. Each securities rating should be
evaluated independently of any other rating.

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ADDITIONAL INFORMATION

Copies of the Registration Statement of which this Prospectus forms
a part and the exhibits thereto are on file at the offices of the Commission
in Washington, D.C. Copies may be obtained at rates prescribed by the
Commission upon request to the Commission, and may be inspected, without
charge, at the offices of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549. See "Available Information."

Copies of FHLMC's most recent Offering Circular for FHLMC
Certificates, FHLMCs Information Statement and the most recent Supplement to
such Information Statement and any quarterly report made available by FHLMC
can be obtained by writing or calling the Investor Inquiry Department at
FHLMC at 8200 Jones Branch Drive, McLean Virginia 22102 (outside Washington,
D.C. metropolitan area, telephone 800-336-FMPC; within Washington, D.C.
metropolitan area, telephone 703-759-8160). The Depositor has not and will
not participate in the preparation of FHLMC's Offering Circulars, Information
Statements or Supplements.

Copies of FNMA's most recent Prospectus for FNMA Certificates and
FNMA's annual report and quarterly financial statements as well as other
financial information are available from the Senior Vice President for
Investor Relations of FNMA, 3900 Wisconsin Avenue, N.W., Washington, D.C.
20016 (202-752-7115). The Depositor has not and will not participate in the
preparation of FNMA's Prospectuses.

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INDEX OF SIGNIFICANT DEFINITIONS

Term Page
- ---- ----

Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75
Advance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60
Advance Reserve. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
APR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
ARM Buy-Outs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Balloon Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Balloon Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Balloon Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Basic Senior Class Distribution. . . . . . . . . . . . . . . . . . . . . . . .37
Buy-Down Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Buy-Down Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Call protection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .81
Certificate Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
Certificate Account Depository . . . . . . . . . . . . . . . . . . . . . . . .57
Certificateholder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Class. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11, 84
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Compound Interest Certificates . . . . . . . . . . . . . . . . . . . . . . . .32
Contract Pool. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Contract Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 22
Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 22
Convertible Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . .18
Cooperative Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Cooperative Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Credit Enhancer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Cut-Off Date Aggregate Principal Balance . . . . . . . . . . . . . . . . .19, 23
D&P. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Debt Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .85
Deferred Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . .14, 20
Definitive Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Deleted Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
Depositor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1, 4, 54
Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Direct or Indirect Participants. . . . . . . . . . . . . . . . . . . . . . . .17
Disqualified Organization. . . . . . . . . . . . . . . . . . . . . . . . . . .97
Distribution Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
DTC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Due Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19, 23
Due Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
Eligible Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
Environmental Condition. . . . . . . . . . . . . . . . . . . . . . . . . . . .81
EPA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .82
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 109
Excess servicing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Extension protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42

113

<PAGE>

FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
FHLBB. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75
FIRREA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .83
Fitch. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Foreign persons. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Funding Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Gain From Acquired Property. . . . . . . . . . . . . . . . . . . . . . . . . .35
GEM Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
GPM Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
GPM Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Grantor Trust Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .85
Indemnification Payments . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Initial Deposit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
Interest Accrual Period. . . . . . . . . . . . . . . . . . . . . . . . . . . .52
Interest Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Liquidated Contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Liquidated Mortgage Loan . . . . . . . . . . . . . . . . . . . . . . . . .15, 35
Liquidation Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . .15, 58
Loan Sale Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Loan-to-Value Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . .19, 22
Moody's. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Mortgage Certificate Pool. . . . . . . . . . . . . . . . . . . . . . . . . . .18
Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Mortgage Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Mortgage Pool. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Mortgage Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Mortgaged Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Mortgages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Mortgagor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Multi-Class Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Net Contract Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Net Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
Net Liquidation Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . .58
Net Mortgage Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Non-REMIC Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . .85
Notional Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
OTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75
Pass-Through Entity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .97
Pass-Through Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60
Payment Deficiencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
Percentage Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Pool . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Pool Distribution Amount . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Pool Value Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
Pooling and Servicing Agreement. . . . . . . . . . . . . . . . . . . . . . . . 4
Prepayment Interest Shortfall. . . . . . . . . . . . . . . . . . . . . . . . .61
PTE 83-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Purchase Obligation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Rating Agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Record Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

114

<PAGE>

Regular Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
Relief Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17, 82
REMIC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .85
REMIC Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .85
REMIC Regulations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .84
Repurchase Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Residual Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
Residual Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .93
Scheduled Principal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Secured-creditor exemption . . . . . . . . . . . . . . . . . . . . . . . . . .81
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Senior Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 30
Senior Class Credit Enhancement. . . . . . . . . . . . . . . . . . . . . . . .37
Senior Class Distributable Amount. . . . . . . . . . . . . . . . . . . . . . .35
Senior Class Principal Portion . . . . . . . . . . . . . . . . . . . . . . . .35
Senior Class Shortfall . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Senior Class Shortfall Accruals. . . . . . . . . . . . . . . . . . . . . . . .37
Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Servicing Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63
Servicing Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Shifting Interest Certificates . . . . . . . . . . . . . . . . . . . . . . . . 2
SMMEA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 112
Special Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
Special Hazard Contract. . . . . . . . . . . . . . . . . . . . . . . . . . . .48
Special Hazard Mortgage Loan . . . . . . . . . . . . . . . . . . . . . . . . .48
Standard Certificateholder . . . . . . . . . . . . . . . . . . . . . . . . . 103
Standard Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Standard Hazard Insurance Policy . . . . . . . . . . . . . . . . . . . . . . .24
Stated Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Stripped Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Sub-Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 57
Sub-Servicing Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
Subclass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Subordinated Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Subordinated Certificates. . . . . . . . . . . . . . . . . . . . . . . . . 2, 30
Subordinated Class Distributable Amount. . . . . . . . . . . . . . . . . . . .35
Subordinated Class Principal Portion . . . . . . . . . . . . . . . . . . . . .36
Subordination Reserve Fund . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Substitute Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
Thrift institutions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .96
Title V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .76, 80
Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
U.S. Person. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .98
UCC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .72, 77
Unaffiliated Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Unpaid Interest Shortfall. . . . . . . . . . . . . . . . . . . . . . . . . . .38
Voting Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67
Window Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75
Window Period Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75
Window Period States . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75

115
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No dealer, salesman or other person has been authorized to give any information
or to make any representations not contained in this Prospectus and, if given or
made, such information or representations must not be relied upon as having been
authorized by the Depositor or by the Underwriter. This Prospectus Supplement
and the Prospectus do not constitute an offer to sell, or a solicitation of an
offer to buy, the securities offered hereby by anyone in any jurisdiction in
which such an offer or solicitation is not authorized or in which the person
making such offer or solicitation is not qualified to do so or to anyone to whom
it is unlawful to make any such offer or solicitation. Neither the delivery of
this Prospectus Supplement and the Prospectus nor any sale made hereunder shall,
under any circumstances, create an implication that information herein or
therein is correct as of any time since the date of this Prospectus Supplement
or the Prospectus.

TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT

Summary Terms of the Certificates. . . . . . . . . . . . . . . . . . . . . . S-3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-16
The Mortgage Pool. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-22
The Originators, the Seller and the Servicer . . . . . . . . . . . . . . . .S-30
Prepayment and Yield Considerations. . . . . . . . . . . . . . . . . . . . .S-35
Description of the Certificates. . . . . . . . . . . . . . . . . . . . . . .S-38
Servicing of the Mortgage Loans. . . . . . . . . . . . . . . . . . . . . . .S-51
The Certificate Insurance Policy . . . . . . . . . . . . . . . . . . . . . .S-55
The Certificate Insurer. . . . . . . . . . . . . . . . . . . . . . . . . . .S-58
Certain Federal Income Tax Considerations. . . . . . . . . . . . . . . . . .S-59
ERISA Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-60
Legal Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-62
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-62
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-63
Ratings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-63
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-63
Index of Significant Prospectus Supplement Definitions . . . . . . . . . . .S-64

PROSPECTUS

Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Available Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Incorporation of Certain Information by Reference. . . . . . . . . . . . . . . 3
Summary of Prospectus. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
The Trust Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Description of the Certificates. . . . . . . . . . . . . . . . . . . . . . . 28
Credit Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Prepayment and Yield Considerations. . . . . . . . . . . . . . . . . . . . . 48
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
The Depositor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Underwriting Guidelines. . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Servicing of the Mortgage Loans and Contracts. . . . . . . . . . . . . . . . 54
The Pooling and Servicing Agreement. . . . . . . . . . . . . . . . . . . . . 65
Certain Legal Aspects of the Mortgage Loans and
Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Certain Federal Income Tax Consequences. . . . . . . . . . . . . . . . . . . 81
ERISA Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Legal Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Rating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Index of Significant Definitions . . . . . . . . . . . . . . . . . . . . . . 113

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ABFS MORTGAGE LOAN TRUST 1996-2

AMERICAN BUSINESS CREDIT, INC.
(SERVICER)

PRUDENTIAL SECURITIES
SECURED FINANCING CORPORATION
(DEPOSITOR)

$38,799,000.00

CLASS A CERTIFICATES

MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 1996-2

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

PROSPECTUS SUPPLEMENT

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

PRUDENTIAL SECURITIES
INCORPORATED

SEPTEMBER 12, 1996

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