RESIDENTIAL ASSET SECURITIES CORP, 424B5, 1996-06-24

RESIDENTIAL ASSET SECURITIES CORP
424B5, 1996-06-24
ASSET-BACKED SECURITIES

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<PAGE>
RULE NO. 424(b)(5)
REGISTRATION NO. 33-56893

PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY 24, 1996)

RESIDENTIAL ASSET SECURITIES CORPORATION
COMPANY

RESIDENTIAL FUNDING CORPORATION
MASTER SERVICER

MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1996-KS3

$143,731,008 ADJUSTABLE RATE CLASS A CERTIFICATES

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

The Series 1996-KS3 Mortgage Pass-Through Certificates (the "Certificates")
will include one class of senior Certificates (the "Class A Certificates") and
one class of subordinate Certificates (the "Class R Certificates" or the
"Residual Certificates"). Only the Class A Certificates are offered hereby.

It is a condition of the issuance of the Class A Certificates that they be
rated "AAA" by Standard & Poor's Ratings Services ("Standard & Poor's") and
"Aaa" by Moody's Investors Service, Inc. ("Moody's").

The Certificates in the aggregate will evidence the entire beneficial
ownership interest in a trust fund (the "Trust Fund") consisting primarily of
a pool of conventional, adjustable rate, one- to four-family first mortgage
loans with terms to maturity of not more than 30 years (the "Mortgage Loans")
to be deposited by Residential Asset Securities Corporation (the "Company")
into the Trust Fund for the benefit of the Certificateholders. The Mortgage
Loans have been originated using underwriting standards that are less
stringent than the underwriting standards applied by other first mortgage loan
purchase programs such as those run by Fannie Mae or Freddie Mac. See "Risk
Factors--Risks Associated with the Mortgage Loans" herein. The characteristics
of the Mortgage Loans are described herein under "Description of the Mortgage
Pool."

The Class A Certificates will be entitled to the benefit of a certificate
guaranty insurance policy (the "Policy") to be issued by AMBAC Indemnity
Corporation (the "Insurer"), pursuant to which it will guarantee certain
payments to the Class A Certificateholders as described herein. See
"Description of the Certificates--Certificate Guaranty Insurance Policy"
herein.
(continued on following page)

[AMBAC'S LOGO APPEARS HERE]

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

PROCEEDS OF THE ASSETS IN THE TRUST FUND AND PROCEEDS FROM THE POLICY (AS
DESCRIBED HEREIN) ARE THE SOLE SOURCE OF PAYMENTS ON THE CLASS A CERTIFICATES.
THE CLASS A CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE
COMPANY, THE MASTER SERVICER, GMAC MORTGAGE CORPORATION OR ANY OF THEIR
AFFILIATES. NEITHER THE CLASS A CERTIFICATES NOR THE MORTGAGE LOANS ARE
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY THE
COMPANY, THE MASTER SERVICER, GMAC MORTGAGE CORPORATION OR ANY OF THEIR
AFFILIATES.

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

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.

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

FOR A DISCUSSION OF SIGNIFICANT MATTERS AFFECTING INVESTMENTS IN THE CLASS A
CERTIFICATES, SEE "RISK FACTORS" COMMENCING ON PAGE S-11 HEREIN AND "RISK
FACTORS" IN THE PROSPECTUS COMMENCING ON PAGE 11.

There is currently no secondary market for the Class A Certificates. Neither
the Company, Residential Funding Securities Corporation (the "Underwriter")
nor any other person or entity intends to create a secondary market in the
Class A Certificates. There can be no assurance that a secondary market for
the Class A Certificates will develop or, if it does develop, that it will
continue. The Class A Certificates will not be listed on any securities
exchange.

The Class A Certificates will be offered by the Underwriter, an affiliate of
the Company, on a best efforts basis, from time to time to the public,
directly or through dealers, in negotiated transactions or otherwise at
varying prices to be determined at the time of sale. The termination date of
the offering is the earlier to occur of June 27, 1997 or the date on which all
of the Class A Certificates have been sold. Proceeds of the offering will not
be placed in any escrow, trust or similar arrangement. The proceeds to the
Company from any sale of the Class A Certificates will be equal to the
purchase price paid by the purchaser thereof, net of any expenses payable by
the Company and any compensation payable to the Underwriter and any dealer.
The Class A Certificates are offered subject to receipt and acceptance by the
Underwriter, to prior sale and to the Underwriter's right to reject any order
in whole or in part and to withdraw, cancel or modify the offer without
notice. It is expected that delivery of the Class A Certificates will be made
only in book-entry form through the Same Day Funds Settlement System of DTC as
discussed herein on or about June 27, 1996, against payment therefor in
immediately available funds.

RESIDENTIAL FUNDING SECURITIES CORPORATION
The date of this Prospectus Supplement is June 20, 1996.
<PAGE>

(Continued from previous page)

The Class A Certificates (the "DTC Registered Certificates") initially will be
represented by certificates registered in the name of Cede & Co., as nominee
of DTC, as further described herein. The interests of beneficial owners of the
DTC Registered Certificates will be represented by book entries on the records
of participating members of DTC. Definitive certificates will be available for
the DTC Registered Certificates only under the limited circumstances described
herein. See "Description of the Certificates--Book-Entry Registration of
Certain of the Class A Certificates" herein.

As described herein, a REMIC election will be made in connection with the
Trust Fund for federal income tax purposes. The Class A Certificates will
represent ownership of "regular interests" in the REMIC and the Residual
Certificates will constitute the sole class of "residual interests" in the
REMIC. See "Certain Federal Income Tax Consequences" herein and in the
Prospectus.

Distributions on the Class A Certificates will be made on the 25th day of each
month or, if such day is not a business day, then on the next business day,
commencing in July 1996 (each, a "Distribution Date"). As described herein,
interest payable with respect to each Distribution Date on the Class A
Certificates will accrue during the related Accrual Period (as defined
herein). Interest will be calculated on the basis of the actual number of days
during such period and on a 360-day year, and will be based on the Certificate
Principal Balance thereof and the then-applicable Pass-Through Rate, as
reduced by certain interest shortfalls. The Pass-Through Rate on the Class A
Certificates with respect to the initial Accrual Period will be 5.85% per
annum. Distributions in respect of principal of the Class A Certificates will
be made as described herein under "Description of the Certificates--Principal
Distributions on the Class A Certificates." The rights of the holders of the
Class R Certificates to receive distributions with respect to the Mortgage
Loans will be subordinate to the rights of the holders of the Class A
Certificates to the extent described herein and in the Prospectus.

THE YIELD TO MATURITY ON THE CLASS A CERTIFICATES WILL DEPEND ON THE RATE AND
TIMING OF PRINCIPAL PAYMENTS (INCLUDING PREPAYMENTS, DEFAULTS AND
LIQUIDATIONS) ON THE MORTGAGE LOANS AND ON ADJUSTMENTS TO THE MORTGAGE RATES
(AS DEFINED HEREIN). THE MORTGAGE LOANS GENERALLY MAY BE PREPAID IN FULL OR IN
PART AT ANY TIME; HOWEVER, PREPAYMENT MAY SUBJECT THE MORTGAGOR TO A
PREPAYMENT CHARGE. THE YIELD TO INVESTORS ON THE CLASS A CERTIFICATES MAY BE
ADVERSELY AFFECTED BY ANY SHORTFALLS IN INTEREST COLLECTED ON THE MORTGAGE
LOANS DUE TO PREPAYMENTS, LIQUIDATIONS OR OTHERWISE. SHORTFALLS IN INTEREST
COLLECTED ON THE MORTGAGE LOANS DUE TO PREPAYMENTS IN FULL WILL BE OFFSET BY
THE MASTER SERVICER TO THE EXTENT DESCRIBED HEREIN. THE YIELD TO INVESTORS ON
THE CLASS A CERTIFICATES MAY ALSO BE ADVERSELY AFFECTED BY THE UNCERTAINTY OF
THE AVAILABILITY OF NET MONTHLY EXCESS CASH FLOW (AS DEFINED HEREIN) TO COVER
ANY UNPAID INTEREST SHORTFALLS (AS DEFINED HEREIN) AND SUCH UNPAID INTEREST
SHORTFALLS MAY REMAIN UNPAID ON THE FINAL DISTRIBUTION DATE OR EARLIER
TERMINATION OF THE TRUST FUND. SEE "SUMMARY--SPECIAL PREPAYMENT
CONSIDERATIONS," "--SPECIAL YIELD CONSIDERATIONS" AND "CERTAIN YIELD AND
PREPAYMENT CONSIDERATIONS" HEREIN AND "YIELD CONSIDERATIONS" IN THE
PROSPECTUS.

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

THE CLASS A CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT CONSTITUTE PART
OF A SEPARATE SERIES OF CERTIFICATES ISSUED BY THE COMPANY AND ARE BEING
OFFERED PURSUANT TO ITS PROSPECTUS DATED MAY 24, 1996, OF WHICH THIS
PROSPECTUS SUPPLEMENT IS A PART AND WHICH ACCOMPANIES 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. SALES OF THE CLASS
A CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.

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

UNTIL SEPTEMBER 18, 1996 AFTER 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 A PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS TO WHICH IT RELATES. THIS DELIVERY REQUIREMENT
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT
AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.

S-2
<PAGE>

SUMMARY

The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere herein and in the Prospectus.
Capitalized terms used herein and not otherwise defined herein have the
meanings assigned in the Prospectus.

Title of Securities......... Mortgage Pass-Through Certificates, Series 1996-
KS3.

Company..................... Residential Asset Securities Corporation, an
affiliate of Residential Funding Corporation. See
"The Company" in the Prospectus.

Master Servicer............. Residential Funding Corporation. See "Pooling and
Servicing Agreement--The Master Servicer" herein
and "Residential Funding Corporation" in the
Prospectus.

Trustee..................... The First National Bank of Chicago, a national
banking association.

Cut-off Date................ June 1, 1996.

Delivery Date............... On or about June 27, 1996.

The Mortgage Pool........... The Mortgage Pool will consist of a pool of
conventional, adjustable rate, fully-amortizing
mortgage loans (the "Mortgage Loans"), with an
aggregate principal balance as of the Cut-off
Date of $143,731,008. The Mortgage Loans are
secured by first liens on fee simple interests in
one- to four-family residential real properties
(each, a "Mortgaged Property") having individual
principal balances at origination of at least
$19,100 but not more than $550,000 with an
average principal balance at origination of
approximately $130,050. The Mortgage Loans have
terms to maturity from the date of origination or
modification of not more than 30 years and a
weighted average remaining term to stated
maturity of approximately 357 months as of the
Cut-off Date. 61.6% of the Mortgage Loans will be
refinanced mortgage loans. All percentages of the
Mortgage Loans described herein are approximate
percentages (except as otherwise indicated) by
aggregate principal balance of the Mortgage Loans
(except as otherwise indicated) as of the Cut-off
Date.

The Mortgage Rate on each Mortgage Loan will
adjust: (a) semi-annually commencing either
approximately (i) six months after origination
with respect to 31.8% of the Mortgage Loans, (ii)
two years after origination with respect to 37.2%
of the Mortgage Loans, or (iii) three years after
origination with respect to 8.2% of the Mortgage
Loans, or (b) annually commencing either
approximately (i) one year after origination with
respect to 13.5% of the Mortgage Loans or (ii)
three years after origination with respect to
9.3% of the Mortgage Loans, in each case, on the
date (the "Adjustment Date") specified in the
related Mortgage Note to a rate equal to the sum
(rounded as described herein) of the related
Index described below and the Note Margin set
forth in the related Mortgage Note, subject

S-3
<PAGE>

to the limitations described herein. The amount
of the monthly payment on each Mortgage Loan will
be adjusted semi-annually or annually, as
applicable, on the first day of the month
following the month in which the Adjustment Date
occurs to the amount necessary to pay interest at
the then applicable Mortgage Rate and, to fully
amortize the outstanding principal balance of the
Mortgage Loan over its remaining term to stated
maturity. The Mortgage Loans will initially bear
interest at Mortgage Rates of at least 6.125% per
annum but no more than 13.450% per annum, with a
weighted average Mortgage Rate of 9.5700% per
annum as of the Cut-off Date. The Mortgage Loans
will have different Adjustment Dates, Note
Margins and limitations on the Mortgage Rate
adjustments, as described herein. None of the
Mortgage Loans provide that, at the option of the
related Mortgagors, the adjustable interest rate
on such Mortgage Loans may be converted to a
fixed interest rate.

For a further description of the Mortgage Loans,
see "Description of the Mortgage Pool" herein.
The Mortgage Loans have been originated using
underwriting standards that are less stringent
than the underwriting standards applied by other
first mortgage loan purchase programs such as
those run by Fannie Mae or by Freddie Mac or the
Company's affiliate, Residential Funding, for the
purpose of collateralizing securities issued by
Residential Funding Mortgage Securities I, Inc.
and Residential Accredit Loans, Inc. See "Risk
Factors--Risks Associated with the Mortgage
Loans" herein.

The Index Applicable to the
Mortgage Loans............. With respect to 41.7% and 35.2% of the Mortgage
Loans the Index will be a per annum rate equal to
the average of interbank offered rates for six-
month U.S. dollar-denominated deposits in the
London market based on quotations of major banks
("Six-Month LIBOR"), as published in The Wall
Street Journal and as most recently available (i)
as of the first business day of the month
immediately preceding the month in which the
Adjustment Date occurs, or (ii) as of the date
forty-five days prior to the Adjustment Date,
respectively. With respect to 0.3% of the
Mortgage Loans the Index will be Six-Month LIBOR,
as published by Fannie Mae and as most recently
available as of the date forty-five days prior to
the Adjustment Date. With respect to 22.8% of the
Mortgage Loans the Index will be a per annum rate
equal to the weekly average yield on U.S.
Treasury securities adjusted to a constant
maturity of one year, reported by the Federal
Reserve Board, as most recently available as of
the date forty-five days prior to the Adjustment
Date. In the event that the related Index
specified in a Mortgage Note is no longer
available, an index reasonably acceptable to the
Trustee that is based on comparable information
will be selected by the Master Servicer. See
"Description of the Mortgage Pool" herein.

The Class A Certificates.... The Class A Certificates will be issued pursuant
to a Pooling and Servicing Agreement, to be dated
as of the Cut-off Date, among the

S-4
<PAGE>

Company, the Master Servicer and the Trustee. The
Class A Certificates will have an initial
principal balance of $143,731,008.

The Class A Certificates are subject to
priorities for payment of interest and principal
as described herein. For a description of the
allocation of interest and principal
distributions to the Class A Certificates see
"Summary--Interest Distributions," and "--
Principal Distributions," "Description of the
Certificates--Interest Distributions," and "--
Principal Distributions on the Class A
Certificates" herein.

Certificate Registration.... The DTC Registered Certificates will be
represented by one or more certificates
registered in the name of Cede & Co., as nominee
of DTC. No Beneficial Owner will be entitled to
receive a Certificate of such class in fully
registered, certificated form (a "Definitive
Certificate"), except under the limited
circumstances described herein. For denomination
amounts and further registration information, see
"Description of the Certificates--General" and
"--Book-Entry Registration of Certain of the
Class A Certificates" herein.

Interest Distributions...... Holders of the Class A Certificates will be
entitled to receive interest distributions based
on the then-applicable Pass-Through Rate, subject
to the limitations set forth below which may
result in Unpaid Interest Shortfalls (as
described below). The Pass-Through Rate on the
Class A Certificates with respect to each Accrual
Period (as defined herein) will be the per annum
rate equal to the lesser of (i) One-Month LIBOR
(see "Description of the Certificates--
Calculation of One-Month LIBOR" herein) plus
0.35%, or, on any Distribution Date when the
aggregate Stated Principal Balance of the
Mortgage Loans is less than 10% of the aggregate
principal balance of the Mortgage Loans as of the
Cut-off Date, One-Month LIBOR plus 0.70% and (ii)
the Maximum Class A Rate (as defined herein under
"Description of the Certificates--Interest
Distributions"). The Pass-Through Rate on the
Class A Certificates with respect to the initial
Accrual Period will be 5.85% per annum. On each
Distribution Date, holders of the Class A
Certificates will be entitled to receive interest
distributions (the "Interest Distribution
Amount") in an amount equal to interest accrued
during the related Accrual Period on the
Certificate Principal Balance thereof at the
then-applicable Pass-Through Rate, subject to
reduction only in the event of shortfalls caused
by the Relief Act and any Prepayment Interest
Shortfalls (as defined herein) to the extent not
covered by the Master Servicer allocated as
described herein; provided that on any
Distribution Date on which such amount exceeds an
amount equal to (i) one-twelfth of the product of
(a) the aggregate Stated Principal Balance of the
Mortgage Loans multiplied by (b) the weighted
average of the Net Mortgage Rates on the Mortgage
Loans as of the first day of the calendar month
in which the Accrual Period begins, minus (ii)
the amount of the premium payable to the Insurer
with respect to the Policy for such

S-5
<PAGE>

Distribution Date, the amount of such difference
(any such amount, an "Unpaid Interest Shortfall")
will not be included in the Interest Distribution
Amount for such Distribution Date and will accrue
interest at the Pass-Through Rate on the Class A
Certificates (as adjusted from time to time) and
will be paid on future Distribution Dates only to
the extent of Net Monthly Excess Cash Flow (as
defined herein) available therefor. Unpaid
Interest Shortfalls will not be covered by the
Policy and may remain unpaid on the final
Distribution Date or earlier termination of the
Trust Fund.

Interest payable with respect to each
Distribution Date on the Class A Certificates
will accrue during the period commencing on the
Distribution Date of the month immediately
preceding the month in which such Distribution
Date occurs (or in the case of the initial
Distribution Date, commencing on the Closing
Date) and ending on the day preceding such
Distribution Date (each such period, an "Accrual
Period"). Interest will be calculated on the
basis of the actual number of days in the related
Accrual Period and on a 360-day year.
Notwithstanding the foregoing, if payments were
not made as required under the Policy, interest
shortfalls may be allocated to the Class A
Certificates, as described herein. See
"Description of the Certificates--Interest
Distributions" herein.

Principal Distributions..... Holders of the Class A Certificates will be
entitled to receive on each Distribution Date, in
the manner set forth herein, to the extent of the
portion of the related Available Distribution
Amount remaining after the Interest Distribution
Amount has been distributed on the Class A
Certificates, a principal distribution in an
amount equal to the Class A Principal
Distribution Amount, as defined herein. 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 Certificate Principal Balance of the
Class A Certificates. See "Description of the
Certificates--Principal Distributions on the
Class A Certificates" herein.

In addition, on each Distribution Date, funds
received as a result of a claim under the Policy
in respect of the principal portion of Realized
Losses allocated to the Class A Certificates will
be distributed by or on behalf of the Trustee to
the holders of the Class A Certificates. See
"Description of the Certificates--Certificate
Guaranty Insurance Policy" herein.

The subordination and cash flow provisions of the
Class R Certificates will 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

S-6
<PAGE>

Certificateholders. See "Prepayment and Yield
Considerations" in the Prospectus.

Credit Enhancement.......... The Credit Enhancement provided for the benefit
of the Class A Certificateholders consists of (a)
the overcollateralization described below and (b)
the Policy (as defined below).

Overcollateralization: The subordination and cash
flow provisions of the Class R Certificates will
result in a limited acceleration of the Class A
Certificates relative to the amortization of the
Mortgage Loans. This acceleration feature will
create overcollateralization which results from
the excess of the aggregate principal balances of
the Mortgage Loans over the aggregate Certificate
Principal Balance 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.

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" herein.

The Certificate Guaranty Insurance Policy: The
Class A Certificates will be entitled to the
benefit of a Policy to be issued by the Insurer,
which, subject to its terms, will protect the
holders of the Class A Certificates against any
interest shortfalls (except for shortfalls in
respect of the Relief Act, any Prepayment
Interest Shortfalls (as defined herein) and
Unpaid Interest Shortfalls) allocated to the
Class A Certificates, and against the principal
portion of any Realized Losses allocated to the
Class A Certificates. See "Description of the
Certificates."

Certificate Guaranty The Insurer will issue the Policy as a means of
Insurance Policy........... providing additional credit enhancement to the
Class A Certificates. Under the Policy, the
Insurer will, subject to the terms of the Policy,
pay the Trustee, for the benefit of the holders
of the Class A Certificates, on each Distribution
Date, as further described herein, an amount that
will cover any interest shortfalls (except for
shortfalls in respect of the Relief Act,
Prepayment Interest Shortfalls and Unpaid
Interest Shortfalls) allocated to the Class A
Certificates plus the principal portion of any
Realized Losses allocated to the Class A
Certificates. A payment by the Insurer under the
Policy is referred to herein as an "Insured
Amount." See "Description of the Certificates--
Certificate Guaranty Insurance Policy" herein.

S-7
<PAGE>

The Master Servicer is required to make advances
Advances.................... in respect of delinquent payments of principal
and interest on the Mortgage Loans, subject to
the limitations described herein. See
"Description of the Certificates--Advances"
herein and in the Prospectus.

Allocation of Losses; Except as otherwise described herein, Realized
Subordination.............. Losses will be allocated first to the Class R
Certificates until the Certificate Principal
Balance thereof has been reduced to zero; second
to the Net Monthly Excess Cash Flow; and third to
the Class A Certificates to the extent described
in "Description of the Certificates--Allocation
of Losses; Subordination" herein. Subject to the
terms of the Policy, all Realized Losses
allocated to the Class A Certificates will be
covered by the Policy. See "Description of the
Certificates-- Certificate Guaranty Insurance
Policy" herein.

Neither the Class A Certificates nor the Mortgage
Loans are insured or guaranteed by any
governmental agency or instrumentality or by the
Company, the Master Servicer, the Trustee, GMAC
Mortgage or any affiliate thereof.

Class R Certificates........ As of the Cut-off Date, the Class R Certificates
will have no initial Certificate Principal
Balance and no Pass-Through Rate. The Class R
Certificates are not being offered hereby.

Optional Termination........ At its option, on any Distribution Date when the
aggregate Stated Principal Balance of the
Mortgage Loans is less than 10% of the aggregate
principal balance of the Mortgage Loans as of the
Cut-off Date, the Master Servicer or the Company
may (i) purchase from the Trust Fund all
remaining Mortgage Loans and other assets
thereof, and thereby effect early retirement of
the Certificates or (ii) purchase in whole, but
not in part, the Certificates. See "Pooling and
Servicing Agreement--Termination" herein and "The
Pooling and Servicing Agreement--Termination;
Retirement of Certificates" in the Prospectus.

Special Prepayment The rate and timing of principal payments on the
Considerations............. Class A Certificates will depend on, among other
things, the rate and timing of principal payments
(including prepayments, defaults, liquidations
and purchases of Mortgage Loans due to a breach
of representation and warranty) on the Mortgage
Loans. As is the case with mortgage-backed
securities generally, the Class A Certificates
are subject to substantial inherent cash flow
uncertainties because the Mortgage Loans may be
prepaid at any time. Generally, when prevailing
interest rates increase, prepayment rates on
mortgage loans tend to decrease, resulting in a
slower return of principal to investors at a time
when reinvestment at such higher prevailing rates
would be desirable. Conversely, when prevailing
interest rates decline, prepayment rates on
mortgage loans tend to increase, resulting in a
faster return of principal to investors at a time
when reinvestment at comparable yields may not be
possible. In addition, a substantial portion of
the Mortgage Loans provide for a prepayment
charge. Typically, the Mortgage Loans with a
prepayment charge provision

S-8
<PAGE>

provide for a prepayment charge for partial
prepayments and full prepayments made within
approximately five years of the origination of
such Mortgage Loan. Such prepayment charges may
reduce the rate of prepayment on the Mortgage
Loans.

See "Description of the Certificates--Principal
Distributions on the Class A Certificates" and
"Certain Yield and Prepayment Considerations"
herein and "Maturity and Prepayment
Considerations" in the Prospectus. For further
information regarding the effect of principal
prepayments on the weighted average life of the
Class A Certificates, see the table entitled
"Percent of Initial Certificate Principal Balance
Outstanding at the Following Percentages of CPR"
herein.

Special Yield The yield to maturity on the Class A Certificates
Considerations............. will depend on, among other things, the rate and
timing of principal payments (including
prepayments, defaults, liquidations and purchases
of Mortgage Loans due to a breach of
representation and warranty) on the Mortgage
Loans and the allocation thereof to reduce the
Certificate Principal Balance of such class. The
yield to investors on the Class A Certificates
will be adversely affected by any allocation of
Prepayment Interest Shortfalls on the Mortgage
Loans, which are expected to result from the
distribution of interest only to the date of
prepayment (rather than a full month's interest)
in connection with prepayments in full, and the
lack of any distribution of interest on the
amount of any partial prepayments. Prepayment
Interest Shortfalls resulting from principal
prepayments in full in any calendar month will
not adversely affect the yield to investors in
the Class A Certificates to the extent such
Prepayment Interest Shortfalls are covered by the
Master Servicer as discussed herein.

In general, if the Class A Certificates are
purchased at a premium and principal
distributions to such class occur at a rate
faster than assumed at the time of purchase, the
investor's actual yield to maturity will be lower
than that anticipated at the time of purchase.
Conversely, if the Class A Certificates are
purchased at a discount and principal
distributions to such class occur at a rate
slower than that assumed at the time of purchase,
the investor's actual yield to maturity will be
lower than anticipated at the time of purchase.
The yield to investors on the Class A
Certificates will be sensitive to fluctuations in
the level of One-Month LIBOR and may be adversely
affected by the application of the Maximum Class
A Rate. The prepayment of Mortgage Loans with
higher Mortgage Rates may result in a lower
Maximum Class A Rate. The yield to investors on
the Class A Certificates may also be adversely
affected by the uncertainty of the availability
of Net Monthly Excess Cash Flow to cover any
Unpaid Interest Shortfalls and such Unpaid
Interest Shortfalls may remain unpaid on the
final Distribution Date or earlier termination of
the Trust Fund.

S-9
<PAGE>

Certain Federal Income Tax
Consequences............... An election will be made to treat the Trust Fund
as a REMIC for federal income tax purposes. Upon
the issuance of the Class A Certificates, Thacher
Proffitt & Wood, counsel to the Company, will
deliver its opinion generally to the effect that,
assuming compliance with all provisions of the
Pooling and Servicing Agreement, for federal
income tax purposes, the Trust Fund will qualify
as a REMIC under Sections 860A through 860G of
the Code.

For federal income tax purposes, the Residual
Certificates will constitute the sole class of
"residual interests" in the REMIC and the Class A
Certificates will represent ownership of "regular
interests" in the REMIC and will generally be
treated as debt instruments of the REMIC.

For further information regarding the federal
income tax consequences of investing in the Class
A Certificates, see "Certain Federal Income Tax
Consequences" herein and in the Prospectus.

Legal Investment............
The Class A Certificates will constitute
"mortgage related securities" for purposes of
SMMEA for so long as they are rated in one of the
two highest rating categories by at least one of
the Rating Agencies. Institutions whose
investment activities are subject to legal
investment laws and regulations, regulatory
capital requirements or review by regulatory
authorities may be subject to restrictions on
investment in the Class A Certificates and should
consult with their legal advisors. See "Legal
Investment" herein and "Legal Investment Matters"
in the Prospectus.

Ratings..................... It is a condition to the issuance of the Class A
Certificates that they be rated "AAA" by Standard
& Poor's and "Aaa" by Moody's. A security rating
is not a recommendation to buy, sell or hold
securities and may be subject to revision or
withdrawal at any time by the assigning rating
organization. A security rating does not address
the frequency of prepayments of Mortgage Loans or
the likelihood of the receipt of any amounts in
respect of Unpaid Interest Shortfalls, or the
corresponding effect on yield to investors. See
"Certain Yield and Prepayment Considerations" and
"Ratings" herein and "Yield Considerations" in
the Prospectus.

S-10
<PAGE>

RISK FACTORS

In addition to the matters described elsewhere in this Prospectus Supplement
and the Prospectus, prospective investors should carefully consider, among
other things, the following factors in connection with the purchase of the
Class A Certificates:

RISKS ASSOCIATED WITH THE MORTGAGE LOANS

The Mortgage Loans have been originated using underwriting standards that
are less stringent than the underwriting standards applied by other first
mortgage loan purchase programs such as those run by Fannie Mae or by Freddie
Mac or by the Company's affiliate, Residential Funding, for the purpose of
collateralizing securities issued by Residential Funding Mortgage Securities
I, Inc. and Residential Accredit Loans, Inc. For example, the Mortgage Loans
may have been made to Mortgagors having imperfect credit histories, ranging
from minor delinquencies to bankruptcies, or Mortgagors with higher ratios of
monthly mortgage payments to income or higher ratios of total monthly credit
payments to income. As a result of the underwriting standards, the Mortgage
Loans are likely to experience rates of delinquency, foreclosure and
bankruptcy that are higher, and that may be substantially higher, than those
experienced by mortgage loans underwritten in a more traditional manner. As of
the Cut-off Date, 1.9% of the Mortgage Loans are one month delinquent in
payment of principal or interest. See "Description of the Mortgage Pool--
Mortgage Pool Characteristics" and "--Underwriting Standards" herein. The
Mortgage Loans with higher loan-to-value ratios (each, a "Loan-to-Value
Ratio") may also present a greater risk of loss. In particular, of the 29.2%
of the Mortgage Loans which are mortgage loans with Loan-to-Value Ratio at
origination in excess of 80%, 96.3% of such Mortgage Loans are not insured by
a Primary Insurance Policy that might otherwise protect against such greater
risk of loss.

No assurance can be given that values of the Mortgaged Properties have
remained or will remain at the levels existing on the dates of origination of
the related Mortgage Loans. If a residential real estate market should
experience an overall decline in property values, the actual rates of
delinquencies, foreclosures and losses could be higher than the rates
otherwise expected by an investor in the Class A Certificates. 34.6% of the
Mortgage Loans are secured by Mortgaged Properties located in the State of
California. If the California residential real estate market should experience
an overall decline in property values after the dates of origination of the
Mortgage Loans, the rates of delinquencies, foreclosures, bankruptcies and
losses on the Mortgage Loans may be expected to increase, and may increase
substantially.

LIMITED OBLIGATIONS

The Certificates will not represent an interest in or obligation of the
Company, the Master Servicer, the Mortgage Collateral Sellers (as defined
herein), GMAC Mortgage or any of their affiliates. The only obligations of the
foregoing entities with respect to the Certificates or any Mortgage Loan will
be the obligations (if any) of the Company, the Mortgage Collateral Sellers
and the Master Servicer pursuant to certain limited representations and
warranties made with respect to the Mortgage Loans and the Master Servicer's
servicing obligations under the Pooling and Servicing Agreement (including the
Master Servicer's limited obligation to make certain Advances). Neither the
Certificates nor the underlying Mortgage Loans will be guaranteed or insured
by any governmental agency or instrumentality, or by the Company, the Master
Servicer, the Mortgage Collateral Sellers, GMAC Mortgage or any of their
affiliates. The Class A Certificates are covered by the Policy, as and to the
extent described herein under the caption "Description of the Certificates--
Certificate Guaranty Insurance Policy" herein. Proceeds of the assets included
in the Trust Fund (including the Mortgage Loans) and the Policy will be the
sole source of payments on the Certificates, and there will be no recourse to
the Company, the Master Servicer, the Mortgage Collateral Sellers, GMAC
Mortgage 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 AND REDUCTION AND SUBSTITUTION OF CREDIT ENHANCEMENT

Credit enhancement will be provided for the Class A Certificates in the form
of the overcollateralization provisions described herein and the Policy. Such
overcollateralization provides limited coverage as to Special

S-11
<PAGE>

Hazard Losses, Fraud Losses and Bankruptcy Losses and provides no coverage as
to Extraordinary Losses. None of the Company, the Master Servicer, the
Mortgage Collateral Sellers, GMAC Mortgage nor any of their affiliates will
have any obligation to replace or supplement such credit enhancement, or to
take any other action to maintain any rating of the Class A Certificates.

PASS-THROUGH RATE RISK

The Mortgage Rate on each Mortgage Loan will adjust: (a) semi-annually
commencing either approximately (i) six months after the date of origination
with respect to 31.8% of the Mortgage Loans, (ii) two years following the date
of origination with respect to 37.2% of the Mortgage Loans or (iii) three
years after the date of origination with respect to 8.2% of the Mortgage
Loans, or (b) annually commencing either approximately (i) one year after
origination with respect to 13.5% of the Mortgage Loans or (ii) three years
after origination with respect to 9.3% of the Mortgage Loans, based upon Six-
Month LIBOR with respect to the Mortgage Loans which adjust semi-annually or
One-Year U.S. Treasury (as defined herein) with respect to the Mortgage Loans
which adjust annually, whereas the Pass-Through Rate on the Class A
Certificates adjusts monthly based upon One-Month LIBOR as described under
"Description of the Certificates--Calculation of One-Month LIBOR" herein,
subject to the Maximum Class A Rate. Consequently, the interest which becomes
due on the Mortgage Loans on the related Due Date may not equal the amount of
interest that would accrue at One-Month LIBOR plus the margin on the Class A
Certificates during the related Accrual Period. In particular, because the
Pass-Through Rate on the Class A Certificates adjusts monthly, while the
interest rates of the Mortgage Loans adjust semi-annually or annually, subject
to the Periodic Cap, in a rising interest rate environment, the Accrued
Certificate Interest (as defined herein) on the Class A Certificates may be
greater than the difference between (i) the amount of interest accrued on the
Mortgage Loans and (ii) the sum of the amount of the premium payable to the
Insurer with respect to the Policy and the Servicing Fee (as defined herein),
possibly resulting in Unpaid Interest Shortfalls to holders of the Class A
Certificates. Any Unpaid Interest Shortfalls are not covered by the Policy and
are payable only to the extent of Net Monthly Excess Cash Flow available
therefor and may remain unpaid on the final Distribution Date or earlier
termination of the Trust Fund. In addition, the related Index and One-Month
LIBOR may respond to different economic and market factors, and there is not
necessarily a correlation between them. Thus, it is possible, for example,
that One-Month LIBOR may rise during periods in which the related Index is
stable or is falling or that, even if both One-Month LIBOR and the related
Index rise during the same period, One-Month LIBOR may rise more rapidly than
the related Index. Finally, the Pass-Through Rate is subject to the Maximum
Class A Rate, which is based on the weighted average of the Maximum Net
Mortgage Rates on the Mortgage Loans, which are fixed for the life of each
Mortgage Loan.

DESCRIPTION OF THE MORTGAGE POOL

GENERAL

The Mortgage Pool will consist of Mortgage Loans with an aggregate principal
balance outstanding as of the Cut-off Date, after deducting payments of
principal due on such date, of $143,731,008. The Mortgage Pool will consist of
conventional, adjustable rate, fully-amortizing, first Mortgage Loans with
terms to maturity of not more than 30 years from the date of origination or
modification. With respect to Mortgage Loans which have been modified,
references herein to the date of origination shall be deemed to be the date of
the most recent modification. All percentages of the Mortgage Loans described
herein are approximate percentages (except as otherwise indicated) by
aggregate principal balance of the Mortgage Loans (except as otherwise
indicated) as of the Cut-off Date.

The Mortgage Loans were purchased by the Company through its affiliate
Residential Funding from mortgage collateral sellers (each a "Mortgage
Collateral Seller") and assigned to the Company by Residential Funding. Such
purchases occurred by (i) direct purchases from Mortgage Collateral Sellers
and (ii) purchases through the AlterNet Mortgage Program. Except for 10.8% and
33.8% of the Mortgage Loans which were purchased from National Mortgage
Corporation and Nomura Asset Capital Corporation, respectively, all of the

S-12
<PAGE>

Mortgage Loans were purchased through the AlterNet Program. 21.5% of the
Mortgage Loans will have been purchased from First Franklin Financial
Corporation. Except as described above, no Mortgage Collateral Seller sold
more than 6.6% of the Mortgage Loans to Residential Funding. See "--The
AlterNet Program" below. For a description of the underwriting criteria
applicable to the Mortgage Loans, see "--Underwriting Standards" below.

The Company and Residential Funding will make certain limited
representations and warranties regarding the Mortgage Loans as of the date of
issuance of the Certificates. The Company and Residential Funding will be
required to repurchase or substitute for any Mortgage Loan as to which a
breach of its representations and warranties with respect to such Mortgage
Loan occurs if such breach materially and adversely affects the interests of
the Certificateholders in any such Mortgage Loan and the Mortgage Loan is not
otherwise repurchased by the related Mortgage Collateral Seller in accordance
with the terms of the Pooling and Servicing Agreement. The Company, as
assignee of Residential Funding, will also assign to the Trustee for the
benefit of the Certificateholders certain of its rights, title and interest in
any agreement relating to the transfer and assignment of the Mortgage Loans to
the Company by Residential Funding, including certain representations and
warranties made by the Mortgage Collateral Sellers. Insofar as any such
agreement relates to the representations and warranties made by the related
Mortgage Collateral Seller in respect of such Mortgage Loan and any remedies
provided thereunder for any breach of such representations and warranties,
such right, title and interest may be enforced by the Master Servicer on
behalf of the Trustee and the Certificateholders. However, neither the Company
nor Residential Funding will be required to repurchase or substitute for any
Mortgage Loan in the event of a breach of its representations and warranties
with respect to such Mortgage Loan if the substance of any such breach also
constitutes fraud in the origination of such affected Mortgage Loan. A limited
amount of losses on Mortgage Loans as to which there was fraud in the
origination of such Mortgage Loans will be covered by the Subordination (as
defined herein) provided by the Class R Certificates as described herein under
"Description of the Certificates--Allocation of Losses; Subordination."
Subject to the terms of the Policy, certain fraud losses will be covered by
the Policy as described herein.

MORTGAGE RATE ADJUSTMENT

Each Mortgage Note contains an interest rate adjustment cap (the "Periodic
Rate Cap") which limits the adjustment of the Mortgage Rate to (i) with
respect to the Mortgage Loans which have their initial Adjustment Date
approximately six months after the date of origination, not more than (a)
1.00% above or below the previous Mortgage Rate with respect to 15.3% of the
Mortgage Loans, (b) 1.00% above the previous Mortgage Rate with respect to
0.4% of the Mortgage Loans, (c) 1.50% above or below the previous Mortgage
Rate with respect to

S-13
<PAGE>

16.0% of the Mortgage Loans, and (d) 1.50% above the previous Mortgage Rate
with respect to 0.1% of the Mortgage Loans; provided, however, in each case
certain of such Mortgage Loans can generally adjust from 1.00% up to 3.00% for
the initial Adjustment Date, (ii) with respect to the Mortgage Loans which
have their initial Adjustment Date approximately two years or three years
after the date of origination and semi-annually thereafter, not more than (a)
1.00% above or below the previous Mortgage Rate with respect to 33.7% of the
Mortgage Loans, (b) 1.00% above the previous Mortgage Rate with respect to
0.4% of the Mortgage Loans, and (c) 1.50% above or below the previous Mortgage
Rate with respect to 11.3% of the Mortgage Loans; provided, however, in each
case certain of such Mortgage Loans can generally adjust from 1.00% up to
3.375% for the initial Adjustment Date, (iii) with respect to the Mortgage
Loans which have their initial Adjustment Date approximately one year after
the date of origination and annually thereafter, not more than 2.00% above or
below the previous Mortgage Rate, and (iv) with respect to the Mortgage Loans
which have their initial Adjustment Date approximately three years after the
date of origination and annually thereafter, not more than 2.00% above or
below the previous Mortgage Rate. The Mortgage Rate on any Mortgage Loan may
not exceed the maximum Mortgage Rate (the "Maximum Mortgage Rate") or be less
than the minimum Mortgage Rate (the "Minimum Mortgage Rate") specified for
such Mortgage Loan in the related Mortgage Note. For 0.1% of the Mortgage
Loans, the Mortgage Rate as of the Cut-off Date was less than the Minimum
Mortgage Rate specified in the Mortgage Note. The Minimum Mortgage Rates of
the Mortgage Loans will range from 2.625% to 13.450%, with a weighted average
Minimum Mortgage Rate as of the Cut-off Date of 8.1987%. The Maximum Mortgage
Rates of the Mortgage Loans will range from 12.125% to 20.450%, with a
weighted average Maximum Mortgage Rate as of the Cut-off Date of 15.8482%. No
Mortgage Loan provides for payment caps on any Adjustment Date which would
result in deferred interest or negative amortization.

With respect to 41.7% and 35.2% of the Mortgage Loans the Index will be a
per annum rate equal to the average of interbank offered rates for six-month
U.S. dollar-denominated deposits in the London market based on quotations of
major banks ("Six-Month LIBOR") as published in The Wall Street Journal and as
most recently available (i) as of the first business day of the month
immediately preceding the month in which the Adjustment Date (each such date
as of which Six-Month LIBOR is determined, a "Reference Date") occurs, or (ii)
as of the date forty-five days prior to the Adjustment Date, respectively.
With respect to 0.3% of the Mortgage Loans the Index will be Six-Month LIBOR,
as published by Fannie Mae and as most recently available as of the date
forty-five days prior to the Adjustment Date. With respect to 22.8% of the
Mortgage Loans the Index will be a per annum rate equal to the weekly average
yield on U.S. Treasury securities adjusted to a constant maturity of one year
as reported by the Federal Reserve Board in statistical Release No. H.15(519)
(the "Release") as most recently available as of the date forty-five days
prior to the Adjustment Date ("One-Year U.S. Treasury"). Such average yields
reflect the yields for the week prior to that week. In the event that the
related Index specified in a Mortgage Note is no longer available, an index
reasonably acceptable to the Trustee that is based on comparable information
will be selected by the Master Servicer.

S-14
<PAGE>

SIX-MONTH LIBOR INDEX

Listed below are levels of Six-Month LIBOR as published by The Wall Street
Journal that are or would have been applicable to mortgage loans with a
Reference Date of the first business day of the preceding month, and having
the following adjustment dates for the indicated years. Such average yields
may fluctuate significantly from month to month as well as over longer periods
and may not increase or decrease in a constant pattern from period to period.
There can be no assurance that levels of Six-Month LIBOR published by Fannie
Mae, or published in The Wall Street Journal on a different Reference Date
would have been at the same levels as those set forth below. The following
does not purport to be representative of future levels of Six-Month LIBOR (as
published by Fannie Mae or The Wall Street Journal). No assurance can be given
as to the level of Six-Month LIBOR on any Adjustment Date or during the life
of any Mortgage Loan based on Six-Month LIBOR.

SIX-MONTH LIBOR

<TABLE>
<CAPTION>
ADJUSTMENT DATE 1992 1993 1994 1995 1996
- --------------- ------ ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
January 1................................... 4.9375% 4.000% 3.500% 6.562% 5.718%
February 1.................................. 4.1875 3.625 3.500 7.000 5.531
March 1..................................... 4.250 3.375 3.375 6.687 5.281
April 1..................................... 4.375 3.312 4.000 6.437 5.312
May 1....................................... 4.500 3.375 4.250 6.500 5.531
June 1...................................... 4.250 3.312 4.688 6.375 5.562
July 1...................................... 4.1875 3.500 5.000 6.000
August 1.................................... 4.0625 3.500 5.250 6.000
September 1................................. 3.625 3.500 5.313 5.875
October 1................................... 3.625 3.437 5.313 5.906
November 1.................................. 3.250 3.375 5.750 5.968
December 1.................................. 3.625 3.437 5.937 5.875
</TABLE>

ONE-YEAR U.S. TREASURY INDEX

The One-Year U.S. Treasury Index is currently calculated based on
information reported in the Release. Listed below are the weekly average
yields on actively traded U.S. Treasury securities adjusted to a constant
maturity of one year as reported in the Release on the date that would have
been applicable to Mortgage Loans whose index was most recently available as
of the date forty-five days prior to the adjustment date and having the
following adjustment dates for the indicated years. Such average yields may
fluctuate significantly from week to week as well as over longer periods and
may not increase or decrease in a constant pattern from period to period. The
following does not purport to be representative of future average yields. No
assurance can be given as to the average yields on such U.S. Treasury
securities on any Adjustment Date or during the life of any Mortgage Loan.

S-15
<PAGE>

ONE-YEAR U.S. TREASURY INDEX

<TABLE>
<CAPTION>
ADJUSTMENT DATE 1992 1993 1994 1995 1996
- --------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
January 1......................................... 5.00% 3.64% 3.55% 6.42% 5.45%
February 1........................................ 4.44 3.72 3.60 7.10 5.35
March 1........................................... 4.06 3.60 3.63 7.24 5.17
April 1........................................... 4.19 3.41 3.85 6.79 4.85
May 1............................................. 4.73 3.39 4.28 6.54 5.15
June 1............................................ 4.25 3.31 4.71 6.28 5.62
July 1............................................ 4.25 3.27 5.49 6.00
August 1.......................................... 4.18 3.61 5.16 5.69
September 1....................................... 3.64 3.42 5.49 5.47
October 1......................................... 3.43 3.48 5.60 5.71
November 1........................................ 3.17 3.32 5.62 5.63
December 1........................................ 3.09 3.35 6.04 5.60
</TABLE>

The initial Mortgage Rate in effect on a Mortgage Loan generally will be
lower, and may be significantly lower, than the sum of the related Index that
would have been applicable at origination and the Note Margin. Therefore,
unless the related Index declines after origination of a Mortgage Loan, the
related Mortgage Rate will generally increase on the first Adjustment Date
following origination of such Mortgage Loan subject to the Periodic Rate Cap.
The repayment of the Mortgage Loans will be dependent on the ability of the
Mortgagors to make larger monthly payments following adjustments of the
Mortgage Rate. Mortgage Loans that have the same initial Mortgage Rate may not
always bear interest at the same Mortgage Rate because such Mortgage Loans may
have different Adjustment Dates (and the Mortgage Rates therefore may reflect
different related Index values), Note Margins, Periodic Rate Caps, Maximum
Mortgage Rates and Minimum Mortgage Rates. The Mortgage Rate on each Mortgage
Loan will be adjusted on each Adjustment Date to equal the sum (rounded as
described herein) of the related Index and Note Margin, subject to the Maximum
Mortgage Rate, Minimum Mortgage Rate and Periodic Rate Cap for such Mortgage
Loan. The Net Mortgage Rate with respect to each Mortgage Loan as of the Cut-
off Date will be set forth in the Mortgage Loan Schedule attached to the
Pooling and Servicing Agreement. The Net Mortgage Rate on each Mortgage Loan
will be adjusted on each Adjustment Date to equal the Mortgage Rate less the
Servicing Fee, but may not exceed the maximum Net Mortgage Rate (the "Maximum
Net Mortgage Rate"), which will be set forth in the Mortgage Loan Schedule, or
be less than the minimum Net Mortgage Rate (the "Minimum Net Mortgage Rate")
for each Mortgage Loan. See "Description of the Mortgage Pool--Mortgage Pool
Characteristics" herein.

S-16
<PAGE>

MORTGAGE POOL CHARACTERISTICS

The Mortgage Pool will have the following characteristics as of the Cut-off
Date:

<TABLE>
<CAPTION>
ONE-YEAR
SIX MONTH LIBOR U.S. TREASURY
--------------- ---------------
<S> <C> <C>
Number of Mortgage Loans....................... 891 216
Range of Net Mortgage Rates.................... 6.170%-12.870% 5.545%-11.295%
Mortgage Rates:
Weighted Average............................. 9.6269% 9.3779%
Range........................................ 6.750%-13.450% 6.125%-11.875%
Note Margins:
Weighted Average............................. 5.7689% 5.4532%
Range........................................ 2.625%-9.530% 3.125%-8.500%
Minimum Mortgage Rates:
Weighted Average............................. 8.1235% 8.4528%
Range........................................ 2.625%-13.450% 3.125%-11.875%
Minimum Net Mortgage Rates:
Weighted Average............................. 7.5435% 7.8728%
Range........................................ 2.045%-12.870% 2.545%-11.295%
Maximum Mortgage Rates:
Weighted Average............................. 15.9834% 15.3919%
Range........................................ 12.625%-20.450% 12.125%-17.875%
Maximum Net Mortgage Rates:
Weighted Average............................. 15.4034% 14.8119%
Range........................................ 12.045%-19.870% 11.545%-17.295%
Weighted Average Months to next Adjustment Date
after
June 1, 1996(1)............................... 16 18
</TABLE>
- --------
(1) The Weighted Average Months to next Adjustment Date will be equal to the
weighted average of the number of months until the Adjustment Date next
following June 1, 1996.

All percentages of the Mortgage Loans described herein are approximate
percentages (except as otherwise indicated) by aggregate principal balance of
the Mortgage Loans (except as otherwise indicated) as of the Cut-off Date.

None of the Mortgage Loans will have been originated prior to August 23,
1994 or will have a maturity date later than June 1, 2026. No Mortgage Loan
will have a remaining term to stated maturity as of the Cut-off Date of less
than 175 months. The weighted average remaining term to stated maturity of the
Mortgage Loans as of the Cut-off Date will be 357 months. The weighted average
original term to maturity of the Mortgage Loans as of the Cut-off Date will be
359 months.

As of the Cut-off Date, 1.9% of the Mortgage Loans are one month delinquent
in payment of principal and interest. As of the Cut-off Date, no Mortgage Loan
is two months or more delinquent in payment of principal and interest.

The Mortgage Loans are generally assumable pursuant to the terms of the
related Mortgage Note. See "Maturity and Prepayment Considerations" in the
Prospectus.

A substantial portion of the Mortgage Loans provide for payment of a
prepayment charge. As to each such Mortgage Loan, the prepayment charge
provisions typically provide for payment of a prepayment charge for partial
prepayments and full prepayments made within approximately five years of the
origination of such Mortgage Loan, in an amount equal to six months' advance
interest on the amount of the prepayment that, when

S-17
<PAGE>

added to all other amounts prepaid during the twelve-month period immediately
preceding the date of the prepayment, exceeds twenty percent (20%) of the
original principal amount of the Mortgage Loan. Prepayment charges received on
the Mortgage Loans will not be available for distribution on the Certificates.

As of the Cut-off Date, 0.7% of the Mortgage Loans were High Cost Loans.

No Mortgage Loan provides for deferred interest or negative amortization.

None of the Mortgage Loans will be Buydown Mortgage Loans.

Set forth below is a description of certain additional characteristics of
the Mortgage Loans as of the Cut-off Date (except as otherwise indicated). All
percentages of the Mortgage Loans are approximate percentages by aggregate
principal balance of the Mortgage Loans (except as otherwise indicated) as of
the Cut-off Date. Unless otherwise specified, all principal balances of the
Mortgage Loans are as of the Cut-off Date and are rounded to the nearest
dollar.

MORTGAGE RATES

<TABLE>
<CAPTION>
NUMBER OF
MORTGAGE PRINCIPAL PERCENT OF
MORTGAGE RATES (%) LOANS BALANCE MORTGAGE POOL
- ------------------ --------- ------------ -------------
<S> <C> <C> <C>
6.000- 6.499.............................. 1 $ 348,974 0.24%
6.500- 6.999.............................. 6 585,880 0.41
7.000- 7.499.............................. 6 618,744 0.43
7.500- 7.999.............................. 31 4,496,564 3.13
8.000- 8.499.............................. 78 12,176,932 8.47
8.500- 8.999.............................. 162 21,969,748 15.29
9.000- 9.499.............................. 167 21,580,761 15.01
9.500- 9.999.............................. 260 38,001,690 26.44
10.000-10.499.............................. 152 19,655,238 13.68
10.500-10.999.............................. 116 14,005,927 9.74
11.000-11.499.............................. 44 4,113,886 2.86
11.500-11.999.............................. 44 4,035,412 2.81
12.000-12.499.............................. 20 896,025 0.62
12.500-12.999.............................. 9 558,806 0.39
13.000-13.499.............................. 11 686,422 0.48
----- ------------ ------
Total.................................... 1,107 $143,731,008 100.00%
===== ============ ======
</TABLE>

As of the Cut-Off Date, the weighted average Mortgage Rate of the Mortgage
Loans will be approximately 9.5700% per annum.

ORIGINAL MORTGAGE LOAN PRINCIPAL BALANCES

<TABLE>
<CAPTION>
NUMBER OF
ORGINAL MORTGAGEI MORTGAGE PERCENT OF
LOAN BALANCE LOANS PRINCIPAL BALANCE MORTGAGE POOL
- ----------------- --------- ----------------- -------------
<S> <C> <C> <C>
$ 0-100,000..................... 519 $ 34,833,087 24.23%
100,001-200,000..................... 388 53,647,088 37.32
200,001-300,000..................... 150 36,527,479 25.41
300,001-400,000..................... 38 13,215,435 9.19
400,001-500,000..................... 10 4,418,140 3.07
500,001-600,000..................... 2 1,089,780 0.76
----- ------------ ------
Total.............................. 1,107 $143,731,008 100.00%
===== ============ ======
</TABLE>

As of the Cut-Off Date, the average unpaid principal balance of the Mortgage
Loans will be approximately $129,838.

S-18
<PAGE>

ORIGINAL LOAN-TO-VALUE RATIOS

<TABLE>
<CAPTION>
ORIGINAL NUMBER OF
LOAN-TO- MORTGAGE PRINCIPAL PERCENT OF
VALUE RATIO (%) LOANS BALANCE MORTGAGE POOL
--------------- --------- ------------ -------------
<S> <C> <C> <C>
0.01--50.00.............................. 37 $ 3,448,663 2.40%
50.01--55.00.............................. 22 1,864,440 1.30
55.01--60.00.............................. 45 3,734,648 2.60
60.01--65.00.............................. 90 9,302,076 6.47
65.01--70.00.............................. 162 17,251,600 12.00
70.01--75.00.............................. 253 32,827,172 22.84
75.01--80.00.............................. 240 33,291,122 23.16
80.01--85.00.............................. 119 18,772,104 13.06
85.01--90.00.............................. 134 22,725,969 15.81
90.01--95.00.............................. 5 513,214 0.36
----- ------------ ------
Total................................... 1,107 $143,731,008 100.00%
===== ============ ======
</TABLE>

The weighted average Loan-to-Value Ratio at origination of the Mortgage
Loans will be approximately 76.76%.

GEOGRAPHIC DISTRIBUTION OF MORTGAGED PROPERTIES

<TABLE>
<CAPTION>
NUMBER OF
MORTGAGE PRINCIPAL PERCENT OF
STATE LOANS BALANCE MORTGAGE POOL
- ----- --------- ------------ -------------
<S> <C> <C> <C>
California................................. 274 $ 49,710,615 34.59%
Colorado................................... 141 17,073,972 11.88
Oregon..................................... 99 11,267,037 7.84
Illinois................................... 88 9,970,831 6.94
Utah....................................... 75 8,352,438 5.81
Washington................................. 57 8,107,099 5.64
Georgia.................................... 64 7,298,909 5.08
Florida.................................... 70 5,889,185 4.10
Other (1).................................. 239 26,060,922 18.13
----- ------------ ------
Total.................................... 1,107 $143,731,008 100.00%
===== ============ ======
</TABLE>
- --------
(1) Other includes states and the District of Columbia with under 3%
concentrations individually.

No more than 0.8% of the Mortgage Loans will be secured by Mortgaged
Properties located in any one zip code area in California and no more than
0.8% of the Mortgage Loans will be secured by Mortgaged Properties located in
any one zip code area outside California.

MORTGAGE LOAN PURPOSE

<TABLE>
<CAPTION>
NUMBER OF
MORTGAGE PRINCIPAL PERCENT OF
LOAN PURPOSE LOANS BALANCE MORTGAGE POOL
- ------------ --------- ------------ -------------
<S> <C> <C> <C>
Purchase................................... 386 $ 55,200,341 38.41%
Rate/Term Refinance........................ 184 25,191,372 17.53
Equity Refinance........................... 537 63,339,296 44.07
----- ------------ ------
Total.................................... 1,107 $143,731,008 100.00%
===== ============ ======
</TABLE>

The weighted average Loan-to-Value Ratio at origination of rate and term
refinance Mortgage Loans will be 76.52%. The weighted average Loan-to-Value
Ratio at origination of equity refinance Mortgage Loans will be 72.33%.

S-19
<PAGE>

MORTGAGE LOAN DOCUMENTATION TYPES

<TABLE>
<CAPTION>
NUMBER OF
MORTGAGE PRINCIPAL PERCENT OF
DOCUMENTATION TYPE LOANS BALANCE MORTGAGE POOL
- ------------------ --------- ------------ -------------
<S> <C> <C> <C>
Full Documentation......................... 771 $100,455,487 69.89%
Reduced Documentation...................... 336 43,275,521 30.11
----- ------------ ------
Total.................................... 1,107 $143,731,008 100.00%
===== ============ ======
</TABLE>

The weighted average Loan-to-Value Ratio at origination of the Mortgage Loans
which were underwritten under a reduced loan documentation program will be
70.13%. No more than 26.6% of such reduced loan documentation Mortgage Loans
will be secured by Mortgaged Properties located in California.

OCCUPANCY TYPES

<TABLE>
<CAPTION>
NUMBER OF
MORTGAGE PRINCIPAL PERCENT OF
OCCUPANCY LOANS BALANCE MORTGAGE POOL
- --------- --------- ------------ -------------
<S> <C> <C> <C>
Primary Residence.......................... 1,011 $136,287,945 94.82%
Second/Vacation............................ 12 1,400,867 0.97
Non Owner-occupied......................... 84 6,042,196 4.20
----- ------------ ------
Total.................................... 1,107 $143,731,008 100.00%
===== ============ ======
</TABLE>

MORTGAGED PROPERTY TYPES

<TABLE>
<CAPTION>
NUMBER OF
MORTGAGE PRINCIPAL PERCENT OF
PROPERTY TYPE LOANS BALANCE MORTGAGE POOL
- ------------- --------- ------------ -------------
<S> <C> <C> <C>
Single-family detached..................... 941 $122,232,029 85.04%
Planned Unit Developments (detached)....... 58 11,458,835 7.97
Two- to four-family units.................. 39 3,858,449 2.68
Condo Low-Rise (less than 5 stories)....... 53 4,367,861 3.04
Condo High-Rise (9 stories or more)........ 1 25,590 0.02
Townhouse.................................. 5 809,057 0.56
Planned Unit Developments (attached)....... 10 979,186 0.68
----- ------------ ------
Total.................................... 1,107 $143,731,008 100.00%
===== ============ ======
</TABLE>

RISK GRADES

<TABLE>
<CAPTION>
NUMBER OF
MORTGAGE PRINCIPAL PERCENT OF
RISK GRADE LOANS BALANCE MORTGAGE POOL
- ---------- --------- ------------ -------------
<S> <C> <C> <C>
Category 1A................................ 348 $ 53,966,808 37.55%
Category 1................................. 364 51,098,334 35.55
Category 2................................. 238 25,300,994 17.60
Category 3................................. 141 12,180,448 8.47
Category 4................................. 16 1,184,425 0.82
----- ------------ ------
Total.................................... 1,107 $143,731,008 100.00%
===== ============ ======
</TABLE>

S-20
<PAGE>

SCHEDULED MORTGAGE TERM

<TABLE>
<CAPTION>
NUMBER OF
MORTGAGE PRINCIPAL PERCENT OF
SCHEDULED MORTGAGE TERM LOANS BALANCE MORTGAGE POOL
- ----------------------- --------- ------------ -------------
<S> <C> <C> <C>
175........................................ 4 $ 117,485 0.08%
176........................................ 4 258,118 0.18
177........................................ 1 46,897 0.03
339........................................ 2 194,002 0.13
345........................................ 1 27,412 0.02
346........................................ 1 48,432 0.03
349........................................ 3 209,174 0.15
350........................................ 5 731,236 0.51
351........................................ 12 1,960,820 1.36
352........................................ 20 3,150,699 2.19
353........................................ 48 7,131,898 4.96
354........................................ 74 9,054,999 6.30
355........................................ 137 14,659,759 10.20
356........................................ 117 12,554,541 8.73
357........................................ 113 13,365,358 9.30
358........................................ 171 25,876,260 18.00
359........................................ 327 45,853,610 31.90
360........................................ 67 8,490,310 5.91
----- ------------ ------
Total.................................... 1,107 $143,731,008 100.00%
===== ============ ======
</TABLE>

As of the Cut-Off Date, the weighted average Scheduled Term to Maturity will
be approximately 357 months.

The following tables set forth certain additional characteristics as of the
Cut-off Date of the Mortgage Loans based on Six-Month LIBOR (by principal
balance of such Mortgage Loans in each specified range relative to the
aggregate principal balance of such Mortgage Loans).

MORTGAGE RATES
(BASED ON SIX-MONTH LIBOR)

<TABLE>
<CAPTION>
NUMBER OF
MORTGAGE PRINCIPAL PERCENT OF SUCH
MORTGAGE RATES (%) LOANS BALANCE MORTGAGE LOANS
- ------------------ --------- ------------ ---------------
<S> <C> <C> <C>
6.500- 6.999............................ 5 $ 438,027 .40%
7.000- 7.499............................ 6 618,744 .56
7.500- 7.999............................ 24 3,458,459 3.12
8.000- 8.499............................ 58 8,104,778 7.31
8.500- 8.999............................ 125 16,486,223 14.87
9.000- 9.499............................ 137 17,120,242 15.44
9.500- 9.999............................ 213 29,848,095 26.92
10.000-10.499............................ 118 14,770,206 13.32
10.500-10.999............................ 86 10,702,936 9.65
11.000-11.499............................ 39 3,619,131 3.26
11.500-11.999............................ 40 3,583,695 3.23
12.000-12.499............................ 20 896,025 .81
12.500-12.999............................ 9 558,806 .50
13.000-13.499............................ 11 686,422 .62
--- ------------ ------
Total.................................. 891 $110,891,788 100.00%
=== ============ ======
</TABLE>

As of the Cut-Off Date, the weighted average Mortgage Rate of such Mortgage
Loans based on Six-Month LIBOR will be approximately 9.6269% per annum.

S-21
<PAGE>

Note Margins
(BASED ON SIX-MONTH LIBOR)

<TABLE>
<CAPTION>
NUMBER OF
MORTGAGE PRINCIPAL PERCENT OF SUCH
NOTE MARGINS (%) LOANS BALANCE MORTGAGE LOANS
- ---------------- --------- ------------ ---------------
<S> <C> <C> <C>
2.500-2.999.............................. 2 $ 217,643 0.20%
3.000-3.499.............................. 18 2,203,095 1.99
3.500-3.999.............................. 15 2,489,337 2.24
4.000-4.499.............................. 21 2,687,246 2.42
4.500-4.999.............................. 83 12,874,715 11.61
5.000-5.499.............................. 127 18,606,548 16.78
5.500-5.999.............................. 186 25,407,067 22.91
6.000-6.499.............................. 175 20,945,578 18.89
6.500-6.999.............................. 109 12,959,457 11.69
7.000-7.499.............................. 52 4,680,001 4.22
7.500-7.999.............................. 66 4,859,388 4.38
8.000-8.499.............................. 26 2,196,089 1.98
8.500-8.999.............................. 9 579,391 0.52
9.500-9.999.............................. 2 186,234 0.17
--- ------------ ------
Total.................................. 891 $110,891,788 100.00%
=== ============ ======
</TABLE>

As of the Cut-Off Date, the weighted average Note Margin of such Mortgage
Loans based on Six-Month LIBOR will be approximately 5.7689% per annum.

Maximum Mortgage Rates
(BASED ON SIX-MONTH LIBOR)

<TABLE>
<CAPTION>
NUMBER OF
MORTGAGE PRINCIPAL PERCENT OF SUCH
MAXIMUM MORTGAGE RATES (%) LOANS BALANCE MORTGAGE LOANS
- -------------------------- --------- ------------ ---------------
<S> <C> <C> <C>
12.000-12.999............................. 4 $ 442,172 0.40%
13.000-13.999............................. 12 1,320,922 1.19
14.000-14.999............................. 123 17,906,686 16.15
15.000-15.999............................. 314 43,173,066 38.93
16.000-16.999............................. 238 29,616,288 26.71
17.000-17.999............................. 118 12,514,823 11.29
18.000-18.999............................. 48 4,277,350 3.86
19.000-19.999............................. 25 1,086,015 0.98
20.000-20.999............................. 9 554,465 0.50
--- ------------ ------
Total................................... 891 $110,891,788 100.00%
=== ============ ======
</TABLE>

As of the Cut-Off Date, the weighted average Maximum Mortgage Rate of such
Mortgage Loans based on Six-Month LIBOR will be approximately 15.9834% per
annum.

S-22
<PAGE>

MINIMUM MORTGAGE RATES
(BASED ON SIX-MONTH LIBOR)

<TABLE>
<CAPTION>
NUMBER OF
MORTGAGE PRINCIPAL PERCENT OF SUCH
MINIMUM MORTGAGE RATES (%) LOANS BALANCE MORTGAGE LOANS
- -------------------------- --------- ------------ ---------------
<S> <C> <C> <C>
2.000- 2.999............................. 2 $ 217,643 0.20%
3.000- 3.999............................. 2 443,762 0.40
4.000- 4.999............................. 60 10,225,132 9.22
5.000- 5.999............................. 123 19,411,561 17.50
6.000- 6.999............................. 82 11,303,799 10.19
7.000- 7.999............................. 31 4,419,745 3.99
8.000- 8.999............................. 121 14,763,524 13.31
9.000- 9.999............................. 197 21,810,449 19.67
10.000-10.999............................. 166 19,884,074 17.93
11.000-11.999............................. 71 6,489,858 5.85
12.000-12.999............................. 25 1,235,821 1.11
13.000-13.999............................. 11 686,422 0.62
--- ------------ ------
Total................................... 891 $110,891,788 100.00%
=== ============ ======
</TABLE>

As of the Cut-Off Date, the weighted average Minimum Mortgage Rate of such
Mortgage Loans based on Six-Month LIBOR will be approximately 8.1235% per
annum.

NEXT INTEREST RATE ADJUSTMENT DATES
(BASED ON SIX-MONTH LIBOR)

<TABLE>
<CAPTION>
NUMBER OF
MORTGAGE PRINCIPAL PERCENT OF SUCH
NEXT INTEREST ADJUSTMENT DATE LOANS BALANCE MORTGAGE LOANS
- ----------------------------- --------- ------------ ---------------
<S> <C> <C> <C>
July 1996................................. 31 $ 3,273,756 2.95%
August 1996............................... 66 6,329,479 5.71
September 1996............................ 69 7,442,639 6.71
October 1996.............................. 71 10,967,618 9.89
November 1996............................. 106 14,702,400 13.26
December 1996............................. 24 2,923,732 2.64
November 1997............................. 18 1,889,207 1.70
December 1997............................. 47 5,203,372 4.69
January 1998.............................. 73 6,784,209 6.12
February 1998............................. 40 4,331,544 3.91
March 1998................................ 18 2,269,290 2.05
April 1998................................ 46 7,682,019 6.93
May 1998.................................. 152 22,336,977 20.14
June 1998................................. 26 2,991,660 2.70
December 1998............................. 1 71,995 0.06
January 1999.............................. 12 697,743 0.63
February 1999............................. 7 402,084 0.36
March 1999................................ 9 1,408,630 1.27
April 1999................................ 25 2,950,952 2.66
May 1999.................................. 44 5,408,631 4.88
June 1999................................. 6 823,850 0.74
--- ------------ ------
Total................................... 891 $110,891,788 100.00%
=== ============ ======
</TABLE>

As of the Cut-Off Date, the weighted average months to Next Interest Rate
Adjustment Date of such Mortgage Loans based on Six-Month Libor will be
approximately 16.

S-23
<PAGE>

The following tables set forth certain additional characteristics as of the
Cut-off Date of the Mortgage Loans based on One-Year U.S. Treasury (by
principal balance of such Mortgage Loans in each specified range relative to
the aggregate principal balance of such Mortgage Loans).

MORTGAGE RATES
(BASED ON ONE-YEAR U.S. TREASURY)

<TABLE>
<CAPTION>
NUMBER OF
MORTGAGE PRINCIPAL PERCENT OF SUCH
MORTGAGE RATES (%) LOANS BALANCE MORTGAGE LOANS
- ------------------ --------- ----------- ---------------
<S> <C> <C> <C>
6.000- 6.499............................. 1 $ 348,974 1.06%
6.500- 6.999............................. 1 147,853 0.45
7.500- 7.999............................. 7 1,038,104 3.16
8.000- 8.499............................. 20 4,072,153 12.40
8.500- 8.999............................. 37 5,483,526 16.70
9.000- 9.499............................. 30 4,460,519 13.58
9.500- 9.999............................. 47 8,153,595 24.83
10.000-10.499............................. 34 4,885,032 14.88
10.500-10.999............................. 30 3,302,991 10.06
11.000-11.499............................. 5 494,755 1.51
11.500-11.999............................. 4 451,717 1.38
--- ----------- ------
Total................................... 216 $32,839,221 100.00%
=== =========== ======
</TABLE>

As of the Cut-Off Date, the weighted average Mortgage Rate of such Mortgage
Loans based on One-Year U.S. Treasury will be approximately 9.3779% per annum.

NOTE MARGINS
(BASED ON ONE-YEAR U.S. TREASURY)

<TABLE>
<CAPTION>
NUMBER OF
MORTGAGE PRINCIPAL PERCENT OF SUCH
NOTE MARGINS (%) LOANS BALANCE MORTGAGE LOANS
- ---------------- --------- ----------- ---------------
<S> <C> <C> <C>
3.000-3.499............................... 4 $ 974,500 2.97%
3.500-3.999............................... 8 1,222,955 3.72
4.000-4.499............................... 26 4,211,881 12.83
4.500-4.999............................... 29 5,448,923 16.59
5.000-5.499............................... 22 3,138,468 9.56
5.500-5.999............................... 48 6,697,742 20.40
6.000-6.499............................... 31 4,717,165 14.36
6.500-6.999............................... 19 2,946,223 8.97
7.000-7.499............................... 14 1,934,792 5.89
7.500-7.999............................... 10 830,280 2.53
8.000-8.499............................... 4 576,965 1.76
8.500-8.999............................... 1 139,326 0.42
--- ----------- ------
Total................................... 216 $32,839,221 100.00%
=== =========== ======
</TABLE>

As of the Cut-Off Date, the weighted average Note Margin of such Mortgage
Loans based on One-Year U.S. Treasury will be approximately 5.4532% per annum.

S-24
<PAGE>

MAXIMUM MORTGAGE RATES
(BASED ON ONE-YEAR U.S. TREASURY)

<TABLE>
<CAPTION>
NUMBER OF
MORTGAGE PRINCIPAL PERCENT OF SUCH
MAXIMUM MORTGAGE RATES (%) LOANS BALANCE MORTGAGE LOANS
- -------------------------- --------- ----------- ---------------
<S> <C> <C> <C>
12.000-12.999.............................. 2 $ 496,828 1.51%
13.000-13.999.............................. 7 961,473 2.93
14.000-14.999.............................. 59 9,815,407 29.89
15.000-15.999.............................. 74 12,067,927 36.75
16.000-16.999.............................. 64 8,409,533 25.61
17.000-17.999.............................. 10 1,088,052 3.31
--- ----------- ------
Total.................................... 216 $32,839,221 100.00%
=== =========== ======
</TABLE>

As of the Cut-Off Date, the weighted average Maximum Mortgage Rate of such
Mortgage Loans based on One-Year U.S. Treasury will be approximately 15.3919%
per annum.

MINIMUM MORTGAGE RATES
(BASED ON ONE-YEAR U.S. TREASURY)

<TABLE>
<CAPTION>
NUMBER OF
MORTGAGE PRINCIPAL PERCENT OF SUCH
MINIMUM MORTGAGE RATES (%) LOANS BALANCE MORTGAGE LOANS
- -------------------------- --------- ----------- ---------------
<S> <C> <C> <C>
3.000- 3.999.............................. 4 $ 951,597 2.90%
4.000- 4.999.............................. 10 1,531,614 4.66
5.000- 5.999.............................. 12 1,743,382 5.31
6.000- 6.999.............................. 24 4,201,885 12.80
7.000- 7.999.............................. 8 1,325,104 4.04
8.000- 8.999.............................. 40 6,115,839 18.62
9.000- 9.999.............................. 52 8,299,811 25.27
10.000-10.999.............................. 57 7,723,517 23.52
11.000-11.999.............................. 9 946,472 2.88
--- ----------- ------
Total.................................... 216 $32,839,221 100.00%
=== =========== ======
</TABLE>

As of the Cut-Off Date, the weighted average Minimum Mortgage Rate of such
Mortgage Loans based on One-Year U.S. Treasury will be approximately 8.4528%
per annum.

S-25
<PAGE>

NEXT INTEREST RATE ADJUSTMENT DATES
(BASED ON ONE-YEAR U.S. TREASURY)

<TABLE>
<CAPTION>
NUMBER OF
MORTGAGE PRINCIPAL PERCENT OF SUCH
NEXT INTEREST ADJUSTMENT DATE LOANS BALANCE MORTGAGE LOANS
- ----------------------------- --------- ----------- ---------------
<S> <C> <C> <C>
July 1996................................. 2 $ 111,356 0.34%
August 1996............................... 4 654,754 1.99
September 1996............................ 6 504,502 1.54
October 1996.............................. 5 540,380 1.65
November 1996............................. 10 1,031,246 3.14
December 1996............................. 9 1,097,403 3.34
January 1997.............................. 13 1,066,782 3.25
February 1997............................. 6 933,652 2.84
March 1997................................ 17 2,023,088 6.16
April 1997................................ 31 4,481,807 13.65
May 1997.................................. 29 4,329,052 13.18
June 1997................................. 20 2,633,100 8.02
September 1998............................ 2 551,400 1.68
October 1998.............................. 12 2,186,866 6.66
November 1998............................. 17 3,421,137 10.42
December 1998............................. 8 1,800,196 5.48
January 1999.............................. 13 3,052,572 9.30
February 1999............................. 4 1,010,979 3.08
March 1999................................ 6 876,890 2.67
April 1999................................ 2 532,059 1.62
--- ----------- ------
Total..................................... 216 $32,839,221 100.00%
=== =========== ======
</TABLE>

As of the Cut-Off Date, the weighted average Months to Next Interest Rate
Adjustment Date of such Mortgage Loans based on One-Year U.S. Treasury will be
approximately 18.

STANDARD HAZARD INSURANCE AND PRIMARY MORTGAGE INSURANCE

Each Mortgage Loan is required to be covered by a standard hazard insurance
policy. In addition, to the best of the Company's knowledge, 9 Mortgage Loans
with a Loan-to-Value Ratio at origination in excess of 80%, representing 1.1%
of the Mortgage Loans (and, representing 3.7% of such Mortgage Loans with
Loan-to-Value Ratios in excess of 80%) will be insured by a Primary Insurance
Policy covering the amount of such Mortgage Loan in excess of 75% of the value
of the related Mortgaged Property used in determining such Loan-to-Value Ratio
(the "Appraised Value"). An additional 28.1% of the Mortgage Loans are
mortgage loans with a Loan-to-Value Ratio at origination in excess of 80% that
are not insured by a Primary Insurance Policy. Substantially all of such
Primary Insurance Policies were issued by General Electric Mortgage Insurance
Corporation, Republic Mortgage Insurance Company, United Guaranty Residential
Insurance Company, Mortgage Guaranty Insurance Corporation, PMI Mortgage
Insurance Company (collectively, the "Primary Insurers"). Each Primary Insurer
has a claims paying ability currently acceptable to the Rating Agencies that
have been requested to rate the Certificates; however, there is no assurance
as to the actual ability of any Primary Insurer to pay claims. See "Insurance
Policies on Mortgage Loans or Contracts--Standard Hazard Insurance on
Mortgaged Properties" and "--Primary Mortgage Insurance Policies" in the
Prospectus.

UNDERWRITING STANDARDS

Prior to assignment to the Company, Residential Funding reviewed the
underwriting for each Mortgage Loan and purchased the Mortgage Loans from
Mortgage Collateral Sellers who participated in or whose loans

S-26
<PAGE>

were in substantial conformity with the standards set forth in Residential
Funding's AlterNet Program, and from National Mortgage Corporation and Nomura
Asset Capital Corporation, each of which had developed their own guidelines
and network of sellers with respect to the Mortgage Loans it funded and
subsequently sold to Residential Funding.

All of the Mortgage Loans including those acquired from National Mortgage
Corporation and Nomura Asset Capital Corporation had features which generally
distinguish such loans from the more stringent underwriting requirements used
as standards for Fannie Mae and Freddie Mac, and moreover, from the more
stringent underwriting standards set forth in Residential Funding's Seller
Guide for Mortgage Loan collateral that does not present significant special
risk features (which generally provides the basis for underwriting Mortgage
Loans that serve as the assets for securities issued by Residential Funding's
affiliates, Residential Funding Mortgage Securities I, Inc. and Residential
Accredit Loans, Inc.). Residential Funding established risk categories by
which it could aggregate acceptable loans into groupings considered to have
progressively greater risk characteristics. A more detailed description of
those risk categories is set forth below.

Residential Funding's underwriting of the Mortgage Loans generally consisted
of analyzing the creditworthiness of a mortgagor, the income sufficiency of a
mortgagor's projected family income relative to the mortgage payment and to
other fixed obligations (including in certain instances rental income from
investment property), and the adequacy of the mortgaged property (expressed in
terms of Loan-to-Value Ratio), to serve as the collateral for a mortgage loan.

Generally, each mortgagor would have been required to complete an
application designed to provide to the original lender pertinent credit
information concerning the mortgagor. As part of the description of the
mortgagor's financial condition, each mortgagor furnished information (which
may have been supplied solely in such application) with respect to its assets,
liabilities, income, credit history, employment history and personal
information, and furnished an authorization to apply for a credit report which
summarized the borrower's credit history with local merchants and lenders and
any record of bankruptcy. The mortgagor may also have been required to
authorize verifications of deposits at financial institutions where the
mortgagor had demand or savings accounts. In the case of investment
properties, income derived from the mortgaged property may have been
considered for underwriting purposes. With respect to mortgaged property
consisting of vacation or second homes, generally no income derived from the
property was considered for underwriting purposes.

Based on the data provided in the application, certain verifications (if
required by the originator of the mortgage loan) and the appraisal or other
valuation of the mortgaged property, a determination was made by the original
lender that the mortgagor's monthly income would be sufficient to enable the
mortgagor to meet its monthly obligations on the mortgage loan and other
expenses related to the property (such as property taxes, utility costs,
standard hazard insurance and other fixed obligations other than housing
expenses). The originator's guidelines for mortgage loans generally specify
that scheduled payments on a mortgage loan during the first year of its term
plus taxes and insurance and all scheduled payments on obligations that extend
beyond ten months (including those mentioned above and other fixed
obligations) equal no more than specified percentages of the prospective
mortgagor's gross income. The originator may also have considered the amount
of liquid assets available to the mortgagor after origination.

Certain of the Mortgage Loans have been originated under "limited
documentation" programs which require less documentation and verification than
do traditional "full documentation" programs. Generally, under such a program,
minimal investigation into a mortgagor's credit history and income profile
would have been undertaken by the originator and the underwriting for such
mortgage loans will place a greater emphasis on the value of the mortgaged
property. As used in this section, "Loan-to-Value Ratio" shall generally mean
that ratio, expressed as a percentage of (a) the principal amount of the
Mortgage Loan at origination, over (b) the lesser of the sales price or the
appraised value of the related Mortgaged Property at origination, or in the
case of a refinanced or modified Mortgage Loan, either the appraised value
determined at origination or, if applicable, at the time of the refinancing or
modification.

S-27
<PAGE>

The adequacy of a mortgaged property as security for repayment of the
related mortgage loan generally has been determined by an appraisal in
accordance with pre-established appraisal procedure guidelines for appraisals
established by or acceptable to the originator. Appraisers were either staff
appraisers employed by the originator or independent appraisers selected in
accordance with pre-established guidelines established by the originator. The
appraisal procedure guidelines generally will have required the appraiser or
an agent on its behalf to personally inspect the property and to verify
whether the property was in good condition and that construction, if new, had
been substantially completed. The appraisal would have considered a market
data analysis of recent sales of comparable properties and, when deemed
applicable, an analysis based on income generated from the property or
replacement cost analysis based on the current cost of constructing or
purchasing a similar property. In certain instances, the Loan-to-Value Ratio
was based on the appraised value as indicated on a review appraisal conducted
by the Mortgage Collateral Seller or originator.

Generally, the Mortgage Loans were either originated and underwritten in
accordance with Residential Funding's AlterNet Program, as discussed below, or
acquired from a Mortgage Collateral Seller and reviewed by Residential Funding
to determine acceptability and risk category classification. With respect to
the Mortgage Loans acquired from First Franklin Financial Corporation,
Residential Funding agreed to underwrite each Mortgage Loan on the basis of
the credit score of the related Mortgagor which First Franklin Financial
Corporation obtained at the time of origination of such Mortgage Loan and
Residential Funding assigned a risk category classification to each Mortgage
Loan which it determined was generally consistent with the risk categories as
described herein. In the case of National Mortgage Corporation, Residential
Funding agreed to review the Mortgage Loans purchased from National Mortgage
Corporation in accordance with the related stated underwriting standards of
National Mortgage Corporation.

The risk categories established by Residential Funding and applicable to all
of the Mortgage Loans, including those acquired from National Mortgage
Corporation, are expressed herein as Risk Categories 1A, 1, 2, 3 and 4.

Risk Category 1A: Under Risk Category 1A, the prospective mortgagor must
have repaid installment or revolving debt according to its terms. A maximum of
one 30-day late payment, and no 60-day or 90-day late payments, within the
last 12 months is acceptable on an existing mortgage loan. Minor derogatory
items are allowed as to non-mortgage credit (provided, open collections and
charge-offs in excess of $200 must be paid down to zero at closing unless they
are 3 years or older and not reflected in the title report or are medical
related). As to each mortgagor in this Risk Category, no bankruptcies were
discharged during the two-year period prior to the date the mortgage loan was
made and there was evidence that the mortgagor had re-established its credit
to an acceptable level. The mortgaged property must be in average to good
condition. A maximum Loan-to-Value Ratio of 90% is permitted (except in the
case of four Mortgage Loans for which a Loan-to-Value Ratio of 95% was
allowed) for a mortgage loan on a single family owner-occupied property (or
80% for a mortgage loan originated under a limited documentation program). A
maximum Loan-to-Value Ratio of 90% (or 65% for mortgage loans originated under
the limited documentation program) is permitted for a mortgage loan on a non-
owner occupied property. The mortgagor's debt service-to-income ratio
generally is 50% or less which, in the case of adjustable rate mortgage loans
will be based on the initial rate on the mortgage loan plus 2% per annum
unless the initial rate would not be subject to change for an extended period.

Risk Category 1: Under Risk Category 1, the prospective mortgagor is
required to have generally repaid all previous or existing installment or
revolving debt according to its terms. A maximum of two 30-day late payments,
and no 60-day or 90-day late payments, within the last 12 months is acceptable
on an existing mortgage loan. As to non-mortgage credit, some prior defaults
may have occurred (provided, open collections and charge-offs in excess of
$200 must be paid down to zero at closing unless they are 3 years or older and
not reflected in the title report or are medical related). No bankruptcies
were discharged during the two-year period prior to the date the mortgage loan
was made and there was evidence that the Mortgagor had re-established its
credit to an acceptable level. The mortgaged property must be in average to
good condition. A maximum Loan-to-Value Ratio of 90% (or 80% for mortgage
loans originated under a limited documentation program) is permitted for a
mortgage loan on an owner-occupied property. A maximum Loan-to-Value Ratio of
75% (or 70% for mortgage loans originated under a limited documentation
program) is permitted for a mortgage loan on a non-owner-occupied property.
The debt service-to-income ratio generally is 50% or less which, in the

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<PAGE>

case of adjustable rate mortgage loans will be based on an initial rate on the
mortgage loan plus 2% per annum unless the initial rate would not be subject
to change for an extended period.

Risk Category 2: Under Risk Category 2, the prospective mortgagor may not
have paid all previous or existing installment or revolving debt according to
its terms, and may have some charge-offs. A maximum of six 30-day late
payments, and one 60-day but no 90-day late payments, within the last 12
months is acceptable on an existing mortgage loan. As to non-mortgage credit,
some prior defaults may have occurred (provided, open collections and charge-
offs must be paid down to an amount not in excess of $500 at closing unless
they are 3 years or older and not reflected in the title report or are medical
related). No bankruptcies were discharged during the eighteen-month period
prior to the date the mortgage loan was made and there was evidence that the
Mortgagor had re-established its credit to an acceptable level. The applicant
must have also established some good credit since any bankruptcy proceedings.
The mortgaged property must be in average to good condition. A maximum Loan-
to-Value Ratio of 90% (or 80% for mortgage loans originated under a limited
documentation program) is permitted for a mortgage loan on an owner-occupied
property (except in the case of one Mortgage Loan for which a Loan-to-Value
Ratio of 92% was allowed). A maximum Loan-to-Value Ratio of 85% (or 70% for
mortgage loans originated under a limited documentation program) is permitted
for a mortgage loan on a non-owner-occupied property. The debt service-to-
income ratio generally is 50% (or 55% if the Loan-to-Value Ratio is 70% or
less) or less which, in the case of adjustable rate mortgage loans will be
based on the initial rate on the mortgage loan plus 2% per annum unless the
initial rate would not be subject to change for an extended period.

Risk Category 3: Under Risk Category 3, the prospective mortgagor may have
experienced significant credit problems in the past. A maximum of six 30-day
late payments, two 60-day late payments and one 90-day late payment, within
the last 12 months is acceptable on an existing mortgage loan, provided that
if there are no 60-day or 90-days late payments, a mortgagor may be permitted
to have more than six 30-day late payments. As to non-mortgage credit,
significant prior defaults may have occurred (provided, open collections and
charge-offs must be paid down to an amount not in excess of $1,000 at closing
unless they are 3 years or older and not reflected in the title report or are
medical related). No bankruptcies were discharged during the 12-month period
prior to the date the mortgage loan was made. The mortgaged property must be
in average to good condition. A maximum Loan-to-Value Ratio of 70% is
permitted for mortgage loans originated under a full or limited documentation
program on an owner-occupied property. A maximum Loan-to-Value Ratio of 70%
(or 60% for mortgage loans originated under a limited documentation program)
is permitted for a mortgage loan on a non-owner-occupied property. The debt
service-to-income ratio generally is 55% or less which, in the case of
adjustable rate mortgage loans will be based on the initial rate on the
mortgage loan plus 2% per annum unless the initial rate would not be subject
to change for an extended period.

Risk Category 4: Under Risk Category 4, the prospective mortgagor may have
experienced substantial credit problems in the past. As to the mortgaged
credit, the mortgagor may have had a history of being generally 30 to 60 days
delinquent, and a maximum of two 90-day late payments within the last 12
months is acceptable on an existing mortgage loan. The prospective mortgagor's
credit history is poor and a notice of default may have been filed. As to non-
mortgage credit, significant prior defaults may have occurred and any open
collections and charge-offs may not have been paid off prior to closing. A
bankruptcy filing by the mortgagor is permitted if it is discharged at
closing. The mortgaged property must be in average to good condition. A
maximum Loan-to-Value Ratio of 70% for mortgage loans originated under a full
or limited documentation program is permitted for a mortgage loan on an owner-
occupied property. A maximum Loan-to-Value Ratio of 65% for mortgage loans
originated under a full or limited documentation program is permitted for a
mortgage loan on a non-owner-occupied property. The debt service-to-income
ratio generally is 60% or less which, in the case of adjustable rate mortgage
loans will be based on the initial rate on the mortgage loan plus 2% per annum
unless the initial rate would not be subject to change for an extended period.

As described above, the indicated underwriting standards applicable to the
Mortgage Loans include the foregoing categories and characteristics as
guidelines only. On a case-by-case basis, the underwriting process may
determine that the prospective mortgagor warrants a risk category upgrade
based on compensating factors.

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<PAGE>

For example, the underwriting standards applicable for Risk Categories 1A, 1
and 2 may include debt service-to-income ratios up to 5% higher for mortgage
loans which have Loan-to-Value Ratios of 70% or less. An additional 5%
variance for mortgage loans which have Loan-to-Value Ratios 65% or less may
also have been permitted. Similar variance adjustments of up to 5% may have
been allowed for Risk Category 3 for mortgage loans which have Loan-to-Value
Ratios less than 65%.

The foregoing risk grade classifications are based on factors which are
exclusive of the additional protection against loss which primary mortgage
insurance customarily provides on loans which have Loan-to-Value Ratios in
excess of 80%. Substantially all of the Mortgage Loan with Loan-to-Value
Ratios in excess of 80% Loan-to-Value Ratio do not have such coverage.

Based on the indicated underwriting standards applicable for mortgage loans
with risk features originated thereunder, and in particular mortgage loans in
Risk Categories 3 and 4 as described herein, such mortgage loans are likely to
experience greater rates of delinquency, foreclosure and loss, and may
experience substantially greater rates of delinquency, foreclosure and loss
than mortgage loans underwritten under more stringent underwriting standards.

THE ALTERNET PROGRAM

Residential Funding has established a program (the "AlterNet Program")
primarily for the purchase of mortgage loans that are made to borrowers that
may have imperfect credit histories, higher debt to income ratios or mortgage
loans that present certain other risks to investors. The Mortgage Collateral
Sellers that participate in the AlterNet Mortgage Program (each, an "AlterNet
Program Seller") have been selected by Residential Funding on the basis of
criteria set forth in Residential Funding's AlterNet Seller Guide (the
"AlterNet Seller Guide"). For those Mortgage Loans which Residential Funding
purchased from AlterNet Program Sellers, each Mortgage Loan determined by
Residential Funding to be acceptable for purchase would have been originated
in accordance with or would have been determined to be generally consistent
with the provisions of the AlterNet Seller Guide. Each AlterNet Program Seller
is a HUD-approved mortgagee (or otherwise originates loans on behalf of a HUD-
approved mortgagee) or a financial institution supervised by a federal or
state authority and has had a minimum of two years' experience (which may be
through a predecessor entity) in originating mortgage loans. If an AlterNet
Program Seller becomes the subject of a receivership, conservatorship or other
insolvency or bankruptcy proceeding or if an AlterNet Program Seller's net
worth, financial performance or delinquency and foreclosure rates are
adversely impacted, such institution may continue to be treated as an AlterNet
Program Seller.

RESIDENTIAL FUNDING

Residential Funding will be responsible for master servicing the Mortgage
Loans. Such responsibilities will include the receipt of funds from
Subservicers, the reconciliation of servicing activity with respect to the
Mortgage Loans, investor reporting, remittances to the Trustee to accommodate
distributions to Certificateholders, follow up with Subservicers with respect
to Mortgage Loans that are delinquent or for which servicing decisions may
need to be made, REO management and liquidation of REO Properties, notices and
other responsibilities as detailed in the Pooling and Servicing Agreement.

Residential Funding and its affiliates are active purchasers of non-
conforming mortgage loans and have sold a substantial amount of mortgage loans
that do not present certain of the special risk factors presented by the
Mortgage Loans as described herein. Residential Funding serves as the master
servicer for transactions backed by most of such higher quality mortgage loans
and, as of March 31, 1996, Residential Funding was master servicing
approximately 120,195 of such mortgage loans, totaling approximately $28.9
billion. As a result of the underwriting standards of the Mortgage Loans,
however, the Mortgage Loans are likely to experience rates of delinquency,
foreclosure and loss that are higher, and that may be substantially higher,
than those experienced by other pools of mortgage loans for which Residential
Funding acts as master servicer. Residential Funding has not had sufficient
experience master servicing the types of mortgage loans comprising the
Mortgage Pool to provide meaningful disclosure of its delinquency and loss
experience with respect to such mortgage loans.

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<PAGE>

THE SERVICERS

Primary servicing will be provided by LSI Financial Group on a contract
basis for 92.0% of the Mortgage Loans. The remainder of the Mortgage Loans
will be serviced by various Mortgage Collateral Sellers.

LSI Financial Group is a privately held Arkansas corporation which is
actively engaged in the servicing of various financial instruments, including
auto receivables, and second and first mortgage loans. It has entered into an
agreement by which it will provide the primary servicing for various risk
featured mortgage loans which had been acquired by Residential Funding. LSI
Financial Group is an approved HUD Title I and Title II servicer. LSI services
several securitized and whole loan portfolios comprised of single family
mortgage products. LSI's corporate offices are located at 415 North McKinley
Street, Suite 1250, Little Rock, Arkansas 72205. LSI commenced mortgage
servicing operations in 1990 and since then has managed and serviced sub-prime
conduit programs, distressed RTC portfolios, and third-party mortgage loan
portfolios. The data presented below was provided by LSI Financial Group as
representative servicing information for generally comparable sub-prime credit
quality mortgage loans including mortgage loans it services on behalf of
Residential Funding, and is presented for informational purposes only. None of
the Company, the Master Servicer or the Underwriter make any representation or
warranties as to the accuracy or completeness of such information.

LSI MORTGAGE PORTFOLIO DELINQUENCY HISTORY

<TABLE>
<CAPTION>
OCTOBER 31,
1995 APRIL 30, 1996
--------------- ---------------
<S> <C> <C>
Total Number of Loans......................... 2,434 7,723
Total Dollar Amount of Loans.................. $220,594,759.59 $672,649,926.28
Weighted Average Maturity..................... 312.60 294.62
Weighted Average Coupon Rate.................. 10.59% 10.46%
</TABLE>

<TABLE>
<CAPTION>
OCTOBER 31, 1995 APRIL 30, 1996
------------------------------- -------------------------------
PERCENTAGE PERCENTAGE
PRINCIPAL BY PRINCIPAL PRINCIPAL BY PRINCIPAL
NUMBER BALANCE BALANCE NUMBER BALANCE BALANCE
------ ----------- ------------ ------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
DELINQUENCY SUMMARY(1)
30-59 days.............. 241 $24,894,345 11.29% 40 $ 2,274,400 0.34%
60-89 days.............. 39 3,769,241 1.71% 94 8,809,103 1.31%
90-119 days............. 9 1,163,886 0.53% 3 139,481 0.02%
Over 120 days........... 22 2,780,863 1.26% 77 9,311,439 1.38%
--- ----------- ----- --- ----------- ----
Total Delinquent Loans.. 311 $32,608,335 14.78% 214 $20,534,424 3.05%
=== =========== ===== === =========== ====
Loans in Foreclosure.... 1 $ 315,000 0.14% 6 $ 821,944 0.12%
</TABLE>
- --------
(1) Loss information for the mortgage loans included in the table is not
provided because a substantial number of clients for whom LSI Financial
Group services engage directly in the liquidation of REO Property.

The above information is for sub prime credit mortgage loans for which LSI
has been serving as the primary servicer. The mortgage loans were originated
and underwritten according to standards judged to be similar to the Mortgage
Loans. There is no certainty that past history is indicative of future
results. The information in the above table may vary for similar types of
mortgage loans due to various factors including differing underwriting
guidelines and economic conditions of the originating area.

It is unlikely that the delinquency experience of the Mortgage Loans
comprising the Mortgage Pool will correspond to the delinquency experience of
the mortgage portfolio set forth in the foregoing table. The statistics shown
above represent the delinquency experience for the indicated mortgage
servicing portfolio only for the periods presented, whereas the aggregate
delinquency experience on the Mortgage Loans comprising the Mortgage Pool will
depend on the results obtained over the life of the Mortgage Pool. The
mortgage servicing portfolio set forth above include mortgage loans that were
originated using a variety of different underwriting

S-31
<PAGE>

procedures and standards which may have been more selective. They include
mortgage loans with a variety of payment and other characteristics (including
geographic location) which are not necessarily representative of the payment
and other characteristics of the Mortgage Loans comprising the Mortgage Pool.
It should be noted that if the residential real estate market should
experience an overall decline in property values, the actual rates of
delinquencies and foreclosures could be higher than those previously
experienced by the Servicers. In addition, adverse economic conditions may
affect the timely payment by Mortgagors of scheduled payments of principal and
interest on the Mortgage Loans and, accordingly, the actual rates of
delinquencies and foreclosures with respect to the Mortgage Pool.

ADDITIONAL INFORMATION

The description in this Prospectus Supplement of the Mortgage Pool and the
Mortgaged Properties is based upon the Mortgage Pool as constituted at the
close of business on the Cut-off Date, as adjusted for the scheduled principal
payments due on or before such date. Prior to the issuance of the Class A
Certificates, Mortgage Loans may be removed from the Mortgage Pool as a result
of incomplete documentation or otherwise, if the Company deems such removal
necessary or appropriate. A limited number of other mortgage loans may be
included in the Mortgage Pool prior to the issuance of the Class A
Certificates. The Company believes that the information set forth herein will
be substantially representative of the characteristics of the Mortgage Pool as
it will be constituted at the time the Class A Certificates are issued
although the range of Mortgage Rates and maturities and certain other
characteristics of the Mortgage Loans in the Mortgage Pool may vary.

A Current Report on Form 8-K will be available to purchasers of the Class A
Certificates and, together with the Pooling and Servicing Agreement, will be
filed with the Securities and Exchange Commission within fifteen days after
the initial issuance of the Class A Certificates. In the event Mortgage Loans
are removed from or added to the Mortgage Pool as set forth in the preceding
paragraph, such removal or addition will be noted in the Current Report on
Form 8-K.

DESCRIPTION OF THE CERTIFICATES

GENERAL

The Certificates in the aggregate will evidence the entire beneficial
ownership interest in the Trust Fund. The Trust Fund will consist of: (i) the
Mortgage Loans; (ii) such assets as from time to time are identified as
deposited in respect of the Mortgage Loans in the Custodial Account and in the
Certificate Account and belonging to the Trust Fund; (iii) property acquired
by foreclosure of such Mortgage Loans or deed in lieu of foreclosure; and (iv)
any applicable Primary Insurance Policies and Primary Hazard Insurance
Policies; (v) the Policy; and (vi) all proceeds of the foregoing. In addition,
the Class A Certificates will be entitled to the benefit of the Policy to be
issued by the Insurer, which will, subject to its terms, protect the holders
of the Class A Certificates against any interest shortfalls (except as
described herein) allocated to the Class A Certificates and the principal
portion of any Realized Losses allocated to the Class A Certificates. See
"Description of the Certificates--Certificate Guaranty Insurance Policy."

The DTC Registered Certificates will be issued, maintained and transferred
on the book-entry records of DTC and its Participants. The DTC Registered
Certificates will be issued in minimum denominations of $25,000 and integral
multiples of $1 in excess thereof.

The DTC Registered Certificates will be represented by one or more
certificates registered in the name of the nominee of DTC. The Company has
been informed by DTC that DTC's nominee will be Cede & Co. ("Cede"). No
Beneficial Owner will be entitled to receive a Definitive Certificate, except
as set forth below

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<PAGE>

under "--Book Entry Registration of Certain of the Class A Certificates--
Definitive Certificates." Unless and until the Definitive Certificates are
issued for the DTC Registered Certificates under the limited circumstances
described herein, all references to actions by Certificateholders with respect
to the DTC Registered Certificates shall refer to actions taken by DTC upon
instructions from its Participants, and all references herein to
distributions, notices, reports and statements to Certificateholders with
respect to the DTC Registered Certificates shall refer to distributions,
notices, reports and statements to DTC or Cede, as the registered holder of
the DTC Registered Certificates, for distribution to Beneficial Owners by DTC
in accordance with DTC procedures.

BOOK-ENTRY REGISTRATION OF CERTAIN OF THE CLASS A CERTIFICATES

General. Beneficial Owners that are not Participants or Intermediaries but
desire to purchase, sell or otherwise transfer ownership of, or other
interests in, the DTC Registered Certificates may do so only through
Participants and Intermediaries. In addition, Beneficial Owners will receive
all distributions of principal of and interest on the DTC Registered
Certificates from the Paying Agent through DTC and Participants. Accordingly,
Beneficial Owners may experience delays in their receipt of payments. Unless
and until Definitive Certificates are issued for the DTC Registered
Certificates, it is anticipated that the only registered Certificateholder of
the DTC Registered Certificates will be Cede, as nominee of DTC. Beneficial
Owners will not be recognized by the Trustee or the Master Servicer as
Certificateholders, as such term is used in the Pooling and Servicing
Agreement, and Beneficial Owners will be permitted to receive information
furnished to Certificateholders and to exercise the rights of
Certificateholders only indirectly through DTC, its Participants and
Intermediaries.

Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
DTC Registered Certificates among Participants and to receive and transmit
distributions of principal of, and interest on, such DTC Registered
Certificates. Participants and Intermediaries with which Beneficial Owners
have accounts with respect to such DTC Registered Certificates similarly are
required to make book-entry transfers and receive and transmit such
distributions on behalf of their respective Beneficial Owners. Accordingly,
although Beneficial Owners will not possess physical certificates evidencing
their interests in the DTC Registered Certificates, the Rules provide a
mechanism by which Beneficial Owners, through their Participants and
Intermediaries, will receive distributions and will be able to transfer their
interests in the DTC Registered Certificates.

None of the Company, the Master Servicer or the Trustee will have any
liability for any actions taken by DTC or its nominee, including, without
limitation, actions for any aspect of the records relating to or payments made
on account of beneficial ownership interests in the DTC Registered
Certificates held by Cede, as nominee for DTC, or for maintaining, supervising
or reviewing any records relating to such beneficial ownership interests.

Definitive Certificates. Definitive Certificates will be issued to
Beneficial Owners or their nominees, respectively, rather than to DTC or its
nominee, only under the limited conditions set forth in the Prospectus under
"Description of the Certificates--Form of Certificates."

Upon the occurrence of an event described in the Prospectus in the fourth
paragraph under "Description of the Certificates--Form of Certificates," the
Trustee is required to notify, through DTC, Participants who have ownership of
DTC Registered Certificates as indicated on the records of DTC of the
availability of Definitive Certificates for their DTC Registered Certificates.
Upon surrender by DTC of Definitive Certificates representing the DTC
Registered Certificates and upon receipt of instructions from DTC for re-
registration, the Trustee will reissue the DTC Registered Certificates as
Definitive Certificates issued in the respective principal amounts owned by
individual Beneficial Owners, and thereafter the Trustee and the Master
Servicer will recognize the holders of such Definitive Certificates as
Certificateholders under the Pooling and Servicing Agreement.

For additional information regarding DTC and the DTC Registered
Certificates, see "Description of the Certificates--Form of Certificates" in
the Prospectus.

S-33
<PAGE>

AVAILABLE DISTRIBUTION AMOUNT

The "Available Distribution Amount" for any Distribution Date is equal to
the sum of (i) the aggregate amount of scheduled payments on the Mortgage
Loans due on the related Due Date and received on or prior to the related
Determination Date, after deduction of the master servicing fee and the
subservicing fees (collectively, the "Servicing Fees") and the premium payable
with respect to the Policy, (ii) certain unscheduled payments, including
Mortgagor prepayments on the Mortgage Loans, Insurance Proceeds, Liquidation
Proceeds and proceeds from repurchases of and substitutions for the Mortgage
Loans occurring during the preceding calendar month, and (iii) all Advances
made for such Distribution Date, in each case net of amounts reimbursable
therefrom to the Master Servicer and any Subservicer. With respect to any
Distribution Date, (i) the Due Date is the first day of the month in which
such Distribution Date occurs, and (ii) the Determination Date is the 20th day
of the month in which such Distribution Date occurs or, if such day is not a
business day, the immediately succeeding business day.

The Master Servicer may elect to treat Insurance Proceeds, Liquidation
Proceeds and other unscheduled collections (not including prepayments by the
Mortgagors) received in any calendar month as included in the Available
Distribution Amount for the Distribution Date in the month of receipt, but is
not obligated to do so. If the Master Servicer so elects, such amounts will be
deemed to have been received (and any related Realized Loss shall be deemed to
have occurred) on the last day of the month prior to the receipt thereof.

INTEREST DISTRIBUTIONS

On each Distribution Date, holders of the Class A Certificates will be
entitled to receive interest distributions (the "Interest Distribution
Amount") in an amount equal to the Accrued Certificate Interest thereon for
such Distribution Date; provided that on any Distribution Date on which such
amount exceeds an amount equal to (i) one-twelfth of the product of (a) the
aggregate Stated Principal Balance of the Mortgage Loans multiplied by (b) the
weighted average of the Net Mortgage Rates on the Mortgage Loans as of the
first day of the calendar month in which the Accrual Period begins, minus (ii)
the amount of the premium payable to the Insurer with respect to the Policy
for such Distribution Date, the amount of such difference (any such amount, an
"Unpaid Interest Shortfall") will not be included in the Interest Distribution
Amount for such Distribution Date and will accrue interest at the Pass-Through
Rate on the Class A Certificates (as adjusted from time to time) and will be
paid (together with interest thereon) on future Distribution Dates only to the
extent of any Net Monthly Excess Cash Flow available therefor on such
Distribution Dates. Unpaid Interest Shortfalls will not be covered by the
Policy and may remain unpaid on the final Distribution Date or any earlier
termination of the Trust Fund. See "--Overcollateralization Provisions" and
"--Certificate Guaranty Insurance Policy." As described below, Accrued
Certificate Interest on the Class A Certificates is subject to reduction in
the event of certain interest shortfalls allocable thereto. However, in the
event that any such shortfall is allocated to the Class A Certificates,
subject to the terms of the Policy, the amount of such allocated shortfall
will be drawn under the Policy and distributed to the holders of the Class A
Certificates; provided that no such draw will be made in respect of any such
shortfall caused by the Relief Act, Prepayment Interest Shortfalls and Unpaid
Interest Shortfalls. Notwithstanding the foregoing, if payments are not made
as required under the Policy, any interest shortfalls may be allocated to the
Class A Certificates as described below. See "Description of the
Certificates--Certificate Guaranty Insurance Policy."

With respect to any Distribution Date and the Class A Certificates, Accrued
Certificate Interest will be equal to interest accrued during the related
Accrual Period on the Certificate Principal Balance of the Class A
Certificates at the then-applicable Pass-Through Rate, in each case, less
interest shortfalls, if any, allocated to such class for such Distribution
Date, to the extent not covered with respect to the Class A Certificates by
the Subordination provided by the Class R Certificates, including in each case
(i) any Prepayment Interest Shortfall (as defined below) to the extent not
covered by the Master Servicer as described below, (ii) the interest portions
of Realized Losses including Special Hazard Losses in excess of the Special
Hazard Amount ("Excess Special Hazard Losses"), Fraud Losses in excess of the
Fraud Loss Amount ("Excess Fraud Losses"), Bankruptcy Losses in excess of the
Bankruptcy Loss Amount ("Excess Bankruptcy Losses") and losses occasioned by
war, civil insurrection, certain governmental actions, nuclear reaction and
certain other risks ("Extraordinary Losses") not allocated solely to the Class
R Certificates, (iii) the interest portion of any Advances that were

S-34
<PAGE>

made with respect to delinquencies that were ultimately determined to be
Excess Special Hazard Losses, Excess Fraud Losses, Excess Bankruptcy Losses or
Extraordinary Losses, and (iv) any other interest shortfalls not covered by
Subordination, including interest shortfalls relating to the Relief Act or
similar legislation or regulations, all allocated as described below. With
respect to each Distribution Date, interest payable on the Class A
Certificates will accrue during the related Accrual Period which is the period
commencing on the Distribution Date of the month immediately preceding the
month in which such Distribution Date occurs (or in the case of the initial
Distribution Date, commencing on the Closing Date) and ending on the day
preceding such Distribution Date. Interest will be calculated on the basis of
the actual number of days in the related Accrual Period and on a 360-day year.

The Prepayment Interest Shortfall for any Distribution Date is equal to the
aggregate shortfall, if any, in collections of interest resulting from
Mortgagor prepayments on the Mortgage Loans during the preceding calendar
month. Such shortfalls will result because interest on prepayments in full is
distributed only to the date of prepayment, and because no interest is
distributed on prepayments in part, as such prepayments in part are applied to
reduce the outstanding principal balance of the related Mortgage Loans as of
the Due Date in the month of prepayment. However, with respect to any
Distribution Date, any Prepayment Interest Shortfalls resulting from
prepayments in full during the preceding calendar month will be offset by the
Master Servicer, but only to the extent such Prepayment Interest Shortfalls do
not exceed an amount equal to the lesser of (a) one-twelfth of 0.125% of the
Stated Principal Balance (as defined herein) of the Mortgage Loans immediately
preceding such Distribution Date and (b) the sum of the master servicing fee
payable to the Master Servicer in respect of its master servicing activities
and reinvestment income received by the Master Servicer on amounts payable
with respect to such Distribution Date. Prepayment Interest Shortfalls
resulting from partial prepayments will not be offset by the Master Servicer
from master servicing compensation or otherwise. No assurance can be given
that the master servicing compensation available to cover Prepayment Interest
Shortfalls will be sufficient therefor. See "Pooling and Servicing Agreement--
Servicing and Other Compensation and Payment of Expenses" herein.

Holders of the Class A Certificates will be entitled to receive interest
distributions based on the then-applicable Pass-Through Rate, subject to the
limitations set forth herein, which may result in Unpaid Interest Shortfalls.
The Pass-Through Rate on the Class A Certificates with respect to any Accrual
Period will equal the lesser of (i) a per annum rate equal to 0.35% plus One-
Month LIBOR or, on any Distribution Date when the aggregate Stated Principal
Balance of the Mortgage Loans is less than 10% of the aggregate principal
balance of the Mortgage Loans as of the Cut-off Date, a per annum rate equal
to 0.70% plus One-Month LIBOR and (ii) a per annum rate (the "Maximum Class A
Rate") equal to (x) (1)one-twelfth of the aggregate Stated Principal Balance
of the Mortgage Loans multiplied by the weighted average of the Maximum Net
Mortgage Rates on the Mortgage Loans as of the first day of the calendar month
in which the Accrual Period begins, minus (2) the amount of the premium
payable to the Insurer with respect to the Policy for such Distribution Date,
divided by (y) the Certificate Principal Balance of the Class A Certificates
as of such Distribution Date multiplied by (z) 360 divided by the actual
number of days in the related Accrual Period. The Pass-Through Rate on the
Class A Certificates with respect to the initial Accrual Period will be 5.85%
per annum. For a description of the Net Mortgage Rates on the Mortgage Loans,
see "Description of the Mortgage Pool--Mortgage Pool Characteristics" herein.

On any Distribution Date, the amount of the premium (the "Premium Fee")
payable to the Insurer with respect to the Policy is equal to one-twelfth of
the product of a percentage specified in the Policy and the Certificate
Principal Balance of the Class A Certificates.

The Certificate Principal Balance of any Class A Certificate as of any date
of determination is equal to the initial Certificate Principal Balance
thereof, reduced by the aggregate of (a) all amounts allocable to principal
previously distributed with respect to such Certificate and (b) any reductions
in the Certificate Principal Balance thereof deemed to have occurred in
connection with allocations of Realized Losses in the manner described herein.
The Certificate Principal Balance of the Class R Certificates in the
aggregate, as of any date of determination is equal to the excess, if any, of
(a) the then aggregate Stated Principal Balance of the Mortgage Loans over (b)
the then aggregate Certificate Principal Balance of the Class A Certificates.

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CALCULATION OF ONE-MONTH LIBOR

The Pass-Through Rate on the Class A Certificates with respect to the
initial Accrual Period will be 5.85% per annum. Thereafter, on the second
business day preceding each Distribution Date (each such date, an "Interest
Determination Date"), the Trustee will determine the London interbank offered
rate for one-month U.S. dollar deposits ("One-Month LIBOR") for the next
Accrual Period for the Class A Certificates on the basis of the offered rates
of the Reference Banks for one-month U.S. dollar deposits, as such rates
appear on the Reuter Screen LIBO Page, as of 11:00 a.m. (London time) on such
Interest Determination Date. As used in this section, "business day" means a
day on which banks are open for dealing in foreign currency and exchange in
London; "Reuter Screen LIBO Page" means the display designated as page "LIBO"
on the Reuter Monitor Money Rates Service (or such other page as may replace
the LIBO page on that service for the purpose of displaying London interbank
offered rates of major banks); and "Reference Banks" means leading banks
selected by the Trustee and engaged in transactions in Eurodollar deposits in
the international Eurocurrency market (i) with an established place of
business in London, (ii) whose quotations appear on the Reuter Screen LIBO
Page on the Interest Determination Date in question, (iii) which have been
designated as such by the Trustee and (iv) not controlling, controlled by, or
under common control with, the Company or any Seller.

On each Interest Determination Date, One-Month LIBOR for the related Accrual
Period for the Class A Certificates will be established by the Trustee as
follows:

(a) If on such Interest Determination Date two or more Reference Banks
provide such offered quotations, One-Month LIBOR for the related Accrual
Period shall be the arithmetic mean of such offered quotations (rounded
upwards if necessary to the nearest whole multiple of 0.0625%).

(b) If on such Interest Determination Date fewer than two Reference Banks
provide such offered quotations, One-Month LIBOR for the related Accrual
Period shall be the higher of (x) One-Month LIBOR as determined on the
previous Interest Determination Date and (y) the Reserve Interest Rate. The
"Reserve Interest Rate" shall be the rate per annum that the Trustee
determines to be either (i) the arithmetic mean (rounded upwards if
necessary to the nearest whole multiple of 0.0625%) of the one-month U.S.
dollar lending rates which New York City banks selected by the Trustee are
quoting on the relevant Interest Determination Date to the principal London
offices of leading banks in the London interbank market or, in the event
that the Trustee can determine no such arithmetic mean, (ii) the lowest
one-month U.S. dollar lending rate which New York City banks selected by
the Trustee are quoting on such Interest Determination Date to leading
European banks.

The establishment of One-Month LIBOR on each Interest Determination Date by
the Trustee and the Trustee's calculation of the rate of interest applicable
to the Class A Certificates for the related Accrual Period shall (in the
absence of manifest error) be final and binding.

PRINCIPAL DISTRIBUTIONS ON THE CLASS A CERTIFICATES

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

(a) the excess of (i) the Available Distribution Amount over (ii) the
Interest Distribution Amount; and

(b) the sum of:

(i) the principal portion of all scheduled monthly payments on the
Mortgage Loans received or Advanced (as defined herein) on the Mortgage
Loans with respect to the related Due Date;

(ii) the principal portion of all proceeds of the repurchase of a
Mortgage Loan (or, in the case of a substitution, certain amounts
representing a principal adjustment) as required by the Pooling and
Servicing Agreement during the preceding calendar month;

(iii) the principal portion of all other unscheduled collections
received during the preceding calendar month (or deemed to be received
during the preceding calendar month) (including, without

S-36
<PAGE>

limitation, full and partial Principal Prepayments made by the
respective Mortgagors, Liquidation Proceeds and Insurance Proceeds
(excluding proceeds paid in respect of the Policy), to the extent not
distributed in the preceding month;

(iv) the principal portion of any Realized Losses incurred (or deemed
to have been incurred) on any Mortgage Loans in the calendar month
preceding such Distribution Date to the extent covered by Net Monthly
Excess Cash Flow for such Distribution Date; and

(v) the amount of any Subordination Increase Amount (as defined
herein) for such Distribution Date;

minus

(vi) the amount of any Subordination Reduction Amount (as defined
herein) for such Distribution Date.

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 Certificate Principal Balance of the Class A Certificates.

In addition, on each Distribution Date, funds received as a result of a
claim under the Policy in respect of the principal portion of Realized Losses
allocated to Class A Certificates will be distributed by or on behalf of the
Trustee to the holders of the Class A Certificates. See "Description of the
Certificates--Certificate Guaranty Insurance Policy" herein.

On each Distribution Date, the Insurer shall be entitled to receive, after
payment to the Class A Certificateholders of the Interest Distribution Amount
and the Class A Principal Distribution Amount (but before application of any
Subordination Increase Amount), from the Available Distribution Amount
remaining, the aggregate of any payment ("Cumulative Insurance Amounts") by
the Insurer under the Policy to the extent not previously reimbursed, plus
interest thereon. See "--Certificate Guaranty Insurance Policy."

The Stated Principal Balance of any Mortgage Loan as of any date of
determination is equal to the principal balance thereof as of the Cut-off
Date, after application of all scheduled principal payments due on or before
the Cut-off Date, whether or not received, reduced by all other amounts
allocable to principal that have been distributed to Certificateholders with
respect to such Mortgage Loan on or before such date, and as further reduced
to the extent that any Realized Loss thereon has been allocated to one or more
classes of Certificates on or before the date of determination.

OVERCOLLATERALIZATION PROVISIONS

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 Available Distribution Amount for such Distribution Date over (y) the sum
of (i) the Interest Distribution Amount payable to the Class A
Certificateholders on such Distribution Date and the amount described in
clauses (b)(i)-(iii) of the definition of "Class A Principal Distribution
Amount" and (ii) Cumulative Insurance Amounts, if any, for such Distribution
Date.

The Net Monthly Excess Cash Flow for any Distribution Date will derive
primarily from the amount of interest accrued on the Mortgage Loans in excess
of the sums of (a) the Interest Distribution Amount, (b) the premium payable
on the Policy and (c) accrued Servicing Fees, in each case in respect of such
Distribution Date. Net Monthly Excess Cash Flow will be applied on any
Distribution Date first to pay the principal portion of Realized Losses
incurred on the Mortgage Loans for the preceding calendar month, second to the
payment of Cumulative Insurance Amounts, third to pay any Subordination
Increase Amount, fourth to pay any Unpaid Interest Shortfalls remaining from
prior Distribution Dates, together with interest thereon, and last, to pay to
the holder of the Class R Certificates.

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<PAGE>

With respect to any Distribution Date, the excess, if any, of (a) the
aggregate Stated Principal Balances of the Mortgage Loans immediately
following such Distribution Date over (b) the Certificate Principal Balance of
the Class A Certificates as of such date (after taking into account the
payment of the amounts described in clauses (b)(i)-(iv) of the definition of
"Class A Principal Distribution Amount" on such Distribution Date) is the
"Subordinated Amount" as of such Distribution Date. The Pooling and Servicing
Agreement requires that the Net Monthly Excess Cashflow, as reduced by the
principal portion of any Realized Losses included in clause (b)(iv) of the
definition of "Class A Principal Distribution Amount," will be applied as an
accelerated payment of principal on the Class A Certificates to the extent the
Required Subordinated Amount exceeds the Subordinated Amount as of such
Distribution Date. 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 "Required Subordinated Amount" with respect to such Distribution
Date. The Required Subordinated Amount will be set at an amount equal to 2.5%
of the Stated Principal Balance of the Mortgage Loans as of the Cut-off Date
until the later to occur of (i) the 31st month following the Cut-off Date and
(ii) the first Distribution Date on which the Stated Principal Balance of the
Mortgage Loans is equal to or less than 50% of the aggregate Stated Principal
Balance of the Mortgage Loans as of the Cut-off Date. Thereafter, subject to
certain loss and delinquency triggers relating to the performance of the
Mortgage Pool and reimbursements of Cumulative Insurance Amounts to the
Insurer, the Required Subordinated Amount with respect to a Distribution Date
will be equal to the lesser of (a) the initial Required Subordinated Amount
and (b) 5.0% of the then outstanding Stated Principal Balance of the Mortgage
Loans immediately preceding such Distribution Date (but not less than 1.0% of
the Stated Principal Balance of the Mortgage Loans as of the Cut-off Date);
provided, however, the Required Subordinated Amount may be required to
increase to a percentage not in excess of 7.5% of the then outstanding Stated
Principal Balance of the Mortgage Loans immediately preceding such
Distribution Date under certain circumstances relating to the loss and
delinquency performance of the Mortgage Pool.

In the event that the Required 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 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 excess, if any, of (a) the Subordinated Amount on such Distribution Date
over (b) the Required 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
Required 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
specified in clauses (b)(i)-(iii) of the definition of "Class A Principal
Distribution Amount" on such Distribution Date; such amount being the
"Subordination Reduction Amount" for such Distribution Date.

CERTIFICATE GUARANTY INSURANCE POLICY

The following summary of the terms of the Policy does not purport to be
complete and is qualified in its entirety by reference to the Policy. The
following information regarding the Policy has been supplied by the Insurer
for inclusion herein.

The Insurer, in consideration of the payment of the premium and subject to
the terms of the Policy, thereby unconditionally and irrevocably guarantees to
any Holder (as defined below) that an amount equal to each full and complete
Insured Amount will be received by the Trustee, or its successor, on behalf of
the Holders from the Insurer, for distribution by the Trustee to each Holder
of each Holder's proportionate share of the Insured

S-38
<PAGE>

Amount. The Insurer's obligations under the Policy with respect to a
particular Insured Amount shall be discharged to the extent funds equal to the
applicable Insured Amount are received by the Trustee from the Insurer,
whether or not such funds are properly applied by the Trustee. Payments of
Insured Amounts shall be made only at the time set forth in the Policy, and no
accelerated payments of Insured Amounts shall be made regardless of any
acceleration of the Class A Certificates, unless such acceleration is at the
sole option of the Insurer.

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

The Insurer will pay any amounts payable under the Policy no later than
12:00 noon, New York City time, on the later of the Distribution Date on which
the related Deficiency Amount (as defined below) is due or the Business Day
following receipt in New York, New York on a Business Day of a Notice (as
described below); provided that if such Notice is received after 12:00 noon,
New York City time, on such Business Day, it will be deemed to be received on
the following Business Day. If any such Notice received is not in proper form
or is otherwise insufficient for the purpose of making claim under the Policy,
it shall be deemed not to have been received for purposes of this paragraph,
and the Insurer shall promptly so advise the Trustee and the Trustee may
submit an amended Notice.

Insured Amounts due under the Policy, unless otherwise stated therein, will
be disbursed by the Insurer to the Trustee on behalf of the Holders by wire
transfer of immediately available funds in the amount of the Insured Amounts.

As used in the Policy, the following terms shall have the following
meanings:

"Agreement" means the Pooling and Servicing Agreement dated as of June 1,
1996, among Residential Asset Securities Corporation, as company, Residential
Funding Corporation, as master servicer, and the Trustee, as trustee, without
regard to any amendment or supplement thereto.

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

"Deficiency Amount" means, with respect to the Class A Certificates as of
any Distribution Date (i) any shortfall in amounts available in the
Certificate Account to pay interest for the related Accrual Period on the
Certificate Principal Balance of the Class A Certificates at the then
applicable Pass-Through Rate, net of any Prepayment Interest Shortfalls, any
interest shortfalls relating to the Relief Act and any Unpaid Interest
Shortfalls and allocated to the Class A Certificates, (ii) the principal
portion of any Realized Loss allocated to the Class A Certificates and (iii)
the Certificate Principal Balance of the Class A Certificates to the extent
unpaid on the final Distribution Date or earlier termination of the Trust Fund
pursuant to the terms of the Agreement.

"Holder" means any person who is the registered or beneficial owner of any
of the Class A Certificates and who, on the applicable Distribution Date, is
entitled under the terms of the applicable Certificate to payment thereunder.

"Insured Amount" means, as of any Distribution Date, any Deficiency Amount.

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

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<PAGE>

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

The Policy is being issued under and pursuant to and shall be construed
under, the laws of the State of Illinois, without giving effect to the
conflict of laws principles thereof.

The insurance provided by the Policy is not covered by the Property/Casualty
Insurance Security Fund specified in Article 76 of the New York Insurance Law.

The Policy is not cancelable for any reason. The premium on the Policy is
not refundable for any reason including payment, or provision being made for
payment, prior to maturity of the Class A Certificates.

ALLOCATION OF LOSSES; SUBORDINATION

To the extent provided in the Policy, the Policy will cover all Realized
Losses allocated to the Class A Certificates. Notwithstanding the foregoing,
if payments are not made as required under the Policy, Realized Losses will be
allocable to the Class A Certificates based on the following priorities.

The Subordination provided to the Class A Certificates by the Class R
Certificates will cover Realized Losses on the Mortgage Loans that are
Defaulted Mortgage Losses, Fraud Losses, Bankruptcy Losses (each, as defined
in the Prospectus) and Special Hazard Losses (as defined herein). Any Realized
Losses which are not Excess Special Hazard Losses, Excess Fraud Losses, Excess
Bankruptcy Losses or Extraordinary Losses will be allocated first, to the
Class R Certificates until the Certificate Principal Balance of the Class R
Certificates has been reduced to zero; second, to the Net Monthly Excess Cash
Flow for the related Distribution Date; and third, to the Class A
Certificates. Any allocation of a Realized Loss (other than a Debt Service
Reduction) to a Certificate will be made by reducing the Certificate Principal
Balance thereof, in the case of the principal portion of such Realized Loss,
and the Accrued Certificate Interest thereon, in the case of the interest
portion of such Realized Loss, by the amount so allocated as of the
Distribution Date occurring in the month following the calendar month in which
such Realized Loss was incurred. As used herein, "Debt Service Reduction"
means a reduction in the amount of the monthly payment due to certain
bankruptcy proceedings, but does not include any permanent forgiveness of
principal. As used herein, "Subordination" refers to the provisions discussed
above for the sequential allocation of Realized Losses among the various
classes, as well as all provisions effecting such allocations including the
priorities for distribution of cash flows in the amounts described herein.

Any Excess Special Hazard Losses, Excess Fraud Losses, Excess Bankruptcy
Losses, Extraordinary Losses or other losses of a type not covered by
Subordination will be allocated on a pro rata basis among the Class A
Certificates and Class R Certificates. An allocation of a Realized Loss on a
"pro rata basis" among two or more classes of Certificates means an allocation
to each such class of Certificates on the basis of its then outstanding
Certificate Principal Balance prior to giving effect to distributions to be
made on such Distribution Date (in the case of an allocation of the principal
portion of a Realized Loss) or based on the Accrued Certificate Interest
thereon (in the case of an allocation of the interest portion of a Realized
Loss).

With respect to any defaulted Mortgage Loan that is finally liquidated,
through foreclosure sale, disposition of the related Mortgaged Property if
acquired on behalf of the Certificateholders by deed in lieu of foreclosure,
or otherwise, the amount of loss realized, if any, will equal the portion of
the Stated Principal Balance remaining, if any, plus interest thereon through
the last day of the month in which such Mortgage Loan was finally liquidated,
after application of all amounts recovered (net of amounts reimbursable to the
Master Servicer or the Subservicer for Advances and expenses, including
attorneys' fees) towards interest and principal owing on the Mortgage Loan.
Such amount of loss realized and any Special Hazard Losses, Fraud Losses and
Bankruptcy Losses are referred to herein as "Realized Losses."

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<PAGE>

In order to maximize the likelihood of distribution in full of amounts of
interest and principal to be distributed to holders of the Class A
Certificates on each Distribution Date, holders of Class A Certificates have a
right to distributions of the Available Distribution Amount that is prior to
the rights of the holders of the Class R Certificates. In addition, the
overcollateralization as described herein will also maximize the likelihood of
distribution of full amounts of interest and principal to holders of the Class
A Certificates on each Distribution Date.

The aggregate amount of Realized Losses which may be allocated to the Class
R Certificates or covered by Net Monthly Excess Cash Flow otherwise
distributable to the Class R Certificateholders in connection with Fraud
Losses (the "Fraud Loss Amount") through Subordination shall initially be
equal to $4,311,930. As of any date of determination after the Cut-off Date,
the Fraud Loss Amount shall equal (X) prior to the first anniversary of the
Cut-off Date an amount equal to 3.00% of the aggregate principal balance of
all of the Mortgage Loans as of the Cut-off Date minus the aggregate amounts
allocated through Subordination with respect to Fraud Losses up to such date
of determination; (Y) from the first to the second anniversary of the Cut-off
Date, an amount equal to (1) the lesser of (a) the Fraud Loss Amount as of the
most recent anniversary of the Cut-off Date and (b) 2.00% of the aggregate
principal balance of all of the Mortgage Loans as of the most recent
anniversary of the Cut-off Date minus (2) the aggregate amount allocated
through Subordination with respect to Fraud Losses since the most recent
anniversary of the Cut-off Date up to such date of determination; and (Z) from
the second to the fifth anniversary of the Cut-off Date, an amount equal to
(1) the lesser of (a) the Fraud Loss Amount as of the most recent anniversary
of the Cut-off Date and (b) 1.00% of the aggregate principal balance of all of
the Mortgage Loans as of the most recent anniversary of the Cut-off Date minus
(2) the aggregate amount allocated through Subordination with respect to Fraud
Losses since the most recent anniversary of the Cut-off Date up to such date
of determination. On and after the fifth anniversary of the Cut-off Date the
Fraud Loss Amount shall be zero and Fraud Losses shall not be allocated
through Subordination.

The aggregate amount of Realized Losses which may be allocated to the Class
R Certificates or covered by Net Monthly Excess Cashflow otherwise
distributable to the Class R Certificateholders in connection with Bankruptcy
Losses (the "Bankruptcy Amount") through Subordination will initially be equal
to $100,000. As of any date of determination, the Bankruptcy Amount shall
equal $100,000 less the sum of any amounts allocated through Subordination for
such losses up to such date of determination.

Notwithstanding the foregoing, the provisions relating to Subordination will
not be applicable in connection with a Bankruptcy Loss so long as the Master
Servicer has notified the Trustee in writing that the Master Servicer is
diligently pursuing any remedies that may exist in connection with the
representations and warranties made regarding the related Mortgage Loan and
either (A) the related Mortgage Loan is not in default with regard to payments
due thereunder or (B) delinquent payments of principal and interest under the
related Mortgage Loan and any premiums on any applicable Primary Hazard
Insurance Policy and any related escrow payments in respect of such Mortgage
Loan are being advanced on a current basis by the Master Servicer or a
Subservicer.

The Special Hazard Amount, Fraud Amount and Bankruptcy Amount are subject to
further reduction as described in the Prospectus under "Subordination."

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<PAGE>

ADVANCES

Prior to each Distribution Date, the Master Servicer is required to make
Advances (out of its own funds, advances made by a Subservicer, or funds held
in the Custodial Account (as described in the Prospectus) for future
distribution or withdrawal) with respect to any payments of principal and
interest (net of the Servicing Fee Rate) which were due on the Mortgage Loans
on the immediately preceding Due Date and delinquent on the business day next
preceding the related Determination Date.

Such Advances are required to be made only to the extent they are deemed by
the Master Servicer to be recoverable from related late collections, Insurance
Proceeds, or Liquidation Proceeds. The purpose of making such Advances is to
maintain a regular cash flow to the Certificateholders, rather than to
guarantee or insure against losses. The Master Servicer will not be required
to make any Advances with respect to reductions in the amount of the monthly
payments on the Mortgage Loans due to Debt Service Reductions or the
application of the Relief Act or similar legislation or regulations. Any
failure by the Master Servicer to make an Advance as required under the
Pooling and Servicing Agreement will constitute an Event of Default
thereunder, in which case the Trustee, as successor Master Servicer, will be
obligated to make any such Advance, in accordance with the terms of the
Pooling and Servicing Agreement.

All Advances will be reimbursable to the Master Servicer on a first priority
basis from either late collections, Insurance Proceeds or Liquidation Proceeds
from the Mortgage Loan as to which such unreimbursed Advance was made. In
addition, any Advances previously made which are deemed by the Master Servicer
to be nonrecoverable from related late collections, Insurance Proceeds and
Liquidation Proceeds may be reimbursed to the Master Servicer out of any funds
in the Custodial Account prior to distributions on the Class A Certificates.

THE INSURER

The following information has been supplied by AMBAC Indemnity Corporation
("AMBAC" or the "Insurer") for inclusion in this Prospectus Supplement. No
representation is made by the Company, the Underwriter or any of their
affiliates as to the accuracy or completeness of such information.

AMBAC is a Wisconsin-domiciled stock insurance corporation regulated by the
Office of the Commissioner of Insurance of the State of Wisconsin and licensed
to do business in 50 states, the District of Columbia, the Commonwealth of
Puerto Rico and Guam. AMBAC primarily insures newly issued municipal bonds.
AMBAC is a wholly owned subsidiary of AMBAC Inc., a 100% publicly held
company. Moody's, Standard & Poor's and Fitch Investors Service, L.P. have
each assigned a triple-A claims-paying ability rating to AMBAC.

AMBAC has entered into pro rata reinsurance agreements under which a
percentage of the insurance underwritten pursuant to certain of AMBAC's
municipal bond insurance programs has been and will be assumed by a number of
foreign and domestic unaffiliated reinsurers.

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<PAGE>

The following table sets forth AMBAC's capitalization as of December 31,
1993, December 31, 1994, December 31, 1995 and March 31, 1996, respectively,
on the basis of generally accepted accounting principles.

AMBAC INDEMNITY CORPORATION

CAPITALIZATION TABLE
(DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31,
1993 1994 1995 1996
------------ ------------ ------------ ---------
UNAUDITED
<S> <C> <C> <C> <C>
Unearned premiums............. $ 785 $ 840 $ 906 $ 924
Other liabilities............. 192 136 295 225
Stockholder's equity:
Common stock................ 82 82 82 82
Additional paid-in capital.. 444 444 481 481
Unrealized gain (loss) on
bonds; net of tax.......... 68 (46) 87 30
Retained earnings........... 668 782 907 944
------ ------ ------ ------
Total stockholder's equity.... $1,262 $1,262 $1,557 $1,537
------ ------ ------ ------
Total liabilities and stock- $2,239 $2,238 $2,758 $2,686
holder's equity.............. ====== ====== ====== ======
</TABLE>

For additional financial information concerning AMBAC, see the audited
financial statements of AMBAC included in Appendix A of this Prospectus
Supplement.

Effective December 31, 1993, AMBAC adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Debt and Equity Securities"
("Statement 115") with all investments designated as available-for-sale. As
required under Statement 115, prior years' financial statements have not been
restated. The cumulative effect of adopting Statement 115 as of December 31,
1993 was to increase AMBAC's stockholder's equity $63.6 million, net of tax.
The adoption of Statement 115 had no effect on earnings.

AMBAC makes no representation regarding the Certificates or the advisability
of investing in the Certificates and makes no representation regarding, nor
has it participated in the preparation of, the Prospectus Supplement other
than the information supplied by the Insurer and presented under the heading
"THE INSURER" and "DESCRIPTION OF THE CERTIFICATES--Certificate Guaranty
Insurance Policy" and in the financial statements hereto.

THE POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND
SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.

CERTAIN YIELD AND PREPAYMENT CONSIDERATIONS

GENERAL

The yield to maturity and the aggregate amount of distributions on the Class
A Certificates will be affected by the rate and timing of principal payments
on the Mortgage Loans, the amount and timing of Mortgagor defaults resulting
in Realized Losses and by adjustments to the Mortgage Rates. Such yield may be
adversely affected by a higher or lower than anticipated rate of principal
payments on the Mortgage Loans in the Trust Fund. The rate of principal
payments on such Mortgage Loans will in turn be affected by the amortization
schedules of the Mortgage Loans (which will change as described in
"Description of the Mortgage Pool-- Mortgage Rate Adjustment"), the rate and
timing of principal prepayments thereon by the Mortgagors, liquidations of
defaulted Mortgage Loans and purchases of Mortgage Loans due to certain
breaches of representations and warranties. The timing of changes in the rate
of prepayments, liquidations and repurchases of the Mortgage Loans may, and
the timing of Realized Losses will, significantly affect the yield to an
investor,

S-43
<PAGE>

even if the average rate of principal payments experienced over time is
consistent with an investor's expectation. Since the rate and timing of
principal payments on the Mortgage Loans will depend on future events and on a
variety of factors (as described more fully herein and in the Prospectus under
"Yield Considerations" and "Maturity and Prepayment Considerations"), no
assurance can be given as to such rate or the timing of principal payments on
the Class A Certificates.

The Mortgage Loans generally may be prepaid by the Mortgagors at any time;
however, in certain circumstances, the Mortgage Loans will be subject to a
prepayment charge for prepayments. The Mortgage Loans generally are assumable
under certain circumstances if, in the sole judgment of the Master Servicer or
Subservicer, the prospective purchaser of a Mortgaged Property is creditworthy
and the security for such Mortgage Loan is not impaired by the assumption. In
the event the Master Servicer or Subservicer does not approve an assumption,
the related Mortgage Loan will be due-on-sale. The Master Servicer shall
enforce any due-on-sale clause contained in any Mortgage Note or Mortgage, to
the extent permitted under applicable law and governmental regulations;
provided, however, if the Master Servicer determines that it is reasonably
likely that any Mortgagor will bring, or if any Mortgagor does bring, legal
action to declare invalid or otherwise avoid enforcement of a due-on-sale
clause contained in any Mortgage Note or Mortgage, the Master Servicer shall
not be required to enforce the due-on-sale clause or to contest such action.
The extent to which the Mortgage Loans are assumed by purchasers of the
Mortgaged Properties rather than prepaid by the related Mortgagors in
connection with the sales of the Mortgaged Properties will affect the weighted
average life of the Class A Certificates and may result in a prepayment
experience on the Mortgage Loans that differs from that on other conventional
mortgage loans. See "Maturity and Prepayment Considerations" in the
Prospectus. Prepayments, liquidations and purchases of the Mortgage Loans will
result in distributions to holders of the Class A Certificates of principal
amounts which would otherwise be distributed over the remaining terms of the
Mortgage Loans. Factors affecting prepayment (including defaults and
liquidations) of mortgage loans include changes in mortgagors' housing needs,
job transfers, unemployment, mortgagors' net equity in the mortgaged
properties, changes in the value of the mortgaged properties, mortgage market
interest rates and servicing decisions.

The Mortgage Loans adjust semi-annually or annually based upon the related
Index, whereas the Pass-Through Rate on the Class A Certificates adjusts
monthly based upon One-Month LIBOR as described under "Description of the
Certificates--Calculation of One-Month LIBOR" herein, subject to the Maximum
Class A Rate. Consequently, the interest which becomes due on the Mortgage
Loans on the related Due Date may not equal the amount of interest that would
accrue at One-Month LIBOR plus the margin on the Class A Certificates during
the related Accrual Period. In particular, because the Pass-Through Rate on
the Class A Certificates adjusts monthly, while the interest rates of the
Mortgage Loans adjust semi-annually or annually, subject to the Periodic Cap,
in a rising interest rate environment, the Accrued Certificate Interest on the
Class A Certificates may be greater than the difference between (i) the amount
of interest accrued on the Mortgage Loans and (ii) the sum of the amount of
the premium payable to the Insurer with respect to the Policy and the
Servicing Fees, possibly resulting in Unpaid Interest Shortfalls to holders of
the Class A Certificates. Any Unpaid Interest Shortfalls are not covered by
the Policy and are payable only to the extent of Net Monthly Excess Cash Flow
available therefor and may remain unpaid on the final Distribution Date or
earlier termination of the Trust Fund. In addition, the related Index and One-
Month LIBOR may respond to different economic and market factors, and there is
not necessarily a correlation between them. Thus, it is possible, for example,
that One-Month LIBOR may rise during periods in which the related Index is
stable or is falling or that, even if both One-Month LIBOR and the related
Index rise during the same period, One-Month LIBOR may rise more rapidly than
the related Index. Finally, the Pass-Through Rate is subject to the Maximum
Class A Rate, which is based on the weighted average of the Maximum Net
Mortgage Rates on the Mortgage Loans, which are fixed for the life of each
Mortgage Loan.

The rate of defaults on the Mortgage Loans will also affect the rate and
timing of principal payments on the Mortgage Loans. In general, defaults on
mortgage loans are expected to occur with greater frequency in their early
years, as increases in the monthly payments to an amount in excess of the
monthly payment required at the time of origination may result in a default
rate higher than that on level payment mortgage loans, particularly

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<PAGE>

since the Mortgagor under each Mortgage Loan was qualified on the basis of the
Mortgage Rate in effect at origination. The repayment of such Mortgage Loans
will be dependent on the ability of the Mortgagor to make larger monthly
payments as the Mortgage Rate increases. Accordingly, if market interest rates
or market yields for securities similar to the Class A Certificates were to
rise, the market value of the Class A Certificates may decline. Furthermore,
the rate of default on Mortgage Loans which are refinance or limited
documentation mortgage loans, and on Mortgage Loans with high Loan-to-Value
Ratios, may be higher than for other types of Mortgage Loans. As a result of
the underwriting standards applicable to the Mortgage Loans, the Mortgage
Loans are likely to experience rates of delinquency, foreclosure, bankruptcy
and loss that are higher, and that may be substantially higher, than those
experienced by mortgage loans underwritten in accordance with the standards
applied by Fannie Mae and Freddie Mac first mortgage loan purchase programs,
or by Residential Funding for the purpose of acquiring mortgage loans to
collateralize securities issued by Residential Funding Mortgage Securities I,
Inc. and Residential Accredit Loans, Inc. See "Description of the Mortgage
Pool-- Underwriting Standards." In addition, because of such underwriting
criteria and their likely effect on the delinquency, foreclosure, bankruptcy
and loss experience of the Mortgage Loans, the Mortgage Loans will generally
be serviced in a manner intended to result in a faster exercise of remedies,
which may include foreclosure, in the event Mortgage Loan delinquencies and
defaults occur, than would be the case if the Mortgage Loans were serviced in
accordance with such other programs. Furthermore, the rate and timing of
prepayments, defaults and liquidations on the Mortgage Loans will be affected
by the general economic condition of the region of the country in which the
related Mortgaged Properties are located. The risk of delinquencies and loss
is greater and prepayments are less likely in regions where a weak or
deteriorating economy exists, as may be evidenced by, among other factors,
increasing unemployment or falling property values. See "Maturity and
Prepayment Considerations" in the Prospectus.

The amount of interest otherwise payable to holders of the Class A
Certificates will be reduced by any interest shortfalls to the extent not
covered by the Policy or by the Master Servicer as described herein. If
payments were not made as required under the Policy, interest shortfalls not
allocable to the Class R Certificates and not covered by the Master Servicer
would be allocated to the Class A Certificates as described herein. See "Yield
Considerations" in the Prospectus and "Description of the Certificates--
Interest Distributions" herein for a discussion of the effect of principal
prepayments on the Mortgage Loans on the yield to maturity of the Class A
Certificates and certain possible shortfalls in the collection of interest.

In addition, the yield to maturity of the Class A Certificates will depend
on, among other things, the price paid by the holders of the Class A
Certificates and the then-applicable Pass-Through Rate. For a discussion of
the Pass-Through Rate Risk applicable to the Class A Certificates, see "Risk
Factors--Pass-Through Rate Risk" herein. The extent to which the yield to
maturity of a Class A Certificate is sensitive to prepayments will depend, in
part, upon the degree to which it is purchased at a discount or premium. In
general, if a Class A Certificate is purchased at a premium and principal
distributions thereon occur at a rate faster than assumed at the time of
purchase, the investor's actual yield to maturity will be lower than that
anticipated at the time of purchase. Conversely, if a Class A Certificate is
purchased at a discount and principal distributions thereon occur at a rate
slower than assumed at the time of purchase, the investor's actual yield to
maturity will be lower than that anticipated at the time of purchase.

Weighted average life refers to the average amount of time that will elapse
from the date of issuance of a security to the date of distribution to the
investor of each dollar distributed in reduction of principal of such security
(assuming no losses). The weighted average life of the Class A Certificates
will be influenced by, among other things, the rate at which principal of the
Mortgage Loans is paid, which may be in the form of scheduled amortization,
prepayments or liquidations. Because the amortization schedule of each
Mortgage Loan will be recalculated semi-annually or annually, as applicable,
after the initial Adjustment Date for such Mortgage Loan, any partial
prepayments thereof will not reduce the term to maturity of such Mortgage
Loan. In addition, an increase in the Mortgage Rate on a Mortgage Loan will
result in a larger monthly payment and in a larger percentage of such monthly
payment being allocated to interest and a smaller percentage being allocated
to principal, and conversely, a decrease in the Mortgage Rate on a Mortgage
Loan will result in a lower monthly

S-45
<PAGE>

payment and in a larger percentage of each monthly payment being allocated to
principal and a smaller percentage being allocated to interest.

The assumed final Distribution Date with respect to the Class A Certificates
is December 25, 2026, which is the Distribution Date six months after the
latest scheduled maturity date of any Mortgage Loan. No Event of Default,
change in the priorities for distribution among the classes or other provision
under the Pooling and Servicing Agreement will arise or become applicable
solely by reason of the failure to retire the entire Certificate Principal
Balance of any class of Certificates on or before its assumed final
Distribution Date.

Prepayments on mortgage loans are commonly measured relative to a prepayment
standard or model. The model used in this Prospectus Supplement, the Constant
Prepayment Rate model ("CPR"), assumes that the outstanding principal balance
of a pool of mortgage loans prepays at a specified constant annual rate or
CPR. In generating monthly cash flows, this rate is converted to an equivalent
constant monthly rate. To assume 24% CPR or any other CPR percentage is to
assume that the stated percentage of the outstanding principal balance of the
pool is prepaid over the course of a year. No representation is made that the
Mortgage Loans will prepay at that or any other rate.

The table set forth below has been prepared on the basis of certain
assumptions as described below regarding the weighted average characteristics
of the Mortgage Loans that are expected to be included in the Trust Fund as
described under "Description of the Mortgage Pool" herein and the performance
thereof. The table assumes, among other things, that, as of the date of
issuance of the Class A Certificates: (i)(a) with respect to each Mortgage
Loan which adjusts semi-annually commencing approximately six months after the
date of origination, the aggregate principal balance of such Mortgage Loans is
$45,639,624 and each such Mortgage Loan has an initial Mortgage Rate of
9.3334% per annum, which is in effect until the initial semi-annual Adjustment
Date occurring in October 1996 when the Mortgage Rate adjusts to 10.5687% per
annum (based on an assumed Index of 5.6875% and a Note Margin of 5.8467%, and
subject to a Periodic Rate Cap of 1.2353% per annum) and continues to adjust
accordingly every six months until it reaches a fully-indexed rate, an initial
aggregate Servicing Fee Rate and Policy premium rate of 0.7800% per annum, an
original term to maturity of 359 months and a remaining term to stated
maturity of 356 months; (b) with respect to each Mortgage Loan which adjusts
semi-annually commencing two years after the date of origination, the
aggregate principal balance of such Mortgage Loans is $53,488,278 and each
such Mortgage Loan has an initial Mortgage Rate of 9.6845% per annum, which is
in effect until the initial semi-annual Adjustment Date occurring in March
1998 when the Mortgage Rate adjusts to 11.3334% per annum (based on an assumed
Index of 5.6875% and a Note Margin of 5.6459% and subject to a Periodic Rate
Cap of 3.0000% per annum), an initial aggregate Servicing Fee Rate and Policy
premium rate of 0.7800% per annum, an original term to maturity of 360 months
and a remaining term to stated maturity of 357 months; (c) with respect to
each Mortgage Loan which adjusts semi-annually commencing three years after
the date of origination, the aggregate principal balance of such Mortgage
Loans is $11,763,885 and each such Mortgage Loan has an initial Mortgage Rate
of 10.5035% per annum, which is in effect until the initial semi-annual
Adjustment Date occurring in April 1999 when the Mortgage Rate adjusts to
11.7141% per annum (based on an assumed Index of 5.6875% and a Note Margin of
6.0266% and subject to a Periodic Rate Cap of 3.0000% per annum), an initial
aggregate Servicing Fee Rate and Policy premium rate of 0.7800% per annum, an
original term to maturity of 358 months and a remaining term to stated
maturity of 357 months; (d) with respect to each Mortgage Loan which adjusts
annually commencing approximately twelve months after the date of origination,
the aggregate principal balance of such Mortgage Loans is $19,407,121 and each
such Mortgage Loan has an initial Mortgage Rate of 9.1610% per annum, which is
in effect until the initial annual Adjustment Date occurring in March 1997
when the Mortgage Rate adjusts to 11.1610% per annum (based on an assumed
Index of 5.8010% and a Note Margin of 5.4567% and subject to a Periodic Rate
Cap of 2.0000% per annum) and continues to adjust accordingly every twelve
months until it reaches a fully-indexed rate, an initial aggregate Servicing
Fee Rate and Policy premium rate of 0.7800% per annum, an original term to
maturity of 360 months and a remaining term to stated maturity of 357 months;
(e) with respect to each Mortgage Loan which adjusts annually commencing three
years after the date of origination, the aggregate principal balance of such
Mortgage Loans is $13,432,099 and each such Mortgage Loan has an initial
Mortgage Rate of 9.6913% per

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<PAGE>

annum, which is in effect until the initial annual Adjustment Date occurring
in December 1998 when the Mortgage Rate adjusts to 11.2491% per annum (based
on an assumed Index of 5.8010% and a Note Margin of 5.4481%, and subject to a
Periodic Rate Cap of 3.0000% per annum) and continues to adjust accordingly
every twelve months thereafter until it reaches a fully-indexed rate, an
initial aggregate Servicing Fee Rate and Policy premium rate of 0.7800% per
annum, an original term to maturity of 360 months and a remaining term to
stated maturity of 354 months (ii) the value of One-Month LIBOR will be
5.5000% per annum; (iii) the scheduled monthly payment for each Mortgage Loan
has been based on its outstanding balance, interest rate and remaining term to
stated maturity, such that the Mortgage Loan will amortize in amounts
sufficient for repayment thereof over its remaining term to stated maturity;
(iv) none of the Collateral Mortgage Sellers, the Master Servicer or the
Company will repurchase any Mortgage Loan, as described under "Description of
the Mortgage Pool" herein, and the Master Servicer will not exercise any
option to purchase the Mortgage Loans and thereby cause a termination of the
Trust Fund or to purchase the Certificates other than the Residual
Certificates; (v) there are no delinquencies or Realized Losses on the
Mortgage Loans and principal payments on the Mortgage Loans will be timely
received together with prepayments, if any, at the respective constant
percentages of CPR set forth in the table; (vi) there is no Prepayment
Interest Shortfall or any other interest shortfall in any month; (vii)
payments on the Certificates will be received on the 25th day of each month,
commencing July 25, 1996; (viii) payments on the Mortgage Loans earn no
reinvestment return; (ix) there are no additional ongoing Trust Fund expenses
payable out of the Trust Fund; and (x) the Certificates will be purchased on
June 27, 1996.

The actual characteristics and performance of the Mortgage Loans will differ
from the assumptions used in constructing the table set forth below, which is
hypothetical in nature and is provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the Mortgage Loans will prepay at a constant
level of CPR until maturity or that all of the Mortgage Loans will prepay at
the same level of CPR. Moreover, the diverse remaining terms to stated
maturity of the Mortgage Loans could produce slower or faster principal
distributions than indicated in the table at the various constant percentages
of CPR specified, even if the weighted average remaining term to stated
maturity of the Mortgage Loans is as assumed. Any difference between such
assumptions and the actual characteristics and performance of the Mortgage
Loans, or actual prepayment experience, will affect the percentages of initial
Certificate Principal Balances outstanding over time and the weighted average
life of the Class A Certificates.

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<PAGE>

Subject to the foregoing discussion and assumptions, the following table
indicates the weighted average life of the Class A Certificates, and sets
forth the percentages of the initial Certificate Principal Balance of the
Class A Certificates that would be outstanding after each of the dates shown
at various percentages of CPR.

PERCENT OF INITIAL CERTIFICATE PRINCIPAL BALANCE OUTSTANDING AT THE FOLLOWING
PERCENTAGES OF CPR

<TABLE>
<CAPTION>
CLASS A
-----------------------------
DISTRIBUTION DATE 0% 10% 20% 24% 30% 40%
- ----------------- ---- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Initial Percentage.............................. 100% 100% 100% 100% 100% 100%
June 25, 1997................................... 97% 87% 77% 73% 67% 57%
June 25, 1998................................... 96% 78% 61% 55% 46% 33%
June 25, 1999................................... 96% 69% 48% 41% 32% 20%
June 25, 2000................................... 95% 62% 38% 31% 22% 12%
June 25, 2001................................... 95% 55% 30% 23% 15% 7%
June 25, 2002................................... 94% 49% 24% 18% 10% 3%
June 25, 2003................................... 93% 43% 19% 13% 7% 2%
June 25, 2004................................... 92% 39% 15% 10% 4% 1%
June 25, 2005................................... 91% 34% 12% 7% 3% 0%
June 25, 2006................................... 90% 31% 9% 5% 2% 0%
June 25, 2007................................... 88% 27% 7% 3% 1% 0%
June 25, 2008................................... 87% 24% 5% 2% * 0%
June 25, 2009................................... 85% 21% 4% 1% 0% 0%
June 25, 2010................................... 83% 19% 3% 1% 0% 0%
June 25, 2011................................... 81% 16% 2% * 0% 0%
June 25, 2012................................... 79% 14% 1% * 0% 0%
June 25, 2013................................... 76% 12% 1% 0% 0% 0%
June 25, 2014................................... 73% 10% * 0% 0% 0%
June 25, 2015................................... 70% 9% * 0% 0% 0%
June 25, 2016................................... 66% 7% 0% 0% 0% 0%
June 25, 2017................................... 62% 6% 0% 0% 0% 0%
June 25, 2018................................... 58% 5% 0% 0% 0% 0%
June 25, 2019................................... 53% 4% 0% 0% 0% 0%
June 25, 2020................................... 47% 3% 0% 0% 0% 0%
June 25, 2021................................... 41% 2% 0% 0% 0% 0%
June 25, 2022................................... 34% 1% 0% 0% 0% 0%
June 25, 2023................................... 26% 1% 0% 0% 0% 0%
June 25, 2024................................... 17% 0% 0% 0% 0% 0%
June 25, 2025................................... 7% 0% 0% 0% 0% 0%
June 25, 2026................................... 0% 0% 0% 0% 0% 0%
---- --- --- --- --- ---
Weighted Average
Life in Years**................................ 21.3 7.8 4.1 3.3 2.6 1.8
==== === === === === ===
</TABLE>
- --------
(*) Indicates a number that is greater than zero but less than 0.5%.
(**) The weighted average life of a Certificate is determined by (i)
multiplying the net reduction, if any, of the Certificate Principal
Balance by the number of years from the date of issuance of the
Certificate to the related Distribution Date, (ii) adding the results,
and (iii) dividing the sum by the aggregate of the net reductions of
Certificate Principal Balance described in (i) above.

This table has been prepared based on the assumptions described in the third
paragraph preceding this table (including the assumptions regarding the
characteristics and performance of the Mortgage Loans, which differ from the
actual characteristics and performance thereof) and should be read in
conjunction therewith.

S-48
<PAGE>

POOLING AND SERVICING AGREEMENT

GENERAL

The Certificates will be issued pursuant to a Pooling and Servicing
Agreement dated as of June 1, 1996, among the Company, the Master Servicer,
and The First National Bank of Chicago, as Trustee. Reference is made to the
Prospectus for important information in addition to that set forth herein
regarding the terms and conditions of the Pooling and Servicing Agreement and
the Class A Certificates. The Trustee, or any of its affiliates, in its
individual or any other capacity, may become the owner or pledgee of
Certificates with the same rights as it would have if it were not Trustee. The
Trustee will appoint Norwest Bank Minnesota, National Association to serve as
Custodian in connection with the Certificates. The Class A Certificates will
be transferable and exchangeable at the corporate trust office of the Trustee,
which will serve as Certificate Registrar and Paying Agent. The Company will
provide a prospective or actual Certificateholder, without charge, on written
request, a copy (without exhibits) of the Pooling and Servicing Agreement.
Requests should be addressed to the President, Residential Asset Securities
Corporation, 8400 Normandale Lake Boulevard, Suite 700, Minneapolis, Minnesota
55437. In addition to the circumstances described in the Prospectus, the
Company may terminate the Trustee for cause under certain circumstances. See
"The Pooling and Servicing Agreement--The Trustee" in the Prospectus.

THE MASTER SERVICER

Residential Funding, an indirect wholly-owned subsidiary of GMAC Mortgage
and an affiliate of the Company, will act as master servicer for the
Certificates pursuant to the Pooling and Servicing Agreement. For a general
description of Residential Funding and its activities, see "Residential
Funding Corporation" in the Prospectus and "The Mortgage Pool--Residential
Funding" herein.

TRIGGER EVENTS; REMOVAL OF MASTER SERVICER

Upon determination by the Insurer that a Trigger Event (as defined in the
Pooling and Servicing Agreement) has occurred due to the loss and delinquency
performance of the Mortgage Pool, the Trustee or the Insurer, as applicable,
will notify the Master Servicer, the Company, the Trustee and the Rating
Agencies. At any time, after the occurrence of such event the Insurer may
direct the Trustee to remove the Master Servicer. In the absence of such
direction, the Master Servicer covenants and agrees to act as the Master
Servicer for a term from the occurrence of the Trigger Event to the end of the
calendar quarter in which such Trigger Event occurs, which term will be
extendable by the Insurer by notice to the Trustee for successive terms of
three (3) calendar months each, until the termination of the Trust Fund. The
Master 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 Master 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 Master Servicer the Trustee shall not have received any Servicer
Extension Notice from the Insurer, the Trustee will, within five (5) days
thereafter, give written notice of such non-receipt to the Insurer and the
Master Servicer. In addition to the items specified in the Prospectus, an
Event of Default under the Pooling and Servicing Agreement will occur in the
event that any claim is made under the Policy and the Insurer is not fully
reimbursed with respect thereto, and to any subsequent claims, within six
months.

SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES

The Servicing Fee for each Mortgage Loan is payable out of the interest
payments on such Mortgage Loan. The Servicing Fee Rate in respect of each
Mortgage Loan will be 0.58% per annum of the outstanding principal balance of
such Mortgage Loan. The Servicing Fee consists of (a) servicing compensation
payable to the Master Servicer in respect of its master servicing activities,
and (b) subservicing and other related compensation payable to the Subservicer
(including such compensation paid to the Master Servicer as the direct
servicer of a Mortgage Loan for which there is no Subservicer). The primary
compensation to be paid to the Master Servicer in respect

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<PAGE>

of its master servicing activities will be 0.08% per annum of the outstanding
principal balance of each Mortgage Loan. Each Subservicer is entitled to
servicing compensation in an amount equal to 0.50% per annum of the
outstanding principal balance of each Mortgage Loan serviced by it. As of the
Cut-off Date, the weighted average of the Servicing Fee Rates for the Mortgage
Loans is approximately 0.58% per annum. The Master Servicer is obligated to
pay certain ongoing expenses associated with the Trust Fund and incurred by
the Master Servicer in connection with its responsibilities under the Pooling
and Servicing Agreement. See "Description of the Certificates--Spread," and
"--Withdrawals from the Custodial Account" in the Prospectus for information
regarding other possible compensation to the Master Servicer and the
Subservicer and for information regarding expenses payable by the Master
Servicer.

VOTING RIGHTS

Certain actions specified in the Prospectus that may be taken by holders of
Certificates evidencing a specified percentage of all undivided interests in
the Trust Fund may be taken by holders of Certificates entitled in the
aggregate to such percentage of the Voting Rights. 99% of all Voting Rights
will be allocated among all holders of the Certificates (other than the
Residual Certificates) in proportion to their then outstanding Certificate
Principal Balances, and 1% of all Voting Rights will be allocated among
holders of the Residual Certificates in proportion to the Percentage Interests
evidenced by their respective Certificates.

Notwithstanding the foregoing, so long as there does not exist a failure by
the Insurer to make a required payment under the Policy, the 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 Insurer except as provided in the Pooling and Servicing
Agreement.

TERMINATION

The circumstances under which the obligations created by the Pooling and
Servicing Agreement will terminate in respect of the Class A Certificates are
described in "The Pooling and Servicing Agreement--Termination; Retirement of
Certificates" in the Prospectus. The Master Servicer or the Company will have
the option, on any Distribution Date on which the aggregate Stated Principal
Balance of the Mortgage Loans is less than 10% of the aggregate principal
balance of the Mortgage Loans as of the Cut-off Date, (i) to purchase all
remaining Mortgage Loans and other assets in the Trust Fund, thereby effecting
early retirement of the Class A Certificates, or (ii) to purchase in whole,
but not in part, the Certificates. Any such purchase of Mortgage Loans and
other assets of the Trust Fund shall be made at a price equal to the sum of
(a) 100% of the unpaid principal balance of each Mortgage Loan (or, if less
than such unpaid principal balance, the fair market appraised value of the
related underlying Mortgaged Properties with respect to Mortgage Loans as to
which title to such underlying Mortgaged Properties has been acquired) (net of
any unreimbursed Advance attributable to principal) as of the date of
repurchase plus (b) accrued interest thereon at the Net Mortgage Rate to, but
not including, the first day of the month in which such repurchase price is
distributed and (c) any amounts due to the Insurer pursuant to the Insurance
Agreement. Distributions on the Certificates in respect of any such optional
termination will be paid, first, to the Class A Certificates, based on their
Certificate Principal Balance, and second, except as set forth in the Pooling
and Servicing Agreement, to the Class R Certificates. The proceeds of any such
distribution may not be sufficient to distribute the full amount to each class
of Certificates if the purchase price is based in part on the fair market
appraised value of any underlying Mortgaged Property and such appraised value
is less than 100% of the unpaid principal balance of the related Mortgage
Loan; provided, however, with respect to the Class A Certificates, if such
amount is an Insured Payment, such amount will be paid under the Policy
subject to the terms thereof. Any such purchase of Mortgage Loans and
termination of the Trust Fund requires the consent of the Insurer if it would
result in a draw on the Policy. Any such purchase of the Certificates will be
made at a price equal to 100% of the Certificate Principal Balance thereof
plus the sum of interest accrued thereon at the applicable Pass-Through Rate
and any previously unpaid Accrued Certificate Interest (including Unpaid
Interest Shortfalls and interest thereon). Upon the purchase of the
Certificates or at any time thereafter, at the option of

S-50
<PAGE>

the Master Servicer or the Company, the Mortgage Loans may be sold, thereby
effecting a retirement of the Certificates and the termination of the Trust
Fund, or the Certificates so purchased may be held or resold by the Master
Servicer or the Company.

Upon presentation and surrender of the Class A Certificates in connection
with the termination of the Trust Fund or a purchase of Certificates, the
holders of the Class A Certificates will receive an amount equal to the
Certificate Principal Balance of such class plus interest accrued thereon at
the then-applicable Pass-Through Rate plus any previously unpaid Accrued
Certificate Interest.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

Upon the issuance of the Class A Certificates, Thacher Proffitt & Wood,
counsel to the Company, will deliver its opinion generally to the effect that,
assuming compliance with all provisions of the Pooling and Servicing
Agreement, for federal income tax purposes, the Trust Fund will qualify as a
REMIC under the Code.

For federal income tax purposes, the Residual Certificates will constitute
the sole class of "residual interests" in the Trust Fund and the Class A
Certificates will represent ownership of "regular interests" in the REMIC and
will generally be treated as debt instruments of the REMIC. See "Certain
Federal Income Tax Consequences--REMICs" in the Prospectus.

For federal income tax reporting purposes, the Class A Certificates will not
be treated as having been issued with original issue discount. The prepayment
assumption that will be used in determining the rate of accrual of original
issue discount, market discount, and premium, if any, for federal income tax
purposes will be based on the assumption that subsequent to the date of any
determination the Mortgage Loans will prepay at a rate equal to 24% CPR. No
representation is made that the Mortgage Loans will prepay at that rate or at
any other rate. See "Certain Federal Income Tax Consequences--REMICs--Taxation
of Owners of REMIC Regular Certificates--Original Issue Discount" in the
Prospectus.

The Internal Revenue Service (the "IRS") has issued OID Regulations under
sections 1271 to 1275 of the Code generally addressing the treatment of debt
instruments issued with original issue discount. Purchasers of the Class A
Certificates should be aware that Section 1272(a)(6) of the Code and the OID
Regulations do not adequately address certain issues relevant to, or not
applicable to, prepayable securities bearing a variable rate of interest such
as the Class A Certificates. In the absence of other authority, the Master
Servicer intends to be guided by certain principles of the OID Regulations
applicable to variable rate debt instruments in determining whether such
Certificates should be treated as issued with original issue discount and in
adapting the provisions of Section 1272(a)(6) of the Code to such Certificates
for the purpose of preparing reports furnished to Certificateholders and the
IRS. Because of the uncertainties concerning the application of Section
1272(a)(6) of the Code to such Certificates and because the rules relating to
debt instruments having a variable rate of interest are limited in their
application in ways that could preclude their application to such Certificates
even in the absence of Section 1272(a)(6) of the Code, the IRS could assert
that the Class A Certificates should be treated as having been issued with
original issue discount or that such Certificates should be governed by some
other method not yet set forth in regulations. Prospective purchasers of the
Class A Certificates are advised to consult their tax advisors concerning the
tax treatment of such Certificates.

In certain circumstances the OID Regulations permit the holder of a debt
instrument to recognize original issue discount under a method that differs
from that used by the issuer. Accordingly, the holder of a Certificate may be
able to select a method for recognizing original issue discount that differs
from that used by the Master Servicer in preparing reports to the
Certificateholders and the IRS.

The Class A Certificates will be treated as "qualifying real property loans"
under Section 593(d) of the Code, assets described in Section 7701(a)(19)(C)
of the Code and "real estate assets" under Section 856(c)(5)(A) of the Code
generally in the same proportion that the assets of the Trust Fund would be so
treated.

S-51
<PAGE>

In addition, interest on the Class A Certificates will be treated as "interest
on obligations secured by mortgages on real property" under Section
856(c)(3)(B) of the Code generally to the extent that such Class A
Certificates are treated as "real estate assets" under Section 856(c)(5)(A) of
the Code. Moreover, the Class A Certificates (other than the Residual
Certificates) will be "qualified mortgages" within the meaning of Section
860G(a)(3) of the Code. However, prospective investors in Class A Certificates
that will be generally treated as assets described in Section 860G(a)(3) of
the Code should note that, notwithstanding such treatment, any repurchase of
such a Certificate pursuant to the right of the Master Servicer or the Company
to repurchase such Class A Certificates may adversely affect any REMIC that
holds such Class A Certificates if such repurchase is made under circumstances
giving rise to a Prohibited Transaction Tax. See "Pooling and Servicing
Agreement--Termination" herein and "Certain Federal Income Tax Consequences--
REMICs--Characterization of Investments in REMIC Certificates" in the
Prospectus.

For further information regarding federal income tax consequences of
investing in the Class A Certificates, see "Certain Federal Income Tax
Consequences--REMICs" in the Prospectus.

METHOD OF DISTRIBUTION

Subject to the terms and conditions set forth in an Underwriting Agreement
(the "Underwriting Agreement"), dated June 27, 1996, the Underwriter has
agreed to offer the Class A Certificates on a best efforts basis and the
Company has agreed to sell to the Underwriter such Class A Certificates when
and if sold by the Underwriter. The termination date of the offering of the
Class A Certificates is the earlier to occur of June 27, 1997, or the date on
which all of such Class A Certificates have been sold. Proceeds of the
offering of the Class A Certificates will not be placed in any escrow, trust
or similar arrangement.

The Underwriter is offering the Class A Certificates on a best efforts basis
and will only be obligated to pay for and accept delivery of any of the Class
A Certificates at such time as it sells such Class A Certificates. The
Underwriter is an indirect wholly-owned subsidiary of the parent of the
Company.

In addition, the Underwriting Agreement provides that the obligation of the
Underwriter to pay for and accept delivery of its Certificates is subject to,
among other things, the receipt of certain legal opinions and to the
conditions, among others, that no stop order suspending the effectiveness of
the Company's Registration Statement shall be in effect, and that no
proceedings for such purpose shall be pending before or threatened by the
Securities and Exchange Commission.

The Class A Certificates will be offered by the Underwriter, on a best
efforts basis, from time to time to the public, directly or through dealers,
in one or more negotiated transactions, or otherwise, at varying prices to be
determined at the time of sale. The proceeds to the Company from any sale of
the Class A Certificates will be equal to the purchase price paid by the
purchaser thereof, net of any expenses payable by the Company and any
compensation payable to the Underwriter and any such dealer. The Underwriter
may effect such transactions by selling its Class A Certificates to or through
dealers, and such dealers may receive compensation in the form of underwriting
discounts, concessions or commissions from the Underwriter. In connection with
the sale of the Class A Certificates, the Underwriter may be deemed to have
received compensation from the Company in the form of underwriting
compensation. The Underwriter and any dealers that participate with the
Underwriter in the distribution of Class A Certificates may be deemed to be
underwriters and any profit on the resale of the Class A Certificates
positioned by them may be deemed to be underwriting discounts and commissions
under the Securities Act of 1933.

The Underwriting Agreement provides that the Company will indemnify the
Underwriter, and under limited circumstances the Underwriter will indemnify
the Company, against certain civil liabilities under the Securities Act of
1933, or contribute to payments required to be made in respect thereof.

There is currently no secondary market for the Class A Certificates. Neither
the Company, the Underwriter nor any other person or entity intends to create
a secondary market in the Class A Certificates. There can be no

S-52
<PAGE>

assurance that a secondary market for the Class A Certificates will develop
or, if it does develop, that it will continue. The primary source of
information available to investors concerning the Class A Certificates will be
the monthly statements as discussed in the Prospectus under "Description of
the Certificates--Reports to Certificateholders," which will include
information as to the outstanding principal balance of the Class A
Certificates and the status of the applicable form of credit enhancement.
There can be no assurance that any additional information regarding the Class
A Certificates will be available through any other source. In addition, the
Company is not aware of any source through which price information about the
Class A Certificates will be generally available on an ongoing basis. The
limited nature of such information regarding the Class A Certificates may
adversely affect the liquidity of the Class A Certificates, even if a
secondary market for the Class A Certificates becomes available.

LEGAL OPINIONS

Certain legal matters relating to the Certificates will be passed upon for
the Company and the Underwriter by Thacher Proffitt & Wood, New York, New
York.

EXPERTS

The consolidated balance sheets of the Insurer, AMBAC Indemnity Corporation,
at December 31, 1995 and 1994 and the consolidated statements of operations,
stockholder's equity and cash flows of AMBAC Indemnity Corporation for each of
the years in the three year period ended December 31, 1995 appearing in
Appendix A of this Prospectus Supplement have been included herein in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein and upon the authority of said firm as
experts in accounting and auditing.

The report of KPMG Peat Marwick LLP covering the consolidated financial
statements referred to above of AMBAC Indemnity Corporation refers to the
adoption of the Financial Accounting Standards Board's Statements of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions," and
No. 112, "Employers' Accounting for Postemployment Benefits" in 1993.

RATINGS

It is a condition to the issuance of the Class A Certificates that they be
rated "AAA" by Standard & Poor's and "Aaa" by Moody's.

Standard & Poor's ratings on mortgage pass-through certificates address the
likelihood of the receipt by Certificateholders of payments required under the
Pooling and Servicing Agreement. Standard & Poor's ratings take into
consideration the credit quality of the mortgage pool, structural and legal
aspects associated with the Certificates, and the extent to which the payment
stream in the mortgage pool is adequate to make payments required under the
Certificates. Standard & Poor's rating on the Class A Certificates is based on
the claims-paying ability of the Insurer. Standard & Poor's rating on the
Class A Certificates does not, however, constitute a statement regarding
frequency of prepayments on the mortgages. In addition, such ratings do not
address the likelihood of the receipt of any amounts in respect of Unpaid
Interest Shortfalls. See "Certain Yield and Prepayment Considerations" herein.

The rating assigned by Moody's to the Class A Certificates is based on the
claims-paying ability of the Insurer. Ratings by Moody's address the
structural, legal and issuer-related aspects associated with the Certificates,
including the nature and quality of the underlying mortgage loans. Such
ratings do not represent any assessment of the likelihood of principal
prepayments by mortgagors or of the degree by which such prepayments might
differ from those originally anticipated. In addition, such ratings do not
address the likelihood of the receipt of any amounts in respect of Unpaid
Interest Shortfalls.

S-53
<PAGE>

The Company has not requested a rating on the Class A Certificates by any
rating agency other than Standard & Poor's and Moody's. However, there can be
no assurance as to whether any other rating agency will rate the Class A
Certificates, or, if it does, what rating would be assigned by any such other
rating agency. A rating on the Certificates by another rating agency, if
assigned at all, may be lower than the ratings assigned to the Class A
Certificates by Standard & Poor's and Moody's.

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

LEGAL INVESTMENT

The Class A Certificates will constitute "mortgage related securities" for
purposes of SMMEA so long as they are rated in at least the second highest
rating category by one of the Rating Agencies, and, as such, are legal
investments for certain entities to the extent provided in SMMEA. SMMEA,
however, provides that states could override its provisions on legal
investment and restrict or condition investment in mortgage related securities
by taking statutory action on or prior to October 3, 1991. Certain states have
enacted legislation which overrides the preemption provisions of SMMEA.

The Company makes no representations as to the proper characterization of
the Class A Certificates for legal investment or other purposes, or as to the
ability of particular investors to purchase the Class A Certificates under
applicable legal investment restrictions. These uncertainties may adversely
affect the liquidity of the Class A Certificates. Accordingly, all
institutions whose investment activities are subject to legal investment laws
and regulations, regulatory capital requirements or review by regulatory
authorities should consult with their own legal advisors in determining
whether and to what extent the Class A Certificates constitute a legal
investment or are subject to investment, capital or other restrictions.

See "Legal Investment Matters" in the Prospectus.

ERISA CONSIDERATIONS

A fiduciary of any employee benefit plan or other plan or arrangement
subject to ERISA, or Section 4975 of the Code (a "Plan") or any insurance
company (whether through its general or separate accounts) or other person
investing "plan assets" 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
Section 4975 of the Code. The purchase or holding of the Class A Certificates
by, on behalf of, or with "plan assets" of, a Plan may qualify for exemptive
relief under the Exemption; however, the Exemption contains a number of
conditions including the requirement that any such Plan must be an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the Securities and
Exchange Commission under the Securities Act of 1933, as amended. See "ERISA
Considerations" in the Prospectus.

S-54
<PAGE>

AMBAC INDEMNITY CORPORATION AND SUBSIDIARIES
(a wholly owned subsidiary of AMBAC Inc.)

Consolidated Financial Statements

December 31, 1995 and 1994

(With Independent Auditors' Report Thereon)
<PAGE>

Independent Auditors' Report

The Board of Directors
AMBAC Indemnity Corporation:

We have audited the accompanying consolidated balance sheets of AMBAC
Indemnity Corporation and subsidiaries (a wholly owned subsidiary of AMBAC Inc.)
as of December 31, 1995 and 1994, and the related consolidated statements of
operations, stockholder's equity and cash flows for each of the years in the
three-year period ended December 31, 1995. These consolidated financial
statements are the responsibility of AMBAC Indemnity Corporation's management.
Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of AMBAC
Indemnity Corporation and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995 in conformity with generally accepted
accounting principles.

As discussed in Note 2 to the consolidated financial statements, AMBAC
Indemnity Corporation has adopted the provisions of the Financial Accounting
Standards Board's Statements of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" and No. 112, "Employers' Accounting for
Postemployment Benefits," in 1993.

KPMG Peat Marwick LLP
New York, New York
January 31, 1996
<PAGE>

AMBAC Indemnity Corporation and Subsidiaries

Consolidated Balance Sheets
(Dollars In Thousands Except Share Data)

<TABLE>
<CAPTION>
December 31,
-------------------------
1995 1994
---------- ----------
<S> <C> <C>
Assets
Investments:
Bonds held in available-for-sale account, at fair value
(amortized cost of $2,090,101 in 1995 and $1,865,350
in 1994).............................................. $2,224,528 $1,795,958
Short-term investments, at cost (approximates fair
value)................................................ 163,953 85,202
---------- ----------
Total investments..................................... 2,388,481 1,881,160
Cash....................................................... 6,912 2,117
Securities purchased under agreements to resell............ 4,120 8,011
Receivable for securities.................................. 8,136 21,508
Investment income due and accrued.......................... 38,319 34,902
Investment in affiliate.................................... 25,827 24,976
Deferred acquisition costs................................. 82,620 71,774
Deferred income taxes...................................... -- 1,778
Current income taxes....................................... 2,171 10,544
Prepaid reinsurance........................................ 153,372 139,855
Other assets............................................... 48,472 41,677
---------- ----------
Total assets.......................................... $2,758,430 $2,238,302
========== ==========
Liabilities and Stockholder's Equity
Liabilities:
Unearned premiums........................................ $ 906,136 $ 839,775
Losses and loss adjustment expenses...................... 65,996 65,662
Ceded reinsurance balances payable....................... 14,654 908
Deferred income taxes.................................... 85,008 --
Accounts payable and other liabilities................... 43,625 43,519
Payable for securities................................... 86,304 26,696
---------- ----------
Total liabilities..................................... 1,201,723 976,560
---------- ----------
Stockholder's equity:
Preferred stock, par value $1,000.00 per share.
Authorized shares -- 285,000; issued and outstanding
shares -- none........................................ -- --
Common stock, par value $2.50 per share. Authorized
shares -- 40,000,000; issued and outstanding
shares -- 32,800,000 at December 31, 1995 and 1994.... 82,000 82,000
Additional paid-in capital............................... 481,059 444,258
Unrealized gains (losses) on investments, net of tax..... 87,112 (46,087)
Retained earnings........................................ 906,536 781,571
---------- ----------
Total stockholder's equity............................ 1,556,707 1,261,742
---------- ----------
Total liabilities and stockholder's equity............ $2,758,430 $2,238,302
========== ==========
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

1
<PAGE>

AMBAC Indemnity Corporation and Subsidiaries

Consolidated Statements of Operations
(Dollars In Thousands)

<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Gross premiums written........................... $195,033 $192,598 $321,490
Ceded premiums written........................... (28,606) 2,815 (35,810)
-------- -------- --------
Net premiums written.......................... 166,427 195,413 285,680
Increase in unearned premiums, net............... (52,844) (76,077) (132,862)
-------- -------- --------
Net premiums earned........................... 113,583 119,336 152,818
Net investment income............................ 131,496 119,737 104,609
Net realized gains (losses)...................... 177 (13,386) 30,145
Other income..................................... 6,777 6,887 1,516
-------- -------- --------
Total revenues................................ 252,033 232,574 289,088
-------- -------- --------
Expenses:
Losses and loss adjustment expenses.............. 3,377 2,593 (1,849)
Underwriting and operating expenses.............. 38,722 35,946 34,746
Interest expense................................. 1,590 1,428 163
-------- -------- --------
Total expenses................................ 43,689 39,967 33,060
-------- -------- --------
Income before income taxes.................... 208,344 192,607 256,028
-------- -------- --------
Income tax expense:
Current taxes.................................... 29,085 26,286 66,386
Deferred taxes................................... 14,461 16,277 4,090
-------- -------- --------
Total income taxes............................ 43,546 42,563 70,476
-------- -------- --------
Income before cumulative effect of changes in
accounting principles......................... 164,798 150,044 185,552
Cumulative effect of changes in accounting
principles.................................... -- -- (98)
-------- -------- --------
Net income.................................... $164,798 $150,044 $185,454
========= ========= =========
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

2
<PAGE>

AMBAC Indemnity Corporation and Subsidiaries

Consolidated Statements of Stockholder's Equity
(Dollars In Thousands)

<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------
1995 1994 1993
--------- --------- --------
<S> <C> <C> <C>
Preferred Stock:
Balance at January 1 and December 31........... $ -- $ -- $ --
========== ========== =========
Common Stock:
Balance at January 1 and December 31........... $ 82,000 $ 82,000 $ 82,000
========== ========== =========
Additional Paid-in Capital:
Balance at January 1........................... $ 444,258 $ 444,143 $397,570
Capital contributions.......................... 35,000 -- 40,000
Cumulative effect of changes in accounting
principles.................................. -- -- 4,708
Other paid-in capital.......................... 1,801 115 1,865
--------- --------- --------
Balance at December 31......................... $ 481,059 $ 444,258 $444,143
========== ========== =========
Unrealized Gains (Losses) on Investments, Net of
Tax:
Balance at January 1........................... $ (46,087) $ 68,091 $ 5,285
Unrealized gain from change in accounting
principle................................... -- -- 63,568
Change in unrealized gain (loss)............... 133,199 (114,178) (762)
--------- --------- --------
Balance at December 31......................... $ 87,112 ($ 46,087) $ 68,091
========== ========== =========
Retained Earnings:
Balance at January 1........................... $ 781,571 $ 667,527 $515,073
Net income..................................... 164,798 150,044 185,454
Dividends declared-common stock................ (40,000) (36,000) (33,000)
Other.......................................... 167 -- --
--------- --------- --------
Balance at December 31......................... $ 906,536 $ 781,571 $667,527
========== ========== =========
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

3
<PAGE>

AMBAC Indemnity Corporation and Subsidiaries

Consolidated Statements of Cash Flows
(Dollars In Thousands)

<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................... $ 164,798 $ 150,044 $ 185,454
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization............ 1,605 1,106 1,080
Amortization of bond premium and
discount.............................. (831) (1,097) (507)
Current income taxes payable............. 8,373 (6,069) (20,844)
Deferred income taxes payable............ 14,462 16,277 (2,463)
Deferred acquisition costs............... (10,846) (20,757) (7,059)
Unearned premiums........................ 52,844 76,077 132,862
Losses and loss adjustment expenses...... 334 1,625 (718)
Ceded reinsurance balances payable....... 13,746 (2,963) (5,147)
(Gain) loss on sales of investments...... (177) 13,386 (30,145)
Proceeds from sales of bonds in trading
account............................... -- -- 2,091,143
Proceeds from maturities of bonds in
trading account....................... -- -- 34,409
Purchases of bonds for trading account... -- -- (2,181,198)
Accounts payable and other liabilities... 106 20,497 9,591
Other, net............................... (11,273) 7,179 (1,622)
----------- ----------- -----------
Net cash provided by operating
activities......................... 233,141 255,305 204,836
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from sales of bonds at amortized
cost.................................. 1,882,485 1,305,011 18,912
Proceeds from maturities of bonds at
amortized cost........................ 163,031 39,126 60,131
Purchases of bonds at amortized cost..... (2,192,824) (1,559,982) (258,832)
Investment in preferred stock of
affiliate............................. -- -- (3,000)
Change in short-term investments......... (78,751) 9,005 (25,252)
Securities purchased under agreements to
resell................................ 3,891 (8,011) --
Other, net............................... (1,178) (3,786) (2,370)
----------- ----------- -----------
Net cash used in investing
activities......................... (223,346) (218,637) (210,411)
----------- ----------- -----------
Cash flows from financing activities:
Dividends paid........................... (40,000) (36,000) (33,000)
Capital contribution..................... 35,000 -- 40,000
----------- ----------- -----------
Net cash (used in) provided by
financing activities............... (5,000) (36,000) 7,000
----------- ----------- -----------
Net cash flow......................... 4,795 668 1,425
Cash at beginning of year.................. 2,117 1,449 24
----------- ----------- -----------
Cash at December 31........................ $ 6,912 $ 2,117 $ 1,449
=========== =========== ===========
Supplemental disclosure of cash flow
information:
Cash paid during the year for:
Income taxes.......................... $ 19,500 $ 32,153 $ 86,781
=========== =========== ===========
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

4
<PAGE>

AMBAC Indemnity Corporation and Subsidiaries

Notes to Consolidated Financial Statements
(Dollar Amounts in Thousands)

1 BACKGROUND

AMBAC Indemnity Corporation ("AMBAC Indemnity") is a leading insurer of
municipal and structured finance obligations. Financial guarantee insurance
underwritten by AMBAC Indemnity guarantees payment when due of the principal of
and interest on the obligation insured. In the case of a default on the insured
bond, payments under the insurance policy may not be accelerated by the
policyholder without AMBAC Indemnity's consent. As of December 31, 1995, AMBAC
Indemnity's net insurance in force (principal and interest) was $199,078,000.
AMBAC Indemnity is a wholly owned subsidiary of AMBAC Inc. (NYSE: ABK), a
holding company that provides financial guarantee insurance and financial
services to both public and private clients through its subsidiaries.

As of December 31, 1995, AMBAC Indemnity owned approximately 26.5% of the
outstanding common stock of an affiliate, HCIA Inc. (NASDAQ: HCIA) ("HCIA"), a
leading health care information content company. AMBAC Inc. owns approximately
19.9% of the outstanding common stock of HCIA. Prior to 1995, AMBAC Inc. and
AMBAC Indemnity combined owned approximately 96% of HCIA. During 1995, HCIA
offered approximately 3.5 million shares of its common stock for sale in two
separate public offerings. In addition, in conjunction with the second public
offering by HCIA, AMBAC Inc. sold approximately 1.1 million shares of HCIA
common stock. As a result of these public offerings, as of December 31, 1995,
AMBAC Indemnity and AMBAC Inc. combined owned 46.4% of the common stock of HCIA.

AMBAC Indemnity, as the sole limited partner, owns a limited partnership
interest representing 90% of the total partnership interests of AMBAC Financial
Services, Limited Partnership ("AFS"), a limited partnership which provides
interest rate swaps primarily to states, municipalities and municipal
authorities. The sole general partner of AFS, AMBAC Financial Services Holdings,
Inc., a wholly owned subsidiary of AMBAC Inc., owns a general partnership
interest representing 10% of the total partnership interest in AFS.

AMBAC Indemnity has one wholly owned subsidiary, American Municipal Bond
Holding Company ("AMBH"), which is a holding company for certain real estate
interests.

2 SIGNIFICANT ACCOUNTING POLICIES

The accompanying consolidated financial statements have been prepared on
the basis of generally accepted accounting principles ("GAAP"). The preparation
of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported revenues and expenses during the
reporting period. Actual results could differ from those estimates. The
significant accounting policies of AMBAC Indemnity and its subsidiaries are as
described below:

CONSOLIDATION:

The consolidated financial statements include the accounts of AMBAC
Indemnity, AFS and AMBH (sometimes collectively referred to as "AMBAC
Indemnity"). All significant intercompany balances have been eliminated.

5
<PAGE>

AMBAC Indemnity Corporation and Subsidiaries

Notes to Consolidated Financial Statements -- (Continued)
(Dollar Amounts in Thousands)

INVESTMENTS:

AMBAC Indemnity's investment portfolio is accounted for on a trade-date
basis and consists entirely of investments in debt securities which are
considered available-for-sale and are carried at fair value. Fair value is based
on quotes obtained by AMBAC Indemnity from independent market sources.
Short-term investments are carried at cost, which approximates their fair value.
Unrealized gains and losses, net of deferred income taxes, are included as a
separate component of stockholder's equity and are computed using amortized cost
as the basis. For purposes of computing amortized cost, premiums and discounts
are accounted for using the interest method. For bonds purchased at a price
below par value, discounts are accreted over the remaining term of the
securities. For bonds purchased at a price above par value which have call
features, premiums are amortized to the most likely call dates as determined by
management. For premium bonds which do not have call features, such premiums are
amortized over the remaining term of the securities. Premiums and discounts on
mortgage-backed securities are adjusted for the effects of actual and
anticipated prepayments. Realized gains and losses on the sale of investments
are determined on the basis of specific identification.

Effective December 31, 1993, AMBAC Indemnity adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("Statement 115"). Pursuant to Statement 115, AMBAC Indemnity
has designated all investments as "available-for-sale" and reports them at fair
value. Unrealized gains and losses are excluded from earnings and reported as a
separate component of stockholder's equity, net of tax. The cumulative effect of
adopting Statement 115 as of December 31, 1993 was to increase AMBAC Indemnity's
stockholder's equity by $63,568, net of tax. The adoption of Statement 115 had
no effect on earnings.

SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL:

Securities purchased under agreements to resell are collateralized
financing transactions, and are recorded at their contracted resale amounts,
plus accrued interest. AMBAC Indemnity takes possession of the collateral
underlying those agreements and monitors its market value on a daily basis and,
when necessary, requires prompt transfer of additional collateral to reflect
current market value.

PREMIUM REVENUE RECOGNITION:

Premiums for municipal new issue and secondary market policies are: (i)
generally computed as a percentage of principal and interest insured; (ii)
typically collected in a single payment at policy inception date; and (iii) are
earned pro rata over the period of risk. Premiums for structured finance
policies can be computed as a percentage of either principal or principal and
interest insured. The timing of the collection of structured finance premiums
varies among individual transactions. For policies where premiums are collected
in a single payment at policy inception date, premiums are earned pro rata over
the period of risk. For policies with premiums that are collected periodically
(i.e., monthly, quarterly or annually), premiums are reflected in income pro
rata over the period covered by the premium payment.

When an AMBAC Indemnity-insured new or secondary market issue has been
refunded or called, the remaining unearned premium is generally earned at that
time, as the risk to AMBAC Indemnity is considered to have been eliminated.

6
<PAGE>

AMBAC Indemnity Corporation and Subsidiaries

Notes to Consolidated Financial Statements -- (Continued)
(Dollar Amounts in Thousands)

LOSSES AND LOSS ADJUSTMENT EXPENSES:

The liability for losses and loss adjustment expenses consists of the
Active Credit Reserve ("ACR") and case basis loss reserves. The development of
the ACR is based upon estimates of the ultimate aggregate losses inherent in the
obligations insured and reflects the net result of contributions related to the
portion of earnings required to cover those losses, less reductions of ACR no
longer deemed necessary by management. When losses occur (actual monetary
defaults or defaults which are imminent on insured obligations), case basis loss
reserves are established in an amount that is sufficient to cover the present
value of the anticipated defaulted debt service payments over the expected
period of default and estimated expenses associated with settling the claims,
less estimated recoveries under salvage or subrogation rights. All or part of
case basis loss reserves are allocated from any ACR available for such insured
obligation.

AMBAC Indemnity's management believes that the reserves for losses and loss
adjustment expenses are adequate to cover the ultimate net cost of claims, but
the reserves are necessarily based on estimates and there can be no assurance
that the ultimate liability will not exceed such estimates.

DEFERRED ACQUISITION COSTS:

Certain costs incurred which vary with, and are primarily related to, the
production of business have been deferred. These costs include direct and
indirect expenses related to underwriting, marketing and policy issuance, rating
agency fees and premium taxes, net of reinsurance ceding commissions. The
deferred acquisition costs are being amortized over the periods in which the
related premiums are earned, and such amortization amounted to $10,183, $9,348
and $12,120 for 1995, 1994 and 1993, respectively. Deferred acquisition costs,
net of such amortization, amounted to $10,845, $20,757 and $7,059 for 1995, 1994
and 1993, respectively.

DEPRECIATION AND AMORTIZATION:

Depreciation of furniture and fixtures and electronic data processing
equipment is provided over the estimated useful lives of the respective assets
using the straight-line method. Amortization of leasehold improvements and
intangibles, including certain computer software licenses, is provided over the
estimated useful lives of the respective assets using the straight-line method.

INTEREST RATE CONTRACTS:

Interest Rate Contracts Held for Purposes Other Than Trading:

AMBAC Indemnity uses interest rate contracts for hedging purposes as part
of its overall interest rate risk management. Gains and losses on interest rate
futures and options contracts that qualify as accounting hedges of existing
assets or liabilities are included in the carrying amounts and amortized over
the remaining lives of the assets and liabilities as an adjustment to interest
income. When the hedged asset is sold, the unamortized gain or loss on the
related hedge is recognized in income. Gains and losses on interest rate
contracts that do not qualify as accounting hedges are recognized in current
period income.

AMBAC Indemnity accounts for its interest rate futures contracts in
accordance with the provisions of Statement of Financial Accounting Standards
No. 80, "Accounting For Futures Contracts" ("Statement 80"). Statement 80
permits hedge accounting for interest rate futures contracts when the item to be
hedged exposes the Company to price or interest rate risk, and the futures
contract effectively reduces that exposure and is designated as a hedge.
Interest rate futures contracts held for purposes other than trading are used
primarily to hedge interest sensitive assets, and are designated at inception as
a hedge to specific assets.

7
<PAGE>

AMBAC Indemnity Corporation and Subsidiaries

Notes to Consolidated Financial Statements -- (Continued)
(Dollar Amounts in Thousands)

Interest rate swaps that are linked with existing liabilities are accounted
for like a hedge of those liabilities, using the accrual method as an adjustment
to interest expense. Interest rate swaps that are linked with existing assets
classified as available-for-sale are accounted for like hedges of those assets,
using the accrual method as an adjustment to interest income, with unrealized
gains and losses included in stockholder's equity, net of tax.

Interest Rate Contracts Held for Trading Purposes:

AMBAC Indemnity, in connection with its market making activities as a
provider of interest rate swaps, primarily to states, municipalities, municipal
authorities and other entities in connection with their financings, uses
interest rate contracts which are classified as held for trading purposes.
Interest rate contracts are recorded on trade date at fair value. Changes in
fair value are recorded as a component of other income. The fair value of
interest rate swaps is determined through the use of valuation models. The
portion of the interest rate swap's initial fair value that reflects credit
considerations, on-going servicing and transaction hedging costs is recognized
over the life of the interest rate swap, as an adjustment to other income.
Interest rate swaps are recorded on a gross basis; assets and liabilities are
netted by customer only when a legal right of set-off exists.

INCOME TAXES:

AMBAC Inc., as common parent, files a consolidated Federal income tax
return with its subsidiaries. Effective January 1, 1993, AMBAC Indemnity adopted
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("Statement 109"). Under Statement 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in the period that includes the enactment
date.

The cumulative effect of this change in accounting for income taxes
resulted in an increase to net income for 1993 of $1,162 and an increase to
additional paid-in capital of $4,708. The adjustment to additional paid-in
capital reflects Statement 109 adjustments for prior business combinations.

The Internal Revenue Code permits municipal bond insurance companies to
deduct from taxable income, subject to certain limitations, the amounts added to
the statutory mandatory contingency reserve during the year. The deduction taken
is allowed only to the extent that U.S. Treasury noninterest-bearing tax and
loss bonds are purchased at their par value prior to the original due date of
AMBAC Inc.'s consolidated Federal tax return and held in an amount equal to the
tax benefit attributable to such deductions. The amounts deducted must be
included in taxable income when the contingency reserve is released, at which
time AMBAC Indemnity may redeem the tax and loss bonds to satisfy the additional
tax liability. The purchases of tax and loss bonds are recorded as payments of
Federal income taxes and are not reflected in AMBAC Indemnity's current tax
provision.

POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS:

AMBAC Inc., through its subsidiaries, provides various postretirement and
postemployment benefits, including pension, and health and life benefits
covering substantially all employees who meet certain age and service
requirements. AMBAC Indemnity accounts for these benefits under the accrual
method of accounting. Amounts related to the defined benefit pension plan and
postretirement health benefits are charged based on actuarial determinations.

8
<PAGE>

AMBAC Indemnity Corporation and Subsidiaries

Notes to Consolidated Financial Statements -- (Continued)
(Dollar Amounts in Thousands)

Effective January 1, 1993, AMBAC Indemnity adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" ("Statement 106"). Statement 106 requires that the expected
cost of postretirement benefits, other than pensions, be charged to expense
during the period that the employee renders service. AMBAC Indemnity elected to
recognize the transition obligation immediately and recorded a charge of $465,
after reduction of $240 for income tax benefits, as a cumulative effect of a
change in accounting principle as of the date of adoption.

Effective January 1, 1993, AMBAC Indemnity adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits" ("Statement 112"), which, similar to Statement 106, requires accrual
of a liability representing the cost of certain benefits earned by employees
over their employment period. Statement 112 applies to vested benefits provided
to former or inactive employees, their beneficiaries and covered dependents,
after employment but before retirement. In adopting Statement 112, AMBAC
Indemnity recorded a charge of $801, after reduction for income tax benefits of
$429, as a cumulative effect of a change in accounting principle as of the date
of adoption.

STOCK COMPENSATION PLANS:

In 1991, AMBAC Inc. adopted the AMBAC Inc. 1991 Stock Incentive Plan. Under
this plan awards are granted to eligible employees of AMBAC Indemnity in the
form of incentive stock options or other stock-based awards. In October 1995,
the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation"
("Statement 123") which must be adopted no later than 1996. Statement 123
applies to all stock-based employee compensation plans (except employee stock
ownership plans) in which an employer grants shares of its stock or other equity
instruments to employees. Statement 123 permits a company to choose either the
fair value based method of accounting as defined in the statement or the
intrinsic value based method of accounting as prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") for its stock-based
compensation plans. Companies electing the accounting requirements under APB 25
must also make pro forma disclosures of net income and earnings per share as if
the fair value based method of accounting had been applied. AMBAC Indemnity
currently accounts for its plans under APB 25 and intends to continue to do so
after adopting Statement 123 in 1996. The adoption of Statement 123 is expected
to have no effect on AMBAC Indemnity's results of operations.

RECLASSIFICATIONS:

Certain reclassifications have been made to prior years' amounts to conform
to the current year's presentation.

9
<PAGE>

AMBAC Indemnity Corporation and Subsidiaries

Notes to Consolidated Financial Statements -- (Continued)
(Dollar Amounts in Thousands)

3 INVESTMENTS

The amortized cost and estimated fair value of investments in debt
securities at December 31, 1995 and 1994 were as follows:

<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1995
Municipal obligations........................ $1,558,754 $ 98,090 $ 2,428 $1,654,416
Corporate securities......................... 261,492 30,785 3,263 289,014
U.S. Government obligations.................. 214,224 8,796 621 222,399
Mortgage-backed securities (including
GNMA)...................................... 55,631 3,362 294 58,699
Other........................................ 163,953 -- -- 163,953
---------- ---------- ---------- ----------
$2,254,054 $ 141,033 $ 6,606 $2,388,481
========= ======== ======== =========

<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1994
Municipal obligations........................ $1,505,501 $ 23,009 $ 80,935 $1,447,575
Corporate securities......................... 228,992 2,336 11,501 219,827
U.S. Government obligations.................. 61,906 311 1,797 60,420
Mortgage-backed securities (including
GNMA)...................................... 70,251 1,325 2,140 69,436
Other........................................ 83,902 -- -- 83,902
---------- ---------- ---------- ----------
$1,950,552 $ 26,981 $ 96,373 $1,881,160
========= ======== ======== =========
</TABLE>

The amortized cost and estimated fair value of debt securities at December
31, 1995, by contractual maturity, were as follows:

<TABLE>
<CAPTION>
Amortized Estimated
Cost Fair Value
---------- ----------
<S> <C> <C>
1995
Due in one year or less..................................... $ 223,069 $ 223,949
Due after one year through five years....................... 168,417 181,772
Due after five years through ten years...................... 302,601 315,385
Due after ten years......................................... 1,504,336 1,608,676
---------- ----------
2,198,423 2,329,782
Mortgage-backed securities.................................. 55,631 58,699
---------- ----------
$2,254,054 $2,388,481
========= =========
</TABLE>

Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties.

10
<PAGE>

AMBAC Indemnity Corporation and Subsidiaries

Notes to Consolidated Financial Statements -- (Continued)
(Dollar Amounts in Thousands)

Net investment income comprised the following:

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Bonds.............................................. $127,865 $118,685 $102,020
Short-term investments............................. 6,116 3,512 4,278
-------- -------- --------
Total investment income.......................... 133,981 122,197 106,298
Investment expense................................. (2,485) (2,460) (1,689)
-------- -------- --------
Net investment income............................ $131,496 $119,737 $104,609
======== ======== ========
</TABLE>

Gross realized gains were $27,786, $26,514 and $42,217 for 1995, 1994 and
1993, respectively, and gross realized losses were $27,609, $39,900 and $12,072
for 1995, 1994 and 1993, respectively.

As of December 31, 1995, AMBAC Indemnity did not have any investment
concentrated in any single repayment source (excluding obligations of the U.S.
Government and its agencies) with a fair value greater than 2.0% of its
stockholder's equity.

As of December 31, 1995 and 1994, AMBAC Indemnity held securities subject
to agreements to resell for $4,120 and $8,011, respectively. Such securities
were held as collateral by AMBAC Indemnity. The agreements had terms of less
than 30 days.

As of December 31, 1995 and 1994, investment securities with a fair value
of $4,583 and $3,948, respectively, were pledged to futures brokers for required
margin.

4 REINSURANCE

In the ordinary course of business, AMBAC Indemnity cedes exposures under
various reinsurance contracts primarily designed to minimize losses from large
risks and to protect capital and surplus. The effect of reinsurance on premiums
written and earned was as follows:

<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------------
1995 1994 1993
--------------------- --------------------- ---------------------
Written Earned Written Earned Written Earned
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Direct................... $192,277 $127,322 $188,057 $136,632 $321,179 $181,320
Assumed.................. 2,756 1,349 4,541 1,325 311 311
Ceded.................... (28,606) (15,088) 2,815 (18,621) (35,810) (28,813)
-------- -------- -------- -------- -------- --------
Net premiums............. $166,427 $113,583 $195,413 $119,336 $285,680 $152,818
======== ======== ======== ======== ======== ========
</TABLE>

The reinsurance of risk does not relieve the ceding insurer of its original
liability to its policyholders. In the event that all or any of the reinsurers
are unable to meet their obligations to AMBAC Indemnity under the existing
reinsurance agreements, AMBAC Indemnity would be liable for such defaulted
amounts. To minimize its exposure to significant losses from reinsurer
insolvencies, AMBAC Indemnity evaluates the financial condition of its
reinsurers and monitors concentrations of credit risk. There were no reinsurance
receivables as of December 31, 1995 and 1994. As of December 31, 1995, prepaid
reinsurance of approximately $48,120 was associated with a single reinsurer. As
of December 31, 1995, AMBAC Indemnity held letters of credit and collateral
amounting to approximately $90,643 from its reinsurers to cover liabilities
ceded under the aforementioned reinsurance contracts.

AMBAC Indemnity terminated reinsurance contracts, resulting in return
premiums to AMBAC Indemnity of $18,141, $30,482 and $36,461 of which $15,700,
$25,891 and $31,010 were recorded as an

11
<PAGE>

AMBAC Indemnity Corporation and Subsidiaries

Notes to Consolidated Financial Statements -- (Continued)
(Dollar Amounts in Thousands)

increase to the unearned premium reserve in 1995, 1994 and 1993, respectively,
with the remainder recognized as revenue.

5 LOSSES AND LOSS ADJUSTMENT EXPENSES

AMBAC Indemnity's liability for losses and loss adjustment expenses
includes case basis loss reserves and the ACR. Following is a summary of the
activity in the case basis loss and active credit reserve accounts and the
components of the liability for losses and loss adjustment expenses:

<TABLE>
<CAPTION>
1995 1994 1993
------- ------- --------
<S> <C> <C> <C>
Case basis loss reserves:
Balance at January 1......................... $38,892 $35,155 $ 28,321
------- ------- --------
Incurred related to:
Current year............................... 750 8,073 6,630
Prior years................................ 2,650 (3,368) (926)
------- ------- --------
Total incurred.......................... 3,400 4,705 5,704
------- ------- --------
Paid related to:
Current year............................... 150 275 315
Prior years................................ 2,893 693 (1,445)
------- ------- --------
Total paid.............................. 3,043 968 (1,130)
------- ------- --------
Balance at December 31....................... 39,249 38,892 35,155
------- ------- --------
Active credit reserve:
Balance at January 1......................... 26,770 28,882 36,434
Net provision for losses..................... 4,097 4,422 6,709
ACR transfers to case reserves............... (4,120) (6,534) (14,261)
------- ------- --------
Balance at December 31....................... 26,747 26,770 28,882
------- ------- --------
Total................................... $65,996 $65,662 $ 64,037
======= ======= ========
</TABLE>

The terms "current year" and "prior years" in the foregoing table refer to
the year in which case basis loss reserves were established.

12
<PAGE>

AMBAC Indemnity Corporation and Subsidiaries

Notes to Consolidated Financial Statements -- (Continued)
(Dollar Amounts in Thousands)

6 COMMITMENTS AND CONTINGENCIES

AMBAC Indemnity is responsible for leases on the rental of office space,
principally in New York City. The lease agreements which expire periodically
through September 2014, contain provisions for scheduled periodic rent increases
and are accounted for as operating leases. An estimate of future net minimum
lease payments in each of the next five years ending December 31, and the
periods thereafter, is as follows:

Year Amount
- --------------- --------

1996........................................................... $ 3,042
1997........................................................... 3,073
1998........................................................... 3,359
1999........................................................... 3,650
2000........................................................... 3,650
All later years................................................ 53,880
-------
$70,654
=======

Rent expense for the aforementioned leases amounted to $2,924, $2,719 and
$2,778 for the years ended December 31, 1995, 1994 and 1993, respectively.

7 INSURANCE REGULATORY RESTRICTIONS

AMBAC Indemnity is subject to insurance regulatory requirements of the
States of Wisconsin, New York and the other jurisdictions in which it is
licensed to conduct business.

AMBAC Indemnity's ability to pay dividends is generally restricted by law
and subject to approval by the Office of the Commissioner of Insurance of the
State of Wisconsin (the "Wisconsin Commissioner"). Wisconsin insurance law
restricts the payment of dividends in any 12-month period without regulatory
approval to the lesser of (a) 10% of policyholders' surplus as of the preceding
December 31 and (b) the greater of (i) statutory net income for the calendar
year preceding the date of dividend, minus realized capital gains for that
calendar year and (ii) the aggregate of statutory net income for three calendar
years preceding the date of the dividend, minus realized capital gains for those
calendar years and minus dividends paid or credited within the first two of the
three preceding calendar years. AMBAC Indemnity paid dividends of $40,000,
$36,000 and $33,000 on its common stock in 1995, 1994 and 1993, respectively.
Based upon these restrictions, at December 31, 1995, the maximum amount that
will be available during 1996 for payment of dividends by AMBAC Indemnity
without prior approval is approximately $86,000.

However, as discussed in Note 15, AMBAC Indemnity, upon consummation of the
proposed PRIDES offering will deliver to AMBAC Inc. (in the form of an
extraordinary dividend) its 2,378,672 shares of HCIA common stock, at fair
value. The Wisconsin Commissioner has approved such dividend. The fair value of
such dividend will be determined based on the price per share of HCIA common
stock used to price the PRIDES. As a result, any dividends paid by AMBAC
Indemnity to AMBAC Inc. for the twelve months following the extraordinary
dividend will require pre-approval from the Wisconsin Commissioner. The
Wisconsin Commissioner has stated to AMBAC Indemnity management that it does not
foresee any reason such pre-approval would not be given.

The New York Financial Guarantee Insurance Law establishes single risk
limits applicable to all obligations issued by a single entity and backed by a
single revenue source. Under the limit applicable to

13
<PAGE>

AMBAC Indemnity Corporation and Subsidiaries

Notes to Consolidated Financial Statements -- (Continued)
(Dollar Amounts in Thousands)

municipal bonds, the insured average annual debt service for a single risk, net
of reinsurance and collateral, may not exceed 10% of the sum of the insurer's
policyholders' surplus and contingency reserves. In addition, insured principal
of municipal bonds attributable to any single risk, net of reinsurance and
collateral, is limited to 75% of the insurer's policyholders' surplus and
contingency reserves. Additional single risk limits, which generally are more
restrictive than the municipal bond single risk limit, are also specified for
several other categories of insured obligations.

Statutory capital and surplus was $862,976 and $781,772 at December 31,
1995 and 1994, respectively. Qualified statutory capital (statutory surplus plus
contingency reserve) was $1,358,769 and $1,218,204 at December 31, 1995 and
1994, respectively. Statutory net income was $142,541, $116,238 and $166,157 for
1995, 1994 and 1993, respectively. Statutory capital and surplus differs from
stockholder's equity determined under GAAP principally due to statutory
accounting rules that treat loss reserves, premiums earned, policy acquisition
costs and deferred income taxes differently.

8 INCOME TAXES

The total effect of income taxes on income and stockholder's equity for the
years ended December 31, 1995 and 1994 was as follows:

<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Total income taxes charged to income.................. $ 43,546 $ 42,563
-------- --------
Income taxes charged (credited) to stockholder's
equity:
Unrealized gain (loss) on bonds..................... 71,722 (61,480)
Unrealized gain on investment in affiliate.......... 602 --
Other............................................... (682) (116)
-------- --------
Total charged (credited) to stockholder's
equity................................... 71,642 (61,596)
-------- --------
Total effect of income taxes.......................... $115,188 $(19,033)
======== ========
</TABLE>

The tax provisions in the accompanying consolidated statements of
operations reflect effective tax rates differing from prevailing Federal
corporate income tax rates. The following is a reconciliation of these
differences:

<TABLE>
<CAPTION>
1995 % 1994 % 1993 %
-------- ----- -------- ---- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Computed expected tax at
statutory rate................ $ 72,920 35.0% $ 67,412 35.0% $ 89,610 35.0%
Increases (reductions) in
expected tax resulting from:
Tax-exempt interest........ (28,274) (13.6) (26,336) (13.7) (21,043) (8.2)
Adjustment to deferred tax
assets and liabilities
for enacted changes in
tax laws and rates...... -- -- -- -- 754 0.3
Other, net................. (1,100) (0.5) 1,487 0.8 1,155 0.4
------- ----- ------- ---- ------- ----
Income tax expense on income from
continuing operations.......... $ 43,546 20.9% $ 42,563 22.1% $ 70,476 27.5%
======= ===== ======= ==== ======= ====
</TABLE>

14
<PAGE>

AMBAC Indemnity Corporation and Subsidiaries

Notes to Consolidated Financial Statements -- (Continued)
(Dollar Amounts in Thousands)

The tax effects of temporary differences that give rise to significant
portions of the deferred tax liabilities and deferred tax assets at December 31,
1995 and 1994 are presented below:

<TABLE>
<CAPTION>
1995 1994
-------- -------
<S> <C> <C>
Deferred tax liabilities:
Unrealized gains on bonds............................ $ 46,906 $ --
Deferred acquisition costs........................... 28,917 25,121
Unearned premiums.................................... 22,079 14,522
Unrealized gain on investment in affiliate........... 602 --
Investments.......................................... 2,911 796
Other................................................ 1,996 1,613
------- -------
Total deferred tax liabilities.............. 103,411 42,052
------- -------
Deferred tax assets:
Unrealized loss on bonds............................. -- 24,816
Loss reserves........................................ 9,631 9,733
Insurance in force................................... 2,870 3,205
Compensation......................................... 2,418 2,812
Other................................................ 3,484 3,264
------- -------
Sub-total deferred tax assets............... 18,403 43,830
Valuation allowance.................................. -- --
------- -------
Total deferred tax assets................... 18,403 43,830
------- -------
Net deferred tax (liabilities) assets....... $(85,008) $ 1,778
======= =======
</TABLE>

AMBAC Indemnity believes that no valuation allowance is necessary in
connection with the deferred tax assets.

9 EMPLOYEE BENEFITS

Pensions:

AMBAC Inc. has a defined benefit pension plan covering substantially all
employees of AMBAC Indemnity and AFS. The benefits are based on years of service
and the employee's compensation during the last five years of employment. AMBAC
Indemnity's funding policy is to contribute annually the maximum amount that can
be deducted for Federal income tax purposes. Contributions are intended to
provide not only for benefits attributed to service-to-date but also for those
expected to be earned in the future.

The actuarial present value of the benefit obligations shown in the table
below sets forth the plan's funded status and amounts recognized by AMBAC Inc.
as of December 31, 1995 and 1994.

15
<PAGE>

AMBAC Indemnity Corporation and Subsidiaries

Notes to Consolidated Financial Statements -- (Continued)
(Dollar Amounts in Thousands)

Actuarial present value of the benefit obligations:

<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Accumulated benefit obligation, including vested benefits of
$6,049 and $4,300, respectively................................ $(6,788) $(5,000)
======= =======
Projected benefit obligation for service rendered to date........ (7,800) (5,500)
Plan assets at fair value, primarily listed stocks, commingled
funds and fixed income securities.............................. 7,054 4,898
------- -------
Unfunded projected benefit....................................... (746) (602)
Unrecognized prior service cost.................................. (1,784) (1,950)
Unrecognized net loss............................................ 1,906 1,412
Unrecognized net transition asset................................ (12) (15)
------- -------
Pension liability -- entire plan................................. $ (636) $(1,155)
======= =======
</TABLE>

Net pension costs for 1995, 1994 and 1993 included the following
components:

<TABLE>
<CAPTION>
1995 1994 1993
------- ----- -----
<S> <C> <C> <C>
Service cost............................................. $ 541 $ 558 $ 447
Interest cost on expected benefit obligation............. 456 386 297
Actual return on plan assets............................. (1,333) 30 (390)
Net amortization and deferral............................ 760 (547) (149)
------- ----- -----
Net periodic pension cost................................ $ 424 $ 427 $ 205
======= ===== =====
</TABLE>

The weighted-average discount rate used in the determination of the
actuarial present value for the projected benefit obligation was 7.25% and 8.0%
for 1995 and 1994, respectively. The expected long-term rate of return on assets
was 9.25% for both 1995 and 1994. The rate of increase in future compensation
levels used in determining the actuarial present value of the projected benefit
obligation was 5.0% in both 1995 and 1994.

Substantially all employees of AMBAC Indemnity and AFS are covered by a
defined contribution plan (the "Savings Incentive Plan") for which contributions
and costs are determined as 6% of each covered employee's base salary, plus a
matching company contribution of 50% on contributions up to 6% of base salary
made by eligible employees to the plan. The total cost of the Savings Incentive
Plan to AMBAC Indemnity was $1,435, $1,292 and $1,243 in 1995, 1994 and 1993,
respectively.

Annual Incentive Plan:

AMBAC Indemnity has an annual incentive plan which provides for awards to
key officers and employees based upon predetermined criteria. The cost of the
plan to AMBAC Indemnity for the years ended December 31, 1995, 1994 and 1993 was
$7,669, $8,531 and $6,165, respectively.

Postretirement Health Care and Other Benefits:

AMBAC Indemnity provides certain medical and life insurance benefits for
retired employees and eligible dependents. All plans are contributory. None of
the plans is currently funded.

16
<PAGE>

AMBAC Indemnity Corporation and Subsidiaries

Notes to Consolidated Financial Statements -- (Continued)
(Dollar Amounts in Thousands)

Postretirement benefits expense was $168, $176 and $500 in 1995, 1994 and
1993, respectively. The unfunded accumulated postretirement benefit obligation
was $1,309 and the accrued postretirement liability was $1,368 as of December
31, 1995.

The assumed weighted average health care cost trend rates range from 13.5%
in 1995, decreasing ratably to 5.5% in 2001, and remaining at that level
thereafter. Increasing the assumed health care cost trend rate by one percentage
point in each future year would increase the accumulated postretirement benefit
obligation at December 31, 1995 by $174 and the 1995 benefit expense by $28. The
weighted average discount rate used to measure the accumulated postretirement
benefit obligation and 1995 expense was 7.25%.

10 INSURANCE IN FORCE

The par amount of bonds insured by AMBAC Indemnity, net of reinsurance, was
$110,997,000 and $93,305,000 at December 31, 1995 and 1994, respectively. As of
December 31, 1995, AMBAC Indemnity's insured portfolio was diversified by type
of insured bond as shown in the following table:

Net Par Amount
Outstanding
--------------------
(Dollars in Millions) As of December 31 1995 1994
-------- -------

Municipal finance:
General obligation........................... $ 30,546 $26,674
Utility revenue.............................. 21,053 19,597
Tax-backed revenue........................... 18,780 16,279
Health care revenue.......................... 12,553 10,922
Transportation revenue....................... 6,293 5,397
Investor Owned Utilities..................... 4,497 3,500
Higher education............................. 3,973 3,447
Student loan................................. 3,769 2,709
Housing revenue.............................. 3,577 2,567
Other........................................ 483 403
-------- -------
Total Municipal finance................... 105,524 91,495
-------- -------
Structured finance:
Domestic..................................... 3,238 902
International................................ 2,235 908
-------- -------
Total Structured finance.................. 5,473 1,810
-------- -------
$110,997 $93,305
========= =======

As of December 31, 1995, California was the state with the highest
aggregate net par amount inforce, accounting for 14.3% of the total, and the
highest single insured risk represented 0.6% of aggregate net par amount
insured. AMBAC Indemnity's direct insurance in force (principal and interest)
was $235,118,000 and $205,810,000, at December 31, 1995 and 1994, respectively.
Net insurance in force (after giving effect to reinsurance) was $199,078,000 and
$171,678,000 as of December 31, 1995 and 1994, respectively.

17
<PAGE>

AMBAC Indemnity Corporation and Subsidiaries

Notes to Consolidated Financial Statements -- (Continued)
(Dollar Amounts in Thousands)

11 FINANCIAL INSTRUMENTS HELD FOR PURPOSES OTHER THAN TRADING

Financial instruments with off-balance-sheet risk:

In the normal course of business, AMBAC Indemnity becomes a party to
various financial transactions to reduce its exposure to fluctuations in
interest rates. These financial instruments include an interest rate swap
agreement and exchange traded interest rate futures contracts. The notional
amounts of AMBAC Indemnity's off-balance-sheet financial instruments which are
held for purposes other than trading were as follows:

As of December 31,
--------------------
1995 1994
------- --------

Interest rate futures contracts................ $44,500 $164,200
Interest rate swap............................. 20,000 20,000

Notional principal amounts are often used to express the volume of these
transactions and do not reflect the extent to which positions may offset one
another. These amounts do not represent the much smaller amounts potentially
subject to risk.

Interest rate futures contracts are sold to hedge interest rate risk
inherent in fixed rate investment securities. At December 31, 1995, interest
rate futures contracts with an outstanding notional amount of $44,500 were
designated as hedges of fixed rate investment securities.

The interest rate swap held for purposes other than trading is used to
manage interest rate risk by synthetically changing the nature of certain
floating rate investments.

Fair values of financial instruments held for purposes other than trading:

The following fair value amounts were determined by AMBAC Indemnity using
independent market information when available, and appropriate valuation
methodologies when market quotes were not available. In cases where specific
market quotes are unavailable, interpreting market data and estimating market
values necessarily require considerable judgment by management. Accordingly, the
estimates presented are not necessarily indicative of the amount AMBAC Indemnity
could realize in a current market exchange.

The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:

Investments: The fair values of bonds are based on quoted market prices or
dealer quotes.

Short-term investments and cash: The fair values of short-term investments
and cash are assumed to equal amortized cost.

Securities purchased under agreements to resell: The fair value of
securities purchased under agreements to resell is assumed to approximate
carrying value.

Investment in affiliate: As of December 31, 1995, the fair value of AMBAC
Indemnity's investment in HCIA is based on the quoted market price of HCIA
common stock. As of December 31, 1994, the fair value of AMBAC Indemnity's
investment in HCIA was assumed to equal carrying value.

Interest rate contracts: Fair values of off-balance-sheet interest rate
contracts (futures and swap) are based on quoted market and dealer prices,
current settlement values, or pricing models.

18
<PAGE>

AMBAC Indemnity Corporation and Subsidiaries

Notes to Consolidated Financial Statements -- (Continued)
(Dollar Amounts in Thousands)

Liability for net financial guarantees written: The fair value of the
liability for those financial guarantees written related to new issue and
secondary market exposures is based on the estimated cost to reinsure those
exposures at current market rates, which amount consists of the current unearned
premium reserve, less an estimated ceding commission thereon.

Certain other financial guarantee insurance policies have been written on
an installment basis, where the future premiums to be received by AMBAC
Indemnity are determined based on the outstanding exposure at the time the
premiums are due. The fair value of AMBAC Indemnity's liability under its
installment premium policies is measured using the present value of estimated
future installment premiums, less an assumed ceding commission. The estimate of
the amounts and timing of the future installment premiums is based on
contractual premium rates, debt service schedules and expected run-off
scenarios. This measure is used as an estimate of the cost to reinsure AMBAC
Indemnity's liability under these policies. The carrying amount and estimated
fair value of these financial instruments are presented below:

<TABLE>
<CAPTION>
As of December 31,
---------------------------------------------------
1995 1994
----------------------- -----------------------
Carrying Estimated Carrying Estimated
(Dollars in Millions) Amount Fair Value Amount Fair Value
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Financial assets:
Investments........................ $2,225 $2,225 $1,796 $1,796
Short-term investments............. 164 164 85 85
Securities purchased under
agreements to resell............. 4 4 8 8
Investment in affiliate............ 26 111 25 25
Cash............................... 7 7 2 2
Unrecognized financial instruments:
Interest rate swap................. -- -- -- (1)
Interest rate futures contracts.... -- -- -- --
Liability for net financial
guarantees
Direct........................... -- 655 -- 609
Net of reinsurance............... -- 543 -- 507
Net installment premiums......... -- 80 -- 51
</TABLE>

12 FINANCIAL INSTRUMENTS HELD FOR TRADING PURPOSES

AMBAC Indemnity, through its affiliate AFS, is a provider of interest rate
swaps to states, municipalities, municipal authorities and other entities,
including its affiliate, AMBAC Capital Management, Inc. ("ACMI"), in connection
with their financings. AMBAC Indemnity manages its interest rate swap business
with the goal of being market neutral to changes in overall interest rates,
while retaining "basis risk", the relationship between changes in floating rate
tax-exempt and floating rate taxable interest rates. If actual or projected
floating rate tax-exempt interest rates rise in relation to floating rate
taxable rates, AMBAC Indemnity will experience an unrealized mark-to-market
loss. Conversely, if actual or projected floating rate tax-exempt interest rates
decline in relation to floating rate taxable interest rates, AMBAC Indemnity
will experience an unrealized mark-to-market gain.

19
<PAGE>

AMBAC Indemnity Corporation and Subsidiaries

Notes to Consolidated Financial Statements -- (Continued)
(Dollar Amounts in Thousands)

In the ordinary course of business, AMBAC Indemnity manages a variety of
risks -- principally credit, market, liquidity, operational and legal. These
risks are identified, measured and monitored through a variety of control
mechanisms, which are in place at different levels throughout the organization.

Credit risk relates to the ability of counterparties to perform according
to the terms of their contractual commitments. Various procedures and controls
are in place to monitor the credit risk of interest rate swaps. These include
the initial credit approval process, the establishment of credit limits,
management approvals and a process that ensures the continuous monitoring of
credit exposure.

Market risk relates to the impact of price changes on future earnings. This
risk is a consequence of AMBAC Indemnity's market-making activities in the
municipal interest rate swap market. The principal market risk is basis risk,
the relationship between changes in floating rate tax-exempt and floating rate
taxable interest rates. Since the third quarter of 1995, all municipal interest
rate swaps transacted contain provisions which are designed to protect AMBAC
Indemnity against certain forms of tax reform, thus mitigating its basis risk.
An independent risk management group monitors trading risk limits and, together
with senior management, is involved in the application of risk measurement
methodologies.

The estimation of potential losses arising from adverse changes in market
relationships, known as "value at risk," is a key element in managing market
risk. AMBAC Indemnity has developed a value at risk methodology to estimate
potential losses over a specified holding period and based on certain
probabilistic assessments. AMBAC Indemnity estimates value at risk utilizing
historical short and long term interest rate volatilities and the relationship
between changes in tax-exempt and taxable interest rates calculated on a
consistent daily basis. For the year ended December 31, 1995, AMBAC Indemnity's
value at risk averaged approximately $1,358, calculated at a ninety-nine percent
confidence level. Since no single measure can capture all dimensions of market
risk, AMBAC Indemnity bolsters its value at risk methodology by performing daily
analyses of parallel and nonparallel shifts in yield curves and stress test
scenarios which measure the potential impact of market conditions, however
improbable, which might cause abnormal volatility swings or disruptions of
market relationships.

Liquidity risk relates to the possible inability to satisfy contractual
obligations when due. This risk is present in interest rate swap agreements and
in futures contracts used to hedge those agreements. AMBAC Indemnity manages
liquidity risk by maintaining cash and cash equivalents, closely matching the
dates swap payments are made and received and limiting the amount of risk hedged
by futures contracts.

Operational risk relates to the potential for loss caused by a breakdown in
information, communication and settlement systems. AMBAC Indemnity mitigates
operational risk by maintaining a comprehensive system of internal controls.
This includes the establishment of systems and procedures to monitor
transactions and positions, documentation and confirmation of transactions,
ensuring compliance with regulations and periodic reviews by auditors.

Legal risk relates to the uncertainty of the enforceability, through legal
or judicial processes, of the obligations of AMBAC Indemnity's counterparties,
including contractual provisions intended to reduce credit exposure by providing
for the offsetting or netting of mutual obligations. AMBAC Indemnity seeks to
remove or minimize such uncertainties through continuous consultation with
internal and external legal advisers to analyze and understand the nature of
legal risk, to improve documentation and to strengthen transaction structure.

20
<PAGE>

AMBAC Indemnity Corporation and Subsidiaries

Notes to Consolidated Financial Statements -- (Continued)
(Dollar Amounts in Thousands)

The following table summarizes information about AMBAC Indemnity's
financial instruments held for trading purposes as of December 31, 1995 and
1994:

<TABLE>
<CAPTION>
Net Net Average Net Fair Value
Carrying Estimated ----------------------- Notional
Amount Fair Value Assets Liabilities Amount
-------- ---------- ------- ----------- ----------
<S> <C> <C> <C> <C> <C>
1995:
Interest rate
swaps............ $5,207 $5,207 $17,714 $16,667 $2,152,400
Interest rate
futures
contracts........ -- -- -- -- 569,800
1994:
Interest rate
swaps............ $1,681 $1,681 $ 4,441 $ 3,560 $ 771,900
Interest rate
futures
contracts........ -- -- -- -- 443,000
</TABLE>

The aggregate amount of net trading income recognized from interest rate
financial instruments held for trading purposes was $2,602 and $3,051 for 1995
and 1994, respectively. Average net fair values were calculated based on average
daily net fair values. For 1994, average net fair values began from the
commencement of operations in September 1994.

13 LINES OF CREDIT

AMBAC Inc. and AMBAC Indemnity maintain a three-year revolving credit
facility with two major international banks, as co-agents, for $100,000. As of
December 31, 1995, no amounts were outstanding under this credit facility, which
expires in July 1998. This facility amended a one-year revolving credit facility
for $75,000. As of December 31, 1994, no amounts were outstanding under this
credit facility.

AMBAC Indemnity has an agreement with another major international bank, as
agent, for a $300,000 credit facility, expiring in 2002. This facility is a
seven-year stand-by irrevocable limited recourse line of credit, which was
increased from $225,000 to $300,000 and extended for an additional year in
December 1995. The line will provide liquidity to AMBAC Indemnity in the event
claims from municipal obligations exceed specified levels. Repayment of any
amounts drawn under the line will be limited primarily to the amount of any
recoveries of losses related to policy obligations. As of December 31, 1995 and
1994, no amounts were outstanding under this line.

14 RELATED PARTY TRANSACTIONS

During 1995 and 1994, AMBAC Indemnity guaranteed the timely payment of
principal and interest on obligations under municipal investment contracts and
municipal investment repurchase agreements issued by its affiliate, ACMI. As of
December 31, 1995 and 1994, the aggregate amount of municipal investment
contracts and municipal investment repurchase contracts insured was $2,240,959
and $2,042,230, respectively, including accrued interest. These insurance
policies are collateralized by ACMI's investment securities, accrued interest,
securities purchased under agreements to resell and cash and cash equivalents,
which as of December 31, 1995 and 1994 had a fair value of $2,299,687 and
$1,964,830, respectively, in the aggregate.

21
<PAGE>

AMBAC Indemnity Corporation and Subsidiaries

Notes to Consolidated Financial Statements -- (Continued)
(Dollar Amounts in Thousands)

During 1995 and 1994, AMBAC Indemnity recorded gross premiums written of $1,707
and $2,692, and net premiums earned of $1,764 and $1,872, respectively, related
to these contracts.

During 1995 and 1994, several interest rate swap transactions were executed
between AFS and ACMI. As of December 31, 1995 and 1994, these contracts had an
outstanding notional amount of approximately $359,000 and $478,000,
respectively. As of December 31, 1995 and 1994, AFS recorded a positive fair
value of $6,539 and a negative fair value of $5,492, respectively, related to
these transactions.

15 SUBSEQUENT EVENTS

On January 19, 1996, AMBAC Inc. filed with the Securities and Exchange
Commission a registration statement related to a proposed offering of 3,781,369
PRIDES(SM) (Provisionally Redeemable Income Debt Exchangeable for Stock). The
PRIDES, which constitute senior debt of AMBAC Inc., will mature in 2001 and will
be mandatorily exchanged at maturity into shares of HCIA common stock (or, at
AMBAC Inc.'s option, cash with an equal value) determined in accordance with an
exchange rate formula. AMBAC Inc. may redeem the PRIDES, in whole or in part,
after three years. AMBAC Inc. has also granted the underwriters an option to
purchase up to 378,136 PRIDES to cover any over-allotments.

AMBAC Indemnity, upon consummation of the PRIDES offering, will deliver to
AMBAC Inc. (in the form of an extraordinary dividend) its 2,378,672 shares of
HCIA common stock, at fair value. The fair value of such dividend will be
determined based on the price per share of HCIA common stock used to price the
PRIDES.

22
<PAGE>

AMBAC Indemnity Corporation and Subsidiaries
(a wholly owned subsidiary of AMBAC Inc.)
Consolidated Unaudited Financial Statements
as of March 31, 1996 and December 31, 1995
and for the periods ended March 31, 1996 and 1995
<PAGE>

AMBAC Indemnity Corporation and Subsidiaries
Consolidated Balance Sheets
(Dollars in Thousands Except Share Data)

<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
(unaudited)
<S> <C> <C>
Assets
- ------
Investments:
Bonds held in available for sale account, at fair value
(amortized cost of $2,054,545 in 1996 and $2,090,101 in 1995) $2,101,319 $2,224,528
Short-term investments, at cost (approximates fair value) 186,959 163,953
------------ ------------
Total investments 2,288,278 2,388,481

Cash 542 6,912
Securities purchased under agreements to resell 7,823 4,120
Receivable for securities 29,091 8,136
Investment income due and accrued 34,045 38,319
Investment in affiliate 26,185 25,827
Deferred acquisition costs 85,405 82,620
Current income taxes - 2,171
Prepaid reinsurance 158,169 153,372
Other assets 56,725 48,472
------------ ------------
Total assets $2,686,263 $2,758,430
============ ============

Liabilities and Stockholder's Equity
- ------------------------------------

Liabilities:
Unearned premiums $924,004 $906,136
Losses and loss adjustment expenses 58,106 65,996
Ceded reinsurance balances payable 5,932 14,654
Deferred income taxes 54,426 85,008
Current income taxes 4,788 -
Accounts payable and other liabilities 41,928 43,625
Payable for securities 59,795 86,304
------------ ------------
Total liabilities 1,148,979 1,201,723
------------ ------------

Stockholder's equity:
Preferred stock, par value $1,000.00 per share; authorized
shares - 285,000; issued and outstanding shares - none - -
Common stock, par value $2.50 per share; authorized shares
- 40,000,000; issued and outstanding shares - 32,800,000
at March 31, 1996 and December 31, 1995 82,000 82,000
Additional paid-in capital 481,427 481,059
Unrealized gains on investments, net of tax 30,403 87,112
Retained earnings 943,454 906,536
------------ ------------
Total stockholder's equity 1,537,284 1,556,707
------------ ------------
Total liabilities and stockholder's equity $2,686,263 $2,758,430
============ ============
</TABLE>

See accompanying Notes to Consolidated Financial Statements.
<PAGE>

AMBAC Indemnity Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
For The Periods Ended March 31, 1996 and 1995
(Dollars in Thousands)

<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1996 1995
--------- ---------
<S> <C> <C>
Revenues:

Gross premiums written $51,292 $40,572
Ceded premiums written (9,612) (3,459)
--------- ---------
Net premiums written 41,680 37,113

Increase in unearned premiums (13,070) (12,437)
--------- ---------
Net premiums earned 28,610 24,676

Net investment income 34,905 31,874
Net realized gains (losses) 2,356 (4,674)
Other income 6,052 2,378
--------- ---------
Total revenues 71,923 54,254
--------- ---------
Expenses:

Losses and loss adjustment expenses 810 1,028
Underwriting and operating expenses 10,083 9,330
Interest expense 514 331
--------- ---------
Total expenses 11,407 10,689
--------- ---------

Income before income taxes 60,516 43,565
--------- ---------

Income tax expense:

Current taxes 13,648 6,847
Deferred taxes (46) 1,208
--------- ---------

Total income taxes 13,602 8,055
--------- ---------

Net income 46,914 35,510
========= =========
</TABLE>

See accompanying Notes to Consolidated Unaudited Financial Statements
<PAGE>

AMBAC Indemnity Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
For The Periods Ended March 31, 1996 and 1995
(Dollars in Thousands)

<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------
1996 1995
-------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $46,914 $35,510
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 456 337
Amortization of bond premium and discount (386) (163)
Current income taxes payable 6,959 6,768
Deferred income taxes payable (46) 1,208
Deferred acquisition costs (2,785) (3,786)
Unearned premiums 13,070 12,437
Losses and loss adjustment expenses (7,890) 68
Ceded reinsurance balances payable (8,722) 58
(Gain) loss on sales of investments (2,356) 4,674
Other, net (9,735) (8,219)
-------------- -------------
Net cash provided by operating activities 35,479 48,892
-------------- -------------

Cash flows from investing activities:
Proceeds from sales of bonds at amortized cost 378,129 431,966
Proceeds from maturities of bonds at amortized cost 24,374 13,917
Purchases of bonds at amortized cost (406,425) (505,448)
Change in short-term investments (23,006) 23,163
Securities purchased under agreements to resell (3,703) 77
Other, net (1,218) (178)
-------------- -------------
Net cash used in investing activities (31,849) (36,503)
-------------- -------------

Cash flows from financing activities:
Dividends paid (10,000) (10,000)
-------------- -------------
Net cash used in financing activities (10,000) (10,000)
-------------- -------------

Net cash flow (6,370) 2,389
Cash at beginning of year 6,912 2,117
-------------- -------------
Cash at March 31 $542 $4,506
============== =============
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Income taxes $6,300 $ -
============== =============
</TABLE>

See accompanying Notes to Consolidated Financial Statements.
<PAGE>

AMBAC INDEMNITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

(1) BASIS OF PRESENTATION

AMBAC Indemnity Corporation ("AMBAC Indemnity") is a leading insurer
of municipal and structured finance obligations. Financial guarantee insurance
underwritten by AMBAC Indemnity guarantees payment when due of the principal of
and interest on the obligation insured. In the case of a default on the insured
obligation, payments under the insurance policy may not be accelerated by the
policyholder without AMBAC Indemnity's consent. As of March 31, 1996, AMBAC
Indemnity's net insurance in force (principal and interest) was $203.7 billion.
AMBAC Indemnity is a wholly-owned subsidiary of AMBAC Inc., which is a holding
company that provides through its affiliates financial guarantee insurance and
financial services to both public and private clients.

AMBAC Indemnity has one wholly-owned subsidiary, American Municipal
Bond Holding Company ("AMBH"), which is a holding company for certain real
estate interests.

AMBAC Indemnity, at March 31, 1996 owned approximately 26.5% of the
outstanding common stock of an affiliate, HCIA Inc. (NASDAQ:HCIA) ("HCIA"), a
leading health care information content company.

AMBAC Indemnity, as the sole limited partner, owns 90% of the total
partnership interests of AMBAC Financial Services, Limited Partnership ("AFS"),
a limited partnership which provides interest rate swaps primarily to states,
municipalities and municipal authorities. The sole general partner of AFS,
AMBAC Financial Services Holdings, Inc., a wholly-owned subsidiary of AMBAC
Inc., owns a general partnership interest representing 10% of the total
partnership interest in AFS.

AMBAC Indemnity's consolidated unaudited interim financial statements
have been prepared on the basis of generally accepted accounting principles and,
in the opinion of management, reflect all adjustments necessary for a fair
presentation of the Company's financial condition, results of operations and
cash flows for the periods presented. The results of operations for the three
months ended March 31, 1996 may not be indicative of the results that may be
expected for the full year ending December 31, 1996. These financial statements
and notes should be read in conjunction with the financial statements and notes
included in the audited consolidated financial statements of AMBAC Indemnity
Corporation and its subsidiaries as of December 31, 1995 and 1994, and for each
of the years in the three-year period ended December 31, 1995.

(2) INCOME TAXES

The tax provisions in the accompanying financial statements reflect
effective tax rates differing from prevailing federal corporate income tax
rates, primarily as a result of tax-exempt interest income.

(3) SUBSEQUENT EVENTS

As previously announced by AMBAC Inc., on April 15, 1996, HCIA filed
an amendment with the Securities and Exchange Commission to HCIA's previously
filed Registration Statement to cover a proposed secondary public offering by
AMBAC Inc. of 4,159,505 shares of HCIA common stock. After completion of the
proposed offering, AMBAC Indemnity and AMBAC Inc. will no longer own any shares
of HCIA common stock.

Mortgage and Manufactured Housing Contract Pass-Through
Certificates Residential Asset Securities Corporation
Depositor

The Mortgage and Manufactured Housing Contract Pass-Through
Certificates (the "Certificates") offered hereby
may be sold from time to time in series, as described in the
related Prospectus Supplement. Each series of
Certificates will represent in the aggregate the entire
beneficial ownership interest, excluding any interest
retained by Residential Asset Securities Corporation (the
"Company") or any other entity specified in the related
Prospectus Supplement, in a trust fund consisting primarily of a
segregated pool of one- to four-family,
residential first or junior lien closed-end mortgage loans (the
"Mortgage Loans"), manufactured housing
conditional sales contracts and installment loan agreements (the
"Contracts") or interests therein (which may
include Agency Securities, as defined herein) (collectively with
the Mortgage Loans and Contracts, the
"Mortgage Collateral"), acquired by the Company from one or more
affiliated or unaffiliated institutions. See
"The Trust Funds." See "Index of Principal Definitions" for the
meanings of capitalized terms and acronyms.

The Mortgage Collateral and certain other assets described herein
under "The Trust Funds" and in the related
Prospectus Supplement will be held in trust (collectively, a
"Trust Fund") for the benefit of the holders of the
related series of Certificates pursuant to a pooling and
servicing agreement (each, a "Pooling and Servicing
Agreement") or a trust agreement (each, a "Trust Agreement") as
described herein under "The Trust Funds" and
in the related Prospectus Supplement. Each Trust Fund will
consist of one or more types of the various types of
Mortgage Collateral described under "The Trust Funds."
Information regarding each class of Certificates of a
series, and the general characteristics of the Mortgage
Collateral to be evidenced by such Certificates, will be
set forth in the related Prospectus Supplement.

Each series of Certificates will include one or more classes.
Each class of Certificates of any series will represent
the right, which right may be senior or subordinate to the rights
of one or more of the other classes of the
Certificates, to receive a specified portion of payments of
principal or interest (or both) on the Mortgage
Collateral in the related Trust Fund in the manner described
herein and in the related Prospectus Supplement.
See "Description of the Certificates Distributions." A series may
include one or more classes of Certificates
entitled to principal distributions, with disproportionate,
nominal or no interest distributions, or to interest
distributions, with disproportionate, nominal or no principal
distributions. A series may include two or more
classes of Certificates which differ as to the timing, sequential
order, priority of payment, pass-through rate or
amount of distributions of principal or interest or both.

The Company's only obligations with respect to a series of
Certificates will be pursuant to certain limited
representations and warranties made by the Company or as
otherwise described in the related Prospectus
Supplement. The related Prospectus Supplement may identify one or
more entities as servicers (each, a
"Servicer") for a series of Certificates secured by Mortgage
Loans or Contracts or, if specified in the
related Prospectus Supplement, an entity may act as master
servicer with respect to the Certificates (the
"Master Servicer"). If specified in the related Prospectus
Supplement, a series of Certificates may have
a certificate administrator (the "Certificate Administrator") in
addition to, or in lieu of, a Servicer or a
Master Servicer. The principal obligations of a Servicer or the
Master Servicer, if any, will be its
contractual servicing obligations (which may include its limited
obligation to make certain advances in
the event of delinquencies in payments on the Mortgage Loans or
Contracts). The principal obligations
of the Certificate Administrator, if any, will be to perform
certain obligations with respect to the
Certificates under the terms of the Pooling and Servicing
Agreement or Trust Agreement, as applicable.
See "Description of the Certificates."

If so specified in the related Prospectus Supplement, the Trust
Fund for a series of Certificates may include any
one or any combination of a mortgage pool insurance policy,
letter of credit, bankruptcy bond, special hazard
insurance policy, reserve fund, certificate insurance policy,
surety bond or other form of credit support. In
addition to or in lieu of the foregoing, credit enhancement may
be provided by means of subordination. See
"Description of Credit Enhancement."

The rate of payment of principal of each class of Certificates
entitled to a portion of principal payments on the
Mortgage Collateral will depend on the priority of payment of
such class and the rate and timing of principal
payments (including prepayments, defaults, liquidations and
repurchases) on the Mortgage Collateral. A rate of
principal payment lower or higher than that anticipated may
affect the yield on each class of Certificates in the
manner described herein and in the related Prospectus Supplement.
See "Yield Considerations."

For a discussion of significant matters affecting investments in
the Certificates, see "Risk Factors"
commencing herein on page 12.

One or more separate elections may be made to treat a Trust Fund
as a "real estate mortgage investment conduit"
(a "REMIC") for federal income tax purposes. The Prospectus
Supplement for a series of Certificates will specify
which class or classes of the related series of Certificates will
be considered to be regular interests in the related
REMIC and which class of Certificates or other interests will be
designated as the residual interest in the related
REMIC, if applicable. See "Certain Federal Income Tax
Consequences."

PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE SOURCE OF
PAYMENTS ON
THE CERTIFICATES. THE CERTIFICATES DO NOT REPRESENT AN INTEREST
IN OR
OBLIGATION OF THE COMPANY, THE MASTER SERVICER, THE CERTIFICATE
ADMINISTRATOR, GMAC MORTGAGE CORPORATION ("GMAC MORTGAGE") OR ANY
OF
THEIR AFFILIATES. NEITHER THE CERTIFICATES NOR THE MORTGAGE
COLLATERAL
WILL BE GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY (EXCEPT IN THE CASE OF FHA LOANS, FHA CONTRACTS,
VA LOANS,
VA CONTRACTS AND GINNIE MAE SECURITIES) OR BY THE COMPANY, THE
MASTER
SERVICER, THE CERTIFICATE ADMINISTRATOR, GMAC MORTGAGE OR ANY OF
THEIR
AFFILIATES.

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.

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

There will be no secondary market for any series of Certificates
prior to the offering thereof. There can be no
assurance that a secondary market for any of the Certificates
will develop or, if it does develop, that it will
continue. The Certificates will not be listed on any securities
exchange.

Retain this Prospectus for future reference. This Prospectus may
not be used to consummate sales of securities
offered hereby unless accompanied by a Prospectus Supplement.
____________________________
The date of this Prospectus is March 21, 1996.
ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration
Statement under the
Securities Act of 1933, as amended, with respect to the
Certificates (the "Registration
Statement"). The Company is also subject to certain of the
information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and, accordingly, will
file reports thereunder with the Commission. The Registration
Statement and the exhibits
thereto, and reports and other information filed by the Company
pursuant to the Exchange
Act can be inspected and copied at the public reference
facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and
at certain of its
Regional Offices located as follows: Chicago Regional Office,
Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and New
York Regional Office,
7 World Trade Center, Suite 1300, New York, New York 10048.
Copies of such material
can also be obtained from the Public Reference Section of the
Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates.

Copies of Ginnie Mae's information statement and annual
report can be obtained
by writing or calling the United States Department of Housing and
Urban Development,
451-7th Street S.W., Room 6210, Washington, D.C. 20410-9000
(202-708-3649). Copies
of Freddie Mac's most recent offering circular for Freddie Mac
Certificates, Freddie Mac's
information statement and most recent supplement to such
information statement and any
quarterly report made available by Freddie Mac can be obtained by
writing or calling the
Investor Relations Department of Freddie Mac at Post Office Box
4112, Reston, Virginia
22090 (outside the Washington, D.C. metropolitan area, telephone
800-424-5401, ext. 8160;
within the Washington, D.C. metropolitan area, telephone
703-759-8160). Copies of Fannie
Mae's most recent prospectus for Fannie Mae Certificates and
Fannie Mae's annual report
and quarterly financial statements, as well as other financial
information, are available from
the Director of Investor Relations of Fannie Mae, 3900 Wisconsin
Avenue, N.W.,
Washington, D.C. 20016 (202-537-7115). The Company does not, and
will not, participate
in the preparation of Ginnie Mae's information statements or
annual reports, Freddie Mac's
offering circulars, information statements or any supplements
thereto or any of its quarterly
reports or Fannie Mae's prospectuses or any of its reports,
financial statements or other
information and, accordingly, makes no representations as to the
accuracy or completeness
of the information set forth therein.

REPORTS TO CERTIFICATEHOLDERS

Monthly reports which contain information concerning the
Trust Fund for a series
of Certificates will be sent by the Master Servicer or
Certificate Administrator, as
applicable, to each holder of record of the Certificates of the
related Series. See "Description
of the Certificates Reports to Certificateholders." The Company
will file with the
Commission such periodic reports with respect to the Trust Fund
for a series of Certificates
as are required under the Exchange Act, and the rules and
regulations of the Commission
thereunder.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

With respect to each series of Certificates offered hereby,
there are incorporated
herein and in the related Prospectus Supplement by reference all
documents and report filed
or caused to be filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, prior to the termination of the
offering of the related series
of Certificates, that relate specifically to such related series
of Certificates. The Company
will provide or cause to be provided without charge to each
person to whom this Prospectus
and related Prospectus Supplement is delivered in connection with
the offering of one or
more classes of such series of Certificates, upon written or oral
request of such person, a
copy of any or all such reports incorporated herein by reference,
in each case to the extent
such reports relate to one or more of such classes of such series
of Certificates, other than
the exhibits to such documents, unless such exhibits are
specifically incorporated by
reference in such documents. Requests should be directed in
writing to Residential Asset
Securities Corporation, 8400 Normandale Lake Boulevard, Suite
700, Minnesota 55437, or
by telephone at (612) 832-7000.

No dealer, salesman, or any other person has been authorized
to give any
information, or to make any representations, other than those
contained in this Prospectus
or the related Prospectus Supplement and, if given or made, such
information or
representations must not be relied upon as having been authorized
by the Company or any
dealer, salesman, or any other person. Neither the delivery of
this Prospectus or the related
Prospectus Supplement nor any sale made hereunder or thereunder
shall under any
circumstances create an implication that there has been no change
in the information herein
or therein since the date hereof. This Prospectus and the related
Prospectus Supplement are
not an offer to sell or a solicitation of an offer to buy any
security in any jurisdiction in
which it is unlawful to make such offer or solicitation.
TABLE OF CONTENTS

Caption Page

ADDITIONAL INFORMATION . . . . . . . . . . . . . 2

REPORTS TO CERTIFICATEHOLDERS. . . . . . . . . . 2

INCORPORATION OF CERTAIN INFORMATION
BY REFERENCE. . . . . . . . . . . . . . . . . . 2

SUMMARY OF PROSPECTUS. . . . . . . . . . . . . . 6

RISK FACTORS . . . . . . . . . . . . . . . . . . 13
Risks Associated with the Mortgage
Collateral . . . . . . . . . . . . . . . . 13
Yield and Prepayment
Considerations . . . . . . . . . . . . . . 15
Limited Representations and
Warranties . . . . . . . . . . . . . . . . 15
Limited Liquidity . . . . . . . . . . . . . 15
Limited Obligations . . . . . . . . . . . . 16
Limitations, Reduction and
Substitution of Credit
Enhancement. . . . . . . . . . . . . . . . 16

THE TRUST FUNDS. . . . . . . . . . . . . . . . . 17
General . . . . . . . . . . . . . . . . . . 17
The Mortgage Loans. . . . . . . . . . . . . 18
The Contracts . . . . . . . . . . . . . . . 24
The Agency Securities . . . . . . . . . . . 25
Mortgage Collateral Sellers . . . . . . . . 27
Representations with Respect to
Mortgage Collateral. . . . . . . . . . . . 27
Repurchases of Mortgage Collateral. . . . . 29
Limited Right of Substitution . . . . . . . 30

DESCRIPTION OF THE CERTIFICATES. . . . . . . . . 31
General . . . . . . . . . . . . . . . . . . 31
Form of Certificates. . . . . . . . . . . . 31
Assignment of Mortgage Loans. . . . . . . . 34
Assignment of Contracts . . . . . . . . . . 35
Review of Mortgage Loan or
Contract Documents . . . . . . . . . . . . 35
Assignment of Agency Securities . . . . . . 36
Spread. . . . . . . . . . . . . . . . . . . 36
Payments on Mortgage Collateral . . . . . . 36
Withdrawals from the Custodial
Account. . . . . . . . . . . . . . . . . . 39
Distributions . . . . . . . . . . . . . . . 40
Advances. . . . . . . . . . . . . . . . . . 42
Prepayment Interest Shortfalls. . . . . . . 43
Reports to Certificateholders . . . . . . . 44
Servicing and Administration of
Mortgage Collateral. . . . . . . . . . . . 45
Realization Upon Defaulted
Property . . . . . . . . . . . . . . . . . 49

SUBORDINATION. . . . . . . . . . . . . . . . . . 51

DESCRIPTION OF CREDIT ENHANCEMENT. . . . . . . . 53
General . . . . . . . . . . . . . . . . . . 53
Letters of Credit . . . . . . . . . . . . . 54
Mortgage Pool Insurance Policies. . . . . . 54

Special Hazard Insurance Policies. . . . . . . . 56
Bankruptcy Bonds . . . . . . . . . . . . . . . . 57
Reserve Funds. . . . . . . . . . . . . . . . . . 57
Certificate Insurance Policies . . . . . . . . . 58
Surety Bonds . . . . . . . . . . . . . . . . . . 58
Maintenance of Credit Enhancement. . . . . . . . 58
Reduction or Substitution of Credit Enhancement. 59

INSURANCE POLICIES ON MORTGAGE LOANS OR CONTRACTS. . 60
Primary Mortgage Insurance Policies. . . . . . . 60
Standard Hazard Insurance on Mortgaged Properties 61
Standard Hazard Insurance on Manufactured Homes. 62
FHA Mortgage Insurance . . . . . . . . . . . . . 62
VA Mortgage Guaranty . . . . . . . . . . . . . . 63

THE COMPANY. . . . . . . . . . . . . . . . . . . . . 63

RESIDENTIAL FUNDING CORPORATION. . . . . . . . . . . 64

THE POOLING AND SERVICING AGREEMENT. . . . . . . . . 64
Servicing and Administration . . . . . . . . . . 64
Events of Default. . . . . . . . . . . . . . . . 64
Rights Upon Event of Default . . . . . . . . . . 65
Amendment. . . . . . . . . . . . . . . . . . . . 66
Termination; Retirement of Certificates. . . . . 67
The Trustee. . . . . . . . . . . . . . . . . . . 67

YIELD CONSIDERATIONS . . . . . . . . . . . . . . . . 68

MATURITY AND PREPAYMENT CONSIDERATIONS . . . . . . . 71

CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS AND CONTRACTS 74
The Mortgage Loans . . . . . . . . . . . . . . . 74
The Contracts. . . . . . . . . . . . . . . . . . 82
Environmental Legislation. . . . . . . . . . . . 85
Soldiers' and Sailors' Civil Relief Act of 1940. 86

Default Interest and Limitations on Prepayments. 86
Forfeitures in Drug and RICO Proceedings . . . . 86

CERTAIN FEDERAL INCOME TAX CONSEQUENCES. . . . . . . 87
General. . . . . . . . . . . . . . . . . . . . . 87
REMICs . . . . . . . . . . . . . . . . . . . . . 88

STATE AND OTHER TAX CONSEQUENCES . . . . . . . . . .104

ERISA CONSIDERATIONS . . . . . . . . . . . . . . . .105
Plan Asset Regulations . . . . . . . . . . . . .105
Prohibited Transaction Exemption . . . . . . . .106
Tax-Exempt Investors . . . . . . . . . . . . . .108
Consultation with Counsel. . . . . . . . . . . .108

LEGAL INVESTMENT MATTERS . . . . . . . . . . . . . .109

USE OF PROCEEDS. . . . . . . . . . . . . . . . . . .110

METHODS OF DISTRIBUTION. . . . . . . . . . . . . . .110

LEGAL MATTERS. . . . . . . . . . . . . . . . . . . .111
FINANCIAL INFORMATION. . . . . . . . . . . . . . . .112

INDEX OF PRINCIPAL DEFINITIONS . . . . . . . . . . .113

SUMMARY OF PROSPECTUS

The following summary is qualified in its entirety by reference
to the detailed
information appearing elsewhere in this Prospectus and by
reference to the information with
respect to each series of Certificates contained in the
Prospectus Supplement to be prepared
and delivered in connection with the offering of such series.
Capitalized terms used in this
summary that are not otherwise defined shall have the meanings
ascribed thereto in this
Prospectus. An index indicating where certain terms used herein
are defined appears at the
end of this Prospectus.

Securities Offered . . . Mortgage and Manufactured Housing
Contract
Pass-Through Certificates.

Company. . . . . . . . . Residential Asset Securities
Corporation. See
"The Company."

Servicer or Master Servicer. . . The related Prospectus

Supplement may identify
one or more entities as

Servicers for a series of
Certificates evidencing

interests in Mortgage
Loans or Contracts or an

entity may act as Master
Servicer. The Master

Servicer may be Residential
Funding Corporation, an

affiliate of the Company
("Residential Funding"). See
"Residential Funding
Corporation" and

"Description of the
Certificates Servicing and

Administration of
Mortgage Collateral."

Certificate Administrator . An entity may be named as the

Certificate
Administrator in the related

Prospectus
Supplement, if required in

addition to or in lieu of
the Master Servicer or Servicer

for a series of
Certificates. The Certificate

Administrator may be
Residential Funding. See

"Residential Funding
Corporation" and "Description of

the
Certificates Servicing and

Administration of
Mortgage Collateral."

Trustee The Trustee for each series of

Certificates will be
specified in the related Prospectus

Supplement.

Certificates . . . . . . Each series of Certificates will

represent in the
aggregate the entire beneficial

ownership interest,
excluding any interest retained by the
Company or
any other entity specified in the

related Prospectus
Supplement, in a Trust Fund consisting
primarily
of the Mortgage Collateral acquired by
the
Company from one or more affiliated or
unaffiliated institutions. Each series
of
Certificates will be issued pursuant

to a Pooling
and Servicing Agreement or a Trust

Agreement
among the Company, the Trustee and one

or more
of any Servicer, the Master Servicer

and the
Certificate Administrator.

As specified in the related Prospectus
Supplement, each series of Certificates,
or class of
Certificates in the case of a series

consisting of
two or more classes, may have a stated

principal
balance, no stated principal balance or a
notional
amount and may be entitled to

distributions of
interest based on a specified interest

rate or rates
(each, a "Pass-Through Rate"). Each

series or
class of Certificates may have a
different Pass-Through Rate, which may be a fixed, variable or
adjustable Pass-Through Rate, or any

combination
of two or more of such Pass-Through

Rates. The
related Prospectus Supplement will

specify the
Pass-Through Rate or Rates for each

series or
class of Certificates, or the initial

Pass-Through
Rate or Rates and the method for

determining
subsequent changes to the Pass-Through

Rate or
Rates.

A series may include one or more classes

of
Certificates (each, a "Strip

Certificate") entitled to
(i) principal distributions, with

disproportionate,
nominal or no interest distributions, or
(ii) interest
distributions, with disproportionate,

nominal or no
principal distributions. In addition, a

series may
include classes of Certificates which

differ as to
timing, sequential order, priority of

payment,
Pass-Through Rate or amount of

distributions of
principal or interest or both, or as to

which
distributions of principal or interest or
both on any
class may be made upon the occurrence of
specified events, in accordance with a

schedule or
formula, or on the basis of collections

from
designated portions of the Trust Fund. In
addition,
a series may include one or more classes
of
Certificates ("Accrual Certificates"), as
to which
certain accrued interest will not be

distributed but
rather will be added to the principal

balance
thereof in the manner described in the

related
Prospectus Supplement. One or more

classes of
Certificates in a series may be entitled

to receive
principal payments pursuant to an

amortization
schedule under the circumstances

described in the
related Prospectus Supplement.

If so specified in the related Prospectus
Supplement, a series of Certificates may
include
one or more classes of Certificates

(collectively,
the "Senior Certificates") which are

senior to one
or more classes of Certificates

(collectively, the
"Subordinate Certificates") in respect of
certain
distributions of principal and interest

and
allocations of losses on the Mortgage

Collateral.
See "Subordination." If so specified in

the related
Prospectus Supplement, a series of

Certificates
may include one or more classes of

Certificates
(collectively, the "Mezzanine

Certificates") which
are Subordinate Certificates but which

are senior
to other classes of Subordinate

Certificates in
respect of such distributions or losses.
In addition,
certain classes of Senior Certificates

may be
senior to other classes of Senior

Certificates in
respect of such distributions or losses.

The
Certificates will be issued in

fully-registered
certificated or book-entry form in the

authorized
denominations specified in the related

Prospectus
Supplement. See "Description of the

Certificates."

Neither the Certificates nor the

underlying
Mortgage Collateral will be guaranteed or
insured
by any governmental agency or

instrumentality
(except in the case of FHA Loans, FHA

Contracts,
VA Loans, VA Contracts and Ginnie Mae
Securities (each as defined herein)) or

by the
Company, the Master Servicer, any

Servicer, the
Mortgage Collateral Seller, the

Certificate
Administrator, GMAC Mortgage or any of

their
affiliates. See "Risk Factors Limited
Obligations."

Interest Distributions . Except as otherwise specified herein

or in the
related Prospectus Supplement,

interest on each
class of Certificates of each series,
other than
Strip Certificates or Accrual

Certificates (prior to
the time when accrued interest becomes
payable
thereon), will be remitted at the
applicable Pass-Through Rate on the outstanding principal
balance of such class, on the 25th day
(or, if such
day is not a business day, the next

business day)
of each month, commencing with the

month
following the month in which the

Cut-off Date (as
defined in the applicable Prospectus

Supplement)
occurs (each, a "Distribution Date").
If the
Prospectus Supplement so specifies,

interest
distributions on any class of

Certificates may be
reduced on account of negative

amortization on
the Mortgage Collateral, with the

Deferred
Interest (as defined herein) allocable
to such class
added to the principal balance

thereof, which
Deferred Interest will thereafter bear
interest at
the applicable Pass-Through Rate.

Distributions,
if any, with respect to interest on

Strip Certificates
will be made on each Distribution Date

as
described herein and in the related

Prospectus
Supplement. See "Description of the
Certificates Distributions." Strip

Certificates
that are entitled to distributions of
principal only
will not receive distributions in

respect of interest.
Interest that has accrued but is not

yet payable on
any Accrual Certificates will be added
to the
principal balance of such class on the
related
Distribution Date, and will thereafter
bear interest
at the applicable Pass-Through Rate.

Unless
otherwise specified in the related

Prospectus
Supplement, distributions of interest
with respect
to any series of Certificates (or

accruals thereof in
the case of Accrual Certificates), or
with respect
to one or more classes included

therein, may be
reduced to the extent of interest

shortfalls not
covered by advances or the applicable
form of
credit support, including any

Prepayment Interest
Shortfalls. See "Description of the

Certificates"
and "Maturity and Prepayment

Considerations."

Principal Distributions. Except as otherwise specified in the

related
Prospectus Supplement, principal

distributions on
the Certificates of each series will

be payable on
each Distribution Date, commencing

with the
Distribution Date in the month

following the
month in which the Cut-off Date

occurs, to the
holders of the Certificates of such

series, or of the
class or classes of Certificates then

entitled
thereto, on a pro rata basis among all
such
Certificates or among the Certificates
of any such
class, in proportion to their

respective outstanding
principal balances or the percentage

interests
represented by such class, in the

priority and
manner specified in the related

Prospectus
Supplement. Strip Certificates with no
principal
balance will not receive distributions
in respect of
principal. Distributions of principal

with respect
to any class of Certificates may be

reduced to the
extent of certain delinquencies not

covered by
advances or losses not covered by the
applicable
form of credit enhancement. See "The

Trust
Funds," "Maturity and Prepayment
Considerations" and "Description of

the
Certificates."

Trust Fund . . . . . . . The Trust Fund for a series of

Certificates will
consist primarily of Mortgage Loans,

Contracts,
whole or partial participations in

Mortgage Loans
or Contracts and/or Agency Securities,
together
with certain accounts, reserve funds,
insurance
policies and related agreements

specified in the
related Prospectus Supplement. The

Trust Fund
for a series of Certificates will also
include the
Certificate Account and a Collection

Account, if
applicable, and may include various

forms of
credit enhancement, all as specified

in the related
Prospectus Supplement. See "The Trust
Funds"
and "Description of Credit

Enhancement."

The Mortgage Collateral will be purchased
by the
Company directly or indirectly (through
Residential Funding or other affiliates)
from
affiliates, including GMAC Mortgage

Corporation
of PA, an indirect parent of the Company,

or
directly or indirectly from sellers

unaffiliated with
the Company (each, a "Mortgage Collateral
Seller"). See "The Trust Funds Mortgage
Collateral Sellers."

Mortgage Loans . . . . . The Trust Fund for a series of

Certificates may
include a pool of Mortgage Loans, or

whole or
partial participations in Mortgage

Loans (a
"Mortgage Pool"), secured by first or
junior liens
on one- to four-family residential

properties
(each, a "Mortgaged Property"). Such

Mortgage
Loans may, as specified in the related
Prospectus
Supplement, include conventional

loans, FHA
Loans, VA Loans, Balloon Loans, GPM

Loans,
Buy-Down Loans, Bi-Weekly Loans or

Mortgage
Loans having other special payment

features, as
described herein and in the related

Prospectus
Supplement. See "The Trust Funds The
Mortgage Loans." The Mortgage Loans

may have
fixed or adjustable interest rates. A
Mortgage Pool
may include Mortgage Loans that have

been
modified prior to their inclusion in a
Trust Fund.
The Mortgage Loans may include either
(i)
Mortgage Loans secured by mortgages,

deeds of
trust or other security instruments

creating a first
or junior lien on the Mortgaged

Properties or (ii)
loans secured by an assignment by the

borrower
of a security interest in shares

issued by a private
cooperative housing association and

the related
proprietary lease or occupancy

agreement on a
cooperative dwelling, which constitute
first or
junior liens on such property

("Cooperative
Loans"). The Mortgaged Properties may
be owner
occupied or non-owner occupied and may
include
vacation and second homes. See "The

Trust
Funds The Mortgage Loans."

Contracts. . . . . . . . The Trust Fund for a series of

Certificates may
include a pool of Contracts, or whole
or partial
participations in Contracts (a

"Contract Pool")
originated by one or more manufactured
housing
dealers, or such other entity or

entities described
in the related Prospectus Supplement.
The
Contracts may be conventional

manufactured
housing contracts or contracts insured
by the FHA
or partially guaranteed by the VA.

Each Contract
will be secured by a manufactured home
(each, a
"Manufactured Home," which shall also
be
included in the term "Mortgaged

Property").
Generally, the Contracts will be

fully-amortizing
and will bear interest at a fixed rate
unless
otherwise specified in the related

Prospectus
Supplement. See "The Trust Funds The
Contracts."

Agency Securities. . . . The Trust Fund for a series of

Certificates may
include a pool of Freddie Mac

Securities, Fannie
Mae Securities or Ginnie Mae

Securities
(collectively, the "Agency

Securities"), or a
combination of Agency Securities. Such
Agency
Securities may represent whole or

partial interests
in pools of (1) Mortgage Loans or

Contracts or (2)
Agency Securities. Unless otherwise

set forth in
the related Prospectus Supplement, all

Ginnie
Mae Securities will be backed by the

full faith and
credit of the United States. None of

the Freddie
Mac Securities or Fannie Mae

Securities will be
backed, directly or indirectly, by the
full faith and
credit of the United States. Agency

Securities may
be backed by fixed or adjustable rate
Mortgage
Loans or other types of Mortgage Loans
or
Contracts specified in the related

Prospectus
Supplement. See "The Trust Funds The

Agency
Securities."

Yield and Prepayment
Considerations . . . . The Mortgage Collateral supporting a

series of
Certificates will have unique

characteristics that
will affect the yield to maturity and
the rate of
payment of principal on such

Certificates. See
"Yield Considerations" and "Maturity

and
Prepayment Considerations" herein and
in the
related Prospectus Supplement.

Credit Enhancement . . . If so specified in the related

Prospectus
Supplement, the Trust Fund with

respect to any
series of Certificates may include any
one or any
combination of a letter of credit,

mortgage pool
insurance policy, special hazard

insurance policy,
bankruptcy bond, reserve fund,

certificate
insurance policy, surety bond or other

type of
credit support to provide partial

coverage for
certain defaults and losses relating

to the
Mortgage Loans. Credit support also

may be
provided in the form of subordination
of one or
more classes of Certificates in a

series under
which losses are first allocated to

any Subordinate
Certificates up to a specified limit.
Any form of

credit enhancement typically will have

certain
limitations and exclusions from

coverage
thereunder, which will be described in
the related
Prospectus Supplement. Losses not

covered by
any form of credit enhancement will be

borne by
the holders of the related

Certificates (or certain
classes thereof). 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 "Description of

Credit
Enhancement" and "Subordination."

Advances . . . . . . . . Unless otherwise specified in the

related
Prospectus Supplement, the Master

Servicer (or,
if there is no Master Servicer for

such series, the
related Servicer) will be obligated to
make certain
advances with respect to delinquent

scheduled
payments on the Mortgage Loans or

Contracts,
but only to the extent that the Master
Servicer or
a Servicer believes that such amounts
will be
recoverable by it. Any advance made by
the
Master Servicer or a Servicer with

respect to a
Mortgage Loan or a Contract is

recoverable by it
as provided herein under "Description
of the
Certificates Advances" either from

recoveries
on the specific Mortgage Loan or

Contract or,
with respect to any advance

subsequently
determined to be nonrecoverable, out

of funds
otherwise distributable to the holders
of the
related series of Certificates.

Optional Termination . . The Master Servicer, the Certificate
Administrator, the Company, a Servicer
or, if
specified in the related Prospectus

Supplement,
the holder of the residual interest in
a REMIC
may at its option either (i) effect

early retirement
of a series of Certificates through

the purchase of
the assets in the related Trust Fund

or (ii)
purchase, in whole but not in part,

the Certificates
specified in the related Prospectus

Supplement; in
each case under the circumstances and
in the
manner set forth herein under "The

Pooling and
Servicing Agreement Termination;

Retirement
of Certificates" and in the related

Prospectus Supplement.

Rating . . . . . . . . . At the date of issuance, as to each

series, each
class of Certificates offered hereby

will be rated,
at the request of the Company, in one
of the four
highest rating categories by one or

more
nationally recognized statistical

rating agencies
(each, a "Rating Agency"). See

"Ratings" in the
related Prospectus Supplement.

Legal Investment . . . . Unless otherwise specified in the

related
Prospectus Supplement and except with
respect to
any class of Certificates that will

evidence an
interest in Mortgages secured by

second or more
junior liens, each class of

Certificates offered
hereby and by the related Prospectus

Supplement
that is rated in one of the two

highest rating
categories by at least one Rating

Agency will
constitute "mortgage related

securities" for
purposes of the Secondary Mortgage

Market
Enhancement Act of 1984, as amended
("SMMEA"), for so long as it sustains
such a
rating. See "Legal Investment

Matters."

ERISA Considerations . . A fiduciary of an employee benefit

plan and
certain other retirement plans and

arrangements,
including individual retirement

accounts and
annuities, Keogh plans, and collective

investment
funds and separate accounts in which

such plans,
accounts, annuities or arrangements

are invested, which is subject to the
Employee Retirement
Income Security Act of 1974, as

amended
("ERISA"), or Section 4975 of the

Internal
Revenue Code of 1986 (the "Code"), and
any
other person contemplating purchasing

a
Certificate with Plan Assets (as

defined herein),
should carefully review with its legal
counsel
whether the purchase or holding of

Certificates
could give rise to a transaction that
is prohibited
or is not otherwise permissible either
under
ERISA or Section 4975 of the Code. See
"ERISA
Considerations" herein and in the

related
Prospectus Supplement.

Certain Federal Income Tax
Consequences . . . . . Certificates of each series offered

hereby will
constitute "regular interests" or

"residual
interests" in a Trust Fund, or a

portion thereof,
treated as a REMIC under Sections 860A
through
860G of the Code, unless otherwise

specified in
the related Prospectus Supplement. See
"Certain
Federal Income Tax Consequences"

herein and in

the related Prospectus Supplement.

RISK FACTORS

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

Risks Associated with the Mortgage Collateral

The primary assets underlying a series of Certificates will
be the Mortgage Loans
or Contracts (or interests therein) in the related Trust Fund or
the Mortgage Loans or
Contracts that underlie the Agency Securities in a Trust Fund.
Defaults on mortgage loans
and contracts may occur because of changes in the economic status
of the related borrower
or because of increases in the monthly payment for such mortgage
loan or contract or
decreases in the related borrower's equity in the related
Mortgaged Property. Losses upon
the foreclosure of a mortgage loan or contract may occur because
the value of the related
Mortgaged Property is insufficient to recover the outstanding
principal balance of the
mortgage loan or contract. Factors which may affect the value of
the related Mortgaged
Property include declines in real estate values and adverse
economic conditions either
generally or in the particular geographic area in which the
related Mortgaged Property is
located. See "Yield Considerations." Losses may also result from
fraud in the origination
of a mortgage loan or contract.

Mortgage Loans or Contracts may have been originated using
underwriting
standards that are less stringent than the underwriting standards
applied by other mortgage
loan purchase programs such as those run by Fannie Mae or Freddie
Mac or by the
Company's affiliate, Residential Funding, for the purpose of
collateralizing securities issued
by Residential Funding Mortgage Securities I, Inc. For example,
the Mortgage Loans or
Contracts may have been made to borrowers (the "Mortgagors")
having imperfect credit
histories, ranging from minor delinquencies to bankruptcies, or
Mortgagors with generally
higher ratios of monthly mortgage payments to income or higher
ratios of total monthly
credit payments to income. Mortgage Loans or Contracts in a Trust
Fund may also present
a greater risk of loss due to higher Loan-to-Value Ratios or
lesser amounts of primary
mortgage insurance than such other lending programs.

Mortgage Loans or Contracts may have been originated one or
more years prior to
the Closing Date for the related Certificates. Such seasoned
Mortgage Collateral may have
higher current loan-to-value ratios than at origination if the
value of the related Mortgaged
Property has declined. No assurance can be given that values of
the Mortgaged Properties
have remained or will remain at the levels existing on the dates
of origination of the related
Mortgage Loans or Contracts. If a residential real estate market
should experience an overall
decline in property values, or if the Mortgagors on such seasoned
Mortgage Collateral have
lower incomes or poorer credit histories than at the time of
origination of the related
Mortgage Loan or Contract, the actual rates of delinquencies,
foreclosures and losses could
be higher than the rates otherwise expected by an investor in the
Certificates.

In addition, in the case of Mortgage Loans or Contracts that
are subject to negative
amortization due to the addition to the related principal balance
of Deferred Interest, the
principal balances of such Mortgage Loans or Contracts 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 by the Mortgagors which may result in
losses on such Mortgage
Loans or Contracts. Certain other Mortgage Loans or Contracts may
provide for escalating
or variable payments by the Mortgagor, as to which the Mortgagor
is generally qualified on
the basis of the initial payment amount. Some of the Mortgage
Loans or Contracts may be
Balloon Loans and the ability of a Mortgagor to pay the related
Balloon Amount may
depend on the Mortgagor's ability to refinance the Mortgage Loan
or Contract. In some
instances, the Mortgagors may not be able to make their loan
payments as such payments
increase and thus the likelihood of default will increase.

The Mortgage Loans may be secured by junior liens on the
related Mortgaged
Properties ("Junior Mortgage Loans") that will be subordinate to
the rights of the mortgagee
under the related senior mortgage or mortgages. Accordingly, the
holder of a Junior
Mortgage Loan will be subject to a loss of its mortgage if the
holder of a senior mortgage
is successful in foreclosure of its mortgage since no junior
liens or encumbrances survive
such a foreclosure. Also, due to the priority of the senior
mortgage, the holder of a Junior
Mortgage Loan may not be able to control the timing, method or
procedure of any
foreclosure action relating to the Mortgaged Property. Investors
should be aware that any
liquidation, insurance or condemnation proceeds received in
respect of such Junior
Mortgage Loans will be available to satisfy the outstanding
balance of such Mortgage Loans
only to the extent that the claims of such senior mortgages have
been satisfied in full,
including any related foreclosure costs. For Mortgage Loans
secured by junior liens that
have low Junior Mortgage Ratios, foreclosure costs may be
substantial relative to the
outstanding balance of the Mortgage Loan upon default, and
therefore the amount of any
liquidation proceeds available to Certificateholders may be
smaller as a percentage of the
outstanding balance of the Mortgage Loan than would be the case
in a typical pool of first
lien residential loans. In addition, the holder of a Junior
Mortgage Loan may only foreclose
on the related Mortgaged Property subject to any senior
mortgages, in which case such
holder must either pay the entire amount due on the senior
mortgages to the senior
mortgagees at or prior to the foreclosure sale or undertake the
obligation to make payments
on the senior mortgages. The Trust Fund will not have any source
of funds to satisfy the
senior mortgages or make payments due to the senior mortgagees,
although the Master
Servicer or Subservicer may, at its option, advance such amounts
to the extent deemed
recoverable and prudent. In the event that proceeds from a
foreclosure or similar sale of the
related Mortgaged Property are insufficient to satisfy all senior
liens and the Mortgage Loan
in the aggregate, the Trust Fund, as the holder of the junior
lien, and, accordingly, Holders
of one or more classes of the Certificates, are likely to (i)
incur losses in jurisdictions in
which a deficiency judgment against the borrower is not
available, and (ii) incur losses if
any deficiency judgment obtained is not realized upon. In the
event that such proceeds are
insufficient to satisfy all senior liens and to reimburse the
Master Servicer or Subservicer
for any advances made in respect thereof, such losses could
exceed the amount of the Junior
Mortgage Loan.

Some Mortgage Loans or Contracts may be one or more months
delinquent with
regard to payment of principal or interest at the time of their
deposit into a Trust Fund.
Certain Mortgage Loans or Contracts may have incomplete legal
files that, as of the time
of deposit into a Trust Fund, may be missing such documents as a
note, a copy of the
Mortgage or a title insurance policy, or may contain documents
that are defective because
they are incomplete, contain incorrect information, are unsigned
by the appropriate parties
or have other defects.

In addition to the foregoing, from time to time certain
geographic regions will
experience weaker regional economic conditions and housing
markets and, consequently,
may experience higher rates of loss and delinquency than will be
experienced on mortgage
loans or contracts generally. For example, a region's economic
condition and housing
market may be directly, or indirectly, adversely affected by
natural disasters or civil
disturbances such as earthquakes, hurricanes, floods, eruptions
or riots. The economic
impact of any of these types of events may also be felt in areas
beyond the region
immediately affected by the disaster or disturbance. The Mortgage
Loans or Contracts in
the Trust Fund for a series of Certificates may be concentrated
in these regions, and such
concentration may present risks in addition to those generally
present for similar mortgage-backed securities without such
concentration.

With respect to Junior Mortgage Loans in general, and in
particular those having
high Combined Loan-to-Value Ratios or low Junior Mortgage Ratios,
the foregoing
considerations may result in circumstances under which it would
be uneconomical to
foreclose on the related Mortgaged Property in the event of a
default. The actual Junior
Mortgage Ratio at any time may be lower than indicated in the
Prospectus Supplement as
a result of any reductions in the Stated Principal Balance
thereof. In addition, the actual
Combined Loan-to-Value Ratio at any time may be higher than
indicated in the Prospectus
Supplement if the Junior Mortgage Loan or any senior mortgage
loan is subject to negative
amortization. In such circumstances, repayment of the Junior
Mortgage Loan would depend
solely on the credit of the Mortgagor, and the ability to obtain
repayment of the Mortgage
Loan may be generally similar to that which would be experienced
if the Mortgage Loan
were an unsecured consumer loan. Moreover, while in most
jurisdictions a mortgagee
would be permitted to elect to either foreclose or sue to collect
the debt evidenced by the
Mortgage Note, in some jurisdictions suits to collect the debt
are prohibited until the
mortgagee has sought to foreclose against the security, so that
the mortgagee may be forced
to foreclose first and thereafter obtain a deficiency judgment.
In addition, in some
jurisdictions, where the mortgagee has chosen to sue on the debt
in lieu of foreclosure, the
mortgagee will be barred from foreclosing against the security.

To the extent that losses on any item of Mortgage Collateral
are not covered by any
credit enhancement, the related Certificateholders (or specific
classes thereof) will bear all
risk of loss resulting from default by the 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 or Contracts. Specific
risks, if any, associated with
the Mortgage Collateral underlying a particular series of
Certificates will be discussed in
the related Prospectus Supplement. See "Risk Factors," if any, in
the related Prospectus
Supplement.

Yield and Prepayment Considerations

The yield to maturity of the Certificates of each series will
depend on the rate and
timing of principal payments (including prepayments, liquidations
due to defaults, and
repurchases due to conversion of ARM Loans to fixed interest rate
loans or breaches of
representations and warranties) on the Mortgage Loans or
Contracts and the price paid by
Certificateholders. Such yield may be adversely affected by a
higher or lower than
anticipated rate of prepayments on the related Mortgage
Collateral. The yield to maturity
on Strip Certificates will be extremely sensitive to the rate of
prepayments on the related
Mortgage Collateral. In addition, the yield to maturity on
certain other types of classes of
Certificates, including Accrual Certificates, Certificates with a
Pass-Through Rate that
fluctuates inversely with an index or certain other classes, may
be relatively more sensitive
to the rate of prepayment on the related Mortgage Collateral than
other classes of
Certificates. Prepayments are influenced by a number of factors,
including prevailing
mortgage market interest rates, local and regional economic
conditions and homeowner
mobility. See "Yield Considerations" and "Maturity and Prepayment
Considerations."

Limited Representations and Warranties

Certain Mortgage Collateral Sellers may make more limited
representations and
warranties with respect to the Mortgage Loans or Contracts that
have been acquired by the
Company than would be required by Fannie Mae or Freddie Mac in
connection with their
first mortgage loan purchase programs. In addition, any item of
Mortgage Collateral for
which a breach of a representation or warranty exists will remain
in the related Trust Fund
in the event that a Mortgage Collateral Seller is unable, or
disputes its obligation, to
repurchase such Mortgage Collateral and such a breach does not
also constitute a breach of
a representation made by Residential Funding, the Company or the
Master Servicer. In
either event, any resulting losses will be borne by the related
form of credit enhancement,
to the extent available, and otherwise by the holders of one or
more classes of Certificates.
See "The Trust Funds Representations with Respect to Mortgage
Collateral."

Limited Liquidity

There can be no assurance that a secondary market for the
Certificates of any series
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. The Certificates will not
be listed on any securities
exchange.

Limited Obligations

The Certificates will not represent an interest in or
obligation of the Company, the
Master Servicer, any Servicer, the Mortgage Collateral Seller,
the Certificate Administrator,
GMAC Mortgage or any of their affiliates. The only obligations of
the foregoing entities
with respect to the Certificates or any Mortgage Collateral will
be the obligations (if any)
of the Company, the related Servicer, if applicable, the Mortgage
Collateral Seller, and the
Master Servicer pursuant to certain limited representations and
warranties made with respect
to the Mortgage Collateral, the Master Servicer's or the
applicable Servicer's servicing
obligations under the related Pooling and Servicing Agreement
(including such entity's
limited obligation to make certain Advances) and pursuant to the
terms of any Agency
Securities, the Certificate Administrator's (if any)
administrative obligations under the
Pooling and Servicing Agreement or the Trust Agreement, and, if
and to the extent
expressly described in the related Prospectus Supplement, certain
limited obligations of the
Master Servicer or the related Servicer in connection with an
agreement to purchase a
Convertible Mortgage Loan upon conversion to a fixed rate.
Neither the Certificates nor the
underlying Mortgage Collateral will be guaranteed or insured by
any governmental agency
or instrumentality (except in the case of FHA Loans, FHA
Contracts, VA Loans, VA
Contracts or Ginnie Mae Securities), or by the Company, the
Master Servicer, any Servicer,
the Mortgage Collateral Seller, the Certificate Administrator,
GMAC Mortgage or any of
their affiliates. Proceeds of the assets included in the related
Trust Fund (including the
Mortgage Collateral and any form of credit enhancement) will be
the sole source of
payments on the Certificates, and there will be no recourse to
the Company, the Master
Servicer, any Servicer, the Mortgage Collateral Seller, the
Certificate Administrator, GMAC
Mortgage 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 may be provided in
limited amounts to cover certain types of losses on the
underlying Mortgage Collateral.
Credit enhancement will be provided in one or more of the forms
referred to herein,
including, but not limited to: subordination of other classes of
Certificates of the same
series; a Letter of Credit; a Mortgage Pool Insurance Policy; a
Special Hazard Insurance
Policy; a Bankruptcy Bond; a Reserve Fund; a Certificate
Insurance Policy; a Surety Bond;
or any combination thereof. See "Subordination" and "Description
of Credit Enhancement"
herein. Regardless of the form of credit enhancement provided,
the amount of coverage will
be limited in amount and in most cases will be subject to
periodic reduction in accordance
with a schedule or formula. Furthermore, such credit enhancement
may provide only very
limited coverage as to certain types of losses or risks, and may
provide no coverage as to
certain other types of losses or risks. In the event losses
exceed the amount of coverage
provided by any credit enhancement or losses of a type not
covered by any credit
enhancement occur, such losses will be borne by the holders of
the related Certificates (or
certain classes thereof). The Master Servicer or the Certificate
Administrator, as applicable,
will generally be permitted to reduce, terminate or substitute
all or a portion of the credit
enhancement for any series of Certificates, if each Rating Agency
indicates that the then-current rating thereof will not be
adversely affected. The rating of any series of Certificates
by any Rating Agency may be lowered following the initial
issuance thereof as a result of
the downgrading of the obligations of any applicable credit
support provider, or as a result
of losses on the related Mortgage Collateral in excess of the
levels contemplated by such
Rating Agency at the time of its initial rating analysis. None of
the Company, the Master
Servicer, any Servicer, the Mortgage Collateral Seller, the
Certificate Administrator, GMAC
Mortgage nor any of their affiliates will have any obligation to
replace or supplement any
credit enhancement, or to take any other action to maintain any
rating of any series of
Certificates. See "Description of Credit Enhancement Reduction or
Substitution of Credit
Enhancement."

THE TRUST FUNDS

General

A Trust Fund for a series of Certificates may include
Mortgage Collateral that
consists of one or more of the following: (1) Mortgage Loans, or
whole or partial
participations in Mortgage Loans, which are one- to four-family
residential mortgage loans,
including loans secured by first or junior mortgages or leases on
cooperative apartment units
and loans to cooperative associations, and which are closed-end
loans that do not permit
revolving debt; (2) Contracts, or whole or partial participations
in Contracts; (3) Agency
Securities which are mortgage pass-through certificates
(including those representing whole
or partial interests in pools of Mortgage Loans, Contracts or
Agency Securities (a)
guaranteed and/or issued by the Government National Mortgage
Association ("Ginnie Mae"
and such securities, "Ginnie Mae Securities"), (b) issued by the
Federal Home Loan
Mortgage Corporation ("Freddie Mac" and such securities, "Freddie
Mac Securities") or (c)
issued by the Federal National Mortgage Association ("Fannie Mae"
and such securities,
"Fannie Mae Securities"); and (4) certain other related property
conveyed by the Company.
Each Trust Fund may also include (i) the amounts required to be
held from time to time in
a trust account (the "Certificate Account"), into which payments
in respect of the Mortgage
Collateral may be deposited, maintained by the Master Servicer, a
Servicer, the Trustee or
the Certificate Administrator, as the case may be, pursuant to
the Pooling and Servicing
Agreement or Trust Agreement, (ii) if so specified in the related
Prospectus Supplement,
a trust account (the "Custodial Account") into which amounts to
be deposited in the
Certificate Account may be deposited on a periodic basis prior to
deposit in the Certificate
Account, (iii) any Mortgaged Property which initially secured a
Mortgage Loan or Contract
and that is acquired by foreclosure or deed in lieu of
foreclosure and (iv) if so specified in
the related Prospectus Supplement, one or more other cash
accounts, insurance policies or
other forms of credit enhancement with respect to the
Certificates, the Mortgage Collateral
or all or any part of the Trust Fund, required to be maintained
pursuant to the related
Pooling and Servicing Agreement or Trust Agreement. See
"Description of Credit
Enhancement."

Each Certificate will evidence the interest specified in the
related Prospectus
Supplement in a Trust Fund, containing a Mortgage Pool, a
Contract Pool or a pool of
Agency Securities (an "Agency Securities Pool") having the
aggregate principal balance as
of the date (the "Cut-off Date") specified in the related
Prospectus Supplement.
Certificateholders of a series will have interests only in such
Mortgage Pool, Contract Pool
or Agency Securities Pool and will have no interest in the
Mortgage Pool, Contract Pool or
Agency Securities Pool created with respect to any other series
of Certificates.

The related Prospectus Supplement may identify one or more
entities as Servicers
for a series of Certificates evidencing interests in Mortgage
Loans or Contracts or, if so
provided in the related Prospectus Supplement, an entity may act
as Master Servicer with
respect to a series of Certificates. The Master Servicer or any
Servicer, as applicable, may
service the Mortgage Loans or Contracts through one or more
Sub-Servicers. See
"Description of the Certificates Servicing and Administration of
Mortgage Collateral." In
addition to or in lieu of the Master Servicer or Servicer for a
series of Certificates, the
related Prospectus Supplement may identify a Certificate
Administrator for the Trust Fund.
The related Prospectus Supplement will identify an entity that
will serve as trustee (the
"Trustee") for a series of Certificates. The Trustee will be
authorized to appoint a custodian
(a "Custodian") pursuant to a custodial agreement to maintain
possession of and review
documents relating to the Mortgage Collateral as the agent of the
Trustee. The identity of
such Custodian, if any, will be set forth in the related
Prospectus Supplement.

The following is a brief description of the Mortgage
Collateral expected to be
included in the Trust Funds. If specific information respecting
the Mortgage Collateral is
not known to the Company at the time Certificates are initially
offered, more general
information of the nature described below will be provided in the
Prospectus Supplement,
and specific information will be set forth in a Current Report on
Form 8-K (a "Form 8-K")
to be filed with the Securities and Exchange Commission (the
"Commission") within fifteen
days after the initial issuance of such Certificates. A copy of
the Pooling and Servicing
Agreement or Trust Agreement, as applicable, with respect to each
series will be an exhibit
to the Form 8-K. A schedule of Mortgage Collateral will be an
exhibit to the related Pooling
and Servicing Agreement or Trust Agreement.

The Mortgage Loans

Unless otherwise stated in the related Prospectus Supplement,
the Mortgage Loans
included in a Trust Fund for a series will have been originated
by or on behalf of either (i)
savings and loan associations, savings banks, commercial banks,
credit unions, insurance
companies or similar institutions which are supervised and/or
examined by a federal or state
authority, or (ii) HUD-approved mortgagees. Each Mortgage Loan
will be selected by the
Company for inclusion in a Mortgage Pool from those purchased by
the Company from
Affiliated Sellers or, either directly or through its affiliates,
including GMAC Mortgage and
Residential Funding, from Unaffiliated Sellers, all as described
in the related Prospectus
Supplement. If a Mortgage Pool is composed of Mortgage Loans
acquired by the Company
directly from Unaffiliated Sellers, the related Prospectus
Supplement will specify the extent
of Mortgage Loans so acquired. The characteristics of the
Mortgage Loans will be as
described in the related Prospectus Supplement. The Mortgage
Loans purchased by the
Company from a Mortgage Collateral Seller will be selected by the
Company. Other
mortgage loans available for purchase by the Company may have had
characteristics which
would have made them eligible for inclusion in a Mortgage Pool,
but were not selected by
the Company for inclusion in such Mortgage Pool.

If so stated in the related Prospectus Supplement, all or a
portion of the Mortgage
Loans that underlie a series of Certificates may have been
purchased by the Company, either
directly, or indirectly through Residential Funding or other
affiliates, from Mortgage
Collateral Sellers under the AlterNet mortgage loan origination
program (the "AlterNet
Mortgage Program") as described below (such Mortgage Loans, the
"AlterNet Loans").

The Mortgage Loans may include mortgage loans insured by the
Federal Housing
Administration (the "FHA" and such loans, "FHA Loans"), a
division of the United States
Department of Housing and Urban Development ("HUD"), mortgage
loans partially
guaranteed by the Veterans Administration (the "VA" and such
loans, "VA Loans") and
mortgage loans not insured or guaranteed by the FHA or VA
("Conventional Loans"). The
Mortgage Loans may have fixed interest rates or adjustable
interest rates ("Mortgage
Rates") and may provide for fixed level payments or may be
Mortgage Loans pursuant to
which the monthly payments by the Mortgagor during the early
years of the related
Mortgage are less than the amount of interest that would
otherwise be payable thereon, with
the interest not so paid added to the outstanding principal
balance of such Mortgage Loan
("GPM Loans"), Mortgage Loans subject to temporary buy-down plans
("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, Mortgage Loans that provide for payment every
other week during the term
thereof ("Bi-Weekly Loans"), Mortgage Loans that experience
negative amortization,
Mortgage Loans that require a larger payment of principal upon
maturity (a "Balloon
Amount") that may be all or a portion of the principal thereof
("Balloon Loans"), or
Mortgage Loans with other payment characteristics as described
below or in the related
Prospectus Supplement. The Mortgage Loans may be secured by
mortgages or deeds of
trust, deeds to secure debt or other similar security instruments
(collectively, "Mortgages")
creating a first or junior lien on the related Mortgaged
Properties. The Mortgage Loans may
also include Cooperative Loans evidenced by promissory notes
secured by a first or junior
lien on the shares issued by private, non-profit, cooperative
housing corporations
("Cooperatives") and on the related proprietary leases or
occupancy agreements granting
exclusive rights to occupy specific units within a Cooperative
("Cooperative Dwellings").

If so specified in the related Prospectus Supplement, a
Mortgage Pool may include
Mortgage Loans that have been modified (each, a "Modified
Mortgage Loan"). Such
modifications may include conversions from an adjustable to a
fixed Mortgage Rate
(discussed below) or other changes in the related mortgage note.
If a Mortgage Loan is a
Modified Mortgage Loan, references to origination generally shall
be deemed to be
references to the date of modification.

The Mortgaged Properties may consist of detached individual
dwellings, individual
condominiums, townhouses, duplexes, row houses, individual units
in planned unit
developments, two- to four-family dwellings and other attached
dwelling units. Each
Mortgaged Property will be located on land owned in fee simple by
the Mortgagor or, if
specified in the related Prospectus Supplement, land leased by
the Mortgagor. Attached
dwellings may include structures where each Mortgagor owns the
land upon which the unit
is built, with the remaining adjacent land owned in common or
dwelling units subject to a
proprietary lease or occupancy agreement in a Cooperative. The
proprietary lease or
occupancy agreement securing a Cooperative Loan is generally
subordinate to any blanket
mortgage on the related cooperative apartment building or on the
underlying land.
Additionally, in the case of a Cooperative Loan, 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. See "Certain Legal
Aspects of Mortgage Loans
and Contracts."

The percentage of Mortgage Loans that are owner-occupied will
be disclosed in the
related Prospectus Supplement. The basis for any statement that a
given percentage of the
Mortgage Loans are secured by Mortgaged Properties that are
owner-occupied will be one
or more of the following: (i) the making of a representation by
the Mortgagor at origination
of a Mortgage Loan that the Mortgagor intends to use the
Mortgaged Property as a primary
residence for at least the first six months of occupancy, (ii) a
representation by the originator
of the Mortgage Loan (which representation may be based solely on
(i) above) or (iii) the
fact that the mailing address for the Mortgagor is the same as
the address of the Mortgaged
Property, and any representation and warranty in the related
Pooling and Servicing
Agreement to such effect may be qualified similarly. To the
extent specified in the related
Prospectus Supplement, the Mortgaged Properties may include
vacation homes, second
homes and non-owner-occupied investment properties. Mortgage
Loans secured by
investment properties (including two- to four-unit dwellings) may
also be secured by an
assignment of leases and rents and operating or other cash flow
guarantees relating to the
Mortgage Loans.

Certain information, including information regarding
loan-to-value ratios (each, a
"Loan-to-Value Ratio") at origination (unless otherwise specified
in the related Prospectus
Supplement) of the Mortgage Loans underlying each series of
Certificates, will be supplied
in the related Prospectus Supplement. In the case of most
Mortgage Loans, the Loan-to-Value Ratio is defined generally as
the ratio, expressed as a percentage, of the principal
amount of the Mortgage Loan at origination to the lesser of (1)
the appraised value
determined in an appraisal obtained at origination of such
Mortgage Loan and (2) the sales
price for the related Mortgaged Property. In the case of certain
refinanced, modified or
converted Mortgage Loans, the Loan-to-Value Ratio at origination
is defined as the ratio,
expressed as a percentage, of the principal amount of such
Mortgage Loan to either the
appraised value determined in an appraisal obtained at the time
of refinancing, modification
or conversion or, if no such appraisal has been obtained, to the
lesser of (1) the appraised
value of the related Mortgaged Property determined at origination
of the loan to be
refinanced, modified or converted and (2) the sales price of the
related Mortgaged Property.
The denominator of the ratio described in the preceding sentence
or the second preceding
sentence, as the case may be, is hereinafter referred to as the
"Appraised Value." Certain
Mortgage Loans which are subject to negative amortization will
have Loan-to-Value Ratios
which will increase after origination as a result of such
negative amortization. In the case
of seasoned Mortgage Loans, the appraisals upon which
Loan-to-Value Ratios have been
calculated may no longer be accurate valuations of the Mortgaged
Properties. Certain
Mortgaged Properties may be located in regions where property
values have declined
significantly since the time of origination.

With respect to any Junior Mortgage Loan, the "Combined
Loan-to-Value Ratio"
generally will be the ratio, expressed as a percentage, of the
sum of (i) the Cut-off Date
Principal Balance of such Junior Mortgage Loan and (ii) the
principal balance of any related
mortgage loans that constitute liens senior to the lien of the
Junior Mortgage Loan on the
related Mortgaged Property, at the time of the origination of
such Junior Mortgage Loan (or,
if appropriate, at the time of an appraisal subsequent to
origination), to the lesser of (A) the
appraised value of the related Mortgaged Property determined in
the appraisal used in the
origination of such Junior Mortgage Loan (or, if appropriate, the
value determined in an
appraisal obtained subsequent to origination) and (B) if
applicable under the corresponding
program, the sales price of each Mortgaged Property. With
respect to each Junior Mortgage
Loan, the "Junior Mortgage Ratio" generally will be the ratio,
expressed as a percentage, of
the Cut-off Date Principal Balance of such Junior Mortgage Loan
to the sum of (i) the Cut-off Date Principal Balance of such
Junior Mortgage Loan and (ii) the principal balance of
any mortgage loans senior to the Junior Mortgage Loan at the time
of the origination of such
Junior Mortgage Loan.

The Mortgage Loans may be "equity refinance" Mortgage Loans,
as to which a
portion of the proceeds are used to refinance an existing
mortgage loan, and the remaining
proceeds may be retained by the Mortgagor or used for purposes
unrelated to the Mortgaged
Property. Alternatively, the Mortgage Loans may be "rate and term
refinance" Mortgage
Loans, as to which substantially all of the proceeds (net of
related costs incurred by the
Mortgagor) are used to refinance an existing mortgage loan or
loans (which may include a
junior lien) primarily in order to change the interest rate or
other terms thereof. The
Mortgage Loans may be mortgage loans that have been consolidated
and/or have had
various terms changed, mortgage loans that have been converted
from adjustable rate
mortgage loans to fixed rate mortgage loans, or construction
loans which have been
converted to permanent mortgage loans. In addition, a Mortgaged
Property may be subject
to secondary financing at the time of origination of the Mortgage
Loan or thereafter.

Mortgage Loans that have adjustable Mortgage Rates ("ARM
Loans") generally will
provide for a fixed initial Mortgage Rate until the first date on
which such Mortgage Rate
is to be adjusted. Thereafter, the Mortgage Rate is subject to
periodic adjustment as
described in the related Prospectus Supplement, subject to the
applicable limitations, based
on changes in the relevant index (the "Index") described in the
applicable Prospectus
Supplement, to a rate equal to the Index plus a fixed percentage
spread over the Index
established contractually for each ARM Loan at the time of its
origination (the "Gross
Margin"). The initial Mortgage Rate on an ARM Loan may be lower
than the sum of the
then-applicable Index and the Gross Margin for such ARM Loan.

ARM Loans have features that provide different investment
considerations than
fixed-rate mortgage loans. In particular, adjustable mortgage
rates can cause payment
increases that may exceed some Mortgagors' capacity to cover such
payments. However,
to the extent specified in the related Prospectus Supplement, an
ARM Loan may provide
that its Mortgage Rate may not be adjusted to a rate above the
applicable maximum
Mortgage Rate (the "Maximum Mortgage Rate") or below the
applicable minimum
Mortgage Rate (the "Minimum Mortgage Rate"), if any, for such ARM
Loan. In addition,
to the extent specified in the related Prospectus Supplement,
certain of the ARM Loans may
provide for limitations on the maximum amount by which their
mortgage rates may adjust
for any single adjustment period (the "Periodic Cap"). Some ARM
Loans provide for
limitations on the amount of scheduled payments of principal and
interest.

Certain ARM Loans may be subject to negative amortization
from time to time prior
to their maturity (such ARM Loans, "Neg-Am ARM Loans"). Such
negative amortization
may result from either the adjustment of the Mortgage Rate on a
more frequent basis than
the adjustment of the scheduled payment or the application of a
cap on the size of the
scheduled payment. In the first case, negative amortization
results if an increase in the
Mortgage Rate occurs prior to an adjustment of the scheduled
payment on the related
Mortgage Loan and such increase causes accrued monthly interest
on the Mortgage Loan
to exceed the scheduled payment. In the second case, negative
amortization results if an
increase in the Mortgage Rate causes accrued monthly interest on
a Mortgage Loan to
exceed the limit on the size of the scheduled payment on such
Mortgage Loan. In the event
that the scheduled payment is not sufficient to pay the accrued
monthly interest on a Neg-Am ARM Loan, the amount of accrued
monthly interest that exceeds the scheduled payment
on such Mortgage Loans (the "Deferred Interest") is added to the
principal balance of such
ARM Loan and is to be repaid from future scheduled payments.
Neg-Am ARM Loans do
not provide for the extension of their original stated maturity
to accommodate changes in
their Mortgage Rate. Investors should be aware that a Junior
Mortgage Loan may be
subordinate to a negatively amortizing senior mortgage loan. An
increase in the principal
balance of such senior mortgage loan may cause the sum of the
outstanding principal
balance of the senior mortgage loan and the outstanding principal
balance of the Junior
Mortgage Loan to exceed the sum of such principal balances at the
time of origination of
the Junior Mortgage Loan. The related Prospectus Supplement will
specify whether the
ARM Loans underlying a series are Neg-Am ARM Loans and the
percentage of any Junior
Mortgage Loans that are subordinate to any related senior
mortgage loan that is negatively
amortizing.

A Mortgage Pool may contain ARM Loans which allow the
Mortgagors to convert
the adjustable rates on such Mortgage Loans to a fixed rate at
one or more specified periods
during the life of such Mortgage Loans (each, a "Convertible
Mortgage Loan"), generally
not later than ten years subsequent to the date of origination.
If specified in the related
Prospectus Supplement, upon any conversion, the Company will
repurchase or Residential
Funding, the applicable Servicer or Sub-Servicer or a third party
will purchase the converted
Mortgage Loan as and to the extent set forth in the related
Prospectus Supplement.
Alternatively, if specified in the related Prospectus Supplement,
the Company or Residential
Funding (or another party specified therein) may agree to act as
remarketing agent with
respect to such converted Mortgage Loans and, in such capacity,
to use its best efforts to
arrange for the sale of converted Mortgage Loans under specified
conditions. Upon the
failure of any party so obligated to purchase any such converted
Mortgage Loan, the
inability of any remarketing agent to arrange for the sale of the
converted Mortgage Loan
and the unwillingness of such remarketing agent to exercise any
election to purchase the
converted Mortgage Loan for its own account, the related Mortgage
Pool will thereafter
include both fixed rate and adjustable rate Mortgage Loans.

If specified in the related Prospectus Supplement, certain of
the Mortgage Loans
may be Buy-Down Loans pursuant to which the monthly payments made
by the Mortgagor
during the early years of the Mortgage Loan (the "Buy-Down
Period") will be less than the
scheduled monthly payments on the Mortgage Loan, the resulting
difference to be made up
from (i) an amount (such amount, exclusive of investment earnings
thereon, being
hereinafter referred to as "Buy-Down Funds") contributed by the
seller of the Mortgaged
Property or another source and placed in an escrow account, (ii)
if the Buy-Down Funds are
contributed on a present value basis, investment earnings on such
Buy-Down Funds or (iii)
additional buydown funds to be contributed over time by the
Mortgagor's employer or
another source.

The related Prospectus Supplement will provide material
information concerning
the types and characteristics of the Mortgage Loans included in a
Trust Fund as of the
related Cut-off Date. In the event that Mortgage Loans are added
to or deleted from the
Trust Fund after the date of the related Prospectus Supplement
and prior to the Closing Date
for the related series of Certificates, the final characteristics
of the Mortgage Pool will be
noted in the Form 8-K.

Certain Mortgage Pools may include Mortgage Loans that are
one or more months
delinquent with regard to payment of principal or interest at the
time of their deposit into
a Trust Fund. The related Prospectus Supplement will set forth
the percentage of Mortgage
Loans that are so delinquent. In addition, the related Prospectus
Supplement will set forth
the percentage of Mortgage Loans that have been delinquent more
than once during the
preceding twelve months. Delinquent Mortgage Loans are more
likely to result in losses
than Mortgage Loans that have a current payment status.

Under the Pooling and Servicing Agreement for each series of
Certificates, the
Company will cause the Mortgage Loans constituting each Mortgage
Pool to be assigned
to the Trustee for such series of Certificates, for the benefit
of the holders of all such
Certificates. Such assignment of the Mortgage Loans to the
Trustee will be without
recourse. See "Description of the Certificates Assignment of
Mortgage Loans."

Underwriting Policies

The Company generally expects that the originator of each of
the Mortgage Loans
will have applied, consistent with applicable federal and state
laws and regulations,
underwriting procedures intended to evaluate the borrower's
credit standing and repayment
ability and/or the value and adequacy of the related property as
collateral. If so specified in
the related Prospectus Supplement, all or a portion of the
Mortgage Loans constituting the
Mortgage Pool for a series of Certificates may have been acquired
either directly or
indirectly by the Company through the AlterNet Mortgage Program.
Any FHA Loans or VA
Loans will have been originated in compliance with the
underwriting policies of the FHA
or VA, respectively. The underwriting criteria applied by the
originators of the Mortgage
Loans included in a Mortgage Pool may vary significantly among
Mortgage Collateral
Sellers. The related Prospectus Supplement will describe
generally certain underwriting
criteria, to the extent known by the Company, that were applied
by the originators of such
Mortgage Loans. The Company generally will have less detailed
information concerning
the origination of seasoned Mortgage Loans than it will have
concerning newly-originated
Mortgage Loans.

General Standards. Generally, each Mortgagor will have been
required to complete
an application designed to provide to the original lender
pertinent credit information
concerning the Mortgagor. As part of the description of the
Mortgagor's financial condition,
such Mortgagor will have furnished information (which may be
supplied solely in such
application) with respect to its assets, liabilities, income,
credit history, employment history
and personal information, and furnished an authorization to apply
for a credit report which
summarizes the borrower's credit history with local merchants and
lenders and any record
of bankruptcy. The Mortgagor may also have been required to
authorize verifications of
deposits at financial institutions where the Mortgagor had demand
or savings accounts. In
the case of investment properties, only income derived from the
Mortgaged Property may
have been considered for underwriting purposes, rather than the
income of the Mortgagor
from other sources. With respect to Mortgaged Property consisting
of vacation or second
homes, no income derived from the property generally will have
been considered for
underwriting purposes.

As described in the related Prospectus Supplement, certain
Mortgage Loans may
have been originated under "limited documentation" or "no
documentation" programs which
require less documentation and verification than do traditional
"full documentation"
programs. Generally, under such a program, minimal investigation
into the Mortgagor's
credit history and income profile is undertaken by the originator
and such underwriting may
be based primarily or entirely on an appraisal of the Mortgaged
Property and the Loan-to-Value Ratio at origination.

The adequacy of the Mortgaged Property as security for
repayment of the related
Mortgage Loan will generally have been determined by appraisal in
accordance with pre-established appraisal procedure guidelines
for appraisals established by or acceptable to the
originator. Appraisers may be staff appraisers employed by the
originator or independent
appraisers selected in accordance with pre-established guidelines
established by the
originator. The appraisal procedure guidelines generally will
have required the appraiser or
an agent on its behalf to personally inspect the property and to
verify whether the property
was in good condition and that construction, if new, had been
substantially completed. The
appraisal generally will have been based upon a market data
analysis of recent sales of
comparable properties and, when deemed applicable, an analysis
based on income generated
from the property or a replacement cost analysis based on the
current cost of constructing
or purchasing a similar property.

The underwriting standards applied by an originator generally
require that the
underwriting officers be satisfied that the value of the property
being financed, as indicated
by an appraisal or other acceptable valuation method, currently
supports and is anticipated
to support in the future the outstanding loan balance. In fact,
certain states where the
Mortgaged Properties may be located have "anti-deficiency" laws
requiring, in general, that
lenders providing credit on single family property look solely to
the property for repayment
in the event of foreclosure. See "Certain Legal Aspects of
Mortgage Loans and Contracts."
Any of these factors could change nationwide or merely could
affect a locality or region in
which all or some of the Mortgaged Properties are located.
However, declining values of
real estate, as experienced recently in certain regions, or
increases in the principal balances
of certain Mortgage Loans, such as GPM Loans and Neg-Am ARM
Loans, could cause the
principal balance of some or all of the Mortgage Loans to exceed
the value of the
Mortgaged Properties.

Based on the data provided in the application, certain
verifications (if required by
the originator of the Mortgage Loan) and the appraisal or other
valuation of the Mortgaged
Property, a determination will have been made by the original
lender that the Mortgagor's
monthly income would be sufficient to enable the Mortgagor to
meet its monthly obligations
on the Mortgage Loan and other expenses related to the property
(such as property taxes,
utility costs, standard hazard and primary mortgage insurance
and, if applicable,
maintenance fees and other levies assessed by a Cooperative) and
other fixed obligations
other than housing expenses including, in the case of Junior
Mortgage Loans, payments
required to be made on any senior mortgage. The originator's
guidelines for Mortgage Loans
generally will specify that scheduled payments on a Mortgage Loan
during the first year of
its term plus taxes and insurance (including primary mortgage
insurance) and all scheduled
payments on obligations that extend beyond one year (including
those mentioned above and
other fixed obligations) would equal no more than specified
percentages of the prospective
Mortgagor's gross income. The originator may also consider the
amount of liquid assets
available to the Mortgagor after origination.

The level of review by Residential Funding, if any, will vary
depending on a
number of factors. Residential Funding, on behalf of the Company,
generally will review
a portion of the Mortgage Loans constituting the Mortgage Pool
for a series of Certificates
for conformity with the applicable underwriting standards and to
assess the likelihood of
repayment of the Mortgage Loan from the various sources for such
repayment, including
the Mortgagor, the Mortgaged Property, and primary mortgage
insurance, if any. In
reviewing seasoned Mortgage Loans (those which have been
outstanding for more than 12
months), Residential Funding may also take into consideration the
Mortgagor's actual
payment history in assessing a Mortgagor's current ability to
make payments on the
Mortgage Loan. In addition, Residential Funding may conduct
additional procedures to
assess the current value of the Mortgaged Properties. Such
procedures may consist of drive
by appraisals or real estate broker's price opinions. The Company
may also consider a
specific area's housing value trends. These alternative valuation
methods are not generally
as reliable as the type of mortgagor financial information or
appraisals that are generally
obtained at origination. In its underwriting analysis,
Residential Funding may also consider
the applicable credit score of the related Mortgagor used in
connection with the origination
of the Mortgage Loan (as determined based on a credit scoring
model acceptable to the
Company.)

The Company anticipates that Mortgage Loans included in
Mortgage Pools for
certain series of Certificates will have been originated based on
underwriting standards that
are less stringent than for other mortgage loan lending programs.
In such cases, borrowers
may have credit histories that contain delinquencies on mortgage
and/or consumer debts.
In addition, some borrowers may have filed bankruptcy within a
few years of the time of
origination of the related Mortgage Loan. Likewise, Mortgage
Loans included in a Trust
Fund may have been originated in connection with a governmental
program under which
underwriting standards were significantly less stringent and
designed to promote home
ownership or the availability of affordable residential rental
property notwithstanding higher
risks of default and losses. As discussed above, in evaluating
seasoned mortgage loans, the
Company may place greater weight on payment history or market and
other economic trends
and less weight on underwriting factors generally applied to
newly originated mortgage
loans.

With respect to the Company's underwriting standards, as well
as any other
underwriting standards that may be applicable to any Mortgage
Loans, such underwriting
standards generally include a set of specific criteria pursuant
to which the underwriting
evaluation is made. However, the application of such
underwriting standards does not imply
that each specific criterion was satisfied individually. Rather,
a Mortgage Loan will be
considered to be originated in accordance with a given set of
underwriting standards if,
based on an overall qualitative evaluation, the loan is in
substantial compliance with such
underwriting standards. For example, a Mortgage Loan may be
considered to comply with
a set of underwriting standards, even if one or more specific
criteria included in such
underwriting standards were not satisfied, if other factors
compensated for the criteria that
were not satisfied or if the Mortgage Loan is considered to be in
substantial compliance with
the underwriting standards.

The AlterNet Program. The underwriting standards with
respect to AlterNet Loans
will generally conform to those published in the AlterNet Seller
Guide (the "AlterNet Seller
Guide"), as modified from time to time. The AlterNet Seller Guide
will set forth general
underwriting standards relating to mortgage loans made to
borrowers having a range of
imperfect credit histories, ranging from minor delinquencies to
borrower bankruptcies. The
underwriting standards set forth in the AlterNet Seller Guide are
revised based on changing
conditions in the residential mortgage market and the market for
the Company's mortgage
pass-through certificates and may also be waived by Residential
Funding from time to time.
The Prospectus Supplement for each series of Certificates secured
by AlterNet Loans will
set forth the general underwriting criteria applicable to such
Mortgage Loans.

A portion of AlterNet Loans generally will be reviewed by
Residential Funding or
by a designated third party for compliance with applicable
underwriting criteria. Certain of
the AlterNet Loans may be purchased in negotiated transactions
(which may be governed
by agreements relating to ongoing purchases of AlterNet Loans by
Residential Funding)
("Master Commitments"), from AlterNet Program Sellers who will
represent that AlterNet
Loans have been originated in accordance with underwriting
standards agreed to by
Residential Funding. Certain other AlterNet Loans will be
purchased from AlterNet
Program Sellers who will represent that AlterNet Loans were
originated pursuant to
underwriting standards determined by a mortgage insurance company
acceptable to
Residential Funding. Residential Funding may accept a
certification from such insurance
company as to an AlterNet Loan's insurability in a mortgage pool
as of the date of
certification as evidence of an AlterNet Loan conforming to
applicable underwriting
standards. Such certifications will likely have been issued
before the purchase of the
AlterNet Loan by Residential Funding or the Company.

FHA and VA Programs. With respect to FHA Loans and VA Loans,
traditional
underwriting guidelines used by the FHA and the VA, as the case
may be, which were in
effect at the time of origination of each such Mortgage Loan will
have generally been
applied.

The Contracts

General

The Trust Fund for a series may include a Contract Pool
evidencing interests in
Contracts originated by one or more manufactured housing dealers,
or such other entity or
entities described in the related Prospectus Supplement. The
Contracts may be conventional
Contracts or Contracts insured by the FHA ("FHA Contracts") or
partially guaranteed by
the VA ("VA Contracts"). Each Contract will be secured by a
Manufactured Home. Unless
otherwise specified in the related Prospectus Supplement, the
Contracts will be fully
amortizing.

The Manufactured Homes securing the Contracts will consist of
"manufactured
homes" within the meaning of 42 U.S.C. (S) 5402(6) which are
treated as "single family
residences" for the purposes of the REMIC provisions of the Code.
Accordingly, a
Manufactured Home will be a structure built on a permanent
chassis, which is transportable
in one or more sections and customarily used at a fixed location,
has a minimum of 400
square feet of living space and minimum width in excess of 81/2
feet and is 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.

The related Prospectus Supplement will provide information
concerning the types
or characteristics of the Contracts included in a Trust Fund as
of the related Cut-off Date.
In the event that Contracts are added to or deleted from the
Trust Fund after the date of the
related Prospectus Supplement, the final characteristics of the
Contract Pool will be noted
in the Form 8-K.

Certain Contract Pools may include Contracts that are one or
more months
delinquent with regard to payment of principal or interest at the
time of their deposit into
a Trust Fund. The related Prospectus Supplement will set forth
the percentage of Contracts
that are delinquent and whether such Contracts have been so
delinquent more than once
during the preceding twelve months. Contract Pools that contain
delinquent Contracts are
more likely to sustain losses than are Contract Pools that
contain Contracts that have a
current payment status.

Underwriting Policies

Conventional Contracts will comply with the underwriting
policies of the applicable
originator or Mortgage Collateral Seller, which will be described
in the related Prospectus
Supplement. With respect to FHA Contracts and VA Contracts,
traditional underwriting
guidelines used by the FHA and the VA, as the case may be, which
were in effect at the time
of origination of each such Contract will generally have been
applied.

With respect to a Contract made in connection with the
Mortgagor's purchase of a
Manufactured Home, the "Appraised Value" is generally the sales
price of the Manufactured
Home or the amount determined by a professional appraiser. The
appraiser must personally
inspect the Manufactured Home and prepare a report which includes
market data based on
recent sales of comparable Manufactured Homes and, when deemed
applicable, a
replacement cost analysis based on the current cost of a similar
Manufactured Home. The
Loan-to-Value Ratio for a Contract generally will be equal to the
original principal amount
of the Contract divided by the lesser of the Appraised Value or
the sales price for the
Manufactured Home; however, unless otherwise specified in the
related Prospectus
Supplement, an appraisal of the Manufactured Home will not be
required.

The Agency Securities

Government National Mortgage Association

Ginnie Mae is a wholly-owned corporate instrumentality of the
United States within
HUD. Section 306(g) of Title III of the National Housing Act of
1934, as amended (the
"Housing Act"), authorizes Ginnie Mae to guarantee the timely
payment of the principal of
and interest on certificates representing interests in a pool of
mortgages (i) insured by the
FHA, under the Housing Act or under Title V of the Housing Act of
1949, or (ii) partially
guaranteed by the VA under the Servicemen's Readjustment Act of
1944, as amended, or
under Chapter 37 of Title 38, United States Code.

Section 306(g) of the Housing Act provides that "the full
faith and credit of the
United States is pledged to the payment of all amounts which may
be required to be paid
under any guarantee under this subsection." In order to meet its
obligations under any such
guarantee, Ginnie Mae may, under Section 306(d) of the Housing
Act, borrow from the
United States Treasury an amount that is at any time sufficient
to enable Ginnie Mae to
perform its obligations under its guarantee. See "Additional
Information" for the availability
of further information regarding Ginnie Mae and Ginnie Mae
Securities.

Ginnie Mae Securities

Unless otherwise specified in the related Prospectus
Supplement, each Ginnie Mae
Security relating to a series (which may be a "Ginnie Mae I
Certificate" or a "Ginnie Mae
II Certificate" as referred to by Ginnie Mae) will be a "fully
modified pass-through"
mortgage-backed certificate issued and serviced by a mortgage
banking company or other
financial concern approved by Ginnie Mae, except with respect to
any stripped mortgage
backed securities guaranteed by Ginnie Mae or any REMIC
securities issued by Ginnie
Mae. The characteristics of any Ginnie Mae Securities included in
the Trust Fund for a
series of Certificates will be set forth in the related
Prospectus Supplement.

Federal Home Loan Mortgage Corporation

Freddie Mac is a corporate instrumentality of the United
States created pursuant to
Title III of the Emergency Home Finance Act of 1970, as amended
(the "Freddie Mac Act").
Freddie Mac was established primarily for the purpose of
increasing the availability of
mortgage credit for the financing of needed housing. The
principal activity of Freddie Mac
currently consists of purchasing first-lien, conventional,
residential mortgage loans or
participation interests in such mortgage loans and reselling the
mortgage loans so purchased
in the form of guaranteed mortgage securities, primarily Freddie
Mac Securities. In 1981,
Freddie Mac initiated its Home Mortgage Guaranty Program under
which it purchases
mortgage loans from sellers with Freddie Mac Securities
representing interests in the
mortgage loans so purchased. All mortgage loans purchased by
Freddie Mac must meet
certain standards set forth in the Freddie Mac Act. Freddie Mac
is confined to purchasing,
so far as practicable, mortgage loans that it deems to be of such
quality and type as to meet
generally the purchase standards imposed by private institutional
mortgage investors. See
"Additional Information" for the availability of further
information regarding Freddie Mac
and Freddie Mac Securities. Neither the United States nor any
agency thereof is obligated
to finance Freddie Mac's operations or to assist Freddie Mac in
any other manner.

Freddie Mac Securities

Unless otherwise specified in the related Prospectus
Supplement, each Freddie Mac
Security relating to a series will represent an undivided
interest in a pool of mortgage loans
that typically consists of conventional loans (but may include
FHA Loans and VA Loans)
purchased by Freddie Mac, except with respect to any stripped
mortgage backed securities
issued by Freddie Mac. Each such pool will consist of mortgage
loans (i) substantially all
of which are secured by one- to four-family residential
properties or (ii) if specified in the
related Prospectus Supplement, are secured by five or more family
residential properties.
The characteristics of any Freddie Mac Securities included in the
Trust Fund for a series of
Certificates will be set forth in the related Prospectus
Supplement.

Federal National Mortgage Association

Fannie Mae is a federally chartered and privately owned
corporation organized and
existing under the Federal National Mortgage Association Charter
Act (12 U.S.C. (S) 1716
et seq.). It is the nation's largest supplier of residential
mortgage funds. Fannie Mae was
originally established in 1938 as a United States government
agency to provide
supplemental liquidity to the mortgage market and was transformed
into a stockholder-owned and privately managed corporation by
legislation enacted in 1968. Fannie Mae
provides funds to the mortgage market primarily by purchasing
home mortgage loans from
local lenders, thereby replenishing their funds for additional
lending. See "Additional
Information" for the availability of further information
respecting Fannie Mae and Fannie
Mae Securities. Although the Secretary of the Treasury of the
United States has authority
to lend Fannie Mae up to $2.25 billion outstanding at any time,
neither the United States nor
any agency thereof is obligated to finance Fannie Mae's
operations or to assist Fannie Mae
in any other manner.

Fannie Mae Securities

Unless otherwise specified in the related Prospectus
Supplement, each Fannie Mae
Security relating to a series will represent a fractional
undivided interest in a pool of
mortgage loans formed by Fannie Mae, except with respect to any
stripped mortgage backed
securities issued by Fannie Mae. Mortgage loans underlying Fannie
Mae Securities will
consist of (i) fixed, variable or adjustable rate conventional
mortgage loans or (ii) fixed-rate
FHA Loans or VA Loans. Such mortgage loans may be secured by
either one- to four-family or multi-family residential
properties. The characteristics of any Fannie Mae
Securities included in the Trust Fund for a series of
Certificates will be set forth in the
related Prospectus Supplement.

Mortgage Collateral Sellers

The Mortgage Collateral to be included in a Trust Fund will
be purchased by the
Company directly or indirectly (through Residential Funding or
other affiliates) from
Mortgage Collateral Sellers that may be (a) banks, savings and
loan associations, mortgage
bankers, investment banking firms, insurance companies, the
Federal Deposit Insurance
Corporation (the "FDIC") and other mortgage loan originators or
sellers not affiliated with
the Company (each, an "Unaffiliated Seller") or (b) GMAC
Mortgage, the indirect parent
of the Company, and its affiliates (each, an "Affiliated
Seller"). Such purchases may occur
by one or more of the following methods: (i) one or more direct
or indirect purchases from
Unaffiliated Sellers, which may occur simultaneously with the
issuance of the Certificates
or which may occur over an extended period of time; (ii) multiple
direct or indirect
purchases through the AlterNet Mortgage Program; or (iii) one or
more purchases from
Affiliated Sellers. The Prospectus Supplement for a series of
Certificates will disclose the
method or methods used to acquire the Mortgage Collateral for
such series. The Company
may issue one or more classes of Certificates to a Mortgage
Collateral Seller as
consideration for the purchase of the Mortgage Collateral
securing such series of
Certificates, if so described in the related Prospectus
Supplement.

The Mortgage Collateral Sellers that participate in the
AlterNet Mortgage Program
(each, an "AlterNet Program Seller") will have been selected by
Residential Funding on the
basis of criteria set forth in the AlterNet Seller Guide. An
AlterNet Program Seller may be
an affiliate of the Company and the Company presently anticipates
that GMAC Mortgage
Corporation of PA, an affiliate of the Company, will be an
AlterNet Program Seller. Except
in the case of the FDIC and investment banking firms, unless
otherwise specified in the
related Prospectus Supplement, each AlterNet Program Seller will
have been a HUD-approved mortgagee or a financial institution
supervised by a federal or state authority and
will have had generally a minimum of two years' experience (which
may be through a
predecessor entity) in originating mortgage loans. If an AlterNet
Program Seller becomes
subject to the direct or indirect control of the FDIC or if an
AlterNet Program Seller's net
worth, financial performance or delinquency and foreclosure rates
are adversely impacted,
such institution may continue to be treated as an AlterNet
Program Seller. Any such event
may adversely affect the ability of any such AlterNet Program
Seller to repurchase
Mortgage Collateral in the event of a breach of a representation
or warranty which has not
been cured. See " Repurchases of Mortgage Collateral" below.

Representations with Respect to Mortgage Collateral

Mortgage Collateral Sellers generally will make certain
limited representations and
warranties with respect to the Mortgage Collateral that they
sell. However, Mortgage
Collateral purchased from certain Unaffiliated Sellers may be
purchased with very limited
representations and warranties. The Company will assign to the
Trustee for the benefit of
the related Certificateholders all of its right, title and
interest in each agreement pursuant
to which it purchased any item of Mortgage Collateral from a
Mortgage Collateral Seller,
to the extent such agreement relates to (i) the representations
and warranties made by a
Mortgage Collateral Seller or Residential Funding, as the case
may be, in respect of such
item of Mortgage Collateral and (ii) any remedies provided for
any breach of such
representations and warranties.

With respect to any Mortgage Loan (including AlterNet Loans)
or Contract
constituting a part of the Trust Fund, unless otherwise disclosed
in the related Prospectus
Supplement, Residential Funding generally will represent and
warrant that: (i) as of the Cut-off Date, the information set
forth in a listing of the related Mortgage Loan or Contract was
true and correct in all material respects; (ii) except in the
case of Cooperative Loans, a
policy of title insurance was effective or attorney's certificate
was received at origination,
and each policy remained in full force and effect on the date of
sale of the related Mortgage
Loan or Contract to the Company; (iii) to the best of Residential
Funding's knowledge, if
required by applicable underwriting standards, the Mortgage Loan
or Contract is the subject
of a Primary Insurance Policy; (iv) Residential Funding had good
title to the Mortgage Loan
or Contract and the Mortgage Loan or Contract is not subject to
offsets, defenses or
counterclaims except as may be provided under the Relief Act and
except with respect to
any buydown agreement for a Buy-Down Loan; (v) each Mortgaged
Property is free of
material damage and in good repair; (vi) the Mortgage Loan or
Contract was not one month
or more delinquent in payment of principal and interest as of the
related Cut-off Date and
was not so delinquent more than once during the twelve-month
period prior to the Cut-off
Date; and (vii) there is no delinquent tax or assessment lien
against the related Mortgaged
Property.

In the event of a breach of a representation or warranty made
by Residential
Funding that materially adversely affects the interests of the
Certificateholders in the
Mortgage Loan or Contract, Residential Funding will be obligated
to repurchase any such
Mortgage Loan or Contract or substitute for such Mortgage Loan or
Contract as described
below. In addition, unless otherwise specified in the related
Prospectus Supplement,
Residential Funding will be obligated to repurchase or substitute
for any Mortgage Loan as
to which it is discovered that the related Mortgage does not
create a valid lien having at least
the priority represented and warranted in the related Pooling and
Servicing Agreement or,
in the case of a Contract a perfected security interest in, the
related Mortgaged Property,
subject only to (a) liens of real property taxes and assessments
not yet due and payable, (b)
covenants, conditions and restrictions, rights of way, easements
and other matters of public
record as of the date of recording of such Mortgage and certain
other permissible title
exceptions, (c) liens of any senior mortgages, in the case of
Junior Mortgage Loans and (d)
other encumbrances to which like properties are commonly subject
which do not materially
adversely affect the value, use, enjoyment or marketability of
the Mortgaged Property. In
addition, unless otherwise specified in the related Prospectus
Supplement, with respect to
any Mortgage Loan or Contract as to which the Company delivers to
the Trustee an affidavit
certifying that the original Mortgage Note or Contract has been
lost or destroyed, if such
Mortgage Loan or Contract subsequently is in default and the
enforcement thereof or of the
related Mortgage or Contract is materially adversely affected by
the absence of the original
Mortgage Note or Contract, Residential Funding will be obligated
to repurchase or
substitute for such Mortgage Loan or Contract in the manner
described below. However,
unless otherwise set forth in the related Prospectus Supplement,
Residential Funding will
not be required to repurchase or substitute for any Mortgage Loan
or Contract if the
circumstances giving rise to such requirement also constitute
fraud in the origination of the
related Mortgage Loan or Contract. Furthermore, because the
listing of the related Mortgage
Collateral generally contains information with respect to the
Mortgage Collateral as of the
Cut-off Date, prepayments and, in certain limited circumstances,
modifications to the
interest rate and principal and interest payments may have been
made with respect to one
or more of the related items of Mortgage Collateral between the
Cut-off Date and the
Closing Date. Neither Residential Funding nor any Seller will be
required to repurchase or
substitute for any item of Mortgage Collateral as a result of any
such prepayment or
modification.

All of the representations and warranties of a Mortgage
Collateral Seller in respect
of an item of Mortgage Collateral will have been made as of the
date on which such
Mortgage Collateral Seller sold the Mortgage Collateral to the
Company or Residential
Funding or one of their affiliates. The date as of which such
representations and warranties
were made generally will be a date prior to the date of issuance
of the related series of
Certificates. A substantial period of time may elapse between the
date as of which the
representations and warranties were made and the date of issuance
of the related series of
Certificates. The Mortgage Collateral Seller's repurchase
obligation (or, if specified in the
related Prospectus Supplement, limited substitution option) will
not arise if, after the sale
of the related Mortgage Collateral, an event occurs that would
have given rise to such an
obligation had the event occurred prior to such period.

Repurchases of Mortgage Collateral

If a Mortgage Collateral Seller or Residential Funding, as
the case may be, cannot
cure a breach of any representation or warranty made by it in
respect of an item of Mortgage
Collateral within 90 days after notice from the Master Servicer,
the Servicer, the Certificate
Administrator or the Trustee, and such breach materially and
adversely affects the interests
of the Certificateholders in such item of Mortgage Collateral,
such Mortgage Collateral
Seller or Residential Funding, as the case may be, will be
obligated to purchase such item
of Mortgage Collateral at a price set forth in the related
Pooling and Servicing Agreement
or Trust Agreement. Likewise, as described under "Description of
the Certificates Review
of Mortgage Loan or Contract Documents," if the Company or the
Mortgage Collateral
Seller, as applicable, cannot cure certain documentary defects
with respect to a Mortgage
Loan or Contract, the Company or the Mortgage Collateral Seller,
as applicable, will be
required to repurchase such item of Mortgage Collateral. Unless
otherwise specified in the
related Prospectus Supplement, the "Purchase Price" for any such
item of Mortgage
Collateral will be equal to the principal balance thereof as of
the date of purchase plus
accrued and unpaid interest to the first day of the month
following the month of repurchase
(less the amount, expressed as a percentage per annum, payable in
respect of servicing or
administrative compensation and the Spread, if any). In certain
limited cases, a substitution
may be made in lieu of such repurchase obligation. See " Limited
Right of Substitution"
below.

The Master Servicer, the Servicer or the Certificate
Administrator, as applicable,
will be required under the applicable Pooling and Servicing
Agreement or Trust Agreement
to enforce this repurchase obligation, or the substitution right
described below, for the
benefit of the Trustee and the Certificateholders, using
practices it would employ in its good
faith business judgment and which are normal and usual in its
general mortgage servicing
activities. If, as a result of a breach of representation or
warranty, a Mortgage Collateral
Seller is required, but fails, to repurchase the related Mortgage
Collateral, the Company or
Residential Funding will only be required to repurchase such
Mortgage Collateral if the
Company or Residential Funding has assumed such representations
and warranties.
Consequently, such Mortgage Collateral will remain in the related
Trust Fund and any
related losses not borne by any applicable credit enhancement
will be borne by
Certificateholders. If the Mortgage Collateral Seller fails to
honor its repurchase or
substitution obligation, such obligation will not become an
obligation of Residential
Funding, the Master Servicer or Servicer (although Residential
Funding, the Master Servicer
or Servicer may have an independent obligation to repurchase or
substitute for such
Mortgage Collateral). In instances where a Mortgage Collateral
Seller is unable or disputes
its obligation to repurchase affected Mortgage Collateral, the
Master Servicer or Servicer,
using practices it would employ in its good faith business
judgment and which are normal
and usual in its general mortgage servicing activities, may
negotiate and enter into
settlement agreements with such Mortgage Collateral Seller that
could provide for, among
other things, the repurchase of only a portion of the affected
Mortgage Collateral. Any such
settlement could lead to losses on the Mortgage Collateral which
would be borne by the
related Certificateholders. In accordance with the above
described practices, the Master
Servicer or Servicer will not be required to enforce any purchase
obligation of a Mortgage
Collateral Seller arising from any misrepresentation by the
Mortgage Collateral Seller, if
the Master Servicer or Servicer determines in the reasonable
exercise of its business
judgment that the matters related to such misrepresentation did
not directly cause or are not
likely to directly cause a loss on the related Mortgage
Collateral. Unless otherwise specified
in the related Prospectus Supplement, the foregoing repurchase
obligations and the limited
right of substitution (described below) will constitute the sole
remedies available to
Certificateholders or the Trustee for a breach of any
representation by a Mortgage Collateral
Seller in its capacity as a seller of Mortgage Collateral, or for
any other event giving rise to
such obligations as described above.

The Company and Residential Funding generally monitor which
Mortgage
Collateral Sellers are under the control of the FDIC, or are
insolvent, otherwise in
receivership or conservatorship or financially distressed. Such
Mortgage Collateral Sellers
may not be able or permitted to repurchase Mortgage Collateral
for which there has been
a breach of representation or warranty. Moreover, any such
Mortgage Collateral Seller may
make no representations or warranties with respect to Mortgage
Collateral sold by it. The
FDIC (either in its corporate capacity or as receiver for a
depository institution), may also
be a Mortgage Collateral Seller, in which event neither the FDIC
nor the related depository
institution may make representations or warranties with respect
to the Mortgage Collateral
sold, or only limited representations or warranties may be made
(for example, that the
related legal documents are enforceable). The FDIC may have no
obligation to repurchase
any Mortgage Collateral for a breach of a representation or
warranty.

Limited Right of Substitution

In the case of a Mortgage Loan or Contract required to be
repurchased from the
Trust Fund (a "Repurchased Mortgage Loan" or a "Repurchased
Contract," respectively) the
related Mortgage Collateral Seller or Residential Funding, as
applicable, may substitute a
new Mortgage Loan or Contract (a "Qualified Substitute Mortgage
Loan" or a "Qualified
Substitute Contract," respectively) for the Repurchased Mortgage
Loan or Contract that was
removed from the Trust Fund, during the limited time period
described below. Any such
substitution must be effected within 120 days of the date of the
issuance of the Certificates
with respect to a Trust Fund for which no REMIC election is to be
made. With respect to
a Trust Fund for which a REMIC election is to be made, except as
otherwise provided in the
related Prospectus Supplement, such substitution must be effected
within two years of the
date of the issuance of the Certificates, and may not be made if
such substitution would
cause the Trust Fund to fail to qualify as a REMIC or result in a
prohibited transaction tax
under the Code.

Except as otherwise provided in the related Prospectus
Supplement, any Qualified
Substitute Mortgage Loan or Qualified Substitute Contract
generally will, on the date of
substitution: (i) have an outstanding principal balance, after
deduction of the principal
portion of the monthly payment due in the month of substitution,
not in excess of the
outstanding principal balance of the Repurchased Mortgage Loan or
Repurchased Contract;
(ii) have a Mortgage Rate and a Net Mortgage Rate not less than
(and not more than one
percentage point greater than) the Mortgage Rate and Net Mortgage
Rate, respectively, of
the Repurchased Mortgage Loan or Repurchased Contract as of the
date of substitution; (iii)
have a Loan-to-Value Ratio at the time of substitution no higher
than that of the
Repurchased Mortgage Loan or Repurchased Contract; (iv) have a
remaining term to
maturity not greater than (and not more than one year less than)
that of the Repurchased
Mortgage Loan or Repurchased Contract; and (v) comply with all of
the representations and
warranties set forth in the related Pooling and Servicing
Agreement as of the date of
substitution. In the event the outstanding principal balance of a
Qualified Substitute
Mortgage Loan or Qualified Substitute Contract is less than the
outstanding principal
balance of the related Repurchased Mortgage Loan or Repurchased
Contract, the amount
of such shortfall shall be deposited into the Custodial Account
in the month of substitution
for distribution to the related Certificateholders. The related
Pooling and Servicing
Agreement may include additional requirements relating to ARM
Loans or other specific
types of Mortgage Loans or Contracts, or additional provisions
relating to meeting the
foregoing requirements on an aggregate basis where a number of
substitutions occur
contemporaneously. Unless otherwise specified in the related
Prospectus Supplement, a
Mortgage Collateral Seller will have no option to substitute for
a Mortgage Loan or Contract
that it is obligated to repurchase in connection with a breach of
a representation and
warranty.

DESCRIPTION OF THE CERTIFICATES

General

The Certificates will be issued in series. Each series of
Certificates (or, in certain
instances, two or more series of Certificates) will be issued
pursuant to a Pooling and
Servicing Agreement or, in the case of Certificates backed by
Agency Securities, a Trust
Agreement, similar to one of the forms filed as an exhibit to the
Registration Statement of
which this Prospectus is a part. Each Pooling and Servicing
Agreement or Trust Agreement
will be filed with the Commission as an exhibit to a Form 8-K.
The following summaries
(together with additional summaries under "The Pooling and
Servicing Agreement" below)
describe certain provisions relating to the Certificates common
to each Pooling and
Servicing Agreement or Trust Agreement. All references herein to
a "Pooling and Servicing
Agreement" and any discussion of the provisions thereof will also
apply to Trust
Agreements. 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 Trust Fund and the related Prospectus
Supplement.

Each series of Certificates may consist of any one or a
combination of the
following: (i) a single class of Certificates; (ii) two or more
classes of Certificates, one or
more classes of which may be Senior Certificates that are senior
in right of payment to any
class or classes of Mezzanine Certificates and to any other class
or classes of Subordinate
Certificates, and as to which certain classes of Senior
Certificates may be senior to other
classes of Senior Certificates, as described in the respective
Prospectus Supplement (any
such series, a "Senior/Subordinate Series"); (iii) one or more
classes of Strip Certificates
which will be entitled to (a) principal distributions, with
disproportionate, nominal or no
interest distributions or (b) interest distributions, with
disproportionate, nominal or no
principal distributions; (iv) two or more classes of Certificates
which differ as to the timing,
sequential order, rate, pass-through rate or amount of
distributions of principal or interest
or both, or as to which distributions of principal or interest or
both on any class may be
made upon the occurrence of specified events, in accordance with
a schedule or formula
(including "planned amortization classes" and "targeted
amortization classes"), or on the
basis of collections from designated portions of the Mortgage
Pool or Contract Pool, which
series may include one or more classes of Accrual Certificates
with respect to which certain
accrued interest will not be distributed but rather will be added
to the principal balance
thereof on each Distribution Date for the period described in the
related Prospectus
Supplement; or (v) other types of classes of Certificates, as
described in the related
Prospectus Supplement. Credit support for each series of
Certificates will be provided by
a Mortgage Pool Insurance Policy, Special Hazard Insurance
Policy, Bankruptcy Bond,
Letter of Credit, Reserve Fund, Certificate Insurance Policy or
other credit enhancement as
described under "Description of Credit Enhancement," or by the
subordination of one or
more classes of Certificates as described under "Subordination"
or by any combination of
the foregoing.

Form of Certificates

As specified in the related Prospectus Supplement, the
Certificates of each series
will be issued either as physical certificates or in book-entry
form. If issued as physical
certificates, the Certificates will be in fully registered form
only in the denominations
specified in the related Prospectus Supplement, and will be
transferrable and exchangeable
at the corporate trust office of the person appointed under the
related Pooling and Servicing
Agreement to register the Certificates (the "Certificate
Registrar"). No service charge will
be made for any registration of exchange or transfer of
Certificates, but the Trustee may
require payment of a sum sufficient to cover any tax or other
governmental charge. The
term "Certificateholder" as used herein refers to the entity
whose name appears on the
records of the Certificate Registrar (or, if applicable, a
transfer agent) as the registered
holder thereof, except as otherwise indicated in the related
Prospectus Supplement.

If issued in book-entry form, specified classes of a series
of Certificates will be
initially issued through the book-entry facilities of The
Depository Trust Company ("DTC"),
or Cedel Bank, societe anonyme ("CEDEL") or the Euroclear System
("Euroclear") (in
Europe) if they are participants of such systems, or indirectly
through organizations which
are participants in such systems, or through such other
depository or facility as may be
specified in the related Prospectus Supplement. As to any such
class of Certificates so
issued ("Book-Entry Certificates"), the record holder of such
Certificates will be DTC's
nominee. 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 (the "Depositaries"), which in turn
will hold such positions in
customers' securities accounts in the depositaries' names on the
books of DTC.

DTC is a limited-purpose trust company organized under the
laws of the State of
New York, which holds securities for its participating
organizations ("DTC Participants,"
and together with the CEDEL and Euroclear participating
organizations, "Participants") and
facilitates the clearance and settlement of securities
transactions between Participants
through electronic book-entry changes in the accounts of
Participants. Participants include
securities brokers and dealers, banks, trust companies and
clearing corporations and may
include certain other organizations. Other institutions that are
not Participants but clear
through or maintain a custodial relationship with Participants
(such institutions, "Indirect
Participants") have indirect access to DTC's clearance system.

Unless otherwise specified in the related Prospectus
Supplement, no person
acquiring an interest in any Book-Entry Certificate (each such
person, a "Beneficial
Owner") will be entitled to receive a Certificate representing
such interest in registered,
certificated form, unless either (i) DTC ceases to act as
depository in respect thereof and a
successor depository is not obtained or (ii) the Company elects
in its sole discretion to
discontinue the registration of such Certificates through DTC.
Prior to any such event,
Beneficial Owners will not be recognized by the Trustee, the
Master Servicer, any Servicer
or the Certificate Administrator as holders of the related
Certificates for purposes of the
Pooling and Servicing Agreement, and Beneficial Owners will be
able to exercise their
rights as owners of such Certificates only indirectly through
DTC, Participants and Indirect
Participants. Any Beneficial Owner that desires to purchase,
sell or otherwise transfer any
interest in Book-Entry Certificates may do so only through DTC,
either directly if such
Beneficial Owner is a Participant or indirectly through
Participants and, if applicable,
Indirect Participants. Pursuant to the procedures of DTC,
transfers of the beneficial
ownership of any Book-Entry Certificates will be required to be
made in minimum
denominations specified in the related Prospectus Supplement.
The ability of a Beneficial
Owner to pledge Book-Entry Certificates to persons or entities
that are not Participants in
the DTC system, or to otherwise act with respect to such
Certificates, may be limited
because of the lack of physical certificates evidencing such
Certificates and because DTC
may act only on behalf of Participants.

Because of time zone differences, the securities account of a
CEDEL or Euroclear
participant as a result of a transaction with a DTC Participant
(other than a depositary
holding on behalf of CEDEL or Euroclear) will be credited during
subsequent securities
settlement processing day (which must be a business day for CEDEL
or Euroclear, as the
case may be) immediately following the DTC settlement date. Such
credits or any
transactions in such securities settled during such processing
will be reported to the relevant
Euroclear Participant 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 or
Euroclear Participant to a DTC Participant (other than the
depositary for CEDEL or
Euroclear) 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 day following
settlement in DTC.

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 by DTC in accordance
with DTC rules on behalf
of the relevant European international clearing system by the
relevant Depositaries;
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 its 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
Depositaries.

CEDEL is incorporated under the laws of Luxembourg as a
professional depository.
CEDEL holds securities for its participating 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,
checkering 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 co-operative 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 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 in respect of the Book-Entry Certificates will
be forwarded by the
Trustee to DTC, and DTC will be responsible for forwarding such
payments to Participants,
each of which will be responsible for disbursing such payments to
the Beneficial Owners
it represents or, if applicable, to Indirect Participants.
Accordingly, Beneficial Owners may
experience delays in the receipt of payments in respect of their
Certificates. Under DTC's
procedures, DTC will take actions permitted to be taken by
holders of any class of Book-Entry Certificates under the Pooling
and Servicing Agreement only at the direction of one
or more Participants to whose account the Book-Entry Certificates
are credited and whose
aggregate holdings represent no less than any minimum amount of
Percentage Interests or
voting rights required therefor. DTC may take conflicting
actions with respect to any action
of Certificateholders of any Class to the extent that
Participants authorize such actions.
None of the Master Servicer, any Servicer, the Company, the
Certificate Administrator, the
Trustee or any of their respective affiliates will have any
liability for any aspect of the
records relating to or payments made on account of beneficial
ownership interests in the
Book-Entry Certificates, or for maintaining, supervising or
reviewing any records relating
to such beneficial ownership interests.

Assignment of Mortgage Loans

At the time of issuance of a series of Certificates, the
Company will cause the
Mortgage Loans being included in the related Trust Fund to be
assigned to the Trustee or
its nominee (which may be the Custodian) together with all
principal and interest received
on or with respect to such Mortgage Loans after the Cut-off Date
(other than principal and
interest due on or before the Cut-off Date and any Spread). The
Trustee will, concurrently
with such assignment, deliver a series of Certificates to the
Company in exchange for the
Mortgage Loans. Each Mortgage Loan will be identified in a
schedule appearing as an
exhibit to the related Pooling and Servicing Agreement. Such
schedule will include, among
other things, information as to the principal balance of each
Mortgage Loan as of the Cut-off
Date, as well as information respecting the Mortgage Rate, the
currently scheduled monthly
payment of principal and interest, the maturity of the Mortgage
Note and the Loan-to-Value
Ratio or Combined Loan-to-Value Ratio and Junior Mortgage Ratio,
as applicable, at
origination or modification (without regard to any secondary
financing).

In addition, the Company will, as to each Mortgage Loan other
than a Mortgage
Loan underlying any Agency Securities, deliver to the Trustee (or
to the Custodian) the legal
documents relating to such Mortgage Loan that are in possession
of the Company, which
may include: (i) the note evidencing such Mortgage Loan (the
"Mortgage Note") (and any
modification or amendment thereto) endorsed without recourse
either in blank or to the
order of the Trustee (or its nominee); (ii) the Mortgage (except
for any Mortgage not
returned from the public recording office) with evidence of
recording indicated thereon or,
in the case of a Cooperative Loan, the respective security
agreements and any applicable
UCC financing statements; (iii) an assignment in recordable form
of the Mortgage (or, with
respect to a Cooperative Loan, an assignment of the respective
security agreements, any
applicable UCC financing statements, recognition agreements,
relevant stock certificates,
related blank stock powers and the related proprietary leases or
occupancy agreements); and
(iv) if applicable, any riders or modifications to such Mortgage
Note and Mortgage, together
with certain other documents at such times as set forth in the
related Pooling and Servicing
Agreement. Such assignments may be blanket assignments covering
Mortgages secured by
Mortgaged Properties located in the same county, if permitted by
law. If so provided in the
related Prospectus Supplement, the Company may not be required to
deliver one or more
of such documents if such documents are missing from the files of
the party from whom
such Mortgage Loans were purchased.

In the event that, with respect to any Mortgage Loan, the
Company cannot deliver
the Mortgage or any assignment with evidence of recording thereon
concurrently with the
execution and delivery of the related Pooling and Servicing
Agreement because of a delay
caused by the public recording office, the Company will deliver
or cause to be delivered to
the Trustee or the Custodian a true and correct photocopy of such
Mortgage or assignment.
The Company will deliver or cause to be delivered to the Trustee
or the Custodian such
Mortgage or assignment with evidence of recording indicated
thereon after receipt thereof
from the public recording office or from the related Servicer or
Sub-Servicer.

Assignments of the Mortgage Loans to the Trustee will be
recorded in the
appropriate public recording office, except in states where, in
the opinion of counsel
acceptable to the Trustee, such recording is not required to
protect the Trustee's interests in
the Mortgage Loan against the claim of any subsequent transferee
or any successor to or
creditor of the Company or the originator of such Mortgage Loan,
or except as otherwise
specified in the related Prospectus Supplement.

Assignment of Contracts

The Company will cause the Contracts constituting the
Contract Pool to be assigned
to the Trustee or its nominee (which may be the Custodian),
together with principal and
interest due on or with respect to the Contracts after the
Cut-off Date, but not including
principal and interest due on or before the Cut-off Date or any
Spread. Each Contract will
be identified in a schedule appearing as an exhibit to the
Pooling and Servicing Agreement.
Such schedule will specify, with respect to each Contract, among
other things: the original
principal amount and the adjusted principal balance as of the
close of business on the Cut-off Date; the Mortgage Rate; the
current scheduled monthly level payment of principal and
interest; and the maturity date of the Contract.

In addition, the Company, the Servicer or the Master
Servicer, as to each Contract,
will deliver or cause to be delivered to the Trustee, or, as
specified in the related Prospectus
Supplement, the Custodian, the original Contract and copies of
documents and instruments
related to each Contract and the security interest in the
Manufactured Home securing each
Contract. The Company, the Master Servicer or the Servicer will
cause a UCC-1 financing
statement to be executed by the Company identifying the Trustee
as the secured party and
identifying all Contracts as collateral. However, unless
otherwise specified in the related
Prospectus Supplement, the Contracts will not be stamped or
otherwise marked to reflect
their assignment from the Company to the Trust Fund and no
recordings or filings will be
made in the jurisdictions in which the Manufactured Homes are
located. See "Certain Legal
Aspects of Mortgage Loans and Contracts The Contracts."

Review of Mortgage Loan or Contract Documents

The Trustee or the Custodian will hold such documents in
trust for the benefit of the
Certificateholders and, generally within 45 days after receipt
thereof, will review such
documents. Unless otherwise provided in the related Prospectus
Supplement, if any such
document is found to be defective in any material respect, the
Trustee or such Custodian
shall immediately notify the Master Servicer or the Servicer, if
any, and the Company, and
if so specified in the related Prospectus Supplement, the Master
Servicer, the Servicer or the
Trustee shall immediately notify the Mortgage Collateral Seller.
If the Mortgage Collateral
Seller (or, if so specified in the related Prospectus Supplement,
the Company) cannot cure
such defect within 60 days (or within such other period specified
in the related Prospectus
Supplement) after notice of the defect is given to the Mortgage
Collateral Seller (or, if
applicable, the Company), the Mortgage Collateral Seller (or, if
applicable, the Company)
will, not later than 90 days after such notice (or within such
other period specified in the
related Prospectus Supplement), either repurchase the related
Mortgage Loan or Contract
or any property acquired in respect thereof from the Trustee or
substitute for such Mortgage
Loan or Contract, a new Mortgage Loan or Contract in accordance
with the standards set
forth herein. See "The Trust Funds Repurchases of Mortgage
Collateral." Unless otherwise
specified in the related Prospectus Supplement, the obligation to
repurchase or substitute
for a Mortgage Loan or Contract constitutes the sole remedy
available to the
Certificateholders or the Trustee for a material defect in a
constituent document.

Assignment of Agency Securities

The Company will transfer, convey and assign to the Trustee
or its nominee (which
may be the Custodian) all right, title and interest of the
Company in the Agency Securities
and other property to be included in the Trust Fund for a series.
Such assignment will
include all principal and interest due on or with respect to the
Agency Securities after the
Cut-off Date specified in the related Prospectus Supplement
(except for any Spread). The
Company will cause the Agency Securities to be registered in the
name of the Trustee or its
nominee, and the Trustee will concurrently authenticate and
deliver the Certificates. Unless
otherwise specified in the related Prospectus Supplement, the
Trustee will not be in
possession of or be assignee of record of any underlying assets
for a Agency Security. Each
Agency Security will be identified in a schedule appearing as an
exhibit to the related
Pooling and Servicing Agreement, which will specify as to each
Agency Security the
original principal amount and outstanding principal balance as of
the Cut-off Date; the
annual pass-through rate or interest rate for each Agency
Security conveyed to the Trustee.

Spread

The Company, the Servicer, the Mortgage Collateral Seller,
the Master Servicer or
any of their affiliates, or such other entity as may be specified
in the related Prospectus
Supplement may retain or be paid a portion of interest (the
"Spread") due with respect to the
related Mortgage Collateral. The payment of any Spread will be
disclosed in the related
Prospectus Supplement. The Spread may be in addition to any other
payment (such as the
Servicing Fee) that any such entity is otherwise entitled to
receive with respect to the
Mortgage Collateral. Any Spread in respect of an item of Mortgage
Collateral will represent
a specified portion of the interest payable thereon and will not
be part of the related Trust
Fund. Any partial recovery of interest in respect of an item of
Mortgage Collateral will be
allocated between the owners of any Spread and the
Certificateholders entitled to payments
of interest as provided in the applicable Pooling and Servicing
Agreement.

Payments on Mortgage Collateral

The Trustee or the Master Servicer, if any, will, as to each
series of Certificates,
establish and maintain in trust the Certificate Account which
will be a separate account that
may be interest bearing or non-interest bearing in the name of
the Trustee, maintained with
a depository institution and in a manner acceptable to each
Rating Agency. If permitted by
each such Rating Agency, a Certificate Account may contain funds
relating to one or more
series of Certificates.

The Trustee, the Servicer or the Master Servicer, if any,
will establish a Custodial
Account which will be a separate trust account, into which
payments on the Mortgage
Collateral for such series may be transferred on a periodic basis
and from which funds may
be transferred to the Certificate Account in order to make
payments to Certificateholders.
The Custodial Account may contain funds relating to more than one
series of Certificates
as well as payments received on other mortgage loans serviced or
master serviced by the
Master Servicer or the Servicer, as applicable. Amounts held in
the Certificate Account or
a Custodial Account may be invested in Permitted Investments. See
" Collection of
Payments on Mortgage Loans and Contracts" below. In addition, if
so stated in such
Prospectus Supplement, one or more other trust accounts,
including any Reserve Funds, will
be established into which cash, certificates of deposit or
letters of credit, or a combination
thereof, will be deposited by the Company, if such assets are
required to make timely
distributions with respect to the Certificates of a series, are
required as a condition to the
rating of such Certificates or are required in order to provide
for certain contingencies as
described in the related Prospectus Supplement.

Collection of Payments on Mortgage Loans and Contracts

Each Servicer or the Master Servicer, if any, will be
required to deposit into the
Custodial Account (unless otherwise specified in the related
Prospectus Supplement) all
amounts enumerated in the following paragraph in respect of the
Mortgage Loans or
Contracts serviced by it, less the Servicing Fee and Spread, if
any.

The Servicer or Master Servicer, as applicable, will deposit
or will cause to be
deposited into the Custodial Account certain payments and
collections received by it
subsequent to the Cut-off Date (other than payments due on or
before the Cut-off Date), as
specifically set forth in the related Pooling and Servicing
Agreement, which (except as
otherwise provided therein) generally will include the following:

(i) all payments on account of principal of the Mortgage
Loans or
Contracts comprising a Trust Fund;

(ii) all payments on account of interest on the
Mortgage Loans
comprising such Trust Fund, net of the portion of each
payment thereof retained by
the Servicer or Sub-Servicer, if any, as Spread, its
servicing or other compensation;

(iii) all amounts (net of unreimbursed liquidation
expenses and insured
expenses incurred, and unreimbursed Servicing Advances made,
by the related
Servicer or Sub-Servicer) received and retained in connection
with the liquidation
of any defaulted Mortgage Loan or Contract, by foreclosure or
otherwise
("Liquidation Proceeds"), including all proceeds of any
Special Hazard Insurance
Policy, Bankruptcy Bond, Mortgage Pool Insurance Policy,
Contract Pool Insurance
Policy, Primary Insurance Policy and any title, hazard or
other insurance policy
covering any Mortgage Loan or Contract in such Trust Fund
(together with any
payments under any Letter of Credit, "Insurance Proceeds") or
proceeds from any
alternative arrangements established in lieu of any such
insurance and described in
the applicable Prospectus Supplement, other than proceeds to
be applied to the
restoration of the related property or released to the
Mortgagor in accordance with
the Master Servicer's or Servicer's normal servicing
procedures;

(iv) any Buy-Down Funds (and, if applicable,
investment earnings
thereon) required to be paid to Certificateholders, as
described below;

(v) all proceeds of any Mortgage Loan or Contract in such
Trust Fund
purchased (or, in the case of a substitution, certain amounts
representing a principal
adjustment) by the Master Servicer, the Company, Residential
Funding, any Sub-Servicer or Mortgage Collateral Seller or any
other person pursuant to the terms of
the Pooling and Servicing Agreement. See "The Trust Funds
Representations with
Respect to Mortgage Collateral" and " Repurchases of
Defective Mortgage
Collateral" herein;

(vi) any amount required to be deposited by the
Master Servicer in
connection with losses realized on investments of funds held
in the Custodial
Account, as described below; and

(vii) any amounts required to be transferred from the
Certificate Account
to the Custodial Account.

Both the Custodial Account and the Certificate Account must
be either (i)
maintained with a depository institution whose debt obligations
at the time of any deposit
therein are rated by any Rating Agency that rated any
Certificates of the related series not
less than a specified level comparable to the rating category of
such Certificates, (ii) an
account or accounts the deposits in which are fully insured to
the limits established by the
FDIC, provided that any deposits not so insured shall be
otherwise maintained such that, as
evidenced by an opinion of counsel, the Certificateholders have a
claim with respect to the
funds in such accounts or a perfected first priority security
interest in any collateral securing
such funds that is superior to the claims of any other depositors
or creditors of the
depository institution with which such accounts are maintained,
(iii) in the case of the
Custodial Account, a trust account or accounts maintained in
either the corporate trust
department or the corporate asset services department of a
financial institution which has
debt obligations that meet certain rating criteria, (iv) in the
case of the Certificate Account,
a trust account or accounts maintained with the Trustee or (v)
such other account or
accounts acceptable to any applicable Rating Agency (an "Eligible
Account"). The collateral
that is eligible to secure amounts in an Eligible Account is
limited to certain permitted
investments, which are generally limited to United States
government securities and other
investments that are rated, at the time of acquisition, in one of
the categories permitted by
the related Pooling and Servicing Agreement ("Permitted
Investments").

Unless otherwise set forth in the related Prospectus
Supplement, not later than the
business day preceding each Distribution Date, the Master
Servicer or Servicer, as
applicable, will withdraw from the Custodial Account and deposit
into the applicable
Certificate Account, in immediately available funds, the amount
to be distributed therefrom
to Certificateholders on such Distribution Date. The Master
Servicer, the Servicer or the
Trustee, as applicable, will also deposit or cause to be
deposited into the Certificate
Account: (i) the amount of any advances made by the Master
Servicer or the Servicer as
described herein under " Advances," (ii) any payments under any
Letter of Credit, and any
amounts required to be transferred to the Certificate Account
from a Reserve Fund, as
described under "Description of Credit Enhancement" below, (iii)
any amounts required to
be paid by the Master Servicer or Servicer out of its own funds
due to the operation of a
deductible clause in any blanket policy maintained by the Master
Servicer or Servicer to
cover hazard losses on the Mortgage Loans as described under
"Insurance Policies on
Mortgage Loans or Contracts" below, (iv) any distributions
received on any Agency
Securities included in the Trust Fund and (v) any other amounts
as set forth in the related
Pooling and Servicing Agreement.

The portion of any payment received by the Master Servicer or
the Servicer in
respect of a Mortgage Loan that is allocable to Spread will
generally be deposited into the
Custodial Account, but will not be deposited in the Certificate
Account for the related series
of Certificates and will be distributed as provided in the
related Pooling and Servicing
Agreement.

Funds on deposit in the Custodial Account may be invested in
Permitted
Investments maturing in general not later than the business day
preceding the next
Distribution Date and funds on deposit in the related Certificate
Account may be invested
in Permitted Investments maturing, in general, no later than the
Distribution Date. Unless
otherwise specified in the related Prospectus Supplement, all
income and gain realized from
any such investment will be for the account of the Servicer or
the Master Servicer as
additional servicing compensation. The amount of any loss
incurred in connection with any
such investment must be deposited in the Custodial Account or in
the Certificate Account,
as the case may be, by the Servicer or the Master Servicer out of
its own funds upon
realization of such loss.

Collection of Payments on Agency Securities

The Trustee or the Certificate Administrator, as specified in
the related Prospectus
Supplement, will deposit in the Certificate Account all payments
on the Agency Securities
as they are received after the Cut-off Date. If the Trustee has
not received a distribution with
respect to any Agency Security by the second business day after
the date on which such
distribution was due and payable, the Trustee will request the
issuer or guarantor, if any, of
such Agency Security to make such payment as promptly as possible
and legally permitted.
The Trustee may take such legal action against such issuer or
guarantor as the Trustee
deems appropriate under the circumstances, including the
prosecution of any claims in
connection therewith. The reasonable legal fees and expenses
incurred by the Trustee in
connection with the prosecution of such legal action will be
reimbursable to the Trustee out
of the proceeds of any such action and will be retained by the
Trustee prior to the deposit
of any remaining proceeds in the Certificate Account pending
distribution thereof to the
Certificateholders of the affected series. In the event that the
Trustee has reason to believe
that the proceeds of any such legal action may be insufficient to
cover its projected legal
fees and expenses, the Trustee will notify such
Certificateholders that it is not obligated to
pursue any such available remedies unless adequate indemnity for
its legal fees and
expenses is provided by such Certificateholders.

Withdrawals from the Custodial Account

The Servicer or the Master Servicer, as applicable, may, from
time to time, make
withdrawals from the Custodial Account for certain purposes, as
specifically set forth in the
related Pooling and Servicing Agreement, which (except as
otherwise provided therein)
generally will include the following:

(i) to make deposits to the Certificate Account in the
amounts and in
the manner provided in the Pooling and Servicing Agreement
and described above
under " Payments on Mortgage Collateral";

(ii) to reimburse itself or any Sub-Servicer for
Advances, or for
amounts advanced in respect of taxes, insurance premiums or
similar expenses
incurred in connection with acquiring by foreclosure or deed
in lieu of foreclosure
a Mortgaged Property, including, if the Master Servicer and
any affiliate of the
Master Servicer provides services such as appraisals and
brokerage services that are
customarily provided by persons other than servicers of
mortgage loans, reasonable
compensation for such services ("Servicing Advances") as to
any Mortgaged
Property, out of late payments, Insurance Proceeds,
Liquidation Proceeds, any
proceeds in respect of any REO Mortgage Loan or collections
on the Mortgage
Loan or Contract with respect to which such Advances or
Servicing Advances were
made;

(iii) to pay to itself or any Sub-Servicer unpaid
Servicing Fees and
subservicing fees, out of payments or collections of interest
on each Mortgage Loan
or Contract;

(iv) to pay to itself as additional servicing
compensation any investment
income on funds deposited in the Custodial Account, any
amounts remitted by Sub-Servicers as interest in respect of
partial prepayments on the Mortgage Loans or
Contracts, and, if so provided in the Pooling and Servicing
Agreement, any profits
realized upon disposition of a Mortgaged Property acquired by
deed in lieu of
foreclosure or repossession or otherwise allowed under the
Pooling and Servicing
Agreement;

(v) to pay to itself, a Sub-Servicer, Residential
Funding, the Company
or the Mortgage Collateral Seller all amounts received with
respect to each
Mortgage Loan or Contract purchased, repurchased or removed
pursuant to the
terms of the Pooling and Servicing Agreement and not required
to be distributed as
of the date on which the related Purchase Price is
determined;

(vi) to pay the Company or its assignee, or any other
party named in the
related Prospectus Supplement, all amounts allocable to the
Spread, if any, out of
collections or payments which represent interest on each
Mortgage Loan or
Contract (including any Mortgage Loan or Contract as to which
title to the
underlying Mortgaged Property was acquired);

(vii) to reimburse itself or any Sub-Servicer for any
Advance previously
made which the Master Servicer has determined to not be
ultimately recoverable
from Liquidation Proceeds, Insurance Proceeds or otherwise (a
"Nonrecoverable
Advance"), subject to any limitations set forth in the
Pooling and Servicing
Agreement as described in the related Prospectus Supplement;

(viii) to reimburse itself or the Company for certain
other expenses
incurred for which it or the Company is entitled to
reimbursement or against which
it or the Company is indemnified pursuant to the Pooling and
Servicing Agreement;
and

(ix) to clear the Custodial Account of amounts
relating to the
corresponding Mortgage Loans or Contracts in connection with
the termination of
the Trust Fund pursuant to the Pooling and Servicing
Agreement, as described in
"The Pooling and Servicing Agreement Termination; Retirement
of Certificates."

Distributions

Distributions of principal and interest (or, where
applicable, of principal only or
interest only) on each class of Certificates entitled thereto
will be made on each Distribution
Date either by the Trustee, the Master Servicer or the
Certificate Administrator acting on
behalf of the Trustee or a paying agent appointed by the Trustee
(the "Paying Agent"). Such
distributions will be made to the persons who are registered as
the holders of such
Certificates at the close of business on the last business day of
the preceding month (the
"Record Date"). Distributions will be made in immediately
available funds (by wire transfer
or otherwise) to the account of a Certificateholder at a bank or
other entity having
appropriate facilities therefor, if such Certificateholder has so
notified the Trustee, the
Master Servicer, the Certificate Administrator or the Paying
Agent, as the case may be, and
the applicable Pooling and Servicing Agreement provides for such
form of payment, or by
check mailed to the address of the person entitled thereto as it
appears on the Certificate
Register. The final distribution in retirement of the
Certificates will be made only upon
presentation and surrender of the Certificates at the office or
agency of the Trustee specified
in the notice to Certificateholders. Distributions will be made
to each Certificateholder in
accordance with such holder's Percentage Interest in a particular
class. The "Percentage
Interest" represented by a Certificate of a particular class will
be equal to the percentage
obtained by dividing the initial principal balance or notional
amount of such Certificate by
the aggregate initial amount or notional balance of all the
Certificates of such class.

Principal and Interest on the Certificates

The method of determining, and the amount of, distributions
of principal and
interest (or, where applicable, of principal only or interest
only) on a particular series of
Certificates will be described in the related Prospectus
Supplement. Distributions of interest
on each class of Certificates will be made prior to distributions
of principal thereon. Each
class of Certificates (other than certain classes of Strip
Certificates) may have a different
Pass-Through Rate, which may be a fixed, variable or adjustable
Pass-Through Rate, or any
combination of two or more such Pass-Through Rates. The related
Prospectus Supplement
will specify the Pass-Through Rate or Rates for each class, or
the initial Pass-Through Rate
or Rates and the method for determining the Pass-Through Rate or
Rates. Unless otherwise
specified in the related Prospectus Supplement, interest on the
Certificates will be calculated
on the basis of a 360-day year consisting of twelve 30-day
months.

On each Distribution Date for a series of Certificates, the
Trustee or the Master
Servicer or the Certificate Administrator on behalf of the
Trustee will distribute or cause the
Paying Agent to distribute, as the case may be, to each holder of
record on the Record Date
of a class of Certificates, an amount equal to the Percentage
Interest represented by the
Certificate held by such holder multiplied by such class's
Distribution Amount. The
"Distribution Amount" for a class of Certificates for any
Distribution Date will be the
portion, if any, of the Principal Distribution Amount (as defined
in the related Prospectus
Supplement) allocable to such class for such Distribution Date,
plus, if such class is entitled
to payments of interest on such Distribution Date, one month's
interest at the applicable
Pass-Through Rate on the principal balance or notional amount of
such class specified in
the applicable Prospectus Supplement, less certain interest
shortfalls, which generally will
include (i) any Deferred Interest added to the principal balance
of the Mortgage Loans
and/or the outstanding balance of one or more classes of
Certificates on the related Due
Date, (ii) any other interest shortfalls (including, without
limitation, shortfalls resulting from
application of the Relief Act or similar legislation or
regulations as in effect from time to
time) allocable to Certificateholders which are not covered by
advances or the applicable
credit enhancement and (iii) unless otherwise specified in the
related Prospectus
Supplement, Prepayment Interest Shortfalls, in each case in such
amount that is allocated
to such class on the basis set forth in the Prospectus
Supplement.

In the case of a series of Certificates which includes two or
more classes of
Certificates, the timing, sequential order, priority of payment
or amount of distributions in
respect of principal, and any schedule or formula or other
provisions applicable to the
determination thereof (including distributions among multiple
classes of Senior Certificates
or Subordinate Certificates) shall be set forth in the related
Prospectus Supplement.
Distributions in respect of principal of any class of
Certificates will be made on a pro rata
basis among all of the Certificates of such class unless
otherwise set forth in the related
Prospectus Supplement.

Except as otherwise provided in the related Pooling and
Servicing Agreement, on
or prior to the 20th day (or, if such day is not a business day,
the next business day) of the
month of distribution (the "Determination Date"), the Master
Servicer or the Certificate
Administrator, as applicable, will determine the amounts of
principal and interest which will
be passed through to Certificateholders on the succeeding
Distribution Date. Prior to the
close of business on the business day succeeding each
Determination Date, the Master
Servicer or the Certificate Administrator, as applicable, will
furnish a statement to the
Trustee (the information in such statement to be made available
to Certificateholders by the
Master Servicer or the Certificate Administrator, as applicable,
on request) setting forth,
among other things, the amount to be distributed on the next
succeeding Distribution Date.

Example of Distributions

The following chart sets forth an example of the flow of
funds as it would relate to
a hypothetical series of Certificates issued, and with a Cut-off
Date occurring, in April 1996:

Date Note Description
April 1 . . . . . . . . (A) Cut-off Date.
April 2-30. . . . . . . (B) The Servicers or the Sub-Servicers,
as
applicable, receive any Principal
Prepayments
and applicable interest on such
Principal
Prepayments.
April 30. . . . . . . . (C) Record Date.
May 1 . . . . . . . . . (D) The due date for a Mortgage Loan or
Contract
(the "Due Date").
May 17. . . . . . . . . (E) The Servicers or the Sub-Servicers,
as
applicable, remit to the Master
Servicer or the
Servicer, as applicable, scheduled
payments of
principal and interest due on May 1
and
received or advanced by them.
May 20. . . . . . . . . (F) Determination Date.
May 28. . . . . . . . . (G) Distribution Date.

Succeeding months follow the pattern of (B) through (G), except
that for succeeding months
(B) will also include the first day of such month. Certain series
of Certificates may have
different prepayment periods, Cut-off Dates, Record Dates, Due
Dates, remittance dates,
Determination Dates and/or Distribution Dates than those set
forth above.
_______________________

(A) The initial principal balance of the Mortgage Pool or
Contract Pool will be the
aggregate principal balance of the Mortgage Loans or
Contracts at the close of
business on April 1, 1996, after deducting principal payments
due on or before such
date. Those principal payments due on or before April 1, and
the accompanying
interest payments, and any Principal Prepayments received as
of the close of
business on April 1, 1996 are not part of the Mortgage Pool
or Contract Pool and
will not be passed through to Certificateholders.

(B) Any principal payments received in advance of the scheduled
Due Date and not
accompanied by a payment of interest for any period
following the date of payment
("Principal Prepayments") may be received at any time during
this period and will
be remitted to the Master Servicer or Servicer as described
in (E) below for
distribution to Certificateholders as described in (F)
below. When a Mortgage Loan
or Contract is prepaid in full, interest on the amount
prepaid is collected from the
Mortgagor only to the date of payment. Partial Principal
Prepayments are applied
so as to reduce the principal balances of the related
Mortgage Loans or Contracts
as of the first day of the month in which the payments are
made; no interest will be
paid to Certificateholders in respect of such prepaid
amounts for the month in which
such partial Principal Prepayments were received.

(C) Distributions on May 28 (because May 25, 1996 is not a
business day) will be made
to Certificateholders of record at the close of business on
April 30.

(D) Scheduled principal and interest payments are due from
Mortgagors.

(E) Payments due on May 1 from Mortgagors will be deposited by
the Sub-Servicers
in subservicing accounts or Servicers in collection accounts
(or will be otherwise
managed in a manner acceptable to the Rating Agencies) as
received and will
include the scheduled principal payments plus interest on
the April balances (with
the exception of interest from the date of prepayment of any
Mortgage Loan or
Contract prepaid in full during April and interest on the
amount of partial Principal
Prepayments in April). Funds required to be remitted from
the collection accounts
or the subservicing accounts to the Master Servicer or the
Servicer, as applicable,
will be so remitted on May 17 (because May 18, 1996 is not a
business day)
together with any required Advances by the Servicer or the
Sub-Servicers (except
that Principal Prepayments in full and certain Principal
Prepayments in part
received by Sub-Servicers during the month of April will
have been remitted to the
Master Servicer or the Servicer, as applicable, within five
business days of receipt).

(F) On May 20, the Master Servicer or the Certificate
Administrator, if any, will
determine the amounts of principal and interest which will
be passed through on
May 28 to the holders of each class of Certificates. The
Master Servicer or the
Certificate Administrator, if any, will be obligated to
distribute those payments due
May 1 which have been received from Servicers or
Sub-Servicers prior to and
including May 17, as well as all Principal Prepayments
received on Mortgage Loans
in April (with interest adjusted to the Pass-Through Rates
applicable to the
respective classes of Certificates and reduced on account of
Principal Prepayments
as described above). Distributions to the holders of Senior
Certificates, if any, on
May 28 may include certain amounts otherwise distributable
to the holders of the
related Subordinate Certificates, amounts withdrawn from any
Reserve Fund and
amounts advanced by the Master Servicer or the Servicer
under the circumstances
described in "Subordination" and " Advances."

(G) On May 28, the amounts determined on May 20 will be
distributed to
Certificateholders.

If provided in the related Prospectus Supplement, the
Distribution Date with respect
to any series of Certificates as to which the Trust Fund includes
Agency Securities may be
a specified date or dates other than the 25th day of each month
in order to allow for the
receipt of distributions on such Agency Securities.

Advances

Unless otherwise specified in the related Prospectus
Supplement, the Master
Servicer or the applicable Servicer will agree to advance (either
out of its own funds, funds
advanced to it by Servicers or Sub-Servicers, as applicable, or
funds being held in the
Custodial Account for future distribution), for the benefit of
the related Certificateholders,
on or before each Distribution Date, an amount equal to the
aggregate of all scheduled
payments of principal (other than any Balloon Amount in the case
of a Balloon Loan) and
interest at the applicable Pass-Through Rate or Net Mortgage
Rate, as the case may be (an
"Advance"), which were delinquent as of the close of business on
the business day
preceding the related Determination Date on the related Mortgage
Loans or Contracts, but
only to the extent that such Advances would, in the judgment of
the Master Servicer or the
Servicer, be recoverable out of late payments by the Mortgagors,
Liquidation Proceeds,
Insurance Proceeds or otherwise. If a Trust Fund includes Agency
Securities, any advancing
obligations with respect to underlying Mortgage Loans or
Contracts will be pursuant to the
terms of such Agency Securities and may differ from the
provisions relating to Advances
described herein.

Advances are intended to maintain a regular flow of scheduled
interest and principal
payments to related Certificateholders. Such Advances do not
represent an obligation of the
Master Servicer or the Servicer to guarantee or insure against
losses. If Advances have been
made by the Master Servicer or Servicer from cash being held for
future distribution to
Certificateholders, such funds will be required to be replaced on
or before any future
Distribution Date to the extent that funds in the Certificate
Account on such Distribution
Date would be less than payments required to be made to
Certificateholders. Any Advances
will be reimbursable to the Master Servicer or Servicer out of
recoveries on the related
Mortgage Loans or Contracts for which such amounts were advanced
(e.g., late payments
made by the related Mortgagor, any related Liquidation Proceeds
and Insurance Proceeds,
proceeds of any applicable form of credit enhancement or proceeds
of any Mortgage
Collateral purchased by the Company, Residential Funding, a
Sub-Servicer or a Mortgage
Collateral Seller under the circumstances described above). Such
Advances will also be
reimbursable from cash otherwise distributable to
Certificateholders to the extent that the
Master Servicer or Servicer shall determine that any such
Advances previously made are
not ultimately recoverable as described above. With respect to
any Senior/Subordinate
Series, so long as the related Subordinate Certificates remain
outstanding and subject to
certain limitations with respect to Special Hazard Losses, Fraud
Losses, Bankruptcy Losses
and Extraordinary Losses, such Advances may also be reimbursable
out of amounts
otherwise distributable to holders of the Subordinate
Certificates, if any. The Master
Servicer or the Servicer will also be obligated to make Servicing
Advances, to the extent
recoverable out of Liquidation Proceeds or otherwise, in respect
of certain taxes and
insurance premiums not paid by Mortgagors on a timely basis.
Funds so advanced will be
reimbursable to the Master Servicer or Servicer to the extent
permitted by the Pooling and
Servicing Agreement. The Master Servicer's or Servicer's
obligation to make Advances may
be supported by another entity, a letter of credit or other
method as may be described in the
related Pooling and Servicing Agreement. In the event that the
short-term or long-term
obligations of the provider of such support are downgraded by a
Rating Agency rating the
related Certificates or if any collateral supporting such
obligation is not performing or is
removed pursuant to the terms of any agreement described in the
related Prospectus
Supplement, the Certificates may also be downgraded.

Prepayment Interest Shortfalls

When a Mortgagor prepays a Mortgage Loan or Contract in full
between scheduled
Due Dates for such Mortgage Loan or Contract, the Mortgagor pays
interest on the amount
prepaid only to but not including the date on which such
Principal Prepayment is made.
Similarly, Liquidation Proceeds from a Mortgaged Property will
not include interest for any
period after the date on which the liquidation took place. The
shortfall between a full
month's interest due with respect to a Mortgage Loan or Contract
and the amount of interest
paid or recovered with respect thereto in the event of a
prepayment or liquidation is referred
to as a "Prepayment Interest Shortfall." If so specified in the
related Prospectus Supplement,
to the extent funds are available from the Servicing Fee, the
Servicer or Master Servicer
may make an additional payment to Certificateholders with respect
to any Mortgage Loan
or Contract that prepaid in full during the related prepayment
period equal to the amount,
if any, necessary to assure that, on the related Distribution
Date, the Available Distribution
Amount would include with respect to each such Mortgage Loan or
Contract an amount
equal to interest at the Mortgage Rate (less the Servicing Fee
and Spread, if any) for such
Mortgage Loan or Contract from the date of such prepayment or
liquidation through the
related Due Date (such amount, "Compensating Interest").
Compensating Interest may be
limited to the aggregate amount (or any portion thereof) of the
Servicing Fee received by
the Servicer or Master Servicer in that month in relation to the
Mortgage Loans or
Contracts, or in any other manner, and, if so limited, may not be
sufficient to cover the
Prepayment Interest Shortfall. If so disclosed in the related
Prospectus Supplement,
Prepayment Interest Shortfalls may be applied to reduce interest
otherwise payable with
respect to one or more classes of Certificates of a series. See
"Yield Considerations."

Reports to Certificateholders

On each Distribution Date, the Master Servicer or the
Certificate Administrator, as
applicable, will forward or cause to be forwarded to each
Certificateholder of record a
statement or statements with respect to the related Trust Fund
setting forth the information
described in the related Pooling and Servicing Agreement. Except
as otherwise provided in
the related Pooling and Servicing Agreement, such information
generally will include the
following (as applicable):

(i) the amount, if any, of such distribution allocable to
principal;

(ii) the amount, if any, of such distribution
allocable to interest and the
amount, if any, of any shortfall in the amount of interest
and principal;

(iii) the aggregate unpaid principal balance of the
Mortgage Collateral
after giving effect to the distribution of principal on such
Distribution Date;

(iv) the outstanding principal balance or notional
amount of each class
of Certificates after giving effect to the distribution of
principal on such
Distribution Date;

(v) based on the most recent reports furnished by
Servicers or Sub-Servicers, the number and aggregate principal
balances of any items of Mortgage
Collateral in the related Trust Fund that are delinquent (a)
one month, (b) two
months and (c) three months, and that are in foreclosure;

(vi) the book value of any property acquired by such
Trust Fund
through foreclosure or grant of a deed in lieu of
foreclosure;

(vii) the balance of the Reserve Fund, if any, at the
close of business on
such Distribution Date;

(viii) the Senior Percentage, if applicable, after
giving effect to the
distributions on such Distribution Date;

(ix) the amount of coverage under any Letter of
Credit, Mortgage Pool
Insurance Policy or other form of credit enhancement covering
default risk as of the
close of business on the applicable Determination Date and a
description of any
credit enhancement substituted therefor;

(x) if applicable, the Special Hazard Amount, Fraud Loss
Amount and
Bankruptcy Amount as of the close of business on the
applicable Distribution Date
and a description of any change in the calculation of such
amounts;

(xi) in the case of Certificates benefiting from
alternative credit
enhancement arrangements described in a Prospectus
Supplement, the amount of
coverage under such alternative arrangements as of the close
of business on the
applicable Determination Date; and

(xii) with respect to any series of Certificates as to
which the Trust Fund
includes Agency Securities, certain additional information as
required under the
related Pooling and Servicing Agreement.

Each amount set forth pursuant to clause (i) and (ii) above
will be expressed as a
dollar amount per Single Certificate. As to a particular class of
Certificates, a "Single
Certificate" generally will evidence a Percentage Interest
obtained by dividing $1,000 by
the initial principal balance or notional balance of all the
Certificates of such class, except
as otherwise provided in the related Pooling and Servicing
Agreement. In addition to the
information described above, reports to Certificateholders will
contain such other
information as is set forth in the applicable Pooling and
Servicing Agreement, which may
include, without limitation, information as to Advances,
reimbursements to Sub-Servicers,
Servicers and the Master Servicer and losses borne by the related
Trust Fund.

In addition, within a reasonable period of time after the end
of each calendar year,
the Master Servicer or the Certificate Administrator, as
applicable, will furnish a report to
each person that was a holder of record any class of Certificates
at any time during such
calendar year. Such report will include information as to the
aggregate of amounts reported
pursuant to clauses (i) and (ii) above for such calendar year or,
in the event such person was
a holder of record of a class of Certificates during a portion of
such calendar year, for the
applicable portion of such year.

Servicing and Administration of Mortgage Collateral

General

The Master Servicer, the Certificate Administrator or any
Servicer, as applicable,
that is a party to a Pooling and Servicing Agreement, will be
required to perform the
services and duties specified in the related Pooling and
Servicing Agreement. The duties to
be performed by the Master Servicer or each Servicer, subject to
the general supervision by
the Master Servicer or the Certificate Administrator, if any,
will include the customary
functions of a servicer, including collection of payments from
Mortgagors; maintenance of
any primary mortgage insurance, hazard insurance and other types
of insurance; processing
of assumptions or substitutions; attempting to cure
delinquencies; supervising foreclosures;
inspection and management of Mortgaged Properties under certain
circumstances; and
maintaining accounting records relating to the Mortgage
Collateral. Each Servicer or the
Master Servicer, if any, may be obligated, under certain
circumstances, to make Advances
in respect of delinquent installments of principal of and
interest on Mortgage Loans or
Contracts and in respect of certain taxes and insurance premiums
not paid on a timely basis
by Mortgagors, as described under " Advances" above. With respect
to any series of
Certificates for which the Trust Fund includes Agency Securities,
the Master Servicer's or
Certificate Administrator's servicing and administration
obligations will be set forth in the
related Prospectus Supplement.

Pursuant to each Pooling and Servicing Agreement, each
Servicer or the Master
Servicer, if there are no Servicers for the related series, may
enter into sub-servicing
agreements (each, a "Sub-Servicing Agreement") with one or more
sub-servicers (each, a
"Sub-Servicer") who will agree to perform certain functions for
the Servicer or Master
Servicer relating to the servicing and administration of the
Mortgage Loans or Contracts
included in the Trust Fund relating to such Sub-Servicing
Agreement. Under any Sub-Servicing Agreement, each Sub-Servicer,
will agree, among other things, to perform some
or all of the Servicer's or the Master Servicer's servicing
obligations, including but not
limited to, making Advances to the related Certificateholders.
The Servicer or the Master
Servicer, as applicable, will remain liable for its servicing
obligations that are delegated to
a Sub-Servicer as if such Servicer or the Master Servicer alone
were servicing such
Mortgage Loans or Contracts.

Collection and Other Servicing Procedures

Each Servicer or the Master Servicer, as applicable, will
make reasonable efforts
to collect all payments called for under the Mortgage Loans or
Contracts and will, consistent
with the related Pooling and Servicing Agreement and any
applicable insurance policy or
other credit enhancement, follow such collection procedures as it
follows with respect to
mortgage loans or contracts serviced by it that are comparable to
the Mortgage Loans or
Contracts. The Servicer or the Master Servicer may, in its
discretion, waive any prepayment
charge in connection with the prepayment of a Mortgage Loan or
extend the due dates for
payments due on a Mortgage Note or Contract, provided that the
insurance coverage for
such Mortgage Loan or Contract or any coverage provided by any
alternative credit
enhancement will not be adversely affected.

In connection with any significant partial prepayment of a
Mortgage Loan, the
Master Servicer, to the extent not inconsistent with the terms of
the Mortgage Note and local
law and practice, may permit the Mortgage Loan to be re-amortized
such that the monthly
payment is recalculated as an amount that will fully amortize the
remaining principal
amount thereof by the original maturity date based on the
original Mortgage Rate, provided
that such re-amortization shall not be permitted if it would
constitute a modification of the
Mortgage Loan for federal income tax purposes.

The Master Servicer, any Servicer or one or more
Sub-Servicers with respect to a
given Trust Fund may establish and maintain an escrow account
(the "Escrow Account")
in which Mortgagors will be required to deposit amounts
sufficient to pay taxes,
assessments, certain mortgage and hazard insurance premiums and
other comparable items
unless, in the case of Junior Mortgage Loans, the Mortgagor is
required to escrow such
amounts pursuant to the senior mortgage documents. Withdrawals
from any such Escrow
Account may be made to effect timely payment of taxes,
assessments, mortgage and hazard
insurance, to refund to Mortgagors amounts determined to be owed,
to pay interest on
balances in any such Escrow Account, if required, to repair or
otherwise protect the
Mortgaged Properties and to clear and terminate such account. The
Master Servicer or any
Servicer or Sub-Servicer, as the case may be, will be responsible
for the administration of
each such Escrow Account and will be obligated to make advances
to such accounts when
a deficiency exists therein. The Master Servicer, Servicer or
Sub-Servicer will be entitled
to reimbursement for any such advances from the Collection
Account.

Other duties and responsibilities of each Servicer, the
Master Servicer and the
Certificate Administrator are described above under " Payments on
Mortgage Collateral."

Servicing Compensation and Payment of Expenses

Each Servicer, the Master Servicer or the Certificate
Administrator, as applicable,
will be paid compensation for the performance of its servicing
obligations, which
compensation will be part of the servicing fee (the "Servicing
Fee") specified in the related
Prospects Supplement. Any Sub-Servicer will be entitled to
receive a portion of the
Servicing Fee. Except as otherwise provided in the related
Prospectus Supplement, the
Servicer or the Master Servicer, if any, will deduct the
Servicing Fee with respect to the
Mortgage Loans or Contracts underlying the Certificates of a
Series in an amount to be
specified in the related Prospectus Supplement. The Servicing Fee
may be fixed or variable.
In addition to the Servicing Fee, unless otherwise specified in
the related Prospectus
Supplement, the Master Servicer, any Servicer or the relevant
Sub-Servicers, if any, will be
entitled to servicing compensation in the form of assumption
fees, late payments charges
or excess proceeds following disposition of property in
connection with defaulted Mortgage
Loans or Contracts and any earnings on investments held in the
Certificate Account or any
Custodial Account. Any Spread retained by a Mortgage Collateral
Seller, the Master
Servicer, or any Servicer or Sub-Servicer will not constitute
part of the Servicing Fee.
Notwithstanding the foregoing, with respect to a series of
Certificates as to which the Trust
Fund includes Agency Securities, the compensation payable to the
Master Servicer or
Certificate Administrator for servicing and administering such
Agency Securities on behalf
of the holders of such Certificates may be based on a percentage
per annum described in the
related Prospectus Supplement of the outstanding balance of such
Agency Securities and
may be retained from distributions of interest thereon, if so
specified in the related
Prospectus Supplement.

Unless otherwise specified in the related Prospectus
Supplement, the Servicer, the
Master Servicer or the Certificate Administrator will pay from
the Servicing Fee (i) the fees
of any Sub-Servicers, (ii) certain expenses incurred in
connection with the servicing of the
Mortgage Loans or Contracts, including, without limitation,
payment of certain of the
insurance policy premiums, fees or other amounts payable for any
alternative credit
enhancement, reimbursement of expenses incurred in connection
with a foreclosure or deed
in lieu of foreclosure upon a Mortgaged Property, payment of the
fees and disbursements
of the Trustee (and any Custodian selected by the Trustee), the
Certificate Registrar, any
Paying Agent, independent accountants and payment of expenses
incurred in enforcing the
obligations of Sub-Servicers, Servicers and Mortgage Collateral
Sellers and (iii) expenses
related to the preparation of reports to Certificateholders.
Certain of these expenses may be
reimbursable from Liquidation Proceeds or insurance policies and,
in the case of
enforcement of the obligations of Sub-Servicers, from any
recoveries in excess of amounts
due with respect to the related Mortgage Loans or Contracts or
from specific recoveries of
costs. The related Pooling and Servicing Agreement may provide
that the Certificate
Administrator, the Master Servicer, and any Servicer and
Sub-Servicer may obtain their
respective fees by deducting them from amounts otherwise required
to be deposited into the
Collection Account.

The related Trust Fund will suffer no loss by reason of the
expenses of the Servicer
or Master Servicer described above to the extent claims are fully
paid from amounts in any
Reserve Fund, any related insurance policies, the Liquidation
Proceeds, any proceeds in
respect of an REO Mortgage Loan (with respect to expenses
incurred in connection with a
foreclosure or deed in lieu of foreclosure) or any applicable
alternative credit enhancement
described in the related Prospectus Supplement. In the event,
however, that claims are either
not made or are not fully paid from such sources, the related
Trust Fund will suffer a loss
to the extent that Liquidation Proceeds, after reimbursement of
the expenses of the Master
Servicer or any Servicer or Sub-Servicer, are less than the
principal balance of and accrued
interest on the related Mortgage Loan or Contract. In addition,
the Master Servicer or any
Servicer or Sub-Servicer, as applicable, will be entitled to
reimbursement of expenditures
incurred by it in connection with the restoration of Mortgaged
Property, such right of
reimbursement being prior to the rights of the Certificateholders
to receive any payments
from any Reserve Fund or from any related Insurance Proceeds,
Liquidation Proceeds or
any proceeds of alternative credit enhancement.

Evidence as to Compliance

Each Servicer, the Master Servicer or the Certificate
Administrator, as appropriate,
will, with respect to each series of Certificates, deliver to the
Trustee, on or before the date
in each year specified in the related Pooling and Servicing
Agreement, an officer's
certificate stating that (i) a review of the activities of the
Certificate Administrator, each
Servicer or the Master Servicer and each Sub-Servicer, as
applicable, during the preceding
calendar year and of performance under such Pooling and Servicing
Agreement and the
applicable Sub-Servicing Agreement, if any, has been made under
the supervision of such
officer, and (ii) to the best of such officer's knowledge, based
on such review, the Certificate
Administrator, each Servicer or the Master Servicer and each
Sub-Servicer, as applicable,
has fulfilled all its obligations under such Pooling and
Servicing Agreement throughout such
year, or, if there has been a default in the fulfillment of any
such obligation, specifying each
such default known to such officer and the nature and status
thereof. If set forth in the
Prospectus Supplement, such officer's certificate shall be
accompanied by a statement of a
firm of independent public accountants to the effect that, on the
basis of an examination of
certain documents and records relating to servicing of the
Mortgage Loans or Contracts,
including similar reports delivered by each Servicer or
Sub-Servicer (upon which such firm
is entitled to rely), conducted in accordance with the Uniform
Single Attestation Program
for Mortgage Bankers or similar standards acceptable to the
Servicer, the Master Servicer
or the Certificate Administrator, as applicable, the servicing of
the Mortgage Loans or
Contracts was conducted in compliance with the provisions of the
related Pooling and
Servicing Agreement and the applicable Sub-Servicing Agreement,
if any, except for (a)
such exceptions as such firm believes to be immaterial and (b)
such other exceptions as are
set forth in such statement.

Certain Other Matters Regarding Servicing

Each Servicer, the Master Servicer or the Certificate
Administrator, as applicable,
may not resign from its obligations and duties under the related
Pooling and Servicing
Agreement except with the consent of all Certificateholders or
upon a determination that its
duties thereunder are no longer permissible under applicable law.
No such resignation will
become effective until the Trustee or a successor servicer or
administrator has assumed the
Servicer's, the Master Servicer's or the Certificate
Administrator's obligations and duties
under such Pooling and Servicing Agreement. A Servicer, the
Master Servicer or the
Certificate Administrator, as applicable, may be removed upon the
occurrence of certain
Events of Default described below under "The Pooling and
Servicing Agreement Events
of Default" and " Rights Upon Event of Default."

Each Pooling and Servicing Agreement will also provide that
neither the Servicer,
the Master Servicer or the Certificate Administrator, nor any
director, officer, employee or
agent thereof, will be under any liability to the Trust Fund or
the Certificateholders for any
action taken or for restraining from taking any action in good
faith pursuant to the Pooling
and Servicing Agreement, or for errors in judgment. However,
neither the Servicer, the
Master Servicer or the Certificate Administrator nor any such
person will be protected
against any liability which would otherwise be imposed by reason
of the failure to perform
its obligations in compliance with any standard of care set forth
in the Pooling and Servicing
Agreement. The Servicer, the Master Servicer or the Certificate
Administrator, as
applicable, may, in its discretion, undertake any such action
that it may deem necessary or
desirable with respect to the Pooling and Servicing Agreement and
the rights and duties of
the parties thereto and the interest 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, the Master Servicer or the
Certificate Administrator will be entitled to be reimbursed
therefor out of funds otherwise
distributable to Certificateholders.

The Master Servicer or Servicer may in its discretion (i)
waive any late payment
charge or any prepayment charge or penalty interest in connection
with the prepayment of
a Mortgage Loan or Contract and (ii) extend the Due Date for
payments due on a Mortgage
Loan or Contract, if the Master Servicer or Servicer has
determined that any such waiver
or extension will not impair the coverage of any related
insurance policy, materially
adversely affect the lien of the related Mortgage or, if a REMIC
election has been made
with respect to the Trust Fund, adversely affect such REMIC
status.

The Master Servicer will be required to maintain a fidelity
bond and errors and
omissions policy with respect to its officers and employees and
other persons acting on
behalf of the Master Servicer in connection with its activities
under the Pooling and
Servicing Agreement.

A Servicer, the Master Servicer or the Certificate
Administrator may have other
business relationships with the Company, any Mortgage Collateral
Seller or their affiliates.

Special Servicing

If provided for in the related Prospectus Supplement, the
Pooling and Servicing
Agreement for a series of Certificates may name a special
servicer (a "Special Servicer").
The Special Servicer will be responsible for the servicing of
certain delinquent Mortgage
Loans or Contracts as described in the Prospectus Supplement. The
Special Servicer may
have certain discretion to extend relief to Mortgagors whose
payments become delinquent.
The Special Servicer may be permitted to grant a period of
temporary indulgence to a
Mortgagor or may enter into a liquidating plan providing for
repayment by the Mortgagor,
in each case without the prior approval of the Master Servicer or
the Servicer, as applicable.
Other types of forbearance generally will require the approval of
the Master Servicer or
Servicer, as applicable.

Enforcement of "Due-on-Sale" Clauses

Unless otherwise specified in the related Prospectus
Supplement, when any
Mortgaged Property relating to a Mortgage Loan or Contract (other
than an ARM Loan
described below) is about to be conveyed by the Mortgagor, the
Master Servicer or the
Servicer, as applicable, directly or through a Sub-Servicer, to
the extent it has knowledge
of such proposed conveyance, generally will be obligated to
exercise the Trustee's rights to
accelerate the maturity of such Mortgage Loan or Contract under
any due-on-sale clause
applicable thereto. A due-on-sale clause will be enforced only if
the exercise of such rights
is permitted by applicable law and only to the extent it would
not adversely affect or
jeopardize coverage under any Primary Insurance Policy or
applicable credit enhancement
arrangements. See "Certain Legal Aspects of Mortgage Loans and
Contracts The
Mortgage Loans Enforceability of Certain Provisions" and " The
Contracts 'Due-on-Sale' Clauses." If the Master Servicer,
Servicer or Sub-Servicer is prevented from enforcing
a due-on-sale clause under applicable law or if the Master
Servicer, Servicer or Sub-Servicer
determines that it is reasonably likely that a legal action would
be instituted by the related
Mortgagor to avoid enforcement of such due-on-sale clause, the
Master Servicer, Servicer
or Sub-Servicer will 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 or Contract subject to
certain specified conditions.
The original Mortgagor may be released from liability on a
Mortgage Loan or Contract if
the Master Servicer, Servicer or Sub-Servicer shall have
determined in good faith that such
release will not adversely affect the collectability of the
Mortgage Loan or Contract. In the
event of the sale of a Mortgaged Property subject to an ARM Loan,
such ARM Loan may
be assumed if it is by its terms assumable and if, in the
reasonable judgment of the Master
Servicer, Servicer or Sub-Servicer, the proposed transferee of
the related Mortgaged
Property establishes its ability to repay the loan and the
security for such ARM Loan would
not be impaired by the assumption. If a Mortgagor transfers the
Mortgaged Property subject
to an ARM Loan without consent, such ARM Loan may be declared due
and payable. In
connection with any such assumption, the Mortgage Rate borne by
the related Mortgage
Note or Contract may not be altered. Mortgagors may, from time to
time, request partial
releases of the Mortgaged Properties, easements, consents to
alteration or demolition and
other similar matters. The Master Servicer, Servicer or
Sub-Servicer may approve such a
request if it has determined, exercising its good faith business
judgment, that such approval
will not adversely affect the security for, and the timely and
full collectability of, the related
Mortgage Loan or Contract. Any fee collected by the Master
Servicer, Servicer or Sub-Servicer for entering into an
assumption or substitution of liability agreement or for
processing a request for partial release of the Mortgaged
Property generally will be retained
by the Master Servicer, Servicer or Sub-Servicer as additional
servicing compensation.

Realization Upon Defaulted Property

With respect to a Mortgage Loan in default, the Master
Servicer or the related
Subservicer will decide whether to foreclose upon the Mortgage
Property or write off the
principal balance of the Mortgage Loan or Contract as a bad debt.

In connection with such
decision, the Master Servicer or the related Subservicer will,
following usual practices in
connection with senior and junior mortgage servicing activities,
estimate the proceeds
expected to be received and the expenses expected to be incurred
in connection with such
foreclosure to determine whether a foreclosure proceeding is
appropriate. With respect to
any Junior Mortgage Loan, following any default thereon, in the
event that the senior
mortgage holder commences a foreclosure action it is likely that
such Mortgage Loan will
be written off as bad debt with no foreclosure proceeding unless
foreclosure proceeds for
such Mortgage Loan are expected to at least satisfy the related
senior mortgage loan in full
and to pay foreclosure costs. See "Risk Factors Risks Associated
with the Mortgage
Collateral" herein.

In the event that title to any Mortgaged Property is acquired
in foreclosure or by
deed in lieu of foreclosure (or, in the case of Contracts in
certain states, by repossession of
the related Manufactured Home), the deed or certificate of sale
will be issued to the Trustee
or to its nominee on behalf of Certificateholders.
Notwithstanding any such acquisition of
title and cancellation of the related Mortgage Loan or Contract,
such Mortgage Loan (an
"REO Mortgage Loan") or Contract (an "REO Contract") will be
considered for most
purposes to be an outstanding Mortgage Loan or Contract held in
the Trust Fund until such
time as the Mortgaged Property is sold and all recoverable
Liquidation Proceeds and
Insurance Proceeds have been received with respect to such
defaulted Mortgage Loan (a
"Liquidated Mortgage Loan") or Contract (a "Liquidated
Contract"). For purposes of
calculations of amounts distributable to Certificateholders in
respect of an REO Mortgage
Loan or an REO Contract, the amortization schedule in effect at
the time of any such
acquisition of title (before any adjustment thereto by reason of
any bankruptcy or any
similar proceeding or any moratorium or similar waiver or grace
period) will be deemed to
have continued in effect (and, in the case of an ARM Loan, such
amortization schedule will
be deemed to have adjusted in accordance with any interest rate
changes occurring on any
adjustment date therefor) so long as such REO Mortgage Loan or
REO Contract is
considered to remain in the Trust Fund. If a REMIC election has
been made, any Mortgaged
Property so acquired by the Trust Fund must be disposed of in
accordance with applicable
federal income tax regulations and consistent with the status of
the Trust Fund as a REMIC.
To the extent provided in the related Pooling and Servicing
Agreement, any income (net of
expenses and other than gains described below) received by the
Sub-Servicer, Servicer or
Master Servicer on such Mortgaged Property prior to its
disposition will be deposited in the
Custodial Account upon receipt and will be available at such time
for making payments to
Certificateholders.

With respect to a Mortgage Loan or Contract in default, the
Master Servicer or
Servicer may pursue foreclosure (or similar remedies) subject to
any senior loan positions
and certain other restrictions pertaining to junior loans as
described under "Certain Legal
Aspects of Mortgage Loans and Related Matters Foreclosure on
Mortgage Loans"
concurrently with pursuing any remedy for a breach of a
representation and warranty.
However, the Master Servicer or Servicer is not required to
continue to pursue both such
remedies if it determines that one such remedy is more likely to
result in a greater recovery.
Upon the first to occur of final liquidation and a repurchase or
substitution pursuant to a
breach of a representation and warranty, such Mortgage Loan or
Contract will be removed
from the related Trust Fund. The Master Servicer or Servicer may
elect to treat a defaulted
Mortgage Loan or Contract as having been finally liquidated if
substantially all amounts
expected to be received in connection therewith have been
received. Any additional
liquidation expenses relating to such Mortgage Loan or Contract
thereafter incurred will be
reimbursable to the Master Servicer or Servicer (or any
Sub-Servicer) from any amounts
otherwise distributable to the related Certificateholders, or may
be offset by any subsequent
recovery related to such Mortgage Loan or Contract.
Alternatively, for purposes of
determining the amount of related Liquidation Proceeds to be
distributed to
Certificateholders, the amount of any Realized Loss or the amount
required to be drawn
under any applicable form of credit enhancement, the Master
Servicer or Servicer may take
into account minimal amounts of additional receipts expected to
be received, as well as
estimated additional liquidation expenses expected to be incurred
in connection with such
defaulted Mortgage Loan or Contract.

With respect to certain series of Certificates, if so
provided in the related Prospectus
Supplement, the applicable form of credit enhancement may
provide, to the extent of
coverage thereunder, that a defaulted Mortgage Loan or Contract
or REO Mortgage Loan
or REO Contract will be removed from the Trust Fund prior to the
final liquidation thereof.
In addition, the Master Servicer or Servicer may have the option
to purchase from the Trust
Fund any defaulted Mortgage Loan or Contract after a specified
period of delinquency. In
the case of a Senior/Subordinate Series, unless otherwise
specified in the related Prospectus
Supplement, if a final liquidation of a Mortgage Loan or Contract
resulted in a Realized
Loss and within two years thereafter the Master Servicer or
Servicer receives a subsequent
recovery specifically related to such Mortgage Loan or Contract
(in connection with a
related breach of a representation or warranty or otherwise),
such subsequent recovery shall
be distributed to the then-current Certificateholders of any
outstanding class to which such
Realized Loss was allocated (with the amounts to be distributed
allocated among such
classes in the same proportions as such Realized Loss was
allocated), provided that no such
distribution shall result in distributions on the Certificates of
any such class in excess of the
total amounts of principal and interest that would have been
distributable thereon if such
Mortgage Loan or Contract had been liquidated with no Realized
Loss. In the case of a
series of Certificates other than a Senior/Subordinate Series, if
so provided in the related
Prospectus Supplement, the applicable form of credit enhancement
may provide for
reinstatement subject to certain conditions in the event that,
following the final liquidation
of a Mortgage Loan or Contract and a draw under such credit
enhancement, subsequent
recoveries are received. If a defaulted Mortgage Loan or Contract
or REO Mortgage Loan
or REO Contract is not so removed from the Trust Fund, then, upon
the final liquidation
thereof, if a loss is realized which is not covered by any
applicable form of credit
enhancement or other insurance, the Certificateholders will bear
such loss. However, if a
gain results from the final liquidation of an REO Mortgage Loan
or REO Contract which
is not required by law to be remitted to the related Mortgagor,
the Master Servicer or the
Servicer will be entitled to retain such gain as additional
servicing compensation unless the
related Prospectus Supplement provides otherwise. For a
description of the Certificate
Administrator's, the Master Servicer's or the Servicer's
obligations to maintain and make
claims under applicable forms of credit enhancement and insurance
relating to the Mortgage
Loans or Contracts, see "Description of Credit Enhancement" and
"Insurance Policies on
Mortgage Loans or Contracts."

For a discussion of legal rights and limitations associated
with the foreclosure of
a Mortgage Loan or Contract, see "Certain Legal Aspects of
Mortgage Loans and
Contracts."

The Master Servicer or the Certificate Administrator, as
applicable, will deal with
any defaulted Agency Securities in the manner set forth in the
related Prospectus
Supplement.

SUBORDINATION

A Senior/Subordinate Series of Certificates will consist of
one or more classes of
Senior Certificates and one or more classes of Subordinate
Certificates, as set forth in the
related Prospectus Supplement. Subordination of the Subordinate
Certificates of any
Senior/Subordinate Series will be effected by the following
method, unless an alternative
method is specified in the related Prospectus Supplement. In
addition, certain classes of
Senior (or Subordinate) Certificates may be senior to other
classes of Senior (or
Subordinate) Certificates, as specified in the related Prospectus
Supplement.

With respect to any Senior/Subordinate Series, the total
amount available for
distribution on each Distribution Date, as well as the method for
allocating such amount
among the various classes of Certificates included in such
series, will be described in the
related Prospectus Supplement. Generally, with respect to any
such series, the amount
available for distribution will be allocated first to interest on
the Senior Certificates and then
to principal of the Senior Certificates up to the amounts
described in the related Prospectus
Supplement, prior to allocation of any amounts to the Subordinate
Certificates.

With respect to any defaulted Mortgage Loan or Contract that
is finally liquidated,
the amount of loss realized, if any (as described in the related
Pooling and Servicing
Agreement, a "Realized Loss"), will equal the portion of the
Stated Principal Balance
remaining after application of all amounts recovered (net of
amounts reimbursable to the
Master Servicer or Servicer for related Advances and expenses)
towards interest and
principal owing on the Mortgage Loan. With respect to a Mortgage
Loan or Contract, the
principal balance of which has been reduced in connection with
bankruptcy proceedings,
the amount of such reduction will be treated as a Realized Loss.
If so provided in the
Pooling and Servicing Agreement, the Master Servicer may be
permitted, under certain
circumstances, to purchase any Mortgage Loan that is three or
more months delinquent in
payments of principal and interest, at the Purchase Price. Any
Realized Loss incurred in
connection with any such Mortgage Loan will be passed through to
the then outstanding
Certificateholders of the related series in the same manner as
Realized Losses on Mortgage
Loans that have not been so purchased.

In the event of any Realized Losses not in excess of the
limitations described below
(other than Extraordinary Losses), the rights of the Subordinate
Certificateholders to receive
distributions will be subordinate to the rights of the Senior
Certificateholders.

Except as noted below, Realized Losses will be allocated to
the Subordinate
Certificates of the related series until the outstanding
principal balance thereof has been
reduced to zero. Additional Realized Losses, if any, will be
allocated to the Senior
Certificates. If such series includes more than one class of
Senior Certificates, such
additional Realized Losses will be allocated either on a pro rata
basis among all of the
Senior Certificates in proportion to their respective outstanding
principal balances or as
otherwise provided in the related Prospectus Supplement.

With respect to certain Realized Losses resulting from
physical damage to
Mortgaged Properties which are generally of the same type as are
covered under a Special
Hazard Insurance Policy, the amount thereof that may be allocated
to the Subordinate
Certificates of the related series may be limited to an amount
(the "Special Hazard
Amount") specified in the related Prospectus Supplement. See
"Description of Credit
Enhancement Special Hazard Insurance Policies." If so, any
Special Hazard Losses in
excess of the Special Hazard Amount will be allocated among all
outstanding classes of
Certificates of the related series, either on a pro rata basis in
proportion to their outstanding
principal balances, or as otherwise provided in the related
Prospectus Supplement. The
respective amounts of other specified types of losses (including
Fraud Losses and
Bankruptcy Losses) that may be borne solely by the Subordinate
Certificates may be
similarly limited to an amount (with respect to Fraud Losses, the
"Fraud Loss Amount" and
with respect to Bankruptcy Losses, the "Bankruptcy Amount"), and
the Subordinate
Certificates may provide no coverage with respect to certain
other specified types of losses,
as described in the related Prospectus Supplement, in which case
such losses would be
allocated on a pro rata basis among all outstanding classes of
Certificates. Each of the
Special Hazard Amount, Fraud Loss Amount and Bankruptcy Amount
may be subject to
periodic reductions and may be subject to further reduction or
termination, without the
consent of the Certificateholders, upon the written confirmation
from each applicable Rating
Agency that the then-current rating of the related series of
Certificates will not be adversely
affected thereby.

Generally, any allocation of a Realized Loss (including a
Special Hazard Loss) to
a Certificate will be made by reducing the outstanding principal
balance thereof as of the
Distribution Date following the calendar month in which such
Realized Loss was incurred.
At any given time, the percentage of the outstanding principal
balances of all of the
Certificates evidenced by the Senior Certificates is the "Senior
Percentage," determined in
the manner set forth in the related Prospectus Supplement. The
"Stated Principal Balance"
of any item of Mortgage Collateral as of any date of
determination is equal to the principal
balance thereof as of the Cut-off Date, after application of all
scheduled principal payments
due on or before the Cut-off Date, whether received or not,
reduced by all amounts allocable
to principal that are distributed to Certificateholders on or
before the date of determination,
and as further reduced to the extent that any Realized Loss
thereon has been allocated to any
Certificates on or before such date.

As set forth above, the rights of holders of the various
classes of Certificates of any
series to receive distributions of principal and interest is
determined by the aggregate
outstanding principal balance of each such class (or, if
applicable, the related notional
amount). The outstanding principal balance of any Certificate
will be reduced by all
amounts previously distributed on such Certificate in respect of
principal and by any
Realized Losses allocated thereto. If there are no Realized
Losses or Principal Prepayments
on any item of Mortgage Collateral, the respective rights of the
holders of Certificates of
any series to future distributions generally would not change.
However, to the extent set
forth in the related Prospectus Supplement, holders of Senior
Certificates may be entitled
to receive a disproportionately larger amount of prepayments
received during certain
specified periods, which will have the effect (absent offsetting
losses) of accelerating the
amortization of the Senior Certificates and increasing the
respective percentage ownership
interest evidenced by the Subordinate Certificates in the related
Trust Fund (with a
corresponding decrease in the Senior Percentage), thereby
preserving the availability of the
subordination provided by the Subordinate Certificates. In
addition, as set forth above,
certain Realized Losses generally will be allocated first to
Subordinate Certificates by
reduction of the outstanding principal balance thereof, which
will have the effect of
increasing the respective ownership interest evidenced by the
Senior Certificates in the
related Trust Fund.

If so provided in the related Prospectus Supplement, certain
amounts otherwise
payable on any Distribution Date to holders of Subordinate
Certificates may be deposited
into a Reserve Fund. Amounts held in any Reserve Fund may be
applied as described under
"Description of Credit Enhancement Reserve Funds" and in the
related Prospectus
Supplement.

With respect to any Senior/Subordinate Series, the terms and
provisions of the
subordination may vary from those described above. Any such
variation and any additional
credit enhancement will be described in the related Prospectus
Supplement.

DESCRIPTION OF CREDIT ENHANCEMENT

General

Credit support with respect to each series of Certificates
may be comprised of one
or more of the following components. Each component will have a
dollar limit and will
provide coverage with respect to Realized Losses that are (i)
attributable to the Mortgagor's
failure to make any payment of principal or interest as required
under the Mortgage Note
or Contract, but not including Special Hazard Losses,
Extraordinary Losses or other losses
resulting from damage to a Mortgaged Property, Bankruptcy Losses
or Fraud Losses (any
such losses, "Defaulted Mortgage Losses"); (ii) of a type
generally covered by a Special
Hazard Insurance Policy (any such losses, "Special Hazard
Losses"); (iii) attributable to
certain actions which may be taken by a bankruptcy court in
connection with a Mortgage
Loan, including a reduction by a bankruptcy court of the
principal balance of or the
Mortgage Rate on a Mortgage Loan or Contract or an extension of
its maturity (any such
losses, "Bankruptcy Losses"); and (iv) incurred on defaulted
Mortgage Loans or Contracts
as to which there was fraud in the origination of such Mortgage
Loans or Contracts (any
such losses, "Fraud Losses").

Unless otherwise specified in the related Prospectus
Supplement, credit support will
not provide protection against all risks of loss and will not
guarantee repayment of the entire
outstanding principal balance of the Certificates and interest
thereon. If losses occur which
exceed the amount covered by credit support or which are not
covered by the credit support,
Certificateholders will bear their allocable share of
deficiencies. In particular, Defaulted
Mortgage Losses, Special Hazard Losses, Bankruptcy Losses and
Fraud Losses in excess
of the amount of coverage provided therefor and losses occasioned
by war, civil
insurrection, certain governmental actions, nuclear reaction and
certain other risks
("Extraordinary Losses") will not be covered. To the extent that
the credit enhancement for
any series of Certificates is exhausted, the Certificateholders
will bear all further risks of
loss not otherwise insured against.

As set forth below and in the related Prospectus Supplement,
(i) coverage with
respect to Defaulted Mortgage Losses may be provided by a
Mortgage Pool Insurance
Policy or Contract Pool Insurance Policy, (ii) coverage with
respect to Special Hazard
Losses may be provided by a Special Hazard Insurance Policy,
(iii) coverage with respect
to Bankruptcy Losses may be provided by a Bankruptcy Bond and
(iv) coverage with
respect to Fraud Losses may be provided by a Mortgage Pool
Insurance Policy or mortgage
repurchase bond. In addition, if so specified in the applicable
Prospectus Supplement, in lieu
of or in addition to any or all of the foregoing arrangements,
credit enhancement may be in
the form of a Reserve Fund to cover such losses, in the form of
subordination of one or more
classes of Certificates as described under "Subordination," or in
the form of a Certificate
Insurance Policy, a Letter of Credit, surety bonds or other types
of insurance policies,
certain other secured or unsecured corporate guarantees or in
such other form as may be
described in the related Prospectus Supplement, or in the form of
a combination of two or
more of the foregoing. The credit support may be provided by an
assignment of the right to
receive certain cash amounts, a deposit of cash into a Reserve
Fund or other pledged assets,
or by banks, insurance companies, guarantees or any combination
thereof identified in the
related Prospectus Supplement.

Each Prospectus Supplement will include a description of (a)
the amount payable
under the credit enhancement arrangement, if any, provided with
respect to a series, (b) any
conditions to payment thereunder not otherwise described herein,
(c) the conditions under
which the amount payable under such credit support may be reduced
and under which such
credit support may be terminated or replaced and (d) the material
provisions of any
agreement relating to such credit support. Additionally, each
such Prospectus Supplement
will set forth certain information with respect to the issuer of
any third-party credit
enhancement.

The descriptions of any insurance policies, bonds or other
instruments described in
this Prospectus or any Prospectus Supplement and the coverage
thereunder do not purport
to be complete and are qualified in their entirety by reference
to the actual forms of such
policies, copies of which will be exhibits to the Current Report
on Form 8-K to be filed with
the Securities and Exchange Commission in connection with the
issuance of the related
series of Certificates.

Letters of Credit

If any component of credit enhancement as to any series of
Certificates is to be
provided by a letter of credit (the "Letter of Credit"), a bank
(the "Letter of Credit Bank")
will deliver to the Trustee an irrevocable Letter of Credit. The
Letter of Credit may provide
direct coverage with respect to the Mortgage Collateral. The
Letter of Credit Bank, the
amount available under the Letter of Credit with respect to each
component of credit
enhancement, the expiration date of the Letter of Credit, and a
more detailed description of
the Letter of Credit will be specified in the related Prospectus
Supplement. On or before
each Distribution Date, the Letter of Credit Bank will be
required to make certain payments
after notification from the Trustee, to be deposited in the
related Certificate Account with
respect to the coverage provided thereby. The Letter of Credit
may also provide for the
payment of Advances.

Mortgage Pool Insurance Policies

Any pool-wide insurance policy covering losses on Mortgage
Loans (each, a
"Mortgage Pool Insurance Policy") obtained by the Company for a
Trust Fund will be issued
by the insurer named in the related Prospectus Supplement (the
"Pool Insurer"). Each
Mortgage Pool Insurance Policy, subject to the limitations
described below and in the
Prospectus Supplement, if any, will cover Defaulted Mortgage
Losses in an amount
specified in the applicable Prospectus Supplement. As set forth
under " Maintenance of
Credit Enhancement" below, the Master Servicer, Servicer or
Certificate Administrator, as
applicable, will use its best reasonable efforts to maintain the
Mortgage Pool Insurance
Policy and to present claims thereunder to the Pool Insurer on
behalf of itself, the Trustee
and the Certificateholders. The Mortgage Pool Insurance Policies,
however, are not blanket
policies against loss, since claims thereunder may only be made
respecting particular
defaulted Mortgage Loans and only upon satisfaction of certain
conditions precedent
described below. Unless specified in the related Prospectus
Supplement, the Mortgage Pool
Insurance Policies may not cover losses due to a failure to pay
or denial of a claim under a
Primary Insurance Policy, irrespective of the reason therefor.

Each Mortgage Pool Insurance Policy will provide that no
claims may be validly
presented thereunder unless, among other things, (i) any required
Primary Insurance Policy
is in effect for the defaulted Mortgage Loan and a claim
thereunder has been submitted and
settled, (ii) hazard insurance on the property securing such
Mortgage Loan has been kept
in force and real estate taxes and other protection and
preservation expenses have been paid
by the Master Servicer, Servicer or Sub-Servicer, (iii) if there
has been physical loss or
damage to the Mortgaged Property, it has been restored to its
condition (reasonable wear
and tear excepted) at the Cut-off Date and (iv) the insured has
acquired good and
merchantable title to the Mortgaged Property free and clear of
liens except certain permitted
encumbrances. Upon satisfaction of these conditions, the Pool
Insurer will have the option
either (a) to purchase the property securing the defaulted
Mortgage Loan at a price equal to
the outstanding principal balance thereof plus accrued and unpaid
interest at the applicable
Mortgage Rate to the date of purchase and certain expenses
incurred by the Master Servicer,
Servicer or Sub-Servicer on behalf of the Trustee and
Certificateholders, or (b) to pay the
amount by which the sum of the outstanding principal balance of
the defaulted Mortgage
Loan plus accrued and unpaid interest at the Mortgage Rate to the
date of payment of the
claim and the aforementioned expenses exceeds the proceeds
received from an approved
sale of the Mortgaged Property, in either case net of certain
amounts paid or assumed to
have been paid under any related Primary Insurance Policy.
Certificateholders will
experience a shortfall in the amount of interest payable on the
related Certificates in
connection with the payment of claims under a Mortgage Pool
Insurance Policy because the
Pool Insurer is only required to remit unpaid interest through
the date a claim is paid rather
than through the end of the month in which such claim is paid. In
addition, the
Certificateholders will also experience losses with respect to
the related Certificates in
connection with payments made under a Mortgage Pool Insurance
Policy to the extent that
the Master Servicer, Servicer or Sub-Servicer expends funds to
cover unpaid real estate
taxes or to repair the related Mortgaged Property in order to
make a claim under a Mortgage
Pool Insurance Policy, as those amounts will not be covered by
payments under such policy
and will be reimbursable to the Master Servicer, Servicer or
Sub-Servicer from funds
otherwise payable to the Certificateholders. If any Mortgaged
Property securing a defaulted
Mortgage Loan is damaged and proceeds, if any (see " Special
Hazard Insurance Policies"
below for risks which are not covered by such policies), from the
related hazard insurance
policy or applicable Special Hazard Instrument are insufficient
to restore the damaged
property to a condition sufficient to permit recovery under the
Mortgage Pool Insurance
Policy, the Master Servicer, Servicer or Sub-Servicer is not
required to expend its own funds
to restore the damaged property unless it determines that (a)
such restoration will increase
the proceeds to Certificateholders on liquidation of the Mortgage
Loan after reimbursement
of the Master Servicer, Servicer or Sub-Servicer for its expenses
and (b) such expenses will
be recoverable by it through Liquidation Proceeds or Insurance
Proceeds.

Unless otherwise specified in the related Prospectus
Supplement, a Mortgage Pool
Insurance Policy (and certain Primary Insurance Policies) will
likely not insure against loss
sustained by reason of a default arising from, among other
things, (i) fraud or negligence
in the origination or servicing of a Mortgage Loan, including
misrepresentation by the
Mortgagor, the Mortgage Collateral Seller or other persons
involved in the origination
thereof, or (ii) failure to construct a Mortgaged Property in
accordance with plans and
specifications. Depending upon the nature of the event, a breach
of representation made by
a Mortgage Collateral Seller may also have occurred. Such a
breach, unless otherwise
specified in the related Prospectus Supplement, would not give
rise to a repurchase
obligation on the part of the Company or Residential Funding.

The original amount of coverage under each Mortgage Pool
Insurance Policy will
be reduced over the life of the related series of Certificates by
the aggregate amount of
claims paid less the aggregate of the net amounts realized by the
Pool Insurer upon
disposition of all foreclosed properties. The amount of claims
paid includes certain expenses
incurred by the Master Servicer, Servicer or Sub-Servicer as well
as accrued interest on
delinquent Mortgage Loans to the date of payment of the claim.
See "Certain Legal Aspects
of Mortgage Loans and Contracts Foreclosure." Accordingly, if
aggregate net claims paid
under any Mortgage Pool Insurance Policy reach the original
policy limit, coverage under
that Mortgage Pool Insurance Policy will be exhausted and any
further losses will be borne
by the related Certificateholders. In addition, unless the Master
Servicer or Servicer could
determine that an Advance in respect of a delinquent Mortgage
Loan would be recoverable
to it from the proceeds of the liquidation of such Mortgage Loan
or otherwise, the Master
Servicer or Servicer would not be obligated to make an Advance
respecting any such
delinquency since the Advance would not be ultimately recoverable
to it from either the
Mortgage Pool Insurance Policy or from any other related source.
See "Description of the
Certificates Advances."

Since each Mortgage Pool Insurance Policy will require that
the property subject
to a defaulted Mortgage Loan be restored to its original
condition prior to claiming against
the Pool Insurer, such policy will not provide coverage against
hazard losses. As set forth
under "Insurance Policies on Mortgage Loans or Contracts Standard
Hazard Insurance on
Mortgaged Properties," the hazard policies covering the Mortgage
Loans typically exclude
from coverage physical damage resulting from a number of causes
and, even when the
damage is covered, may afford recoveries which are significantly
less than full replacement
cost of such losses. Additionally, no coverage in respect of
Special Hazard Losses, Fraud
Losses or Bankruptcy Losses will cover all risks, and the amount
of any such coverage will
be limited. See " Special Hazard Insurance Policies" below. As a
result, certain hazard
risks will not be insured against and may be borne by
Certificateholders.

Contract Pools may be covered by pool insurance policies
(each, a "Contract Pool
Insurance Policy") that are similar to the Mortgage Pool
Insurance Policies described above.

Special Hazard Insurance Policies

Any insurance policy covering Special Hazard Losses (a
"Special Hazard Insurance
Policy") obtained for a Trust Fund will be issued by the insurer
named in the related
Prospectus Supplement (the "Special Hazard Insurer"). Each
Special Hazard Insurance
Policy, subject to limitations described below and in the related
Prospectus Supplement, if
any, will protect the related Certificateholders from Special
Hazard Losses which are (i)
losses due to direct physical damage to a Mortgaged Property
other than any loss of a type
covered by a hazard insurance policy or a flood insurance policy,
if applicable, and (ii)
losses from partial damage caused by reason of the application of
the co-insurance clauses
contained in hazard insurance policies. See "Insurance Policies
on Mortgage Loans or
Contracts." A Special Hazard Insurance Policy will not cover
losses occasioned by war,
civil insurrection, certain governmental actions, errors in
design, faulty workmanship or
materials (except under certain circumstances), nuclear reaction,
chemical contamination
or waste by the Mortgagor. Aggregate claims under a Special
Hazard Insurance Policy will
be limited to the amount set forth in the related Pooling and
Servicing Agreement and will
be subject to reduction as set forth in such related Pooling and
Servicing Agreement. A
Special Hazard Insurance Policy will provide that no claim may be
paid unless hazard and,
if applicable, flood insurance on the property securing the
Mortgage Loan or Contract has
been kept in force and other protection and preservation expenses
have been paid by the
Master Servicer or Servicer.

Subject to the foregoing limitations, a Special Hazard
Insurance Policy will provide
that, where there has been damage to property securing a
foreclosed Mortgage Loan (title
to which has been acquired by the insured) and to the extent such
damage is not covered by
the hazard insurance policy or flood insurance policy, if any,
maintained by the Mortgagor
or the Master Servicer, Servicer or Sub-Servicer, the insurer
will pay the lesser of (i) the
cost of repair or replacement of such property or (ii) upon
transfer of the property to the
insurer, the unpaid principal balance of such Mortgage Loan or
Contract at the time of
acquisition of such property by foreclosure or deed in lieu of
foreclosure, plus accrued
interest at the Mortgage Rate to the date of claim settlement and
certain expenses incurred
by the Master Servicer, Servicer or Sub-Servicer with respect to
such property. If the
property is transferred to a third party in a sale approved by
the Special Hazard Insurer, the
amount that the Special Hazard Insurer will pay will be the
amount under (ii) above reduced
by the net proceeds of the sale of the property. If the unpaid
principal balance plus accrued
interest and certain expenses is paid by the Special Hazard
Insurer, the amount of further
coverage under the related Special Hazard Insurance Policy will
be reduced by such amount
less any net proceeds from the sale of the property. Any amount
paid as the cost of repair
of the property will further reduce coverage by such amount.
Restoration of the property
with the proceeds described under (i) above will satisfy the
condition under each Mortgage
Pool Insurance Policy or Contract Pool Insurance Policy that the
property be restored before
a claim under such policy may be validly presented with respect
to the defaulted Mortgage
Loan or Contract secured by such property. The payment described
under (ii) above will
render presentation of a claim in respect of such Mortgage Loan
or Contract under the
related Mortgage Pool Insurance Policy or Contract Pool Insurance
Policy unnecessary.
Therefore, so long as a Mortgage Pool Insurance Policy or
Contract Pool Insurance Policy
remains in effect, the payment by the insurer under a Special
Hazard Insurance Policy of the
cost of repair or of the unpaid principal balance of the related
Mortgage Loan or contract
plus accrued interest and certain expenses will not affect the
total Insurance Proceeds paid
to Certificateholders, but will affect the relative amounts of
coverage remaining under the
related Special Hazard Insurance Policy and Mortgage Pool
Insurance Policy or Contract
Pool Insurance Policy.

To the extent set forth in the related Prospectus Supplement,
coverage in respect of
Special Hazard Losses for a series of Certificates may be
provided, in whole or in part, by
a type of special hazard coverage other than a Special Hazard
Insurance Policy or by means
of a representation of the Company or Residential Funding.

Bankruptcy Bonds

In the event of a personal bankruptcy of a Mortgagor, a
bankruptcy court may
establish the value of the Mortgaged Property of such Mortgagor
at an amount less than the
then outstanding principal balance of the first and junior liens
or Contract secured by such
Mortgaged Property (such difference, a "Deficient Valuation").
The amount of the secured
debt could then be reduced to such value and, thus, the holder of
a Mortgage Loan or
Contract would become an unsecured creditor to the extent the
outstanding principal balance
of such Mortgage Loan (together with any senior mortgage loan,
with respect to a Junior
Mortgage Loan) or Contract exceeds the value assigned to the
Mortgaged Property by the
bankruptcy court. In addition, certain other modifications of the
terms of a Mortgage Loan
or Contract can result from a bankruptcy proceeding, including a
reduction in the amount
of the Monthly Payment on the related Mortgage Loan (a "Debt
Service Reduction"). See
"Certain Legal Aspects of Mortgage Loans and Contracts Mortgage
Loans Anti-Deficiency Legislation and Other Limitations on
Lenders." Any Bankruptcy Bond to
provide coverage for Bankruptcy Losses resulting from proceedings
under the federal
Bankruptcy Code obtained for a Trust Fund will be issued by an
insurer named in the related
Prospectus Supplement. The level of coverage under each
Bankruptcy Bond will be set forth
in the related Prospectus Supplement.

Reserve Funds

If so specified in the related Prospectus Supplement, the
Company will deposit or
cause to be deposited in an account (a "Reserve Fund") any
combination of cash or
Permitted Investments in specified amounts, or any other
instrument satisfactory to the
Rating Agency or Agencies, which will be applied and maintained
in the manner and under
the conditions specified in such Prospectus Supplement. In the
alternative or in addition to
such deposit, to the extent described in the related Prospectus
Supplement, a Reserve Fund
may be funded through application of all or a portion of amounts
otherwise payable on any
related Subordinate Certificates, from the Spread or otherwise.
To the extent that the
funding of the Reserve Fund is dependent on amounts otherwise
payable on related
Subordinate Certificates, Spread or other cash flows attributable
to the related Mortgage
Loans or on reinvestment income, the Reserve Fund may provide
less coverage than initially
expected if the cash flows or reinvestment income on which such
funding is dependent are
lower than anticipated. With respect to any series of
Certificates as to which credit
enhancement includes a Letter of Credit, if so specified in the
related Prospectus
Supplement, under certain circumstances the remaining amount of
the Letter of Credit may
be drawn by the Trustee and deposited in a Reserve Fund. Amounts
in a Reserve Fund may
be distributed to Certificateholders, or applied to reimburse the
Master Servicer or Servicer
for outstanding Advances, or may be used for other purposes, in
the manner and to the
extent specified in the related Prospectus Supplement. Unless
otherwise specified in the
related Prospectus Supplement, any such Reserve Fund will not be
deemed to be part of the
related Trust Fund. A Reserve Fund may provide coverage to more
than one series of
Certificates, if set forth in the related Prospectus Supplement.

Unless otherwise specified in the related Prospectus
Supplement, the Trustee will
have a perfected security interest for the benefit of the
Certificateholders in the assets in the
Reserve Fund. However, to the extent that the Company, any
affiliate thereof or any other
entity has an interest in any Reserve Fund, in the event of the
bankruptcy, receivership or
insolvency of such entity, there could be delays in withdrawals
from the Reserve Fund and
the corresponding payments to the Certificateholders. Such delays
could adversely affect
the yield to investors on the related Certificates.

Amounts deposited in any Reserve Fund for a series will be
invested in Permitted
Investments by, or at the direction of, and for the benefit of a
Servicer, the Master Servicer,
the Certificate Administrator or any other person named in the
related Prospectus
Supplement.

Certificate Insurance Policies

If so specified in the related Prospectus Supplement, the
Company may obtain one
or more certificate insurance policies (each, a "Certificate
Insurance Policy"), issued by
insurers acceptable to the Rating Agency or Agencies rating the
Certificates offered
pursuant to such Prospectus Supplement, insuring the holders of
one or more classes of
Certificates the payment of amounts due in accordance with the
terms of such class or
classes of Certificates. Any Certificate Insurance Policy will
have the characteristics
described in and will be subject to such limitations and
exceptions as set forth in the related
Prospectus Supplement.

Surety Bonds

If so specified in the related Prospectus Supplement, the
Company may obtain one
or more surety bonds (each, a "Surety Bond"), issued by insurers
acceptable to the Rating
Agency or Agencies rating the Certificates offered pursuant to
such Prospectus Supplement,
insuring the holders of one or more classes of Certificates the
payment of amounts due in
accordance with the terms of such class or classes of
Certificates. Any surety bond will have
the characteristics described in and will be subject to such
limitations and exceptions as set
forth in the related Prospectus Supplement.

Maintenance of Credit Enhancement

If credit enhancement has been obtained for a series of
Certificates, the Master
Servicer, the Servicer or the Certificate Administrator will be
obligated to exercise its best
reasonable efforts to keep or cause to be kept such credit
enhancement in full force and
effect throughout the term of the applicable Pooling and
Servicing Agreement or Trust
Agreement, unless coverage thereunder has been exhausted through
payment of claims or
otherwise, or substitution therefor is made as described below
under " Reduction or
Substitution of Credit Enhancement." The Master Servicer, the
Servicer or the Certificate
Administrator, as applicable, on behalf of itself, the Trustee
and Certificateholders, will be
required to provide information required for the Trustee to draw
under any applicable credit
enhancement.

Unless otherwise specified in the related Prospectus
Supplement, the Master
Servicer, the Servicer or the Certificate Administrator will
agree to pay the premiums for
each Mortgage Pool Insurance Policy, Contract Pool Insurance
Policy, Special Hazard
Insurance Policy, Bankruptcy Bond, Certificate Insurance Policy
or Surety Bond, as
applicable, on a timely basis. In the event the related insurer
ceases to be a "Qualified
Insurer" because it ceases to be qualified under applicable law
to transact such insurance
business or coverage is terminated for any reason other than
exhaustion of such coverage,
the Master Servicer, the Servicer or the Certificate
Administrator will use its best reasonable
efforts to obtain from another Qualified Insurer a comparable
replacement insurance policy
or bond with a total coverage equal to the then outstanding
coverage of such policy or bond.
If the cost of the replacement policy is greater than the cost of
such policy or bond, the
coverage of the replacement policy or bond will, unless otherwise
agreed to by the
Company, be reduced to a level such that its premium rate does
not exceed the premium rate
on the original insurance policy. In the event that the Pool
Insurer ceases to be a Qualified
Insurer because it ceases to be approved as an insurer by Freddie
Mac, Fannie Mae or any
successor entity, the Master Servicer, the Servicer or the
Certificate Administrator, as
applicable, will review, not less often than monthly, the
financial condition of the Pool
Insurer with a view toward determining whether recoveries under
the Mortgage Pool
Insurance Policy or Contract Pool Insurance Policy are
jeopardized for reasons related to
the financial condition of the Pool Insurer. If the Master
Servicer, the Servicer or the
Certificate Administrator determines that recoveries are so
jeopardized, it will exercise its
best reasonable efforts to obtain from another Qualified Insurer
a replacement insurance
policy as described above, subject to the same cost limit. Any
losses in market value of the
Certificates associated with any reduction or withdrawal in
rating by an applicable Rating
Agency shall be borne by the Certificateholders.

If any property securing a defaulted Mortgage Loan or
Contract is damaged and
proceeds, if any, from the related hazard insurance policy or any
applicable Special Hazard
Insurance Policy are insufficient to restore the damaged property
to a condition sufficient
to permit recovery under any Letter of Credit, Mortgage Pool
Insurance Policy, Contract
Pool Insurance Policy or any related Primary Insurance Policy,
the Master Servicer or the
Servicer, as applicable, is not required to expend its own funds
to restore the damaged
property unless it determines (i) that such restoration will
increase the proceeds to one or
more classes of Certificateholders on liquidation of the Mortgage
Loan after reimbursement
of the Master Servicer or the Servicer, as applicable, for its
expenses and (ii) that such
expenses will be recoverable by it through Liquidation Proceeds
or Insurance Proceeds. If
recovery under any Letter of Credit, Mortgage Pool Insurance
Policy, Contract Pool
Insurance Policy, other credit enhancement or any related Primary
Insurance Policy is not
available because the Master Servicer or the Servicer, as
applicable, has been unable to
make the above determinations, has made such determinations
incorrectly or recovery is not
available for any other reason, the Master Servicer or the
Servicer, as applicable, is
nevertheless obligated to follow such normal practices and
procedures (subject to the
preceding sentence) as it deems necessary or advisable to realize
upon the defaulted
Mortgage Loan and in the event such determination has been
incorrectly made, is entitled
to reimbursement of its expenses in connection with such
restoration.

Reduction or Substitution of Credit Enhancement

Unless otherwise specified in the Prospectus Supplement, the
amount of credit
support provided with respect to any series of Certificates may
be reduced under certain
specified circumstances. In most cases, the amount available as
credit support will be
subject to periodic reduction on a non-discretionary basis in
accordance with a schedule or
formula set forth in the related Pooling and Servicing Agreement
or Trust Agreement.
Additionally, in most cases, such credit support may be replaced,
reduced or terminated, and
the formula used in calculating the amount of coverage with
respect to Bankruptcy Losses,
Special Hazard Losses or Fraud Losses may be changed, without the
consent of the
Certificateholders, upon the written assurance from each
applicable Rating Agency that the
then-current rating of the related series of Certificates will
not be adversely affected thereby.
Furthermore, in the event that the credit rating of any obligor
under any applicable credit
enhancement is downgraded, the credit rating of each class of the
related Certificates may
be downgraded to a corresponding level, and, unless otherwise
specified in the related
Prospectus Supplement, the Master Servicer, the Servicer or the
Certificate Administrator,
as applicable, will not be obligated to obtain replacement credit
support in order to restore
the rating of the Certificates. The Master Servicer, the Servicer
or the Certificate
Administrator, as applicable, will also be permitted to replace
such credit support with other
credit enhancement instruments issued by obligors whose credit
ratings are equivalent to
such downgraded level and in lower amounts which would satisfy
such downgraded level,
provided that the then-current rating of each class of the
related series of Certificates is
maintained. Where the credit support is in the form of a Reserve
Fund, a permitted reduction
in the amount of credit enhancement will result in a release of
all or a portion of the assets
in the Reserve Fund to the Company, the Master Servicer or such
other person that is
entitled thereto. Any assets so released will not be available
for distributions in future
periods.

INSURANCE POLICIES ON MORTGAGE LOANS OR CONTRACTS

Each Mortgage Loan or Contract will be required to be covered
by a hazard
insurance policy (as described below) and, in certain cases, a
Primary Insurance Policy. In
addition, FHA Loans and VA Loans will be covered by the
government mortgage insurance
programs described below. The descriptions of any insurance
policies set forth in this
Prospectus or any Prospectus Supplement and the coverage
thereunder do not purport to be
complete and are qualified in their entirety by reference to such
forms of policies.

Primary Mortgage Insurance Policies

Unless otherwise specified in the related Prospectus
Supplement, (i) each Mortgage
Loan having a Loan-to-Value Ratio at origination of over 80% will
be covered by a primary
mortgage guaranty insurance policy (a "Primary Insurance Policy")
insuring against default
on such Mortgage Loan as to at least the principal amount thereof
exceeding 75% of the
Appraised Value of the Mortgaged Property at origination of the
Mortgage Loan, unless and
until the principal balance of the Mortgage Loan is reduced to a
level that would produce
a Loan-to-Value Ratio equal to or less than 80%, and (ii) the
Company or the related
Mortgage Collateral Seller will represent and warrant that, to
the best of such entity's
knowledge, such Mortgage Loans are so covered. Unless otherwise
specified in the
Prospectus Supplement, the Company will have the ability to
cancel any Primary Insurance
Policy if the Loan-to-Value Ratio of the Mortgage Loan is reduced
below 80% (or a lesser
specified percentage) based on an appraisal of the Mortgaged
Property after the related
Closing Date or as a result of principal payments that reduce the
principal balance of the
Mortgage Loan after such Closing Date. Mortgage Loans which are
subject to negative
amortization will only be covered by a Primary Insurance Policy
if such coverage was so
required upon their origination, notwithstanding that subsequent
negative amortization may
cause such Mortgage Loan's Loan-to-Value Ratio (based on the
then-current balance) to
subsequently exceed the limits which would have required such
coverage upon their
origination. Junior Mortgage Loans generally will not be required
by the Company to be
covered by a primary mortgage guaranty insurance policy insuring
against default on such
Mortgage Loan.

While the terms and conditions of the Primary Insurance
Policies issued by one
primary mortgage guaranty insurer (a "Primary Insurer") will
differ from those in Primary
Insurance Policies issued by other Primary Insurers, each Primary
Insurance Policy
generally will pay either: (i) the insured percentage of the loss
on the related Mortgaged
Property; (ii) the entire amount of such loss, after receipt by
the Primary Insurer of good and
merchantable title to, and possession of, the Mortgaged Property;
or (iii) at the option of the
Primary Insurer under certain Primary Insurance Policies, the sum
of the delinquent monthly
payments plus any advances made by the insured, both to the date
of the claim payment and,
thereafter, monthly payments in the amount that would have become
due under the
Mortgage Loan if it had not been discharged plus any advances
made by the insured until
the earlier of (a) the date the Mortgage Loan would have been
discharged in full if the
default had not occurred or (b) an approved sale. The amount of
the loss as calculated under
a Primary Insurance Policy covering a Mortgage Loan will
generally consist of the unpaid
principal amount of such Mortgage Loan and accrued and unpaid
interest thereon and
reimbursement of certain expenses, less (i) rents or other
payments received by the insured
(other than the proceeds of hazard insurance) that are derived
from the related Mortgaged
Property, (ii) hazard insurance proceeds received by the insured
in excess of the amount
required to restore such Mortgaged Property and which have not
been applied to the
payment of the Mortgage Loan, (iii) amounts expended but not
approved by the Primary
Insurer, (iv) claim payments previously made on such Mortgage
Loan and (v) unpaid
premiums and certain other amounts.

As conditions precedent to the filing or payment of a claim
under a Primary
Insurance Policy, in the event of default by the Mortgagor, the
insured will typically be
required, among other things, to: (i) advance or discharge (a)
hazard insurance premiums
and (b) as necessary and approved in advance by the Primary
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 Insurance Policy
(ordinary wear and tear excepted); and (iii) tender to the
Primary Insurer good and
merchantable title to, and possession of, the Mortgaged Property.

The Pooling and Servicing Agreement for a series generally
will require that the
Master Servicer or Servicer maintain, or cause to be maintained,
coverage under a Primary
Insurance Policy to the extent such coverage was in place on the
Cut-off Date. In the event
that the Company gains knowledge that, as of the Closing Date, a
Mortgage Loan had a
Loan-to-Value Ratio at origination in excess of 80% and was not
the subject of a Primary
Insurance Policy (and was not included in any exception to such
standard disclosed in the
related Prospectus Supplement) and that such Mortgage Loan has a
then current Loan-to-Value Ratio in excess of 80%, then the
Master Servicer or the Servicer is required to use its
reasonable efforts to obtain and maintain a Primary Insurance
Policy to the extent that such
a policy is obtainable at a reasonable price.

Any primary mortgage insurance or primary credit insurance
policies relating to
Contracts will be described in the related Prospectus Supplement.

Standard Hazard Insurance on Mortgaged Properties

The terms of the Mortgage Loans require each Mortgagor to
maintain a hazard
insurance policy covering the related Mortgaged Property and
providing for coverage at
least equal to that of the standard form of fire insurance policy
with extended coverage
customary in the state in which the property is located. Such
coverage generally will be in
an amount equal to the lesser of (i) the principal balance of
such Mortgage Loan and, in the
case of Junior Mortgage Loans, the principal balance of any
senior mortgage loans, or (ii)
100% of the insurable value of the improvements securing the
Mortgage Loan. The Pooling
and Servicing Agreement will provide that the Master Servicer or
Servicer shall cause such
hazard policies to be maintained or shall obtain a blanket policy
insuring against losses on
the Mortgage Loans. The ability of the Master Servicer or
Servicer to ensure that hazard
insurance proceeds are appropriately applied may be dependent on
its being named as an
additional insured under any hazard insurance policy and under
any flood insurance policy
referred to below, or upon the extent to which information in
this regard is furnished to the
Master Servicer or the Servicer by Mortgagors or Sub-Servicers.
If Junior Mortgage Loans
are included within any Trust Fund, investors should also
consider the application of hazard
insurance proceeds discussed herein under "Certain Legal Aspects
of the Mortgage Loans
and Contracts The Mortgage Loans Junior Mortgages, Rights of
Senior Mortgages."

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, hail, riot, strike and civil commotion, subject
to the conditions and
exclusions specified in each policy. The policies relating to the
Mortgage Loans will be
underwritten by different insurers under different state laws in
accordance with different
applicable state forms and therefore will not contain identical
terms and conditions, the
basic terms thereof are dictated by respective state laws. Such
policies typically do 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 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. Where the
improvements securing a Mortgage Loan are located in a federally
designated flood area at
the time of origination of such Mortgage Loan, the Pooling and
Servicing Agreement
generally requires the Master Servicer or Servicer to cause to be
maintained for each such
Mortgage Loan serviced, flood insurance (to the extent available)
in an amount equal in
general to the lesser of the amount required to compensate for
any loss or damage on a
replacement cost basis or the maximum insurance available under
the federal flood
insurance program.

Since the amount of hazard insurance that Mortgagors are
required to maintain on
the improvements securing the Mortgage Loans may decline as the
principal balances owing
thereon decrease, and since residential properties have
historically appreciated in value over
time, hazard insurance proceeds could be insufficient to restore
fully the damaged property
in the event of a partial loss. See "Subordination" above for a
description of when
subordination is provided, the protection (limited to the Special
Hazard Amount as
described in the related Prospectus Supplement) afforded by such
subordination, and
"Description of Credit Enhancement Special Hazard Insurance
Policies" for a description
of the limited protection afforded by any Special Hazard
Insurance Policy against losses
occasioned by hazards which are otherwise uninsured against.

Standard Hazard Insurance on Manufactured Homes

The terms of the Pooling and Servicing Agreement will require
the Servicer or the
Master Servicer, as applicable, to cause to be maintained with
respect to each Contract one
or more Standard Hazard Insurance Policies which provide, at a
minimum, the same
coverage as a standard form fire and extended coverage insurance
policy that is customary
for manufactured housing, issued by a company authorized to issue
such policies in the state
in which the Manufactured Home is located, and in an amount which
is not less than the
maximum insurable value of such Manufactured Home or the
principal balance due from
the Mortgagor on the related Contract, whichever is less. Such
coverage may be provided
by one or more blanket insurance policies covering losses on the
Contracts resulting from
the absence or insufficiency of individual Standard Hazard
Insurance Policies. If a
Manufactured Home's location was, at the time of origination of
the related Contract, within
a federally designated flood area, the Servicer or the Master
Servicer also will be required
to maintain flood insurance.

If the Servicer or the Master Servicer repossesses a
Manufactured Home on behalf
of the Trustee, the Servicer or the Master Servicer will either
(i) maintain at its expense
hazard insurance with respect to such Manufactured Home or (ii)
indemnify the Trustee
against any damage to such Manufactured Home prior to resale or
other disposition.

FHA Mortgage Insurance

The Housing Act authorizes various FHA mortgage insurance
programs. Some of
the Mortgage Loans may be insured under either Section 203(b),
Section 234 or Section 235
of the Housing Act. Under Section 203(b), FHA insures mortgage
loans of up to 30 years'
duration for the purchase of one- to four-family dwelling units.
Mortgage Loans for the
purchase of condominium units are insured by FHA under Section
234. Loans insured under
these programs must bear interest at a rate not exceeding the
maximum rate in effect at the
time the loan is made, as established by HUD, and may not exceed
specified percentages
of the lesser of the appraised value of the property and the
sales price, less seller paid
closing costs for the property, up to certain specified maximums.
In addition, FHA imposes
initial investment minimums and other requirements on mortgage
loans insured under the
Section 203(b) and Section 234 programs.

Under Section 235, assistance payments are paid by HUD to the
mortgagee on
behalf of eligible mortgagors for as long as the mortgagors
continue to be eligible for the
payments. To be eligible, a mortgagor must be part of a family,
have income within the
limits prescribed by HUD at the time of initial occupancy, occupy
the property and meet
requirements for recertification at least annually.

The regulations governing these programs provide that
insurance benefits are
payable either (i) upon foreclosure (or other acquisition of
possession) and conveyance of
the mortgaged premises to HUD or (ii) upon assignment of the
defaulted mortgage loan to
HUD. The FHA insurance that may be provided under these programs
upon the conveyance
of the home to HUD is equal to 100% of the outstanding principal
balance of the mortgage
loan, plus accrued interest, as described below, and certain
additional costs and expenses.
When entitlement to insurance benefits results from assignment of
the mortgage loan to
HUD, the insurance payment is computed as of the date of the
assignment and includes the
unpaid principal amount of the mortgage loan plus mortgage
interest accrued and unpaid
to the assignment date.

When entitlement to insurance benefits results from
foreclosure (or other acquisition
of possession) and conveyance, the insurance payment is equal to
the unpaid principal
amount of the mortgage loan, adjusted to reimburse the mortgagee
for certain tax, insurance
and similar payments made by it and to deduct certain amounts
received or retained by the
mortgagee after default, plus reimbursement not to exceed
two-thirds of the mortgagee's
foreclosure costs. Any FHA insurance relating to Contracts
underlying a series of
Certificates will be described in the related Prospectus
Supplement.

VA Mortgage Guaranty

The Servicemen's Readjustment Act of 1944, as amended,
permits a veteran (or, in
certain instances, his or her spouse) to obtain a mortgage loan
guaranty by the VA covering
mortgage financing of the purchase of a one- to four-family
dwelling unit to be occupied
as the veteran's home at an interest rate not exceeding the
maximum rate in effect at the time
the loan is made, as established by HUD. The program has no limit
on the amount of a
mortgage loan, requires no down payment from the purchaser and
permits the guaranty of
mortgage loans with terms, limited by the estimated economic life
of the property, up to 30
years. The maximum guaranty that may be issued by the VA under
this program is 50% of
the original principal amount of the mortgage loan up to a
certain dollar limit established
by the VA. The liability on the guaranty is reduced or increased
pro rata with any reduction
or increase in the amount of indebtedness, but in no event will
the amount payable on the
guaranty exceed the amount of the original guaranty.
Notwithstanding the dollar and
percentage limitations of the guaranty, a mortgagee will
ordinarily suffer a monetary loss
only when the difference between the unsatisfied indebtedness and
the proceeds of a
foreclosure sale of mortgaged premises is greater than the
original guaranty as adjusted. The
VA may, at its option, and without regard to the guaranty, make
full payment to a mortgagee
of the unsatisfied indebtedness on a mortgage upon its assignment
to the VA.

Since there is no limit imposed by the VA on the principal
amount of a VA-guaranteed mortgage loan but there is a limit on
the amount of the VA guaranty, additional
coverage under a Primary Mortgage Insurance Policy may be
required by the Company for
VA loans in excess of certain amounts. The amount of any such
additional coverage will be
set forth in the related Prospectus Supplement. Any VA guaranty
relating to Contracts
underlying a series of Certificates will be described in the
related Prospectus Supplement.

THE COMPANY

The Company is an indirect wholly-owned subsidiary of GMAC
Mortgage which
is a wholly-owned subsidiary of General Motors Acceptance
Corporation. The Company
was incorporated in the State of Delaware in November 1994. The
Company was organized
for the purpose of acquiring mortgage loans and contracts and
issuing securities backed by
such mortgage loans or contracts. The Company anticipates that it
will in many cases have
acquired Mortgage Loans indirectly through Residential Funding,
which is also an indirect
wholly-owned subsidiary of GMAC Mortgage. The Company does not
have, nor is it
expected in the future to have, any significant assets.

The Certificates do not represent an interest in or an
obligation of the Company. The
Company's only obligations with respect to a series of
Certificates will be pursuant to
certain limited representations and warranties made by the
Company or as otherwise
provided in the related Prospectus Supplement.

The Company maintains its principal office at 8400 Normandale
Lake Boulevard,
Suite 700, Minneapolis, Minnesota 55437. Its telephone number is
(612) 832-7000.

RESIDENTIAL FUNDING CORPORATION

Unless otherwise specified in the related Prospectus
Supplement, Residential
Funding, an affiliate of the Company, will act as the Master
Servicer or Certificate
Administrator for each series of Certificates.

Residential Funding buys conventional mortgage loans under
several loan purchase
programs from mortgage loan originators or sellers nationwide
that meet its seller/servicer
eligibility requirements and services mortgage loans for its own
account and for others.
Residential Funding's principal executive offices are located at
8400 Normandale Lake
Boulevard, Suite 700, Minneapolis, Minnesota 55437. Its telephone
number is (612) 832-7000. Residential Funding conducts operations
from its headquarters in Minneapolis and
from offices located in California, Connecticut, Florida,
Georgia, Rhode Island and
Washington, D.C. At September 30, 1995, Residential Funding was
master servicing a
mortgage loan portfolio of approximately $25.256 billion.

THE POOLING AND SERVICING AGREEMENT

As described above under "Description of the Certificates
General," each series
of Certificates will be issued pursuant to a Pooling and
Servicing Agreement or, if the Trust
Fund for a series of Certificates contains Agency Securities, a
Trust Agreement. The
discussion below covers Pooling and Servicing Agreements, but its
terms are also generally
applicable to Trust Agreements. The following summaries describe
certain additional
provisions common to each Pooling and Servicing Agreement and are
qualified entirely by
reference to the actual terms of the Pooling and Servicing
Agreement for a series of
Certificates.

Servicing and Administration

The Pooling and Servicing Agreement for a series of
Certificates will set forth the
party responsible for performing servicing functions for such
series which may be the
Master Servicer or one or more Servicers. If there is more than
one Servicer and there is no
Master Servicer, a Certificate Administrator may be party to the
Pooling and Servicing
Agreement. The Certificate Administrator will not be responsible
for servicing Mortgage
Loans or Contracts and instead will perform certain specified
administrative and reporting
functions with regard to the Trust Fund. In addition, if the
Trust Fund for a series of
Certificates contains Agency Securities, generally the
Certificate Administrator will perform
collection, administrative and reporting functions pursuant to a
Trust Agreement and no
Master Servicer or Servicer will be appointed for such series.

The Master Servicer or any Servicer for a series of
Certificates generally will
perform the functions set forth under "Description of the
Certificates Servicing and
Administration of Mortgage Collateral" above.

Events of Default

Events of Default under the Pooling and Servicing Agreement
in respect of a series
of Certificates, unless otherwise specified in the Prospectus
Supplement, will include: (i)
in the case of a Trust Fund including Mortgage Loans or
Contracts, any failure by the
Certificate Administrator, the Master Servicer or a Servicer (if
such Servicer is a party to
the Pooling and Servicing Agreement) to make a required deposit
to the Certificate Account
or, if the Certificate Administrator or the Master Servicer is
the Paying Agent, to distribute
to the holders of any class of Certificates of such series any
required payment which
continues unremedied for five days after the giving of written
notice of such failure to the
Master Servicer or the Certificate Administrator, as applicable,
by the Trustee or the
Company, or to the Master Servicer, the Certificate
Administrator, the Company and the
Trustee by the holders of Certificates of such class evidencing
not less than 25% of the
aggregate Percentage Interests constituting such class; (ii) any
failure by the Master Servicer
or the Certificate Administrator, as applicable, duly to observe
or perform in any material
respect any other of its covenants or agreements in the Pooling
and Servicing Agreement
with respect to such series of Certificates which continues
unremedied for 30 days (15 days
in the case of a failure to pay the premium for any insurance
policy which is required to be
maintained under the Pooling and Servicing Agreement) after the
giving of written notice
of such failure to the Master Servicer or the Certificate
Administrator, as applicable, by the
Trustee or the Company, or to the Master Servicer, the
Certificate Administrator, the
Company and the Trustee by the holders of any class of
Certificates of such series
evidencing not less than 25% (33% in the case of a Trust Fund
including Agency Securities)
of the aggregate Percentage Interests constituting such class;
and (iii) certain events of
insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings
regarding the Master Servicer or the Certificate Administrator,
as applicable, and certain
actions by the Master Servicer or the Certificate Administrator
indicating its insolvency or
inability to pay its obligations. A default pursuant to the terms
of any Agency Securities
included in any Trust Fund will not constitute an Event of
Default under the related Pooling
and Servicing Agreement.

Rights Upon Event of Default

So long as an Event of Default remains unremedied, either the
Company or the
Trustee may, and, at the direction of the holders of Certificates
evidencing not less than 51%
of the aggregate voting rights in the related Trust Fund, the
Trustee shall, by written
notification to the Master Servicer or the Certificate
Administrator, as applicable, and to the
Company or the Trustee, terminate all of the rights and
obligations of the Master Servicer
or the Certificate Administrator under the Pooling and Servicing
Agreement (other than any
rights of the Master Servicer or the Certificate Administrator as
Certificateholder) covering
such Trust Fund and in and to the Mortgage Collateral and the
proceeds thereof, whereupon
the Trustee or, upon notice to the Company and with the Company's
consent, its designee
will succeed to all responsibilities, duties and liabilities of
the Master Servicer or the
Certificate Administrator under such Pooling and Servicing
Agreement (other than the
obligation to purchase Mortgage Collateral under certain
circumstances) and will be entitled
to similar compensation arrangements. In the event that the
Trustee would be obligated to
succeed the Master Servicer but is unwilling so to act, it may
appoint (or if it is unable so
to act, it shall appoint) or petition a court of competent
jurisdiction for the appointment of,
a Fannie Mae or Freddie Mac approved mortgage servicing
institution with a net worth of
at least $10,000,000 to act as successor to the Master Servicer
under the Pooling and
Servicing Agreement (unless otherwise set forth in the Pooling
and Servicing Agreement).
Pending such appointment, the Trustee is obligated to act in such
capacity. The Trustee and
such successor may agree upon the servicing compensation to be
paid, which in no event
may be greater than the compensation to the initial Master
Servicer or the Certificate
Administrator under the Pooling and Servicing Agreement.

No Certificateholder will have any right under a Pooling and
Servicing Agreement
to institute any proceeding with respect to such Pooling and
Servicing Agreement unless
such holder previously has given to the Trustee written notice of
default and the continuance
thereof and unless the holders of Certificates of any class
evidencing not less than 25% of
the aggregate Percentage Interests constituting such class 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 after receipt of such
request and indemnity has neglected or refused to institute any
such proceeding. However,
the Trustee will be under no obligation to exercise any of the
trusts or powers vested in it
by the Pooling and Servicing Agreement or to institute, conduct
or defend any litigation
thereunder or in relation thereto at the request, order or
direction of any of the holders of
Certificates covered by such Pooling and Servicing Agreement,
unless such
Certificateholders have offered to the Trustee reasonable
security or indemnity against the
costs, expenses and liabilities which may be incurred therein or
thereby.

Amendment

Each Pooling and Servicing Agreement may be amended by the
Company, the
Master Servicer, the Certificate Administrator or any Servicer,
as applicable, and the
Trustee, without the consent of the related Certificateholders:
(i) to cure any ambiguity; (ii)
to correct or supplement any provision therein which may be
inconsistent with any other
provision therein or to correct any error; (iii) to change the
timing and/or nature of deposits
in the Custodial Account or the Certificate Account or to change
the name in which the
Custodial Account is maintained (except that (a) deposits to the
Certificate Account may
not occur later than the related Distribution Date, (b) such
change may not adversely affect
in any material respect the interests of any Certificateholder,
as evidenced by an opinion of
counsel, and (c) such change may not adversely affect the
then-current rating of any rated
classes of Certificates, as evidenced by a letter from each
applicable Rating Agency); (iv)
if a REMIC election has been made with respect to the related
Trust Fund, to modify,
eliminate or add to any of its provisions (a) to the extent
necessary to maintain the
qualification of the Trust Fund as a REMIC or to avoid or
minimize the risk of imposition
of any tax on the related Trust Fund, provided that the Trustee
has received an opinion of
counsel to the effect that (1) such action is necessary or
desirable to maintain such
qualification or to avoid or minimize such risk and (2) such
action will not adversely affect
in any material respect the interests of any related
Certificateholder or (b) to restrict the
transfer of the REMIC Residual Certificates, provided that the
Company has determined
that such change would not adversely affect the applicable
ratings of any classes of the
Certificates, as evidenced by a letter from each applicable
Rating Agency, and that any such
amendment will not give rise to any tax with respect to the
transfer of the REMIC Residual
Certificates to a non-permitted transferee; or (v) to make any
other provisions with respect
to matters or questions arising under such Pooling and Servicing
Agreement which are not
materially inconsistent with the provisions thereof, so long as
such action will not adversely
affect in any material respect the interests of any
Certificateholder.

The Pooling and Servicing Agreement may also be amended by
the Company, the
Master Servicer, the Certificate Administrator or any Servicer,
as applicable, and the
Trustee with the consent of the holders of Certificates of each
class affected thereby
evidencing, in each case, not less than 66% of the aggregate
Percentage Interests
constituting such class 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 related
Certificateholders, except that no such
amendment may (i) reduce in any manner the amount of, or delay
the timing of, payments
received on Mortgage Collateral which are required to be
distributed on a Certificate of any
class without the consent of the holder of such Certificate or
(ii) reduce the percentage of
Certificates of any class the holders of which are required to
consent to any such
amendment unless the holders of all Certificates of such class
have consented to the change
in such percentage.

Notwithstanding the foregoing, if a REMIC election has been
made with respect to
the related Trust Fund, the Trustee will not be entitled to
consent to any amendment to a
Pooling and Servicing Agreement without having first received an
opinion of counsel to the
effect that such amendment or the exercise of any power granted
to the Master Servicer, the
Certificate Administrator, any Servicer, the Company or the
Trustee in accordance with
such amendment will not result in the imposition of a tax on the
related Trust Fund or cause
such Trust Fund to fail to qualify as a REMIC.

Termination; Retirement of Certificates

The obligations created by the Pooling and Servicing
Agreement for each series of
Certificates (other than certain limited payment and notice
obligations of the Trustee and
the Company, respectively) will terminate upon the payment to the
related
Certificateholders of all amounts held in the Certificate Account
or by the Master Servicer
or any Servicer and required to be paid to Certificateholders
following the earlier of (i) the
final payment or other liquidation or disposition (or any advance
with respect thereto) of the
last item of Mortgage Collateral subject thereto and all property
acquired upon foreclosure
or deed in lieu of foreclosure of any Mortgage Loan or Contract
and (ii) the purchase by the
Master Servicer, the Certificate Administrator, a Servicer or the
Company or, if specified
in the related Prospectus Supplement, by the holder of the REMIC
Residual Certificates (see
"Certain Federal Income Tax Consequences" below) from the Trust
Fund for such series of
all remaining Mortgage Collateral and all property acquired in
respect of such Mortgage
Collateral. In addition to the foregoing, the Master Servicer,
the Certificate Administrator
or the Company may have the option to purchase, in whole but not
in part, the Certificates
specified in the related Prospectus Supplement in the manner set
forth in the related
Prospectus Supplement. Upon the purchase of such Certificates or
at any time thereafter,
at the option of the Master Servicer, the Certificate
Administrator or the Company, the
Mortgage Collateral may be sold, thereby effecting a retirement
of the Certificates and the
termination of the Trust Fund, or the Certificates so purchased
may be held or resold by the
Master Servicer, the Certificate Administrator or the Company.
Written notice of
termination of the Pooling and Servicing Agreement will be given
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 Trustee
which will be specified in the
notice of termination. If the Certificateholders are permitted to
terminate the trust under the
applicable Pooling and Servicing Agreement, a penalty may be
imposed upon the
Certificateholders based upon the fee that would be foregone by
the Master Servicer, the
Certificate Administrator or a Servicer, as applicable, because
of such termination.

Any such purchase of Mortgage Collateral and property
acquired in respect of
Mortgage Collateral evidenced by a series of Certificates shall
be made at the option of the
Master Servicer, the Certificate Administrator, a Servicer, the
Company or, if applicable,
the holder of the REMIC Residual Certificates at the price
specified in the related
Prospectus Supplement. The exercise of such right will effect
early retirement of the
Certificates of that series, but the right of any such entity to
purchase the Mortgage
Collateral and related property will be subject to the criteria,
and will be at the price, set
forth in the related Prospectus Supplement. Such early
termination may adversely affect the
yield to holders of certain classes of such Certificates. If a
REMIC election has been made,
the termination of the related Trust Fund will be effected in a
manner consistent with
applicable federal income tax regulations and its status as a
REMIC.

The Trustee

The Trustee under each Pooling and Servicing Agreement will
be named in the
related Prospectus Supplement. The commercial bank or trust
company serving as Trustee
may have normal banking relationships with the Company and/or its
affiliates, including
Residential Funding.

The Trustee may resign at any time, in which event the
Company will be obligated
to appoint a successor trustee. The Company may also remove the
Trustee if the Trustee
ceases to be eligible to continue as such under the Pooling and
Servicing Agreement or if
the Trustee becomes insolvent. Upon becoming aware of such
circumstances, the Company
will be 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 aggregate voting
rights in the related Trust Fund. Any resignation or removal of
the Trustee and appointment
of a successor Trustee will not become effective until acceptance
of the appointment by the
successor Trustee.

YIELD CONSIDERATIONS

The yield to maturity of a Certificate will depend on the
price paid by the holder for
such Certificate, the Pass-Through Rate on any such Certificate
entitled to payments of
interest (which Pass-Through Rate may vary if so specified in the
related Prospectus
Supplement) and the rate and timing of principal payments
(including prepayments,
defaults, liquidations and repurchases) on the Mortgage
Collateral and the allocation thereof
to reduce the principal balance of such Certificate (or notional
amount thereof, if
applicable).

The rate of defaults on the Mortgage Loans or Contracts will
affect the rate and
timing of principal prepayments on such Mortgage Collateral and,
thus, the yield on the
Certificates. Defaults on the Mortgage Loans or Contracts may
lead to Realized Losses upon
foreclosure and liquidation. To the extent Realized Losses are
not covered by any credit
enhancement, they will be allocated to Certificates as described
in the related Prospectus
Supplement and, accordingly, will affect the yield on such
Certificates. In general, defaults
on mortgage loans or manufactured housing contracts are expected
to occur with greater
frequency in their early years. The rate of default on refinance,
limited documentation or no
documentation mortgage loans, and on mortgage loans or
manufactured housing contracts
with high Loan-to-Value Ratios or Combined Loan-to-Value Ratios,
as applicable, may be
higher than for other types of mortgage loans or manufactured
housing contracts. See "Risk
Factors Risks Associated with the Mortgage Collateral." Likewise,
the rate of default on
mortgage loans or manufactured housing contracts that have been
originated pursuant to
lower than traditional underwriting standards may be higher than
those originated pursuant
to traditional standards. A Trust Fund may include Mortgage Loans
or Contracts that are one
month or more delinquent at the time of offering of the related
series of Certificates. In
addition, the rate and timing of prepayments, defaults and
liquidations on the Mortgage
Loans or Contracts will be affected by the general economic
condition of the region of the
country or the locality in which the related Mortgaged Properties
are located. The risk of
delinquencies and loss is greater and prepayments are less likely
in regions where a weak
or deteriorating economy exists, as may be evidenced by, among
other factors, increasing
unemployment or falling property values. In addition,
Manufactured Homes may decline
in value even in areas where real estate values generally have
not declined. Each Prospectus
Supplement will highlight any material characteristics of the
Mortgage Collateral in the
related Trust Fund that may make such Mortgage Collateral more
susceptible to default.

To the extent that any document relating to a Mortgage Loan
or Contract is not in
the possession of the Trustee, such deficiency may make it
difficult or impossible to realize
on the Mortgaged Property in the event of foreclosure which will
affect the amount of
Liquidation Proceeds received by the Trustee. See "Description of
the
Certificates Assignment of Mortgage Loans" and " Assignment of
Contracts."

The amount of interest payments with respect to each item of
Mortgage Collateral
distributed (or accrued in the case of Deferred Interest or
Accrual Certificates) monthly to
holders of a class of Certificates entitled to payments of
interest will be calculated on the
basis of such class's specified percentage of each such payment
of interest (or accrual in the
case of Accrual Certificates) and will be expressed as a fixed,
adjustable or variable Pass-Through Rate payable on the
outstanding principal balance or notional amount of such
Certificate, or any combination of such Pass-Through Rates,
calculated as described herein
and in the related Prospectus Supplement. See "Description of the
Certificates Distributions." Holders of Strip Certificates or a
class of Certificates having
a Pass-Through Rate that varies based on the weighted average
interest rate of the
underlying Mortgage Collateral will be affected by
disproportionate prepayments and
repurchases of Mortgage Collateral having higher net interest
rates or higher rates
applicable to the Strip Certificates, as applicable.

The effective yield to maturity to each holder of
Certificates entitled to payments
of interest will be below that otherwise produced by the
applicable Pass-Through Rate and
purchase price of such Certificate because, while interest will
accrue on each Mortgage
Loan or Contract from the first day of each month, the
distribution of such interest will be
made on the 25th day (or, if such day is not a business day, the
next succeeding business
day) of the month following the month of accrual or, in the case
of a Trust Fund including
Agency Certificates, such other day that is specified in the
related Prospectus Supplement.

A class of Certificates may be entitled to payments of
interest at a fixed, variable
or adjustable Pass-Through Rate, or any combination of such
Pass-Through Rates, as
specified in the related Prospectus Supplement. A variable
Pass-Through Rate may be
calculated based on the weighted average of the Mortgage Rates
(net of Servicing Fees and
any Certificate Administrator fee or Spread (each, a "Net
Mortgage Rate")) of the related
Mortgage Collateral for the month preceding the Distribution
Date, by reference to an index
or otherwise. The aggregate payments of interest on a class of
Certificates, and the yield to
maturity thereon, will be affected by the rate of payment of
principal on the Certificates (or
the rate of reduction in the notional amount of Certificates
entitled to payments of interest
only) and, in the case of Certificates evidencing interests in
ARM Loans, by changes in the
Net Mortgage Rates on the ARM Loans. See "Maturity and Prepayment
Considerations"
below. The yield on the Certificates will also be affected by
liquidations of Mortgage Loans
or Contracts following Mortgagor defaults and by purchases of
Mortgage Collateral in the
event of breaches of representations made in respect of such
Mortgage Collateral by the
Company, the Master Servicer and others, or conversions of ARM
Loans to a fixed interest
rate. See "The Trust Funds Representations with Respect to
Mortgage Collateral."

In general, if a Certificate is purchased at a premium over
its face amount and
payments of principal on the related Mortgage Collateral occur at
a rate faster than
anticipated at the time of purchase, the purchaser's actual yield
to maturity will be lower
than that assumed at the time of purchase. Conversely, if a class
of Certificates is purchased
at a discount from its face amount and payments of principal on
the related Mortgage
Collateral occur at a rate slower than that assumed at the time
of purchase, the purchaser's
actual yield to maturity will be lower than that originally
anticipated. If Strip Certificates
are issued evidencing a right to payments of interest only or
disproportionate payments of
interest, a faster than expected rate of principal prepayments on
the Mortgage Collateral will
negatively affect the total return to investors in any such
Certificates. If Strip Certificates
are issued evidencing a right to payments of principal only or
disproportionate payments of
principal, a slower than expected rate of principal payments on
the Mortgage Collateral
could negatively affect the anticipated yield on such Strip
Certificates. If Certificates with
either of the foregoing characteristics are issued, the total
return to investors of such
Certificates will be extremely sensitive to such prepayments. In
addition, the total return to
investors of Certificates evidencing a right to distributions of
interest at a rate that is based
on the weighted average Net Mortgage Rate of the Mortgage
Collateral from time to time
will be adversely affected by principal prepayments on Mortgage
Collateral with Mortgage
Rates higher than the weighted average Mortgage Rate on the
Mortgage Collateral. In
general, mortgage loans or manufactured housing contracts with
higher Mortgage Rates
prepay at a faster rate than mortgage loans or manufactured
housing contracts with lower
Mortgage Rates. The yield on a class of Strip Certificates that
is entitled to receive a portion
of principal or interest from each item of Mortgage Collateral in
a Trust Fund will be
affected by any losses on the Mortgage Collateral because of the
affect on timing and
amount of payments. In certain circumstances, rapid prepayments
may result in the failure
of such holders to recoup their original investment. In addition,
the yield to maturity on
certain other types of classes of Certificates, including Accrual
Certificates, Certificates
with a Pass-Through Rate that fluctuates inversely with or at a
multiple of an index or
certain other classes in a series including more than one class
of Certificates, may be
relatively more sensitive to the rate of prepayment on the
related Mortgage Collateral than
other classes of Certificates.

The timing of changes in the rate of principal payments on or
repurchases of the
Mortgage Collateral may significantly affect an investor's actual
yield to maturity, even if
the average rate of principal payments experienced over time is
consistent with an investor's
expectation. In general, the earlier a prepayment of principal on
the Mortgage Collateral or
a repurchase thereof, the greater will be the effect on an
investor's yield to maturity. As a
result, the effect on an investor's yield of principal payments
and repurchases occurring at
a rate higher (or lower) than the rate anticipated by the
investor during the period
immediately following the issuance of a series of Certificates
would not be fully offset by
a subsequent like reduction (or increase) in the rate of
principal payments.

Unless otherwise specified in the related Prospectus
Supplement, prepayments in
full or final liquidations will reduce the amount of interest
distributed in the following
month to holders of Certificates entitled to distributions of
interest because the resulting
Prepayment Interest Shortfall will not be covered by Compensating
Interest. See
"Description of the Certificates Prepayment Interest Shortfalls."
Unless otherwise
specified in the related Prospectus Supplement, a partial
prepayment of principal is applied
so as to reduce the outstanding principal balance of the related
Mortgage Loan or Contract
as of the first day of the month in which such partial prepayment
is received. As a result,
unless otherwise specified in the related Prospectus Supplement,
the effect of a partial
prepayment on a Mortgage Loan or Contract will be to reduce the
amount of interest
distributed to holders of Certificates in the month following the
receipt of such partial
prepayment by an amount equal to one month's interest at the
applicable Pass-Through Rate
or Net Mortgage Rate, as the case may be, on the prepaid amount.
See "Description of the
Certificates Prepayment Interest Shortfalls." Neither full or
partial principal prepayments
nor Liquidation Proceeds will be distributed until the
Distribution Date in the month
following receipt. See "Maturity and Prepayment Considerations."

With respect to certain ARM Loans, the Mortgage Rate at
origination may be below
the rate that would result from the sum of the then-applicable
Index and Gross Margin.
Under the applicable underwriting standards, the Mortgagor under
each Mortgage Loan or
Contract generally will be qualified on the basis of the Mortgage
Rate in effect at
origination and not the higher rate that would be produced by the
sum of the Index and
Gross Margin. The repayment of any such Mortgage Loan or Contract
may thus be
dependent on the ability of the Mortgagor to make larger level
monthly payments following
the adjustment of the Mortgage Rate. In addition, the periodic
increase in the amount paid
by the Mortgagor of a Buy-Down Loan during or at the end of the
applicable Buy-Down
Period may create a greater financial burden for the Mortgagor,
who might not have
otherwise qualified for a mortgage under the applicable
underwriting guidelines, and may
accordingly increase the risk of default with respect to the
related Mortgage Loan.

For any Junior Mortgage Loans, the inability of the Mortgagor
to pay off the
balance thereof may affect the ability of the Mortgagor to obtain
refinancing of any related
senior mortgage loan, thereby preventing a potential improvement
in the Mortgagor's
circumstances. Furthermore, if so specified in the related
Prospectus Supplement, under the
applicable Pooling and Servicing Agreement the Master Servicer
may be restricted or
prohibited from consenting to any refinancing of any related
senior mortgage loan, which
in turn could adversely affect the Mortgagor's circumstances or
result in a prepayment or
default under the corresponding Junior Mortgage Loan.

If so specified in the related Prospectus Supplement, a Trust
Fund may contain Neg-Am ARM Loans with fluctuating Mortgage Rates
that adjust more frequently than the
monthly payment with respect to such Mortgage Loans or Contracts.
During a period of
rising interest rates as well as immediately after origination,
the amount of interest accruing
on the principal balance of such Mortgage Loans may exceed the
amount of the minimum
scheduled monthly payment thereon. As a result, a portion of the
accrued interest on Neg-Am ARM Loans may become Deferred Interest
which will be added to the principal balance
thereof and will bear interest at the applicable Mortgage Rate.
The addition of any such
Deferred Interest to the principal balance of any related class
of Certificates will lengthen
the weighted average life thereof and may adversely affect yield
to holders thereof. In
addition, with respect to certain Neg-Am ARM Loans, during a
period of declining interest
rates, it might be expected that each minimum scheduled monthly
payment on such a
Mortgage Loan would exceed the amount of scheduled principal and
accrued interest on the
principal balance thereof, and since such excess will be applied
to reduce the principal
balance of the related class or classes of Certificates, the
weighted average life of such
Certificates will be reduced and may adversely affect yield to
holders thereof.

If so specified in the related Prospectus Supplement, a Trust
Fund may contain
GPM Loans or Buy-Down Loans which have monthly payments that
increase during the
first few years following origination. Mortgagors generally will
be qualified for such loans
on the basis of the initial monthly payment. To the extent that
the related Mortgagor's
income does not increase at the same rate as the monthly payment,
such a loan may be more
likely to default than a mortgage loan with level monthly
payments.

If so specified in the related Prospectus Supplement, a Trust
Fund may contain
Balloon Loans which require a single payment of a Balloon Amount.
The payment of
Balloon Amounts may result in a lower yield on Certificates than
would be the case if all
such Mortgage Collateral was fully-amortizing because the
maturity of a Balloon Loan
occurs earlier than that for a fully-amortizing Mortgage Loan due
to the payment of a
Balloon Amount. Balloon Loans also pose a greater risk of default
than fully-amortizing
Mortgage Loans because Mortgagors are required to pay the Balloon
Amount upon
maturity. A Mortgagor's ability to pay a Balloon Amount may
depend on its ability to
refinance the related Mortgaged Property.

If credit enhancement for a series of Certificates is
provided by a Letter of Credit,
insurance policy or bond that is issued or guaranteed by an
entity that suffers financial
difficulty, such credit enhancement may not provide the level of
support that was anticipated
at the time an investor purchased its Certificate. In the event
of a default under the terms of
such a Letter of Credit, insurance policy or bond, any Realized
Losses on the Mortgage
Collateral not covered by such credit enhancement will be applied
to a series of Certificates
in the manner described in the related Prospectus Supplement and
may reduce an investor's
anticipated yield to maturity.

The related Prospectus Supplement may set forth other factors
concerning the
Mortgage Collateral securing a series of Certificates or the
structure of such series that will
affect the yield on such Certificates.

MATURITY AND PREPAYMENT CONSIDERATIONS

As indicated above under "The Trust Funds," the original
terms to maturity of the
Mortgage Collateral in a given Trust Fund will vary depending
upon the type of Mortgage
Collateral included in such Trust Fund. The Prospectus Supplement
for a series of
Certificates will contain information with respect to the types
and maturities of the
Mortgage Collateral in the related Trust Fund. The prepayment
experience, the timing and
rate of repurchases and the timing and amount of liquidations
with respect to the related
Mortgage Loans or Contracts will affect the life and yield of the
related series of
Certificates.

Prepayments on mortgage loans and manufactured housing
contracts are commonly
measured relative to a prepayment standard or model. The
Prospectus Supplement for each
series of Certificates may describe one or more such prepayment
standards or models and
may contain tables setting forth the projected yields to maturity
on each class of Certificates
or the weighted average life of each class of Certificates and
the percentage of the original
principal amount of each class of Certificates of such series
that would be outstanding on
specified payment dates for such series based on the assumptions
stated in such Prospectus
Supplement, including assumptions that prepayments on the
Mortgage Collateral are made
at rates corresponding to various percentages of the prepayment
standard or model specified
in the related Prospectus Supplement.

There is no assurance that prepayment of the Mortgage
Collateral 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
factors, including homeowner
mobility, economic conditions, changes in mortgagors' housing
needs, job transfers,
unemployment, mortgagors' net equity in the properties securing
the mortgages, servicing
decisions, enforceability of due-on-sale clauses, mortgage market
interest rates, mortgage
recording taxes, solicitations and the availability of mortgage
funds, may affect prepayment
experience. The rate of prepayment with respect to conventional
fixed-rate mortgage loans
and contracts has fluctuated significantly in recent years. In
general, however, if prevailing
interest rates fall significantly below the Mortgage Rates on the
Mortgage Loans or
Contracts underlying a series of Certificates, the prepayment
rate of such Mortgage Loans
or Contracts is 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 certain series
may evidence an interest in Mortgage Loans or Contracts with
different Mortgage Rates.
Accordingly, the prepayment experience of these Certificates will
to some extent be a
function of the range of interest rates of such Mortgage Loans or
Contracts.

Generally, junior mortgage loans are not viewed by Mortgagors
as permanent
financing. Accordingly, Junior Mortgage Loans may experience a
higher rate of
prepayment than typical first lien mortgage loans.

Unless otherwise specified in the related Prospectus
Supplement, all of the
Mortgage Loans or Contracts may be prepaid without penalty in
full or in part at any time.
The terms of the related Pooling and Servicing Agreement
generally will require the
Servicer or Master Servicer, as the case may be, to enforce any
due-on-sale clause to the
extent it has knowledge of the conveyance or the proposed
conveyance of the underlying
Mortgaged Property and to the extent permitted by applicable law,
except that any
enforcement action that would impair or threaten to impair any
recovery under any related
insurance policy will not be required or permitted. See
"Description of the
Certificates Servicing and Administration of Mortgage Collateral
Enforcement of 'Due-on-Sale' Clauses" and "Certain Legal Aspects
of Mortgage Loans and Contracts The
Mortgage Loans Enforceability of Certain Provisions" and " The
Contracts" for a
description of certain provisions of each Pooling and Servicing
Agreement and certain legal
aspects that may affect the prepayment rate of Mortgage Loans or
Contracts.

Certain types of Mortgage Collateral included in a Trust Fund
may have
characteristics that make it more likely to default than
collateral provided for mortgage
pass-through certificates from other mortgage purchase programs.
The Company anticipates
including "limited documentation" and "no documentation" Mortgage
Loans and Contracts,
as well as Mortgage Loans and Contracts that were originated in
accordance with lower
underwriting standards and which may have been made to Mortgagors
with imperfect credit
histories and prior bankruptcies. Likewise, a Trust Fund may
include Mortgage Loans or
Contracts that are one month or more delinquent at the time of
offering of the related series
of Certificates. Such Mortgage Collateral may be susceptible to a
greater risk of default and
liquidation than might otherwise be expected by investors in the
related Certificates.

The Master Servicer, a Servicer, a Sub-Servicer or a Mortgage
Collateral Seller may
refinance a Mortgage Loan or Contract in a Trust Fund by
accepting full prepayment thereof
and making a new loan secured by a mortgage on the same property.
A Mortgagor may be
legally entitled to require the Master Servicer, Servicer,
Sub-Servicer or Mortgage
Collateral Seller, as applicable, to allow such refinancing. Any
such refinancing will have
the same effect on the Certificateholders as a prepayment in full
of the refinanced Mortgage
Loan or Contract, thereby affecting the yield to
Certificateholders.

There are no uniform statistics compiled for prepayments of
contracts relating to
Manufactured Homes. Prepayments on manufactured housing contracts
may be influenced
by a variety of economic, geographic, social and other facts,
including repossessions, aging,
seasonality and interest rate fluctuations. Other factors
affecting prepayment of
manufactured housing contracts include changes in housing needs,
job transfers,
unemployment and servicing decisions. An investment in
Certificates evidencing interests
in Contracts may be affected by, among other things, a downturn
in regional or local
economic conditions. These regional or local economic conditions
are often volatile, and
historically have affected the delinquency, loan loss and
repossession experience of the
Contracts. To the extent that losses on the Contracts are not
covered by any credit
enhancement, holders of the Certificates of a series evidencing
interests in such Contracts
will bear all risk of loss resulting from default by Mortgagors
and will have to look
primarily to the value of the Manufactured Homes, which generally
depreciate in value, for
recovery of the outstanding principal and unpaid interest of the
defaulted Contracts. See
"The Trust Funds The Contracts."

While most manufactured housing contracts will contain
"due-on-sale" provisions
permitting the holder of the contract to accelerate the maturity
of the contract upon
conveyance by the Mortgagor, the Master Servicer, Servicer or
Sub-Servicer, as applicable,
may permit proposed assumptions of contracts where the proposed
buyer of the
Manufactured Home meets the underwriting standards described
above. Such assumption
would have the effect of extending the average life of the
contract. FHA Loans, FHA
Contracts, VA Loans and VA Contracts are not permitted to contain
"due-on-sale" clauses,
and are freely assumable.

Although the Mortgage Rates on ARM Loans will be subject to
periodic
adjustments, such adjustments generally will (i) not increase or
decrease such Mortgage
Rates by more than a fixed percentage amount on each adjustment
date, (ii) not increase
such Mortgage Rates over a fixed percentage amount during the
life of any ARM Loan and
(iii) be based on an index (which may not rise and fall
consistently with mortgage interest
rates) plus the related Gross Margin (which may be different from
margins being used at the
time for newly originated adjustable rate mortgage loans). As a
result, the Mortgage Rates
on the ARM Loans in a Trust Fund at any time may not equal the
prevailing rates for
similar, newly originated adjustable rate mortgage loans. In
certain rate environments, the
prevailing rates on fixed-rate mortgage loans may be sufficiently
low in relation to the then-current Mortgage Rates on ARM Loans
that the rate of prepayment may increase as a result
of refinancings. There can be no certainty as to the rate of
prepayments on the Mortgage
Collateral during any period or over the life of any series of
Certificates.

With respect to Balloon Loans, payment of the Balloon Amount
(which, based on
the amortization schedule of such Mortgage Loans, is expected to
be a substantial amount)
will generally depend on the Mortgagor's ability to obtain
refinancing of such a Mortgage
Loan or to sell the Mortgaged Property prior to the maturity of
the Balloon Loan. The ability
to obtain refinancing will depend on a number of factors
prevailing at the time refinancing
or sale is required, including, without limitation, real estate
values, the Mortgagor's financial
situation, prevailing mortgage loan interest rates, the
Mortgagor's equity in the related
Mortgaged Property, tax laws and prevailing general economic
conditions. Unless otherwise
specified in the related Prospectus Supplement, none of the
Company, the Master Servicer,
a Servicer, a Sub-Servicer, a Mortgage Collateral Seller nor any
of their affiliates will be
obligated to refinance or repurchase any Mortgage Loan or to sell
the Mortgaged Property.

An ARM Loan is assumable under certain conditions if the
proposed transferee of
the related Mortgaged Property establishes its ability to repay
the Mortgage Loan and, in
the reasonable judgment of the Master Servicer or the related
Sub-Servicer, the security for
the ARM Loan would not be impaired by the assumption. The extent
to which ARM Loans
are assumed by purchasers of the Mortgaged Properties rather than
prepaid by the related
Mortgagors in connection with the sales of the Mortgaged
Properties will affect the
weighted average life of the related series of Certificates. See
"Description of the
Certificates" and "Certain Legal Aspects of Mortgage Loans and
Contracts."

No assurance can be given that the value of the Mortgaged
Property securing a
Mortgage Loan or Contract has remained or will remain at the
level existing on the date of
origination. If the residential real estate market should
experience an overall decline in
property values such that the outstanding balances of the
Mortgage Loans or Contracts and
any secondary financing on the Mortgaged Properties in a
particular Mortgage Pool or
Contract 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, the value of property
securing Cooperative Loans and the delinquency rates with respect
to Cooperative Loans
could be adversely affected if the current favorable tax
treatment of cooperative tenant
stockholders were to become less favorable. See "Certain Legal
Aspects of Mortgage Loans
and Contracts."

To the extent that losses resulting from delinquencies,
losses and foreclosures or
repossession of Mortgaged Property with respect to Mortgage Loans
or Contracts included
in a Trust Fund for a series of Certificates are not covered by
the methods of credit
enhancement described herein under "Description of Credit
Enhancement" or in the related
Prospectus Supplement, such losses will be borne by holders of
the Certificates of such
series. Even where credit enhancement covers all Realized Losses
resulting from
delinquency and foreclosure or repossession, the effect of
foreclosures and repossessions
may be to increase prepayment experience on the Mortgage
Collateral, thus reducing
average weighted life and affecting yield to maturity. See "Yield
Considerations."

Under certain circumstances, the Master Servicer, a Servicer,
the Company or, if
specified in the related Prospectus Supplement, the holders of
the REMIC Residual
Certificates may have the option to purchase the Mortgage Loans
in a Trust Fund. See "The
Pooling and Servicing Agreement Termination; Retirement of
Certificates." Any such
repurchase will shorten the weighted average lives of the related
Certificates.

CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS AND CONTRACTS

The following discussion contains summaries of certain legal
aspects of mortgage
loans and manufactured housing contracts that are general in
nature. Because such legal
aspects are governed in part by state law (which laws may differ
substantially from state to
state), the summaries do not purport to be complete, to reflect
the laws of any particular
state or to encompass the laws of all states in which the
Mortgaged Properties may be
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 (other than Cooperative Loans) will be
secured by deeds of
trust, mortgages or deeds to secure debt, depending upon the
prevailing practice in the state
in which the related Mortgaged Property is located. In some
states, a mortgage, deed of trust
or deed to secure debt creates a lien upon the real property
encumbered by the mortgage. In
other states, the mortgage, deed of trust or deed to secure debt
conveys legal title to the
property to the mortgagee subject to a condition subsequent
(i.e., the payment of the
indebtedness secured thereby). It is not prior to the lien for
real estate taxes and assessments
and other charges imposed under governmental police powers.
Priority with respect to such
instruments depends on their terms and in some cases on the terms
of separate subordination
or inter-creditor agreements, and generally on the order of
recordation of the mortgage in
the appropriate recording office. There are two parties to a
mortgage, the mortgagor, who
is the borrower and homeowner, and the mortgagee, who is the
lender. Under the mortgage
instrument, the mortgagor delivers to the mortgagee a note or
bond and the mortgage. In the
case of a land trust, there are three parties because title to
the property is held by a land
trustee under a land trust agreement of which the borrower is the
beneficiary; at origination
of a mortgage loan, the borrower executes a separate undertaking
to make payments on the
mortgage note. Although a deed of trust is similar to a mortgage,
a deed of trust has three
parties: the trustor, who is the borrower/homeowner; the
beneficiary, who is the lender; and
a third-party grantee called the trustee. Under a deed of trust,
the borrower grants the
property, irrevocably until the debt is paid, in trust, generally
with a power of sale, to the
trustee to secure payment of the obligation. A deed to secure
debt typically has two parties,
pursuant to which the borrower, or grantor, conveys title to the
real property to the grantee,
or lender, generally with a power of sale, until such time as the
debt is repaid. The trustee's
authority under a deed of trust and the mortgagee's authority
under a mortgage or a deed to
secure debt are governed by the law of the state in which the
real property is located, the
express provisions of the deed of trust, mortgage or deed to
secure debt and, in certain deed
of trust transactions, the directions of the beneficiary.

Cooperative Loans

If specified in the Prospectus Supplement relating to a
series of Certificates, the
Mortgage Loans may include Cooperative Loans. Each debt
instrument (a "Cooperative
Note") evidencing a Cooperative Loan will be secured by a
security interest in shares issued
by a related cooperative housing corporation, which is a private
corporation entitled to be
treated as a housing cooperative under federal tax law, and in
the related proprietary lease
or occupancy agreement granting exclusive rights to occupy a
specific dwelling unit in the
cooperative's building. The security agreement will create a lien
upon, or grant a security
interest in, the cooperative shares and proprietary leases or
occupancy agreements, the
priority of which will depend on the terms of the particular
security agreement as well as
the order of recordation of the agreement (or the filing of the
financing statements related
thereto) in the appropriate recording office or the taking of
possession of the cooperative
shares, depending on the law of the state in which the
cooperative is located. Such a lien
or security interest is not, in general, prior to liens in favor
of the cooperative corporation
for unpaid assessments or common charges.

Unless otherwise specified in the related Prospectus
Supplement, all cooperative
apartments relating to the Cooperative Loans are located in the
State of New York. Each
cooperative owns in fee or has a leasehold interest in all the
real property and owns in fee
or leases the building and all separate dwelling units therein.
The cooperative is directly
responsible for property management and, in most cases, payment
of real estate taxes, other
governmental impositions and hazard and liability insurance. If
there is a blanket mortgage
(or mortgages) on the cooperative apartment building or
underlying land, as is generally the
case, or an underlying lease of the land, as is the case in some
instances, the cooperative
housing corporation, as property mortgagor or lessee, as the case
may be, is also responsible
for fulfilling such mortgage or rental obligations. A blanket
mortgage is ordinarily incurred
by the cooperative in connection with either the construction or
purchase of the
cooperative's apartment building or the obtaining of capital by
the cooperative. The interest
of the occupant under proprietary leases or occupancy agreements
as to which that
cooperative is the landlord is generally subordinate to the
interest of the holder of a blanket
mortgage and to the interest of the holder of a land lease. If
the cooperative is unable to
meet the payment obligations (i) arising under a blanket
mortgage, the mortgagee holding
a blanket mortgage could foreclose on that mortgage and terminate
all subordinate
proprietary leases and occupancy agreements or (ii) arising under
its land lease, the holder
of the landlord's interest under the land lease could terminate
it and all subordinate
proprietary leases and occupancy agreements. In addition, a
blanket mortgage on a
cooperative may provide financing in the form of a mortgage that
does not fully amortize,
with a significant portion of principal being due in one final
payment at maturity. The
inability of the cooperative to refinance a mortgage and its
consequent inability to make
such final payment could lead to foreclosure by the mortgagee.
Similarly, a land lease has
an expiration date and the inability of the cooperative to extend
its term or, in the
alternative, to purchase the land, could lead to termination of
the cooperative's interest in
the property and termination of all proprietary leases and
occupancy agreements. In either
event, a foreclosure by the holder of a blanket mortgage or the
termination of the underlying
lease could eliminate or significantly diminish the value of any
collateral held by the lender
who financed the purchase by an individual tenant-stockholder of
cooperative shares or, in
the case of the Mortgage Loans, the collateral securing the
Cooperative Loans.

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

Foreclosure on Mortgage Loans

Although a deed of trust or a deed to secure debt may also be
foreclosed by judicial
action, foreclosure of a deed of trust or a deed to secure debt
is generally accomplished by
a non-judicial trustee's sale under a specific provision in the
deed of trust which authorizes
the trustee or lender, as applicable, to sell the property upon
any default by the borrower
under the terms of the note or deed of trust or a deed to secure
debt. In addition to any notice
requirements contained in a deed of trust, 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 notice of default and notice of sale. In
addition, in some states, the
trustee or lender, as applicable, must provide notice 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 a specified period, a notice of sale
must be posted in a public place
and, in most states, published for a specific period of time in
one or more newspapers. In
addition, some states' 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 real
property.

Foreclosure of a mortgage generally is accomplished by
judicial action. Generally,
the action is initiated by the service of legal pleadings upon
all parties having an interest of
record in the real property. Delays in completion of the
foreclosure may occasionally result
from difficulties in locating necessary parties. If the
mortgagee's right to foreclose is
contested, the legal proceedings necessary to resolve the issue
can be time-consuming.

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, in such states, the
borrower, or any other person having a junior encumbrance on the
real estate, may, during
a reinstatement period, cure the default by paying the entire
amount in arrears plus the costs
and expenses incurred in enforcing the obligation.

In the case of foreclosure under a mortgage, a deed of trust
or deed to secure debt,
the sale by the referee 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 a foreclosure sale. Rather, it is common for the
lender to purchase the property
from the trustee or referee for a credit bid less than or equal
to the unpaid principal amount
of the mortgage, deed of trust or deed to secure debt, accrued
and unpaid interest and the
expense of foreclosure. Generally, state law controls the amount
of foreclosure costs and
expenses, including attorneys' fees, which may be recovered by a
lender. 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. Generally, the lender will obtain the services
of a real estate broker and pay
the broker's commission in connection with the sale of the
property. Depending upon market
conditions, the ultimate proceeds of the sale of the property may
not equal the lender's
investment in the property and, in some states, the lender may be
entitled to a deficiency
judgment. In some cases, a deficiency judgment may be pursued in
lieu of foreclosure. Any
loss may be reduced by the receipt of any mortgage insurance
proceeds or other forms of
credit enhancement for a series of Certificates. See "Description
of Credit Enhancement."

A junior mortgagee may not foreclose on the property securing
a Junior Mortgage
Loan unless it forecloses subject to the senior mortgages, in
which case it must either pay
the entire amount due on the senior mortgages to the senior
mortgagees prior to or at the
time of the foreclosure sale or undertake the obligation to make
payments on the senior
mortgages in the event the mortgagor is in default thereunder, in
either event adding the
amounts expended to the balance due on the junior loan, and may
be subrogated to the rights
of the senior mortgagees. In addition, in the event that the
foreclosure by a junior
mortgagee triggers the enforcement of a "due-on-sale" clause in a
senior mortgage, the
junior mortgagee may be required to pay the full amount of the
senior mortgages to the
senior mortgagees (to avoid a default with respect thereto).
Accordingly, with respect to
such Junior Mortgage Loans, if the junior lender purchases the
property, the lender's title
will be subject to all senior liens and claims and certain
governmental liens. The proceeds
received by the referee or trustee from the sale are applied
first to the costs, fees and
expenses of sale and then in satisfaction of the indebtedness
secured by the mortgage or
deed of trust under which the sale was conducted. Any remaining
proceeds are generally
payable to the holders of junior mortgages or deeds of trust and
other liens and claims in
order of their priority, whether or not the borrower is in
default. Any additional proceeds
are generally payable to the mortgagor or trustor. The payment
of the proceeds to the
holders of junior mortgages may occur in the foreclosure action
of the senior mortgagee or
may require the institution of separate legal proceedings. See
"Risk Factors Risks
Associated with the Mortgage Collateral" and "Description of the
Certificates Realization
Upon Defaulted Property" herein.

Foreclosure on Shares of Cooperatives

The cooperative shares owned by the tenant-stockholder,
together with the rights
of the tenant-stockholder under the proprietary lease or
occupancy agreement, are pledged
to the lender and 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 in the proprietary lease or
occupancy agreement. The proprietary lease or occupancy
agreement, even while pledged,
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. Generally, rent and
other obligations and charges arising under a proprietary lease
or occupancy agreement
which are owed to the cooperative are made liens upon the shares
to which the proprietary
lease or occupancy agreement relates. In addition, the
proprietary lease or occupancy
agreement generally permits the cooperative to terminate such
lease or agreement in the
event the borrower defaults in the performance of covenants
thereunder. Typically, the
lender and the cooperative enter into a recognition agreement
which, together with any
lender protection provisions contained in the proprietary lease,
establishes the rights and
obligations of both parties in the event of a default by the
tenant-stockholder on its
obligations under the proprietary lease or occupancy agreement. A
default by the tenant-stockholder under the proprietary lease or
occupancy agreement will usually constitute a
default under the security agreement between the lender and the
tenant-stockholder.

The recognition agreement generally provides that, in the
event that the tenant-stockholder has defaulted under the
proprietary lease or occupancy agreement, the
cooperative will take no action to terminate such lease or
agreement until the lender has
been provided with notice of and 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 or which have
become liens on the shares
relating to the 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 amount realized upon a sale of the
collateral below the
outstanding principal balance of the Cooperative Loan and accrued
and unpaid interest
thereon.

Recognition agreements also generally provide that in the
event the lender succeeds
to the tenant-shareholder's shares and proprietary lease or
occupancy agreement as the result
of realizing upon its collateral for 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 and assigning the proprietary lease. Such
approval or consent is usually
based on the prospective purchaser's income and net worth, among
other factors, and may
significantly reduce the number of potential purchasers, which
could limit the ability of the
lender to sell and realize upon the value of the collateral.
Generally, the lender is not limited
in any rights it may have to dispossess the tenant-stockholder.

The terms of the Cooperative Loans do not require either the
tenant-stockholder or
the cooperative to obtain title insurance of any type.
Consequently, the existence of any
prior liens or other imperfections of title to the building also
may adversely affect the
marketability of the cooperative dwelling unit in the event of
foreclosure.

A foreclosure on the cooperative shares is accomplished by
public 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
sale has been conducted
in a "commercially reasonable" manner will depend on the facts in
each case. In
determining commercial reasonableness, a court will look to the
notice given the debtor and
the method, manner, time, place and terms of the sale and the
sale price. Generally, a sale
conducted according to the usual practice of creditors selling
similar collateral in the same
area will be considered reasonably conducted.

Where the lienholder is the junior lienholder, any
foreclosure may be delayed until
the junior lienholder obtains actual possession of such
cooperative shares . Additionally,
if the lender does not have a first priority perfected security
interest in such cooperative
shares, any foreclosure sale would be subject to the rights and
interests of any creditor
holding senior interests therein. Also, a junior lienholder may
not be able to obtain a
recognition agreement from a cooperative since many cooperatives
do not permit
subordinate financing. Without a recognition agreement, the
junior lienholder will not be
afforded the usual lender protections (i.e., notice of default
and opportunity to cure) from
the cooperative which are generally provided for in recognition
agreements.

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, a
deed to secure debt or
foreclosure of a mortgage, the borrower and foreclosed junior
lienors or other parties are
given a statutory period (generally ranging from six months to
two years) in which to
redeem the property from the foreclosure sale. In some states,
redemption may occur only
upon payment of the entire principal balance of the loan, accrued
interest and expenses of
foreclosure. In other states, redemption may be authorized if the
former borrower pays only
a portion of the sums due. The effect of a statutory right of
redemption is to diminish the
ability of the lender to sell the foreclosed property. The rights
of redemption would defeat
the title of any purchaser subsequent to foreclosure or sale
under a deed of trust or a deed
to secure debt. Consequently, the practical effect of the
redemption right is to force the
lender to maintain the property and pay the expenses of ownership
until the redemption
period has expired.

Anti-Deficiency Legislation and Other Limitations on Lenders

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

In the case of cooperative loans, lenders generally realize
on cooperative shares and
the accompanying proprietary lease or occupancy agreement given
to secure a cooperative
loan under Article 9 of the UCC. Some courts have interpreted
Article 9 to prohibit or limit
a deficiency award in certain circumstances, including
circumstances where the disposition
of the collateral was not conducted in a commercially reasonable
manner.

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

Courts with federal bankruptcy jurisdiction have also
indicated that the terms of a
mortgage loan secured by property of the debtor may be modified.
These courts have
allowed modifications that include reducing the amount of each
monthly payment, changing
the rate of interest, altering the repayment schedule, forgiving
all or a portion of the debt
and reducing the lender's security interest to the value of the
residence, thus leaving the
lender a general unsecured creditor for the difference between
the value of the residence and
the outstanding balance of the loan. Generally, however, the
terms of a mortgage loan
secured only by a mortgage on real property that is the debtor's
principal residence may not
be modified pursuant to a plan confirmed pursuant to Chapter 13
except with respect to
mortgage payment arrearages, which may be cured within a
reasonable time period.

Certain tax liens arising under the Code may, in certain
circumstances, have priority
over the lien of a mortgage, deed to secure debt or deed of
trust. In addition, substantive
requirements are imposed upon mortgage lenders in connection with
the origination and the
servicing of mortgage loans by numerous federal and some state
consumer protection laws.
These laws include the federal Truth-in-Lending Act, Real Estate
Settlement Procedures
Act, Equal Credit Opportunity Act, Fair Credit Billing Act, Fair
Credit Reporting Act and
related statutes. These federal laws impose specific statutory
liabilities upon lenders who
originate 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.

Certain of the Mortgage Loans may be subject to special
rules, disclosure
requirements and other provisions that were added to the federal
Truth-in-Lending Act by
the Homeownership and Equity Protection Act of 1994 (such
Mortgage Loans, "High Cost
Loans"), if such Mortgage Loans were originated on or after
October 1, 1995, are not
mortgage loans made to finance the purchase of the mortgaged
property and have interest
rates or origination costs in excess of certain prescribed
levels. Purchasers or assignees of
any High Cost Loan, including any Trust Fund, could be liable for
all claims and subject to
all defenses arising under such provisions that the borrower
could assert against the
originator thereof. Remedies available to the borrower include
monetary penalties, as well
as recision rights if the appropriate disclosures were not given
as required.

Enforceability of Certain Provisions

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

The Garn-St Germain Act also sets forth nine specific
instances in which a
mortgage lender covered by the Garn-St Germain Act may not
exercise a due-on-sale
clause, notwithstanding the fact that a transfer of the property
may have occurred. These
include intra-family transfers, certain transfers by operation of
law, leases of fewer than
three years and the creation of a junior encumbrance. Regulations
promulgated under the
Garn-St Germain Act also prohibit the imposition of a prepayment
penalty upon the
acceleration of a loan pursuant to a due-on-sale clause.

The inability to enforce a due-on-sale clause may result in a
mortgage loan bearing
an interest rate below the current market rate being assumed by a
new home buyer rather
than being paid off, which may have an impact upon the average
life of the Mortgage Loans
and the number of Mortgage Loans which may be outstanding until
maturity.

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

Applicability of Usury Laws

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

Usury limits apply to junior mortgage loans in many states.
Any applicable usury
limits in effect at origination will be reflected in the maximum
Mortgage Rates on ARM
Loans, which will be set forth in the related Prospectus
Supplement.

Unless otherwise set forth in the related Prospectus
Supplement, each Mortgage
Collateral Seller, or another specified party, will have
represented that each Mortgage Loan
was originated in compliance with then applicable state laws,
including usury laws, in all
material respects. However, the Mortgage Rates on the Mortgage
Loans will be subject to
applicable usury laws as in effect from time to time.

Alternative Mortgage Instruments

Alternative mortgage instruments, including adjustable rate
mortgage loans and
early ownership mortgage loans, originated by non-federally
chartered lenders, have
historically been subjected to a variety of restrictions. Such
restrictions differed from state
to state, resulting in difficulties in determining whether a
particular alternative mortgage
instrument originated by a state-chartered lender was in
compliance with applicable law.
These difficulties were alleviated substantially as a result of
the enactment of Title VIII of
the Garn-St Germain Act ("Title VIII"). Title VIII provides that,
notwithstanding any state
law to the contrary, (i) state-chartered banks may originate
alternative mortgage instruments
in accordance with regulations promulgated by the Comptroller of
the Currency with respect
to the origination of alternative mortgage instruments by
national banks, (ii) state-chartered
credit unions may originate alternative mortgage instruments in
accordance with regulations
promulgated by the National Credit Union Administration with
respect to origination of
alternative mortgage instruments by federal credit unions and
(iii) all other non-federally
chartered housing creditors, including state-chartered savings
and loan associations, state-chartered savings banks and mutual
savings banks and mortgage banking companies, may
originate alternative mortgage instruments in accordance with the
regulations promulgated
by the Federal Home Loan Bank Board, predecessor to the Office of
Thrift Supervision,
with respect to origination of alternative mortgage instruments
by federal savings and loan
associations. Title VIII also provides that any state may reject
applicability of the provisions
of Title VIII by adopting, prior to October 15, 1985, a law or
constitutional provision
expressly rejecting the applicability of such provisions. Certain
states have taken such
action.

Junior Mortgages; Rights of Senior Mortgagees

The Mortgage Loans included in the Trust Fund may be junior
to other mortgages,
deeds to secure debt or deeds of trust held by other lenders.
The rights of the Trust Fund
(and therefore the Certificateholders), as mortgagee under a
junior mortgage, are
subordinate to those of the mortgagee under the senior mortgage,
including the prior rights
of the senior mortgagee to receive hazard insurance and
condemnation proceeds and to
cause the property securing the Mortgage Loan to be sold upon
default of the mortgagor,
which may extinguish the junior mortgagee's lien unless the
junior mortgagee asserts its
subordinate interest in the property in foreclosure litigation
and, in certain cases, either
reinstates or satisfies the defaulted senior loan or loans. A
junior mortgagee may satisfy a
defaulted senior loan in full or, in some states, may cure such
default and bring the senior
loan current thereby reinstating the senior loan, in either event
usually adding the amounts
expended to the balance due on the junior loan. In most states,
absent a provision in the
mortgage, deed to secure debt or deed of trust, no notice of
default is required to be given
to a junior mortgagee. Where applicable law or the terms of the
senior mortgage, deed to
secure debt or deed of trust do not require notice of default to
the junior mortgagee, the lack
of any such notice may prevent the junior mortgagee from
exercising any right to reinstate
the loan which applicable law may provide.

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

Another provision sometimes found in the form of the
mortgage, deed to secure
debt or deed of trust used by institutional lenders obligates the
mortgagor to pay before
delinquency all taxes and assessments on the property and, when
due, all encumbrances,
charges and liens on the property which are prior to the mortgage
or deed of trust, to provide
and maintain fire insurance on the property, to maintain and
repair the property and not to
commit or permit any waste thereof, and to appear in and defend
any action or proceeding
purporting to affect the property or the rights of the mortgagee
under the mortgage. Upon
a failure of the mortgagor to perform any of these obligations,
the mortgagee or beneficiary
is given the right under certain mortgages or deeds of trust to
perform the obligation itself,
at its election, with the mortgagor agreeing to reimburse the
mortgagee for any sums
expended by the mortgagee on behalf of the mortgagor. All sums
so expended by a senior
mortgagee become part of the indebtedness secured by the senior
mortgage. Also, since
most senior mortgages require the related Mortgagor to make
escrow deposits with the
holder of the senior mortgage for all real estate taxes and
insurance premiums, many junior
mortgagees will not collect and retain such escrows and will rely
upon the holder of the
senior mortgage to collect and disburse such escrows.

The Contracts

General

A Contract evidences both (a) the obligation of the Mortgagor
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 below.

Security Interests in Manufactured Homes

The law governing perfection of a security interest in a
Manufactured Homes varies
from state to state. 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 payments 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 lender, the Servicer or the Master 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 Contract is
registered. In the event the Master Servicer, the Servicer or the
lender fails 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 holder of the
security interest must record
a mortgage, deed of trust or deed to secure debt, as applicable,
under the real estate laws of
the state where the manufactured home is located. These filings
must be made in the real
estate records office of the county where the manufactured home
is located. Unless
otherwise provided in the related Prospectus Supplement,
substantially all of the Contracts
will contain provisions prohibiting the Mortgagor from
permanently attaching the
Manufactured Home to its site. So long as the Mortgagor does not
violate this agreement
and a court does not hold that the Manufactured Home is real
property, 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
seller's security interest in the
Manufactured Home. If, however, a Manufactured Home is
permanently attached to its site
or if a court determines that a Manufactured Home is real
property, other parties could
obtain an interest in the Manufactured Home which is prior to the
security interest originally
retained by the Mortgage Collateral Seller and transferred to the
Company. In certain cases,
the Master Servicer or the Servicer, as applicable, may be
required to perfect a security
interest in the Manufactured Home under applicable real estate
laws. If such real estate
recordings are not required and if any of the foregoing events
were to occur, the only
recourse of the Certificateholders would be against the Mortgage
Collateral Seller pursuant
to its repurchase obligation for breach of representations or
warranties.

The Company will assign its security interests in the
Manufactured Homes to the
Trustee on behalf of the Certificateholders. See "Description of
the
Certificates Assignment of Contracts." Unless otherwise specified
in the related
Prospectus Supplement, if a Manufactured Home is governed by the
applicable motor
vehicle laws of the relevant state neither the Company nor the
Trustee will amend the
certificates of title to identify the Trustee as the new secured
party. Accordingly, the
Company or such other entity as may be specified in the
Prospectus Supplement will
continue to be named as the secured party on the certificates of
title relating to the
Manufactured Homes. However, there exists a risk that, in the
absence of an amendment to
the certificate of title, such assignment of the security
interest may not be held effective
against subsequent purchasers of a Manufactured Home or
subsequent lenders who take a
security interest in the Manufactured Home or creditors of the
assignor.

If the owner of a Manufactured Home moves it to a state other
than the state in
which such Manufactured Home initially is registered and if steps
are not taken to re-perfect
the Trustee's security interest in such state, the security
interest in the Manufactured Home
will cease to be perfected. While in many circumstances the
Trustee would have the
opportunity to re-perfect its security interest in the
Manufactured Home in the state of
relocation, there can be no assurance that the Trustee will be
able to do so.

When a Mortgagor under a Contract sells a Manufactured Home,
the Trustee, or the
Servicer or the Master Servicer on behalf of the Trustee, must
surrender possession of the
certificate of title or will receive notice as a result of its
lien noted thereon and accordingly
will have an opportunity to require satisfaction of the related
lien before release of the lien.

Under the laws of most states, liens for repairs performed on
a Manufactured Home
take priority over a perfected security interest. The applicable
Mortgage Collateral Seller
generally will represent 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 and such lien
would not give rise to a
repurchase obligation on the part of the party specified in the
Pooling and Servicing
Agreement.

To the extent that Manufactured Homes are not treated as real
property under
applicable state law, contracts generally are "chattel paper" as
defined in 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 Master Servicer
or the Company, as the case may be, will transfer physical
possession of the Contracts to
the Trustee or its Custodian. In addition, the Master 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 Company to the Trustee. Therefore, if a
subsequent purchaser were
able to take physical possession of the Contracts without notice
of such assignment, the
Trustee's interest in the Contracts could be defeated. To the
extent that Manufactured Homes
are treated as real property under applicable state law,
Contracts will be treated in a manner
similar to that described above with regard to Mortgage Loans.
See " The Mortgage
Loans" above.

Enforcement of Security Interests in Manufactured Homes

The Servicer or the Master 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 sale of the
Manufactured Homes securing such defaulted Contracts. So long as
the Manufactured
Home has not become subject to real estate law, a creditor
generally can repossess a
Manufactured Home securing a Contract by voluntary surrender, by
"self-help" repossession
that is "peaceful" or, in the absence of voluntary surrender and
the ability to repossess
without breach of the peace, by judicial process. 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 debtor may also have
a right to redeem the Manufactured Home at or before resale.

Certain 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. For a
discussion of deficiency
judgments, see " The Mortgage Loans Anti-Deficiency Legislation
and Other
Limitations on Lenders" above.

Consumer Protection Laws

If the transferor of a consumer credit contract is also the
seller of goods that give
rise to the transaction (and, in certain cases, related lenders
and assignees), the "Holder-in-Due-Course" rule of the Federal
Trade Commission is intended to defeat the ability of such
transferor to transfer such contract free of notice of claims by
the debtor thereunder. The
effect of this rule is to subject the assignee of such a contract
to all claims and defenses that
the debtor could assert against the seller of goods. Liability
under this rule is limited to
amounts paid under a Contract; however, the Mortgagor also may be
able to assert the rule
to set off remaining amounts due as a defense against a claim
brought against such
Mortgagor. 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.

"Due-on-Sale" Clauses

The Contracts, in general, prohibit the sale or transfer of
the related Manufactured
Homes without the consent of the Company, the Master Servicer or
the Servicer and permit
the acceleration of the maturity of the Contracts by the Company,
the Master Servicer or the
Servicer upon any such sale or transfer that is not consented to.
Unless otherwise specified
in the related Prospectus Supplement, the Company, the Master
Servicer or the Servicer
generally will permit most transfers of Manufactured Homes and
not accelerate the maturity
of the related Contracts. In certain cases, the transfer may be
made by a delinquent
Mortgagor in order to avoid a repossession proceeding with
respect to a Manufactured
Home.

In the case of a transfer of a Manufactured Home after which
the Company desires
to accelerate the maturity of the related Contract, the Company's
ability to do so will depend
on the enforceability under state law of the "due-on-sale"
clause. The Garn-St Germain Act
preempts, subject to certain exceptions and conditions, state
laws prohibiting enforcement
of "due-on-sale" clauses applicable to the Manufactured Homes. In
some states the
Company or the Master Servicer may be prohibited from enforcing a
"due-on-sale" clause
in respect of certain Manufactured Homes.

Applicability of Usury Laws

Title V provides that, subject to certain conditions, state
usury limitations shall not
apply to any loan that is secured by a first lien on certain
kinds of manufactured housing.
For a discussion of Title V, see " The Mortgage Loans
Applicability of Usury Laws"
above. Unless otherwise specified in the related Pooling and
Servicing Agreement, each
Mortgage Collateral Seller, or another specified party, will
represent that all of the Contracts
comply with applicable usury laws.

Environmental Legislation

Real property pledged as security to a lender may be subject
to unforeseen
environmental risks. Most environmental statutes create
obligations for any party that can
be classified as the "owner" or "operator" of a "facility"
(referring to both operating
facilities and to real property). Under the laws of some states
and under the federal
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, a lender
may be liable, as an "owner" or "operator," for costs arising out
of releases or threatened
releases of hazardous substances that require remedy at a
mortgaged property, if agents or
employees of the lender have become sufficiently involved in the
operations of the borrower
or, subsequent to a foreclosure, in the management of the
property. Such liability may arise
regardless of whether the environmental damage or threat was
caused by a prior owner.

Under federal and certain state laws, contamination of a
property may give rise to
a lien on the property to assure the payment of costs of
clean-up. Under federal law and in
several states, such a lien has priority over the lien of an
existing mortgage against such
property. If a lender is or becomes directly liable following a
foreclosure, it may be
precluded from bringing an action for contribution against the
owner or operator who
created the environmental hazard. Such clean-up costs may be
substantial. It is possible that
such costs could become a liability of the related Trust Fund and
occasion a loss to
Certificateholders in certain circumstances described above if
such remedial costs were
incurred.

Except as otherwise specified in the applicable Prospectus
Supplement, at the time
the Mortgage Loans or Contracts were originated, no environmental
assessment or a very
limited environment assessment of the Mortgaged Properties will
have been conducted.

Soldiers' and Sailors' Civil Relief Act of 1940

Under the terms of the Relief Act, a borrower who enters
military service after the
origination of such borrower's mortgage loan or contract
(including a borrower who was in
reserve status and is called to active duty after origination of
the mortgage loan or contract),
may not be charged interest (including fees and charges) 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. The Relief Act applies to borrowers
who are members of the Air
Force, Army, Marines, Navy, National Guard, Reserves or Coast
Guard, and officers of the
U.S. Public Health Service assigned to duty with the military.
Because the Relief Act
applies to borrowers who enter military service (including
reservists who are called to active
duty) after origination of the related mortgage loan or contract,
no information can be
provided as to the number of Mortgage Loans or Contracts that may
be affected by the
Relief Act. With respect to Mortgage Loans or Contracts included
in a Trust Fund,
application of the Relief Act would adversely affect, for an
indeterminate period of time,
the ability of the Servicer or the Master Servicer, as
applicable, to collect full amounts of
interest on such Mortgage Collateral. Any shortfall in interest
collections resulting from the
application of the Relief Act or similar legislation or
regulations, which would not be
recoverable from the related Mortgage Loans or Contracts, would
result in a reduction of
the amounts distributable to the holders of the related
Certificates, and would not be covered
by Advances or any form of credit enhancement provided in
connection with the related
series of Certificates. In addition, the Relief Act imposes
limitations that would impair the
ability of the Servicer or the Master Servicer, as applicable, to
foreclose on an affected
Mortgage Loan or Contract during the Mortgagor's period of active
duty status, and, under
certain circumstances, during an additional three month period
thereafter. Thus, in the event
that the Relief Act or similar legislation or regulations applies
to any Mortgage Loan or
Contract which goes into default, there may be delays in payment
and losses on the related
Certificates in connection therewith. Any other interest
shortfalls, deferrals or forgiveness
of payments on the Mortgage Loans or Contracts resulting from
similar legislation or
regulations may result in delays in payments or losses to
Certificateholders of the related
series.

Default Interest and Limitations on Prepayments

Notes and mortgages may contain provisions that obligate the
borrower to pay a late
charge or additional interest if payments are not timely made,
and in some circumstances,
may prohibit prepayments for a specified period and/or condition
prepayments upon the
borrower's payment of prepayment fees or yield maintenance
penalties. In certain states,
there are or may be specific limitations upon the late charges
which a lender may collect
from a borrower for delinquent payments. Certain states also
limit the amounts that a lender
may collect from a borrower as an additional charge if the loan
is prepaid. In addition, the
enforceability of provisions that provide for prepayment fees or
penalties upon an
involuntary prepayment is unclear under the laws of many states.
Most conventional single-family mortgage loans may be prepaid in
full or in part without penalty. The regulations
of the Federal Home Loan Bank Board, as succeeded by the OTS,
prohibit the imposition
of a prepayment penalty or equivalent fee for or in connection
with the acceleration of a
loan by exercise of a due-on-sale clause. A mortgagee to whom a
prepayment in full has
been tendered may be compelled to give either a release of the
mortgage or an instrument
assigning the existing mortgage. The absence of a restraint on
prepayment, particularly with
respect to Mortgage Loans having higher mortgage rates, may
increase the likelihood of
refinancing or other early retirements of the Mortgage Loans.

Forfeitures in Drug and RICO Proceedings

Federal law provides that property owned by persons convicted
of drug-related
crimes or of criminal violations of the Racketeer Influenced and
Corrupt Organizations
("RICO") statute can be seized by the government if the property
was used in, or purchased
with the proceeds of, such crimes. Under procedures contained in
the Comprehensive
Crime Control Act of 1984 (the "Crime Control Act"), the
government may seize the
property even before conviction. The government must publish
notice of the forfeiture
proceeding and may give notice to all parties "known to have an
alleged interest in the
property," including the holders of mortgage loans.

A lender may avoid forfeiture of its interest in the property
if it establishes that: (i)
its mortgage was executed and recorded before commission of the
crime upon which the
forfeiture is based, or (ii) the lender was, at the time of
execution of the mortgage,
"reasonably without cause to believe" that the property was used
in, or purchased with the
proceeds of, illegal drug or RICO activities.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

General

The following is a general discussion of certain anticipated
material federal income
tax consequences of the purchase, ownership and disposition of
the Certificates offered
hereunder. This discussion has been prepared with the advice of
Orrick, Herrington &
Sutcliffe and Thacher Proffitt & Wood, counsel to the Company.
This discussion is directed
solely to Certificateholders that hold the Certificates as
capital assets within the meaning
of Section 1221 of the Code and does not purport to discuss all
federal income tax
consequences that may be applicable to particular categories of
investors, some of which
(such as banks, insurance companies and foreign investors) may be
subject to special rules.
In addition, the authorities on which this discussion, and the
opinion referred to below, are
based are subject to change or differing interpretations, which
could apply retroactively.
Taxpayers and preparers of tax returns (including those filed by
any REMIC or other issuer)
should be aware that under applicable Treasury regulations a
provider of advice on specific
issues of law is not considered an income tax return preparer
unless the advice (i) is given
with respect to events that have occurred at the time the advice
is rendered and is not given
with respect to the consequences of contemplated actions, and
(ii) is directly relevant to the
determination of an entry on a tax return. Accordingly, taxpayers
should consult their tax
advisors and tax return preparers regarding the preparation of
any item on a tax return, even
where the anticipated tax treatment has been discussed herein or
in a Prospectus
Supplement. In addition to the federal income tax consequences
described herein, potential
investors should consider the state and local tax consequences,
if any, of the purchase,
ownership and disposition of the Certificates. See "State and
Other Tax Consequences."
Certificateholders are advised to consult their tax advisors
concerning the federal, state,
local or other tax consequences to them of the purchase,
ownership and disposition of the
Certificates offered hereunder.

The following discussion addresses certificates (the "REMIC
Certificates")
representing interests in a Trust Fund, or a portion thereof,
which the Master Servicer or
Certificate Administrator, as applicable, will covenant to elect
to have treated as a REMIC
under Sections 860A through 860G (the "REMIC Provisions") of the
Code. The Prospectus
Supplement for each series of Certificates will indicate whether
a REMIC election (or
elections) will be made for the related Trust Fund and, if such
an election is to be made, will
identify all "regular interests" and "residual interests" in the
REMIC. If a REMIC election
will not be made for a Trust Fund, the federal income
consequences of the purchase,
ownership and disposition of the related Certificates will be set
forth in the related
Prospectus Supplement. For purposes of this tax discussion,
references to a
"Certificateholder" or a "holder" are to the beneficial owner of
a Certificate.

The following discussion is based in part upon the rules
governing original issue
discount that are set forth in Sections 1271 through 1273 and
Section 1275 of the Code and
in the Treasury regulations issued thereunder (the "OID
Regulations"), and in part upon the
REMIC Provisions and the Treasury regulations issued thereunder
(the "REMIC
Regulations"). The OID Regulations do not adequately address
certain issues relevant to,
and in some instances provide that they are not applicable to,
securities such as the
Certificates.

REMICs

Classification of REMICs

Upon the issuance of each series of REMIC Certificates,
Orrick, Herrington &
Sutcliffe or Thacher Proffitt & Wood, counsel to the Company,
will deliver their opinion
generally to the effect that, assuming compliance with all
provisions of the related Pooling
and Servicing Agreement or Trust Agreement, the related Trust
Fund (or each applicable
portion thereof) will qualify as a REMIC and the REMIC
Certificates offered with respect
thereto will be considered to evidence ownership of "regular
interests" ("REMIC Regular
Certificates") or "residual interests" ("REMIC Residual
Certificates") in that REMIC within
the meaning of the REMIC Provisions.

If an entity electing to be treated as a REMIC fails to
comply with one or more of
the ongoing requirements of the Code for such status during any
taxable year, the Code
provides that the entity will not be treated as a REMIC for such
year and thereafter. In that
event, such entity may be taxable as a separate corporation under
Treasury regulations, and
the related REMIC Certificates may not be accorded the status or
given the tax treatment
described below. Although the Code authorizes the Treasury
Department to issue
regulations providing relief in the event of an inadvertent
termination of REMIC status, no
such regulations have been issued. Any such relief, moreover, may
be accompanied by
sanctions, such as the imposition of a corporate tax on all or a
portion of the Trust Fund's
income for the period in which the requirements for such status
are not satisfied. The
Pooling and Servicing Agreement or Trust Agreement, with respect
to each REMIC will
include provisions designed to maintain the Trust Fund's status
as a REMIC under the
REMIC Provisions. It is not anticipated that the status of any
Trust Fund as a REMIC will
be terminated.

Characterization of Investments in REMIC Certificates

In general, the REMIC Certificates will be "qualifying real
property loans" within
the meaning of Section 593(d) of the Code, "real estate assets"
within the meaning of
Section 856(c)(5)(A) of the Code and assets described in Section
7701(a)(19)(C) of the
Code in the same proportion that the assets of the REMIC
underlying such Certificates
would be so treated. Moreover, if 95% or more of the assets of
the REMIC qualify for any
of the foregoing treatments at all times during a calendar year,
the REMIC Certificates will
qualify for the corresponding status in their entirety for that
calendar year. Interest
(including original issue discount) on the REMIC Regular
Certificates and income allocated
to the class of REMIC Residual Certificates will be interest
described in Section
856(c)(3)(B) of the Code to the extent that such Certificates are
treated as "real estate
assets" within the meaning of Section 856(c)(5)(A) of the Code.
In addition, the REMIC
Regular Certificates will be "qualified mortgages" within the
meaning of Section
860G(a)(3)(C) of the Code if transferred to another REMIC on its
startup day in exchange
for regular or residual interests therein. The determination as
to the percentage of the
REMIC's assets that constitute assets described in the foregoing
sections of the Code will
be made with respect to each calendar quarter based on the
average adjusted basis of each
category of the assets held by the REMIC during such calendar
quarter. The Master Servicer
or the Certificate Administrator, as applicable, will report
those determinations to
Certificateholders in the manner and at the times required by
applicable Treasury
regulations.

The assets of the REMIC will include, in addition to Mortgage
Collateral, payments
on Mortgage Collateral held pending distribution on the REMIC
Certificates and property
acquired by foreclosure held pending sale, and may include
amounts in reserve accounts.
It is unclear whether property acquired by foreclosure held
pending sale and amounts in
reserve accounts would be considered to be part of the Mortgage
Collateral, or whether such
assets (to the extent not invested in assets described in the
foregoing sections) otherwise
would receive the same treatment as the Mortgage Collateral for
purposes of all of the
foregoing sections. In addition, in some instances Mortgage
Collateral may not be treated
entirely as assets described in the foregoing sections. If so,
the related Prospectus
Supplement will describe the Mortgage Collateral that may not be
so treated. The REMIC
Regulations do provide, however, that payments on Mortgage
Collateral held pending
distribution are considered part of the Mortgage Collateral for
purposes of Sections 593(d)
and 856(c)(5)(A) of the Code.

Tiered REMIC Structures

For certain series of REMIC Certificates, two or more
separate elections may be
made to treat designated portions of the related Trust Fund as
REMICs ("Tiered REMICs")
for federal income tax purposes. Upon the issuance of any such
series of REMIC
Certificates, Orrick, Herrington & Sutcliffe or Thacher Proffitt
& Wood, counsel to the
Company, will deliver their opinion generally to the effect that,
assuming compliance with
all provisions of the related Pooling and Servicing Agreement or
Trust Agreement, the
Tiered REMICs will each qualify as a REMIC and the REMIC
Certificates issued by the
Tiered REMICs, respectively, will be considered to evidence
ownership of REMIC Regular
Certificates or REMIC Residual Certificates in the related REMIC
within the meaning of
the REMIC Provisions.

Solely for purposes of determining whether the REMIC
Certificates will be
"qualifying real property loans" under Section 593(d) of the
Code, "real estate assets" within
the meaning of Section 856(c)(5)(A) of the Code, and "loans
secured by an interest in real
property" under Section 7701(a)(19)(C) of the Code, and whether
the income on such
Certificates is interest described in Section 856(c)(3)(B) of the
Code, the Tiered REMICs
will be treated as one REMIC.

Taxation of Owners of REMIC Regular Certificates

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

Original Issue Discount. Certain REMIC Regular Certificates
may be issued with
"original issue discount" within the meaning of Section 1273(a)
of the Code. Any holders
of REMIC Regular Certificates issued with original issue discount
generally will be required
to include original issue discount in income as it accrues, in
accordance with the method
described below, in advance of the receipt of the cash
attributable to such income. In
addition, Section 1272(a)(6) of the Code provides special rules
applicable to REMIC
Regular Certificates and certain other debt instruments issued
with original issue discount.
Regulations have not been issued under that section.

The Code requires that a prepayment assumption be used with
respect to Mortgage
Collateral held by a REMIC in computing the accrual of original
issue discount on REMIC
Regular Certificates issued by that REMIC, and that adjustments
be made in the amount and
rate of accrual of such discount to reflect differences between
the actual prepayment rate
and the prepayment assumption. The prepayment assumption is to be
determined in a
manner prescribed in Treasury regulations; as noted above, those
regulations have not been
issued. The Conference Committee Report (the "Committee Report")
accompanying the Tax
Reform Act of 1986 indicates that the regulations will provide
that the prepayment
assumption used with respect to a REMIC Regular Certificate must
be the same as that used
in pricing the initial offering of such REMIC Regular
Certificate. The Prepayment
Assumption used by the Master Servicer or the Certificate
Administrator, as applicable, in
reporting original issue discount for each series of REMIC
Regular Certificates will be
consistent with this standard and will be disclosed in the
related Prospectus Supplement.
However, neither the Company, the Master Servicer nor the
Certificate Administrator will
make any representation that the Mortgage Collateral will in fact
prepay at a rate
conforming to the Prepayment Assumption or at any other rate.

The original issue discount, if any, on a REMIC Regular
Certificate will be the
excess of its stated redemption price at maturity over its issue
price. The issue price of a
particular class of REMIC Regular Certificates will be the first
cash price at which a
substantial amount of REMIC Regular Certificates of that class is
sold (excluding sales to
bond houses, brokers and underwriters). If less than a
substantial amount of a particular
class of REMIC Regular Certificates is sold for cash on or prior
to the date of their initial
issuance (the "Closing Date"), the issue price for such class
will be treated as the fair market
value of such class on the Closing Date. Under the OID
Regulations, the stated redemption
price of a REMIC Regular Certificate is equal to the total of all
payments to be made on
such Certificate other than "qualified stated interest."
"Qualified stated interest" includes
interest that is unconditionally payable at least annually at a
single fixed rate, or in the case
of a variable rate debt instrument, at a "qualified floating
rate," an "objective rate," a
combination of a single fixed rate and one or more "qualified
floating rates" or one
"qualified inverse floating rate," or a combination of "qualified
floating rates" that generally
does not operate in a manner that accelerates or defers interest
payments on such REMIC
Regular Certificate.

In the case of REMIC Regular Certificates bearing adjustable
interest rates, the
determination of the total amount of original issue discount and
the timing of the inclusion
thereof will vary according to the characteristics of such REMIC
Regular Certificates. If the
original issue discount rules apply to such Certificates, the
related Prospectus Supplement
will describe the manner in which such rules will be applied by
the Master Servicer or the
Certificate Administrator, as applicable, with respect to those
Certificates in preparing
information returns to the Certificateholders and the Internal
Revenue Service (the "IRS").

Certain classes of the REMIC Regular Certificates may provide
for the first interest
payment with respect to such Certificates to be made more than
one month after the date of
issuance, a period which is longer than the subsequent monthly
intervals between interest
payments. Assuming the "accrual period" (as defined herein) for
original issue discount is
each monthly period that begins or ends on a Distribution Date,
in some cases, as a
consequence of this "long first accrual period," some or all
interest payments may be
required to be included in the stated redemption price of the
REMIC Regular Certificate and
accounted for as original issue discount. Because interest on
REMIC Regular Certificates
must in any event be accounted for under an accrual method,
applying this analysis would
result in only a slight difference in the timing of the inclusion
in income of the yield on the
REMIC Regular Certificates.

In addition, if the accrued interest to be paid on the first
Distribution Date is
computed with respect to a period that begins prior to the
Closing Date, a portion of the
purchase price paid for a REMIC Regular Certificate will reflect
such accrued interest. In
such cases, information returns to the Certificateholders and the
IRS will be based on the
position that the portion of the purchase price paid for the
interest accrued with respect to
periods prior to the Closing Date is treated as part of the
overall cost of such REMIC
Regular Certificate (and not as a separate asset the cost of
which is recovered entirely out
of interest received on the next Distribution Date) and that
portion of the interest paid on the
first Distribution Date in excess of interest accrued for a
number of days corresponding to
the number of days from the Closing Date to the first
Distribution Date should be included
in the stated redemption price of such REMIC Regular Certificate.
However, the OID
Regulations state that all or some portion of such accrued
interest may be treated as a
separate asset the cost of which is recovered entirely out of
interest paid on the first
Distribution Date. It is unclear how an election to do so would
be made under the OID
Regulations and whether such an election could be made
unilaterally by a Certificateholder.

Notwithstanding the general definition of original issue
discount, original issue
discount on a REMIC Regular Certificate will be considered to be
de minimis if it is less
than 0.25% of the stated redemption price of the REMIC Regular
Certificate multiplied by
its weighted average life. For this purpose, the weighted average
life of the REMIC Regular
Certificate is computed as the sum of the amounts determined, as
to each payment included
in the stated redemption price of such REMIC Regular Certificate,
by multiplying (i) the
number of complete years (rounding down for partial years) from
the issue date until such
payment is expected to be made (presumably taking into account
the Prepayment
Assumption) by (ii) a fraction, the numerator of which is the
amount of the payment, and
the denominator of which is the stated redemption price at
maturity of such REMIC Regular
Certificate. Under the OID Regulations, original issue discount
of only a de minimis amount
(other than de minimis original issue discount attributable to a
so-called "teaser" interest rate
or an initial interest holiday) will be included in income as
each payment of stated principal
is made, based on the product of the total amount of such de
minimis original issue discount
and a fraction, the numerator of which is the amount of such
principal payment and the
denominator of which is the outstanding stated principal amount
of the REMIC Regular
Certificate. The OID Regulations also would permit a
Certificateholder to elect to accrue
de minimis original issue discount into income currently based on
a constant yield method.
See " Market Discount" for a description of such election under
the OID Regulations.

If original issue discount on a REMIC Regular Certificate is
in excess of a de
minimis amount, the holder of such Certificate must include in
ordinary gross income the
sum of the "daily portions" of original issue discount for each
day during its taxable year
on which it held such REMIC Regular Certificate, including the
purchase date but excluding
the disposition date. In the case of an original holder of a
REMIC Regular Certificate, the
daily portions of original issue discount will be determined as
follows.

As to each "accrual period," that is, unless otherwise stated
in the related Prospectus
Supplement, each period that begins or ends on a date that
corresponds to a Distribution
Date and begins on the first day following the immediately
preceding accrual period (or in
the case of the first such period, begins on the Closing Date), a
calculation will be made of
the portion of the original issue discount that accrued during
such accrual period. The
portion of original issue discount that accrues in any accrual
period will equal the excess,
if any, of (i) the sum of (A) the present value, as of the end of
the accrual period, of all of
the distributions remaining to be made on the REMIC Regular
Certificate, if any, in future
periods and (B) the distributions made on such REMIC Regular
Certificate during the
accrual period of amounts included in the stated redemption
price, over (ii) the adjusted
issue price of such REMIC Regular Certificate at the beginning of
the accrual period. The
present value of the remaining distributions referred to in the
preceding sentence will be
calculated (1) assuming that distributions on the REMIC Regular
Certificate will be
received in future periods based on the Mortgage Collateral being
prepaid at a rate equal to
the Prepayment Assumption and (2) using a discount rate equal to
the original yield to
maturity of the Certificate. For these purposes, the original
yield to maturity of the
Certificate will be calculated based on its issue price and
assuming that distributions on the
Certificate will be made in all accrual periods based on the
Mortgage Collateral being
prepaid at a rate equal to the Prepayment Assumption. The
adjusted issue price of a REMIC
Regular Certificate at the beginning of any accrual period will
equal the issue price of such
Certificate, increased by the aggregate amount of original issue
discount that accrued with
respect to such Certificate in prior accrual periods, and reduced
by the amount of any
distributions made on such REMIC Regular Certificate in prior
accrual periods of amounts
included in its stated redemption price. The original issue
discount accruing during any
accrual period, computed as described above, will be allocated
ratably to each day during
the accrual period to determine the daily portion of original
issue discount for such day.

The OID Regulations suggest that original issue discount with
respect to securities
that represent multiple uncertificated REMIC regular interests,
in which ownership interests
will be issued simultaneously to the same buyer and which may be
required under the
related Pooling and Servicing Agreement to be transferred
together, should be computed on
an aggregate method. In the absence of further guidance from the
IRS, original issue
discount with respect to securities that represent the ownership
of multiple uncertificated
REMIC regular interests will be reported to the IRS and the
Certificateholders on an
aggregate method based on a single overall constant yield and the
prepayment assumption
stated in the related Prospectus Supplement, treating all such
uncertificated regular interests
as a single debt instrument as set forth in the OID Regulations,
so long as the Pooling and
Servicing Agreement requires that such uncertificated regular
interests be transferred
together.

A subsequent purchaser of a REMIC Regular Certificate that
purchases such
Certificate at a cost (excluding any portion of such cost
attributable to accrued qualified
stated interest) less than its remaining stated redemption price
will also be required to
include in gross income the daily portions of any original issue
discount with respect to such
Certificate. However, each such daily portion will be reduced, if
such cost is in excess of
its "adjusted issue price," in proportion to the ratio such
excess bears to the aggregate
original issue discount remaining to be accrued on such REMIC
Regular Certificate. The
adjusted issue price of a REMIC Regular Certificate on any given
day equals the sum of (i)
the adjusted issue price (or, in the case of the first accrual
period, the issue price) of such
Certificate at the beginning of the accrual period which includes
such day and (ii) the daily
portions of original issue discount for all days during such
accrual period prior to such day.

Market Discount. A Certificateholder that purchases a REMIC
Regular Certificate
at a market discount, that is, in the case of a REMIC Regular
Certificate issued without
original issue discount, at a purchase price less than its
remaining stated principal amount,
or in the case of a REMIC Regular Certificate issued with
original issue discount, at a
purchase price less than its adjusted issue price will recognize
income upon receipt of each
distribution representing stated redemption price. In particular,
under Section 1276 of the
Code such a Certificateholder generally will be required to
allocate the portion of each such
distribution representing stated redemption price first to
accrued market discount not
previously included in income, and to recognize ordinary income
to that extent. A
Certificateholder may elect to include market discount in income
currently as it accrues
rather than including it on a deferred basis in accordance with
the foregoing. If made, such
election will apply to all market discount bonds acquired by such
Certificateholder on or
after the first day of the first taxable year to which such
election applies. In addition, the
OID Regulations permit a Certificateholder to elect to accrue all
interest, discount
(including de minimis market or original issue discount) and
premium in income as interest,
based on a constant yield method. If such an election were made
with respect to a REMIC
Regular Certificate with market discount, the Certificateholder
would be deemed to have
made an election to include currently market discount in income
with respect to all other
debt instruments having market discount that such
Certificateholder acquires during the
taxable year of the election or thereafter, and possibly
previously acquired instruments.
Similarly, a Certificateholder that made this election for a
Certificate that is acquired at a
premium would be deemed to have made an election to amortize bond
premium with respect
to all debt instruments having amortizable bond premium that such
Certificateholder owns
or acquires. See " Premium." Each of these elections to accrue
interest, discount and
premium with respect to a Certificate on a constant yield method
or as interest would be
irrevocable.

However, market discount with respect to a REMIC Regular
Certificate will be
considered to be de minimis for purposes of Section 1276 of the
Code if such market
discount is less than 0.25% of the remaining stated redemption
price of such REMIC
Regular Certificate multiplied by the number of complete years to
maturity remaining after
the date of its purchase. In interpreting a similar rule with
respect to original issue discount
on obligations payable in installments, the OID Regulations refer
to the weighted average
maturity of obligations, and it is likely that the same rule will
be applied with respect to
market discount, presumably taking into account the Prepayment
Assumption. If market
discount is treated as de minimis under this rule, it appears
that the actual discount would
be treated in a manner similar to original issue discount of a de
minimis amount. See
" Original Issue Discount." Such treatment would result in
discount being included in
income at a slower rate than discount would be required to be
included in income using the
method described above.

Section 1276(b)(3) of the Code specifically authorizes the
Treasury Department to
issue regulations providing for the method for accruing market
discount on debt
instruments, the principal of which is payable in more than one
installment. Until
regulations are issued by the Treasury Department, certain rules
described in the Committee
Report apply. The Committee Report indicates that in each accrual
period market discount
on REMIC Regular Certificates should accrue, at the
Certificateholder's option: (i) on the
basis of a constant yield method, (ii) in the case of a REMIC
Regular Certificate issued
without original issue discount, in an amount that bears the same
ratio to the total remaining
market discount as the stated interest paid in the accrual period
bears to the total amount of
stated interest remaining to be paid on the REMIC Regular
Certificate as of the beginning
of the accrual period, or (iii) in the case of a REMIC Regular
Certificate issued with original
issue discount, in an amount that bears the same ratio to the
total remaining market discount
as the original issue discount accrued in the accrual period
bears to the total original issue
discount remaining on the REMIC Regular Certificate at the
beginning of the accrual
period. Moreover, the Prepayment Assumption used in calculating
the accrual of original
issue discount is to be used in calculating the accrual of market
discount. Because the
regulations referred to in this paragraph have not been issued,
it is not possible to predict
what effect such regulations might have on the tax treatment of a
REMIC Regular
Certificate purchased at a discount in the secondary market.

To the extent that REMIC Regular Certificates provide for
monthly or other
periodic distributions throughout their term, the effect of these
rules may be to require
market discount to be includible in income at a rate that is not
significantly slower than the
rate at which such discount would accrue if it were original
issue discount. Moreover, in any
event a holder of a REMIC Regular Certificate generally will be
required to treat a portion
of any gain on the sale or exchange of such 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.

In addition, under Section 1277 of the Code, a holder of a
REMIC Regular
Certificate may be required to defer a portion of its interest
deductions for the taxable year
attributable to any indebtedness incurred or continued to
purchase or carry a REMIC
Regular Certificate purchased with market discount. For these
purposes, the de minimis rule
referred to above applies. Any such deferred interest expense
would not exceed the market
discount that accrues during such taxable year and is, in
general, allowed as a deduction not
later than the year in which such market discount is includible
in income. If such holder
elects to include market discount in income currently as it
accrues on all market discount
instruments acquired by such holder in that taxable year or
thereafter, the interest deferral
rule described above will not apply.

Premium. A REMIC Regular Certificate purchased at a cost
(excluding any portion
of such cost attributable to accrued qualified stated interest)
greater than its remaining stated
redemption price will be considered to be purchased at a premium.
The holder of such a
REMIC Regular Certificate may elect under Section 171 of the Code
to amortize such
premium under the constant yield method over the life of the
Certificate. If made, such an
election will apply to all debt instruments having amortizable
bond premium that the holder
owns or subsequently acquires. Amortizable premium will be
treated as an offset to interest
income on the related REMIC Regular Certificate, rather than as a
separate interest
deduction. The OID Regulations also permit Certificateholders to
elect to include all
interest, discount and premium in income based on a constant
yield method, further treating
the Certificateholder as having made the election to amortize
premium generally. See
" Market Discount." The Committee Report states that the same
rules that apply to accrual
of market discount (which rules will require use of a Prepayment
Assumption in accruing
market discount with respect to REMIC Regular Certificates
without regard to whether such
Certificates have original issue discount) will also apply in
amortizing bond premium under
Section 171 of the Code.

Realized Losses. Under Section 166 of the Code, both
corporate holders of the
REMIC Regular Certificates and noncorporate holders of the REMIC
Regular Certificates
that acquire such Certificates in connection with a trade or
business should be allowed to
deduct, as ordinary losses, any losses sustained during a taxable
year in which their
Certificates become wholly or partially worthless as the result
of one or more Realized
Losses on the Mortgage Collateral. However, it appears that a
noncorporate holder that does
not acquire a REMIC Regular Certificate in connection with a
trade or business will not be
entitled to deduct a loss under Section 166 of the Code until
such holder's Certificate
becomes wholly worthless (i.e., until its outstanding principal
balance has been reduced to
zero) and that the loss will be characterized as a short-term
capital loss.

Each holder of a REMIC Regular Certificate will be required
to accrue interest and
original issue discount with respect to such Certificate, without
giving effect to any
reductions in distributions attributable to defaults or
delinquencies on the Mortgage
Collateral until it can be established that any such reduction
ultimately will not be
recoverable. As a result, the amount of taxable income reported
in any period by the holder
of a REMIC Regular Certificate could exceed the amount of
economic income actually
realized by the holder in such period. Although the holder of a
REMIC Regular Certificate
eventually will recognize a loss or reduction in income
attributable to previously accrued
and included income that, as the result of a realized loss,
ultimately will not be realized, the
law is unclear with respect to the timing and character of such
loss or reduction in income.

Taxation of Owners of REMIC Residual Certificates

General. As residual interests, the REMIC Residual
Certificates will be subject to
tax rules that differ significantly from those that would apply
if the REMIC Residual
Certificates were treated for federal income tax purposes as
direct ownership interests in the
Mortgage Collateral or as debt instruments issued by the REMIC.

A holder of a REMIC Residual Certificate generally will be
required to report its
daily portion of the taxable income or, subject to the
limitations noted in this discussion, the
net loss of the REMIC for each day during a calendar quarter that
such holder owned such
REMIC Residual Certificate. For this purpose, the taxable income
or net loss of the REMIC
will be allocated to each day in the calendar quarter ratably
using a "30 days per month/90
days per quarter/360 days per year" convention unless otherwise
disclosed in the related
Prospectus Supplement. The daily amounts will then be allocated
among the REMIC
Residual Certificateholders in proportion to their respective
ownership interests on such day.
Any amount included in the gross income or allowed as a loss of
any REMIC Residual
Certificateholder by virtue of this allocation will be treated as
ordinary income or loss. The
taxable income of the REMIC will be determined under the rules
described below in
" Taxable Income of the REMIC" and will be taxable to the REMIC
Residual
Certificateholders without regard to the timing or amount of cash
distributions by the
REMIC. Ordinary income derived from REMIC Residual Certificates
will be "portfolio
income" for purposes of the taxation of taxpayers subject to
limitations under Section 469
of the Code on the deductibility of "passive losses."

A holder of a REMIC Residual Certificate that purchased such
Certificate from a
prior holder of such Certificate also will be required to report
on its federal income tax
return amounts representing its daily portion of the taxable
income (or net loss) of the
REMIC for each day that it holds such REMIC Residual Certificate.
These daily portions
generally will equal the amounts of taxable income or net loss
determined as described
above. The Committee Report indicates that certain modifications
of the general rules may
be made, by regulations, legislation or otherwise, to reduce (or
increase) the income or loss
of a holder of a REMIC Residual Certificateholder that purchased
such REMIC Residual
Certificate from a prior holder of such Certificate at a price
greater than (or less than) the
adjusted basis (as defined herein) such REMIC Residual
Certificate would have had in the
hands of an original holder of such Certificate. The REMIC
Regulations, however, do not
provide for any such modifications.

Any payments received by a holder of a REMIC Residual
Certificate in connection
with the acquisition of such REMIC Residual Certificate will be
taken into account in
determining the income of such holder for federal income tax
purposes. Although it appears
likely that any such payment would be includible in income
immediately upon its receipt,
the IRS might assert that such payment should be included in
income over time according
to an amortization schedule or according to some other method.
Because of the uncertainty
concerning the treatment of such payments, holders of REMIC
Residual Certificates should
consult their tax advisors concerning the treatment of such
payments for income tax
purposes.

The amount of income REMIC Residual Certificateholders will
be required to
report (or the tax liability associated with such income) may
exceed the amount of cash
distributions received from the REMIC for the corresponding
period. Consequently, REMIC
Residual Certificateholders should have other sources of funds
sufficient to pay any federal
income taxes due as a result of their ownership of REMIC Residual
Certificates or unrelated
deductions against which income may be offset, subject to the
rules relating to "excess
inclusions," residual interests without "significant value" and
"noneconomic" residual
interests discussed below. The fact that the tax liability
associated with the income allocated
to REMIC Residual Certificateholders may exceed the cash
distributions received by such
REMIC Residual Certificateholders for the corresponding period
may significantly
adversely affect such REMIC Residual Certificateholders'
after-tax rate of return.

Taxable Income of the REMIC. The taxable income of the REMIC
will equal the
income from the Mortgage Collateral and other assets of the REMIC
plus any cancellation
of indebtedness income due to the allocation of realized losses
to REMIC Regular
Certificates, less the deductions allowed to the REMIC for
interest (including original issue
discount and reduced by the amortization of any premium received
on issuance) on the
REMIC Regular Certificates (and any other class of REMIC
Certificates constituting
"regular interests" in the REMIC not offered hereby),
amortization of any premium on the
Mortgage Collateral, bad debt deductions with respect to the
Mortgage Collateral and,
except as described below, for servicing, administrative and
other expenses.

For purposes of determining its taxable income, the REMIC
will have an initial
aggregate basis in its assets equal to their fair market value
immediately after their transfer
to the REMIC. For this purpose, the Master Servicer or the
Certificate Administrator, as
applicable, intends to treat the fair market value of the
Mortgage Collateral as being equal
to the aggregate issue prices of the REMIC Regular Certificates
and REMIC Residual
Certificates. Such aggregate basis will be allocated among the
Mortgage Collateral
collectively and the other assets of the REMIC in proportion to
their respective fair market
values. The issue price of any REMIC Certificates offered hereby
will be determined in the
manner described above under " Taxation of Owners of REMIC
Regular
Certificates Original Issue Discount." Accordingly, if one or
more classes of REMIC
Certificates are retained initially rather than sold, the Master
Servicer or the Certificate
Administrator, as applicable, may be required to estimate the
fair market value of such
interests in order to determine the basis of the REMIC in the
Mortgage Collateral and other
property held by the REMIC.

Subject to the possible application of the de minimis rules,
the method of accrual
by the REMIC of original issue discount income and market
discount income with respect
to Mortgage Collateral that it holds will be equivalent to the
method of accruing original
issue discount income for REMIC Regular Certificateholders (that
is, under the constant
yield method taking into account the Prepayment Assumption).
However, a REMIC that
acquires Mortgage Collateral at a market discount must include
such discount in income
currently, as it accrues, on a constant interest basis. See "
Taxation of Owners of REMIC
Regular Certificates" above, which describes a method of accruing
discount income that is
analogous to that required to be used by a REMIC as to Mortgage
Collateral with market
discount that it holds.

An item of Mortgage Collateral will be deemed to have been
acquired with discount
(or premium) to the extent that the REMIC's basis therein,
determined as described in the
preceding paragraph, is less than (or greater than) its stated
redemption price. Any such
discount will be includible in the income of the REMIC as it
accrues, in advance of receipt
of the cash attributable to such income, under a method similar
to the method described
above for accruing original issue discount on the REMIC Regular
Certificates. It is
anticipated that each REMIC will elect under Section 171 of the
Code to amortize any
premium on the Mortgage Collateral. Premium on any item of
Mortgage Collateral to which
such election applies may be amortized under a constant yield
method, presumably taking
into account a Prepayment Assumption.

The REMIC will be allowed deductions for interest (including
original issue
discount) on the REMIC Regular Certificates (including any other
class of REMIC
Certificates constituting "regular interests" in the REMIC not
offered hereby) equal to the
deductions that would be allowed if the REMIC Regular
Certificates (including any other
class of REMIC Certificates constituting "regular interests" in
the REMIC not offered
hereby) were indebtedness of the REMIC. Original issue discount
will be considered to
accrue for this purpose as described above under " Taxation of
Owners of REMIC Regular
Certificates Original Issue Discount," except that the de minimis
rule and the adjustments
for subsequent holders of REMIC Regular Certificates (including
any other class of
Certificates constituting "regular interests" in the REMIC not
offered hereby) described
therein will not apply.

If a class of REMIC Regular Certificates is issued at a price
in excess of the stated
redemption price of such class (such excess, "Issue Premium"),
the net amount of interest
deductions that are allowed the REMIC in each taxable year with
respect to the REMIC
Regular Certificates of such class will be reduced by an amount
equal to the portion of the
Issue Premium that is considered to be amortized or repaid in
that year. Although the matter
is not entirely certain, it is likely that Issue Premium would be
amortized under a constant
yield method in a manner analogous to the method of accruing
original issue discount
described above under " Taxation of Owners of REMIC Regular
Certificates Original
Issue Discount."

As a general rule, the taxable income of the REMIC will be
determined in the same
manner as if the REMIC were an individual having the calendar
year as its taxable year and
using the accrual method of accounting. However, no item of
income, gain, loss or
deduction allocable to a prohibited transaction will be taken
into account. See " Prohibited
Transactions and Other Possible REMIC Taxes" below. Further, the
limitation on
miscellaneous itemized deductions imposed on individuals by
Section 67 of the Code
(which allows such deductions only to the extent they exceed in
the aggregate two percent
of the taxpayer's adjusted gross income) will not be applied at
the REMIC level so that the
REMIC will be allowed deductions for servicing, administrative
and other non-interest
expenses in determining its taxable income. All such expenses
will be allocated as a
separate item to the holders of REMIC Certificates, subject to
the limitation of Section 67
of the Code. See " Possible Pass-Through of Miscellaneous
Itemized Deductions" below.
If the deductions allowed to the REMIC exceed its gross income
for a calendar quarter, such
excess will be the net loss for the REMIC for that calendar
quarter.

Basis Rules, Net Losses and Distributions. The adjusted
basis of a REMIC Residual
Certificate will be equal to the amount paid for such REMIC
Residual Certificate, increased
by amounts included in the income of the related
Certificateholder and decreased (but not
below zero) by distributions made, and by net losses allocated,
to such Certificateholder.

A REMIC Residual Certificateholder is not allowed to take
into account any net loss
for any calendar quarter to the extent such net loss exceeds such
REMIC Residual
Certificateholder's adjusted basis in its REMIC Residual
Certificate as of the close of such
calendar quarter (determined without regard to such net loss).
Any loss that is not currently
deductible by reason of this limitation may be carried forward
indefinitely to future calendar
quarters and, subject to the same limitation, may be used only to
offset income from the
REMIC Residual Certificate. The ability of holders of REMIC
Residual Certificates to
deduct net losses may be subject to additional limitations under
the Code, as to which such
Certificateholders should consult their tax advisors.

Any distribution on a REMIC Residual Certificate will be
treated as a non-taxable
return of capital to the extent it does not exceed the holder's
adjusted basis in such REMIC
Residual Certificate. To the extent a distribution on a REMIC
Residual Certificate exceeds
such adjusted basis, it will be treated as gain from the sale of
such REMIC Residual
Certificate. Holders of certain REMIC Residual Certificates may
be entitled to distributions
early in the term of the related REMIC under circumstances in
which their bases in such
REMIC Residual Certificates will not be sufficiently large that
such distributions will be
treated as nontaxable returns of capital. Their bases in such
REMIC Residual Certificates
will initially equal the amount paid for such REMIC Residual
Certificates and will be
increased by their allocable shares of taxable income of the
Trust Fund. However, such basis
increases may not occur until the end of the calendar quarter, or
perhaps the end of the
calendar year, with respect to which such REMIC taxable income is
allocated to the holders
of REMIC Residual Certificates. To the extent such
Certificateholders' initial bases are less
than the distributions to such REMIC Residual Certificateholders,
and increases in such
initial bases either occur after such distributions or (together
with their initial bases) are less
than the amount of such distributions, gain will be recognized to
such Certificateholders on
such distributions and will be treated as gain from the sale of
their REMIC Residual
Certificates.

The effect of these rules is that a Certificateholder may not
amortize its basis in a
REMIC Residual Certificate, but may only recover its basis
through distributions, through
the deduction of its share of any net losses of the REMIC or upon
the sale of its REMIC
Residual Certificate. See " Sales of REMIC Certificates" below.
For a discussion of
possible modifications of these rules that may require
adjustments to income of a holder of
a REMIC Residual Certificate other than an original holder in
order to reflect any difference
between the cost of such REMIC Residual Certificate to such
holder and the adjusted basis
such REMIC Residual Certificate would have had in the hands of
the original holder, see
" General" above.

Excess Inclusions. Any "excess inclusions" with respect to a
REMIC Residual
Certificate will, with an exception discussed below for certain
REMIC Residual Certificates
held by thrift institutions, be subject to federal income tax in
all events.

In general, the "excess inclusions" with respect to a REMIC
Residual Certificate for
any calendar quarter will be the excess, if any, of (i) the sum
of the daily portions of REMIC
taxable income allocable to such REMIC Residual Certificate over
(ii) the sum of the "daily
accruals" (as defined herein) for each day during such quarter
that such REMIC Residual
Certificate was held by such REMIC Residual Certificateholder.
The daily accruals of a
REMIC Residual Certificateholder will be determined by allocating
to each day during a
calendar quarter its ratable portion of the product of the
"adjusted issue price" of the REMIC
Residual Certificate at the beginning of the calendar quarter and
120% of the "long-term
federal rate" in effect on the Closing Date. For this purpose,
the adjusted issue price of a
REMIC Residual Certificate as of the beginning of any calendar
quarter will be equal to the
issue price of the REMIC Residual Certificate, increased by the
sum of the daily accruals
for all prior quarters and decreased (but not below zero) by any
distributions made with
respect to such REMIC Residual Certificate before the beginning
of such quarter. The issue
price of a REMIC Residual Certificate is the initial offering
price to the public (excluding
bond houses and brokers) at which a substantial amount of the
REMIC Residual Certificates
were sold. The "long-term federal rate" is an average of current
yields on Treasury securities
with a remaining term of greater than nine years, computed and
published monthly by the
IRS.

For REMIC Residual Certificateholders, an excess inclusion
(i) will not be
permitted to be offset by deductions, losses or loss carryovers
from other activities, (ii) will
be treated as "unrelated business taxable income" to an otherwise
tax-exempt organization
and (iii) will not be eligible for any rate reduction or
exemption under any applicable tax
treaty with respect to the 30% United States withholding tax
imposed on distributions to
REMIC Residual Certificateholders that are foreign investors.
See, however, " Foreign
Investors in REMIC Certificates" below.

As an exception to the general rules described above, thrift
institutions are allowed
to offset their excess inclusions with unrelated deductions,
losses or loss carryovers, but
only if the REMIC Residual Certificates are considered to have
"significant value." The
REMIC Regulations provide that in order to be treated as having
significant value, the
REMIC Residual Certificates must have an aggregate issue price at
least equal to two
percent of the aggregate issue prices of all of the related
REMIC's Regular and Residual
Certificates. In addition, based on the Prepayment Assumption,
the anticipated weighted
average life of the REMIC Residual Certificates must equal or
exceed 20% of the
anticipated weighted average life of the REMIC and on any
required or permitted clean up
calls or required qualified liquidation provided for in the
REMIC's organizational
documents. Although it has not done so, the Treasury also has
authority to issue regulations
that would treat the entire amount of income accruing on a REMIC
Residual Certificate as
an excess inclusion if the REMIC Residual Certificates are
considered not to have
"significant value." The related Prospectus Supplement will
disclose whether offered
REMIC Residual Certificates may be considered to have
"significant value" under the
REMIC Regulations; except that any disclosure that a REMIC
Residual Certificate will have
"significant value" will be based upon certain assumptions, and
the Company will make no
representation that a REMIC Residual Certificate will have
"significant value" for purposes
of the above-described rules. The above-described exception for
thrift institutions applies
only to those residual interests held directly by, and
deductions, losses and loss carryovers
incurred by, such institutions (and not by other members of an
affiliated group of
corporations filing a consolidated income tax return) or by
certain wholly-owned direct
subsidiaries of such institutions formed or operated exclusively
in connection with the
organization and operation of one or more REMICs.

In the case of any REMIC Residual Certificates held by a real
estate investment
trust, the aggregate excess inclusions with respect to such REMIC
Residual Certificates,
reduced (but not below zero) by the real estate investment trust
taxable income (within the
meaning of Section 857(b)(2) of the Code, excluding any net
capital gain), will be allocated
among the shareholders of such trust in proportion to the
dividends received by such
shareholders from such trust, and any amount so allocated will be
treated as an excess
inclusion with respect to a REMIC Residual Certificate as if held
directly by such
shareholder. Treasury regulations yet to be issued could apply a
similar rule to regulated
investment companies, common trust funds and certain
cooperatives; the REMIC
Regulations currently do not address this subject.

Noneconomic REMIC Residual Certificates. Under the REMIC
Regulations,
transfers of "noneconomic" REMIC Residual Certificates will be
disregarded for all federal
income tax purposes if "a significant purpose of the transfer was
to enable the transferor to
impede the assessment or collection of tax." If such transfer is
disregarded, the purported
transferor will continue to remain liable for any taxes due with
respect to the income on
such "noneconomic" REMIC Residual Certificate. The REMIC
Regulations provide that a
REMIC Residual Certificate is noneconomic unless, based on the
Prepayment Assumption
and on any required or permitted clean up calls, or required
qualified liquidation provided
for in the REMIC's organizational documents, (1) the present
value of the expected future
distributions (discounted using the "applicable federal rate" for
obligations whose term ends
on the close of the last quarter in which excess inclusions are
expected to accrue with
respect to the REMIC Residual Certificate, which rate is computed
and published monthly
by the IRS) on the REMIC Residual Certificate equals at least the
present value of the
expected tax on the anticipated excess inclusions, and (2) the
transferor reasonably expects
that the transferee will receive distributions with respect to
the REMIC Residual Certificate
at or after the time the taxes accrue on the anticipated excess
inclusions in an amount
sufficient to satisfy the accrued taxes. Accordingly, all
transfers of REMIC Residual
Certificates that may constitute noneconomic residual interests
will be subject to certain
restrictions under the terms of the related Pooling and Servicing
Agreement or Trust
Agreement that are intended to reduce the possibility of any such
transfer being disregarded.
Such restrictions will require each party to a transfer to
provide an affidavit that no purpose
of such transfer is to impede the assessment or collection of
tax, including certain
representations as to the financial condition of the prospective
transferee, as to which the
transferor also is required to make a reasonable investigation to
determine such transferee's
historic payment of its debts and ability to continue to pay its
debts as they come due in the
future. Prior to purchasing a REMIC Residual Certificate,
prospective purchasers should
consider the possibility that a purported transfer of such REMIC
Residual Certificate by
such a purchaser to another purchaser at some future date may be
disregarded in accordance
with the above-described rules which would result in the
retention of tax liability by such
purchaser.

The related Prospectus Supplement will disclose whether
offered REMIC Residual
Certificates may be considered "noneconomic" residual interests
under the REMIC
Regulations. Any such disclosure that a REMIC Residual
Certificate will not be considered
"noneconomic" will be based upon certain assumptions, and the
Company will make no
representation that a REMIC Residual Certificate will not be
considered "noneconomic" for
purposes of the above-described rules. See " Foreign Investors in
REMIC Certificates"
below for additional restrictions applicable to transfers of
certain REMIC Residual
Certificates to foreign persons.

Mark-to-Market Rules. On December 28, 1993, the IRS released
temporary
regulations (the "Mark-to-Market Regulations") relating to the
requirement that a securities
dealer mark to market securities held for sale to customers. This
mark-to-market
requirement applies to all securities owned by a dealer, except
to the extent that the dealer
has specifically identified a security as held for investment.
The Mark-to-Market
Regulations provide that for purposes of this mark-to-market
requirement, a "negative
value" REMIC Residual Certificate is not treated as a security
and thus generally may not
be marked to market. This exclusion from the mark-to-market
requirement is expanded to
include all REMIC Residual Certificates under proposed Treasury
regulations published
January 4, 1995 which provide that any REMIC Residual Certificate
issued after January
4, 1995 will not be treated as a security and therefore generally
may not be marked to
market. Prospective purchasers of a REMIC Residual Certificate
should consult their tax
advisors regarding the possible application of the mark-to-market
requirement to REMIC
Residual Certificates.

Possible Pass-Through of Miscellaneous Itemized Deductions.
Fees and expenses
of a REMIC generally will be allocated to the holders of the
related REMIC Residual
Certificates. The applicable Treasury regulations indicate,
however, that in the case of a
REMIC that is similar to a single class grantor trust, all or a
portion of such fees and
expenses should be allocated to the holders of the related REMIC
Regular Certificates.
Unless otherwise stated in the related Prospectus Supplement,
such fees and expenses will
be allocated to holders of the related REMIC Residual
Certificates in their entirety and not
to the holders of the related REMIC Regular Certificates.

With respect to REMIC Residual Certificates or REMIC Regular
Certificates the
holders of which receive an allocation of fees and expenses in
accordance with the
preceding discussion, if any holder thereof is an individual,
estate or trust, or a "pass-through entity" beneficially owned by
one or more individuals, estates or trusts, (i) an
amount equal to such individual's, estate's or trust's share of
such fees and expenses will be
added to the gross income of such holder and (ii) such
individual's, estate's or trust's share
of such fees and expenses will be treated as a miscellaneous
itemized deduction allowable
subject to the limitation of Section 67 of the Code, which
permits such deductions only to
the extent they exceed in the aggregate two percent of a
taxpayer's adjusted gross income.
In addition, Section 68 of the Code provides that the amount of
itemized deductions
otherwise allowable for an individual whose adjusted gross income
exceeds a specified
amount will be reduced by the lesser of (i) 3% of the excess of
the individual's adjusted
gross income over such amount or (ii) 80% of the amount of
itemized deductions otherwise
allowable for the taxable year. The amount of additional taxable
income reportable by
REMIC Certificateholders that are subject to the limitations of
either Section 67 or Section
68 of the Code may be substantial. Furthermore, in determining
the alternative minimum
taxable income of such a holder of a REMIC Certificate that is an
individual, estate or trust,
or a "pass-through entity" beneficially owned by one or more
individuals, estates or trusts,
no deduction will be allowed for such holder's allocable portion
of servicing fees and other
miscellaneous itemized deductions of the REMIC, even though an
amount equal to the
amount of such fees and other deductions will be included in such
holder's gross income.
Accordingly, such REMIC Certificates may not be appropriate
investments for individuals,
estates, or trusts, or pass-through entities beneficially owned
by one or more individuals,
estates or trusts. Such prospective investors should consult with
their tax advisors prior to
making an investment in such Certificates.

Sales of REMIC Certificates

If a REMIC Certificate is sold, the selling Certificateholder
will recognize gain or
loss equal to the difference between the amount realized on the
sale and its adjusted basis
in the REMIC Certificate. The adjusted basis of a REMIC Regular
Certificate generally will
equal the cost of such REMIC Regular Certificate to such
Certificateholder, increased by
income reported by such Certificateholder with respect to such
REMIC Regular Certificate
(including original issue discount and market discount income)
and reduced (but not below
zero) by distributions on such REMIC Regular Certificate received
by such
Certificateholder and by any amortized premium. The adjusted
basis of a REMIC Residual
Certificate will be determined as described under " Taxation of
Owners of REMIC
Residual Certificates Basis Rules, Net Losses and Distributions"
above. Except as
described below, any such gain or loss generally will be capital
gain or loss. The Code as
of the date of this Prospectus provides for a top marginal tax
rate of 39.6% for individuals
and a maximum marginal rate for long-term capital gains of
individuals of 28%. No such
rate differential exists for corporations. In addition, the
distinction between a capital gain
or loss and ordinary income or loss remains relevant for other
purposes.

Gain from the sale of a REMIC Regular Certificate that might
otherwise be capital
gain will be treated as ordinary income to the extent such gain
does not exceed the excess,
if any, of (i) the amount that would have been includible in the
seller's income with respect
to such REMIC Regular Certificate had income accrued thereon at a
rate equal to 110% of
the "applicable federal rate" (generally, a rate based on an
average of current yields on
Treasury securities having a maturity comparable to that of the
Certificate, which rate is
computed and published monthly by the IRS), determined as of the
date of purchase of such
REMIC Regular Certificate, over (ii) the amount of ordinary
income actually includible in
the seller's income prior to such sale. In addition, gain
recognized on the sale of a REMIC
Regular Certificate by a seller who purchased such REMIC Regular
Certificate at a market
discount will be taxable as ordinary income to the extent of any
accrued and previously
unrecognized market discount that accrued during the period the
Certificate was held. See
" Taxation of Owners of REMIC Regular Certificates Market
Discount" above.

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

A portion of any gain from the sale of a REMIC Regular
Certificate that might
otherwise be capital gain may be treated as ordinary income to
the extent that such
Certificate is held as part of a "conversion transaction" within
the meaning of Section 1258
of the Code. A conversion transaction generally is one in which
the taxpayer has taken two
or more positions in Certificates or similar property that reduce
or eliminate market risk, if
substantially all of the taxpayer's return is attributable to the
time value of the taxpayer's net
investment in such transaction. The amount of gain so realized in
a conversion transaction
that is recharacterized as ordinary income generally will not
exceed the amount of interest
that would have accrued on the taxpayer's net investment at 120%
of the appropriate
"applicable federal rate" (which rate is computed and published
monthly by the IRS) at the
time the taxpayer enters into the conversion transaction, subject
to appropriate reduction for
prior inclusion of interest and other ordinary income items from
the transaction.

Finally, a taxpayer may elect to have net capital gain taxed
at ordinary income rates
rather than capital gains rates in order to include such net
capital gain in total net investment
income for the taxable year, for purposes of the limitation on
the deduction of interest on
indebtedness incurred to purchase or carry property held for
investment to a taxpayer's net
investment income.

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

Prohibited Transactions and Other Possible REMIC Taxes

The Code imposes a tax on REMICs equal to 100% of the net
income derived from
"prohibited transactions" (the "Prohibited Transactions Tax"). In
general, subject to certain
specified exceptions a prohibited transaction means the
disposition of an item of Mortgage
Collateral, the receipt of income from a source other than an
item of Mortgage Collateral
or certain other permitted investments, the receipt of
compensation for services, or gain
from the disposition of an asset purchased with the payments on
the Mortgage Collateral for
temporary investment pending distribution on the REMIC
Certificates. It is not anticipated
that any REMIC will engage in any prohibited transactions in
which it would recognize a
material amount of net income.

In addition, certain contributions to a REMIC made after the
day on which the
REMIC issues all of its interests could result in the imposition
of a tax on the REMIC equal
to 100% of the value of the contributed property (the
"Contributions Tax"). Each Pooling
and Servicing Agreement or Trust Agreement will include
provisions designed to prevent
the acceptance of any contributions that would be subject to such
tax.

REMICs also are 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. "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. Unless otherwise disclosed in the related
Prospectus Supplement, it is not
anticipated that any REMIC will recognize "net income from
foreclosure property" subject
to federal income tax.

Unless otherwise disclosed in the related Prospectus
Supplement, it is not
anticipated that any material state or local income or franchise
tax will be imposed on any
REMIC.

Unless otherwise stated in the related Prospectus Supplement,
and to the extent
permitted by then applicable laws, any Prohibited Transactions
Tax, Contributions Tax, tax
on "net income from foreclosure property" or state or local
income or franchise tax that may
be imposed on the REMIC will be borne by the related Master
Servicer, the Certificate
Administrator or the Trustee in either case out of its own funds,
provided that the Master
Servicer, the Certificate Administrator or the Trustee, as the
case may be, has sufficient
assets to do so, and provided further that such tax arises out of
a breach of the Master
Servicer's, the Certificate Administrator's or the Trustee's
obligations, as the case may be,
under the related Pooling and Servicing Agreement or Trust
Agreement and in respect of
compliance with applicable laws and regulations. Any such tax not
borne by the Master
Servicer, the Certificate Administrator or the Trustee will be
payable out of the related Trust
Fund resulting in a reduction in amounts payable to holders of
the related REMIC
Certificates.

Tax and Restrictions on Transfers of REMIC Residual
Certificates to Certain
Organizations

If a REMIC Residual Certificate is transferred to a
"disqualified organization" (as
defined below), a tax would be imposed in an amount (determined
under the REMIC
Regulations) equal to the product of (i) the present value
(discounted using the "applicable
federal rate" for obligations whose term ends on the close of the
last quarter in which excess
inclusions are expected to accrue with respect to the
Certificate, which rate is computed and
published monthly by the IRS) of the total anticipated excess
inclusions with respect to such
REMIC Residual Certificate for periods after the transfer and
(ii) the highest marginal
federal income tax rate applicable to corporations. The
anticipated excess inclusions must
be determined as of the date that the REMIC Residual Certificate
is transferred and must
be based on events that have occurred up to the time of such
transfer, the Prepayment
Assumption and any required or permitted clean up calls or
required liquidation provided
for in the REMIC's organizational documents. Such a tax generally
would be imposed on
the transferor of the REMIC Residual Certificate, except that
where such transfer is through
an agent for a disqualified organization, the tax would instead
be imposed on such agent.
However, a transferor of a REMIC 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.
Moreover, an entity will not
qualify as a REMIC unless there are reasonable arrangements
designed to ensure that (i)
residual interests in such entity are not held by disqualified
organizations and (ii)
information necessary for the application of the tax described
herein will be made available.
Restrictions on the transfer of REMIC Residual Certificates and
certain other provisions that
are intended to meet this requirement will be included in the
Pooling and Servicing
Agreement or Trust Agreement, including provisions (a) requiring
any transferee of a
REMIC Residual Certificate to provide an affidavit representing
that it is not a "disqualified
organization" and is not acquiring the REMIC Residual Certificate
on behalf of a
"disqualified organization," undertaking to maintain such status
and agreeing to obtain a
similar affidavit from any person to whom it shall transfer the
REMIC Residual Certificate,
(b) providing that any transfer of a REMIC Residual Certificate
to a "disqualified person"
shall be null and void and (c) granting to the Master Servicer or
Certificate Administrator,
as applicable, the right, without notice to the holder or any
prior holder, to sell to a
purchaser of its choice any REMIC Residual Certificate that shall
become owned by a
"disqualified organization" despite (a) and (b) above.

In addition, if a "pass-through entity" (as defined below)
includes in income excess
inclusions with respect to a REMIC Residual Certificate, and a
disqualified organization is
the record holder of an interest in such entity, then a tax will
be imposed on such entity
equal to the product of (i) the amount of excess inclusions on
the REMIC Residual
Certificate that are allocable to the interest in the
pass-through entity held by such
disqualified organization and (ii) the highest marginal federal
income tax rate imposed on
corporations. A pass-through entity will not be subject to this
tax for any period, however,
if each record holder of an interest in such pass-through entity
furnishes to such pass-through entity (i) such holder's social
security number and a statement under penalties of
perjury that such social security number is that of the record
holder or (ii) a statement under
penalties of perjury that such record holder is not a
disqualified organization.

For these purposes, a "disqualified organization" means (i)
the United States, any
State or political subdivision thereof, any foreign government,
any international
organization, or any agency or instrumentality of the foregoing
(but would not include
instrumentalities described in Section 168(h)(2)(D) of the Code
or Freddie Mac), (ii) any
organization (other than a cooperative described in Section 521
of the Code) that is exempt
from federal income tax, unless it is subject to the tax imposed
by Section 511 of the Code
or (iii) any organization described in Section 1381(a)(2)(C) of
the Code. For these purposes,
a "pass-through entity" means any regulated investment company,
real estate investment
trust, trust, partnership or certain other entities described in
Section 860E(e)(6) of the Code.
In addition, a person holding an interest in a pass-through
entity as a nominee for another
person will, with respect to such interest, be treated as a
pass-through entity.

Termination

A REMIC will terminate immediately after the Distribution
Date following receipt
by the REMIC of the final payment in respect of the Mortgage
Collateral or upon a sale of
the REMIC's assets following the adoption by the REMIC of a plan
of complete liquidation.
The last distribution on a REMIC Regular Certificate will be
treated as a payment in
retirement of a debt instrument. In the case of a REMIC Residual
Certificate, if the last
distribution on such REMIC Residual Certificate is less than the
Certificateholder's adjusted
basis in such Certificate, such Certificateholder should be
treated as realizing a loss equal
to the amount of such difference, and such loss may be treated as
a capital loss.

Reporting and Other Administrative Matters

Solely for purposes of the administrative provisions of the
Code, the REMIC will
be treated as a partnership and holders of REMIC Residual
Certificates will be treated as
partners. Unless otherwise stated in the related Prospectus
Supplement, the Master Servicer
or the Certificate Administrator, as applicable, will file REMIC
federal income tax returns
on behalf of the related REMIC and will be designated as and will
act as the "tax matters
person" for the REMIC in all respects, and may hold a nominal
amount of REMIC Residual
Certificates.

As the tax matters person, the Master Servicer or the
Certificate Administrator, as
applicable, subject to certain notice requirements and various
restrictions and limitations,
generally will have the authority to act on behalf of the REMIC
and the holders of REMIC
Residual Certificates in connection with the administrative and
judicial review of items of
income, deduction, gain or loss of the REMIC, as well as the
REMIC's classification.
Holders of REMIC Residual Certificates generally will be required
to report such REMIC
items consistently with their treatment on the related REMIC's
tax return and may in some
circumstances be bound by a settlement agreement between the
Master Servicer or the
Certificate Administrator, as applicable, as tax matters person,
and the IRS concerning any
such REMIC item. Adjustments made to the REMIC tax return may
require a holder of a
REMIC Residual Certificate to make corresponding adjustments on
its return, and an audit
of the REMIC's tax return, or the adjustments resulting from such
an audit, could result in
an audit of such Certificateholder's return. No REMIC will be
registered as a tax shelter
pursuant to Section 6111 of the Code because it is not
anticipated that any REMIC will have
a net loss for any of the first five taxable years of its
existence. Any person that holds a
REMIC Residual Certificate as a nominee for another person may be
required to furnish to
the related REMIC, in a manner to be provided in Treasury
regulations, the name and
address of such person and other information.

Reporting of interest income, including any original issue
discount, with respect to
REMIC Regular Certificates is required annually, and may be
required more frequently
under Treasury regulations. These information reports generally
are required to be sent to
individual holders of REMIC Regular Interests and the IRS;
holders of REMIC Regular
Certificates that are corporations, trusts, securities dealers
and certain other non-individuals
will be provided interest and original issue discount income
information and the information
set forth in the following paragraph upon request in accordance
with the requirements of the
applicable regulations. The information must be provided by the
later of 30 days after the
end of the quarter for which the information was requested, or
two weeks after the receipt
of the request. The REMIC must also comply with rules requiring a
REMIC Regular
Certificate issued with original issue discount to disclose on
its face certain information
including the amount of original issue discount and the issue
date, and requiring such
information to be reported to the IRS. Reporting with respect to
the REMIC Residual
Certificates, including income, excess inclusions, investment
expenses and relevant
information regarding qualification of the REMIC's assets will be
made as required under
the Treasury regulations, generally on a quarterly basis.

As applicable, the REMIC Regular Certificate information
reports will include a
statement of the adjusted issue price of the REMIC Regular
Certificate at the beginning of
each accrual period. In addition, the reports will include
information required by regulations
with respect to computing the accrual of any market discount.
Because exact computation
of the accrual of market discount on a constant yield method
requires information relating
to the holder's purchase price that the Master Servicer or the
Certificate Administrator will
not have, such regulations only require that information
pertaining to the appropriate
proportionate method of accruing market discount be provided. See
" Taxation of Owners
of REMIC Regular Certificates Market Discount."

The responsibility for complying with the foregoing reporting
rules will be borne
by the Master Servicer or the Certificate Administrator.
Certificateholders may request any
information with respect to the returns described in Section
1.6049-7(e)(2) of the Treasury
regulations. Such request should be directed to the Master
Servicer or the Certificate
Administrator, as applicable, at Residential Funding Corporation,
8400 Normandale Lake
Boulevard, Suite 600, Minneapolis, Minnesota 55437.

Backup Withholding with Respect to REMIC Certificates

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

Foreign Investors in REMIC Certificates

A REMIC Regular Certificateholder that is not a "United
States person" and is not
subject to federal income tax as a result of any direct or
indirect connection to the United
States in addition to its ownership of a REMIC Regular
Certificate will not be subject to
United States federal income or withholding tax in respect of a
distribution on a REMIC
Regular Certificate, provided that the holder complies to the
extent necessary with certain
identification requirements (including delivery of a statement,
signed by the
Certificateholder under penalties of perjury, certifying that
such Certificateholder is not a
United States person and providing the name and address of such
Certificateholder). For
these purposes, "United States person" means a citizen or
resident of the United States, a
corporation, partnership or other entity created or organized in,
or under the laws of, the
United States or any political subdivision thereof, or an estate
or trust whose income from
sources without the United States is includible in gross income
for United States federal
income tax purposes regardless of its connection with the conduct
of a trade or business
within the United States. It is possible that the IRS may assert
that the foregoing tax
exemption should not apply with respect to a REMIC Regular
Certificate held by a
Certificateholder that owns directly or indirectly a 10% or
greater interest in the REMIC
Residual Certificates. If the holder does not qualify for
exemption, distributions of interest,
including distributions in respect of accrued original issue
discount, to such holder may be
subject to a tax rate of 30%, subject to reduction under any
applicable tax treaty.

In addition, the foregoing rules will not apply to exempt a
United States shareholder
of a controlled foreign corporation from taxation on such United
States shareholder's
allocable portion of the interest income received by such
controlled foreign corporation.

Further, it appears that a REMIC Regular Certificate would
not be included in the
estate of a non-resident alien individual and would not be
subject to United States estate
taxes. However, Certificateholders who are non-resident alien
individuals should consult
their tax advisors concerning this question.

Unless otherwise stated in the related Prospectus Supplement,
transfers of REMIC
Residual Certificates to investors that are not United States
persons will be prohibited under
the related Pooling and Servicing Agreement or Trust Agreement.

STATE AND OTHER TAX CONSEQUENCES

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

ERISA CONSIDERATIONS

ERISA imposes certain fiduciary and prohibited transaction
restrictions on
employee pension and welfare benefit plans subject to ERISA
("ERISA Plans"). Section
4975 of the Code imposes similar prohibited transaction
restrictions on tax-qualified
retirement plans described in Section 401(a) of the Code
("Qualified Retirement Plans") and
on individual retirement accounts and annuities ("IRAs")
described in Section 408 of the
Code (collectively, "Tax-Favored Plans").

Certain employee benefit plans, such as governmental plans
(as defined in Section
3(32) of ERISA), are not subject to the ERISA requirements
discussed herein. Accordingly,
assets of such plans may be invested in Certificates without
regard to the ERISA
considerations described below, subject to the provisions of
applicable federal and state law.
Any such plan that is a Qualified Retirement Plan and exempt from
taxation under Sections
401(a) and 501(a) of the Code, however, is subject to the
prohibited transaction rules set
forth in Section 503 of the Code.

In addition to imposing general fiduciary requirements,
including those of
investment prudence and diversification and the requirement that
a Plan's investment be
made in accordance with the documents governing the Plan, Section
406 of ERISA and
Section 4975 of the Code prohibit a broad range of transactions
involving "plan assets" of
ERISA Plans and Tax-Favored Plans (collectively, "Plans") and
persons ("Parties in
Interest" under ERISA or "Disqualified Persons" under the Code)
who have certain
specified relationships to the Plans, unless a statutory or
administrative exemption is
available. Certain Parties in Interest or Disqualified Persons
that participate in a prohibited
transaction may be subject to a penalty (or an excise tax)
imposed pursuant to Section 502(i)
of ERISA or Section 4975 of the Code, unless a statutory or
administrative exemption is
available.

Plan Asset Regulations

An investment of Plan Assets in Certificates may cause the
underlying Mortgage
Loans, Contracts or Agency Securities included in a Trust Fund to
be deemed "plan assets"
of such Plan. The U.S. Department of Labor (the "DOL") has
promulgated regulations at
29 C.F.R. (S) 2510.3-101 (the "DOL 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 applying the general fiduciary
responsibility provisions of ERISA and
the prohibited transaction provisions of ERISA and Section 4975
of the Code, when a Plan
acquires an "equity interest" (such as a Certificate) in such
entity. Because of the factual
nature of certain of the rules set forth in the DOL Regulations,
Plan Assets either may be
deemed to include an interest in the assets of an entity (such as
a Trust Fund) or may be
deemed merely to include its interest in the instrument
evidencing such equity interest (such
as a Certificate). Therefore, neither Plans nor such entities
should acquire or hold
Certificates in reliance upon the availability of any exception
under the DOL Regulations.
For purposes of this section, the term "plan assets" ("Plan
Assets") or "assets of a Plan" has
the meaning specified in the DOL Regulations and includes an
undivided interest in the
underlying assets of certain entities in which a Plan invests.

The prohibited transaction provisions of Section 406 of ERISA
and Section 4975
of the Code may apply to a Trust Fund and cause the Company, the
Master Servicer, the
Certificate Administrator, any Servicer, any Sub-Servicer, the
Trustee, the obligor under any
credit enhancement mechanism or certain affiliates thereof to be
considered or become
Parties in Interest or Disqualified Persons with respect to an
investing Plan (or of a Plan
holding an interest in such an entity). If so, the acquisition or
holding of Certificates by or
on behalf of the investing Plan could also give rise to a
prohibited transaction under ERISA
and/or Section 4975 of the Code, unless some statutory or
administrative exemption is
available. Certificates acquired by a Plan would be assets of
that Plan. Under the DOL
Regulations, the Trust Fund, including the Mortgage Loans,
Contracts or Agency Securities
and the other assets held in the Trust Fund, may also be deemed
to be assets of each Plan
that acquires Certificates. Special caution should be exercised
before Plan Assets are used
to acquire a Certificate in such circumstances, especially if,
with respect to such assets, the
Company, the Master Servicer, the Certificate Administrator, any
Servicer, any Sub-Servicer, the Trustee, the obligor under any
credit enhancement mechanism or an affiliate
thereof either (i) has investment discretion with respect to the
investment of Plan Assets;
or (ii) has authority or responsibility to give (or regularly
gives) investment advice with
respect to Plan Assets for a fee pursuant to an agreement or
understanding that such advice
will serve as a primary basis for investment decisions with
respect to such Plan Assets.

Any person who has discretionary authority or control
respecting the management
or disposition of Plan Assets, and any person who provides
investment advice with respect
to such Plan Assets for a fee (in the manner described above), is
a fiduciary of the investing
Plan. If the Mortgage Loans, Contracts or Agency Securities were
to constitute Plan Assets,
then any party exercising management or discretionary control
regarding those Plan Assets
may be deemed to be a Plan "fiduciary," and thus subject to the
fiduciary requirements of
ERISA and the prohibited transaction provisions of ERISA and
Section 4975 of the Code
with respect to any investing Plan. In addition, if the Mortgage
Loans, Contracts or Agency
Securities were to constitute Plan Assets, then the acquisition
or holding of Certificates by,
on behalf of or with Plan Assets, as well as the operation of the
Trust Fund, may constitute
or involve a prohibited transaction under ERISA and the Code.

Prohibited Transaction Exemption

On March 29, 1994, the DOL issued (with an effective date of
June 9, 1992) an
individual exemption (the "Exemption"), to Residential Funding
and certain of its affiliates,
which generally exempts from the application of the prohibited
transaction provisions of
Section 406 of ERISA, and the excise taxes imposed on such
prohibited transactions
pursuant to Section 4975(a) and (b) of the Code, certain
transactions, among others, relating
to the servicing and operation of pools of certain secured
obligations such as Mortgage
Loans, Cooperative Loans, Contracts or Agency Securities which
are held in a trust and the
purchase, sale and holding of pass-through certificates issued by
such a trust as to which (i)
the Company or any of its affiliates is the sponsor if any entity
which has received from the
DOL an individual prohibited transaction exemption which is
similar to the Exemption is
the sole underwriter, or manager or co-manager of the
underwriting syndicate or a seller or
placement agent, or (ii) the Company or an affiliate is the
underwriter, provided that certain
conditions set forth in the Exemption are satisfied. For purposes
of this section, the term
"Underwriter" shall include (a) the Company and certain of its
affiliates, (b) any person
directly or indirectly, through one or more intermediaries,
controlling, controlled by or
under common control with the Company and certain of its
affiliates, (c) any member of the
underwriting syndicate or selling group of which a person
described in (a) or (b) is a
manager or co-manager with respect to a class of Certificates, or
(d) any entity which has
received an exemption from the DOL relating to Certificates which
is similar to the
Exemption.

The Exemption sets forth six general conditions which must be
satisfied for a
transaction involving the purchase, sale and holding of
Certificates to be eligible for
exemptive relief thereunder. First, the acquisition of
Certificates by a Plan or with Plan
Assets must be on terms that are at least as favorable to the
Plan as they would be in an
arm's-length transaction with an unrelated party. Second, the
Exemption only applies to
Certificates evidencing rights and interests that are not
subordinated to the rights and
interests evidenced by the other Certificates of the same trust.
Third, the Certificates at the
time of acquisition by a Plan or with Plan Assets must be rated
in one of the three highest
generic rating categories by Standard & Poor's Ratings Services,
Moody's Investors Service,
Inc., Duff & Phelps, Inc. or Fitch Investors Service, L.P.
Fourth, the Trustee cannot be an
affiliate of any other member of the "Restricted Group" which
consists of any Underwriter,
the Company, the Master Servicer, the Certificate Administrator,
any Servicer, any Sub-Servicer, the Trustee and any mortgagor
with respect to assets of a Trust Fund constituting
more than 5% of the aggregate unamortized principal balance of
the assets in the related
Trust Fund as of the date of initial issuance of the
Certificates. Fifth, the sum of all
payments made to and retained by the underwriters must represent
not more than reasonable
compensation for underwriting the Certificates; the sum of all
payments made to and
retained by the Company pursuant to the assignment of the assets
to the related Trust Fund
must represent not more than the fair market value of such
obligations; and the sum of all
payments made to and retained by the Master Servicer, the
Certificate Administrator, any
Servicer or any Sub-Servicer must represent not more than
reasonable compensation for
such person's services under the related Pooling and Servicing
Agreement or Trust
Agreement and reimbursement of such person's reasonable expenses
in connection
therewith. Sixth, the Exemption states that the investing Plan or
Plan Asset investor must
be an accredited investor as defined in Rule 501(a)(1) of
Regulation D of the Commission
under the Securities Act of 1933, as amended.

A fiduciary of or other investor of Plan Assets contemplating
purchasing a
Certificate must make its own determination that the general
conditions set forth above will
be satisfied with respect to such Certificate.

If the general conditions of the Exemption are satisfied, the
Exemption may provide
an exemption from the restrictions imposed by Sections 406(a) and
407 of ERISA (as well
as the excise taxes imposed by Sections 4975(a) and (b) of the
Code by reason of Sections
4975(c)(1)(A) through (D) of the Code) in connection with the
direct or indirect sale,
exchange, transfer, holding or the direct or indirect acquisition
or disposition in the
secondary market of Certificates by a Plan or with Plan Assets.
However, no exemption is
provided from the restrictions of Sections 406(a)(1)(E) and
406(a)(2) of ERISA for the
acquisition or holding of a Certificate by a Plan or with Plan
Assets of an Excluded Plan by
any person who has discretionary authority or renders investment
advice with respect to
Plan Assets of such Excluded Plan. For purposes of the
Certificates, an "Excluded Plan" is
a Plan sponsored by any member of the Restricted Group.

If certain specific conditions of the Exemption are also
satisfied, the Exemption
may provide an exemption from the restrictions imposed by
Sections 406(b)(1) and (b)(2)
of ERISA and the taxes imposed by Section 4975(c)(1)(E) of the
Code in connection with
(1) the direct or indirect sale, exchange or transfer of
Certificates in the initial issuance of
Certificates between the Company or an Underwriter and a Plan
when the person who has
discretionary authority or renders investment advice with respect
to the investment of the
relevant Plan Assets in the Certificates is (a) a mortgagor with
respect to 5% or less of the
fair market value of the assets of a Trust Fund or (b) an
affiliate of such a person, (2) the
direct or indirect acquisition or disposition in the secondary
market of Certificates by a Plan
or with Plan Assets and (3) the holding of Certificates by a Plan
or with Plan Assets.

Additionally, if certain specific conditions of the Exemption
are satisfied, the
Exemption may provide an exemption from the restrictions imposed
by Sections 406(a),
406(b) and 407 of ERISA, and the taxes imposed by Sections
4975(a) and (b) of the Code
by reason of Section 4975(c) of the Code, for transactions in
connection with the servicing,
management and operation of the Mortgage Pools and Contract
Pools. The Company
expects that the specific conditions of the Exemption required
for this purpose will be
satisfied with respect to the Certificates so that the Exemption
would provide an exemption
from the restrictions imposed by Sections 406(a) and (b) of ERISA
(as well as the excise
taxes imposed by Sections 4975(a) and (b) of the Code by reason
of Section 4975(c) of the
Code) for transactions in connection with the servicing,
management and operation of the
Mortgage Pools and Contract Pools, provided that the general
conditions of the Exemption
are satisfied.

The Exemption also may provide an exemption from the
restrictions imposed by
Sections 406(a) and 407(a) of ERISA, and the taxes imposed by
Section 4975(a) and (b) of
the Code by reason of Sections 4975(c)(1)(A) through (D) of the
Code if such restrictions
are deemed to otherwise apply merely because a person is deemed
to be a Party in Interest
or a Disqualified Person with respect to an investing Plan (or
the investing entity holding
Plan Assets) by virtue of providing services to the Plan or such
Plan Assets (or by virtue of
having certain specified relationships to such a person) solely
as a result of the ownership
of Certificates by a Plan or such Plan Asset investor.

Before purchasing a Certificate, a fiduciary or other
investor of Plan Assets should
itself confirm (a) that the Certificates constitute
"certificates" for purposes of the Exemption
and (b) that the specific and general conditions set forth in the
Exemption and the other
requirements set forth in the Exemption would be satisfied. In
addition to making its own
determination as to the availability of the exemptive relief
provided in the Exemption, the
fiduciary or other investor of Plan Assets should consider its
general fiduciary obligations
under ERISA in determining whether to purchase any Certificates
with Plan Assets.

Any fiduciary or other investor of Plan Assets that proposes
to purchase Certificates
on behalf of or with Plan Assets should consult with its counsel
with respect to the potential
applicability of ERISA and the Code to such investment and the
availability of the
Exemption or any other prohibited transaction exemption in
connection therewith. In
particular, in connection with a contemplated purchase of
Certificates representing a
beneficial ownership interest in a pool of single-family
residential first Mortgage Loans or
Agency Certificates, such fiduciary or other Plan investor should
consider the availability
of the Exemption or Prohibited Transaction Class Exemption
("PTCE") 83-1 ("PTCE 83-1")
for certain transactions involving mortgage pool investment
trusts. However, PTCE 83-1
does not provide exemptive relief with respect to Certificates
evidencing interests in Trust
Funds that include Mortgage Loans secured by third or more junior
liens, Contracts or
Cooperative Loans. In addition, such fiduciary or other Plan
investor should consider the
availability of PTCE 95-60, regarding investments by insurance
company general accounts,
PTCE 90-1, regarding investments by insurance company pooled
separate accounts, PTCE
91-38, regarding investments by bank collective investment funds,
and PTCE 84-14,
regarding transactions effected by "qualified professional asset
managers." The Prospectus
Supplement with respect to a series of Certificates may contain
additional information
regarding the application of the Exemption, PTCE 83-1, or any
other exemption, with
respect to the Certificates offered thereby. There can be no
assurance that any of these
exemptions will apply with respect to any particular Plan's or
other Plan Asset investor's
investment in the Certificates or, even if an exemption were
deemed to apply, that any
exemption would apply to all prohibited transactions that may
occur in connection with such
an investment.

Tax-Exempt Investors

A Plan that is exempt from federal income taxation pursuant
to Section 501 of the
Code (a "Tax-Exempt Investor") nonetheless will be subject to
federal income taxation to
the extent that its income is "unrelated business taxable income"
("UBTI") within the
meaning of Section 512 of the Code. All "excess inclusions" of a
REMIC allocated to a
REMIC Residual Certificate held by a Tax-Exempt Investor will be
considered UBTI and
thus will be subject to federal income tax. See "Certain Federal
Income Tax Consequences-Taxation of Owners of REMIC Residual
Certificates Excess Inclusions."

Consultation with Counsel

Any fiduciary or other investor of Plan Assets that proposes
to acquire or hold
Certificates on behalf of or with Plan Assets of any Plan should
consult with its counsel with
respect to the potential applicability of the fiduciary
responsibility provisions of ERISA and
the prohibited transaction provisions of ERISA and the Code to
the proposed investment and
the Exemption, the availability of PTCE 83-1 or any other
prohibited transaction exemption.

LEGAL INVESTMENT MATTERS

Each class of Certificates offered hereby and by the related
Prospectus Supplement
will be rated at the date of issuance in one of the four highest
rating categories by at least
one Rating Agency. Unless otherwise specified in the related
Prospectus Supplement and
except with respect to any class of Certificates that will
evidence an interest in Mortgage
Loans secured by second or more junior liens, each such class
that is, and continues to be,
rated in one of the two highest rating categories by at least one
nationally recognized
statistical rating organization will constitute "mortgage related
securities" for purposes of
SMMEA, and, as such, will be legal investments for persons,
trusts, corporations,
partnerships, associations, business trusts and business entities
(including depository
institutions, life insurance companies and pension funds) created
pursuant to or existing
under the laws of the United States or of any State 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. Under
SMMEA, if a State enacted
legislation on or prior to October 3, 1991 specifically limiting
the legal investment authority
of any such entities with respect to "mortgage related
securities," such securities will
constitute legal investments for entities subject to such
legislation only to the extent
provided therein. Certain States enacted legislation which
overrides the preemption
provisions of SMMEA. SMMEA provides, however, that in no event
will the enactment of
any such legislation affect the validity of any contractual
commitment to purchase, hold or
invest in "mortgage related securities," or require the sale or
other disposition of such
securities, so long as such contractual commitment was made or
such securities acquired
prior to the enactment of such legislation.

SMMEA also amended the legal investment authority of
federally-chartered
depository institutions as follows: federal savings and loan
associations and federal savings
banks may invest in, sell or otherwise deal with "mortgage
related securities" without
limitation as to the percentage of their assets represented
thereby, federal credit unions may
invest in such securities, and national banks may purchase such
securities for their own
account without regard to the limitations generally applicable to
investment securities set
forth in 12 U.S.C. (S) 24 (Seventh), subject in each case to such
regulations as the
applicable federal regulatory authority may prescribe.

The Federal Financial Institutions Examination Council has
issued a supervisory
policy statement (the "Policy Statement") applicable to all
depository institutions, setting
forth guidelines for and significant restrictions on investments
in "high-risk mortgage
securities." The Policy Statement has been adopted by the Federal
Reserve Board, the Office
of the Comptroller of the Currency, the FDIC and the Office of
Thrift Supervision (the
"OTS") with an effective date of February 10, 1992. The Policy
Statement generally
indicates that a mortgage derivative product will be deemed to be
high risk if it exhibits
greater price volatility than a standard fixed-rate thirty-year
mortgage security. According
to the Policy Statement, prior to purchase, a depository
institution will be required to
determine whether a mortgage derivative product that it is
considering acquiring is high-risk
and, if so, that the proposed acquisition would reduce the
institution's overall interest rate
risk. Reliance on analysis and documentation obtained from a
securities dealer or other
outside party without internal analysis by the institution would
be unacceptable. There can
be no assurance as to which classes of Certificates will be
treated as high-risk under the
Policy Statement.

The predecessor to the OTS issued a bulletin, entitled
"Mortgage Derivative
Products and Mortgage Swaps," which is applicable to thrift
institutions regulated by the
OTS. The bulletin established guidelines for the investment by
savings institutions in certain
"high-risk" mortgage derivative securities and limitations on the
use of such securities by
insolvent, undercapitalized or otherwise "troubled" institutions.
According to the bulletin,
such "high-risk" mortgage derivative securities include
securities having certain specified
characteristics, which may include certain classes of
Certificates. In addition, the National
Credit Union Administration has issued regulations governing
federal credit union
investments which prohibit investment in certain specified types
of securities, which may
include certain classes of Certificates. Similar policy
statements have been issued by
regulators having jurisdiction over other types of depository
institutions.

Certain classes of Certificates offered hereby, including any
class that is not rated
in one of the two highest rating categories by at least one
nationally recognized statistical
rating organization and any class of Certificates that evidences
an interest in Mortgage
Loans secured by second or more junior liens, will not constitute
"mortgage related
securities" for purposes of SMMEA. Any such class of Certificates
will be identified in the
related Prospectus Supplement. Prospective investors in such
classes of Certificates, in
particular, should consider the matters discussed in the
following paragraph.

There may be other restrictions on the ability of certain
investors either to purchase
certain classes of Certificates or to purchase any class of
Certificates representing more than
a specified percentage of the investors' assets. The Company will
make no representations
as to the proper characterization of any class of Certificates
for legal investment or other
purposes, or as to the ability of particular investors to
purchase any class of Certificates
under applicable legal investment restrictions. These
uncertainties may adversely affect the
liquidity of any class of Certificates. Accordingly, all
investors whose investment activities
are subject to legal investment laws and regulations, regulatory
capital requirements or
review by regulatory authorities should consult with their own
legal advisors in determining
whether and to what extent the Certificates of any class
constitute legal investments or are
subject to investment, capital or other restrictions, and, if
applicable, whether SMMEA has
been overridden in any jurisdiction relevant to such investor.

USE OF PROCEEDS

Unless otherwise specified in the related Prospectus
Supplement, substantially all
of the net proceeds to be received from the sale of Certificates
will be applied by the
Company to finance the purchase of, or to repay short-term loans
incurred to finance the
purchase of, the Mortgage Collateral underlying the Certificates
or will be used by the
Company for general corporate purposes. The Company expects that
it will make additional
sales of securities similar to the Certificates from time to
time, but the timing and amount
of any such additional offerings will be dependent upon a number
of factors, including the
volume of mortgage loans, contracts or mortgage securities
purchased by the Company,
prevailing interest rates, availability of funds and general
market conditions.

METHODS OF DISTRIBUTION

The Certificates offered hereby and by the related Prospectus
Supplements will be
offered in series through one or more of the methods described
below. The Prospectus
Supplement prepared for each series will describe the method of
offering being utilized for
that series and will state the net proceeds to the Company from
such sale.

The Company intends that Certificates will be offered through
the following
methods from time to time and that offerings may be made
concurrently through more than
one of these methods or that an offering of a particular series
of Certificates may be made
through a combination of two or more of these methods. Such
methods are as follows:

1. by negotiated firm commitment or best efforts
underwriting and
public re-offering by underwriters;

2. by placements by the Company with institutional
investors through
dealers; and

3. by direct placements by the Company with
institutional investors.

In addition, if specified in the related Prospectus
Supplement, a series of Certificates
may be offered in whole or in part in exchange for the Mortgage
Collateral (and other
assets, if applicable) that would comprise the Trust Fund for
such Certificates.

If underwriters are used in a sale of any Certificates (other
than in connection with
an underwriting on a best efforts basis), such Certificates will
be acquired by the
underwriters for their own account and may be resold from time to
time in one or more
transactions, including negotiated transactions, at fixed public
offering prices or at varying
prices to be determined at the time of sale or at the time of
commitment therefor. Such
underwriters may be broker-dealers affiliated with the Company
whose identities and
relationships to the Company will be as set forth in the related
Prospectus Supplement. The
managing underwriter or underwriters with respect to the offer
and sale of a particular series
of Certificates will be set forth on the cover of the Prospectus
Supplement relating to such
series and the members of the underwriting syndicate, if any,
will be named in such
Prospectus Supplement.

In connection with the sale of the Certificates, underwriters
may receive
compensation from the Company or from purchasers of the
Certificates in the form of
discounts, concessions or commissions. Underwriters and dealers
participating in the
distribution of the Certificates may be deemed to be underwriters
in connection with such
Certificates, and any discounts or commissions received by them
from the Company and
any profit on the resale of Certificates by them may be deemed to
be underwriting discounts
and commissions under the Securities Act of 1933, as amended.

It is anticipated that the underwriting agreement pertaining
to the sale of any series
of Certificates will provide that the obligations of the
underwriters will be subject to certain
conditions precedent, that the underwriters will be obligated to
purchase all such Certificates
if any are purchased (other than in connection with an
underwriting on a best efforts basis)
and that, in limited circumstances, the Company will indemnify
the several underwriters and
the underwriters will indemnify the Company against certain civil
liabilities, including
liabilities under the Securities Act of 1933, as amended, or will
contribute to payments
required to be made in respect thereof.

The Prospectus Supplement with respect to any series offered
by placements
through dealers will contain information regarding the nature of
such offering and any
agreements to be entered into between the Company and purchasers
of Certificates of such
series.

The Company anticipates that the Certificates offered hereby
will be sold primarily
to institutional investors or sophisticated non-institutional
investors. 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,
as amended, in connection with reoffers and sales by them of
Certificates. Holders of
Certificates should consult with their legal advisors in this
regard prior to any such reoffer
or sale.

LEGAL MATTERS

Certain legal matters, including certain federal income tax
matters, will be passed
upon for the Company by Orrick, Herrington & Sutcliffe, New York,
New York, or by
Thacher Proffitt & Wood, New York, New York, as specified in the
Prospectus Supplement.

FINANCIAL INFORMATION

The Company has determined that its financial statements are
not material to the
offering made hereby. The Certificates do not represent an
interest in or an obligation of the
Company. The Company's only obligations with respect to a series
of Certificates will be
to repurchase certain items of Mortgage Collateral upon any
breach of certain limited
representations and warranties made by the Company, or as
otherwise provided in the
applicable Prospectus Supplement.

INDEX OF PRINCIPAL DEFINITIONS

Page

Accrual Certificates . . . . . . . . . . . . . . . . . . . . . .
. . .7
Advance. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 43
Affiliated Seller. . . . . . . . . . . . . . . . . . . . . . . .
. . 27
Agency Securities. . . . . . . . . . . . . . . . . . . . . . . .
. . 10
Agency Securities Pool . . . . . . . . . . . . . . . . . . . . .
. . 17
AlterNet Loans . . . . . . . . . . . . . . . . . . . . . . . . .
. . 18
AlterNet Mortgage Program. . . . . . . . . . . . . . . . . . . .
. . 18
AlterNet Program Seller. . . . . . . . . . . . . . . . . . . . .
. . 27
AlterNet Seller Guide. . . . . . . . . . . . . . . . . . . . . .
. . 24
Appraised Value. . . . . . . . . . . . . . . . . . . . . . . . .
19, 25
ARM Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 20
Balloon Amount . . . . . . . . . . . . . . . . . . . . . . . . .
. . 18
Balloon Loans. . . . . . . . . . . . . . . . . . . . . . . . . .
. . 18
Bankruptcy Amount. . . . . . . . . . . . . . . . . . . . . . . .
. . 52
Bankruptcy Losses. . . . . . . . . . . . . . . . . . . . . . . .
. . 53
Beneficial Owner . . . . . . . . . . . . . . . . . . . . . . . .
. . 32
Bi-Weekly Loans. . . . . . . . . . . . . . . . . . . . . . . . .
. . 18
Book-Entry Certificates. . . . . . . . . . . . . . . . . . . . .
. . 32
Buy-Down Funds . . . . . . . . . . . . . . . . . . . . . . . . .
. . 21
Buy-Down Loans . . . . . . . . . . . . . . . . . . . . . . . . .
. . 18
Buy-Down Period. . . . . . . . . . . . . . . . . . . . . . . . .
. . 21
CEDEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 32
CEDEL Participants . . . . . . . . . . . . . . . . . . . . . . .
. . 33
Certificate Account. . . . . . . . . . . . . . . . . . . . . . .
. . 17
Certificate Administrator. . . . . . . . . . . . . . . . . . . .
. . .1
Certificate Insurance Policy . . . . . . . . . . . . . . . . . .
. . 58
Certificate Registrar. . . . . . . . . . . . . . . . . . . . . .
. . 31
Certificateholder. . . . . . . . . . . . . . . . . . . . . . . .
. . 31
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .1
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 90
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 12
Combined Loan-to-Value Ratio . . . . . . . . . . . . . . . . . .
. . 19
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 17
Committee Report . . . . . . . . . . . . . . . . . . . . . . . .
. . 89
Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .1
Compensating Interest. . . . . . . . . . . . . . . . . . . . . .
. . 44
Contract Pool. . . . . . . . . . . . . . . . . . . . . . . . . .
. . 10
Contract Pool Insurance Policy . . . . . . . . . . . . . . . . .
. . 56
Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .1
Contributions Tax. . . . . . . . . . . . . . . . . . . . . . . .
. .101
Conventional Loans . . . . . . . . . . . . . . . . . . . . . . .
. . 18
Convertible Mortgage Loan. . . . . . . . . . . . . . . . . . . .
. . 21
Cooperative. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 33
Cooperative Dwellings. . . . . . . . . . . . . . . . . . . . . .
. . 18
Cooperative Loans. . . . . . . . . . . . . . . . . . . . . . . .
. . .9
Cooperative Note . . . . . . . . . . . . . . . . . . . . . . . .
. . 75
Cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 18
Crime Control Act. . . . . . . . . . . . . . . . . . . . . . . .
. . 87
Custodial Account. . . . . . . . . . . . . . . . . . . . . . . .
. . 17
Custodian. . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 17
Cut-off Date . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 17
Debt Service Reduction . . . . . . . . . . . . . . . . . . . . .
. . 57
Defaulted Mortgage Losses. . . . . . . . . . . . . . . . . . . .
. . 53
Deferred Interest. . . . . . . . . . . . . . . . . . . . . . . .
. . 21
Deficient Valuation. . . . . . . . . . . . . . . . . . . . . . .
. . 57
Depositaries . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 32
Determination Date . . . . . . . . . . . . . . . . . . . . . . .
. . 41
Disqualified Persons . . . . . . . . . . . . . . . . . . . . . .
. .105
Distribution Amount. . . . . . . . . . . . . . . . . . . . . . .
. . 40
Distribution Date. . . . . . . . . . . . . . . . . . . . . . . .
. . .8
DOL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .105
DOL Regulations. . . . . . . . . . . . . . . . . . . . . . . . .
. .105
DTC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 32
DTC Participants . . . . . . . . . . . . . . . . . . . . . . . .
. . 32
Due Date . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 41
Eligible Account . . . . . . . . . . . . . . . . . . . . . . . .
. . 38
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 12
ERISA Plans. . . . . . . . . . . . . . . . . . . . . . . . . . .
. .105
Escrow Account . . . . . . . . . . . . . . . . . . . . . . . . .
. . 46
Euroclear. . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 32
Euroclear Operator . . . . . . . . . . . . . . . . . . . . . . .
. . 33
Euroclear Participants . . . . . . . . . . . . . . . . . . . . .
. . 33
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .2
Excluded Plan. . . . . . . . . . . . . . . . . . . . . . . . . .
. .107
Exemption. . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .106
Extraordinary Losses . . . . . . . . . . . . . . . . . . . . . .
. . 53
Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 17
Fannie Mae Securities. . . . . . . . . . . . . . . . . . . . . .
. . 17
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 27
FHA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 18
FHA Contracts. . . . . . . . . . . . . . . . . . . . . . . . . .
. . 24
FHA Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 18
Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 17
Fraud Loss Amount. . . . . . . . . . . . . . . . . . . . . . . .
. . 52
Fraud Losses . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 53
Freddie Mac. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 17
Freddie Mac Act. . . . . . . . . . . . . . . . . . . . . . . . .
. . 26
Freddie Mac Securities . . . . . . . . . . . . . . . . . . . . .
. . 17
Garn-St Germain Act. . . . . . . . . . . . . . . . . . . . . . .
. . 80
Ginnie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 17
Ginnie Mae Securities. . . . . . . . . . . . . . . . . . . . . .
. . 17
GMAC Mortgage. . . . . . . . . . . . . . . . . . . . . . . . . .
. . .1
GPM Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 18
Gross Margin . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 20
High Cost Loans. . . . . . . . . . . . . . . . . . . . . . . . .
. . 80
Housing Act. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 25
HUD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 18
Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 20
Indirect Participants. . . . . . . . . . . . . . . . . . . . . .
. . 32
Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . .
. . 37
IRAs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .105
IRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 90
Issue Premium. . . . . . . . . . . . . . . . . . . . . . . . . .
. . 96
Junior Mortgage Loans. . . . . . . . . . . . . . . . . . . . . .
. . 13
Junior Mortgage Ratio. . . . . . . . . . . . . . . . . . . . . .
. . 20
Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . .
. . 54
Letter of Credit Bank. . . . . . . . . . . . . . . . . . . . . .
. . 54
Liquidated Contract. . . . . . . . . . . . . . . . . . . . . . .
. . 50
Liquidated Mortgage Loan . . . . . . . . . . . . . . . . . . . .
. . 50
Liquidation Proceeds . . . . . . . . . . . . . . . . . . . . . .
. . 37
Loan-to-Value Ratio. . . . . . . . . . . . . . . . . . . . . . .
. . 19
Manufactured Home. . . . . . . . . . . . . . . . . . . . . . . .
. . 10
Mark-to-Market Regulations . . . . . . . . . . . . . . . . . . .
. . 99
Master Commitments . . . . . . . . . . . . . . . . . . . . . . .
. . 24
Master Servicer. . . . . . . . . . . . . . . . . . . . . . . . .
. . .1
Maximum Mortgage Rate. . . . . . . . . . . . . . . . . . . . . .
. . 20
Mezzanine Certificates . . . . . . . . . . . . . . . . . . . . .
. . .7
Minimum Mortgage Rate. . . . . . . . . . . . . . . . . . . . . .
. . 20
Modified Mortgage Loan . . . . . . . . . . . . . . . . . . . . .
. . 18
Mortgage Collateral. . . . . . . . . . . . . . . . . . . . . . .
. . .1
Mortgage Collateral Seller . . . . . . . . . . . . . . . . . . .
. . .9
Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . .
. . .1
Mortgage Note. . . . . . . . . . . . . . . . . . . . . . . . . .
. . 34
Mortgage Pool. . . . . . . . . . . . . . . . . . . . . . . . . .
. . .9
Mortgage Pool Insurance Policy . . . . . . . . . . . . . . . . .
. . 54
Mortgage Rates . . . . . . . . . . . . . . . . . . . . . . . . .
. . 18
Mortgaged Property . . . . . . . . . . . . . . . . . . . . . . .
.9, 10
Mortgages. . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 18
Mortgagors . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 13
Neg-Am ARM Loans . . . . . . . . . . . . . . . . . . . . . . . .
. . 20
Net Mortgage Rate. . . . . . . . . . . . . . . . . . . . . . . .
. . 69
Nonrecoverable Advance . . . . . . . . . . . . . . . . . . . . .
. . 39
OID Regulations. . . . . . . . . . . . . . . . . . . . . . . . .
. . 87
OTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .109
Participants . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 32
Parties in Interest. . . . . . . . . . . . . . . . . . . . . . .
. .105
Pass-Through Rate. . . . . . . . . . . . . . . . . . . . . . . .
. . .7
Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 40
Percentage Interest. . . . . . . . . . . . . . . . . . . . . . .
. . 40
Periodic Cap . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 20
Permitted Investments. . . . . . . . . . . . . . . . . . . . . .
. . 38
Plan Assets. . . . . . . . . . . . . . . . . . . . . . . . . . .
. .105
Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .105
Policy Statement . . . . . . . . . . . . . . . . . . . . . . . .
. .109
Pool Insurer . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 54
Pooling and Servicing Agreement. . . . . . . . . . . . . . . . .
. . .1
Prepayment Interest Shortfall. . . . . . . . . . . . . . . . . .
. . 43
Primary Insurance Policy . . . . . . . . . . . . . . . . . . . .
. . 60
Primary Insurer. . . . . . . . . . . . . . . . . . . . . . . . .
. . 60
Principal Prepayments. . . . . . . . . . . . . . . . . . . . . .
. . 42
Prohibited Transactions Tax. . . . . . . . . . . . . . . . . . .
. .101
PTCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .108
PTCE 83-1. . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .108
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . .
. . 29
Qualified Insurer. . . . . . . . . . . . . . . . . . . . . . . .
. . 59
Qualified Retirement Plans . . . . . . . . . . . . . . . . . . .
. .105
Qualified Substitute Contract. . . . . . . . . . . . . . . . . .
. . 30
Qualified Substitute Mortgage Loan . . . . . . . . . . . . . . .
. . 30
Rating Agency. . . . . . . . . . . . . . . . . . . . . . . . . .
. . 11
Realized Loss. . . . . . . . . . . . . . . . . . . . . . . . . .
. . 51
Record Date. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 40
Registration Statement . . . . . . . . . . . . . . . . . . . . .
. . .2
REMIC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .1
REMIC Certificates . . . . . . . . . . . . . . . . . . . . . . .
. . 87
REMIC Provisions . . . . . . . . . . . . . . . . . . . . . . . .
. . 87
REMIC Regular Certificates . . . . . . . . . . . . . . . . . . .
. . 88
REMIC Regulations. . . . . . . . . . . . . . . . . . . . . . . .
. . 88
REMIC Residual Certificates. . . . . . . . . . . . . . . . . . .
. . 88
REO Contract . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 50
REO Mortgage Loan. . . . . . . . . . . . . . . . . . . . . . . .
. . 50
Repurchased Contract . . . . . . . . . . . . . . . . . . . . . .
. . 30
Repurchased Mortgage Loan. . . . . . . . . . . . . . . . . . . .
. . 30
Reserve Fund . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 57
Residential Funding. . . . . . . . . . . . . . . . . . . . . . .
. . .6
Restricted Group . . . . . . . . . . . . . . . . . . . . . . . .
. .106
RICO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 87
Senior Certificates. . . . . . . . . . . . . . . . . . . . . . .
. . .7
Senior Percentage. . . . . . . . . . . . . . . . . . . . . . . .
. . 52
Senior/Subordinate Series. . . . . . . . . . . . . . . . . . . .
. . 31
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .1
Servicing Advances . . . . . . . . . . . . . . . . . . . . . . .
. . 39
Servicing Fee. . . . . . . . . . . . . . . . . . . . . . . . . .
. . 46
Single Certificate . . . . . . . . . . . . . . . . . . . . . . .
. . 45
SMMEA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 11
Special Hazard Amount. . . . . . . . . . . . . . . . . . . . . .
. . 52
Special Hazard Insurance Policy. . . . . . . . . . . . . . . . .
. . 56
Special Hazard Insurer . . . . . . . . . . . . . . . . . . . . .
. . 56
Special Hazard Losses. . . . . . . . . . . . . . . . . . . . . .
. . 53
Special Servicer . . . . . . . . . . . . . . . . . . . . . . . .
. . 48
Spread . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 36
Stated Principal Balance . . . . . . . . . . . . . . . . . . . .
. . 52
Strip Certificate. . . . . . . . . . . . . . . . . . . . . . . .
. . .7
Sub-Servicer . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 45
Sub-Servicing Agreement. . . . . . . . . . . . . . . . . . . . .
. . 45
Subordinate Certificates . . . . . . . . . . . . . . . . . . . .
. . .7
Surety Bond. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 58
Tax-Exempt Investor. . . . . . . . . . . . . . . . . . . . . . .
. .108
Tax-Favored Plans. . . . . . . . . . . . . . . . . . . . . . . .
. .105
Terms and Conditions . . . . . . . . . . . . . . . . . . . . . .
. . 33
Tiered REMICs. . . . . . . . . . . . . . . . . . . . . . . . . .
. . 89
Title V. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 81
Title VIII . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 81
Trust Agreement. . . . . . . . . . . . . . . . . . . . . . . . .
. . .1
Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .1
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 17
UBTI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .108
UCC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 78
Unaffiliated Seller. . . . . . . . . . . . . . . . . . . . . . .
. . 27
Underwriter. . . . . . . . . . . . . . . . . . . . . . . . . . .
. .106
VA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 18
VA Contracts . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 24
VA Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 18

<PAGE>

NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY 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 TO ANYONE IN ANY JURISDICTION 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

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Summary.................................................................... S-3
Risk Factors............................................................... S-11
Description of the Mortgage Pool........................................... S-12
Description of the Certificates............................................ S-32
The Insurer................................................................ S-42
Certain Yield and Prepayment Considerations................................ S-43
Pooling and Servicing Agreement............................................ S-49
Certain Federal Income Tax Consequences.................................... S-51
Method of Distribution..................................................... S-52
Legal Opinions............................................................. S-53
Experts.................................................................... S-53
Ratings.................................................................... S-53
Legal Investment........................................................... S-54
ERISA Considerations....................................................... S-54
Appendix A................................................................. A-1
PROSPECTUS
Additional Information..................................................... 2
Reports to Certificateholders.............................................. 2
Incorporation of Certain Information by Reference.......................... 2
Summary of Prospectus...................................................... 4
Risk Factors............................................................... 11
The Trust Funds............................................................ 14
Description of the Certificates............................................ 27
Subordination.............................................................. 46
Description of Credit Enhancement.......................................... 48
Insurance Policies on Mortgage Loans or Contracts.......................... 54
The Company................................................................ 58
Residential Funding Corporation............................................ 58
The Pooling and Servicing Agreement........................................ 58
Yield Considerations....................................................... 62
Maturity and Prepayment Considerations..................................... 65
Certain Legal Aspects of Mortgage Loans and Contracts...................... 68
Certain Federal Income Tax Consequences.................................... 80
State and Other Tax Consequences........................................... 97
ERISA Considerations....................................................... 97
Legal Investment Matters................................................... 100
Use of Proceeds............................................................ 102
Methods of Distribution.................................................... 102
Legal Matters.............................................................. 103
Financial Information...................................................... 103
Index of Principal Definitions............................................. 104
</TABLE>

RESIDENTIAL ASSET SECURITIES
CORPORATION

MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1996-KS3

$143,731,008
ADJUSTABLE RATE CLASS A CERTIFICATES

RESIDENTIAL FUNDING SECURITIES CORPORATION

PROSPECTUS SUPPLEMENT

JUNE 20, 1996