Prospectus Supplement

Prospectus Supplement dated March 30, 2005 (to Prospectus dated September 28, 2004)

You should consider carefully the risk factors beginning on page S-10 in this prospectus supplement.

The Impac CMB Trust Series 2005-3 will consist primarily of a pool of adjustable and fixed-rate, first lien one- to four-family residential mortgage loans and fixed-rate, second lien one- to four-family residential mortgage loans.

The trust will issue eleven classes of bonds, the Class A-1, Class A-2, Class A-3, Class A-IO, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, and Class B Bonds, each of which is offered under this prospectus supplement.

The offered bonds will have credit enhancement in the form of excess interest and overcollateralization, subordination and a surety bond issued by Financial Guaranty Insurance Company for the benefit of the Class A-3 Bonds only.

In addition, derivative contracts will be included in the trust to cover basis risk shortfalls on the bonds, and, in some situations, to provide additional net monthly excess cashflow on the bonds.

The price to investors will vary from time to time and will be determined at the time of sale. The proceeds to the company from the offering will be approximately 100.41% of the sum of the aggregate initial bond principal balance of the Class A-1, Class A-2 and Class A-3 Bonds and the aggregate bond principal balance of the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, and Class B Bonds, less expenses estimated to be approximately $900,000. See “Method of Distribution” in this prospectus supplement.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the offered bonds or determined that this prospectus supplement or the prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

The Attorney General of the State of New York has not passed on or endorsed the merits of this offering. Any representation to the contrary is unlawful.

Important notice about information presented in this prospectus supplement and

You should rely on the information contained in this document. We have not authorized anyone to provide you with different information.

We provide information to you about the bonds in two separate documents that provide progressively more detail:

The Company’s principal offices are located at 1401 Dove Street, Newport Beach, California 92660 and its phone number is (949) 475-3600.

The following summary is a very general overview of the bonds and does not contain all of the information that you should consider in making your investment decision. To understand all of the terms of the bonds, you should read carefully this entire document and the accompanying prospectus.

Class A-1, Class A-2, Class A-3, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds:

The bond interest rate on the Class A-1, Class A-2 , Class A-3, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds will be equal to the least of:

The company will establish Impac CMB Trust Series 2005-3, a Delaware statutory trust, pursuant to a trust agreement among the company, the owner trustee and the certificate registrar. The trust will issue the bonds pursuant to an indenture between the issuer and the indenture trustee. On the closing date, the company will deposit into the trust the initial mortgage loans and the original pre-funded amount described below.

The trust will also include a surety bond provided by Financial Guaranty Insurance Company, which will guarantee certain payments on the Class A-3 Bonds.

In addition, the company will assign to the trust five derivative contracts, which may cover basis risk shortfalls on the related bonds and may provide additional net monthly excess cashflow.

Payments of interest and principal on the bonds will be made from payments received from the assets of the trust as described in this prospectus supplement.

The beneficial ownership interest in the trust will be represented by the certificates, which are not offered by this prospectus supplement.

The trust will initially contain mortgage loans consisting of one- to four-family, adjustable rate and fixed-rate, residential mortgage loans secured by first liens on the related mortgaged property and one- to four-family, fixed-rate, residential mortgage loans secured by second liens on the related mortgaged property.

The interest rate on the adjustable-rate mortgage loans will adjust on each adjustment date to equal the sum of the related index and the related gross margin on such mortgage loan, subject to a maximum and minimum interest rate, as described in this prospectus supplement.

The mortgage loans will include initial mortgage loans and subsequent mortgage loans. The initial mortgage loans will be the mortgage loans deposited into the trust on the closing date. The subsequent mortgage loans will be purchased with amounts on deposit in the pre-funding account described in this prospectus supplement and deposited in the trust no later than June 30, 2005.

The statistical information included in this prospectus supplement with respect to the mortgage loans is based on a pool of 4,006 sample mortgage loans as of the cut-off date. The characteristics of the final mortgage loans will not materially differ from the information provided with respect to the sample mortgage loans. Unless otherwise specified, all percentages described with respect to the sample mortgage loans are calculated based on the aggregate principal balance of the sample mortgage loans as of the cut-off date. It is expected that mortgage loans will be added to and certain sample mortgage loans will be deleted from the pool of sample mortgage loans to constitute the final pool of mortgage loans.

Approximately 82.83% of the sample mortgage loans have adjustable rates and are secured by first liens on the related mortgage property. Approximately 16.13% of the sample mortgage loans have fixed rates and are secured by first liens on the related mortgage property. Approximately 1.04% of the sample mortgage loans have fixed rates and are secured by second liens on the related mortgage property.

The sample mortgage loans have original terms to maturity of not greater than 30 years and the following characteristics as of the cut-off date:

For additional information regarding the mortgage loans, see “The Mortgage Pool” in this prospectus supplement.

On or before June 30, 2005, the company may sell and the indenture trustee will be obligated to purchase, on behalf of the trust, subsequent mortgage loans to be included in the mortgage pool.

On the closing date, the company will pay to the indenture trustee, an amount equal to the difference between:

the aggregate stated principal balance of the initial mortgage loans as of the cut-off date plus the undercollateralized amount of the bonds on the closing date,

which will be held by the indenture trustee in the pre-funding account. The amounts on deposit in the pre-funding account will be reduced by the amounts thereof used to purchase the subsequent mortgage loans during the period from the closing date up to and including June 30, 2005. Any amounts remaining in the pre-funding account after June 30, 2005, will be distributed as principal on the next payment date to the holders of the related offered securities.

On the closing date, the company will pay to the indenture trustee for deposit in an interest coverage account, an amount which will be applied by the indenture trustee to cover shortfalls in the amount of interest generated by the mortgage loans attributable to the pre-funding feature.

For additional information regarding the interest coverage account, see “Description of the Bonds-Interest Coverage Account” in this prospectus supplement.

Priority of Payments. In general, on any payment date, funds available for distribution from payments and other amounts received on the mortgage loans, after the payment of certain fees, will be distributed in the following order:

To pay accrued bond interest, sequentially, (i) first, concurrently to the Class A-1 Bonds, Class A-2 Bonds, Class A-3 Bonds and Class A-IO Bonds, and (ii) second, sequentially, to the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds.

Amounts available after paying interest on the Class A-1, Class A-2, Class A-3, Class A-IO, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds will be used to pay principal on these bonds (except the Class A-IO Bonds) on a pro rata basis as described in this prospectus supplement.

Amounts available after paying interest and principal as described above and certain amounts from the related derivative contracts to the extent not used to cover basis risk shortfalls will be the related net monthly excess cashflow and will be used for various purposes, including reimbursing the bond insurer and paying principal on the bonds, on a pro rata basis, to create and maintain the target amount of overcollateralization and making payments for reimbursement of losses.

See “Description of the Bonds” in this prospectus supplement for additional information.

The credit enhancement provided for the benefit of the holders of the bonds consists of net monthly excess cashflow, overcollateralization, the

subordination provided to the Class A Bonds by the Class M Bonds and Class B Bonds and to each class of Class M Bonds by each class of Class M Bonds with a lower payment priority and the Class B Bonds and, a surety bond issued by Financial Guaranty Insurance Company for the benefit of the Class A-3 Bonds.

See “The Bond Insurer” and “Description of the Bonds- Overcollateralization Provisions,” “-Allocation of Realized Losses,” “-Description of the Bond Insurance Policy,” “-Subordination,” and “-Allocation of Losses” in this prospectus supplement.

The trust will include five derivative contracts. On the closing date, either the seller will assign to the company, and the company will assign to the issuer for the benefit of the bonds, its rights under the derivative contracts, or the seller will cause the issuer to enter into the derivative contracts with the derivative contract counterparty. Payments under the derivative contracts will be made pursuant to the formulas described in this prospectus supplement. Net swap payments paid to the trust under the derivative contracts will be available first, to cover basis risk shortfalls on the bonds as follows: to the Class A Bonds (other than the Class A-IO Bonds) on a pro rata basis, then sequentially to the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds and second, on or after the payment date in May 2006, any remaining amounts shall be included in the net monthly excess cashflow for the mortgage loans. Any amounts received from the derivative contracts not used to cover basis risk shortfalls or net excess cashflow as described in this prospectus supplement shall be paid to the holders of the certificates.

See “Description of the Bonds - The Derivative Contracts” in this prospectus supplement.

Approximately 50.72% of the mortgage loans with a loan-to-value at origination in excess 80.00% will be insured by a primary insurance policy issued by a private mortgage insurer (other than a policy issued by the PMI Insurer) or a primary insurance policy issued by the PMI Insurer. Approximately 1.12% of the mortgage loans (by aggregate principal balance of the related loan group as of the cut-off date), will be insured by an insurance policy issued by the PMI Insurer. However, each such policy will provide only limited protection against losses on defaulted mortgage loans which are covered by such policy. See “The Mortgage Pool—Primary Mortgage Insurance” and “—PMI Policy” in this prospectus supplement.

At its option, the majority holder of the certificates, not offered pursuant to this prospectus supplement, may purchase the bonds from the trust, effecting an early retirement of the bonds, on or after the earlier of (i) the payment date on which the sum of the aggregate stated principal balance of the mortgage loans and pre-funded amount have been reduced to less than or equal to 20% of the sum of the aggregate stated principal balance of the mortgage loans as of the cut-off date and the aggregate amount deposited into the pre-funding account on the closing date and (ii) the payment date occurring in March 2015; provided further that if the majority holder of the certificates fails to exercise such option, the bond insurer will have the right to exercise such option with respect to the Class A-3 Bonds only.

See “Description of the Bonds - Optional Redemption” in this prospectus supplement.

For federal income tax purposes, the bonds will be treated as indebtedness to a bondholder other than the owner of the certificates and not as an equity interest in the issuer.

When issued, the bonds will receive ratings not lower than the ratings set forth on page S-4 of this prospectus supplement. The ratings on the bonds address the likelihood that holders of the bonds will receive all distributions on the underlying mortgage loans to which they are entitled. However, the ratings do not address the possibility that bondholders might suffer a lower than anticipated yield.

A security rating is not a recommendation to buy, sell or hold a security and is subject to change or withdrawal at any time by the assigning rating agency. The ratings also do not address the rate of principal prepayments on the mortgage loans.

In particular, the rate of prepayments, if different than originally anticipated, could adversely affect the yield realized by holders of the bonds.

The bonds will not constitute “mortgage related securities” for purposes of SMMEA.

See “Legal Investment” in this prospectus supplement and in the prospectus.

The bonds may be eligible for purchase by persons investing assets of employee benefit plans or individual retirement accounts, subject to important considerations. Plans should consult with their legal advisors before investing in the bonds.

You should carefully consider, among other things, the following factors in connection with the purchase of the bonds:

The Bonds May Have Limited Liquidity, So You May Be Unable to Sell Your Securities or May Be Forced to Sell Them at a Discount from Their Fair Market Value

There can be no assurance that a secondary market for the bonds will develop or, if one does develop, that it will provide holders of the bonds with liquidity of investment or that it will continue for the life of the bonds. As a result, any resale prices that may be available for any bond in any market that may develop may be at a discount from the initial offering price or the fair market value thereof. The bonds will not be listed on any securities exchange.

The Mortgage Loans Were Underwritten to Non-Conforming Underwriting Standards, Which May Result in Losses or Shortfalls on the Bonds

The mortgage loans were underwritten generally in accordance with underwriting standards which are primarily intended to provide for single family “non-conforming” mortgage loans. A “non-conforming” mortgage loan means a mortgage loan which is ineligible for purchase by Fannie Mae or Freddie Mac due to either credit characteristics of the related mortgagor or documentation standards in connection with the underwriting of the related mortgage loan that do not meet the Fannie Mae or Freddie Mac underwriting guidelines for “A” credit mortgagors. These credit characteristics include mortgagors whose creditworthiness and repayment ability do not satisfy such Fannie Mae or Freddie Mac underwriting guidelines and mortgagors who may have a record of credit write-offs, outstanding judgments, prior bankruptcies and other credit items that do not satisfy such Fannie Mae or Freddie Mac underwriting guidelines. These documentation standards may include mortgagors who provide limited or no documentation in connection with the underwriting of the related mortgage loan. Accordingly, mortgage loans underwritten under the seller’s non-conforming credit underwriting standards are likely to experience rates of delinquency, foreclosure and loss that are higher, and may be substantially higher, than mortgage loans originated in accordance with the Fannie Mae or Freddie Mac underwriting guidelines. Any resulting losses, to the extent not covered by credit enhancement, may affect the yield to maturity of the bonds.

The Credit Enhancement Is Limited, and the Potential Inadequacy of the Credit Enhancement May Cause Losses or Shortfalls to Be Incurred on the Bonds

On the closing date, the bond principal balance of the bonds will exceed the aggregate principal balance of the mortgage loans resulting in undercollateralization of the bonds.

The credit enhancement features described in the summary of this prospectus supplement are intended to enhance the likelihood that holders of the Class A Bonds, and to a more limited extent, the holders of the Class M Bonds and Class B Bonds, will receive regular payments of interest and in the case of all these Bonds (other than the Class A-IO Bonds), principal. However, we cannot assure you that the applicable credit enhancement will adequately cover any shortfalls in cash available to pay on your bonds as a result of delinquencies or defaults on the mortgage loans. Net monthly excess cashflow may be insufficient to cover current losses or to reimburse bonds for losses incurred in prior periods. On each payment date through September 2005, the overcollateralization target amount will equal approximately 0.00% of the aggregate stated principal balance of the mortgage loans and prefunding balance amount as of the cut-off date. On each payment date after September 2005, the overcollateralization target amount will equal approximately 0.35% of the aggregate stated principal balance of the mortgage loans and prefunding balance amount as of the cut-off date. There can no assurance that net monthly excess cashflow will be sufficient for the amount of overcollateralization to reach its target amount.

If delinquencies or defaults occur on the mortgage loans, neither the master servicer nor any other entity will advance scheduled monthly payments of interest and principal on delinquent or defaulted mortgage loans if, in the good faith judgment of the master servicer, these advances would not be ultimately recovered from the proceeds of the mortgage loan.

If substantial losses occur as a result of defaults and delinquent payments on the mortgage loans, you may suffer losses. Realized losses on the mortgage loans, to the extent not covered by the net monthly excess cashflow or the overcollateralization will be allocated to the Class B, Class M-6, Class M-5, Class M-4, Class M-3, Class M-2, Class M-1, in that order, and then to the Class A-1, Class A-2 and Class A-3 Bonds, on a pro rata basis; provided, however, that any realized losses allocable to the Class A-1 Bonds will be instead applied to the Class A-2 Bonds until the bond principal balance of the Class A-2 Bonds has been reduced to zero and any realized losses allocable to the Class A-3 Bonds will instead be covered by the bond insurance policy.

The indenture trustee will make a draw on the surety bond to the extent that payments on the mortgage loans as described in this prospectus supplement are insufficient to make certain payments on the Class A-3 Bonds.

The ratings of the bonds by the rating agencies may be lowered following the initial issuance thereof as a result of losses on the mortgage loans in excess of the levels contemplated by the rating agencies at the time of their initial rating analysis or, in the case of the Class A-3 Bonds, by a change of the financial strength rating of the bond insurer. None of the company, the master servicer, any subservicer, the bond insurer, the indenture trustee, the owner trustee or any of their respective affiliates will have any obligation to replace or supplement any credit enhancement, or to take any other action to maintain the ratings of the bonds. See “Description of Credit Enhancement” in the prospectus.

Interest Generated by the Mortgage Loans and Amounts Contributed from the Interest Coverage Account May Be Insufficient to Create or Maintain Overcollateralization

The amount of interest generated by the mortgage loans (net of fees and expenses) plus, amounts contributed from the interest coverage account is expected to be higher than the amount of interest required to be paid to the related bonds. Any such excess interest will be used to reimburse the bond insurer, to create or maintain the current level of overcollateralization by covering realized losses on the related mortgage loans, to create additional overcollateralization until the required level of overcollateralization is reached. We cannot assure you, however, that enough excess interest will be available to create or maintain the required level of overcollateralization. The factors described below will affect the amount of excess interest that the mortgage loans will generate:

In addition, during the funding period, amounts on deposit in the pre-funding account will earn a limited amount of interest which will be available to the bondholders. The interest earned will be significantly less than interest generated by the mortgage loans in the trust, and the shortfall will not be covered by any account of the trust or by any third-party, including the bond insurer.

Payments from the Derivative Contracts Are Subject to the Credit Risk of the Derivative Contract Counterparty

Payments made by the derivative contract counterparty will be used first, to cover basis risk shortfalls on the related bonds, and then, up to the amounts described in this prospectus supplement, to be used as net monthly excess cashflow as described in this prospectus supplement. However, if the derivative contract counterparty defaults on its obligations under the derivative contracts, then there may be insufficient funds to cover basis risk shortfalls, and the amount of net monthly excess cashflow may be reduced. As a result, investors in the bonds will be subject to the credit risk of the derivative contract counterparty.

Net Payments by the Issuer to the Derivative Contract Counterparty under the Derivative Contracts May Reduce Excess Interest and the Bond Interest Rate for the Bonds

The amount of excess interest generated by the mortgage loans available for payments to the bonds and amounts on deposit in the pre-funding account will be reduced by net payments to the derivative contract counterparty under the derivative contracts in the event One-Month LIBOR is below the fixed levels set forth in those derivative contracts as described in this prospectus supplement. In addition, the available funds rate and therefore the bond interest rate on the related bonds may be reduced by the requirement of the issuer to pay net payments to the derivative contract counterparty under the derivative contracts.

The Difference Between the Interest Rates on the Bonds and the Mortgage Loans May Result in Basis Risk Shortfall with Respect to Such Bonds

The bond interest rate with respect to the bonds (other than the Class A-IO Bonds) adjusts each month and is based upon the value of an index (One-Month LIBOR) plus the related margin, limited by the related maximum bond interest rate and the available funds rate. However, the mortgage rate of substantially all of the sample adjustable-rate mortgage loans is based upon a different index (Six-Month LIBOR or One-Year LIBOR) plus the related gross margin, and adjusts semi-annually or annually, commencing, in many cases, after an initial fixed-rate period. Also, the mortgage rate on 17.17% of the sample mortgage loans is a fixed rate. One-Month LIBOR, Six-Month LIBOR or One-Year LIBOR may respond differently to economic and market factors, and there is not necessarily any correlation between them. Moreover, the sample adjustable-rate mortgage loans are subject to periodic rate caps, maximum mortgage rates and minimum mortgage rates. Also, because substantially all of the mortgage rates on the sample adjustable-rate mortgage loans adjust semi-annually or annually, and, in many cases, after an initial fixed-rate period, there will be a delay between the change in Six-Month LIBOR or One-Year LIBOR and the rate on the related mortgage loan. Thus, it is possible, for example, that One-Month

LIBOR may rise during periods in which Six-Month LIBOR or One-Year LIBOR is stable or falling or that, even if both One-Month LIBOR and Six-Month LIBOR or One-Year LIBOR rise during the same period, One-Month LIBOR may rise much more rapidly than Six-Month LIBOR or One-Year LIBOR. To the extent that the related bond interest rate is limited to the available funds rate, basis risk shortfalls may occur. See “Description of the Bonds - Interest Payments on the Bonds.”

The derivative contracts will be assigned to, or entered into by, the trust and the net amounts payable from the derivative contracts will provide some protection against any basis risk shortfalls on the bonds, respectively. However, net amounts payable under the derivative contracts are based on the parameters described in this prospectus supplement, and to the extent the actual performance of the final pool of mortgage loans differs from the expectations on which these parameters were based, the derivative contracts may provide insufficient funds to cover these shortfalls.

To the extent that the net amounts payable from the derivative contracts are insufficient to cover basis risk shortfalls on the related bonds, net monthly excess cashflow may be used, subject to the priorities described in this prospectus supplement. However, there can be no assurance that available net monthly excess cashflow will be sufficient to cover these shortfalls, particularly because in a situation where the bond interest rate on a class of bonds is limited to the available funds rate, there will be little or no net monthly excess cashflow. Basis risk shortfalls with respect to the Class A-3 Bonds are not covered by the surety bond and may remain unpaid on the final scheduled payment date.

Approximately 1.04% of the sample mortgage loans (by aggregate outstanding principal balance of the related sample mortgage loans as of the cut-off date) are secured by second liens, rather than first liens. In the case of second liens, proceeds from liquidation of the mortgaged property will be available to satisfy the mortgage loans only if the claims of any senior mortgages have been satisfied in full. When it is uneconomical to foreclose on a mortgaged property or engage in other loss mitigation procedures, the master servicer may write off the entire outstanding balance of the mortgage loan as a bad debt.

Some of the Mortgage Loans in Were Originated Simultaneously with Second Liens

Generally, with respect to the second lien mortgage loans, at the time of origination of the first lien mortgage loan, the seller also originated or acquired a second lien mortgage loan. With respect to these mortgage loans, foreclosure frequency may be increased relative to mortgage loans that were originated without a simultaneous second lien because the mortgagors on such mortgage loans have less equity in the mortgaged property. Investors should also note that any mortgagor may obtain secondary financing at any time subsequent to the date of origination of their mortgage loan from the seller or from any other lender.

Statutory and Judicial Limitations on Foreclosure Procedures May Delay Recovery with Respect to the Mortgaged Properties and, in Some Instances, Limit the Amount That May Be Recovered by the Foreclosing Lender, Resulting in Losses on the Mortgage Loans That Might Cause Losses or Shortfalls to Be Incurred on the Bonds

Foreclosure procedures vary from state to state. Two primary methods of foreclosing a mortgage instrument are judicial foreclosure, involving court proceedings, and non-judicial foreclosure pursuant to a power of sale granted in the mortgage instrument. A foreclosure action is subject to most of the delays and expenses of other lawsuits if defenses are raised or counterclaims are asserted. Delays may also result from difficulties in locating necessary defendants. Non-judicial foreclosures may be subject to delays resulting from state laws mandating the recording of notice of default and notice of sale and, in some

states, notice to any party having an interest of record in the real property, including junior lienholders. Some states have adopted “anti-deficiency” statutes that limit the ability of a lender to collect the full amount owed on a loan if the property sells at foreclosure for less than the full amount owed. In addition, United States courts have traditionally imposed general equitable principles to limit the remedies available to lenders in foreclosure actions that are perceived by the court as harsh or unfair. The effect of these statutes and judicial principles may be to delay and/or reduce payments with respect to the bonds. See “Legal Aspects of Mortgage Loans—Foreclosure on Mortgages and Some Contracts” in the prospectus.

The Value of the Mortgage Loans May Be Affected By, Among Other Things, a Decline in Real Estate Values and Changes in the Borrowers’ Financial Condition, Which May Cause Losses or Shortfalls to Be Incurred on the Bonds

No assurance can be given that values of the mortgaged properties have remained or will remain at their levels as of the dates of origination of the related mortgage loans. If the residential real estate market should experience an overall decline in property values so that the outstanding balances of the mortgage loans, and any secondary financing on the mortgaged properties, 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 particular, mortgage loans with high loan-to- value ratios or high principal balances will be affected by any decline in real estate values. Also, in recent years, property values have risen at a greater rate than previously. Any decrease in the value of the mortgage loans may result in the allocation of losses to the bonds to the extent not covered by credit enhancement.

Some of the Mortgage Loans Have an Initial Interest Only Period, Which May Result in Increased Delinquencies and Losses with Respect to These Mortgage Loans

Approximately 0.06%, 0.12%, 65.19%, 0.05%, and 6.52% of the sample mortgage loans (by aggregate outstanding principal balance of the sample mortgage loans as of the cut-off date) have initial interest only periods of two, three, five, seven, and ten years, respectively. During this period, the payment made by the related borrower will be less than it would be if the mortgage loan amortized. In addition, the mortgage loan balance will not be reduced by the principal portion of scheduled monthly payments during this period. As a result, no principal payments will be made to the bonds from these mortgage loans during their interest only period except in the case of a prepayment.

After the initial interest only period, the scheduled monthly payment on these mortgage loans will increase, which may result in increased delinquencies by the related borrowers, particularly if interest rates have increased and the borrower is unable to refinance. In addition, losses may be greater on these mortgage loans as a result of the mortgage loan not amortizing during the early years of these mortgage loans. Although the amount of principal included in each scheduled monthly payment for a traditional mortgage loan is relatively small during the first few years after origination, in the aggregate the amount can be significant. Any resulting delinquencies and losses, to the extent not covered by credit enhancement, will be allocated to the bonds.

Mortgage loans with an initial interest only period are relatively new in the mortgage marketplace. The performance of these mortgage loans may be significantly different than mortgage loans that fully amortize. In particular, there may be a higher expectation by these borrowers of refinancing their mortgage loans with a new mortgage loan, in particular one with an initial interest only period, which may result in higher or lower prepayment speeds than would otherwise be the case. In addition, the failure to build equity in the property by the related mortgagor may affect the delinquency and prepayment of these mortgage loans.

The Mortgage Loans Are Concentrated in the State of California, Which May Result in Losses with Respect to These Mortgage Loans

Investors should note that some geographic regions of the United States from time to time will experience weaker regional economic conditions and housing markets, and, consequently, mortgage loans from these regions will experience higher rates of loss and delinquency than will be experienced on mortgage loans generally. For example, a region’s economic condition and housing market may be directly, or indirectly, adversely affected by natural disasters such as earthquakes, hurricanes, floods and eruptions, civil disturbances such as riots, and by other disruptions such as ongoing power outages or terrorist actions or acts of war. 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. Approximately 45.11% of the sample mortgage loans (by aggregate outstanding principal balance of the related sample mortgage loans as of the cut-off date), are in the state of California. The concentration of the mortgage loans in the state of California may present risk considerations in addition to those generally present for similar mortgage-backed securities without this concentration. In particular, property values in California have increased at a rate greater than previously in recent years, and may as a result be subject to decline in the future. Any risks associated with mortgage loan concentration may affect the yield to maturity of the bonds to the extent losses caused by these risks which are not covered by credit enhancement are allocated to the bonds.

Some of the Sample Mortgage Loans Provide for Balloon Payments at Maturity, Which May Result in a Greater Risk of Loss with Respect to These Mortgage Loans

Approximately 0.80% of the sample mortgage loans (by aggregate outstanding principal balance of the sample mortgage loans as of the cut-off date) are balloon loans. These mortgage loans will require a substantial payment of principal, or “balloon payment,” at their stated maturity in addition to their scheduled monthly payment. Mortgage loans of this type involve a greater degree of risk than self-amortizing loans because the ability of a mortgagor to make a balloon payment typically will depend upon its ability either to fully refinance the loan or to sell the related mortgaged property at a price sufficient to permit the mortgagor to make the balloon payment. The ability of a mortgagor to accomplish either of these goals will be affected by a number of factors, including the value of the related mortgaged property, the level of available mortgage rates at the time of sale or refinancing, the mortgagor’s equity in the related mortgaged property, prevailing general economic conditions, the availability of credit for loans secured by comparable real properties. Any risks associated with the balloon loans may affect the yield to maturity of the bonds to the extent losses or delays in payment caused by these risks which are not covered by credit enhancement are allocated to, or result in a slower rate of principal payments on, the bonds.

Borrowers may prepay their mortgage loans in whole or in part at any time. We cannot predict the rate at which borrowers will repay their mortgage loans. A prepayment of a mortgage loan generally will result in a prepayment on the bonds:

The Mortgage Loans May Have Environmental Risks, Which May Result in Increased Losses with Respect to These Mortgage Loans

To the extent the master servicer for a mortgage loan acquires title to any related mortgaged property contaminated with or affected by hazardous wastes or hazardous substances, these mortgage loans may incur losses. See “Servicing of Mortgage Loans - Realization upon or Sale of Defaulted Mortgage Loans” and “Legal Aspects of Mortgage Loans - Environmental Legislation” in the prospectus. To the extent these environmental risks result in losses on the mortgage loans, the yield to maturity of the bonds, to the extent not covered by credit enhancement, may be affected.

Some Additional Risks Are Associated with the Class A-2, Class M and Class B Bonds

The weighted average lives of, and the yields to maturity on, the Class A-2, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds will be sensitive to the rate and timing of mortgagor defaults and the severity of ensuing losses on the mortgage loans. If the actual rate and severity of losses on the mortgage loans are higher than those assumed by an investor in the Class A-2, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds, the actual yield to maturity of such bonds may be lower than assumed. The timing of losses on the mortgage loans will also affect an investor’s actual yield to maturity, even if the rate of defaults and severity of losses over the life of the mortgage pool are consistent with an investor’s expectations. In general, the earlier a loss occurs, the greater the effect on an investor’s yield to maturity. Realized losses on the mortgage loans, to the extent they exceed the amount of overcollateralization, and (with respect to the Class A-3 Bonds, payments by the bond insurer pursuant to the surety bond), following payments of principal on the related payment date, will be allocated to the Class B Bonds and then to the Class M Bonds, and thereby reduce

the bond principal balance of the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds, in reverse order of their priority, and thereafter pro rata, to the Class A-1, Class A-2 and Class A-3 Bonds; provided however any losses allocable to the Class A-1 Bonds will instead be applied to the Class A-2 Bonds until the Class A-2 Bonds have been reduced to zero and any losses allocable to the Class A-3 Bonds will instead be covered by the bond insurance policy. As a result of such reductions, less interest will accrue on the such class of Class A-2, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds than would otherwise be the case. Furthermore, the timing of receipt of principal and interest by the Class A-2, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds may be adversely affected by losses even if such class of bonds does not ultimately bear such loss, to the extent losses affect the required amount of overcollateralization.

Once a realized loss is allocated to a Class A-2, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds, no amounts will be distributable with respect to such written-down amount. However, the amount of any realized losses allocated to the Class A-2, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds may be repaid to the holders thereof from the net monthly excess cashflow according to the priorities set forth under “Description of the Bonds - Overcollateralization Provisions” in this prospectus supplement.

Prepayment Interest Shortfalls and Relief Act Shortfalls Will Affect Your Yield

When a principal prepayment in full is made on a mortgage loan, the mortgagor is charged interest only up to the date of the principal prepayment, instead of for a full month. When a partial principal prepayment is made on a mortgage loan, the mortgagor is not charged interest on the amount of the prepayment for any days in the month in which the prepayment is made. In addition, the application of the Relief Act or any similar state or local laws to any mortgage loan will adversely affect, for an indeterminate period of time, the ability of the master servicer to collect full amounts of interest on the mortgage loan. This may result in a shortfall in interest collections available for payment to bondholders on the next payment date. The master servicer is required to cover a portion of the shortfall in interest collections that are attributable to prepayments in full, but only up to the lesser of (a) one-twelfth of 0.125% of the aggregate stated principal balance of the mortgage loans immediately preceding such payment date and (b) the amount of the master servicer’s aggregate master servicing fee and any subservicing fee for the related due period. Prepayment interest shortfalls resulting from prepayments in part will not be covered by the master servicer, any subservicer or otherwise. In addition, certain shortfalls in interest collections arising from the application of the Relief Act or any similar state or local laws will not be covered by the master servicer or any subservicer. Further, any such shortfalls on the Class A-3 Bonds will not be covered by the surety bond.

On any payment date, any shortfalls resulting from the application of the Relief Act or any similar state or local laws and any prepayment interest shortfalls to the extent not covered by compensating interest paid by the master servicer will be allocated to the bonds on a pro rata basis based on the respective amounts of interest accrued on such bonds for such payment date. The holders of the bonds will be entitled to reimbursement for any such interest shortfalls with interest thereon solely from the net monthly excess cashflow in accordance with the payment provisions in this prospectus supplement. If these shortfalls are allocated to the bonds and are not reimbursed on any payment date, the amount of interest paid to those bonds will be reduced, adversely affecting the yield on your investment.

Violation of Various Federal and State Laws May Result in Losses on the Mortgage Loans

Applicable state laws generally regulate interest rates and other charges, require specific disclosure, and require licensing of the seller. In addition, other state laws, public policy and general principles of equity relating to the protection of consumers, unfair and deceptive practices and debt collection practices may apply to the origination, servicing and collection of the mortgage loans.

Depending on the provisions of the applicable law and the specific facts and circumstances involved, violations of these federal or state laws, policies and principles may limit the ability of the trust to collect all or part of the principal of or interest on the mortgage loans, may entitle the borrower to a refund of amounts previously paid and, in addition, could subject the trust to damages and administrative enforcement. See “Legal Aspects of Mortgage Loans -Consumer Compliance Laws and Regulations” in the prospectus.

The seller will represent that as of the closing date, with respect to the initial mortgage loans, and as of the applicable subsequent transfer date, with respect to the subsequent mortgage loans, each mortgage loan at the time it was originated complied in all material respects with applicable local, state and federal laws, including, without limitation, usury, equal credit opportunity, truth-in-lending and disclosure laws. The seller will also represent that each mortgage loan is being serviced in all material respects in accordance with applicable local, state and federal laws, including, without limitation, usury, equal credit opportunity and disclosure laws. In the event of a breach of this representation, it will be obligated to cure the breach or repurchase or replace the affected mortgage loan in the manner described in the prospectus.

There May Be Variations in the Mortgage Loans from the Sample Mortgage Loans

The sample mortgage loans include mortgage loans whose characteristics may vary from the specific characteristics reflected in the mortgage loans, although the extent of such variance is not expected to be material. Within 15 days of the closing date, tables will be filed on Form 8-K reflecting the final composition of the mortgage loans.

There May Be Variations in the Subsequent Mortgage Loans from the Initial Mortgage Loans

Each subsequent mortgage loan generally will satisfy the eligibility criteria described in this prospectus supplement at the time of its sale to the trust. The characteristics of the subsequent mortgage loans, however, may vary from the specific characteristics reflected in the statistical information relating to the sample mortgage loans presented in this prospectus supplement, although the extent of such variance is not expected to be material. Within 15 days of the delivery of the last subsequent mortgage loan to the trust, tables will be filed on Form 8-K reflecting the final pool of mortgage loans.

To the extent that the amounts on deposit in the pre-funding account have not been fully applied to the purchase of subsequent mortgage loans on or before June 30, 2005, the holders of the related bonds then entitled to principal distributions will receive on the payment date immediately following June 30, 2005, any amounts remaining in the pre-funding account. Although no assurance can be given, the company intends that the principal amount of subsequent mortgage loans sold to the indenture trustee will require the application of substantially all amounts on deposit in the pre-funding account and that there will be no material principal payment to the holders of the related bonds on such payment date.

The Ratings on the Bonds Are Not a Recommendation to Buy, Sell or Hold the Bonds and Are Subject to Withdrawal at Any Time, Which May Result in Losses on the Bonds

It is a condition to the issuance of the bonds that each class of bonds be rated no lower than the ratings described on page S-4 of this prospectus supplement. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time. No person is obligated to maintain the rating on any bond, and, accordingly, there can be no assurance that the ratings assigned to any bond on the date on which the bonds are initially issued will not be lowered or withdrawn by a rating agency at any time thereafter. In the event any rating is revised or withdrawn, the liquidity or the market value of the bonds may be adversely affected. See “Ratings” in this prospectus supplement and in the prospectus.

A Transfer of Subservicing May Result in Increased Losses and Delinquencies on the Mortgage Loans

Subservicing of substantially all of the mortgage loans will be transferred to Countrywide Home Loans Servicing LP commencing on or before June 1, 2005. Subservicing of substantially all of the subsequent mortgage loans will be transferred to Countrywide Home Loans Servicing LP within three months of transfer into the trust fund. Investors should note, however, that when the servicing of mortgage loans is transferred, there is generally a rise in delinquencies associated with such transfer. Such increase in delinquencies may result in losses, which, to the extent they are not absorbed by credit enhancement, will cause losses or shortfalls to be incurred by the holders of the bonds. In addition, any higher default rate resulting from such transfer may result in an acceleration of prepayments on these mortgage loans.

The Recording of Mortgages in the Name of MERS May Affect the Yield on the Bonds.

The mortgages or assignments of mortgage for some of the mortgage loans have been or may be recorded in the name of Mortgage Electronic Registration Systems, Inc., or MERS, solely as nominee for the seller and its successors and assigns. Subsequent assignments of those mortgages are registered electronically through the MERS® System. However, if MERS discontinues the MERS® System and it becomes necessary to record an assignment of the mortgage to the indenture trustee, then any related expenses shall be paid by the trust and will reduce the amount available to pay principal of and interest on the bonds. The recording of mortgages in the name of MERS is a new practice in the mortgage lending industry. Public recording officers and others may have limited, if any, experience with lenders seeking to foreclose mortgages, assignments of which are registered with MERS. Accordingly, delays and additional costs in commencing, prosecuting and completing foreclosure proceedings and conducting foreclosure sales of the mortgaged properties could result. Those delays and additional costs could in turn delay the payment of liquidation proceeds to bondholders and increase the amount of losses on the mortgage loans.

For additional information regarding MERS and the MERS® System, see “The Mortgage Pool - Sample Mortgage Loan Characteristics” and “Yield on the Bonds-General Yield and Prepayment Considerations” in this prospectus supplement.

The mortgage pool will consist of conventional, one- to four-family, adjustable rate and fixed-rate, fully-amortizing, interest-only residential mortgage loans secured by first liens on mortgaged properties and one- to four-family, fixed-rate, fully-amortizing, balloon residential mortgage loans secured by second liens on mortgaged properties. The mortgage loans will have original terms to maturity of not greater than 30 years.

The Freddie Mac or Fannie Mae conforming balance for mortgage loans secured by a single family property is $359,650 for all mortgage loans other than those originated in Alaska, Hawaii, Guam and the U.S. Virgin Islands, for which it is $539,475. The conforming balance is higher for mortgage loans secured by two- to four-family properties.

The mortgage pool will include the initial mortgage loans and the Subsequent Mortgage Loans. The initial mortgage loans will be the mortgage loans deposited into the trust on the Closing Date. The Subsequent Mortgage Loans will be purchased with amounts on deposit in the Pre-Funding Account described in this prospectus supplement.

The Company will convey the initial mortgage loans to the trust on the Closing Date pursuant to the Trust Agreement. The Company will convey the Subsequent Mortgage Loans to the trust during the Funding Period. The Subsequent Mortgage Loans will be acquired with amounts on deposit in the Pre-Funding Account, pursuant to the Subsequent Transfer Instrument. The Seller will make certain representations and warranties with respect to the initial mortgage loans in the Mortgage Loan Purchase Agreement and with respect to the Subsequent Mortgage Loans in the subsequent mortgage loan purchase agreement. These representations and warranties will be assigned to the indenture trustee for the benefit of the Bondholders and the Bond Insurer. As more particularly described in the prospectus, the Seller will have certain repurchase or substitution obligations in connection with a breach of any such representation or warranty, as well as in connection with an omission or defect in respect of certain constituent documents required to be delivered with respect to the mortgage loans, if such breach, omission or defect cannot be cured and it materially and adversely affects the interests of the Bondholders or the Bond Insurer. See “The Mortgage Pools - Representations by Sellers” in the prospectus.

The mortgage loans will have been originated or acquired by the Seller in accordance with the underwriting criteria described in this prospectus supplement. See “-Underwriting Standards” Below.

Substantially all of the mortgage loans will be subserviced by Countrywide Home Loans Servicing LP. See “Description of the Servicing Agreement — The Subservicers” in this prospectus supplement.

Substantially all of the initial mortgage loans were not 30 days or more delinquent as of the Cut-off Date.

Substantially all of the mortgage loans have scheduled monthly payments due on the first of the month. Each adjustable-rate loan is generally assumable in accordance with the terms of the related mortgage note.

Each mortgage loan is required to be covered by a standard hazard insurance policy. See “Primary Mortgage Insurance, Hazard Insurance; Claims Thereunder-Hazard Insurance Policies” in the prospectus.

The mortgage rate on substantially all of the adjustable-rate mortgage loans will generally adjust semi-annually commencing after an initial period after origination of generally six months, two years, three years or five years, in each case on each applicable adjustment date to a rate equal to the sum, generally rounded to the nearest one-eighth of one percentage point (12.5 basis points), of (i) the related index and (ii) the gross margin. In addition, the mortgage rate on each adjustable-rate mortgage loan is subject on its first adjustment date following its origination to an initial rate cap and on each adjustment date thereafter to a periodic rate cap. All of the adjustable-rate mortgage loans are also subject to maximum and minimum lifetime mortgage rates. The adjustable-rate mortgage loans were generally originated with an initial mortgage rate below the sum of the index at origination and the gross margin. Due to the application of the initial rate caps, periodic rate caps, maximum mortgage rates and minimum mortgage rates, the mortgage rate on any adjustable-rate mortgage loan, as adjusted on any adjustment date, may not equal the sum of the index and the gross margin.

The mortgage rate on substantially all of the sample adjustable-rate mortgage loans adjusts based on an index equal to either One-Month LIBOR, Six-Month LIBOR or One-Year LIBOR. In the event that the related index is no longer available, an index that is based on comparable information will be selected by the Master Servicer, to the extent that it is permissible under the terms of the related mortgage and mortgage note.

Substantially all of the sample adjustable-rate mortgage loans (other than the Seasoned Mortgage Loans) will not have reached their first adjustment date as of the Closing Date. The initial mortgage rate is generally lower than the rate that would have been produced if the applicable gross margin had been added to the index in effect at origination. Adjustable-rate mortgage loans that have not reached their first adjustment date are subject to the initial rate cap on their first adjustment date, and periodic rate caps thereafter.

The index applicable to the determination of the mortgage rate on approximately 71.63% (by the aggregate outstanding principal balance of the sample mortgage loans as of the Cut-off Date) of the sample mortgage loans is the average of the interbank offered rates for six-month United States dollar deposits in the London market as published by Fannie Mae or The Wall Street Journal and, in most cases, as most recently available as of the first business day of the month preceding such adjustment date, or Six-Month LIBOR.

The table below sets forth historical average rates of Six-Month LIBOR for the months indicated as made available from Fannie Mae. The rates are determined from information that is available as of 11:00 a.m. (London time) on the second to last business day of each month. Such average rates 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 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). No assurance can be given as to the level of Six-Month LIBOR on any adjustment date or during the life of any adjustable-rate mortgage loan based on Six-Month LIBOR.

The index applicable to the determination of the mortgage rate on approximately 11.01% (by aggregate outstanding principal balance of the sample mortgage loans as of the Cut-off Date) of the sample mortgage loans is the average of the interbank offered rates for one-year United States dollar deposits in the London market as published by Fannie Mae or The Wall Street Journal and, in most cases, as most recently available as of the first business day of the month preceding such adjustment date, or One-Year LIBOR.

The index applicable to the determination of the mortgage rate on approximately 0.19% (by aggregate outstanding principal balance of the sample mortgage loans as of the Cut-off Date) of the sample mortgage loans will be based on One-Month LIBOR. One-Month LIBOR will be a per annum rate equal to the average of interbank offered rates for one-month U.S. dollar-denominated deposits in the London market based on quotations of major banks as published in The Wall Street Journal and as most recently available as of the time specified in the related mortgage note.

Approximately 71.51% of the sample mortgage loans (by aggregate outstanding principal balance of the related sample mortgage loans as of the Cut-off Date), provide for payment by the mortgagor of a prepayment charge in limited circumstances on prepayments. Generally, mortgage loans with prepayment charges provide for payment of a prepayment charge on some partial or full prepayments made within one year, two years, three years or five years, or other period as provided in the related mortgage note from the date of origination of the mortgage loan. No mortgage loan provides for payment of a prepayment charge on partial or full prepayments made more than six years from the date of origination of that mortgage loan. The amount of the prepayment charge is as provided in the related mortgage note. The prepayment charge will generally apply if, in any twelve-month period during the first year, five years or other period as provided in the related mortgage note from the date of origination of the mortgage loan, the mortgagor prepays an aggregate amount exceeding 20% of the original principal balance of the mortgage loan. The amount of the prepayment charge on the residential loans will generally be equal to 6 months’ advance interest calculated on the basis of the mortgage rate in effect at the time of the prepayment on the amount prepaid in excess of 20% of the original principal balance of the mortgage loan. The prepayment charges may, in certain circumstances, be waived by the Master Servicer or the related subservicer. Some of these prepayment charges may not be enforceable in cases where the mortgagor sells the related mortgaged property. There can be no assurance that the prepayment charges will have any effect on the prepayment performance of the mortgage loans. The Master Servicer will deposit all prepayment charges received on the loans into the Payment Account to be included in the Available Funds.

Approximately 50.72% of the sample mortgage loans with a loan-to-value ratio at origination in excess of 80.00% are insured by one of the following: (1) a Primary Insurance Policy issued by a private mortgage insurer (other than a PMI Insurer Policy) or (2) the PMI Insurer Policy.

Each Primary Insurance Policy will insure against default under each insured mortgage note as follows: (A) for which the outstanding principal balance at origination of such mortgage loan is greater than or equal to 80.01% and up to and including 90.00% of the lesser of the Appraised Value and the sale price, such mortgage loan is covered by a Primary Insurance Policy in an amount equal to at least 12.00% of the Allowable Claim and (B) for which the outstanding principal balance at origination of such mortgage loan exceeded 90.00% of the lesser of the Appraised Value and the sales price, such mortgage loan is covered by a Primary Insurance Policy in an amount equal to at least 20.00% of the Allowable Claim.

See “Primary Mortgage Insurance, Hazard Insurance; Claims Thereunder - Hazard Insurance Policies” in the Prospectus.

Radian Guaranty Inc., a Pennsylvania corporation with its principal offices in Philadelphia, Pennsylvania, is a private mortgage insurance company and a wholly-owned subsidiary of Radian Group Inc., an insurance holding company listed on the New York Stock Exchange. Radian is licensed in all 50 states and in the District of Columbia to offer such insurance and is approved as a private mortgage insurer by Fannie Mae and Freddie Mac. Radian’s financial strength is rated “AA” by S&P and Fitch Ratings and “Aa3” by Moody’s. Radian’s financial strength currently is not rated by any other rating agency. Each financial strength rating of Radian should be evaluated independently. The ratings reflect the respective rating agencies’ current assessments of the creditworthiness of Radian and its ability to pay claims on its policies of insurance. Any further explanation as to the significance of the above ratings may be obtained only from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any class of Offered Securities, and such ratings are subject to revision, qualification or withdrawal at any time by the applicable rating agencies. Any downward revision, qualification or withdrawal of any of the above ratings may have an adverse effect on the market prices of the Offered Securities. Radian does not guaranty the market prices of the Offered Securities nor does it guaranty that its financial strength ratings will not be revised, qualified or withdrawn.

Copies of Radian’s quarterly and annual statutory financial statements, which are based on accounting principles that differ in significant respects from generally accepted accounting principles, are available upon request to Radian at Radian Guaranty Inc., 1601 Market Street, Philadelphia, Pennsylvania 19103. Radian’s telephone number is (215) 231-1000.

Approximately 1.12% of the sample mortgage loans by aggregate principal balance as of the Cut-off Date, are insured by the PMI Insurer pursuant to the PMI Insurer Policy. The mortgage loans covered by the PMI Insurer Policy are referred to as the PMI Mortgage Loans. The Insured Percentage of the Claim varies on a loan-by-loan basis based upon the original loan-to-value ratio of the mortgage loan.

The PMI Insurer Policy will only cover those mortgage loans which meet certain underwriting criteria as determined by the PMI Insurer. The PMI Insurer Policy will be required to remain in force with respect to each PMI Mortgage Loan until (i) the principal balance of the PMI Mortgage Loan is paid in full or liquidated, (ii) upon written notice of cancellation of the PMI Insurer Policy from the insured to the PMI Insurer, (iii) upon written notice of cancellation of the PMI Insurer Policy from the PMI Insurer to the insured or (iv) any event specified in the PMI Insurer Policy occurs that allows for the termination of that PMI Insurer Policy by the PMI Insurer.

The PMI Insurer Policy generally will require that delinquencies on any PMI Mortgage Loan must be reported to the PMI Insurer within fifteen (15) days after such loan is three (3) months in default, and appropriate proceedings to obtain title to the property securing such PMI Mortgage Loan must be commenced within six months of default. The PMI Policy under which the PMI Mortgage Loans are insured will contain provisions substantially as follows: (i) a claim generally includes unpaid principal, accrued interest to the date such claim is presented by the insured, and certain advances and expenses as set forth in the PMI Insurer Policy; (ii) when a claim is presented the PMI Insurer will have the option of either (A) paying the claim in full, taking title to the property securing the PMI Mortgage Loan, and arranging for its sale or (B) paying the insured percentage of the claim with the insured retaining title to the property securing the PMI Mortgage Loan; and (iii) a claim generally must be paid within 60 days after the claim is filed by the insured.

Unless approved in writing by the PMI Insurer, the insured under the PMI Insurer Policy will not be permitted to make any change in the terms of a PMI Mortgage Loan, including the borrowed amount, mortgage rate, term or amortization schedule of the PMI Mortgage Loan, except as specifically permitted by the terms of the related PMI Mortgage Loan; nor make any change in the property or other collateral securing the PMI Mortgage Loan; nor release any mortgagor under the PMI Mortgage Loan from liability. If a PMI Mortgage Loan is assumed with the insured’s approval, the PMI Insurer’s liability for coverage of the PMI Mortgage Loan under the related PMI Insurer Policy generally will terminate as of the date of such assumption, unless the applicable PMI Insurer approves the assumption in writing.

The PMI Insurer Policy specifically excludes coverage of: (i) any claim resulting from a default existing at the inception of coverage or occurring after lapse or cancellation of coverage; and (ii) certain claims involving or arising out of any breach by the insured of its obligations under, or its failure to comply with the terms of, the PMI Insurer Policy or of its obligations as imposed by operation of law and (iii) certain other claims as set forth in the PMI Insurer Policy.

In issuing the PMI Insurer Policy, the PMI Insurer will rely upon certain information and data regarding the PMI Mortgage Loans furnished to the PMI Insurer by the originator. The PMI Policy will not insure against a loss sustained by reason of a default arising from or involving certain matters, including (i) any loss arising in connection with the failure of the borrower to make any payment of principal and interest due under a loan which payment arises because the insured exercised its right to call or accelerate such loan or because the term of such loan is shorter than the amortization period, and which payment is for an amount more than twice the regular periodic payments of principal and interest, (ii) any loss from a loan where a delinquency exists at the effective date of the certificate of insurance, as defined in the PMI Insurer Policy, (iii) misrepresentation or fraud in obtaining such PMI Insurer Policy or negligence in origination or servicing of the PMI Mortgage Loans, including, but not limited to, misrepresentation by the lender or certain other persons involved in the origination of the PMI Mortgage Loan or the application for insurance, or (iv) failure to construct a property securing a PMI Mortgage Loan in accordance with specified plans. In addition, the PMI Insurer Policy will not cover the costs or expenses related to the repair of physical damage to a property securing a PMI Mortgage Loan.

The preceding description of the PMI Policy is only a brief outline and does not purport to summarize or describe all of the provisions, terms and conditions of the PMI Insurer Policy. For a more complete description of these provisions, terms and conditions, reference is made to the PMI Insurer Policy, a copies of which are available upon request from the Indenture Trustee.

The statistical information included in this prospectus supplement with respect to the sample mortgage loans is based on a pool of 4,006 sample mortgage loans. References to percentages of the sample mortgage loans unless otherwise noted are calculated based on the aggregate principal balance of the sample mortgage loans as of the Cut-off Date.

The original mortgages for some of the sample mortgage loans have been, or in the future may be, at the sole discretion of the Master Servicer, recorded in the name of Mortgage Electronic Registration Systems, Inc., or MERS, solely as nominee for the Seller and its successors and assigns, and subsequent assignments of those mortgages have been, or in the future may be, at the sole discretion of the Master Servicer, registered electronically through the MERS® System. In some other cases, the original mortgage was recorded in the name of the originator of the sample mortgage loan, record ownership was later assigned to MERS, solely as nominee for the owner of the sample mortgage loan, and subsequent assignments of the mortgage were, or in the future may be, at the sole discretion of the Master Servicer, registered electronically through the MERS® System. For each of these sample mortgage loans, MERS serves as mortgagee of record on the mortgage solely as a nominee in an administrative capacity on behalf of the indenture trustee, and does not have any interest in the mortgage loan. For additional information regarding the recording of mortgages in the name of MERS see “Yield on the Bonds-Yield Sensitivity of the Bonds” in this prospectus supplement.

The sample mortgage loans had an aggregate principal balance as of the Cut-off Date of approximately $873,375,574, after application of scheduled payments due on or before the Cut-off Date, whether or not received. Approximately $864,255,471 of the sample mortgage loans have adjustable rates and fixed rates and are secured by first liens on the related mortgaged property. Approximately $9,120,103 of the sample mortgage loans have fixed rates and are secured by second liens on the related mortgaged property.

The average principal balance of the sample mortgage loans as of the Cut-off Date was approximately $218,017. No sample mortgage loan had a principal balance as of the Cut-off Date of greater than approximately $1,100,000 or less than approximately $8,886.

As of the Cut-off Date, the sample mortgage loans had mortgage rates ranging from approximately 2.990% per annum to approximately 16.770% per annum and the weighted average mortgage rate was approximately 6.092% per annum. The weighted average remaining term to stated maturity of the sample mortgage loans was approximately 356 months as of the Cut-off Date. None of the sample mortgage loans will have a first Due Date prior to October 1, 1996 or after May 1, 2005, or will have a remaining term to maturity of less than 30 months or greater than 360 months as of the Cut-off Date. The latest maturity date of any sample mortgage loan is April 1, 2035.

Approximately 0.06%, 0.12%, 65.19%, 0.05% and 6.52% of the sample mortgage loans have initial interest only periods of two, three, five, seven and ten years, respectively.

The loan-to-value ratio of a sample mortgage loan secured by a first lien is equal to the ratio, expressed as a percentage, of the principal amount of the loan at origination, to the lesser of the appraised value of the related mortgaged property at the time of origination and the sales price. The combined loan-to-value ratio of a mortgage loan secured by a second lien is equal to the ratio, expressed as a percentage, of the principal amount of the loan at origination, plus the outstanding principal balance of the related senior lien, to the appraised value of the related mortgaged property at the time of origination. The weighted average of the loan-to-value ratios and combined loan-to-value ratios, as applicable, at origination of the sample mortgage loans was approximately 75.37%. No loan-to-value ratio or combined loan-to-value ratio, as applicable, at origination of any sample mortgage loan was greater than approximately 125.00% or less than approximately 2.65%.

Approximately 0.80% of the sample mortgage loans are balloon loans. The amount of the balloon payment on each of these sample mortgage loans is substantially in excess of the amount of the scheduled monthly payment on such sample mortgage loan for the period prior to the Due Date of the balloon payment. These sample mortgage loans have a weighted average remaining term to maturity of approximately 179 months.

Substantially all of the sample adjustable-rate loans (other than the Seasoned Mortgage Loans) have not reached their first adjustment date as of the Closing Date.

Approximately 71.51% of the sample mortgage loans provide for prepayment charges.

Approximately 2.95% and 1.12% of the sample mortgage loans are covered by a Primary Insurance Policy and the PMI Insurer Policy, respectively. For the sample mortgage loans, the weighted average of the PMI Insurer Fee Rates for the mortgage loans covered by the PMI Insurer Policy is approximately 1.399% per annum.

Set forth below is a description of certain additional characteristics of the sample mortgage loans as of the Cut-off Date, except as otherwise indicated. All percentages of the sample mortgage loans are approximate percentages by aggregate principal balance as of the Cut-off Date, except as otherwise indicated. Dollar amounts and percentages may not add up to totals due to rounding. All references to loan-to-value ratio or LTV in the following tables refer to the combined-loan-to-value ratio in the case of sample mortgage loans secured by second liens.

As of origination, the average principal balance of the sample mortgage loans was approximately $218,230.

As of the Cut-off Date, the average current principal balance of the sample mortgage loans was approximately $218,017.

The weighted average mortgage rate of the sample mortgage loans was approximately 6.092% per annum.

As of the Cut-off Date, the weighted average remaining months to the next adjustment date of the sample mortgage loans was approximately 30 months.

As of the Cut-off Date, the weighted average Gross Margin of the sample mortgage loans was approximately 3.954% per annum.

As of the Cut-off Date, the weighted average Maximum Mortgage Rate of the sample mortgage loans was approximately 11.827% per annum.

The minimum and maximum loan-to-value ratios of the sample mortgage loans at origination were approximately 2.65% and 125.00%, respectively, and the weighted average of the loan-to-value ratios of the sample mortgage loans at origination was approximately 75.37%.

Occupancy type is based on the representation of the borrower at the time of origination.

See “-Underwriting Standards” below for a detailed description of the Seller’s loan programs and documentation requirements.

See “-Underwriting Standards” below for a description of the Seller’s risk categories.

No more than approximately 0.70% of the sample mortgage loans (by aggregate outstanding principal balance as of the Cut-off Date) are secured by mortgaged properties located in any one zip code.

As of the Cut-off Date, the weighted average debt to income ratio of the sample mortgage loans was approximately 39.68% per annum.

As of the Cut-off Date, the weighted average months remaining to scheduled maturity of the sample mortgage loans was approximately 356 months.

As of the Cut-off Date, the weighted average credit score of the sample mortgage loans was approximately 688.

As of the Cut-off Date, the weighted average months to first roll of the sample mortgage loans was approximately 30 months.

In general, in the case of a mortgage loan made for “rate and term” refinance purposes, substantially all of the proceeds are used to pay in full the principal balance of a previous mortgage loan of the mortgagor with respect to a mortgaged property and to pay origination and closing costs associated with such refinancing. Mortgage loans made for “cash-out” refinance purposes may involve the use of the proceeds to pay in full the principal balance of a previous mortgage loan and related costs except that a portion of the proceeds are generally retained by the mortgagor for uses unrelated to the mortgaged property. The amount of these proceeds retained by the mortgagor may be substantial.

Under and to the extent provided in the Indenture, the Indenture Trustee, on behalf of the Trust, will be obligated to purchase from the Company during the Funding Period, subject to the availability thereof, the Subsequent Mortgage Loans. The Subsequent Mortgage Loans will be transferred to the Indenture Trustee, on behalf of the Trust, on the related Subsequent Transfer Date pursuant to the related Subsequent Transfer Instrument between the company and the Indenture Trustee. In connection with the purchase of Subsequent Mortgage Loans on such Subsequent Transfer Dates, the Indenture Trustee, on behalf of the Trust, will be required to pay to the company solely from amounts on deposit in the Pre-Funding Account, a cash purchase price of 100% of the principal balance of the Subsequent Mortgage Loans. The amount paid from the Pre-Funding Account on each Subsequent Transfer Date will not include accrued interest on the Subsequent Mortgage Loans. Following each Subsequent Transfer Date,

the aggregate Stated Principal Balance of the mortgage loans will increase by an amount equal to the aggregate Stated Principal Balance of the Subsequent Mortgage Loans so purchased and the amount in the Pre-Funding Account will decrease accordingly.

The Pre-Funding Account will be established to provide the Indenture Trustee, on behalf of the Trust, with sufficient funds to purchase, respectively, the Subsequent Mortgage Loans. On or about June 30, 2005, and otherwise during the Funding Period, the Original Pre-Funded Amount will be reduced by the amount used to purchase the Subsequent Mortgage Loans for the mortgage pool in accordance with the Indenture. Any investment income on funds in the Pre-Funding Account will be included in Available Funds.

Any conveyance of Subsequent Mortgage Loans on a Subsequent Transfer Date is subject to certain conditions including, but not limited to the following: (a) each such mortgage loan must satisfy the representations and warranties specified in the related Subsequent Transfer Instrument and the Indenture; (b) the company will not select such mortgage loans in a manner that it believes to be adverse to the interests of the Bondholders or the Bond Insurer; (c) the Company will deliver certain opinions of counsel with respect to the validity of the conveyance of such mortgage loans; (d) as of the related Subsequent Cut-off Date, each such mortgage loan will satisfy the following criteria: (i) such mortgage loan may not be 30 or more days delinquent as of the last day of the month preceding the Subsequent Cut-off Date; (ii) the original term to stated maturity of such mortgage loan will be 360 months; (iii) each Subsequent Mortgage Loan must be an adjustable or fixed-rate mortgage loan with a first lien on the related mortgaged property; (iv) no Subsequent Mortgage Loan will have a first payment date occurring after July 1, 2005; (v) the latest maturity date of any Subsequent Mortgage Loan will be no later than June 1, 2035; (vi) none of the Subsequent Mortgage Loans will be a buydown loan; (vii) such mortgage loan will have a credit score of not less than 501; (viii) each Subsequent Mortgage Loan will have a Mortgage Rate as of the applicable Subsequent Cut-off Date ranging from approximately 1.99% per annum to approximately 16.77% per annum; (ix) none of the Subsequent Mortgage Loans will be a New York State “high cost” loan; and (x) such mortgage loan shall have been underwritten in accordance with the criteria set forth under “The Mortgage Pool-Underwriting Standards” in this prospectus supplement; (e) as of the related Subsequent Cut-off Date, the Subsequent Mortgage Loans (where applicable), will satisfy the following criteria: (i) consist of mortgage loans with prepayment charges representing no less than approximately 72% of the respective Pool Balance; (ii) have a weighted average credit score ranging from 680 to 700; (iii) have no more than 55% of such mortgage loans concentrated in the state of California; (iv) have no less than 76% of the mortgaged properties securing the mortgage loans being owner occupied; (v) have no less than 68% of the mortgaged properties securing the mortgage loans be single family detached and de minimis planned unit developments; (vi) have no more than 32% of the mortgage loans be cash-out refinance; (vii) substantially all of the Subsequent Mortgage Loans with a loan to value ratio greater than 80% will be covered by a Primary Insurance Policy or the Radian Lender-Paid PMI Policy; (viii) have no more than 82% of the loans be mortgage loans with an interest only period; and (ix) together with the mortgage loans already included in the trust, have no more than 1.5% of such mortgage loans (by aggregate Stated Principal Balance as of the Subsequent Cut-off Date) secured by mortgaged properties located in any one zip code.

Notwithstanding the foregoing, any Subsequent Mortgage Loan may be rejected by any one of the Rating Agencies or by the Bond Insurer if the inclusion of such mortgage loan would adversely affect the ratings on any class of Offered Securities, without, in the case of the Class A-3 Bonds, taking the Bond Insurance Policy into account. In addition, minor variances from the characteristics stated above will be permitted with the consent of the Rating Agencies and the Bond Insurer so long as there are compensating factors. The final characteristics of the mortgage loans will be reflected in a Form 8-K which will be filed within 15 days of the end of the Funding Period.

Approximately 0.29%, of the sample mortgage loans are Seasoned Mortgage Loans. Approximately 48.94% of the sample Non-Seasoned Mortgage Loans were underwritten pursuant to, or in accordance with, the standards of the Seller’s Progressive Series Program which is described below. Approximately 6.76% of the sample Non-Seasoned Mortgage Loans were underwritten pursuant to, or in accordance with, the standards of the Progressive Express^™ Program, each of which is described below. Approximately 44.30% of the sample mortgage loans were acquired by the Seller in bulk purchases from third-party originators, the underwriting standards of whom were reviewed for acceptability by the Master Servicer and are generally similar to the underwriting standards of the Seller as described below. None of these third-party originators contributed more than 10% of the mortgage loans.

The following provisions apply to all of the mortgage loans originated under the Seller’s Progressive Series Program and Progressive Express^™ Program.

Eligibility. The Seller generally performs a pre-funding audit on each mortgage loan. This audit includes a review for compliance with the related program parameters and accuracy of the legal documents.

Quality Control. The Seller performs a post-closing quality control review on a minimum of 25% of the mortgage loans originated or acquired under the programs described below for complete re-verification of employment, income and liquid assets used to qualify for such mortgage loan. Such review also includes procedures intended to detect evidence of fraudulent documentation and/or imprudent activity during the processing, funding, servicing or selling of the mortgage loan. Verification of occupancy and applicable information is made by regular mail.

Variations. The Seller uses the following parameters as guidelines only. On a case-by-case basis, the Seller may determine that the prospective mortgagor warrants an exception outside the standard program guidelines. An exception may be allowed if the loan application reflects certain compensating factors, including instances where the prospective mortgagor:

Appraisals. The Seller does not publish an approved appraiser list for the conduit seller. Each conduit seller maintains its own list of appraisers, provided that each appraiser must:

With respect to the Seller’s Progressive Series Program or Progressive Express^™ Program in general one full appraisal is required on each loan. In addition, an automated valuation model, or AVM, or a quantitative appraisal report (Fannie Mae Form 2055), or a Hansen Pro, or enhanced desk review is obtained either (a) when the loan-to-value ratio is 90.01% to 95% or (b) when the property has multiple units and the loan-to-value ratio is greater than 80%, or (c) the loan is a Progressive Express^™ No Doc Program and the loan-to-value ratio is 80.01% to 90%. In addition, a quantitative appraisal report (Fannie Mae Form 2055), or a Hansen Pro, or enhanced desk review is obtained when the loan is a Progressive Express^™ No Doc Program and the loan-to-value ratio is equal to or greater than 90.01%. An enhanced field review is also required when the loan-to-value ratio is equal to or greater than 95.01% or when the loan amount is above $500,000 or the property is located in Georgia and the loan-to-value ratio is 70.01% and above. At the underwriter’s discretion, any one of the above appraisal reviews may be required when program parameters do not require an appraisal review.

General. The underwriting guidelines utilized in the Progressive Series Program, as developed by the Seller, are intended to assess the borrower’s ability and willingness to repay the mortgage loan obligation and to assess the adequacy of the mortgaged property as collateral for the mortgage loan. The Progressive Series Program is designed to meet the needs of borrowers with excellent credit, as well as those whose credit has been adversely affected. The Progressive Series Program consists of seven mortgage loan programs. Each program has different credit criteria, reserve requirements, qualifying ratios and loan-to-value ratio restrictions. Series I is designed for credit history and income requirements typical of “A” credit borrowers. In the event a borrower does not fit the Series I criteria, the borrower’s mortgage loan is placed into either Series II, III, III+, IV, V or VI, depending on which series’ mortgage loan parameters meets the borrower’s unique credit profile. Series II, III, III+, IV, V or VI allow for less restrictive standards because of certain compensating or offsetting factors such as a lower loan-to-value ratio, verified liquid assets, job stability, pride of ownership and, in the case of refinanced mortgage loans, length of time owning the mortgaged property. The philosophy of the Progressive Series Program is that no single borrower characteristic should automatically determine whether an application for a mortgage loan should be approved or disapproved. Lending decisions are based on a risk analysis assessment after the review of the entire mortgage loan file. Each mortgage loan is individually underwritten with emphasis placed on the overall quality of the mortgage loan. The Progressive Series I, II, III, III+, IV, V and VI Program borrowers are required to have debt service-to-income ratios within the range of 45% to 60% calculated on the basis of monthly income and depending on the loan-to-value ratio of the mortgage loan.

Under the Progressive Series Program, the Seller underwrites one- to four-family mortgage loans with loan-to-value ratios at origination of up to 100%, depending on, among other things, a borrower’s credit history, repayment ability and debt service-to-income ratio, as well as the type and use of the mortgaged property. Second lien financing of the mortgaged properties may be provided by lenders other than the Seller at origination; however, the combined loan-to-value ratio (“CLTV”) generally may not exceed 100%. Generally, when the loan-to-value ratio is 97.00% to 100.00%, second liens are ineligible.

Mortgage loans with a loan-to-value ratio of up to 95.00% on owner-occupied mortgage properties are allowed a CLTV of up to 100%. Generally, second home-owner-occupied and non-owner-occupied mortgage properties are allowed a maximum CLTV of up to 95%. Under the Seller’s 80/20 program, which is available to Progressive Series I and II borrowers only, the Seller may allow second lien financing at the same time as the origination of the first lien with CLTVs of up to 100%.

The mortgage loans in the Progressive Series Program generally bear rates of interest that are greater than those which are originated in accordance with Freddie Mac and Fannie Mae standards. In general, the maximum amount for mortgage loans originated under the Progressive Series Program is $750,000; however, the Seller may approve mortgage loans in excess of such amount on a case-by-case basis where generally the maximum loan amount is up to $1 million, owner-occupied, with a minimum credit score of 681, the maximum loan-to-value is 80% on full documentation and 75% on reduced documentation, the CLTV is 100% on full documentation and 90% on reduced documentation and the property must be a single-family residence, excluding condominiums.

All of the mortgage loans originated under the Progressive Series I, II and III Programs are prior approved and/or underwritten either by employees of the Seller or underwritten by contracted mortgage insurance companies or delegated conduit sellers. Generally all of the mortgage loans originated under the Series III+, IV, V and VI Programs are prior approved and/or underwritten by employees of the Seller and underwritten by designated conduit sellers. Generally, all of the Series I, Series II and Series III Program mortgage loans with loan-to-value ratios at origination in excess of 80% have mortgage insurance which may include insurance by Radian, Republic Mortgage Insurance Corporation, General Electric Mortgage Insurance, PMI or United Guaranty Insurance. The borrower may elect to have primary mortgage insurance covered by their loan payment. If the borrower makes such election, a loan-to-value ratio between 80.01% and 85.00% requires 22% coverage, a loan-to-value ratio between 85.01% and 90.00% requires 25% coverage, a loan-to-value ratio between 90.01% and 95.00% requires 30% coverage and a loan-to-value ratio between 95.01% and 100% requires 35% coverage. Generally, when the borrower’s credit score is less than 660 or the borrower does not make such an election, the related mortgage loan will be covered by a modified primary mortgage insurance policy issued by Radian to the Seller providing coverage in the amount of (i) 22% coverage for a mortgage loan with a loan-to-value ratio between 80.01% and 85.00%, (ii) 25% coverage for a mortgage loan with a loan-to-value ratio between 85.01% and 90.00%, (iii) 30% coverage for a mortgage loan with a loan-to-value ratio between 90.01% and 95.00% and (iv) 35% coverage for a mortgage loan with a loan-to-value ratio between 95.01% and 100%. None of the Series III+ Program mortgage loans with loan-to-value ratios at origination in excess of 80% will be insured by a Primary Insurance Policy. All Series IV, V and VI Program mortgage loans have loan-to-value ratios at origination which are less than or equal to 85% and do not require a Primary Insurance Policy. The Seller receives verbal verification from the conduit seller of employment prior to funding or acquiring each Progressive Series Program mortgage loan.

Full/Alternative Documentation and Reduced Documentation Progressive Series Programs. Each prospective borrower completes a mortgage loan application which includes information with respect to the applicant’s liabilities, income, credit history, employment history and personal information. The Seller requires a credit report on each applicant from a credit reporting company. The report typically contains information relating to credit history with local and national merchants and lenders, installment debt payments and any record of defaults, bankruptcies, repossessions or judgments.

The Progressive Series Program allows for approval of an application pursuant to the (a) Full/Alternative Documentation Program, or (b) the Limited Documentation Program or the “No Income, No Assets” Program or the No Ratio Program (any of the foregoing, a “Reduced Documentation Program”). The Full/Alternative Documentation Program requires the following documents: (i) Uniform Residential Loan Application (Fannie Mae Form 1003 or Freddie Mac Form 65), (ii) Statement of Assets and Liabilities (Fannie Mae Form 1003A or Freddie Mac Form 65A), (iii) In-File Tri-Merged Credit Report or Residential Mortgage Credit Report with records obtained from at least two separate repositories, (iv) Verification of Employment Form providing a complete two year employment history,

(v) Verification of Deposit Form for all liquid assets, verifying minimum cash reserves based upon the loan-to-value ratio and borrower’s income, and (vi) a Uniform Residential Appraisal Report (Fannie Mae Form 1004 or Freddie Mac Form 70). The Full/Alternative Documentation Program allows for the use of certain alternative documents in lieu of the Verification of Deposit Form and Verification of Employment Form. These include W-2 Statements, tax returns and one pay check from the most recent full month for verification of income and the most recent one month personal bank statement for verification of liquid assets. In addition, self-employed borrowers must provide federal tax returns for the previous two years, including K-1’s, federal business tax returns for two years, year-to-date financial statements and a signed IRS Form 4506 (Request for Copy of Tax Returns).

Under the Full Income Documentation/Stated Assets Program available to borrowers in the Series I, II and III programs, the borrower provides full income and employment documentation information, which the Seller is required to verify. The borrower states assets on the Residential Loan Application (Fannie Mae Form 1003 or Freddie Mac Form 65); however, verification of assets is not required. With respect to the Full Income Documentation/Stated Assets Program, a mortgage loan is allowed to have a loan-to-value ratio at origination of up to 100%.

Under each Reduced Documentation Program, which is available to borrowers in every Progressive Series Program, the Seller obtains from prospective borrowers either a verification of deposits or bank statements for the most recent one-month period preceding the mortgage loan application. Under this program the borrower provides income information on the mortgage loan application, and the debt service-to-income ratio is calculated. However, income is not verified. Permitted maximum loan-to-value ratios (including secondary financing) under the Reduced Documentation Program generally are limited.

Under the “Stated Income Stated Assets” program available to borrowers in the Series I & II program, the borrower provides income and asset information, which the Seller is not required to verify, on the mortgage loan application. However, a debt-to-income ratio is calculated. Employment information is provided and is verbally verified. Permitted maximum loan-to-value ratios (including secondary financing) under the Stated Income Stated Asset program generally are limited.

Under the “No Ratio” program available to borrowers in the Series I and II program, the borrower provides no income information, but provides employment and asset information, which the Seller is required to verify, on the mortgage loan application. With respect to the “No Ratio” program, a mortgage loan with a loan-to-value ratio at origination in excess of 80% is generally not eligible.

Under the “No Income, No Assets” Program available to borrowers in the Series I Program, the borrower provides no income information, but provides employment and unverified asset information on the mortgage loan application. With respect to the “No Income, No Assets” Program, a mortgage loan with a loan-to-value ratio at origination in excess of 80% is generally not eligible.

Under the Lite Income/Stated Assets Program which is available to borrowers for the Series I, II, and III Programs, the Seller obtains from prospective salaried borrowers a 30-day pay stub and from prospective self-employed borrowers bank statements for the most recent twelve-month period preceding the mortgage loan application and a year-to-date profit and loss statement. Under this program the borrower provides income information on the mortgage loan application, and the debt service-to-income ratio is provided. The maximum loan-to-value ratio under this program is 97%.

Under the Lite Documentation Program, which is available to Series III+, Series IV, and Series V Program self-employed borrowers, the previous 12 months bank statements are utilized in lieu of tax returns. Under these programs the borrower provides income information on the mortgage loan applicant and the debt-to-service-to income ratio is calculated. However, income is not verified. Permitted maximum loan-to-value ratios (including secondary financing) under the Lite Documentation Program generally are limited.

Under all Progressive Series Programs, the Seller or the conduit seller verbally verifies the borrower’s employment prior to closing. Credit history, collateral quality and the amount of the down payment are important factors in evaluating a mortgage loan submitted under one of the Reduced Documentation Programs. In addition, in order to qualify for a Reduced Documentation Program, a mortgage loan must conform to certain criteria regarding maximum loan amount, property type and occupancy status. Mortgage loans having a loan-to-value ratio at origination in excess of 95% where the related mortgaged property is used as a second or vacation home or is a non-owner occupied home are not eligible for the Series I, II or III Reduced Documentation Program. In general, the maximum loan amount for mortgage loans underwritten in accordance with Series I, II and III Reduced Documentation Program is $750,000 for purchase transactions, rate-term transactions and cash out refinance transactions. The maximum loan amount is $500,000 for mortgage loans underwritten in accordance with Series III+ Reduced Documentation Program, $400,000 for mortgage loans underwritten in accordance with Series IV and V Reduced Documentation Program, and $175,000 for mortgage loans underwritten in accordance with Series VI Reduced Documentation Program, however, exceptions are granted on a case-by-case basis. Secondary financing is allowed in the origination of the Reduced Documentation Program but must meet the CLTV requirements described above and certain other requirements for subordinate financing. In all cases, liquid assets must support the level of income of the borrower as stated in proportion to the type of employment of the borrower. Full Documentation is requested by the underwriter if it is the judgment of the underwriter that the compensating factors are insufficient for loan approval.

Credit History. The Progressive Series Program defines an acceptable credit history in each of the Series I, II and III Programs. The Series I Program defines an acceptable credit history as a borrower who has “A” credit, meaning a minimum of four trade accounts, including a mortgage and/or rental history, along with one non-traditional trade account to satisfy five trades, with 24 months credit history, or at 80% LTV and less 4 trades minimum, 2 trades with 12 months credit history plus 1 trade with a minimum 24 months credit history plus 24 months mortgage or rent history, no 30-day delinquent mortgage payments in the last 12 months, and a maximum of one 30-day delinquent payments on any revolving credit account within the past 12 months and a maximum of one 30-day delinquent payment on installment credit account within the past 12 months. However, if the loan-to-value ratio of the loan is 90% or less, consumer credit is disregarded. Bankruptcies must be at least 24 months old, fully discharged and the borrower must have re-established or re-affirmed satisfactory credit history. Foreclosures are not allowed in the past 3 years. No judgments, suits, tax liens, other liens, collections or charge-offs in the past 24 months, generally older items must be paid prior to or at closing; provided that any such judgments, suits, other liens, collections or charge-offs in the past 24 months must not exceed $500 in the aggregate and any such judgments, suits, other liens, collections or charge-offs older than 24 months must not exceed $2,000 in the aggregate, in either case without regard to any medical judgments, suits, tax liens, other liens, collections or charge-offs that are not excessive or impact the borrower’s ability to repay the loan.

With respect to the Series II Program, a borrower must have a minimum of four trade accounts including a mortgage and/or rental history, along with one non-traditional trade account to satisfy five trades, 80% LTV and less 4 trades minimum, 2 trades with 12 months credit history plus 1 trade with a minimum 24 months credit history plus 24 months mortgage or rent history, no 30-day delinquent mortgage payments in the last 12 months, and a maximum of one 30-day delinquent payments within the past 12 months on any installment credit account. However, if the loan-to-value ratio of the loan is 90% or less, consumer credit is disregarded. All bankruptcies must be at least 24 months old, fully discharged and the borrower must have re-established or re-affirmed satisfactory credit history. Foreclosures are not allowed in the past 3 years. No judgments, suits, tax liens, other liens, collections or charge-offs in the past 24 months, generally older items must be paid prior to or at closing; provided that any such judgments, suits, other liens, collections or charge-offs in the past 24 months must not exceed $500 in the aggregate and any such judgments, suits, other liens, collections or charge-offs older than 24 months must not exceed $2,000 in the aggregate, in either case without regard to any medical judgments, suits, tax liens, other liens, collections or charge-offs that are not excessive or impact the borrower’s ability to repay the loan.

With respect to the Series III Program, a borrower must have a minimum of four trade accounts including a mortgage and/or rental history, along with one non-traditional trade account to satisfy five trades, with 24-months credit history, a borrower may not have more than two 30-day delinquent mortgage payments within the past 12 months. Bankruptcies must be at least 24 months old, fully discharged and the borrower must have re-established or re-affirmed satisfactory credit history. Foreclosures are not allowed in the past 3 years. No judgments, suits, tax liens, other liens, collections or charge-offs in the past 24 months, generally older items must be paid prior to or at closing.

With respect to the Series III+ Program, a borrower must have a minimum of two trade accounts including a mortgage and/or rental history, along with one non-traditional trade account to satisfy three trades, with 12 months credit history, a borrower may not have more than two 30-day delinquent mortgage payments within the past 12 months. Any open judgments, suits, liens, collections and charge-offs not to exceed $500 cumulatively within the past 12 months generally are paid prior to or at closing. Bankruptcies must be at least 24 months old, fully discharged and the borrower must have re-established or re-affirmed satisfactory credit history. Foreclosures are not allowed during the past 24 months. Tax liens are not allowed within the last 12 months.

With respect to the Series IV Program, a borrower must have a minimum of two trade accounts including a mortgage and/or rental history, along with one non-traditional trade account to satisfy three trades, with 12 months credit history, a borrower may not have more than four 30-day delinquent mortgage payments or three 30-day delinquent mortgage payments and one 60-day delinquent mortgage payment within the past 12 months. Any open judgments, suits, liens, collections and charge-offs not to exceed $1,000 cumulatively within the past 12 months generally are paid prior to or at closing. Bankruptcies must be at least 18 months old, fully discharged and the borrower must have re-established or re-affirmed satisfactory credit history. Foreclosures are not allowed in the past 18 months. Tax liens are not allowed within the last 12 months.

With respect to the Series V Program, a borrower must have a minimum of two trade accounts including a mortgage and/or rental history, along with one non-traditional trade account to satisfy three trades, with 12 months credit history, a borrower may not have more than five 30-day delinquent mortgage payments or two 60-day delinquent mortgage payments or one 90-day delinquent mortgage payment within the past 12 months. Any open judgments, suits, liens, collections and charge-offs not to exceed $4,000 cumulatively within the past 12 months generally are paid prior to or at closing. Bankruptcies must be at least 12 months old, fully discharged and the borrower must have re-established or re-affirmed satisfactory credit history. Foreclosures are not allowed in the past 12 months. Tax liens are not allowed within the last 12 months.

With respect to the Series VI program, a borrower must have a minimum of two trade accounts including a mortgage and/or rental history, along with one non-traditional trade account to satisfy three trades, with 12 months credit history, a borrower may not have more than one 90-day delinquent mortgage payment within the past 12 months. Any open judgments, suits, liens, collections and charge-offs generally are paid prior to or at closing. Bankruptcies must be at least 6 months old. Foreclosures are not allowed in the past 6 months. Tax liens are not allowed within the last 6 months.

General. In July 1996, the Seller developed an additional series to the Progressive Program, the “Progressive Express^™ Program.” The concept of the Progressive Express^™ Program is to underwrite the loan focusing on the borrower’s Credit Score, ability and willingness to repay the mortgage loan obligation, and assess the adequacy of the mortgaged property as collateral for the loan. The Credit Score is an electronic evaluation of past and present credit accounts on the borrower’s credit bureau report. This includes all reported accounts as well as public records and inquiries. The Progressive Express^™ Program offers six levels of mortgage loan programs. The Progressive Express^™ Program has a

minimum Credit Score that must be met by the borrower’s primary wage earner and does not allow for exceptions to the Credit Score requirement. The Credit Score requirement is as follows: Progressive Express^™ I above 680, Progressive Express^™ II 680-620, Progressive Express^™ III 619-601, Progressive Express^™ IV 600-581, Progressive Express^™ V 580-551, and Progressive Express^™ VI 550-500. Each Progressive Express^™ program has different Credit Score requirements, credit criteria, reserve requirements, and loan-to-value ratio restrictions. Progressive Express^™ I is designed for credit history and income requirements typical of “A+” credit borrowers. In the event a borrower does not fit the Progressive Express^™ I criteria, the borrower’s mortgage loan is placed into either Progressive Express^™ II, III, IV, V, or VI, depending on which series’ mortgage loan parameters meets the borrowers unique credit profile.

All of the mortgage loans originated under the Progressive Express^™ program are prior approved and/or underwritten either by employees of the Seller or underwritten by contracted mortgage insurance companies or delegated conduit sellers. Under the Progressive Express^™ Program, the Seller underwrites single family dwellings with loan-to-value ratios at origination of up to 100%. In general, the maximum amount for mortgage loans originated under the Progressive Express Program is $750,000; however, the Seller may approve mortgage loans on a case-by-case basis where generally the maximum loan amount is up to $1 million, owner-occupied, with a minimum credit score of 681. The borrower must disclose employment and assets which both are verified by the Seller, the loan-to-value must not be greater than 70%, the CLTV must not be greater than 80% and the property must be single-family residence, excluding condominiums. For loans that exceed a 97% loan-to-value ratio to a maximum of a 100% loan-to-value ratio, (i) such loans must be for purchase transactions only, (ii) the borrower must have a minimum credit score of 700, (iii) the mortgaged property must be an owner-occupied, primary residence, (iv) the borrower must state income and assets on the Residential Loan Application and meet a debt ratio not to exceed 50% and (v) such loan must be underwritten utilizing the Impac Direct Access System for Lending (IDASL) automated underwriting system. Condominiums are not allowed on the 100% loan-to-value ratio feature. In order for the property to be eligible for the Progressive Express^™ Program, it may include a single-family residence (1-unit), 2-4 units, condominium and/or planned unit development (PUD). Progressive Express^™ I & II allow owner-occupied and second home single-family residence property subject to a maximum loan-to-value ratio of 95% and a maximum 100% CLTV on owner-occupied mortgaged properties and 95% on mortgaged properties that are second homes. Express III allows owner-occupied single-family residence property subject to a maximum 90% loan-to-value ratio and a CLTV of 95%. Progressive Express^™ I & II allow owner-occupied and non-owner occupied properties to a maximum 90% loan-to-value ratio on 1-2 units and 80% loan-to-value ratio on 3-4 units with a maximum 100% CLTV on owner-occupied and Express II non-owner occupied to 95% CLTV. Express III allow non-owner occupied subject to a maximum 80% loan-to-value ratio on 1-4 units with a maximum 95% CLTV. Express IV, V and VI allow owner-occupied and second homes only and non-owner occupied property is not allowed. Express IV owner-occupied is subject to a maximum 90% loan-to-value ratio, Express V is subject to a maximum of 80% loan-to-value ratio and Express VI is subject to a maximum of 75% loan-to-value ratio and CLTV is not allowed on Express IV, V or VI. Express IV, V or VI loans secured by a second home are subject to a maximum of 70% loan-to-value ratio on Express IV, V and VI and CLTV is not allowed. Progressive Express^™ Programs I through IV loans with loan-to-value ratios at origination in excess of 80% are generally insured by MGIC, Radian or RMIC. The borrower can elect to have primary mortgage insurance covered by their loan payment. If the borrower makes such election, a loan-to-value ratio between 80.01% and 85.00% requires 22% coverage, a loan-to-value ratio between 85.01% and 90.00% requires 25% coverage, a loan-to-value ratio between 90.00% and 95.00% requires 30% coverage and a loan-to-value ratio between 95.01% and 100% requires 35% coverage. Generally, when the borrower’s credit score is less than 660 or the borrower does not make such an election, the related mortgage loan will be covered by a modified primary mortgage insurance policy issued by Radian to the Seller providing coverage in the amount of (i) a loan-to-value ratio between 80.01% and 85.00% requires 22% coverage, (ii) a loan-to-value ratio between 85.01% and 90.00% requires 25% coverage, (iii) 30% for a mortgage loan with a loan-to-value ratio between 90.01% and 95.00% and (iv) 35% for mortgage loan with a loan-to-value ratio between 95.01% and 100%.

Each borrower completes a Residential Loan Application (Fannie Mae Form 1003 or Freddie Mac Form 65). The borrower must disclose employment and assets on the application, however, there is no verification of the information. If the borrower elects to verify assets, the Seller obtains from the borrower either verification of deposits or bank statements for the most recent one-month period preceding the mortgage loan application. The conduit seller obtains a verbal verification of employment on each borrower.

The Seller uses the foregoing parameters as guidelines only. The Seller may include certain provisions in the note that the Seller may not enforce. Full documentation is requested by the underwriter if it is the judgment of the underwriter that the compensating factors are insufficient for loan approval under the Progressive Express^™ Product Line.

Credit History. The Progressive Express^™ Program defines an acceptable credit history in each of the programs I through VI. Progressive Express^™ I defines an acceptable credit history as a borrower who has “A+” credit, meaning a minimum of four trade accounts including a mortgage and/or rental history, along with one non-traditional trade account to satisfy five trades, no 30-day delinquent mortgage payments in the past 12 months, and a maximum of one 30-day delinquent payments on any revolving credit accounts within the past 12 months and one 30-day delinquent payment on any installment credit accounts within the past 12 months. However, if the loan-to-value ratio of the loan is 90% or less, consumer credit is disregarded. All bankruptcies must be at least 24 months old, fully discharged and the borrower must have re-established or re-affirmed satisfactory credit history. Foreclosures are not allowed in the past 3 years. No judgments, suits, tax liens, other liens, collections or charge-offs in the past 24 months, generally older items must be paid prior to or at closing.

With respect to Progressive Express^™ II, a borrower must have a minimum of four trade accounts including a mortgage and/or rental history, along with one non-traditional trade account to satisfy five trades, and no late mortgage payments for the past 12 months. In addition, a borrower must have a maximum of two 30-day delinquent payments on any revolving credit accounts within the past 12 months and one 30-day delinquent payment on any installment credit accounts within the past 12 months. However, if the loan-to-value ratio of the loan is 90% or less, revolving and installment credit is disregarded. All bankruptcies must be at least 24 months old, fully discharged and the borrower must have re-established or re-affirmed satisfactory credit history. Foreclosures are not allowed in the past 3 years. No judgments, suits, tax liens, other liens, collections or charge-offs allowed within the past 24 months, generally older items must be paid prior to or at closing.

With respect to Progressive Express^™ III, a borrower must have a minimum of four trade accounts including a mortgage and/or rental history, along with one non-traditional trade account to satisfy five trades and no more than one 30-day late mortgage payment for the past 12 months. All bankruptcies must be at least 24 months old, fully discharged and the borrower must have re-established or re-affirmed satisfactory credit history. Foreclosures are not allowed in the past 3 years. No judgments, suits, tax liens, other liens, collections or charge-offs allowed within the past 24 months, generally older items must be paid prior to or at closing.

With respect to Progressive Express^™ IV, a borrower must have a minimum of four trade accounts including a mortgage and/or rental history, along with one non-traditional trade account to satisfy five trades, no more than two 30-day late mortgage payments for the past 12 months. All bankruptcies must be at least 24 months old, fully discharged and the borrower must have re-established or re-affirmed satisfactory credit history. Foreclosures are not allowed in the past 3 years. No judgments, suits, tax liens, other liens, collections or charge-offs allowed within the past 24 months, generally older items must be paid prior to or at closing.

With respect to Progressive Express^™ V, a borrower must have a minimum of two trade accounts including a mortgage and/or rental history, along with one non-traditional trade account to satisfy three trades, with 12 months credit history, no more than two 30-day late mortgage payments in the past 12

months. All bankruptcies must be at least 24 months old, fully discharged and the borrower must have re-established or re-affirmed satisfactory credit history. Foreclosures are not allowed in the past 24 months. Judgments, suits, liens, collections or charge-offs, may not exceed $500 cumulatively within the past 12 months, and must be paid prior to or at closing. Tax liens are not allowed within the last 12 months.

With respect to Progressive Express^™ VI, a borrower must have a minimum of two trade accounts including a mortgage and/or rental history, along with one non-traditional trade account to satisfy three trades, with 12 months credit history, no more than four 30-day or three 30-day and one 60-day late mortgage payments in the past 12 months. All bankruptcies must be at least 18 months old and fully discharged. Foreclosures are not allowed in the past 18 months. Judgments, suits, liens, collections or charge-offs, may not exceed $1,000 cumulatively within the past 12 months, and must be paid prior to or at closing. Tax liens are not allowed within the last 12 months.

In May, 1999, the Seller introduced a Progressive Express^™ No Doc Program (the “No Doc program”). The concept of the No Doc program is to underwrite the loan focusing on the borrower’s credit score, ability and willingness to repay the mortgage loan obligation, and assess the adequacy of the mortgaged property as collateral for the loan. The No Doc program has a minimum credit score and does not allow for exceptions to the credit score. The credit score requirement is as follows: 681 for Progressive Express^™ No Doc I and 620 for Progressive Express^™ No Doc II. Each program has a different credit score requirement and credit criteria.

All of the mortgage loans originated under the Progressive Express^™ No Doc program are prior approved and/or underwritten either by employees of the Seller or underwritten by contracted mortgage insurance companies or delegated conduit sellers. Under the Progressive Express^™ No Doc program, the Seller employees or contracted mortgage insurance companies or delegated conduit sellers underwrite single family dwellings with loan-to-value ratios at origination up to 95% and $500,000. In order for the property to be eligible for the Progressive Express^™ No Doc program, it must be a single family residence (single unit only), condominium and/or planned unit development (PUD) or 2-units to a maximum loan-to-value ratio of 80%. The borrower can elect to have primary mortgage insurance covered by their loan payment. If the borrower makes such election, the loan-to-value ratios at origination in excess of 80%, generally are insured by MGIC, Radian or RMIC. For loan-to-value ratios of 80.01% to 85.00%, mortgage insurance coverage is 22%, for loan-to-value ratios 85.01% to 90.00%, mortgage insurance coverage is 25% and for loan-to-value ratios of 90% to 95%, mortgage insurance coverage is 30%. Generally, when the borrower’s credit score is less than 660 or if the borrower does not make such election, the related mortgage loan will be covered by a modified primary insurance policy issued by Radian to the Seller providing coverage in the amount of 22% for a mortgage loan with a loan-to-value ratio between 80.01% and 85.00%, 25% for a mortgage loan with a loan-to-value ratio between 85.01% and 90.00% and 30% for a mortgage loan with a loan-to-value ratio of 90.01% to 95.00%.

Each borrower completes a Residential Loan Application (Fannie Mae Form 1003 or Freddie Mac Form 65). The borrower does not disclose income, employment, or assets and a Verbal Verification of Employment is not provided. Generally, borrowers provide a daytime telephone number as well as an evening telephone number. If the prospective borrower elects to state and verify assets on the Residential Loan Application, Seller obtains from prospective borrowers either a verification of deposits or bank statements for the most recent one-month period preceding the mortgage loan application.

Credit History. The Progressive Express^™ No Doc program defines an acceptable credit history as follows: Progressive Express^™ No Doc I defines an acceptable credit history as a borrower who has “A+” credit, meaning a minimum of four trade accounts including a mortgage and/or rental history, along with one non-traditional trade account to satisfy five trades, and no 30-day delinquent mortgage payments in the past 12 months and a maximum of one 30-day delinquent payments on any revolving credit

accounts within the past 12 months and one 30-day delinquent payment on any installment credit accounts within the past 12 months. However, if the loan-to-value ratio of the loan is 90% or less, revolving and installment credit is disregarded. All bankruptcies must be at least 24 months old, fully discharged and the borrower must have re-established or re-affirmed a satisfactory credit history. Foreclosures are not allowed in the past 3 years. No judgments, suits, tax liens, other liens, collections or charge-offs are allowed within the past 24 months, generally older items must be paid prior to or at closing.

With respect to Progressive Express^™ No Doc II a borrower must have a minimum of four trade accounts including a mortgage and/or rental history, along with one non-traditional trade account to satisfy five trades, and no late mortgage payments for the past 12 months and a maximum of two 30-day delinquent payments on any revolving credit accounts and one 30-day delinquent payment on any installment credit accounts within the past 12 months. However, if the loan-to-value ratio of the loan is 90% or less, revolving and installment credit is disregarded. All bankruptcies must be at least 24 months old, fully discharged and the borrower must have re-established or re-affirmed satisfactory credit history. Foreclosures are not allowed in past 3 years. No judgments, suits, tax liens, other liens, collections or charge-offs allowed within the past 24 months, generally older items must be paid prior to or at closing.

In addition, see “The Mortgage Pools - Underwriting Standards” in the prospectus.

Based solely upon information provided by the Seller, the following tables summarize, for the respective dates indicated, the delinquency, foreclosure, bankruptcy and REO property status with respect to all one- to four-family residential and multi-family mortgage loans originated or acquired by the Seller which were being master serviced by the Seller at the dates indicated. The indicated periods of delinquency are based on the number of days past due on a contractual basis. The monthly payments under all of such mortgage loans are due on the first day of each calendar month. A mortgage loan is considered “30 days” delinquent if a payment due on the first of the month is not received by the second day of the following month, and so forth.

Based solely on information provided by the Seller, the following table presents the changes in the Seller’s charge-offs and recoveries for the periods indicated.

The above data on charge-offs and recoveries are calculated on the basis of the total mortgage loans originated or acquired by the Seller. However, the total amount of mortgage loans on which the above data are based includes many mortgage loans which were not, as of the respective dates indicated, outstanding long enough to give rise to some of the indicated charge-offs. In the absence of such mortgage loans, the charge-off percentages indicated above would be higher and could be substantially higher. Because the mortgage pool will consist of fixed mortgage loans, the actual charge-off percentages with respect to the mortgage pool may therefore be expected to be higher, and may be substantially higher, than the percentages indicated above.

The information set forth in the preceding paragraphs concerning the Seller has been provided by the Seller.

On March 16, 2005, the Seller announced that it will be delaying the filing of its annual report on Form 10-K for the year ended December 31, 2004. On February 15, 2005, the Seller announced an update to the timing of its efforts to comply with Section 404 of the Sarbanes-Oxley Act, or SOX 404. In substance, SOX 404 requires an annual management assessment of the effectiveness of a company’s internal control over financial reporting, and an audit by its independent registered public accounting firm on management’s assessment on internal control over financial reporting. At that time, the Seller reported that despite its plan to comply with SOX 404 in a timely manner, it believed that it was unlikely that it would meet the current SOX 404 requirements by the filing deadline of March 16, 2005. The Seller had previously disclosed, in July 2004, as part of its ongoing documentation and evaluation efforts in meeting SOX 404 requirements, that it had discovered an error in its financial statements. Such error resulted in a restatement of its financial statements for the quarters ended March 31, 2004 and 2003 and for the years ended December 31, 2003, 2002 and 2001. The Seller also restated its financial statements for the quarter ended June 30, 2004 as a result of a clerical error. The restatement process and the amended filings of the Form 10-K and Form 10-Qs were finalized in October of 2004. During the Seller’s initial assessment of internal controls over financial reporting, it identified certain documentation and control deficiencies that may rise to the level of significant deficiencies or material weaknesses, in addition to those previously disclosed as part of the restatement. The Seller stated that these have been a focus of its remediation efforts prior to year end. As the Seller completes its process, it will need to evaluate the severity of any remaining deficiencies both individually and in the aggregate in the context of its overall evaluation of internal control over financial reporting. As such, the Seller may not be able to render a conclusion that its internal controls over financial reporting were effective as of December 31, 2004.

The description in this prospectus supplement of the sample mortgage loans and the mortgaged properties is based upon the sample mortgage pool as of the Cut-off Date, as adjusted for the scheduled principal payments due on or before this date. The sample mortgage loans consist of mortgage loans that are intended to be included in the trust as initial mortgage loans, but not the Subsequent Mortgage Loans. However, many of the sample mortgage loans may not be included in the trust as initial mortgage loans as a result of incomplete documentation or otherwise if the company deems this removal necessary or desirable, and may be prepaid at any time. The characteristics of the final pool will not materially differ from the information provided with respect to the sample pool. Within 15 days of the Closing Date and 15 days of the end of the Funding Period, tables reflecting the composition of the initial mortgage loans and the final pool of mortgage loans, respectively, will be filed on Form 8-K with the Commission. However, only one set of tables will be filed if the final pool of mortgage loans is determined within 15 days of the closing date.

When a principal prepayment in full is made on a mortgage loan, the mortgagor is charged interest only for the period from the Due Date of the preceding monthly payment up to the date of the principal prepayment, instead of for a full month. When a partial principal prepayment is made on a mortgage loan, the mortgagor is not charged interest on the amount of the prepayment for any days in the month in which the prepayment is made. In addition, the application of the Relief Act to any mortgage loan will adversely affect, for an indeterminate period of time, the ability of the Master Servicer or any subservicer to collect full amounts of interest on the mortgage loan. See “Legal Aspects of the Mortgage Loans-Servicemembers Civil Relief Act” in the prospectus. The Master Servicer is obligated to pay from its own funds only those interest shortfalls attributable to full prepayments by the mortgagors on the mortgage loans, but only to the extent of the lesser of (a) one-twelfth of 0.125% of the aggregate Stated Principal Balance of the mortgage loans immediately preceding such payment date and (b) the sum of the Master Servicing Fee and the Subservicing Fee for the related Due Period. See “Description of the Servicing Agreement—Servicing and Other Compensation and Payment of Expenses” in this prospectus supplement. Accordingly, the effect of (1) any principal prepayments in full or in part on the mortgage loans, to the extent that any resulting Prepayment Interest Shortfall exceeds any Compensating Interest or (2) any Relief Act Shortfalls, will be to reduce the aggregate amount of interest collected that is available for payment to holders of the Bonds. Prepayment Interest Shortfalls and Relief Act Shortfalls with respect to the Bonds will not be covered by the Bond Insurance Policy. Any resulting Unpaid Interest Shortfalls will be allocated among the Bonds as provided in this prospectus supplement under “Description of the Bonds—Interest Payments on the Bonds” and will be reimbursed solely from the Net Monthly Excess Cashflow as provided in this prospectus supplement under “Description of the Bonds—Overcollateralization.”

The yield to maturity of the Bonds will be sensitive to defaults on the mortgage loans. If a purchaser of a Bond calculates its anticipated yield based on an assumed rate of default and amount of losses that is lower than the default rate and amount of losses actually incurred, its actual yield to maturity will be lower than that so calculated. In general, the earlier a loss occurs, the greater is the effect on an investor’s yield to maturity. There can be no assurance as to the delinquency, foreclosure or loss experience with respect to the mortgage loans.

The mortgage loans were underwritten generally in accordance with underwriting standards which are primarily intended to provide for single family “non-conforming” mortgage loans. A “non-conforming” mortgage loan means a mortgage loan which is ineligible for purchase by Fannie Mae or Freddie Mac due to either credit characteristics of the related mortgagor or documentation standards in connection with the underwriting of the related mortgage loan that do not meet the Fannie Mae or Freddie Mac underwriting guidelines for “A” credit mortgagors. These credit characteristics include mortgagors whose creditworthiness and repayment ability do not satisfy such Fannie Mae or Freddie Mac underwriting guidelines and mortgagors who may have a record of credit write-offs, outstanding judgments, prior bankruptcies and other credit items that do not satisfy such Fannie Mae or Freddie Mac underwriting guidelines. These documentation standards may include mortgagors who provide limited or no documentation in connection with the underwriting of the related mortgage loan. Accordingly, mortgage loans underwritten under the Seller’s non-conforming credit underwriting standards are likely to experience rates of delinquency, foreclosure and loss that are higher, and may be substantially higher, than mortgage loans originated in accordance with the Fannie Mae or Freddie Mac underwriting guidelines. Any resulting losses, to the extent not covered by credit enhancement, may affect the yield to maturity of the Bonds.

The rate of principal payments, the aggregate amount of payments and the yields to maturity of the Bonds will be affected by the rate and timing of payments of principal on the mortgage loans, respectively. The rate of principal payments on the mortgage loans will in turn be affected by the amortization schedules of the mortgage loans and by the rate of principal prepayments (including for this purpose prepayments resulting from refinancing, liquidations of the mortgage loans due to defaults, casualties or condemnations and repurchases by the Seller). Certain of the mortgage loans contain prepayment charge provisions. The rate of principal payments may or may not be less than the rate of principal payments for mortgage loans that did not have prepayment charge provisions.

If provided in the related mortgage note, the adjustable-rate loans typically are assumable under some 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 the mortgage loan is not impaired by the assumption. The fixed-rate mortgage loans contain due-on-sale clauses.

Prepayments, liquidations and purchases of the mortgage loans (including any optional purchases) will result in payments on the Bonds (other than the Class A-IO Bonds) of principal amounts which would otherwise be distributed over the remaining terms of the mortgage loans. Since the rate of payment of principal on the mortgage loans will depend on future events and a variety of other factors, no assurance can be given as to such rate or the rate of principal prepayments. The extent to which the yield to maturity of a class of Bonds may vary from the anticipated yield will depend in the case of the Bonds upon the degree to which such class of Bonds is purchased at a discount or premium. Further, an investor should consider the risk that, in the case of any Bond (other than the Class A-IO Bonds) purchased at a discount, a slower than anticipated rate of principal payments (including prepayments) on the mortgage loans could result in an actual yield to such investor that is lower than the anticipated yield and, in the case of any Bond (other than the Class A-IO Bonds) purchased at a premium, a faster than anticipated rate of principal payments on the mortgage loans could result in an actual yield to such investor that is lower than the anticipated yield.

The rate of principal payments (including prepayments) on pools of mortgage loans may vary significantly over time and may be influenced by a variety of economic, geographic, social and other factors, including changes in mortgagors’ housing needs, job transfers, unemployment, mortgagors’ net equity in the mortgaged properties and servicing decisions. In general, if prevailing interest rates were to fall significantly below the mortgage rates on the mortgage loans, such mortgage loans could be subject to higher prepayment rates than if prevailing interest rates were to remain at or above the mortgage rates on such mortgage loans. Conversely, if prevailing interest rates were to rise significantly, the rate of prepayments on such mortgage loans would generally be expected to decrease. The mortgage loans may be subject to a greater rate of principal prepayments in a low interest rate environment. For example, if prevailing interest rates were to fall, mortgagors may be inclined to refinance their mortgage loans with a fixed-rate loan to “lock in” at a lower interest rate or to refinance their mortgage loans with adjustable-rate mortgage loans with low introductory interest rates. No assurances can be given as to the rate of prepayments on the mortgage loans in stable or changing interest rate environments.

Approximately 0.06%, 0.12%, 65.19%, 0.05% and 6.52% of the sample mortgage loans have initial interest only periods of two, three, five, seven and ten years, respectively. During this period, the payment made by the related borrower will be less than it would be if the sample mortgage loan amortized. In addition, the mortgage loan balance will not be reduced by the principal portion of scheduled monthly payments during this period. As a result, no principal payments will be made to the Bonds from these sample mortgage loans during their interest only period except in the case of a prepayment.

Approximately 71.51% of the sample mortgage loans provide for payment by the borrower of a prepayment charge in limited circumstances on certain prepayments. The Master Servicer will deposit in the Payment Account all prepayment charges received on the mortgage loans to be included in the Available Funds. The Master Servicer will be entitled to all prepayment charges received on the mortgage loans and these amounts will not be available for payment on the Bonds. There can be no assurance that the prepayment charges will have any effect on the prepayment performance of the mortgage loans. Investors should conduct their own analysis of the effect, if any, that the prepayment premiums, and decisions by the Master Servicer or the related subservicer with respect to the waiver thereof, may have on the prepayment performance of the mortgage loans.

The Available Funds Rates on the Class A, Class M and Class B Bonds (other than the Class A-IO Bonds) will be affected by the amount of interest payable on the Class A-IO Bonds. As the aggregate principal balance of the mortgage loans is reduced by payments of principal, including prepayments and the proceeds of liquidations of defaulted mortgage loans, the portion of the total amount of interest generated by the mortgage loans that is used to pay interest on the Class A-IO Bonds will increase. A rapid rate of prepayments on the mortgage loans could lower the Available Funds Rate for the Class A, Class M and Class B Bonds (other than the Class A-IO Bonds), increasing the likelihood that the Available Funds Rate will limit the Interest Rate on one or more of these classes of Bonds.

The Derivative Contracts will be assigned to, or entered into by, the Trust and will provide some protection against Basis Risk Shortfalls first, on the Class A-1, Class A-2 and Class A-3 Bonds, pro rata, and second, in the order of priority described herein, on the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds. However, the Derivative Contracts may not provide sufficient funds to cover all such Basis Risk Shortfalls on such related Bonds. In addition, payments under the related Derivative Contracts are limited to a specified rate in effect from time to time. To the extent that net amounts payable under the Derivative Contracts are insufficient to cover all Basis Risk Shortfalls on the related Bonds, some or all of the Net Monthly Excess Cashflow may be used. However, there can be no assurance that the Net Monthly Excess Cashflow will be sufficient to cover these shortfalls, particularly because on any payment date where the Bond Interest Rate is limited to the Available Funds Rate, there will be little or no excess interest. Further, the Bond Insurance Policy (with respect to the Class A-3 Bonds) will not cover Basis Risk Shortfalls. In the event of a decrease in One-Month LIBOR, the amount of Net Monthly Excess Cashflow available to the related Bonds will be reduced by any Net Derivative Fees paid to the Derivative Contract Counterparty under the Derivative Contracts. In addition, the Available Funds Rate and therefore the Bond Interest Rate on the related Bonds may be reduced by the requirement of the Issuer to pay the Net Derivative Fee to the Derivative Contract Counterparty under the related Derivative Contracts.

The recording of mortgages in the name of MERS is a new practice in the mortgage lending industry. While the company expects that the Master Servicer or applicable subservicer will be able to commence foreclosure proceedings on the mortgaged properties, when necessary and appropriate, public recording officers and others, however, may have limited, if any, experience with lenders seeking to foreclose mortgages, assignments of which are registered with MERS. Accordingly, delays and additional costs in commencing, prosecuting and completing foreclosure proceedings, defending litigation commenced by third parties and conducting foreclosure sales of the mortgaged properties could result. Those delays and additional costs could in turn delay the distribution of liquidation proceeds to the bondholders and increase the amount of Realized Losses on the mortgage loans. In addition, if, as a result of MERS discontinuing or becoming unable to continue operations in connection with the MERS® System, it becomes necessary to remove any mortgage loan from registration on the MERS® System and

to arrange for the assignment of the related mortgages to the Indenture Trustee, then any related expenses shall be reimbursable by the trust to the Master Servicer, which will reduce the amount available to pay principal of and interest on the Bonds. For additional information regarding the recording of mortgages in the name of MERS see “The Mortgage Pool- Sample Mortgage Loan Characteristics” in this prospectus supplement.

If the amount of overcollateralization with respect to the mortgage loans and the bond principal balances of the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds have been reduced to zero, the yield to maturity on the Class A-1, Class A-2 and Class A-3 Bonds will become extremely sensitive to Realized Losses on the mortgage loans (and the timing thereof), because the entire amount of any Realized Losses (to the extent not covered by Net Monthly Excess Cashflow) will be allocated pro rata to the Class A-1, Class A-2 and Class A-3 Bonds, provided, however, that any Realized Losses allocable to the Class A-1 Bonds will be instead applied to the Class A-2 Bonds until the Bond Principal Balance of the Class A-2 Bonds has been reduced to zero and any Realized Losses allocable to the Class A-3 Bonds will instead be covered by the Bond Insurance Policy. If the amount of overcollateralization with respect to the mortgage loans and the bond principal balances of the Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds have been reduced to zero, the yield to maturity on the Class M-1 Bonds will become extremely sensitive to Realized Losses on the mortgage loans (and the timing thereof), because the entire amount of any Realized Losses (to the extent not covered by Net Monthly Excess Cashflow) will be allocated to the Class M-1 Bonds. If the amount of overcollateralization with respect to the mortgage loans and the bond principal balances of the Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds have been reduced to zero, the yield to maturity on the Class M-2 Bonds will become extremely sensitive to Realized Losses on the mortgage loans (and the timing thereof), because the entire amount of any Realized Losses (to the extent not covered by Net Monthly Excess Cashflow) will be allocated to the Class M-2 Bonds. If the amount of overcollateralization with respect to the mortgage loans and the bond principal balances of the Class M-4, Class M-5, Class M-6 and Class B Bonds have been reduced to zero, the yield to maturity on the Class M-3 Bonds will become extremely sensitive to Realized Losses on the mortgage loans (and the timing thereof), because the entire amount of any Realized Losses (to the extent not covered by Net Monthly Excess Cashflow) will be allocated to the Class M-3 Bonds. If the amount of overcollateralization with respect to the mortgage loans and the bond principal balances of the Class M-5, Class M-6 and Class B Bonds have been reduced to zero, the yield to maturity on the Class M-4 Bonds will become extremely sensitive to Realized Losses on the mortgage loans (and the timing thereof), because the entire amount of any Realized Losses (to the extent not covered by Net Monthly Excess Cashflow) will be allocated to the Class M-4 Bonds. If the amount of overcollateralization with respect to the mortgage loans and the bond principal balances of the Class M-6 and Class B Bonds have been reduced to zero, the yield to maturity on the Class M-5 Bonds will become extremely sensitive to Realized Losses on the mortgage loans (and the timing thereof), because the entire amount of any Realized Losses (to the extent not covered by Net Monthly Excess Cashflow) will be allocated to the Class M-5 Bonds. If the amount of overcollateralization with respect to the mortgage loans and the bond principal balances of the Class B Bonds have been reduced to zero, the yield to maturity on the Class M-6 Bonds will become extremely sensitive to Realized Losses on the mortgage loans (and the timing thereof), because the entire amount of any Realized Losses (to the extent not covered by Net Monthly Excess Cashflow) will be allocated to the Class M-6 Bonds. The initial percentage of the principal balance of the Class A-1, Class A-2 , Class A-3, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds on the Closing Date will be approximately 56.70%, 6.30%, 15.00%, 9.50%, 4.50%, 2.40%, 1.60%, 1.75%, 1.00% and 1.25%, respectively. The initial amount of overcollateralization in the trust is approximately 0.00% of the Cut-off Date Balance.

Investors in the Class A-2, Class M and Class B Bonds should fully consider the risk that Realized Losses on the related mortgage loans could result in the failure of such investors to fully recover their investments. In addition, once Realized Losses have been allocated to the Class A-2, Class M and Class B Bonds, such amounts with respect to such bonds will no longer accrue interest and will not be reinstated thereafter. However, Allocated Realized Loss Amounts may be paid to the holders of the Class A-2 Bonds, Class M Bonds and Class B Bonds from Net Monthly Excess Cashflow in the priority set forth under “Description of the Securities — Overcollateralization Provisions” in this prospectus supplement.

For additional considerations relating to the yield on the Bonds, see “Yield Considerations” and “Maturity and Prepayment Considerations” in the Prospectus.

The timing of changes in the rate of principal prepayments on the mortgage loans may significantly affect an investor’s actual yield to maturity, even if the average rate of principal prepayments is consistent with such investor’s expectation. In general, the earlier a principal prepayment on the mortgage loans occurs, the greater the effect of such principal prepayment on an investor’s yield to maturity. The effect on an investor’s yield of principal prepayments occurring at a rate higher (or lower) than the rate anticipated by the investor during the period immediately following the issuance of the Bonds may not be offset by a subsequent like decrease (or increase) in the rate of principal prepayments.

The weighted average life of a Bond is the average amount of time that will elapse from the Closing Date until each dollar of principal is repaid to the investors in such Bond. Because it is expected that there will be prepayments and defaults on the mortgage loans, the actual weighted average lives of these Bonds, other than the Class A-IO Bonds, are expected to vary substantially from the weighted average remaining term to stated maturity of the sample mortgage loans as set forth under “The Mortgage Pool” in this prospectus supplement.

Prepayments of mortgage loans are commonly measured relative to a prepayment standard or model. The model used in this prospectus supplement for the mortgage loans is the related Prepayment Assumption. The Prepayment Assumptions do not purport to be either a historical description of the prepayment experience of any pool of mortgage loans or a prediction of the anticipated rate of prepayment of any mortgage loans, including the related mortgage loans to be included in the trust.

The following tables entitled “Percent of Initial Bond Principal Balance Outstanding at the Following Percentages of Prepayment Assumption” were prepared on the basis of the assumptions in the following paragraph and the table set forth below. There are certain differences between the loan characteristics included in such assumptions and the characteristics of the actual mortgage loans. Any such discrepancy may have an effect upon the percentages of original Bond Principal Balances outstanding and weighted average lives of the Bonds set forth in the tables. In addition, since the actual mortgage loans in the trust will have characteristics that differ from those assumed in preparing the tables set forth below, the payments of principal of the Bonds may be made earlier or later than indicated in the tables.

The percentages and weighted average lives in the tables entitled “Percent of Initial Bond Principal Balance Outstanding at the Following Percentages of the Prepayment Assumption” were determined assuming that: (i) there are 59 hypothetical mortgage loans having the following characteristics:

(i) the hypothetical mortgage loans with an Index indicated as “6 Month LIBOR” have an Index of Six-Month LIBOR, which remains constant at 3.29% per annum; (ii) the hypothetical mortgage loans with an Index indicated as “12 Month LIBOR” have an Index of twelve-Month LIBOR, which remains constant at 3.69% per annum (iii) the hypothetical mortgage loans with an Index indicated as “1 Month LIBOR” have an Index of One-Month LIBOR, which remains constant at 2.83% per annum; (iv) payments on the Bonds are received, in cash, on the 25th day of each month, commencing in April 2005; (v) there are no delinquencies or losses on the mortgage loans and principal payments on the mortgage loans are timely received together with prepayments, if any, at the respective percentages of the Prepayment Assumption set forth in the following tables; (vi) there are no repurchases of the mortgage loans; (vii) except for hypothetical mortgage loans 49 and 50, all of the hypothetical mortgage loans are fully-amortizing, in some cases, following any interest-only period; (viii) there is no Prepayment Interest Shortfall or any other interest shortfall in any month; (ix) the scheduled monthly payment for the mortgage loan is calculated based on its principal balance, mortgage rate and remaining term to maturity such that such mortgage loan will amortize in amounts sufficient to repay the remaining principal balance of such mortgage loan by its remaining term to maturity, in some cases, following an interest-only period; (x) with respect to each adjustable-rate mortgage loan, the Index remains constant at the rate set forth above and the mortgage rate on each adjustable-rate mortgage loan is adjusted on the next adjustment date (and on subsequent adjustment dates, as necessary) to equal the Index plus the applicable gross margin, subject to the maximum mortgage rates, minimum mortgage rates and periodic rate caps listed above; (xi) none of the mortgage loans provide for negative amortization; (xii) the monthly payment on each adjustable-rate mortgage loan is adjusted on the due date immediately following the next related adjustment date (and on subsequent adjustment dates, as necessary) to equal a fully amortizing payment as described in clause (xiii) above, subject, if applicable, to certain payment terms if the mortgage loan has an initial interest only period; (xiv) payments on the mortgage loans earn no reinvestment return; (xv) there are no additional ongoing expenses payable out of the trust, other than the premium payable to the Bond Insurer and any Net Derivative Fee payable to the Derivative Contract Counterparty; (xvi) Net Derivative Fees were calculated using 31 days for the first period; (xvii) for the calculation of Weighted Average Life to Call the Issuer exercises its option to redeem the Bonds on the first payment date on which it would be permitted to do so as described in “Description of the Bonds-Optional Redemption” in this prospectus supplement; (xviii) the Bonds will be purchased on April 6, 2005; and (xix) with respect to the “Pre-Funding Term” column, hypothetical mortgage loans with a value of N/A and 1, respectively, will begin to pay principal and interest in April 2005 and May 2005, respectively, with the characteristics set forth in the previous table, and in each case are computed prior to giving effect to prepayments received on the last day of the prior month. Nothing contained in the foregoing assumptions should be construed as a representation that the mortgage loans will not experience delinquencies or losses or will otherwise behave in accordance with any of the above structuring assumptions.

Based on the foregoing assumptions, the following table indicates the projected weighted average lives of each class of the Bonds, other than the Class A-IO Bonds, and set forth the percentages of the original Bond Principal Balance of each such class of Bonds that would be outstanding after each of the dates shown, at various constant percentages of the Prepayment Assumption.

There is no assurance that prepayments of the mortgage loans will conform to any of the percentages of the Prepayment Assumption indicated in the tables above or to any other level, or that the actual weighted average life of the Bonds will conform to any of the weighted average lives set forth in the tables above. Furthermore, the information contained in the tables with respect to the weighted average life of each specified class of Bonds is not necessarily indicative of the weighted average life that might be calculated or projected under different or varying prepayment assumptions or other structuring assumptions.

The characteristics of the mortgage loans will differ from those assumed in preparing the tables above. In addition, it is unlikely that any mortgage loan will prepay at any constant percentage of the Prepayment Assumption until maturity or that all of the mortgage loans will prepay at the same rate. The timing of changes in the rate of prepayments may significantly affect the actual yield to maturity to investors, even if the average rate of principal prepayments is consistent with the expectations of investors.

The final scheduled payment date on each class Bonds will be the payment date in August 2035, which is the payment date in the month immediately following the month of the final scheduled monthly payment on any mortgage loan. Due to losses and prepayments on the mortgage loans, the final scheduled payment date on each class of Bonds may be substantially earlier than the payment date in August 2035. With respect to the Class A-3 Bonds, the Bond Insurance Policy will pay the Bond Principal Balance of those Bonds to the extent unpaid on the final scheduled payment date.

For additional considerations relating to the yield on the Bonds, see “Yield Considerations” and “Maturity and Prepayment Considerations” in the prospectus.

The Issuer is a statutory trust formed under the laws of the State of Delaware pursuant to the Trust Agreement for the transactions described in this prospectus supplement. The Trust Agreement constitutes the “governing instrument” under the laws of the State of Delaware relating to statutory trusts. After its formation, the Issuer will not engage in any activity other than (i) acquiring and holding the Mortgage Loans and the other assets of the Trust and proceeds therefrom, (ii) issuing the Bonds and Certificates, (iii) making payments on the Bonds and the Certificates and (iv) engaging in other activities that are necessary, suitable or convenient to accomplish the foregoing or are incidental thereto or connected therewith.

The assets of the Issuer will consist of the Mortgage Loans, the Bond Insurance Policy, the Derivative Contracts and certain related assets.

Wilmington Trust Company is the Owner Trustee under the Trust Agreement. The Owner Trustee is a Delaware banking corporation with its principal offices located in Wilmington, Delaware. The Owner Trustee shall be entitled to compensation for its services on each payment date in an amount equal to the Owner Trustee’s Fee.

Neither the Owner Trustee nor any director, officer or employee of the Owner Trustee will be under any liability to the Issuer or the Bondholders under the Trust Agreement under any circumstances, except for the Owner Trustee’s own misconduct, gross negligence, bad faith or grossly negligent failure

to act or in the case of the inaccuracy of certain representations made by the Owner Trustee in the Trust Agreement. All persons into which the Owner Trustee may be merged or with which it may be consolidated or any person resulting from such merger or consolidation shall be the successor of the Owner Trustee under the Trust Agreement.

Wells Fargo Bank, N.A. will be the Indenture Trustee under the Indenture. The Indenture Trustee has designated its offices located at Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479-0113, Attention: Corporate Trust Services IMH Assets Corp. 2005-3, for purposes of the transfer and exchange of the Bonds. For all other purposes, the Indenture Trustee’s “Corporate Trust Office” is located at 9062 Old Annapolis Road, Columbia, Maryland 21045, Attention: Client Manager, IMH Asset Corp., 2005-3, or such other address as the Indenture Trustee may designate from time to time by notice to the Bondholders, the Company and the Master Servicer. The Indenture Trustee shall be entitled to compensation for its services on each payment date in an amount equal to the Indenture Trustee’s Fee.

The Bond Insurer has supplied the following information for inclusion in this prospectus supplement. No representation is made by the Issuer or the Underwriters as to the accuracy and completeness of this information.

The Bond Insurer, a New York stock insurance corporation, is a direct, wholly-owned subsidiary of FGIC Corporation, and provides financial guaranty insurance for public finance and structured finance obligations. The Bond Insurer is licensed to engage in financial guaranty insurance in all 50 states, the District of Columbia, the Commonwealth of Puerto Rico and, through a branch, in the United Kingdom.

On December 18, 2003, an investor group consisting of The PMI Group, Inc. (“PMI”), affiliates of The Blackstone Group L.P. (“Blackstone”), affiliates of The Cypress Group L.L.C. (“Cypress”) and affiliates of CIVC Partners L.P. (“CIVC”) acquired FGIC Corporation (the “FGIC Acquisition”) from a subsidiary of General Electric Capital Corporation (“GE Capital”). PMI, Blackstone, Cypress and CIVC acquired approximately 42%, 23%, 23% and 7%, respectively, of FGIC Corporation’s common stock. FGIC Corporation paid GE Capital approximately $284.3 million in pre-closing dividends from the proceeds of dividends it, in turn, had received from the Bond Insurer, and GE Capital retained approximately $234.6 million in liquidation preference of FGIC Corporation’s convertible participating preferred stock and approximately 5% of FGIC Corporation’s common stock. Neither FGIC Corporation nor any of its shareholders is obligated to pay any debts of the Bond Insurer or any claims under any insurance policy, including the Bond Insurance Policy issued by the Bond Insurer.

The Bond Insurer is subject to the insurance laws and regulations of the State of New York, where the Bond Insurer is domiciled, including Article 69 of the New York Insurance Law (“Article 69”), a comprehensive financial guaranty insurance statute. The Bond Insurer is also subject to the insurance laws and regulations of all other jurisdictions in which it is licensed to transact insurance business. The insurance laws and regulations, as well as the level of supervisory authority that may be exercised by the various insurance regulators, vary by jurisdiction, but generally require insurance companies to maintain minimum standards of business conduct and solvency, to meet certain financial tests, to comply with requirements concerning permitted investments and the use of policy forms and premium rates and to file quarterly and annual financial statements on the basis of statutory accounting principles (“SAP”) and other reports. In addition, Article 69, among other things, limits the business of each financial guaranty bond insurer to financial guaranty insurance and certain related lines.

For the years ended December 31, 2004, and 2003 the Bond Insurer had written directly or assumed through reinsurance, guaranties of approximately $59.5 billion and $42.4 billion par value of securities, respectively (of which approximately 56% and 79%, respectively, constituted guaranties of municipal bonds), for which it had collected gross premiums of approximately $323.6 million and $260.3 million, respectively. For the year ended December 31, 2004, the Bond Insurer had reinsured, through facultative and excess loss arrangements, approximately 2.3% of the risks it had written.

The following table sets forth the capitalization of the Bond Insurer as of December 31, 2003 and December 31, 2004 respectively, on the basis of generally accepted accounting principles (“GAAP”).

The audited financial statements of the Bond Insurer as of December 31, 2003 and 2004 and for each of the years in the three-year period ended December 31, 2004, which are included as Exhibit 99.1 to the Current Report on Form 8-K filed by the Issuer on March 30, 2005 in connection with the registration statement (SEC file number 333-117817) of which this prospectus supplement is a part, are hereby incorporated by reference in this prospectus supplement. Any statement contained in this prospectus supplement under the heading “The Bond Insurer” or in such Exhibit 99.1, shall be modified or superseded to the extent required by any statement in any document subsequently incorporated by reference in this prospectus supplement with the approval of the Bond Insurer, and shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus supplement.

All financial statements of the Bond Insurer (if any) included in documents filed by the Issuer with the Securities and Exchange Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, subsequent to the date of this prospectus supplement and prior to the termination of the offering of the Bonds shall be deemed to be incorporated by reference into this prospectus supplement and to be a part hereof from the respective dates of filing of such documents.

Copies of the Bond Insurer’s GAAP and SAP financial statements are available upon request to: Financial Guaranty Insurance Company, 125 Park Avenue, New York, NY 10017, Attention: Corporate Communications Department. The Bond Insurer’s telephone number is (212) 312-3000.

Neither the Bond Insurer nor any of its affiliates accepts any responsibility for the accuracy or completeness of, nor have they participated in the preparation of, the prospectus, the prospectus

supplement or any information or disclosure that is provided to potential purchasers of the Bonds, or omitted from such disclosure, other than with respect to the accuracy of information regarding the Bond Insurer and the Bond Insurance Policy set forth under the heading “The Bond Insurer” and “Description of the Bonds-Description of the Bond Insurance Policy” in this prospectus supplement. In addition, the Bond Insurer makes no representation regarding the Bonds or the advisability of investing in the Bonds.

The financial strength of the Bond Insurer is rated “AAA” by Standard & Poor’s, a Division of The McGraw-Hill Companies, Inc., “Aaa” by Moody’s Investors Service, and “AAA” by Fitch Ratings. Each rating of the Bond Insurer should be evaluated independently. The ratings reflect the respective ratings agencies’ current assessments of the insurance financial strength of the Bond Insurer. Any further explanation of any rating may be obtained only from the applicable rating agency. These ratings are not recommendations to buy, sell or hold the Bonds, and are subject to revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal of any of the above ratings may have an adverse effect on the market price of the Bonds. The Bond Insurer does not guarantee the market price or investment value of the Bonds nor does it guarantee that the ratings on the Bonds will not be revised or withdrawn.

The Series 2005-3 Bonds will consist of eleven classes of bonds, the Class A-1, Class A-2, Class A-3, Class A-IO, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, and Class B Bonds, each of which are offered hereby.

The Certificates, which are not offered hereby, will be entitled to payments on any payment date only after all required payments have been made on the Bonds. The principal balance of the Certificates as of any date of determination will be equal to the aggregate principal balance of the mortgage loans minus the aggregate Bond Principal Balance of all the Bonds. The Certificates will be entitled to payments as provided in the Agreements.

The Bonds will be issued by a trust, the assets of which on the closing date will consist primarily of the initial mortgage loans and the Original Pre-Funded Amount.

Payments of principal and interest on the Bonds will be made first from payments received on the mortgage loans, as described in this prospectus supplement. See “-Interest Payments on the Bonds”, “-Principal Payments on the Bonds” and “-Overcollateralization Provisions” in this prospectus supplement.

Each class of the Bonds will have the initial Bond Principal Balance or Notional Amount as set forth on page S-4 hereof and will have the Bond Interest Rate as defined under “Glossary” in this prospectus supplement. The Bond Interest Rate on each class of Bonds, other than the Class A-IO Bonds, will be limited to the least of One-Month LIBOR plus the related Bond Margin, the Available Funds Rate and the related Maximum Bond Interest Rate. In addition, the Bond Interest Rate on each class of the Bonds, other than the Class A-IO Bonds, will be subject to increase on and after the Step-Up Date.

The Bonds will be issued, maintained and transferred on the book-entry records of DTC, Clearstream and Euroclear and their participants in minimum denominations representing Bond Principal

Balances or Notional Amounts of $25,000 and integral multiples of $1 in excess thereof. The Bonds will be issued as Global Bonds. See Annex I to this prospectus supplement and “Description of the Bonds - Global Bonds” in the prospectus.

No person acquiring an interest in any class of the Book-Entry Bonds will be entitled to receive a Bond representing such person’s interest, except as set forth below under “-Definitive Bonds.” Unless and until definitive bonds are issued under the limited circumstances described in this prospectus supplement, all references to actions by Bondholders with respect to the Book-Entry Bonds shall refer to actions taken by DTC, Clearstream and Euroclear upon instructions from its participants and all references in this prospectus supplement to payments, notices, reports and statements to Bondholders with respect to the Book-Entry Bonds shall refer to payments, notices, reports and statements to DTC or Cede & Co., as the registered holder of the Book-Entry Bonds, for payment to Bond Owners in accordance with DTC procedures. See “ - Registration of the Book-Entry Bonds” and “ - Definitive Bonds” in this prospectus supplement.

The definitive bonds, if ever issued, will be transferable and exchangeable at the offices of the Indenture Trustee designated by the Indenture Trustee from time to time for these purposes. The Indenture Trustee has initially designated its offices located at Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479, Attention: Corporate Trust Services, IMH Assets Corp., 2005-3 for such purpose. No service charge will be imposed for any registration of transfer or exchange, but the Indenture Trustee may require payment of a sum sufficient to cover any tax or other governmental charge imposed in connection therewith.

All payments to holders of the Bonds, other than the final payment on any class of Bonds, will be made on each payment date by or on behalf of the Indenture Trustee to the persons in whose names the Bonds are registered at the close of business on the Record Date. Payments will be made by wire transfer in immediately available funds to the account of the Bondholders specified in the request. The final payment on any class of Bonds will be made in like manner, but only upon presentment and surrender of the Bonds at the location specified by the Indenture Trustee in the notice to Bondholders of the final payment.

DTC is a limited-purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participants and to facilitate the clearance and settlement of securities transactions between participants through electronic book entries, thereby eliminating the need for physical movement of Bonds.

Bondholders that are not participants or indirect participants but desire to purchase, sell or otherwise transfer ownership of, or other interests in, the Book-Entry Bonds may do so only through participants and indirect participants in DTC. As a result, Clearstream and Euroclear will hold positions on behalf of their participants through their relevant depositary which in turn will hold those positions in their accounts as DTC participants. Secondary market trading between DTC participants will be settled using the procedures applicable to prior mortgage loan asset-backed bonds issues in same-day funds. Secondary market trading between Clearstream participants or Euroclear participants will be settled using the procedures applicable to conventional eurobonds in same-day funds. See “Description of the Bonds - The Global Bonds” in the prospectus. In addition, Bondholders will receive all payments of principal of and interest on the Book-Entry Bonds from the Indenture Trustee through DTC and DTC participants. Accordingly, Bondholders may experience delays in their receipt of payments. Unless and until definitive

bonds are issued, it is anticipated that the only Bondholders of the Book-Entry Bonds will be Cede & Co., as nominee of DTC. Bond Owners will not be recognized by the Indenture Trustee as Bondholders, as such term is used in the Indenture, and Bond Owners will be permitted to exercise the rights of Bondholders only indirectly through DTC and its participants.

Under the Rules, DTC is required to make book-entry transfers of Book-Entry Bonds among participants and to receive and transmit payments of principal of, and interest on, the Book-Entry Bonds. Participants and indirect participants with which Bondholders have accounts with respect to the Book-Entry Bonds similarly are required to make book-entry transfers and receive and transmit these payments on behalf of their respective Bondholders. Accordingly, although Bondholders will not possess definitive bonds, the Rules provide a mechanism by which Bondholders, through their participants and indirect participants, will receive payments and will be able to transfer their interest in the Book-Entry Bonds.

Because DTC can only act on behalf of participants, who in turn act on behalf of indirect participants and on behalf of certain banks, the ability of a Bondholder to pledge Book-Entry Bonds to persons or entities that do not participate in the DTC system, or to otherwise act with respect to Book-Entry Bonds, may be limited due to the absence of physical bonds for the Book-Entry Bonds. In addition, under a book-entry format, Bondholders may experience delays in their receipt of payments since payment will be made by the Indenture Trustee to Cede & Co., as nominee for DTC.

Under the Rules, DTC will take any action permitted to be taken by Bondholders under the Indenture only at the direction of one or more participants to whose DTC account the Book-Entry Bonds are credited. Clearstream or Euroclear, as the case may be, will take any action permitted to be taken by Bondholders under the Indenture on behalf of a Clearstream participant or Euroclear participant in accordance with its rules. Additionally, DTC, Clearstream or Euroclear, under the Rules or its respective rules, as the case may be, will take actions with respect to specified voting rights only at the direction, and on the behalf, of participants whose holdings of Book-Entry Bonds evidence these specified voting rights. DTC may take conflicting actions with respect to voting rights, to the extent that participants whose holdings of Book-Entry Bonds evidence voting rights authorize divergent action.

The Company, the Master Servicer and the Indenture Trustee will have no liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Book-Entry Bonds held by Cede & Co., as nominee for DTC, or for maintaining, supervising or reviewing any records relating to beneficial ownership interests.

Definitive bonds will be issued to Bondholders or their nominees, respectively, rather than to DTC or its nominee, only if (1) the Company advises the Indenture Trustee in writing that DTC is no longer willing or able to discharge properly its responsibilities as clearing agency with respect to the Book-Entry Bonds and the Company is unable to locate a qualified successor, (2) the Company, at its option, elects to terminate the book- entry system through DTC, or (3) after the occurrence of an Event of Default, Bondholders representing in the aggregate not less than 51% of the aggregate Bond Principal Balance of the Book-Entry Bonds advise the Indenture Trustee and DTC through participants, in writing, that the continuation of a book-entry system through DTC (or a successor thereto) is no longer in the Bond Owners’ best interest.

Upon the occurrence of any event described in the immediately preceding paragraph, the Indenture Trustee is required to notify all Bondholders, through participants, of the availability of definitive bonds. Upon surrender by DTC of the definitive bonds representing the Book-Entry Bonds and receipt of instructions for re-registration, the Indenture Trustee will reissue the Book-Entry Bonds as

definitive bonds issued in the respective principal amounts owned by individual Bondholders, and thereafter the Indenture Trustee will recognize the holders of definitive bonds as Bondholders under the Indenture. Definitive bonds will be issued in minimum denominations of $25,000, except that any beneficial ownership represented by a Book-Entry Bond in an amount less than $25,000 immediately prior to the issuance of a definitive bond shall be issued in a minimum denomination equal to the amount of the beneficial ownership.

On each payment date, the Indenture Trustee shall withdraw from the Payment Account the Available Funds for such payment date and make the following disbursements and transfers, to the extent of the Available Funds remaining for such payment date, sequentially, (i) first, pro rata, to the holders of the Class A-1, Class A-2, Class A-3 and Class A-IO Bonds, and (ii) second, sequentially, to the holders of Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds, in that order, the related Accrued Bond Interest for such class for such payment date.

If on any payment date, the Available Funds are insufficient to pay Accrued Bond Interest on the Class A-3 Bonds, the shortfall will be covered by the Bond Insurance Policy; provided, that to the extent such shortfalls are caused by Prepayment Interest Shortfalls, Relief Act Shortfalls or Basis Risk Shortfalls with respect to the mortgage loans, they will not be covered by the Bond Insurance Policy. Shortfalls covered by the Bond Insurance Policy could occur, for example, if delinquencies on the mortgage loans were exceptionally high and were not covered by P&I Advances.

On any payment date, any shortfalls resulting from any Prepayment Interest Shortfalls on the mortgage loans to the extent not covered by Compensating Interest paid by the Master Servicer or the application of the Relief Act or similar state or local laws will constitute Unpaid Interest Shortfalls and will be allocated to the Class A-1, Class A-2, Class A-3, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds, on a pro rata basis, based on the respective amounts of interest accrued on such Bonds for such payment date as provided in the definition of Accrued Bond Interest. Prepayment Interest Shortfalls resulting from partial prepayments on the mortgage loans will not be offset by the Master Servicer from the Master Servicing Fee, Subservicing Fee or otherwise. No assurance can be given that Compensating Interest available to cover Prepayment Interest Shortfalls on the mortgage loans will be sufficient therefor. Unpaid Interest Shortfalls allocated to the Class A Bonds (other than the Class A-IO Bonds) shall only be reimbursed as described in “-Overcollateralization Provisions” below.

In addition, during the Funding Period, amounts on deposit in the Pre-Funding Account will earn a limited amount of interest which will primarily be available to the Bondholders. The interest earned will be significantly less than interest generated by the mortgage loans in the trust. Any such shortfalls will be covered by the Interest Coverage Account as described in “- Interest Coverage Accounts” below.

On each Interest Determination Date, the Indenture Trustee will determine the London interbank offered rate for one-month United States dollar deposits, or One-Month LIBOR, for the next Accrual Period for the Bonds on the basis of the offered rates of the Reference Banks for one-month United States dollar deposits, as such rate appears on the Telerate Screen Page 3750, as of 11:00 a.m. (London time) on such Interest Determination Date.

On each Interest Determination Date, if the rate does not appear or is not available on Telerate Screen Page 3750, One-Month LIBOR for the related Accrual Period for the Bonds will be established by the Indenture 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 establishment of One-Month LIBOR on each Interest Determination Date by the Indenture Trustee and the Indenture Trustee’s calculation of the rate of interest applicable to the Bonds for the related Accrual Period shall (in the absence of manifest error) be final and binding.

Class A-1, Class A-2, Class A-3, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds

On each payment date, the holders of the Class A-1, Class A-2, Class A-3, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds shall be entitled to receive payments in respect of principal equal to the Principal Distribution Amount for that payment date, allocated on a pro rata basis, based on the Bond Principal Balances thereof, in reduction of the Bond Principal Balances thereof until reduced to zero.

The weighted average of the Net Mortgage Rates for the mortgage loans is generally expected to be higher than the weighted average of the Bond Interest Rates on the related Bonds. As a result, interest collections on the mortgage loans and amounts contributed by the Interest Coverage Account are generally expected to be generated in excess of the amount of interest payable to the holders of the related Bonds and the related fees and expenses payable by the trust. This excess interest, together with any Overcollateralization Release Amount and any amounts from the related Derivative Contracts as provided below, will generally constitute the Net Monthly Excess Cashflow on any payment date.

With respect to any payment date, any Net Monthly Excess Cashflow in respect of the mortgage loans shall be paid as follows:

(i) to the Bond Insurer, the aggregate of all payments, if any, made by the Bond Insurer under the Bond Insurance Policy with respect to the Class A-3 Bonds, including interest thereon, and any other amounts due to the Bond Insurer pursuant to the insurance and indemnity agreement, pursuant to which the Bond Insurance Policy was issued, to the extent not previously paid or reimbursed;

(ii) to the holders of the Class A-1, Class A-2, Class A-3, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds, pro rata, in an amount equal to any Overcollateralization Increase Amount, payable to such holders as part of the Principal Distribution Amount as described under “ — Principal Payments on the Bonds” above;

(iii) sequentially, (i) concurrently on a pro rata basis to the holders of the Class A-1, Class A-2, Class A-3 Bonds; provided that any amounts payable to the Class A-2 Bonds will first be used to reduce unpaid Allocated Realized Loss Amounts related to the Class A-1 Bonds, and (ii) sequentially, to the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds in an amount equal to the Allocated Realized Loss Amount for such Bonds;

(iv) sequentially, (i) first, concurrently to the holders of the Class A-1, Class A-2 and Class A-3 Bonds, and (ii) second, sequentially, to the holders of the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, and Class B Bonds, any Unpaid Interest Shortfall for such Bonds on such payment date, to the extent not previously reimbursed;

(v) sequentially, (i) first, concurrently to the holders of the Class A-1, Class A-2 and Class A-3 Bonds, and (ii) second sequentially, to the holders of the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, and Class B Bonds, any related Basis Risk Shortfall Carry-Forward Amount for such Bonds on such payment date, to the extent not covered by the Derivative Contracts; and

The Bond Insurer will issue a surety bond (referred to as the Bond Insurance Policy in this prospectus supplement) for the benefit of the Class A-3 Bonds. The following summary of the provisions of the Bond Insurance Policy does not purport to be complete and is qualified in its entirety by reference to the Bond Insurance Policy.

The Bond Insurer, in consideration of the payment of premiums as provided in the insurance and indemnity agreement pursuant to which the Bond Insurance Policy was issued and subject to the terms and conditions of the Bond Insurance Policy, will unconditionally and irrevocably agree to pay Insured Amounts to the Indenture Trustee for the benefit of the holders of the Insured Bonds.

For the purposes of the Bond Insurance Policy, “Notice” means a written notice in the form attached as an exhibit to the Bond Insurance Policy by registered or certified mail or telephonic or telegraphic notice, subsequently confirmed by written notice delivered via telecopy, telex or hand delivery from the Indenture Trustee to the Bond Insurer specifying the information set forth in the exhibit.

The Bond Insurer will pay a Deficiency Amount with respect to the Insured Bonds by 12:00 noon (New York City time) in immediately available funds to the Indenture Trustee on the later of (i) the second business day following the business day on which the Bond Insurer shall have received Notice that a Deficiency Amount is due in respect of the Insured Bonds and (ii) the payment date on which the related Deficiency Amount is payable to the Bondholders pursuant to the Indenture, for payment to the Bondholders in the same manner as other payments with respect to the Insured Bonds are required to be made. Any Notice received by the Bond Insurer after 12:00 noon New York City time on a given business day or on any day that is not a business day shall be deemed to have been received by the Bond Insurer on the next succeeding business day.

Upon such payment of a Deficiency Amount, the Bond Insurer shall be fully subrogated to the rights of the Bondholders to receive the amount so paid. The Bond Insurer’s obligations with respect to the Insured Bonds under the Bond Insurance Policy with respect to each payment date will be discharged to the extent funds consisting of the related Insured Amount are received by the Indenture Trustee on behalf of the Bondholders for payment to such Bondholders, as provided in the Indenture and the Bond Insurance Policy, whether or not such funds are properly applied by the Indenture Trustee.

If any portion or all of any amount that is insured under the Bond Insurance Policy that was previously distributed to a Bondholder is recoverable and recovered from such Bondholder as a voidable preference by a trustee in bankruptcy pursuant to the U.S. Bankruptcy Code, pursuant to a final non-appealable order of a court exercising proper jurisdiction in an insolvency proceeding (a “Final Order”) (such recovered amount, a “Preference Amount”), the Bond Insurer will pay on the guarantee described in the second paragraph of this section, an amount equal to each such Preference Amount by 12:00 noon on the next payment date after the second business day following receipt by the Bond Insurer of (w) a certified copy of the Final Order, (x) an opinion of counsel satisfactory to the Bond Insurer that such order is final and not subject to appeal, (y) an assignment, in form reasonably satisfactory to the Bond Insurer, irrevocably assigning to the Bond Insurer all rights and claims of the Indenture Trustee and/or such Bondholder relating to or arising under such Preference Amount and appointing the Bond Insurer as the agent of the Indenture Trustee and/or such Bondholder in respect of such Preference Amount, and (z) a Notice appropriately completed and executed by the Indenture Trustee or such Bondholder, as the case may be. Such payment shall be made to the receiver, conservator, debtor-in-possession or trustee in bankruptcy named in the Final Order and not to the Indenture Trustee or Bondholder directly (unless the Bondholder has previously paid such amount to such receiver, conservator, debtor-in-possession or trustee named in such Final Order in which case payment shall be made to the Indenture Trustee for payment to the Bondholder upon delivery of proof of such payment reasonably satisfactory to the Bond Insurer). Notwithstanding the foregoing, in no event will the Bond Insurer be (i) required to make any payment under the Bond Insurance Policy in respect of any Preference Amount to the extent such Preference Amount is comprised of amounts previously paid by the Bond Insurer under the Bond Insurance Policy, or (ii) obligated to make any payment in respect of any Preference Amount, which payment represents a payment of the principal amount of any Insured Bonds, prior to the time the Bond Insurer otherwise would have been required to make a payment in respect of such principal, in which case the Bond Insurer will pay the balance of the Preference Amount when such amount otherwise would have been required.

Any of the documents required under clauses (w) through (z) of the preceding paragraph that are received by the Bond Insurer after 12:00 noon, New York City time on a given business day or on any day that is not a business day will be deemed to have been received by the Bond Insurer on the next succeeding business day. If any notice received by the Bond Insurer is not in proper form or is otherwise insufficient for the purpose of making a claim under the Bond Insurance Policy, it will be deemed not to have been received by the Bond Insurer, and the Bond Insurer will promptly so advise the Indenture Trustee, and the Indenture Trustee may submit an amended Notice. All payments made by the Bond Insurer under the Bond Insurance Policy in respect of Preference Amounts will be made with the Bond Insurer’s own funds.

The Bond Insurance Policy is non-cancelable for any reason, including nonpayment of any premium. The premium on the Bond Insurance Policy is not refundable for any reason, including the payment of the Insured Bonds prior to their maturity. The Bond Insurance Policy shall expire and terminate without any action on the part of the Bond Insurer or any other person on the date that is the later of (i) the date that is one year and one day following the date on which the Insured Bonds have been paid in full and (ii) if any insolvency proceeding referenced in the second preceding paragraph has been commenced on or prior to the date specified in clause (i) in this paragraph, the 30^th day after the entry of a final, non-appealable order in resolution or settlement of such proceeding.

The Bond Insurance Policy will not cover Basic Risk Shortfalls, Prepayment Interest Shortfalls or Relief Act Shortfalls on the Insured Bonds, nor does the Bond Insurance Policy guarantee to the holders of the Insured Bonds any particular rate of principal payment. In addition, the Bond Insurance Policy does not cover shortfalls, if any, attributable to the liability of the issuer or the Indenture Trustee for withholding taxes, if any (including interest and penalties in respect of any liability for withholding taxes)

or any shortfalls in amounts distributable to the Class A-3 Bonds as a result of limited earnings in the Pre-Funding Account. The Bond Insurance Policy also does not cover the failure of the Indenture Trustee to make any payment required under the Indenture to the holder of an Insured Bond.

The Bond Insurance Policy is subject to and shall be governed by the laws of the State of New York. The proper venue for any action or proceeding on the Bond Insurance Policy shall be the County of New York, State of New York.

THE INSURANCE PROVIDED BY THE BOND INSURANCE POLICY IS NOT COVERED BY THE NEW YORK PROPERTY/CASUALTY INSURANCE SECURITY FUND (NEW YORK INSURANCE CODE, ARTICLE 76).

In the event that payments under any Insured Bond are accelerated, nothing contained in the Bond Insurance Policy shall obligate the Bond Insurer to make any payment of principal or interest on such Insured Bond on an accelerated basis, unless such acceleration of payment is at the sole option of the Bond Insurer; it being understood that a payment shortfall in respect of the optional termination of the trust fund pursuant to the Indenture does not constitute acceleration for the purposes of the Bond Insurance Policy.

On the Closing Date, either the Seller will assign to the Company, and the Company will assign to the Issuer for the benefit of the Bonds, its rights under the Derivative Contracts, or the Seller will cause the Issuer to enter into the Derivative Contracts with the Derivative Contract Counterparty. The Derivative Contracts consist of five swap agreements, each of which will contain a Swap Agreement Fixed-Rate and provide for the calculation of One-Month LIBOR. The Derivative Contracts will provide for net swap payments (a) to the Issuer, if One-Month LIBOR exceeds the related Swap Agreement Fixed-Rate or (b) to the Derivative Contract Counterparty, if such Swap Agreement Fixed-Rate exceeds One-Month LIBOR. Net swap payments payable from the Derivative Contracts will be available solely to make payments to the Bonds as provided below. On any payment date, any such amounts not paid to the related Bonds will be paid to the Certificates and will be not be available to make payments to the Bonds on future payment dates.

Net swap payments will be made with respect to each Derivative Contract based on a notional balance for each payment date as determined in accordance with such Derivative Contract. The notional balance for each Derivative Contract for any payment date will be the lesser of (a) the scheduled notional balance for such Derivative Contract for such payment date and (b) a percentage of the aggregate Bond Principal Balance of the related Bonds immediately prior to such payment date. The percentage referenced above will be determined separately for each Derivative Contract and each payment date. The percentage for each Derivative Contract and each payment date will be equal to the quotient, expressed as a percentage, of the scheduled notional balance of such Derivative Contract for such payment date divided by the aggregate scheduled notional balance of all Derivative Contracts for such payment date.

On each payment date, the Indenture Trustee will determine whether a net swap payment is due to the Issuer or to the Derivative Contract Counterparty under the Derivative Contracts, and will collect or make such payments, as applicable. Net swap payments due to the Derivative Contract Counterparty under the Derivative Contracts will be made prior to payments on the Bonds.

The Derivative Contract Counterparty, or the guarantor thereof making payments to the Issuer is, as of the Closing Date, rated at least “A” (or its equivalent) by two of S&P, Moody’s or Fitch Ratings.

The Swap Agreement Fixed-Rates and scheduled notional balances of the Derivative Contracts will be determined in accordance with the tables below, provided that the actual notional balance of any Derivative Contract may from time to time be less than its scheduled notional balance based on the aggregate Bond Principal Balances of the related Bonds as described above.

After the payment date in April 2007, the first Derivative Contract will terminate without termination payments by either party.

After the payment date in March 2008, the second Derivative Contract will terminate without termination payments by either party.

After the payment date in April 2010, the third Derivative Contract will terminate without termination payments by either party.

After the payment date in April 2007, the fourth Derivative Contract will terminate without termination payments by either party.

After the payment date in April 2008, the fifth Derivative Contract will terminate without termination payments by either party

With respect to the Derivative Contracts, on each payment date, the Net Derivative Contract Payment Amount with respect to such payment date will be allocated to the Bonds and the Certificates in the following order of priority, in each case to the extent of amounts remaining:

(i) to the holders of the Class A-1, Class A-2 and Class A-3 Bonds, pro rata, any related Basis Risk Shortfall Carry-Forward Amount for such payment date;

(ii) sequentially, to the holders of the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds, any related Basis Risk Shortfall Carry-Forward Amount for such payment date; and

The rights of the holders of the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds and the Certificates to receive distributions will be subordinated, to the extent described in this prospectus supplement, to the rights of the holders of the Class A-1, Class A-2, Class A-3 and Class A-IO Bonds. The protection afforded to the holders of the Class A-1, Class A-2, Class A-3 and Class A-IO Bonds by means of the subordination of the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds and the Certificates will be accomplished in part by the preferential right of the holders of the Class A-1, Class A-2, Class A-3 and Class A-IO Bonds to receive on any payment date, prior to distributions on the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds and the Certificates, distributions in respect of interest and, prior to the Certificates, distributions in respect of interest and principal (other than the Class A-IO Bond). The rights of the holders of the Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds and the Certificates to receive distributions will be subordinated, to the extent described in this prospectus supplement, to the rights of the holders of the Class M-1 Bonds. The protection afforded to the holders of the Class M-1 Bonds by means of the subordination of the Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds and the Certificates will be accomplished in part by the preferential right of the holders of the Class M-1 Bonds to receive on any payment date, prior to distributions on the Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds and the Certificates, distributions in respect of interest and, prior to the Certificates, distributions in respect of interest and principal. The rights of the holders of the Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds and the Certificates to receive distributions will be subordinated, to the extent described in this prospectus supplement, to the rights of the holders of the Class M-2 Bonds. The protection afforded to the holders of the Class M-2 Bonds by means of the subordination of the Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds and the Certificates will be accomplished in part by the preferential right of the holders of the Class M-2 Bonds to receive on any payment date, prior to distributions on the Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds and the Certificates, distributions in respect of interest and, prior to the Certificates, distributions in respect of interest and principal. The rights of the holders of the Class M-4, Class M-5, Class M-6 and Class B Bonds and the Certificates to receive distributions will be subordinated, to the extent described in this prospectus supplement, to the rights of the holders of the Class M-3 Bonds. The protection afforded to the holders of the Class M-3 Bonds by means of the subordination of the Class M-4, Class M-5, Class M-6 and Class B Bonds and the Certificates will be accomplished in part by the preferential right of the holders of the Class M-3 Bonds to receive on any payment date, prior to distributions on the Class M-4, Class M-5, Class M-6 and Class B Bonds and the Certificates, distributions in respect of interest and, prior to the Certificates, distributions in respect of interest and principal. The rights of the holders of the Class M-5, Class M-6 and Class B Bonds and the Certificates to receive distributions will be subordinated, to the extent described in this prospectus supplement, to the rights of the holders of the Class M-4 Bonds. The protection afforded to the holders of

the Class M-4 Bonds by means of the subordination of the Class M-5, Class M-6 and Class B Bonds and the Certificates will be accomplished in part by the preferential right of the holders of the Class M-4 Bonds to receive on any payment date, prior to distributions on the Class M-5, Class M-6 and Class B Bonds and the Certificates, distributions in respect of interest and, prior to the Certificates, distributions in respect of interest and principal. The rights of the holders of the Class M-6 Bonds and Class B Bonds and the Certificates to receive distributions will be subordinated, to the extent described in this prospectus supplement, to the rights of the holders of the Class M-5 Bonds. The protection afforded to the holders of the Class M-5 Bonds by means of the subordination of the Class M-6 Bonds and Class B Bonds and the Certificates will be accomplished in part by the preferential right of the holders of the Class M-5 Bonds to receive on any payment date, prior to distributions on the Class M-6 Bonds and Class B Bonds and the Certificates, distributions in respect of interest and, prior to the Certificates, distributions in respect of interest and principal. The rights of the holders of the Class B Bonds and the Certificates to receive distributions will be subordinated, to the extent described in this prospectus supplement, to the rights of the holders of the Class M-6 Bonds. The protection afforded to the holders of the Class M-6 Bonds by means of the subordination of the Class B Bonds and the Certificates will be accomplished in part by the preferential right of the holders of the Class M-6 Bonds to receive on any payment date, prior to distributions on the Class B Bonds and the Certificates, distributions in respect of interest and, prior to the Certificates, distributions in respect of interest and principal.

In addition, the rights of the holders of the Bonds to receive payments in respect of interest and principal will be senior to the rights of the holders of the Certificates, to the extent described in this prospectus supplement.

Any Realized Losses on the mortgage loans will be allocated or covered on any payment date as follows: first, to the Net Monthly Excess Cashflow, by an increase in the Overcollateralization Increase Amount for that payment date; second, in reduction of the amount of overcollateralization, until reduced to zero; and third, to the Class B, Class M-6, Class M-5, Class M-4, Class M-3, Class M-2, Class M-1 Bonds, in that order, and thereafter to the Class A-1, Class A-2 and Class A-3 Bonds (on a pro rata basis, provided, however, that any such Realized Loss allocated to the Class A-3 Bonds will be covered by the Bond Insurance Policy; and that any such Realized Loss allocated to the Class A-1 Bonds will instead be applied to the Class A-2 Bonds), in that order, in each case in reduction of the Bond Principal Balances thereof, until reduced to zero.

Once Realized Losses have been allocated to the Bonds, such amounts with respect to such bonds will no longer accrue interest nor will such amounts in respect of interest be reinstated thereafter. However, Allocated Realized Loss Amounts may be repaid to the Bonds from Net Monthly Excess Cashflow from the mortgage loans, according to the priorities set forth under “-Overcollateralization Provisions” above. In addition, the Bond Principal Balances of the Bonds may be increased to the extent of any Subsequent Recoveries received with respect to mortgage loans which incurred a Realized Loss which was allocated to such bonds.

Any allocation of a Realized Loss to a bond will be made by reducing the Bond Principal Balance thereof by the amount so allocated as of the payment date in the month following the calendar month in which such Realized Loss was incurred. Notwithstanding anything to the contrary described in this prospectus supplement, in no event will the Bond Principal Balance of any bond be reduced more than once in respect of any particular amount both (i) allocable to such bond in respect of Realized Losses and (ii) payable as principal to the holder of such bond from Net Monthly Excess Cashflow.

On the Closing Date, the Company will deliver to the Indenture Trustee for deposit in the Interest Coverage Account a cash amount as specified in the Indenture. On each payment date during the Funding Period and on the payment date immediately following the termination of the Funding Period, funds on deposit in the Interest Coverage Account will be applied by the Indenture Trustee to cover shortfalls in the amount of interest generated by the related assets in the trust attributable to the pre-funding feature. The Indenture permits funds in the Interest Coverage Account, to the extent that they will not be needed to fund any shortfall of the kind described above, to be released by the Indenture Trustee to the Company or its designee.

Subject to the following limitations, the Master Servicer will be obligated to advance or cause to be advanced on or before each payment date its own funds, advances made by a subservicer or funds in the Payment Account that are not included in the Available Funds for such payment date, in an amount equal to the P&I Advances for such payment date. With respect to a delinquent balloon payment, the Master Servicer is not required to make a P&I Advance of such delinquent balloon payment.

P&I Advances are required to be made only to the extent they are deemed, in the good faith judgment of the Master Servicer, to be recoverable from related late collections, Insurance Proceeds or Liquidation Proceeds, including amounts paid under the PMI Insurer Policy. The purpose of making P&I Advances is to maintain a regular cash flow to the Bondholders, rather than to guarantee or insure against losses. The Master Servicer will not be required to make any P&I Advances with respect to reductions in the amount of the monthly payments due on the mortgage loans due to bankruptcy proceedings or the application of the Relief Act.

All P&I Advances will be reimbursable to the Master Servicer from late collections, insurance proceeds and liquidation proceeds from the mortgage loan as to which the unreimbursed P&I Advance was made. In addition, any P&I Advances previously made in respect of any mortgage loan that are deemed by the Master Servicer to be nonrecoverable from related late collections, insurance proceeds or liquidation proceeds may be reimbursed to the Master Servicer out of any funds in the Payment Account prior to the payments on the Bonds. In the event the Master Servicer fails in its obligation to make any such advance, the Indenture Trustee, as successor Master Servicer, will be obligated to make any such advance, to the extent required in the Servicing Agreement.

The Paying Agent shall initially be the Indenture Trustee. The Paying Agent shall have the revocable power to withdraw funds from the Payment Account for the purpose of making payments to the Bondholders.

The majority holder of the Certificates may purchase the Bonds from the trust, effecting an early retirement of the Bonds, on or after the earlier of (i) the payment date on which the sum of the aggregate Stated Principal Balance of the mortgage loans and amounts on deposit in the pre-funding account have been reduced to 20% or less of the Cut-off Date Balance and (ii) the payment date occurring in March 2015; provided further that if the majority holder of the Certificates fails to exercise such option, the Bond Insurer will have the right to exercise such option with respect to the Class A-3 Bonds only.

The purchase price for each class of Bonds will be equal to 100% of the aggregate outstanding Bond Principal Balance thereof and accrued and unpaid interest thereon (including any related Unpaid Interest Shortfall or Basis Risk Shortfall Carry-Forward Amount) at the Bond Interest Rate through the date on which these Bonds are redeemed in full together with all amounts due and owing to the Indenture Trustee and the Bond Insurer.

Impac Funding Corporation will act as master servicer for the mortgage loans pursuant to the Servicing Agreement. See “Impac Funding Corporation” in the prospectus. As of the Cut-off Date, the Master Servicer has entered into a subservicing arrangement for substantially all of the mortgage loans with Countrywide Home Loans Servicing LP, such that subservicing of the Mortgage Loans will commence on or about March 1, 2005, and with respect to the Subsequent Mortgage Loans, within three months of transfer into the trust fund. Notwithstanding these arrangements, the Master Servicer will remain primarily liable for servicing the mortgage loans.

Countrywide Home Loans Servicing LP is an approved mortgage loan servicer for Fannie Mae, Freddie Mac, Ginnie Mae, HUD and VA and is licensed to service mortgage loans in each state where a license is required. As of December 31, 2004, Countrywide Home Loans Servicing LP had a net worth of approximately $11.9 billion. The principal executive offices of Countrywide Home Loans Servicing LP are located at 7105 Corporate Drive, Plano, Texas 75024. Countrywide Home Loans Servicing LP is a Texas limited partnership directly owned by Countrywide GP, Inc. and Countrywide LP, Inc., each a Nevada corporation and a direct wholly owned subsidiary of Countrywide Home Loans, Inc., a New York corporation. Countrywide Home Loans, Inc., is a direct wholly owned subsidiary of Countrywide Financial Corporation, a Delaware corporation (formerly known as Countrywide Credit Industries, Inc.). Countrywide Home Loans Servicing LP is an affiliate of Countrywide Securities Corporation.

The principal compensation to be paid to the Master Servicer in respect of its master servicing activities for the Bonds and the Certificates will be equal to the Master Servicing Fee. The principal compensation to be paid to any subservicer of the mortgage loans will be equal to the Subservicing Fee. As additional servicing compensation, the Master Servicer or any subservicer is entitled to any assumption fees and any late payment charges, to the extent collected from mortgagors, together with any interest or other income earned on funds held in the Payment Account and any escrow accounts in respect of the mortgage loans. However, the Master Servicer is obligated to offset any Prepayment Interest Shortfall in respect of the mortgage loans on any payment date with Compensating Interest. The Master Servicer or the related subservicer is obligated to pay certain insurance premiums and ongoing expenses associated with the mortgage pool in respect of mortgage loans serviced by it and incurred by the Master Servicer or such subservicer in connection with its responsibilities under the Servicing Agreement or the related subservicing agreement. However, the Master Servicer or such subservicer is entitled to reimbursement therefor as provided in the Servicing Agreement or the related subservicing agreement.

The Master Servicer, on behalf of the Issuer, may either purchase itself or sell to a third-party any mortgage loan that is 90 days or more delinquent from the Issuer at a price equal to the Stated Principal

Balance thereof plus one month’s interest thereon and any amounts, including advances, owed to the Master Servicer and the related subservicer. The removal of any such mortgage loan from the Trust may affect the loss and delinquency tests which determine the level of the Overcollateralization Target Amount.

In addition to the procedures set forth under the heading “Servicing of Mortgage Loans-Realization upon or Sale of Defaulted Mortgage Loans” in the prospectus, the Master Servicer, on behalf of the Issuer, may also, in its discretion, as an alternative to foreclosure, sell defaulted mortgage loans at fair market value to third-parties, if the Master Servicer reasonably believes that such sale would maximize proceeds to the Securityholders in the aggregate (on a present value basis) with respect to that mortgage loan.

The servicing agreement provides that the Master Servicer will have the option, but not the obligation, to purchase at any one time up to 1.0% of the mortgage loans (and in any case, at least 5 mortgage loans) from the trust at a purchase price of par plus accrued interest.

The following summary describes certain terms of the Indenture. The summary does not purport to be complete and is subject to, and qualified in its entirety by reference to, the provisions of the Trust Agreement and Indenture. Whenever particular defined terms of the Indenture are referred to, such defined terms are thereby incorporated in this prospectus supplement by reference. Deutsche Bank National Trust Company will act as custodian under the custodial agreement. See “The Agreements” in the prospectus.

In case an Event of Default should occur and be continuing with respect to the Bonds, then (in every such case) the Indenture Trustee at the written direction of Bondholders representing more than 50% of the aggregate Bond Principal Balance of the Bonds, other than the Class A-IO Bonds, and 50% or more of the Notional Amount of the Class A-IO Bonds then outstanding, shall declare the principal of the Bonds, together with accrued and unpaid interest thereon through the date of acceleration, to be due and payable. Such declaration may under certain circumstances be rescinded by Bondholders representing more than 50% of the aggregate Bond Principal Balance of the Bonds, other than the Class A-IO Bonds, and 50% or more of the Notional Amount of the Class A-IO Bonds then outstanding.

If, following an Event of Default, any Bonds have been declared to be due and payable, the Indenture Trustee may, if directed by the related Bondholders, refrain from selling such assets and continue to apply all amounts received on such assets to payments due on the Bonds in accordance with their terms, notwithstanding the acceleration of the maturity of such Bonds. The Indenture Trustee, however, must sell or cause to be sold the assets included in the Trust if collections in respect of such assets are determined to be insufficient to pay certain expenses payable under the Indenture and to make all scheduled payments on the Bonds. In the event the assets of the Trust are sold, any collection on, or the proceeds from the sale of, the mortgage loans will be applied in accordance with the Indenture.

Subject to the provisions of the Indenture relating to the duties of the Indenture Trustee, in case an Event of Default shall occur and be continuing, the Indenture Trustee shall be under no obligation to exercise any of the rights and powers under the Indenture at the request or direction of any of the Bondholders, unless such Bondholders shall have offered to the Indenture Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. Subject to such provisions for indemnification and certain limitations contained in the Indenture, Bondholders representing more than 50% of the aggregate Bond Principal Balance of the Bonds, other than the Class A-IO Bonds, and 50% or more of the Notional Amount of the Class A-IO Bonds then outstanding, shall have the right to direct the time, method, and place of conducting any proceeding or any remedy available to the Indenture Trustee or exercising any trust or power conferred on the Indenture Trustee with respect to such Bonds; and Bondholders representing more than 50% of the aggregate Bond Principal Balance, other than the Class A-IO Bonds, and 50% or more of the Notional Amount of the Class A-IO Bonds then outstanding, of the Bonds may, in certain cases, waive any default with respect thereto, except a default in the payment of principal or interest or a default in respect of a covenant or provision of the Indenture that cannot be modified without the waiver or consent of the holder of each outstanding Bond affected thereby. So long as the Bond Insurer is not in default, the Bond Insurer has, and may exercise without the consent of the Class A-3 Bondholders, all of the rights of the Class A-3 Bondholders under the Indenture.

No Bondholder will have any right to institute any proceedings with respect to the Indenture unless (1) such Bondholder has previously given written notice to the Indenture Trustee of a continuing Event of Default; (2) Bondholders representing not less than 25% of the aggregate Bond Principal Balance of the Bonds, other than the Class A-IO Bonds, and 50% or more of the Notional Amount of the Class A-IO Bonds then outstanding, have made written request to the Indenture Trustee to institute proceedings in respect of such Event of Default in its own name as Indenture Trustee; (3) such Bondholders have offered to the Indenture Trustee indemnity satisfactory to it against the costs, expenses and liabilities to be incurred in compliance with such request; (4) for 60 days after its receipt of such notice, request and offer of indemnity the Indenture Trustee has failed to institute any such proceedings; (5) no direction inconsistent with such written request has been given to the Indenture Trustee during such 60-day period by the Bondholders representing more than 50% of the aggregate Bond Principal Balance of the Bonds, other than the Class A-IO Bonds, and 50% or more of the Notional Amount of the Class A-IO Bonds then outstanding; and (6) such Bondholders have the written consent of the Bond Insurer, unless a Bond Insurer default exists.

The Indenture Trustee may resign at any time, or in the event there is a conflict of interest with respect to any class of Bonds, as Indenture Trustee with respect to one or more classes of Bonds, in which event the Issuer will be obligated to appoint a successor Indenture Trustee for the Bonds or such class of Bonds within the period specified in the Indenture. The Indenture Trustee also may be removed at any time by Bondholders representing more than 50% of the aggregate Bond Principal Balance of the Bonds, other than the Class A-IO Bonds, and 50% or more of the Notional Amount of the Class A-IO Bonds then outstanding, if the Indenture Trustee ceases to be eligible to continue as such under the Indenture or if the Indenture Trustee becomes incapable of acting, bankrupt, insolvent or if a receiver or public officer takes charge of the Indenture Trustee or its property. Any resignation or removal of the Indenture Trustee and appointment of a successor Indenture Trustee will not become effective until acceptance of the appointment by the successor Indenture Trustee.

For federal income tax purposes, the Bonds will be characterized as indebtedness to a Bondholder other than the owner of the Certificates and not as representing an ownership interest in the Trust Fund or an equity interest in the Issuer or the Company. In addition, for federal income tax purposes, the Issuer will not be (i) classified as an association taxable as a corporation for federal income tax purposes, (ii) a taxable mortgage pool as defined in Section 7701(i) of the Code, or (iii) a “publicly traded partnership” as defined in Treasury Regulation Section 1.7704-1. The Bonds (other than the Class A-IO Bonds), will not, and the Class A-IO Bonds will, be treated as having been issued with “original issue discount” (as defined in the prospectus). See “Federal Income Tax Consequences” in the prospectus.

The Bonds will not be treated as assets described in Section 7701(a)(19)(C) of the Code or “real estate assets” under Section 856(c)(4)(A) of the Code. In addition, interest on the Bonds will not be treated as “interest on obligations secured by mortgages on real property” under Section 856(c)(3)(B) of the Code. The Bonds will also not be treated as “qualified mortgages” under Section 860G(a)(3)(C) of the Code.

Prospective investors in the Bonds should see “Federal Income Tax Consequences” and “State and Other Tax Consequences” in the prospectus for a discussion of the application of certain federal income and state and local tax laws to the Issuer and purchasers of the Bonds.

Subject to the terms and conditions set forth in an underwriting agreement, dated March 30, 2005, Countrywide Securities Corporation has agreed to purchase 50%, Merrill Lynch, Pierce, Fenner & Smith Incorporated has agreed to purchase 30% and UBS Securities LLC has agreed to purchase 20% of each class of Bonds; the Company has agreed to sell to the Underwriters the Bonds. It is expected that delivery of the Bonds will be made only in book-entry form through the Same Day Funds Settlement System of DTC on or about April 6, 2005 against payment therefor in immediately available funds.

The Bonds will be purchased from the Company by the Underwriters and will be offered by the Underwriters from time to time to the public in negotiated transactions or otherwise at varying prices to be determined for each investor at the time of sale. The proceeds to the Company from the sale of the Bonds are expected to be approximately 100.41% of the aggregate initial Bond Principal Balance of the Class A-1, Class A-2, Class A-3, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds, less expenses expected to equal approximately $900,000. The Underwriters may effect such transactions by selling the Bonds to or through dealers, and such dealers may receive compensation in the form of underwriting discounts, concessions or commissions from the Underwriters. In connection with the sale of the Bonds, the Underwriters may be deemed to have received compensation from the Company in the form of underwriting compensation. The Underwriters and any dealers that participate with the Underwriters in the distribution of the Bonds may be deemed to be underwriters and any profit on the resale of the Bonds positioned by them may be deemed to be underwriting discounts and commissions under the Securities Act of 1933, as amended.

The underwriting agreement provides that the Company, the Seller and Impac Funding Corporation will jointly and severally indemnify the Underwriters, and that under limited circumstances the Underwriters will indemnify the Company, the Seller and Impac Funding Corporation against certain civil liabilities under the Securities Act of 1933, as amended, or contribute to payments required to be made in respect thereof.

Countrywide Securities Corporation is an affiliate of Countrywide Home Loans Servicing LP.

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

The predecessor basis financial statements of Financial Guaranty Insurance Company for the year ended December 31, 2002 have been included in the Current Report on Form 8-K of the depositor, which is incorporated by reference in the registration statement to which the prospectus supplement relates, in reliance upon the report of KPMG LLP, independent registered public accounting firm, which is also included therein, and upon the authority of said firm as experts in accounting and auditing.

The financial statements of Financial Guaranty Insurance Company as of December 31, 2004 and 2003 and for the year ended December 31, 2004 and the periods from December 18, 2003 through December 31, 2003, and from January 1, 2003 through December 17, 2003 appearing in the Form 8-K of the depositor, which are incorporated by reference, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such financial statements are incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

Legal matters relating to the Bonds will be passed upon for the Company by Thacher Proffitt & Wood LLP, New York, New York and for the Underwriters by Sidley Austin Brown & Wood LLP, New York, New York. Sidley Austin Brown & Wood LLP represents the Seller on certain matters from time to time.

It is a condition to the issuance of the Bonds that each class of Class A Bonds be rated “AAA” by S&P and DBRS and “Aaa” by Moody’s, that the Class M-1 Bonds be rated at least “AA+” by S&P, “Aa1” by Moody’s and “AA (high)” by DBRS, that the Class M-2 Bonds be rated at least “AA” by S&P, “Aa2” by Moody’s and “AA” by DBRS, that the Class M-3 Bonds be rated at least “AA-” by S&P, “Aa3” by Moody’s and “AA (low)” by DBRS, that the Class M-4 Bonds be rated at least “A+” by S&P, “A1” by Moody’s and “A (high)” by DBRS, that the Class M-5 Bonds be rated at least “A” by S&P, “A2” by Moody’s and “A” by DBRS, that the Class M-6 Bonds be rated at least “A-” by S&P, “A3” by Moody’s and “A (low)” by DBRS, and that the Class B Bonds be rated at least “BBB+” by S&P, “Baa2” by Moody’s and “BBB (high)” by DBRS.

The ratings of S&P, Moody’s and DBRS assigned to collateralized asset-backed bonds address the likelihood of the receipt by Bondholders of all distributions to which the Bondholders are entitled other than Unpaid Interest Shortfalls or Basis Risk Shortfalls. The rating process addresses structural and legal aspects associated with the Bonds, including the nature of the underlying mortgage loans. The

ratings assigned to collateralized asset-backed bonds do not represent any assessment of the likelihood that principal prepayments will be made by the mortgagors or the degree to which the rate and timing principal prepayments will differ from that originally anticipated.

The Company has not requested that any rating agency rate any class of the Bonds other than as stated above. However, there can be no assurance as to whether any other rating agency will rate any class of the Bonds, or, if it does, what rating would be assigned by any other rating agency. A rating on any class of the Bonds by another rating agency, if assigned at all, may be lower than the ratings assigned to the Bonds as stated above. The ratings do not address the possibility that Bondholders might suffer a lower than anticipated yield due to non-credit events.

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 Bonds are subsequently lowered for any reason, no person or entity is obligated to provide any additional credit support or credit enhancement with respect to the Bonds.

The Bonds will not constitute “mortgage related securities” for purposes of SMMEA.

The Company makes no representations as to the proper characterization of any class of Bonds for legal investment or other purposes, or as to the ability of particular investors to purchase any class of Bonds under applicable legal investment restrictions. These uncertainties may adversely affect the liquidity of any class of Bonds. 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 legal advisors in determining whether and to what extent any class of Bonds constitutes a legal investment or is subject to investment, capital or other restrictions.

ERISA and Section 4975 of the Code impose certain requirements on Plans (as defined in the prospectus) and on persons who are fiduciaries with respect to such Plans. Any Plan fiduciary which proposes to cause a Plan to acquire any of the Bonds would be required to determine whether such an investment is permitted under the governing Plan instruments and is prudent and appropriate for the Plan in view of its overall investment policy and the composition and diversification of its portfolio. The DOL (as defined in the prospectus) has promulgated the DOL Regulations defining the term “Plan Assets” for purposes of applying the general fiduciary responsibility provisions of ERISA and the prohibited transaction provisions of ERISA and Section 4975 of the Code. Under the DOL Regulations, generally, when a Plan acquires an “equity interest” in another entity (such as the Trust), the underlying assets of that entity may be considered to be Plan Assets. The DOL Regulations provide that the term “equity interest” means any interest in an entity other than an instrument which is treated as indebtedness under applicable local law and which has no “substantial equity features.”

As of the date hereof, the ratings of the Bonds and the traditional debt features of these Bonds should cause these Bonds to be treated as debt with no “substantial equity features” under the DOL Regulations. There can be no assurance given, however, that the Bonds are or will be treated as debt and not “equity interests” under the DOL Regulations. Moreover, the debt treatment of the Bonds for ERISA purposes could change subsequent to their issuance; that is, they could be treated as equity interests, if, for

example, the ratings of the Bonds change. Because of the factual nature of certain of the above-described provisions of ERISA, the Code and the DOL Regulations, Plans or persons investing Plan Assets should carefully consider whether such an investment might constitute or give rise to a prohibited transaction under ERISA or the Code. Any Plan fiduciary which proposes to cause a Plan to acquire any of the Bonds should consult with its counsel with respect to the potential consequences under ERISA and the Code of the Plan’s acquisition and ownership of such Bonds.

In addition, ERISA and the Code prohibit certain transactions involving the assets of a Plan and Parties in Interest (as defined in the prospectus) who have certain specified relationships to the Plan. Accordingly, even if the Bonds are treated as indebtedness under the DOL Regulations, prior to making an investment in the Bonds, investing Plans should determine whether the Issuer, the Seller, the Company, any Underwriter, the Owner Trustee, the Indenture Trustee, the Master Servicer, any other servicer, any administrator, any provider of credit support, including the Derivative Contract Counterparty, any owner of the Certificates, which could be transferred subsequent to the purchase of a Bond by a Plan, or any of their affiliates is a Party in Interest with respect to such Plan and, if so, whether such transaction is subject to one or more statutory, regulatory or administrative exemptions. Additionally, an investment of the assets of a Plan in certain securities may cause the assets of the issuer of those securities to be deemed “Plan Assets” of such Plan, and any person with certain specified relationships to such issuer to be deemed a Party in Interest with respect to the investing Plan.

By acquiring a Bond, each purchaser will be deemed to represent that either (1) it is not acquiring the Bond with the assets of a Plan; or (2) (A) the acquisition, holding and transfer of the Bond will not give rise to a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code as a result of the Issuer, the Seller, the Company, any Underwriter, the Owner Trustee, the Indenture Trustee, the Master Servicer, any other servicer, any administrator, any provider of credit support, including the Derivative Contract Counterparty, any owner of the Certificates, or any of their affiliates being a Party in Interest with respect to such purchaser that is a Plan and (B) the Bonds are rated investment grade or better and such person believes that the Bonds are properly treated as indebtedness without substantial equity features for purposes of the DOL Regulations, and agrees to so treat the Bonds. Alternatively, regardless of the rating of the Bonds, such person may provide the Indenture Trustee and the Owner Trustee with an opinion of counsel, which opinion of counsel will not be at the expense of the Issuer, the Seller, the Company, any Underwriter, the Owner Trustee, the Indenture Trustee, the Master Servicer or any successor servicer which opines that the acquisition, holding and transfer of such Bond or interest therein are permissible under applicable law, will not constitute or result in a non-exempt prohibited transaction under ERISA or Section 4975 of the Code and will not subject the Issuer, the Seller, the Company, any Underwriter, the Owner Trustee, the Indenture Trustee, the Master Servicer or any successor servicer to any obligation in addition to those undertaken in the Indenture.

Accrual Period - With respect to any payment date and each class of Bonds (other than the Class A-IO Bonds), the period from the preceding payment date (or in the case of the first payment date, from the Closing Date) through the day preceding such payment date. With respect to the Class A-IO Bonds and any payment date, the calendar month preceding the month in which such payment date occurs.

Accrued Bond Interest - With respect to any payment date and each class of Bonds (except the Class A-IO Bonds), interest accrued during the related Accrual Period at the then-applicable Bond Interest Rate on the related Bond Principal Balance thereof immediately prior to such payment date, less such Bonds’ Unpaid Interest Shortfall for such payment date, plus any Accrued Bond Interest remaining unpaid from any prior payment date with interest thereon at the related Bond Interest Rate. With respect to any payment date and the Class A-IO Bonds, interest accrued during the related Accrual Period at the then-applicable Bond Interest Rate on the related Notional Amount thereof immediately prior to such payment date. Accrued Bond Interest for the Bonds (other than the Class A-IO Bonds) shall be calculated on the basis of the actual number of days in the Accrual Period and a 360 day year. Accrued Bond Interest for the Class A-IO Bonds shall be calculated on the basis of a 360 day year consisting of twelve 30-day months.

Agreements - The Servicing Agreement, the Indenture, the Trust Agreement and the Mortgage Loan Purchase Agreement.

Allocated Realized Loss Amount - With respect to any class of Bonds (other than the Class A-IO Bonds) and any payment date, an amount equal to the sum of any related Realized Loss allocated to reduce the Bond Principal Balance of that class of Bonds on that payment date and any Allocated Realized Loss Amount for that class remaining unpaid from the previous payment date, less the amount of any Subsequent Recoveries added to the Bond Principal Balance of such Bond.

Allowable Claim - For any mortgage loan covered by a Primary Insurance Policy, the current principal balance of such mortgage loan plus accrued interest and allowable expenses at the time of the claim.

Appraised Value - The appraised value of a mortgaged property based upon the lesser of (i) the appraisal made at the time of the origination of the related mortgage loan, or (ii) the sale price of such mortgaged property at such time of origination. With respect to a mortgage loan, the proceeds of which were used to refinance an existing mortgage loan, the appraised value of the mortgaged property based upon the appraisal obtained at the time of refinancing.

Available Funds - For any payment date, an amount equal to the amount received by the Indenture Trustee and available in the Payment Account on that payment date in respect of the mortgage loans. The Available Funds will generally be equal to (a) the sum of (1) the aggregate amount of scheduled payments on the mortgage loans received or advanced that were due during the Due Period, (2) any unscheduled payments and receipts on the mortgage loans, including mortgagor prepayments on such mortgage loans, the proceeds of any repurchase of the mortgage loans by the Master Servicer or Seller, Insurance Proceeds, Subsequent Recoveries and Liquidation Proceeds, received during the related Prepayment Period, in each case net of amounts reimbursable therefrom to the Indenture Trustee, the Master Servicer and any subservicer, and (3) any Compensating Interest paid by the Master Servicer in respect of the mortgage loans, and reduced by (b) the sum of (1) Master Servicing Fees, the Subservicing Fees, the Indenture Trustee’s Fees, the Owner Trustee’s Fee, the Net Derivative Fee, if any, the premium on the Bond Insurance Policy in respect of the Class A-3 Bonds, any amounts in respect of the premiums payable to Radian under the PMI Insurer Policies in respect of the mortgage loans and (2) certain amounts owed to the Master Servicer, the Depositor, the Indenture Trustee and the Owner Trustee in respect of the mortgage loans, as provided in the Agreements.

Available Funds Rate – On any payment date during the Funding Period and for the Class A-1, Class A-2, Class A-3, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds, the per annum rate equal to the product of:

(y) the amount of interest earned on amounts on deposit in the Pre-Funding Account from the prior payment date to the current payment date, expressed as a percentage of the Pre-Funded Amount at the end of the prior Due Period and converted to a per annum rate;

in the case of (x), weighted on the basis of the aggregate Stated Principal Balance of the mortgage loans as of the end of the prior Due Period, and in the case of (y), weighted on the basis of the Pre-Funded Amount as of the end of the related Due Period, and

(x) the aggregate Stated Principal Balance of the mortgage loans and Pre-Funded Amount as of the end of the prior Due Period divided by

(y) the aggregate Bond Principal Balance of the Class A-1, Class A-2, Class A-3, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds immediately prior to such payment date; minus

(x) the Bond Principal Balance of the Class A-3 Bonds as of the end of the prior Due Period divided by

(ii) a fraction equal to (x) 30 divided by (y) the number of days in the related Accrual Period.

On any payment date following the Funding Period and for the Class A-1, Class A-2, Class A-3, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B Bonds, the per annum rate equal to the product of:

(x) the aggregate Stated Principal Balance of the mortgage loans as of the end of the prior Due Period divided by

(x) the Bond Principal Balance of the Class A-3 Bonds as of the end of the prior Due Period divided by

(ii) a fraction equal to (x) 30 divided by (y) the number of days in the related Accrual Period.

Basic Principal Distribution Amount - With respect to any payment date, the lesser of (a) the excess of (i) the Available Funds for such payment date over (ii) the aggregate amount of Accrued Bond Interest for the Bonds for such payment date and (b) the excess of (i) the Principal Remittance Amount for such payment date over (ii) the Overcollateralization Release Amount, if any, for such payment date.

Basis Risk Shortfall - With respect to any class of Bonds (other than the Class A-IO Bonds), on each payment date where clause (iii) of the definition of “Bond Interest Rate” is less than clauses (i) or (ii) of the definition of “Bond Interest Rate,” the excess, if any, of (x) the aggregate Accrued Bond Interest thereon for such payment date calculated pursuant to the lesser of clause (i) or (ii) of the definition of Bond Interest Rate over (y) interest accrued on the mortgage loans at the Available Funds Rate.

Basis Risk Shortfall Carry-Forward Amount - With respect to each class of Bonds (other than the Class A-IO Bonds) and any payment date, as determined separately for each such class of Bonds, an amount equal to the aggregate amount of Basis Risk Shortfall for such Bonds on such payment date, plus any unpaid Basis Risk Shortfall for such class of Bonds from prior payment dates, plus interest thereon at the Bond Interest Rate for such payment date, to the extent previously unreimbursed by the Net Monthly Excess Cashflow or the Derivative Contracts.

Bond - A Class A-1, Class A-2, Class A-3, Class A-IO, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, or Class B Bond.

Bond Insurance Policy – The surety bond issued by the Bond Insurer for the benefit of the Class A-3 Bondholders.

Bond Insurer – Financial Guaranty Insurance Company, a New York domiciled stock insurance corporation, or any successor thereto as provided in the Indenture.

Bond Interest Rate - With respect to each payment date and (a) each class of Bonds (other than the Class A-IO Bonds), a floating rate equal to the least of (i) One-Month LIBOR plus the related Bond Margin, (ii) the related Maximum Bond Interest Rate and (iii) the Available Funds Rate with respect to such payment date and (b) the Class A-IO Bonds, (i) for the April 2005 payment date through the September 2005 payment date, 1.45% per annum, (ii) for each payment date from October 2005 through the March 2006 payment date, 0.85% per annum, and (iii) for each payment date thereafter, 0.00% per annum.

Bond Margin - With respect to the Class A-1 Bonds, on any payment date prior to the Step-Up Date, 0.240% per annum, and on any payment date on and after the Step-Up Date, 0.480% per annum. With respect to the Class A-2 Bonds, on any payment date prior to the Step-Up Date, 0.300% per annum, and on any payment date on and after the Step-Up Date, 0.600% per annum. With respect to the Class A-3 Bonds, on any payment date prior to the Step-Up Date, 0.180% per annum, and on any payment date on and after the Step-Up Date, 0.360% per annum. With respect to the Class M-1 Bonds, on any payment date prior to the Step-Up Date, 0.420% per annum, and on any payment date on and after the Step-Up Date, 0.630% per annum. With respect to the Class M-2 Bonds, on any payment date prior to the Step-Up Date, 0.450% per annum, and on any payment date on and after the Step-Up Date, 0.675% per annum. With respect to the Class M-3 Bonds, on any payment date prior to the Step-Up Date, 0.500% per annum, and on any payment date on and after the Step-Up Date, 0.750% per annum. With respect to the Class M-4 Bonds, on any payment date prior to the Step-Up Date, 0.650% per annum, and on any payment date on and after the Step-Up Date, 0.975% per annum. With respect to the Class M-5 Bonds, on any payment date prior to the Step-Up Date, 0.700% per annum, and on any payment date on and after the Step-Up Date, 1.050% per annum. With respect to the Class M-6 Bonds, on any payment date prior to the Step-Up Date, 0.750% per annum, and on any payment date on and after the Step-Up Date, 1.125% per annum. With respect to the Class B Bonds, on any payment date prior to the Step-Up Date, 1.350% per annum, and on any payment date on and after the Step-Up Date, 2.025% per annum.

Bond Principal Balance - With respect to any Bond (other than the Class A-IO Bonds) as of any date of determination, the initial Bond Principal Balance as stated on the face thereof, minus all amounts distributed in respect of principal with respect to such Bond and, in the case of any Bond, the aggregate amount of any reductions in the Bond Principal Balance thereof deemed to have occurred in connection with allocations of Realized Losses on all prior payment dates as described in this prospectus supplement; provided that, the Bond Principal Balance of any class of Bonds with the highest payment priority to which Realized Losses have been allocated shall be increased by the amount of any Subsequent Recoveries on the mortgage loans not previously allocated, but not by more than the amount of Realized Losses previously allocated to reduce the Bond Principal Balance of that class.

Book-Entry Bonds - Each class of the Bonds for so long as they are issued, maintained and transferred at DTC.

Certificate Registrar - Wells Fargo Bank, N.A., and its successors and assigns.

Certificates - The IMH Assets Corp., Trust Certificates, Series 2005-3, issued pursuant to the Trust Agreement and representing the beneficial ownership interest in the trust. The Certificates are not offered hereby.

Class M Bonds - The Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, and Class M-6 Bonds.

Code - The Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

Compensating Interest - With respect to any payment date, the amount of any Prepayment Interest Shortfalls resulting from prepayments in full during the preceding calendar month on the mortgage loans, 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 aggregate Stated Principal Balance of the mortgage loans immediately preceding such payment date and (b) the sum of the Master Servicing Fee and Subservicing Fee for such payment date for the mortgage loans.

Credit Score - A measurement of the relative degree of risk a borrower represents to a lender obtained from credit reports utilizing, among other things, payment history, delinquencies on accounts, levels of outstanding indebtedness, length of credit history, types of credit, and bankruptcy experience.

Cut-off Date – The later of March 1, 2005 or the origination date of such initial mortgage loans.

Cut-off Date Balance - The sum of the aggregate Stated Principal Balance of the mortgage loans as of the Cut-off Date and the Original Pre-Funded Amount.

Deficiency Amount - With respect to any payment date and the Insured Bonds, an amount, if any, equal to the sum of:

(1) the amount by which the aggregate amount of Accrued Bond Interest on the related Insured Bonds on that payment date exceeds the portion of Available Funds otherwise allocable to the Class A-3 Bonds; and

(2) (i) with respect to any payment date that is not the final scheduled payment date, any Allocated Realized Loss Amount for that payment date (without giving effect to any payments in respect of such Allocated Realized Loss Amounts from the Bond Insurance Policy) to the extent not applied to reduce the Net Monthly Excess Cashflow on such payment date or not otherwise previously reimbursed from payments under the Bond Insurance Policy or otherwise; or

(ii) on the final scheduled payment date, the aggregate outstanding Bond Principal Balance of the Insured Bonds to the extent otherwise not paid on that date.

Derivative Contracts - The five derivative contracts between the Seller and the Derivative Contract Counterparty primarily for the benefit of the Bonds and the Certificates.

Determination Date - With respect to any payment date is on the 15th day of the related month or, if such day is not a business day, on the immediately preceding business day.

Due Date - With respect to each mortgage loan, the day of the month on which each scheduled monthly payment is due.

Due Period - With respect to any payment date and the mortgage loans, the period commencing on the second day of the month immediately preceding the month of such payment date (or, with respect to the first Due Period, the day following the Cut-off Date) and ending on the first day of the month of such payment date.

Event of Default - Any one of the following: (a) the failure by the Issuer to pay (i) Accrued Bond Interest on any Class of Bonds or the Principal Distribution Amount with respect to a payment date on such payment date, or (ii) any Unpaid Interest Shortfall on any class of Bonds with respect to a payment date, but in the case of clause (ii) only to the extent funds are available to make such payment as described under “—Overcollateralization Provisions” in this prospectus supplement; (b) a default by the Issuer in the observance of certain negative covenants in the Indenture; (c) a default by the Issuer in the observance of any other covenant of the Indenture, and the continuation of any such default for a period of thirty days after notice to the Issuer by the Indenture Trustee or by the Holders of at least 25% of the aggregate Bond Principal Balance of the Bonds (for which purpose the Class A-IO Bonds, if outstanding, will be deemed to have a Bond Principal Balance equal to 5% of the aggregate Bond Principal Balance of the other classes of Bonds), as applicable; (d) any representation or warranty made by the Issuer in the Indenture or in any Bond or other writing delivered pursuant thereto having been incorrect in a material respect as of the time made, and the circumstance in respect of which such representation or warranty is incorrect not

having been cured within thirty days after notice thereof is given to the Issuer by the Indenture Trustee, by the Holders of at least 25% of the aggregate Bond Principal Balance of the Bonds (for which purpose the Class A-IO Bonds, if outstanding, will be deemed to have a Bond Principal Balance equal to 5% of the aggregate Bond Principal Balance of the other classes of Bonds), as applicable; (e) certain events of bankruptcy, insolvency, receivership or reorganization of the Issuer; or (f) the failure by the Issuer on the final scheduled payment date to reduce the Bond Principal Balances of the Bonds to zero.

Funding Period – The period from the Closing Date until the earlier of (i) the date on which the amount on deposit in the Pre-Funding Account is reduced to less than $10,000 or (ii) June 30, 2005.

Homeownership Act - Home Ownership and Equity Protection Act of 1994, as amended.

Indenture - The Indenture dated as of April 6, 2005, between the Issuer and the Indenture Trustee.

Indenture Trustee - Wells Fargo Bank, N.A., and its successors and assigns or any successor indenture trustee appointed pursuant to the terms of the Indenture.

Indenture Trustee’s Fee - With respect to any payment date, 1/12^th of the Indenture Trustee’s Fee Rate multiplied by the Stated Principal Balance of each mortgage loan, plus investment earnings on deposits in the Payment Account.

Insured Amount – With respect to any payment date and the Insured Bonds, (a) any Deficiency Amount and (b) any Preference Amount.

Interest Coverage Account - A trust account that the Indenture Trustee will establish for the benefit of the Bondholders.

Interest Determination Date - With respect to the first Accrual Period, the second LIBOR Business Day preceding the Closing Date, and with respect to each Accrual Period thereafter, the second LIBOR Business Day preceding the related payment date on which such Accrual Period commences.

Issuer - Impac CMB Trust Series 2005-3, a Delaware statutory trust, or its successor in interest.

LIBOR Business Day - A day on which banks are open for dealing in foreign currency and exchange in London and New York City.

Master Servicer - Impac Funding Corporation, a California corporation, and its successors and assigns.

Master Servicing Fee - With respect to each mortgage loan and any payment date, the fee payable monthly to the Master Servicer in respect of master servicing compensation that accrues at an annual rate equal to the Master Servicing Fee Rate multiplied by the Stated Principal Balance of such Mortgage Loan as of the related Due Date in the related Due Period.

Master Servicing Fee Rate - With respect to any mortgage loan, 0.030% per annum.

Maximum Bond Interest Rate - With respect to each class of Bonds, 11.25% per annum.

Mortgage Loan Purchase Agreement - The Mortgage Loan Purchase Agreement, dated as of the Closing Date, between the Seller and the Company, whereby the mortgage loans are being sold to the Company.

Net Derivative Contract Payment Amount – With respect to any payment date, the amount equal to the excess, if any, of (a) the aggregate amount payable on that payment date to the Issuer from the Derivative Contract Counterparty pursuant to the Derivative Contracts, over (b) the aggregate amount payable on that payment date to the Derivative Contract Counterparty under the Derivative Contracts, in each case as described in “Description of the Securities—The Derivative Contracts” in this prospectus supplement.

Net Derivative Fee - With respect to any payment date, the amount equal to the excess, if any, of (a) the aggregate amount payable on that payment date to the Derivative Contract Counterparty in respect of the Derivative Contracts, over (b) the aggregate amount payable on that payment date to the Issuer from the Derivative Contract Counterparty pursuant to the Derivative Contracts, as described in “Description of the Bonds—The Derivative Contracts” in this prospectus supplement.

Net Derivative Fee Rate - With respect to any payment date, the fraction, expressed as a rate per annum, equal to (x) the Net Derivative Fee on such payment date over (y) the aggregate Stated Principal Balance of the mortgage loans and Pre-Funded Amount.

Net Monthly Excess Cashflow - - For any payment date, the sum of (a) any Overcollateralization Release Amount, (b) the excess of (x) the Available Funds for such payment date over (y) the sum for such payment date of (A) the aggregate amount of Accrued Bond Interest for the related Bonds and (B) the related Principal Remittance Amount and (c) any related amounts payable from the related Derivative Contracts as described in “Description of the Securities-The Derivative Contracts” in this prospectus supplement.

Net Mortgage Rate - On any mortgage loan and any payment date, the then applicable mortgage rate thereon for the scheduled monthly payment thereon during the related Due Period, minus the sum of (1) the Master Servicing Fee Rate, (2) the Subservicing Fee Rate, (3) the Indenture Trustee’s Fee Rate, (4) the Owner Trustee’s Fee Rate, (5) the Net Derivative Fees Rate and (6) the related PMI Insurer Rate, if such mortgage loan is a PMI Mortgage Loan.

Non-Seasoned Mortgage Loans - Mortgage loans other than the Seasoned Mortgage Loans.

Notional Amount – With respect to the Class A-IO Bonds immediately prior to the related payment date, an amount equal to the amount set for the below:

OID Regulations - Treasury regulations under Sections 1271 to 1275 of the Code generally addressing the treatment of debt instruments issued with original issue discount.

Original Pre-Funded Amount - The amount deposited in the Pre-Funding Account on the Closing Date by the Indenture Trustee.

Overcollateralization Increase Amount - With respect to any payment date, the lesser of (i) the Net Monthly Excess Cashflow for such payment date but, with respect to the Class A-3 Bonds, after payments to the Bond Insurer in respect of clause (i) of “Description of the Bonds-Overcollateralization Provisions” and (ii) the excess, if any, of (a) the Overcollateralization Target Amount over (b) the Overcollateralized Amount on such payment date (after taking into account payments to the related Bonds of the Basic Principal Distribution Amount on such payment date).

Overcollateralization Release Amount - With respect to any payment date, the lesser of (x) the Principal Remittance Amount for such payment date and (y) the excess, if any, of (i) the Overcollateralized Amount for such payment date (assuming that 100% of the Principal Remittance Amount is applied as a principal payment on such payment date) over (ii) the Overcollateralization Target Amount for such payment date.

Overcollateralization Target Amount – With respect to any payment date, (i) on or before the payment date occurring in September 2005, approximately zero, and (ii) with respect to any payment date thereafter, 0.35% of the Cut-off Date Balance.

Overcollateralized Amount - - For any payment date, the amount, if any, by which (i) the aggregate principal balance of the mortgage loans (after giving effect to scheduled payments of principal due during the related Due Period, to the extent received or advanced, unscheduled collections of principal received during the related Prepayment Period and Realized Losses on the mortgage loans incurred during the related Prepayment Period), plus the Pre-Funded Amount, exceeds (ii) the aggregate Bond Principal Balance of the Bonds as of such payment date (assuming that 100% of the Principal Remittance Amount is applied as a principal payment on the Bonds on such payment date).

Owner Trustee - Wilmington Trust Company and its successors and assigns or any successor owner trustee appointed pursuant to the terms of the Trust Agreement.

Owner Trustee’s Fee - - With respect to any payment date the product of (i) the Owner Trustee’s Fee Rate divided by 12 and (ii) the aggregate Stated Principal Balance of the mortgage loans as of the first day of the related Due Period plus amounts on deposit in the Pre-Funding Account.

P&I Advance - The aggregate of all payments of interest and principal, net of the Master Servicing Fee and Subservicing Fee, that were due during the Due Period on the mortgage loans and that were delinquent on the related Determination Date, to the extent they are deemed, in the good faith judgment of the Master Servicer, to be recoverable from related late collections, Insurance Proceeds or Liquidation Proceeds, including amounts paid under the Radian Lender-Paid PMI Policy.

Plan - Any employee benefit plan subject to Title I of ERISA and any plan or other arrangement subject to Section 4975 of the Code.

Plan Assets - The assets of a Plan as determined under Department of Labor regulation section 2510.3-101 or other applicable law.

PMI Insurer Policy — The lender-paid primary mortgage insurance policy issued by the PMI Insurer in accordance with a March 29, 2002 letter between the Seller and the PMI Insurer.

PMI Mortgage Loans — The mortgage loans covered by the PMI Insurer Policy.

PMI Insurer Fee Rate — With respect to each PMI Mortgage Loan, the per annum rate payable to the PMI Insurer under the PMI Insurer Policy.

Pre-Funded Amount - The amount on deposit in the Pre-Funding Account on any date of determination.

Pre-Funding Account - An account established by the Indenture Trustee for the benefit of the Bondholders and funded on the Closing Date by the Company with the Original Pre-Funded Amount.

Prepayment Assumption - (i) With respect to the adjustable-rate, first lien and fixed-rate, second lien Mortgage Loans, 30% CPR and (ii) with respect to the fixed-rate first lien Mortgage Loans, 100% PPC, which assumes 10.00% CPR in month one, an additional 1/11^th of 15.00% CPR for each month thereafter, building to 25% CPR in month 12 and remaining constant at 25% CPR thereafter.

Prepayment Interest Shortfall - For any payment date, the aggregate shortfall, if any, in collections of interest (less the related Subservicing Fees) resulting from Mortgagor prepayments in full and in part on the mortgage loans during the related Prepayment Period. Such shortfalls will result because interest on prepayments in full is paid only to the date of prepayment, and because no interest is paid on prepayments in part, as such prepayments in part are applied to reduce the outstanding principal balance of the mortgage loans as of the Due Date in the month of prepayment.

Prepayment Period - With respect to any payment date is the calendar month immediately preceding the month in which such payment date occurs.

Principal Distribution Amount - For any payment date, the sum of (a) the Basic Principal Distribution Amount and (b) the Overcollateralization Increase Amount (to the extent available from Net Monthly Excess Cashflow (i) in the case of the mortgage loans pursuant to clause (iii) of “Description of the Bonds-Overcollateralization Provisions”.

(1) the principal portion of all scheduled monthly payments on the mortgage loans due on the Due Date, to the extent received or advanced;

(2) 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 Servicing Agreement during the preceding calendar month;

(3) the principal portion of all other unscheduled collections received during the preceding calendar month in respect of the mortgage loans, including full and partial prepayments, the proceeds of any repurchase of such mortgage loans by the Master Servicer or Seller, Liquidation Proceeds, Subsequent Recoveries and Insurance Proceeds (including amounts, if any, paid under the PMI Insurer Policy), in each case to the extent applied as recoveries of principal; and

(4) any amount remaining on deposit in the relevant Pre-Funding Account at the end of the Funding Period.

Record Date - With respect to any Book-Entry Bonds and any payment date, the close of business on the Business Day immediately preceding such Payment Date. With respect to any Bonds that are not Book-Entry Bonds, the close of business on the last Business Day of the calendar month preceding such payment date. With respect to the Class A-IO Bonds, the close of business on the last Business Day of the prior calendar month.

Reference Banks - Leading banks selected by the Indenture 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 Telerate Screen Page 3750 on the Interest Determination Date in question, (iii) which have been designated as such by the Indenture Trustee and (iv) not controlling, controlled by, or under common control with, the Company or the Seller.

Relief Act Shortfall - For any payment date and any mortgage loan, any shortfalls relating to the Servicemembers Civil Relief Act or similar legislation or regulations.

Reserve Interest Rate - With respect to any Interest Determination Date, the rate per annum that the Indenture 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 United States dollar lending rates which New York City banks selected by the Indenture Trustee are quoting on the relevant Interest Determination Date to the principal London offices of leading banks in the London interbank market or (ii) in the event that the Indenture Trustee can determine no such arithmetic mean, the lowest one-month United States dollar lending rate which New York City banks selected by the Indenture Trustee are quoting on such Interest Determination Date to leading European banks.

Rules - The rules, regulations and procedures creating and affecting DTC and its operations.

Seasoned Mortgage Loans - Any mortgage loan which was originated more than twelve months prior to the Cut-off Date, that may have been acquired by the Company in connection with the termination of prior securitizations of mortgage loans originated or acquired by the Seller.

Seller - Impac Mortgage Holdings, Inc., in its capacity as seller under the Mortgage Loan Purchase Agreement, and its successors and assigns.

Servicing Agreement - The Servicing Agreement, dated as of April 6, 2005, among the Master Servicer, the Issuer and the Indenture Trustee.

Stated Principal Balance - With respect to any mortgage loan as of any date of determination, (i) the principal balance thereof as of the Cut-off Date, as applicable, after application of all scheduled principal payments due on or before the Cut-off Date, as applicable, whether or not received, minus (ii) the sum of (a) the principal portion of the scheduled monthly payments due with respect to such mortgage loan during each Due Period ending prior to the most recent payment date which were received or with respect to which a P&I Advance was made, (b) all principal prepayments with respect to such mortgage loan and all Insurance Proceeds and Liquidation Proceeds to the extent applied by the Master Servicer as recoveries of principal in accordance with the Servicing Agreement which were distributed to the holders of the Bonds and Certificates on any previous payment date and (c) the principal portion of any Realized Loss with respect thereto allocated to the trust on any previous payment date.

Step-Up Date - With respect to the Bonds, the first payment date following the earlier of (i) the first payment date for which the sum of the aggregate Stated Principal Balance of the mortgage loans and as of the end of the related Due Period and the Pre-Funded Amount have been reduced to 20% or less of the Cut-off Date Balance and (ii) the payment date occurring in March 2015.

Subsequent Mortgage Loans - The mortgage loans purchased by the Trust from the Seller on any Subsequent Payment Date.

Subsequent Cut-off Date - With respect to any Subsequent Mortgage Loan, the date, as designated by the Company, that is the later of (i) the first day of the month in which the related Subsequent Transfer Date occurs and (ii) the origination date of such Subsequent Mortgage Loan, as the cut-off date with respect to the Subsequent Mortgage Loan.

Subsequent Payment Date – With respect to the Subsequent Mortgage Loans, the applicable date upon which such mortgage loans were purchased from the Seller with the amounts on deposit in the Pre-Funding Account.

Subsequent Recoveries - Additional recoveries, net of reimbursable expenses, with respect to mortgage loans that have been previously liquidated and that resulted in a Realized Loss.

Subsequent Transfer Date - With respect to any Subsequent Mortgage Loan, the applicable date upon which such mortgage loan was purchased from the Seller with amounts on deposit in the Pre-Funding Account, as applicable.

Subsequent Transfer Instrument - With respect to the Subsequent Mortgage Loans, the subsequent transfer instrument, dated as of the applicable Subsequent Transfer Date, between IMH Assets Corp., as company, and Wells Fargo Bank, N.A., as indenture trustee, or such other instrument as agreed upon by the company and the Indenture Trustee.

Subservicing Fee - With respect to each mortgage loan and any payment date, the fee payable monthly to the related subservicer in respect of servicing compensation that accrues at an annual rate equal to the Subservicing Fee Rate multiplied by the Stated Principal Balance of such Mortgage Loan as of the related Due Date in the related Due Period.

Subservicing Fee Rate - On each adjustable-rate mortgage loan, a rate equal to 0.375% per annum. On each fixed-rate first lien mortgage loan, a rate equal to 0.250% per annum. On each fixed-rate second lien mortgage loan, a rate equal to 0.750% per annum.

Swap Agreement Fixed-Rate – With respect to each Derivative Contract, the fixed rate set forth in the related Derivative Contract used to determine payments to the Issuer or to the Derivative Contract Counterparty.

Telerate Screen Page 3750 - The display designated as page 3750 on the Telerate Service (or such other page as may replace page 3750 on that service for the purpose of displaying London interbank offered rates of major banks).

Trust Agreement - The Amended and Restated Trust Agreement dated as of April 6, 2005, among the Owner Trustee, the Certificate Registrar and the Company.

Underwriters - Countrywide Securities Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated and UBS Securities LLC.

Unpaid Interest Shortfall - For each class of Bonds (other than the Class A-IO Bonds) and any payment date, such Bonds’ pro rata share, based on the amount of Accrued Bond Interest otherwise payable on such Bond on such payment date, of (a) any Prepayment Interest Shortfalls on the mortgage loans, to the extent not covered by Compensating Interest, and (b) any Relief Act Shortfalls on the mortgage loans, plus interest on the amount of previously allocated Unpaid Interest Shortfall on such class of Bonds which remains unreimbursed, at the Bond Interest Rate for such class for the related Accrual Period.

Except in certain limited circumstances, the globally offered Impac CMB Trust Series 2005-3 Collateralized Asset-Backed Bonds, Class A-1, Class A-2, Class A-3, Class A-IO, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6 and Class B (the “Global Securities”) will be available only in book-entry form. Investors in the Global Securities may hold interests in such Global Securities through any of DTC, Clearstream or Euroclear. The Global Securities will be tradable as home market instruments in both the European and U.S. domestic markets. Initial settlement and all secondary trades will settle in same day funds. Capitalized terms used but not defined in this Annex I have the meanings assigned to them in this prospectus supplement and the prospectus.

Secondary market trading between investors holding interests in Global Securities through Clearstream and Euroclear will be conducted in accordance with their normal rules and operating procedures and in accordance with conventional eurobond practice (i.e., seven calendar day settlement). Secondary market trading between investors holding interests in Global Securities through DTC will be conducted according to the rules and procedures applicable to U.S. corporate debt obligations.

Secondary cross-market trading between investors holding interests in Global Securities through Clearstream or Euroclear and investors holding interests in Global Securities through DTC participants will be effected on a delivery-against-payment basis through the respective depositories of Clearstream and Euroclear (in such capacity) and as DTC participants.

Non-U.S. holders (as described below) of Global Securities will be subject to U.S. withholding taxes unless such holders meet certain requirements and deliver appropriate U.S. tax documents to the securities clearing organizations or their participants.

All Global Securities will be held in book-entry form by DTC in the name of Cede & Co. as nominee of DTC. Investors’ interests in the Global Securities will be represented through financial institutions acting on their behalf as direct and indirect participants in DTC. Clearstream and Euroclear will hold positions on behalf of their participants through their respective depositories, which in turn will hold such positions in accounts as DTC participants.

Investors electing to hold interests in Global Securities through DTC participants will be subject to the settlement practices applicable to similar issues of pass-through certificates. Investors’ securities custody accounts will be credited with their holdings against payment in same-day funds on the settlement date.

Investors electing to hold interests in Global Securities through Clearstream or Euroclear accounts will follow the settlement procedures applicable to conventional eurobonds, except that there will be no temporary global security and no “lock-up” or restricted period. Global Securities will be credited to the securities custody accounts on the settlement date against payment in same-day funds.

Since the purchaser determines the place of delivery, it is important to establish at the time of the trade where both the purchaser’s and seller’s accounts are located to ensure that settlement can be made on the desired value date.

Transfers Between DTC Participants. Secondary market trading between DTC participants will be settled using the DTC procedures applicable to similar issues of pass-through certificates in same-day funds.

Transfers Between Clearstream and/or Euroclear Participants. Secondary market trading between Clearstream participants or Euroclear participants will be settled using the procedures applicable to conventional eurobonds in same-day funds.

Transfers Between DTC Seller and Clearstream or Euroclear Purchaser. When Global Securities are to be transferred from the account of a DTC participant to the account of a Clearstream participant or a Euroclear participant, the purchaser will send instructions to Clearstream or Euroclear through a Clearstream participant or Euroclear participant at least one business day prior to settlement. Clearstream or Euroclear will instruct its respective depository to receive the Global Securities against payment. Payment will include interest accrued on the Global Securities from and including the last payment date to but excluding the settlement date. Payment will then be made by the respective depository to the DTC participant’s account against delivery of the Global Securities. After such settlement has been completed, the Global Securities will be credited to the respective clearing system, and by the clearing system, in accordance with its usual procedures, to the Clearstream participant’s or Euroclear participant’s account. The Global Securities credit will appear on the next business day (European time) and the cash debit will be back-valued to, and the interest on the Global Securities will accrue from, the value date (which would be the preceding day when settlement occurred in New York). If settlement is not completed through DTC on the intended value date (i.e., the trade fails), the Clearstream or Euroclear cash debit will be valued instead as of the actual settlement date.

Clearstream participants and Euroclear participants will need to make available to the respective clearing system the funds necessary to process same-day funds settlement. The most direct means of doing so is to pre-position funds for settlement, either from cash on hand or existing lines of credit, as they would for any settlement occurring with Clearstream or Euroclear. Under this approach, they may take on credit exposure to Clearstream or Euroclear until the Global Securities are credited to their accounts one day later.

As an alternative, if Clearstream or Euroclear has extended a line of credit to them, Clearstream participants or Euroclear participants can elect not to pre-position funds and allow that credit line to be drawn upon the finance settlement. Under this procedure, Clearstream participants or Euroclear participants purchasing Global Securities would incur overdraft charges for one day, to the extent they cleared the overdraft when the Global Securities were credited to their accounts. However, interest on the Global Securities would accrue from the value date. Therefore, the investment income on the interest in the Global Securities earned during that one-day period may substantially reduce or offset the amount of such overdraft charges, although this result will depend on each Clearstream participant’s or Euroclear participant’s cost of funds.

Since the settlement through DTC will take place during New York business hours, DTC participants can employ their usual procedures for sending Global Securities to the respective depository for the benefit of Clearstream participants or Euroclear participants. The sale proceeds will be available to the DTC seller on the settlement date. Thus, to the DTC participant, a cross-market transaction will settle no differently than a trade between two DTC participants.

Transfers Between Clearstream or Euroclear Seller and DTC Purchaser. Due to time zone differences in their favor, Clearstream participants and Euroclear participants may employ their customary procedures for transactions in which Global Securities are to be transferred by the respective clearing system, through the respective depository, to a DTC participant. The seller will send instructions to Clearstream or the Euroclear Operator through a Clearstream participant or Euroclear participant at least one business day prior to settlement. Clearstream or Euroclear will instruct its respective depository, to deliver the Global Securities to the DTC participant’s account against payment. Payment will include interest accrued on the Global Securities from and including the last payment date to but excluding the settlement date. The payment will then be reflected in the account of the Clearstream participant or Euroclear participant the following business day, and receipt of the cash proceeds in the Clearstream participant’s or Euroclear participant’s account would be back- valued to the value date (which would be the preceding day, when settlement occurred through DTC in New York). Should the Clearstream participant or Euroclear participant have a line of credit with its respective clearing system and elect to be in debt in anticipation of receipt of the sale proceeds in its account, the back- valuation will extinguish any overdraft charges incurred over that one-day period. If settlement is not completed on the intended value date (i.e., the trade fails), receipt of the cash proceeds in the Clearstream participant’s or Euroclear participant’s account would instead be valued as of the actual settlement date.

Finally, day traders that use Clearstream or Euroclear and purchase Global Securities from DTC participants for delivery to Clearstream participants or Euroclear participants should note that these trades will automatically fail on the sale side unless affirmative action were taken. At least three techniques should be available to eliminate this potential problem:

(a) borrowing Global Securities through Clearstream or Euroclear for one day (until the purchase side of the day trade is reflected in the relevant Clearstream or Euroclear accounts) in accordance with the clearing system’s customary procedures;

(b) borrowing Global Securities in the United States from a DTC participant no later than one day prior to settlement, which would give the Global Securities sufficient time to be reflected in the relevant Clearstream or Euroclear accounts in order to settle the sale side of the trade; or

(c) staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase from the DTC participant is at least one day prior to the value date for the sale to the Clearstream participant or Euroclear participant.

A beneficial owner of Global Securities holding securities through Clearstream or Euroclear (or through DTC if the holder has an address outside the U.S.) will be subject to the 30% U.S. withholding tax that generally applies to payments of interest (including original issue discount) on registered debt issued by U.S. Persons (as defined below), unless (i) each clearing system, bank or other financial institution that holds customers’ securities in the ordinary course of its trade or business in the chain of intermediaries between such beneficial owner and the U.S. entity required to withhold tax, complies with applicable certification requirements and (ii) such beneficial owner takes one of the following steps to obtain an exemption or reduced tax rate:

Exemption for Non-U.S. Persons (Form W-8BEN). Beneficial Holders of Global Securities that are Non-U.S. Persons (as defined below) can obtain a complete exemption from the withholding tax by filing a signed Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding). If the information shown on Form W-8BEN changes, a new Form W-8BEN must be filed within 30 days of such change.

Exemption for Non-U.S. Persons with Effectively Connected Income (Form W-8ECI). A Non-U.S. Person (as defined below), including a non-U.S. corporation or bank with a U.S. branch, for which the interest income is effectively connected with its conduct of a trade or business in the United States, can obtain an exemption from the withholding tax by filing Form W-8ECI (Exemption from Withholding of Tax on Income Effectively Connected with the Conduct of a Trade or Business in the United States) or a substitute form.

Exemption or Reduced Rate for Non-U.S. Persons Resident in Treaty Countries (Form W-8BEN). Non- U.S. Persons residing in a country that has a tax treaty with the United States can obtain an exemption or reduced tax rate (depending on the treaty terms) by filing Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding). Form W-8BEN may be filed by a beneficial owner or its agent.

Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete exemption from the withholding tax by filing Form W-9 (Payer’s Request for Taxpayer Identification Number and Certification).

U.S. Federal Income Tax Reporting Procedure. The beneficial owner of a Global Security or, in the case of a Form W-8BEN or a Form W-8ECI filer, his agent, files by submitting the appropriate form to the person through whom it holds the security (the clearing agency, in the case of persons holding directly on the books of the clearing agency). Form W-8BEN and Form W-8ECI are effective until the third succeeding calendar year from the date the form is signed.

The term “U.S. Person” means (i) a citizen or resident of the United States, (ii) a corporation, a partnership or other entity treated as a corporation or a partnership for United States federal income tax purposes, organized in or under the laws of the United States or any state thereof, including for this purpose the District of Columbia, (iii) an estate, the income of which is includible in gross income for United States tax purposes, regardless of its source, (iv) a trust if a court within the United States is able to exercise primary supervision of the administration of the trust and one or more United States fiduciaries have the authority to control all substantial decisions of the trust; or (v) to the extent provided in Treasury regulations, certain trusts in existence on August 20, 1996 that are treated as United States persons prior to such date and elect to continue to be treated as United States persons. The term “Non-U.S. Person” means any person who is not a U.S. Person. This summary does not deal with all aspects of U.S. Federal income tax withholding that may be relevant to foreign holders of the Global Securities. Investors are advised to consult their own tax advisors for specific tax advice concerning their holding and disposing of the Global Securities.

                                IMH ASSETS CORP.

                                     Company

                        COLLATERALIZED ASSET-BACKED BONDS

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        YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS IN THE PROSPECTUS.
- --------------------------------------------------------------------------------

THE OFFERED BONDS
The company proposes to establish one or more trusts to issue and sell from time
to time one or more classes of offered bonds, which shall be collateralized
asset-backed bonds.

THE TRUST FUND
Each series of bonds will be secured by a trust fund consisting primarily of a
segregated pool of mortgage loans, including:

mortgage loans secured by first and junior liens on the related mortgage
property;

         o        home equity revolving lines of credit;

         o        mortgage loans where the borrower has little or no equity in
                  the related mortgaged property;

         o        mortgage loans secured by one-to-four-family residential
                  properties;

         o        mortgage loans secured by multifamily properties;

         o        mortgage loans secured by commercial properties and mixed
                  residential and commercial properties, provided that the
                  concentration of these properties is less than 10% of the
                  pool; and

         o        manufactured housing conditional sales contracts and
                  installment loan agreements or interests therein;

in each case acquired by the company from one or more affiliated or unaffiliated
institutions.

CREDIT ENHANCEMENT
If so specified in the related prospectus supplement, the trust for a series of
bonds may include any one or any combination of a financial guaranty insurance
policy, mortgage pool insurance policy, letter of credit, special hazard
insurance policy or reserve fund, and currency or interest rate exchange
agreements. In addition to or in lieu of the foregoing, credit enhancement may
be provided by means of subordination of one or more classes of bonds, by
cross-support or by overcollateralization.

The offered bonds may be offered to the public through different methods as
described in "Methods of Distribution" in this prospectus.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE BONDS OFFERED HEREBY OR DETERMINED
THAT THIS PROSPECTUS OR THE PROSPECTUS SUPPLEMENT IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.



               The date of this prospectus is September 28, 2004.

















                                                 TABLE OF CONTENTS

Caption                                                                                                        Page
- -------                                                                                                        ----
INTRODUCTION......................................................................................................3
     General......................................................................................................3

THE MORTGAGE POOLS................................................................................................4
     General......................................................................................................4
     The Mortgage Loans...........................................................................................5
     Underwriting Standards.......................................................................................9
     Qualifications of Originators and Sellers...................................................................11
     Representations by Sellers..................................................................................12

SERVICING OF MORTGAGE LOANS......................................................................................14
     General.....................................................................................................14
     The Master Servicer.........................................................................................15
     Collection and Other Servicing Procedures; Mortgage Loan
     Modifications...............................................................................................15
     Subservicers................................................................................................17
     Special Servicers...........................................................................................17
     Realization upon or Sale of Defaulted Mortgage Loans........................................................17
     Servicing and Other Compensation and Payment of
     Expenses; Retained Interest.................................................................................20
     Evidence as to Compliance...................................................................................20

DESCRIPTION OF THE BONDS.........................................................................................21
     General.....................................................................................................21
     Form of Bonds...............................................................................................23
     Global Bonds................................................................................................23
     Assignment of Trust Fund Assets.............................................................................26
     Payment Account.............................................................................................29
     Distributions...............................................................................................32
     Distributions of Interest and Principal on the Bonds........................................................32
     Pre-Funding Account.........................................................................................33
     Distributions on the Bonds in Respect of Prepayment
     Premiums....................................................................................................34
     Allocation of Losses and Shortfalls.........................................................................34
     Advances....................................................................................................34
     Reports to Bondholders......................................................................................35

DESCRIPTION OF CREDIT ENHANCEMENT................................................................................36
     General.....................................................................................................36
     Subordinate Bonds...........................................................................................37
     Cross-support...............................................................................................37
     Overcollateralization.......................................................................................37
     Financial Guaranty Insurance Policy.........................................................................37
     Mortgage Pool Insurance Policies............................................................................38
     Letter of Credit............................................................................................39
     Special Hazard Insurance Policies...........................................................................40
     Reserve Funds...............................................................................................40
     Cash Flow Agreements........................................................................................41
     Maintenance of Credit Enhancement...........................................................................41
     Reduction or Substitution of Credit Enhancement.............................................................43

OTHER FINANCIAL OBLIGATIONS RELATED TO THE
     BONDS.......................................................................................................43
     Swaps and Yield Supplement Agreements.......................................................................43
     Purchase Obligations........................................................................................44

PRIMARY MORTGAGE INSURANCE, HAZARD INSURANCE;
     CLAIMS THEREUNDER...........................................................................................44
     General.....................................................................................................44
     Primary Mortgage Insurance Policies.........................................................................44
     Hazard Insurance Policies...................................................................................46
     FHA Insurance...............................................................................................47
     VA Mortgage Guaranty........................................................................................47

THE COMPANY......................................................................................................48

IMPAC FUNDING CORPORATION........................................................................................48

IMPAC MORTGAGE HOLDINGS, INC.....................................................................................48

THE AGREEMENTS...................................................................................................49
     General.....................................................................................................49
     Certain Matters Regarding the Master Servicer and the
     Company.....................................................................................................49
     Events of Default and Rights upon Event Default.............................................................50
     Amendment...................................................................................................52
     Termination; Retirement of Bonds............................................................................52
     The Trustee.................................................................................................53
     Duties of the Trustee.......................................................................................53
     Some Matters Regarding the Trustee..........................................................................53

RESIGNATION AND REMOVAL OF THE TRUSTEE...........................................................................54

YIELD CONSIDERATIONS.............................................................................................54

MATURITY AND PREPAYMENT CONSIDERATIONS...........................................................................56

LEGAL ASPECTS OF MORTGAGE LOANS..................................................................................58
     Mortgages...................................................................................................58
     Cooperative Mortgage Loans..................................................................................58
     Tax Aspects of Cooperative Ownership........................................................................59
     Leases and Rents............................................................................................60
     Contracts...................................................................................................60
     Foreclosure on Mortgages and Some Contracts.................................................................61
     Foreclosure on Shares of Cooperatives.......................................................................63
     Repossession with Respect to Contracts......................................................................64
     Rights of Redemption........................................................................................65
     Anti-deficiency Legislation and Other Limitations on
     Lenders.....................................................................................................66
     Environmental Legislation...................................................................................68
     Consumer Protection Laws with Respect to Contracts..........................................................69
     Enforceability of Some Provisions...........................................................................69
     Subordinate Financing.......................................................................................71
     Installment Contracts.......................................................................................71
     Applicability of Usury Laws.................................................................................71
     Alternative Mortgage Instruments............................................................................72
     Formaldehyde Litigation with Respect to Contracts...........................................................72
     Servicemembers' Civil Relief Act of 1940....................................................................73
     Forfeitures in Drug and Rico Proceedings....................................................................73
     Junior Mortgages............................................................................................74
     Negative Amortization Loans.................................................................................74

FEDERAL INCOME TAX CONSEQUENCES..................................................................................75
     General.....................................................................................................75
     Grantor Trust Funds.........................................................................................81

STATE AND OTHER TAX CONSEQUENCES.................................................................................90

ERISA CONSIDERATIONS.............................................................................................90
     Representation from Plans Investing in Bonds with
     "Substantial Equity Features" or Non-exempt Bonds...........................................................94
     Tax Exempt Investors........................................................................................94
     Consultation with Counsel...................................................................................95

LEGAL INVESTMENT MATTERS.........................................................................................95

USE OF PROCEEDS..................................................................................................96

METHODS OF DISTRIBUTION..........................................................................................96

LEGAL MATTERS....................................................................................................97

FINANCIAL INFORMATION............................................................................................97

RATINGS..........................................................................................................97

AVAILABLE INFORMATION............................................................................................98

REPORTS TO BONDHOLDERS...........................................................................................98

INCORPORATION OF INFORMATION BY REFERENCE........................................................................98

GLOSSARY.........................................................................................................99


                                        2


                                  INTRODUCTION

                    ALL CAPITALIZED TERMS IN THIS PROSPECTUS
                    ARE DEFINED IN THE GLOSSARY AT THE END.

GENERAL

         The collateralized asset-backed bonds offered by this prospectus and
the prospectus supplement will be offered from time to time in series. The bonds
of each series will consist of the offered bonds of the series, together with
any other collateralized asset-backed bonds of the series. In addition, bonds of
each series may be included in a grantor trust and collateralized asset-backed
grantor trust certificates may be issued in connection with the same series.

         Each series of bonds will represent indebtedness of a trust fund to be
established by the company. Each trust fund will consist primarily of a mortgage
pool of mortgage loans or interests therein, which may include mortgage
securities, acquired by the company from one or more affiliated or unaffiliated
sellers. See "The Company" and "The Mortgage Pools." The mortgage loans may
include sub-prime mortgage loans. The trust fund assets may only include, if
applicable, the mortgage loans, reinvestment income, reserve funds, cash
accounts and various forms of credit enhancement as described in this prospectus
and will be held in trust for the benefit of the related bondholders pursuant to
an indenture, in each case as more fully described in this prospectus and in the
related prospectus supplement. Information regarding the offered bonds of a
series, and the general characteristics of the mortgage loans and other trust
fund assets in the related trust fund, will be set forth in the related
prospectus supplement.

         Each series of bonds will include one or more classes. Each class of
bonds 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 bonds, to
receive a specified portion of payments of principal or interest or both on the
mortgage loans and the other trust fund assets in the related trust fund in the
manner described in this prospectus under "Description of the Bonds" and in the
related prospectus supplement. A series may include one or more classes of bonds
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 bonds 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 bonds will
be pursuant to representations and warranties made by the company, except as
provided in the related prospectus supplement. The master servicer for any
series of bonds will be named in the related prospectus supplement. The
principal obligations of the master servicer will be pursuant to its contractual
servicing obligations, which include its limited obligation to make advances in
the event of delinquencies in payments on the related mortgage loans. See
"Description of the Bonds."

         If so specified in the related prospectus supplement, the trust fund
for a series of bonds may include any one or any combination of a financial
guaranty insurance policy, mortgage pool insurance policy, letter of credit,
special hazard insurance policy, reserve fund or currency or interest rate
exchange agreements. In addition to or in lieu of the foregoing, credit
enhancement may be provided by means of subordination of one or more classes of
bonds or by overcollateralization. See "Description of Credit Enhancement."

         The rate of payment of principal of each class of bonds entitled to a
portion of principal payments on the mortgage loans in the related mortgage pool
and the trust fund assets will depend onthe priority of payment of the class and
the rate and timing of principal payments on the mortgage loans and other trust
fund assets, including by reason of prepayments, defaults, liquidations and
repurchases of mortgage loans. A rate of principal payment slower or faster than
that anticipated may affect the yield on a class of bonds in the manner
described in this prospectus and in the related prospectus supplement. See
"Yield Considerations."



                                        3




         The offered bonds may be offered through one or more different methods,
including offerings through underwriters, as more fully described under "Methods
of Distribution" and in the related prospectus supplement.

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

         Collateralized asset-backed grantor trust certificates may be issued in
connection with any series, as a result of depositing one or more bonds into a
grantor trust and issuing one or more grantor trust certificates. Any such
grantor trust certificate and any related grantor trust agreement will be
described in the related prospectus supplement. Any statements in this
prospectus referencing the bonds will generally include any grantor trust
certificate issued, provided that the tax treatment of such certificate will
differ as described in "Federal Income Tax Consequences."

                               THE MORTGAGE POOLS

GENERAL

         Each mortgage pool will consist primarily of mortgage loans, minus any
interest retained by the company or any affiliate of the company. The mortgage
loans may consist of single family loans, multifamily loans, commercial loans,
mixed-use loans and Contracts, each as described below.

         The single family loans will be evidenced by mortgage notes and secured
by mortgages that, in each case, create a first or junior lien on the related
mortgagor's fee or leasehold interest in the related mortgaged property. The
related mortgaged property for a single family loan may be owner- occupied or
may be a vacation, second or non-owner-occupied home.

         If specified in the related prospectus supplement relating to a series
of bonds, the single family loans may include cooperative apartment loans
evidenced by a mortgage note secured by security interests in the related
mortgaged property including shares issued by cooperatives and in the related
proprietary leases or occupancy agreements granting exclusive rights to occupy
specific dwelling units in the related buildings.

         The multifamily loans will be evidenced by mortgage notes and secured
by mortgages that create a first or junior lien on residential properties
consisting of five or more dwelling units in high- rise, mid- rise or garden
apartment structures or projects.

         The commercial loans will be evidenced by mortgage notes and secured
mortgages that create a first or junior lien on commercial properties including
office building, retail building and a variety of other commercial properties as
may be described in the related prospectus supplement.

         The mixed-use loans will be evidenced by mortgage loans and secured by
mortgages that create a first or junior lien on properties consisting of mixed
residential and commercial structures.

         The aggregate concentration by original principal balance of commercial
and mixed-use loans in any mortgage pool will be less than 10% of the original
principal balance of the mortgage pool.

         Mortgaged properties may be located in any one of the 50 states, the
District of Columbia or the Commonwealth of Puerto Rico.

         The mortgage loans will not be guaranteed or insured by the company or
any of its affiliates. However, if so specified in the related prospectus
supplement, the mortgage loans may be insured by the FHA or the VA. See "Primary
Mortgage Insurance, Hazard Insurance; Claims Thereunder--FHA Insurance" and
"--VA Mortgage Guaranty" in this prospectus.

         A mortgage pool may include mortgage loans that are delinquent as of
the date the related series of bonds is issued. In that case, the related
prospectus supplement will set forth, as to each


                                        4




mortgage loan, available information as to the period of delinquency and any
other information relevant for a prospective purchaser to make an investment
decision. No mortgage loan in a mortgage pool shall be 90 days or more
delinquent. Mortgage loans which are more than 30 and less than 90 days
delinquent included in any mortgage pool will have delinquency data relating to
them included in the related prospectus supplement. No mortgage pool will
include a concentration of mortgage loans which is more than 30 and less than 90
days delinquent of 20% or more.

         The mortgage loans may include "sub-prime" mortgage loans. "Sub-prime"
mortgage loans will be underwritten in accordance with underwriting standards
which are less stringent than guidelines for "A" quality borrowers. Mortgagors
may have a record of outstanding judgments, prior bankruptcies and other credit
items that do not satisfy the guidelines for "A" quality borrowers. They may
have had past debts written off by past lenders.

         A mortgage pool may include mortgage loans that do not meet the
purchase requirements of Fannie Mae and Freddie Mac. These mortgage loans are
known as nonconforming loans. The mortgage loans may be nonconforming because
they exceed the maximum principal balance of mortgage loans purchased by Fannie
Mae and Freddie Mac, known as jumbo loans, because they are sub-prime mortgage
loans, or because of some other failure to meet the purchase criteria of Fannie
Mae and Freddie Mac. The related prospectus supplement will detail to what
extent the mortgage loans are nonconforming mortgage loans.

         Each mortgage loan will be selected by the company for inclusion in a
mortgage pool from among those purchased by the company, either directly or
through its affiliates, from Unaffiliated Sellers or Affiliated Sellers. 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
are as described in the related prospectus supplement. Other mortgage loans
available for purchase by the company may have characteristics which would make
them eligible for inclusion in a mortgage pool but were not selected for
inclusion in the mortgage pool.

         The mortgage loans may be delivered to the trust fund pursuant to a
Designated Seller Transaction, concurrently with the issuance of the related
series of bonds. These bonds may be sold in whole or in part to the Seller in
exchange for the related mortgage loans, or may be offered under any of the
other methods described in this prospectus under "Methods of Distribution." The
related prospectus supplement for a mortgage pool composed of mortgage loans
acquired by the company pursuant to a Designated Seller Transaction will
generally include information, provided by the related Seller, about the Seller,
the mortgage loans and the underwriting standards applicable to the mortgage
loans.

         If specified in the related prospectus supplement, the trust fund for a
series of bonds may include mortgage securities, as described in this
prospectus. The mortgage securities may have been issued previously by the
company or an affiliate thereof, a financial institution or other entity engaged
generally in the business of mortgage lending or a limited purpose corporation
organized for the purpose of, among other things, acquiring and depositing
mortgage loans into trusts, and selling beneficial interests in trusts. The
mortgage securities will be generally similar to bonds offered under this
prospectus. However, any mortgage securities included in a trust fund will (1)
either have been (a) previously registered under the Securities Act, or (b)
eligible for sale under Rule 144(k) under the Exchange Act; and (2) be acquired
in bona fide secondary market transactions. If the mortgage securities are the
securities of the company or an affiliate thereof, they will be registered under
the Securities Act, even if they satisfy the requirements of the preceding
sentence. As to any series of mortgage securities, the related prospectus
supplement will include a description of (1) the mortgage securities and any
related credit enhancement, and (2) the mortgage loans underlying the mortgage
securities.

THE MORTGAGE LOANS

         Each of the mortgage loans will be a type of mortgage loan described or
referred to below, with any variations described in the related prospectus
supplement:



                                        5




         o        Fixed-rate, fully-amortizing mortgage loans (which may include
                  mortgage loans converted from adjustable-rate mortgage loans
                  or otherwise modified) providing for level monthly payments of
                  principal and interest and terms at origination or
                  modification of not more than approximately 15 years;

         o        Fixed-rate, fully-amortizing mortgage loans (which may include
                  mortgage loans converted from adjustable-rate mortgage loans
                  or otherwise modified) providing for level monthly payments of
                  principal and interest and terms at origination or
                  modification of more than 15 years, but not more than
                  approximately 30 years;

         o        Fully-amortizing ARM Loans having an original or modified term
                  to maturity of not more than approximately 30 years with a
                  related mortgage rate which generally adjusts initially either
                  three months, six months or one, two, three, five, seven or
                  ten years or other intervals subsequent to the initial payment
                  date, and thereafter at either three- month, six-month,
                  one-year or other intervals (with corresponding adjustments in
                  the amount of monthly payments) over the term of the mortgage
                  loan to equal the sum of the related Note Margin and the
                  Index. The related prospectus supplement will set forth the
                  relevant Index and the highest, lowest and weighted average
                  Note Margin with respect to the ARM Loans in the related
                  mortgage pool. The related prospectus supplement will also
                  indicate any periodic or lifetime limitations on changes in
                  any per annum mortgage rate at the time of any adjustment. If
                  specified in the related prospectus supplement, an ARM Loan
                  may include a provision that allows the mortgagor to convert
                  the adjustable mortgage rate to a fixed rate at some point
                  during the term of the ARM Loan generally not later than six
                  to ten years subsequent to the initial payment date;

         o        Negatively-amortizing ARM Loans having original or modified
                  terms to maturity of not more than approximately 30 years with
                  mortgage rates which generally adjust initially on the payment
                  date referred to in the related prospectus supplement, and on
                  each of specified periodic payment dates thereafter, to equal
                  the sum of the Note Margin and the Index. The scheduled
                  monthly payment will be adjusted as and when described in the
                  related prospectus supplement to an amount that would fully
                  amortize the mortgage loan over its remaining term on a level
                  debt service basis; provided that increases in the scheduled
                  monthly payment may be subject to limitations as specified in
                  the related prospectus supplement. Any Deferred Interest will
                  be added to the principal balance of the mortgage loan;

         o        Fixed-rate, graduated payment mortgage loans having original
                  or modified terms to maturity of not more than approximately
                  15 years with monthly payments during the first year
                  calculated on the basis of an assumed interest rate which is a
                  specified percentage below the mortgage rate on the mortgage
                  loan. Monthly payments on these mortgage loans increase at the
                  beginning of the second year by a specified percentage of the
                  monthly payment during the preceding year and each year
                  thereafter to the extent necessary to amortize the mortgage
                  loan over the remainder of its approximately 15-year term.
                  Deferred Interest, if any, will be added to the principal
                  balance of these mortgage loans;

         o        Fixed-rate, graduated payment mortgage loans having original
                  or modified terms to maturity of not more than approximately
                  30 years with monthly payments during the first year
                  calculated on the basis of an assumed interest rate which is a
                  specified percentage below the mortgage rate. The monthly
                  payments on these mortgage loans increase at the beginning of
                  the second year by a specified percentage of the monthly
                  payment during the preceding year and each year thereafter to
                  the extent necessary to fully amortize the


                                        6




                  mortgage loan within its approximately 25- or 30-year term.
                  Deferred Interest, if any, will be added to the principal
                  balance of these mortgage loans;

         o        Balloon loans having payment terms similar to those described
                  in one of the preceding paragraphs, calculated on the basis of
                  an assumed amortization term, but providing for a balloon
                  payment of all outstanding principal and interest to be made
                  at the end of a specified term that is shorter than the
                  assumed amortization term.

         o        Mortgage loans that provide for a line of credit pursuant to
                  which amounts may be advanced to the borrower from time to
                  time; or

         o        Another type of mortgage loan described in the related
                  prospectus supplement.

         The mortgage pool may contain single family loans and multifamily loans
secured by junior liens, and the related senior liens may not be included in the
mortgage pool. The primary risk to holders of mortgage loans secured by junior
liens is the possibility that adequate funds will not be received in connection
with a foreclosure of the related senior liens to satisfy fully both the senior
liens and the mortgage loan. In the event that a holder of a senior lien
forecloses on a mortgaged property, the proceeds of the foreclosure or similar
sale will be applied first to the payment of court costs and fees in connection
with the foreclosure, second to real estate taxes, third in satisfaction of all
principal, interest, prepayment or acceleration penalties, if any, and any other
sums due and owing to the holder of the senior liens. The claims of the holders
of the senior liens will be satisfied in full out of proceeds of the liquidation
of the related mortgaged property, if the proceeds are sufficient, before the
trust fund as holder of the junior lien receives any payments in respect of the
mortgage loan. If the master servicer were to foreclose on a mortgage loan
secured by a junior lien, it would do so subject to any related senior liens. In
order for the debt related to the mortgage loan to be paid in full at the sale,
a bidder at the foreclosure sale of the mortgage loan would have to bid an
amount sufficient to pay off all sums due under the mortgage loan and the senior
liens or purchase the mortgaged property subject to the senior liens. In the
event that the 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 bonds of the related series
bear (1) the risk of delay in distributions while a deficiency judgment against
the borrower is sought and (2) the risk of loss if the deficiency judgment is
not realized upon. Moreover, deficiency judgments may not be available in some
jurisdictions or the mortgage loan may be nonrecourse. In addition, a junior
mortgagee may not foreclose on the property securing a junior mortgage unless it
forecloses subject to the senior mortgages.

         A mortgage loan may contain a prohibition on prepayment or lock-out
period or require payment of a prepayment penalty. A multifamily, commercial or
mixed-use loan may also contain a provision that entitles the lender to a share
of profits realized from the operation or disposition of the related mortgaged
property. If the holders of any class or classes of offered bonds of a series
will beentitled to all or a portion of this type of equity participation, the
related prospectus supplement will describe the equity participation and the
method or methods by which distributions in respect thereof will be made to such
holders.

         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 which have been consolidated and/or have had various terms
changed, mortgage loans which 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


                                        7




of origination of the mortgage loan or thereafter. In addition, some or all of
the single family loans secured by junior liens may be High LTV Loans.

         A mortgage pool may contain convertible ARM Loans which allow the
mortgagors to convert the adjustable rates on these mortgage loans to a fixed
rate at some point during the life of these mortgage loans, generally not later
than six to ten years subsequent to the date of origination, depending upon the
length of the initial adjustment period. If specified in the related prospectus
supplement, upon any conversion, the company, the related master servicer, the
applicable Seller 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 the related
master servicer (or another specified party) may agree to act as remarketing
agent with respect to the converted mortgage loans and, in this 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
converted mortgage loan, the inability of any remarketing agent to arrange for
the sale of the converted mortgage loan and the unwillingness of the 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 provided for in the related prospectus supplement, the mortgage
loans may include buydown mortgage loans. Under the terms of a buydown mortgage
loan, the monthly payments made by the mortgagor during the early years of the
mortgage loan will be less than the scheduled monthly payments on the mortgage
loan. The resulting difference will made up from:

         o        funds contributed by the seller of the mortgaged property or
                  another source and placed in a custodial account,

         o        If funds contributed by the seller are contributed on a
                  present value basis, investment earnings on these funds or

         o        additional funds to be contributed over time by the
                  mortgagor's employer or another source.

         See "Description of the Bonds--Payment Account."

         Generally, the mortgagor under each buydown mortgage loan will be
qualified at the applicable lower monthly payment. Accordingly, the repayment of
a buydown mortgage loan is dependent on the ability of the mortgagor to make
larger level monthly payments after the Buydown Funds have been depleted and,
for some buydown mortgage loans, during the Buydown Period.

         The prospectus supplement for each series of bonds will contain
information, to the extent known or reasonably ascertainable, as to the loss and
delinquency experience of the Seller and/or the master servicer with respect to
mortgage loans similar to those included in the trust fund. Information
generally will be provided when the Seller and/or master servicer have a
seasoned portfolio of mortgage loans.

         The prospectus supplement for each series of bonds will contain
information as to the type of mortgage loans that will be included in the
related mortgage pool. Each prospectus supplement applicable to a series of
bonds will include information, generally as of the cut-off date and to the
extent then available to the company, on an approximate basis, as to the
following:

         o        the aggregate principal balance of the mortgage loans,

         o        the type of property securing the mortgage loans,

         o        the original or modified terms to maturity of the mortgage
                  loans,

         o        the range of principal balances of the mortgage loans at
                  origination or modification,



                                        8




         o        the earliest origination or modification date and latest
                  maturity date of the mortgage loans,

         o        the loan-to-value ratios of the mortgage loans,

         o        the mortgage rate or range of mortgage rates borne by the
                  mortgage loans,

         o        if any of the mortgage loans are ARM Loans, the applicable
                  Index, the range of Note Margins and the weighted average Note
                  Margin,

         o        the geographical distribution of the mortgage loans,

         o        the number of buydown mortgage loans, if applicable, and

         o        the percent of ARM Loans which are convertible to fixed-rate
                  mortgage loans, if applicable.

         A Current Report on Form 8-K will be available upon request to holders
of the related series of bonds and will be filed, together with the related
servicing agreement, owner trust agreement and indenture, with the Commission
within fifteen days after the initial issuance of the bonds. In the event that
mortgage loans are added to or deleted from the trust fund after the date of the
related prospectus supplement, the addition or deletion will be noted in the
Current Report on Form 8-K. In no event, however, will more than 5% (by
principal balance at the cut-off date) of the mortgage loans or mortgage
securities deviate from the characteristics of the mortgage loans or mortgage
securities set forth in the related prospectus supplement.

         The company will cause the mortgage loans constituting each mortgage
pool, or mortgage securities evidencing interests therein, to be assigned,
without recourse, to the trustee named in the related prospectus supplement, for
the benefit of the holders of all of the bonds of a series. Except to the extent
that servicing of any mortgage loan is to be transferred to a special servicer,
the master servicer named in the related prospectus supplement will service the
mortgage loans, directly or through subservicers, pursuant to a servicing
agreement, and will receive a fee for these services. See "Servicing of Mortgage
Loans," "Description of the Bonds" and "The Agreements." With respect to those
mortgage loans serviced by the master servicer through a subservicer, the master
servicer will remain liable for its servicing obligations under the related
servicing agreement as if the master servicer alone were servicing the mortgage
loans. The master servicer's obligations with respect to the mortgage loans will
consist principally of its contractual servicing obligations under the related
servicing agreement (including its obligation to enforce the purchase and other
obligations of subservicers and Sellers, as more fully described in this
prospectus under "--Representations by Sellers" in this prospectus, "Servicing
of Mortgage Loans--Subservicers," and "Description of the Bonds--Assignment of
Trust Fund Assets," and, if and to the extent set forth in the related
prospectus supplement, its obligation to make cash advances in the event of
delinquencies in payments on or with respect to the mortgage loans as described
in this prospectus under "Description of the Bonds--Advances") or pursuant to
the terms of any mortgage securities.

UNDERWRITING STANDARDS

         Mortgage loans to be included in a mortgage pool will have been
purchased by the company, either directly or indirectly from Sellers. The
mortgage loans, as well as mortgage loans underlying mortgage securities, will
have been originated in accordance with underwriting standards acceptable to the
company and generally described below. Any mortgage loan not directly
underwritten by the company or its affiliates will be reunderwritten by the
company or its affiliates, except in the case of a Designated Seller's
Transaction, in which case each mortgage loan will be underwritten by the Seller
or an affiliate thereof. The reunderwriting standards of the company or its
affiliates for these mortgage loans generally will be in accordance with the
same standards as those for mortgage loans directly underwritten, with any
variations described in the related prospectus supplement.



                                        9




         The underwriting standards to be used in originating the mortgage loans
are primarily intended to assess the creditworthiness of the mortgagor, the
value of the mortgaged property and the adequacy of the property as collateral
for the mortgage loan.

         The primary considerations in underwriting a mortgage loan are the
mortgagor's employment stability and whether the mortgagor has sufficient
monthly income available (1) to meet the mortgagor's monthly obligations on the
proposed mortgage loan (generally determined on the basis of the monthly
payments due in the year of origination) and other expenses related to the home
(including property taxes and hazard insurance) and (2) to meet monthly housing
expenses and other financial obligations and monthly living expenses. However,
the loan-to-value ratio of the mortgage loan is another critical factor. In
addition, a mortgagor's credit history and repayment ability, as well as the
type and use of the mortgaged property, are also considerations.

         High LTV Loans are underwritten with an emphasis on the
creditworthiness of the related mortgagor. High LTV Loans are underwritten with
a limited expectation of recovering any amounts from the foreclosure of the
related mortgaged property.

         In the case of the multifamily loans, commercial loans or mixed-use
loans, lenders typically look to the debt service coverage ratio of a loan as an
important measure of the risk of default on that loan. Unless otherwise defined
in the related prospectus supplement, the debt service coverage ratio of a
multifamily loan or commercial loan at any given time is the ratio of (1) the
net operating income of the related mortgaged property for a twelve-month period
which is to (2) the annualized scheduled payments on the mortgage loan and on
any other loan that is secured by a lien on the mortgaged property prior to the
lien of the related mortgage. The total operating revenues derived from a
multifamily, commercial or mixed-use property, as applicable, during that
period, minus the total operating expenses incurred in respect of that property
during that period other than (a) non-cash items such as depreciation and
amortization, (b) capital expenditures and (c) debt service on loans (including
the related mortgage loan) secured by liens on that property. The net operating
income of a multifamily, commercial or mixed-use property, as applicable, will
fluctuate over time and may or may not be sufficient to cover debt service on
the related mortgage loan at any given time. As the primary source of the
operating revenues of a multifamily, commercial or mixed-use property, as
applicable, rental income (and maintenance payments from tenant-stockholders of
a cooperatively owned multifamily property) may be affected by the condition of
the applicable real estate market and/or area economy. Increases in operating
expenses due to the general economic climate or economic conditions in a
locality or industry segment, such as increases in interest rates, real estate
tax rates, energy costs, labor costs and other operating expenses, and/or
changes in governmental rules, regulations and fiscal policies, may also affect
the risk of default on a multifamily, commercial or mixed-use loan. Lenders also
look to the loan-to-value ratio of a multifamily, commercial or mixed-use loan
as a measure of risk of loss if a property must be liquidated following a
default.

         Each prospective mortgagor will generally complete a mortgage loan
application that includes information on the applicant's liabilities, income,
credit history, employment history and personal information. One or more credit
reports on each applicant from national credit reporting companies generally
will be required. The report typically contains information relating to credit
history with local and national merchants and lenders, installment debt payments
and any record of defaults, bankruptcies, repossessions, or judgments. In the
case of a multifamily loan, commercial loan or mixed-use loan, the mortgagor
will also be required to provide certain information regarding the related
mortgaged property, including a current rent roll and operating income
statements (which may be pro forma and unaudited). In addition, the originator
will generally also consider the location of the mortgaged property, the
availability of competitive lease space and rental income of comparable
properties in the relevant market area, the overall economy and demographic
features of the geographic area and the mortgagor's prior experience in owning
and operating properties similar to the multifamily properties or commercial
properties, as the case may be.

         Mortgaged properties generally will be appraised by licensed
appraisers. The appraiser will generally address neighborhood conditions, site
and zoning status and condition and valuation of improvements. In the case of
mortgaged properties secured by single family loans, the appraisal report will
generally include a reproduction cost analysis (when appropriate) based on the
current cost of constructing a similar home and a market value analysis based on
recent sales of comparable


                                       10




homes in the area. With respect to multifamily properties, commercial properties
and mixed-use properties, the appraisal must specify whether an income analysis,
a market analysis or a cost analysis was used. An appraisal employing the income
approach to value analyzes a property's projected net cash flow, capitalization
and other operational information in determining the property's value. The
market approach to value analyzes the prices paid for the purchase of similar
properties in the property's area, with adjustments made for variations between
those other properties and the property being appraised. The cost approach to
value requires the appraiser to make an estimate of land value and then
determine the current cost of reproducing the improvements less any accrued
depreciation. In any case, the value of the property being financed, as
indicated by the appraisal, must support, and support in the future, the
outstanding loan balance. All appraisals are required to be on forms acceptable
to Fannie Mae or Freddie Mac.

         Notwithstanding the foregoing, loan-to-value ratios will not
necessarily constitute an accurate measure of the risk of liquidation loss in a
pool of mortgage loans. For example, the value of a mortgaged property as of the
date of initial issuance of the related series of bonds may be less than the
Value determined at loan origination, and will likely continue to fluctuate from
time to time based upon changes in economic conditions and the real estate
market. Mortgage loans which are subject to negative amortization will have
loan-to-value ratios which will increase after origination as a result of
negative amortization. Also, even when current, an appraisal is not necessarily
a reliable estimate of value for a multifamily property or commercial property.
As stated above, appraised values of multifamily, commercial and mixed-use
properties are generally based on the market analysis, the cost analysis, the
income analysis, or upon a selection from or interpolation of the values derived
from those approaches. Each of these appraisal methods can present analytical
difficulties. It is often difficult to find truly comparable properties that
have recently been sold; the replacement cost of a property may have little to
do with its current market value; and income capitalization is inherently based
on inexact projections of income and expenses and the selection of an
appropriate capitalization rate. Where more than one of these appraisal methods
are used and provide significantly different results, an accurate determination
of value and, correspondingly, a reliable analysis of default and loss risks, is
even more difficult.

         If so specified in the related prospectus supplement, the underwriting
of a multifamily loan, commercial loan or mixed-use loan may also include
environmental testing. Under the laws of some states, contamination of real
property may give rise to a lien on the property to assure the costs of cleanup.
In several states, this type of lien has priority over an existing mortgage lien
on that property. In addition, 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 of
addressing releases or threatened releases of hazardous substances at a
property, if agents or employees of the lender have become sufficiently involved
in the operations of the borrower, regardless of whether or not the
environmental damage or threat was caused by the borrower or a prior owner. A
lender also risks such liability on foreclosure of the mortgage as described
under "Legal Aspects of Mortgage Loans--Environmental Legislation" in this
prospectus.

         With respect to any FHA loan or VA loans the mortgage loan Seller will
be required to represent that it has complied with the applicable underwriting
policies of the FHA or VA, respectively. See "Primary Mortgage Insurance, Hazard
Insurance; Claims Thereunder--FHA Insurance" and "-- VA Mortgage Guaranty" in
this prospectus.

                    QUALIFICATIONS OF ORIGINATORS AND SELLERS

         Each mortgage loan generally will be originated, directly or through
mortgage brokers and correspondents, by a savings and loan association, savings
bank, commercial bank, credit union, insurance company, or similar institution
which is supervised and examined by a federal or state authority, or by a
mortgagee approved by the Secretary of Housing and Urban Development pursuant to
sections 203 and 211 of the Housing Act.



                                       11




                           REPRESENTATIONS BY SELLERS

         Each Seller will have made representations and warranties in respect of
the mortgage loans and/or mortgage securities sold by the Seller and evidenced
by a series of bonds. In the case of mortgage loans, representations and
warranties will generally include, among other things, that as to each mortgage
loan:

         o        any required hazard and primary mortgage insurance policies
                  were effective at the origination of the mortgage loan, and
                  each the policy remained in effect on the date of purchase of
                  the mortgage loan from the Seller by or on behalf of the
                  company;

         o        with respect to each mortgage loan other than a Contract or a
                  cooperative mortgage loan, either (A) a title insurance policy
                  insuring (subject only to permissible title insurance
                  exceptions) the lien status of the mortgage was effective at
                  the origination of the mortgage loan and the policy remained
                  in effect on the date of purchase of the mortgage loan from
                  the Seller by or on behalf of the company or (B) if the
                  mortgaged property securing the mortgage loan is located in an
                  area where these policies are generally not available, there
                  is in the related mortgage file an attorney's certificate of
                  title indicating (subject to permissible exceptions set forth
                  therein) the lien status of the mortgage;

         o        the Seller has good title to the mortgage loan and the
                  mortgage loan was subject to no offsets, defenses or
                  counterclaims except as may be provided under the Relief Act
                  and except to the extent that any buydown agreement exists for
                  a buydown mortgage loan;

         o        there are no mechanics' liens or claims for work, labor or
                  material affecting the related mortgaged property which are,
                  or may be a lien prior to, or equal with, the lien of the
                  related mortgage (subject only to permissible title insurance
                  exceptions);

         o        the related mortgaged property is free from damage and in good
                  repair;

         o        there are no delinquent tax or assessment liens against the
                  related mortgaged property;

         o        the mortgage loan is not more than 90 days delinquent as to
                  any scheduled payment of principal and/or interest;

         o        if a Primary Insurance Policy is required with respect to the
                  mortgage loan, the mortgage loan is the subject of the policy;
                  and

         o        the mortgage loan was made in compliance with, and is
                  enforceable under, all applicable local, state and federal
                  laws in all material respects.

         If the mortgage loans include cooperative mortgage loans,
representations and warranties with respect to title insurance or hazard
insurance may not be given. Generally, the cooperative itself is responsible for
the maintenance of hazard insurance for property owned by the cooperative, and
the borrowers (tenant-stockholders) of the cooperative do not maintain hazard
insurance on their individual dwelling units. In the case of mortgage
securities, representations and warranties will generally include, among other
things, that as to each mortgage security: (1) the mortgage security is validly
issued and outstanding and entitled to the benefits of the agreement pursuant to
which it was issued; and (2) the Seller has good title to the mortgage security.
In the event of a breach of a Seller's representation or warranty that
materially adversely affects the interests of the bondholders in a mortgage loan
or mortgage security, the related Seller will be obligated to cure the breach or
repurchase or, if permitted, replace the mortgage loan or mortgage security as
described below. However, there can be no assurance that a Seller will honor its
obligation to repurchase or, if


                                       12




permitted, replace any mortgage loan or mortgage security as to which a breach
of a representation or warranty arises.

         All of the representations and warranties of a Seller in respect of a
mortgage loan or mortgage security will have been made as of the date on which
the mortgage loan or mortgage security was purchased from the Seller by or on
behalf of the company. As a result, the date as of which the representations and
warranties were made may be a date prior to the date of initial issuance of the
related series of bonds or, in the case of a Designated Seller Transaction, will
be the date of closing ofthe related sale by the applicable Seller. A
substantial period of time may have elapsed between the date as of which the
representations and warranties were made and the later date of initial issuance
of the related series of bonds. Accordingly, the Seller's purchase obligation
(or, if specified in the related prospectus supplement, limited replacement
option) described below will not arise if, during the period commencing on the
date of sale of a mortgage loan or mortgage security by the Seller, an event
occurs that would have given rise to a purchase obligation had the event
occurred prior to sale of the affected mortgage loan or mortgage security, as
the case may be. The only representations and warranties to be made for the
benefit of holders of bonds in respect of any related mortgage loan or mortgage
security relating to the period commencing on the date of sale of the mortgage
loan or mortgage security by the Seller to or on behalf of the company will be
the limited representations of the company and the master servicer described
under "Description of the Bonds--Assignment of Trust Fund Assets" below.

         The company will assign to the trustee for the benefit of the holders
of the related series of bonds all of its right, title and interest in each
purchase agreement by which it purchased a mortgage loan or mortgage security
from a Seller insofar as the purchase agreement relates to the representations
and warranties made by the Seller in respect of the mortgage loan or mortgage
security and any remedies provided for with respect to any breach of
representations and warranties with respect to the mortgage loan or mortgage
security. If a Seller cannot cure a breach of any representation or warranty
made by it in respect of a mortgage loan or mortgage security which materially
and adversely affects the interests of the bondholders therein within a
specified period after having discovered or received notice of a breach, then,
the Seller will be obligated to purchase the mortgage loan or mortgage security
at a purchase price set forth in the related agreement which purchase price
generally will be equal to the principal balance thereof as of the date of
purchase plus accrued and unpaid interest through or about the date of purchase
at the related mortgage rate or pass- through rate, as applicable (net of any
portion of this interest payable to the Seller in respect of master servicing
compensation, special servicing compensation or subservicing compensation, as
applicable, and any interest retained by the company).

         As to any mortgage loan required to be purchased by a Seller as
provided above, rather than repurchase the mortgage loan, the Seller, if so
specified in the related prospectus supplement, will be entitled, at its sole
option, to remove the Deleted Mortgage Loan from the trust fund and substitute
in its place a Qualified Substitute Mortgage Loan. Any Qualified Substitute
Mortgage Loan generally will, on the date of substitution:

                  o        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
                           Deleted Mortgage Loan (the amount of any shortfall to
                           be deposited in the Payment Account by the related
                           Seller or the master servicer in the month of
                           substitution for distribution to the bondholders),

                  o        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 Deleted Mortgage Loan as of the
                           date of substitution,

                  o        have a loan-to-value ratio at the time of
                           substitution no higher than that of the Deleted
                           Mortgage Loan at the time of substitution,



                                       13




                  o        have a remaining term to maturity not greater than
                           (and not more than one year less than) that of the
                           Deleted Mortgage Loan and

                  o        comply with all of the representations and warranties
                           made by the Seller as of the date of substitution.

The related mortgage loan purchase agreement may include additional requirements
relating to ARM Loans or other specific types of mortgage loans, or additional
provisions relating to meeting the foregoing requirements on an aggregate basis
where a number of substitutions occur contemporaneously. No Seller will have any
option to substitute for a mortgage security that it is obligated to repurchase
in connection with a breach of a representation and warranty.

         The master servicer will be required under the applicable servicing
agreement to use reasonable efforts to enforce this purchase or substitution
obligation for the benefit of the trustee and the bondholders, following those
practices it would employ in its good faith business judgment and which are
normal and usual in its general mortgage servicing activities; provided,
however, that this purchase or substitution obligation will not become an
obligation of the master servicer in the event the applicable Seller fails to
honor the obligation. In instances where a Seller is unable, or disputes its
obligation, to purchase affected mortgage loans and/or mortgage securities, the
master servicer, employing the standards set forth in the preceding sentence,
may negotiate and enter into one or more settlement agreements with the related
Seller that could provide for the purchase of only a portion of the affected
mortgage loans and/or mortgage securities. Any settlement could lead to losses
on the mortgage loans and/or mortgage securities which would be borne by the
related bonds. In accordance with the above described practices, the master
servicer will not be required to enforce any purchase obligation of a Seller
arising from any misrepresentation by the Seller, if the master servicer
determines in the reasonable exercise of its business judgment that the matters
related to the misrepresentation did not directly cause or are not likely to
directly cause a loss on the related mortgage loan or mortgage security. If the
Seller fails to repurchase and no breach of any other party's representations
has occurred, the Seller's purchase obligation will not become an obligation of
the company or any other party. In the case of a Designated Seller Transaction
where the Seller fails to repurchase a mortgage loan or mortgage security and
neither the company nor any other entity has assumed the representations and
warranties, the repurchase obligation of the Seller will not become an
obligation of the company or any other party. The foregoing obligations will
constitute the sole remedies available to bondholders or the trustee for a
breach of any representation by a Seller or for any other event giving rise to
the obligations as described above.

         Neither the company nor the master servicer will be obligated to
purchase a mortgage loan or mortgage security if a Seller defaults on its
obligation to do so, and no assurance can be given that the Sellers will carry
out their purchase obligations. A default by a Seller is not a default by the
company or by the master servicer. However, to the extent that a breach of the
representations and warranties of a Seller also constitutes a breach of a
representation made by the company or the master servicer, as described below
under "Description of the Bonds--Assignment of Trust Fund Assets," the company
or the master servicer may have a purchase or substitution obligation. Any
mortgage loan or mortgage security not so purchased or substituted for shall
remain in the related trust fund and any losses related thereto shall be
allocated to the related credit enhancement, to the extent available, and
otherwise to one or more classes of the related series of bonds.

         If a person other than a Seller makes the representations and
warranties referred to in the first paragraph of this "--Representations by
Sellers" section, or a person other than a Seller is responsible for
repurchasing or replacing any mortgage loan or mortgage security for a breach of
those representations and warranties, the identity of that person will be
specified in the related prospectus supplement.

                           SERVICING OF MORTGAGE LOANS

GENERAL

         The mortgage loans and mortgage securities included in each mortgage
pool will be serviced and administered pursuant to a servicing agreement. A form
of servicing agreement has been filed


                                       14




as an exhibit to the registration statement of which this prospectus is a part.
However, the provisions of each servicing agreement will vary depending upon the
nature of the related mortgage pool. The following summaries describe the
material servicing-related provisions that may appear in a servicing agreement
for a mortgage pool that includes mortgage loans. The related prospectus
supplement will describe any servicing-related provision of its related
servicing agreement that materially differs from the description thereof
contained in this prospectus. If the related mortgage pool includes mortgage
securities, the related prospectus supplement will summarize the material
provisions of the related servicing agreement and identify the responsibilities
of the parties to that servicing agreement.

         With respect to any series of bonds as to which the related mortgage
pool includes mortgage securities, the servicing and administration of the
mortgage loans underlying any mortgage securities will be pursuant to the terms
of those mortgage securities. Mortgage loans underlying mortgage securities in a
mortgage pool will be serviced and administered generally in the same manner as
mortgage loans included in a mortgage pool, however, there can be no assurance
that this will be the case, particularly if the mortgage securities are issued
by an entity other than the company or any of its affiliates. The related
prospectus supplement will describe any material differences between the
servicing described below and the servicing of the mortgage loans underlying
mortgage securities in any mortgage pool.

                               THE MASTER SERVICER

         The master servicer, if any, for a series of bonds will be named in the
related prospectus supplement and may be Impac Funding Corporation or another
affiliate of the company. The master servicer is 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 a servicing agreement.

     COLLECTION AND OTHER SERVICING PROCEDURES; MORTGAGE LOAN MODIFICATIONS

         The master servicer for any mortgage pool, directly or through
subservicers, will be obligated under the servicing agreement to service and
administer the mortgage loans in the mortgage pool for the benefit of the
related bondholders, in accordance with applicable law, the terms of the
servicing agreement, the mortgage loans and any instrument of credit enhancement
included in the related trust fund, and, to the extent consistent with the
foregoing, the customs and standards of prudent institutional mortgage lenders
servicing comparable mortgage loans for their own account in the jurisdictions
where the related mortgaged properties are located. Subject to the foregoing,
the master servicer will have full power and authority to do any and all things
in connection with servicing and administration that it may deem necessary and
desirable.

         As part of its servicing duties, the master servicer will be required
to make reasonable efforts to collect all payments called for under the terms
and provisions of the mortgage loans that it services. The master servicer will
be obligated to follow the same collection procedures as it would follow for
comparable mortgage loans held for its own account, so long as these procedures
are consistent with the servicing standard of and the terms of the related
servicing agreement and the servicing standard generally described in the
preceding paragraph, and do not impair recovery under any instrument of credit
enhancement included in the related trust fund. Consistent with the foregoing,
the master servicer will be permitted, in its discretion, to waive any
prepayment premium, late payment charge or other charge in connection with any
mortgage loan.

         Under a servicing agreement, a master servicer will be granted
discretion to extend relief to mortgagors whose payments become delinquent. In
the case of single family loans and Contracts, a master servicer may, for
example, grant a period of temporary indulgence to a mortgagor or may enter into
a liquidating plan providing for repayment of delinquent amounts within a
specified period from the date of execution of the plan. However, the master
servicer must first determine that any waiver or extension will not impair the
coverage of any related insurance policy or materially adversely affect the
security for the mortgage loan. In addition, unless otherwise specified in the
related prospectus supplement, if a material default occurs or a payment default
is reasonably foreseeable with respect to a multifamily loan, commercial loan or
mixed-use loan, the master servicer will be permitted, subject to any specific
limitations set forth in the related servicing agreement and


                                       15




described in the related prospectus supplement, to modify, waive or amend any
term of such mortgage loan, including deferring payments, extending the stated
maturity date or otherwise adjusting the payment schedule, provided that the
modification, waiver or amendment (1) is reasonably likely to produce a greater
recovery with respect to that mortgage loan on a present value basis than would
liquidation and (2) will not adversely affect the coverage under any applicable
instrument of credit enhancement.

         In the case of multifamily loans, commercial loans and mixed-use loans,
a mortgagor's failure to make required mortgage loan payments may mean that
operating income is insufficient to service the mortgage debt, or may reflect
the diversion of that income from the servicing of the mortgage debt. In
addition, a mortgagor under a multifamily, commercial or mixed-use loan that is
unable to make mortgage loan payments may also be unable to make timely payment
of taxes and otherwise to maintain and insure the related mortgaged property.
Generally, the related master servicer will be required to monitor any
multifamily loan or commercial loan that is in default, evaluate whether the
causes of the default can be corrected over a reasonable period without
significant impairment of the value of the related mortgaged property, initiate
corrective action in cooperation with the mortgagor if cure is likely, inspect
the related mortgaged property and take any other actions as are consistent with
the servicing standard described above and in the servicing agreement. A
significant period of time may elapse before the master servicer is able to
assess the success of any such corrective action or the need for additional
initiatives. The time within which the master servicer can make the initial
determination of appropriate action, evaluate the success of corrective action,
develop additional initiatives, institute foreclosure proceedings and actually
foreclose (or accept a deed to a mortgaged property in lieu of foreclosure) on
behalf of the bondholders of the related series may vary considerably depending
on the particular multifamily, commercial or mixed-use loan, the mortgaged
property, the mortgagor, the presence of an acceptable party to assume that loan
and the laws of the jurisdiction in which the mortgaged property is located. If
a mortgagor files a bankruptcy petition, the master servicer may not be
permitted to accelerate the maturity of the related multifamily, commercial or
mixed-use loan or to foreclose on the mortgaged property for a considerable
period of time. See "Legal Aspects of Mortgage Loans."

         Some or all of the mortgage loans in a mortgage pool may contain a
due-on-sale clause that entitles the lender to accelerate payment of the
mortgage loan upon any sale or other transfer of the related mortgaged property
made without the lender's consent. Certain of the multifamily loans in a
mortgage pool may also contain a due-on-encumbrance clause that entitles the
lender to accelerate the maturity of the mortgage loan upon the creation of any
other lien or encumbrance upon the mortgaged property. In any case in which a
mortgaged property is being conveyed by the mortgagor, themaster servicer will
in general be obligated, to the extent it has knowledge of the conveyance, to
exercise its rights to accelerate the maturity of the related mortgage loan
under any due-on-sale clause applicable thereto, but only if the exercise of
these 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. If applicable law prevents the
master servicer from enforcing a due-on-sale or due-on-encumbrance clause or if
the master servicer determines that itis reasonably likely that the related
mortgagor would institute a legal action to avoid enforcement of a due-on-sale
or due-on-encumbrance clause, the master servicer may enter into an assumption
and modification agreement with the person to whom the property has been or is
about to be conveyed, pursuant to which this person becomes liable under the
mortgage loan subject to specified conditions. The original mortgagor may be
released from liability on a single family loan if the master servicer shall
have determined in good faith that the release will not adversely affect the
collectability of the mortgage loan. The master servicer will determine whether
to exercise any right the trustee may have under any due-on-sale or
due-on-encumbrance provision in a multifamily loan, commercial loan or mixed-use
loan in a manner consistent with the servicing standard. The master servicer
generally will be entitled to retain as additional servicing compensation any
fee collected in connection with the permitted transfer of a mortgaged property.
See "Legal Aspects of Mortgage Loans--Enforceability of Some Provisions." FHA
loans do not contain due-on-sale or due-on-encumbrance clauses and may be
assumed by the purchaser of the mortgaged property.

         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 may approve a request if it has determined,
exercising its good faith business judgment in the same


                                       16




manner as it would if it were the owner of the related mortgage loan, that
approval will not adversely affect the security for, or the timely and full
collectability of, the related mortgage loan. Any fee collected by the master
servicer for processing these requests will be retained by the master servicer
as additional servicing compensation.

         In the case of mortgage loans secured by junior liens on the related
mortgaged properties, the master servicer will be required to file (or cause to
be filed) of record a request for notice of any action by a superior lienholder
under the senior lien for the protection of the related trustee's interest,
where permitted by local law and whenever applicable state law does not require
that a junior lienholder be named as a party defendant in foreclosure
proceedings in order to foreclose the junior lienholder's equity of redemption.
The master servicer also will be required to notify any superior lienholder in
writing of the existence of the mortgage loan and request notification of any
action (as described below) to be taken against the mortgagor or the mortgaged
property by the superior lienholder. If the master servicer is notified that any
superior lienholder has accelerated or intends to accelerate the obligations
secured by the related senior lien, or has declared or intends to declare a
default under the mortgage or the promissory note secured thereby, or has filed
or intends to file an election to have the related mortgaged property sold or
foreclosed, then, the master servicer will be required to take, on behalf of the
related trust fund, whatever actions are necessary to protect the interests of
the related bondholders, and/or to preserve the security of the related mortgage
loan. The master servicer will be required to advance the necessary funds to
cure the default or reinstate the superior lien, if the advance is in the best
interests of the related bondholders and the master servicer determines the
advances are recoverable out of payments on or proceeds of the related mortgage
loan.

         The master servicer for any mortgage pool will also be required to
perform other customary functions of a servicer of comparable loans, including
maintaining escrow or impound accounts for paymentof taxes, insurance premiums
and similar items, or otherwise monitoring the timely payment of those items;
adjusting mortgage rates on ARM Loans; maintaining Buydown Accounts; supervising
foreclosures and similar proceedings; managing REO properties; and maintaining
servicing records relating to the mortgage loans in the mortgage pool. The
master servicer will be responsible for filing and settling claims in respect of
particular mortgage loans under any applicable instrument of credit enhancement.
See "Description of Credit Enhancement."

                                  SUBSERVICERS

         A master servicer may delegate its servicing obligations in respect of
the mortgage loans serviced by it to one or more third-party subservicers, but
the master servicer will remain liable for its obligations under the related
servicing agreement. The master servicer will be solely liable for all fees owed
by it to any subservicer, regardless of whether the master servicer's
compensation pursuant to the related servicing agreement is sufficient to pay
the subservicer's fees. Each subservicer will be entitled to reimbursement for
some of the expenditures which it makes, generally to the same extent as would
the master servicer for making the same expenditures. See "--Servicing and Other
Compensation and Payment of Expenses; Retained Interest" below and "Description
of the Bonds--The Payment Account."

                                SPECIAL SERVICERS

         If and to the extent specified in the related prospectus supplement, a
special servicer may be a party to the related servicing agreement or may be
appointed by the master servicer or another specified party to perform specified
duties in respect of servicing the related mortgage loans that would otherwise
be performed by the master servicer (for example, the workout and/or foreclosure
of defaulted mortgage loans). The rights and obligations of any special servicer
will be specified in the related prospectus supplement, and the master servicer
will be liable for the performance of a special servicer only if, and to the
extent, set forth in that prospectus supplement.

              REALIZATION UPON OR SALE OF DEFAULTED MORTGAGE LOANS

         Except as described below, the master servicer will be required, in a
manner consistent with the servicing standard, to foreclose upon or otherwise
comparably convert the ownership of properties securing any mortgage loans in
the related mortgage pool that come into and continue in


                                       17




default and as to which no satisfactory arrangements can be made for collection
of delinquent payments. Generally, the foreclosure process will commence no
later than 90 days after delinquency of the related mortgage loan. The master
servicer will be authorized to institute foreclosure proceedings, exercise any
power of sale contained in the related mortgage, obtain a deed in lieu of
foreclosure, or otherwise acquire title to the related mortgaged property, by
operation of law or otherwise, if the action is consistent with the servicing
standard. The master servicer's actions in this regard must be conducted,
however, in a manner that will permit recovery under any instrument of credit
enhancement included in the related trust fund. In addition, the master servicer
will not be required to expend its own funds in connection with any foreclosure
or to restore any damaged property unless it shall determine that (1) the
foreclosure and/or restoration will increase the proceeds of liquidation of the
mortgage loan to the related bondholders after reimbursement to itself for these
expenses and (2) these expenses will be recoverable to it from related Insurance
Proceeds, Liquidation Proceeds or amounts drawn out of any fund or under any
instrument constituting credit enhancement (respecting which it shall have
priority for purposes of withdrawal from the Payment Account in accordance with
the servicing agreement).

         However, unless otherwise specified in the related prospectus
supplement, the master servicer may not acquire title to any multifamily
property or commercial property securing a mortgage loan or take any other
action that would cause the related trustee, for the benefit of bondholders of
the related series, or any other specified person to be considered to hold title
to, to be a "mortgagee-in- possession" of, or to be an "owner" or an "operator"
of such mortgaged property within the meaning of federal environmental laws,
unless the master servicer has previously determined, based on a report prepared
by a person who regularly conducts environmental audits (which report will be an
expense of the trust fund), that either:

                  (1) the mortgaged property is in compliance with applicable
         environmental laws and regulations or, if not, that taking actions as
         are necessary to bring the mortgaged property into compliance with
         these laws is reasonably likely to produce a greater recovery on a
         present value basis than not taking those actions; and

                  (2) there are no circumstances or conditions present at the
         mortgaged property that have resulted in any contamination for which
         investigation, testing, monitoring, containment, clean-up or
         remediation could be required under any applicable environmental laws
         and regulations or, if those circumstances or conditions are present
         for which any such action could be required, taking those actions with
         respect to the mortgaged property is reasonably likely to produce a
         greater recovery on a present value basis than not taking those
         actions. See "Legal Aspects of Mortgage Loans--Environmental
         Legislation."

         The master servicer will not be obligated to foreclose upon or
otherwise convert the ownership of any mortgaged property securing a single
family loan if it has received notice or has actual knowledge that the property
may be contaminated with or affected by hazardous wastes or hazardous
substances; however, environmental testing will not be required. The master
servicer will not be liable to the bondholders of the related series if, based
on its belief that no such contamination or effect exists, the master servicer
forecloses on a mortgaged property and takes title to the mortgaged property,
and thereafter the mortgaged property is determined to be so contaminated or
affected.

         With respect to a mortgage loan in default, the master servicer may
pursue foreclosure (or similar remedies) concurrently with pursuing any remedy
for a breach of a representation and warranty. However, the master servicer is
not required to continue to pursue both remedies if it determines that one
remedy is more likely than the other to result in a greater recovery. Upon the
first to occur of final liquidation (by foreclosure or otherwise) or a
repurchase or substitution pursuant to a breach of a representation and
warranty, the mortgage loan will be removed from the related trust fund if it
has not been removed previously. The master servicer may elect to treat a
defaulted mortgage loan as having been finally liquidated if a substantial
portion or all of the amounts expected to be received from that mortgage loan
have been received. Any additional liquidation expenses relating to the mortgage
loan thereafter incurred will be reimbursable to the master servicer (or any
subservicer) from any amounts otherwise distributable to holders of securities
of the related series, or may be offset by any subsequent recovery related to
the mortgage loan. Alternatively, for purposes


                                       18




of determining the amount of related Liquidation Proceeds to be distributed to
securityholders, the amount of any Realized Loss or the amount required to be
drawn under any applicable form of credit support, the master 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 the defaulted mortgage loan.

         As provided above, the master servicer may pass through less than the
full amount it expects to receive from the related mortgage loan; however, the
master servicer may only do this if the master servicer reasonably believes it
will maximize the proceeds to the securityholders in the aggregate. To the
extent the master servicer receives additional recoveries following liquidation,
the amount of the Realized Loss will be restated, and the additional recoveries
will be passed through the trust as Liquidation Proceeds. In the event the
amount of the Realized Loss is restated, the amount of overcollateralization or
the principal balance of the most subordinate class of securities in the trust
may be increased. However, the holders of any bonds whose principal balance is
increased will not be reimbursed interest for the period during which the
principal balance of their bonds was lower.

         With respect to a series of bonds, if so provided in the related
prospectus supplement, the applicable form of credit enhancement may provide, to
the extent of coverage, that a defaulted mortgage loan will be removed from the
trust fund prior to the final liquidation thereof. In addition, a servicing
agreement may grant to the master servicer, a special servicer, a provider of
credit enhancement and/or the holder or holders of specified classes of bonds of
the related series a right of first refusal to purchase from the trust fund, at
a predetermined purchase price, any mortgage loan as to which a specified number
of scheduled payments are delinquent. If the purchase price is insufficient to
fully fund the entitlements of bondholders to principal and interest, it will be
specified in the related prospectus supplement. Furthermore, a servicing
agreement may authorize the master servicer to sell any defaulted mortgage loan
if and when the master servicer determines, consistent with the servicing
standard, that the sale would produce a greater recovery to bondholders on a
present value basis than would liquidation of the related mortgaged property.

         In the event that title to any mortgaged property is acquired by
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
will be issued to the trustee or to its nominee on behalf of bondholders of the
related series. Notwithstanding any acquisition of title and cancellation of the
related mortgage loan, the REO Mortgage Loan will be considered for most
purposes to be an outstanding mortgage loan held in the trust fund until the
mortgaged property is sold and all recoverable Liquidation Proceeds and
Insurance Proceeds have been received with respect to the defaulted mortgage
loan. For purposes of calculations of amounts distributable to bondholders in
respect of an REO Mortgage Loan, the amortization schedule in effect at the time
of any 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, the amortization schedule will be deemed to have adjusted in
accordance with any interest rate changes occurring on any adjustment date
therefor) so long as the REO Mortgage Loan is considered to remain in the trust
fund.

         If Liquidation Proceeds collected with respect to a defaulted mortgage
loan are less than the outstanding principal balance of the defaulted mortgage
loan plus accrued interest plus the aggregate amount of reimbursable expenses
incurred by the master servicer with respect to the mortgage loan, and the
shortfall is not covered under any applicable instrument or fund constituting
credit enhancement, the trust fund will realize a loss in the amount of the
difference. The master servicer will be entitled to reimburse itself from the
Liquidation Proceeds recovered on any defaulted mortgage loan, prior to the
distribution of Liquidation Proceeds to bondholders, amounts that represent
unpaid servicing compensation in respect of the mortgage loan, unreimbursed
servicing expenses incurred with respect to the mortgage loan and any
unreimbursed advances of delinquent payments made with respect to the mortgage
loan. If so provided in the related prospectus supplement, the applicable form
of credit enhancement may provide for reinstatement subject to specified
conditions in the event that, following the final liquidation of a mortgage loan
and a draw under the credit enhancement, subsequent recoveries are received. In
addition, if a gain results from the final liquidation of a defaulted mortgage
loan or an REO Mortgage Loan which is not required by law to be remitted to the
related mortgagor, the master servicer will be entitled to retain the gain as
additional servicing compensation unless the related prospectus supplement
provides otherwise.


                                       19




For a description of the master servicer's (or other specified person's)
obligations to maintain and make claims under applicable forms of credit
enhancement and insurance relating to the mortgage loans, see "Description of
Credit Enhancement" and "Primary Mortgage Insurance, Hazard Insurance; Claims
Thereunder."

SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES; RETAINED INTEREST

         The principal servicing compensation to be paid to the master servicer
in respect of its master servicing activities for a series of bonds will be
equal to the percentage or range of percentages per annum described in the
related prospectus supplement of the outstanding principal balance of each
mortgage loan, and this compensation will be retained by it on a monthly or
other periodic basis from collections of interest on each mortgage loan in the
related trust fund at the time the collections are deposited into the applicable
Payment Account. This portion of the servicing fee will be calculated with
respect to each mortgage loan by multiplying the fee by the principal balance of
the mortgage loan. In addition, the master servicer may retain all prepayment
premiums, assumption fees and late payment charges, to the extent collected from
mortgagors, and any benefit which may accrue as a result of the investment of
funds in the applicable Payment Account. Any additional servicing compensation
will be described in the related prospectus supplement. Any subservicer will
receive a portion of the master servicer's compensation as its subservicing
compensation.

         In addition to amounts payable to any subservicer, the master servicer
will pay or cause to be paid some of the ongoing expenses associated with each
trust fund and incurred by it in connection with its responsibilities under the
servicing agreement, including, if so specified in the related prospectus
supplement, payment of any fee or other amount payable in respect of any
alternative credit enhancement arrangements, payment of the fees and
disbursements of the trustee, any custodian appointed by the trustee and the
bond registrar, and payment of expenses incurred in enforcing the obligations of
subservicers and Sellers. The master servicer will be entitled to reimbursement
of expenses incurred in enforcing the obligations of subservicers and Sellers
under limited circumstances. In addition, the master servicer will be entitled
to reimbursements for some ofits expenses incurred in connection with liquidated
mortgage loans and in connection with the restoration of mortgaged properties,
this right of reimbursement being prior to the rights of bondholders to receive
any related Liquidation Proceeds or Insurance Proceeds. If and to the extent so
provided in the related prospectus supplement, the master servicer will be
entitled to receive interest on amounts advanced to cover reimbursable expenses
for the period that the advances are outstanding at the rate specified in the
prospectus supplement, and the master servicer will be entitled to payment of
the interest periodically from general collections on the mortgage loans in the
related trust fund prior to any payment to bondholders or as otherwise provided
in the related servicing agreement and described in the prospectus supplement.

         The prospectus supplement for a series of bonds will specify whether
there will be any interest in the mortgage loans retained by the company. Any
retained interest will be a specified portion of the interest payable on each
mortgage loan in a mortgage pool and will not be part of the related trust fund.
Any retained interest will be established on a loan-by-loan basis and the amount
thereof with respect to each mortgage loan in a mortgage pool will be specified
on an exhibit to the related servicing agreement. Any partial recovery of
interest in respect of a mortgage loan will be allocated between the owners of
any retained interest and the holders of classes of bonds entitled to payments
of interest as provided in the related prospectus supplement and the applicable
servicing agreement.

         If and to the extent provided in the related prospectus supplement, the
master servicer may be required to apply a portion of the servicing compensation
otherwise payable to it in respect of any period to any Prepayment Interest
Shortfalls resulting from mortgagor prepayments during that period. See "Yield
Considerations."

EVIDENCE AS TO COMPLIANCE

         Each servicing agreement will provide that on or before a specified
date in each year, beginning the first such date that is at least a specified
number of months after the cut-off date, a firm of independent public
accountants will furnish a statement to the company and the trustee to the


                                       20




effect that, on the basis of an examination by the firm conducted substantially
in compliance with the Uniform Single Attestation Program for Mortgage Bankers
or the Audit Program for mortgages serviced for Freddie Mac, the servicing of
mortgage loans under agreements (including the related servicing agreement)
substantially similar to each other was conducted in compliance with the
agreements except for significant exceptions or errors in records that, in the
opinion of the firm, the Uniform Single Attestation Program for Mortgage Bankers
or the Audit Program for mortgages serviced for Freddie Mac requires it to
report. In rendering its statement the firm may rely, as to the matters relating
to the direct servicing of mortgage loans by subservicers, upon comparable
statements for examinations conducted substantially in compliance with the
Uniform Single Attestation Program for Mortgage Bankers or the Audit Program for
mortgages serviced for Freddie Mac (rendered within one year of the statement)
of firms of independent public accountants with respect to those subservicers
which also have been the subject of this type of examination.

         Each servicing agreement will also provide for delivery to the trustee,
on or before a specified date in each year, of an annual statement signed by one
or more officers of the master servicer to the effect that, to the best
knowledge of each officer, the master servicer has fulfilled in all material
respects its obligations under the servicing agreement throughout the preceding
year or, if there has been a material default in the fulfillment of any
obligation, the statement shall specify each known default and the nature and
status thereof. This statement may be provided as a single form making the
required statements as to more than one servicing agreement.

         Copies of the annual accountants' statement and the annual statement of
officers of a master servicer may be obtained by bondholders without charge upon
written request to the master servicer or trustee.

                            DESCRIPTION OF THE BONDS

GENERAL

         The bonds will be issued in series. Each series of bonds (or, in some
instances, two or more series of bonds) will be issued pursuant to an indenture
between the related Issuer and the trustee, similar to the form filed as an
exhibit to the registration statement of which this prospectus is a part. The
trust fund will be created pursuant to an owner trust agreement between the
company and the owner trustee. Each indenture, along with the related servicing
agreement and owner trust agreement, will be filed with the Commission as an
exhibit to a Current Report on Form 8-K. Qualified counsel will render an
opinion to the effect that the trust fund's assets will not be considered assets
of the Seller or the company in the event of the bankruptcy Seller or the
company. The following summaries (together with additional summaries under "The
Agreements" below) describe the material provisions relating to the bonds common
to each Agreement.

         Each series of bonds covered by a particular indenture will evidence
indebtedness of a separate trust fund created pursuant to the related owner
trust agreement. A trust fund will consist of, to the extent provided in the
owner trust agreement:

                  o        the mortgage loans (and the related mortgage
                           documents) or interests therein (including any
                           mortgage securities) underlying a particular series
                           of bonds as from time to time are subject to the
                           servicing agreement, exclusive of, if specified in
                           the related prospectus supplement, any interest
                           retained by the company or any of its affiliates with
                           respect to each mortgage loan;

                  o        all payments and collections in respect of the
                           mortgage loans or mortgage securities due after the
                           related cut-off date, as from time to time are
                           identified as deposited in respect thereof in the
                           related Payment Account as described below;

                  o        any property acquired in respect of mortgage loans in
                           the trust fund, whether through foreclosure of a
                           mortgage loan or by deed in lieu of foreclosure;



                                       21




                  o        hazard insurance policies, Primary Insurance Policies
                           and FHA insurance policies, if any, maintained in
                           respect of mortgage loans in the trust fund and the
                           proceeds of these policies;

                  o        the rights of the company under any mortgage loan
                           purchase agreement, including in respect of any
                           representations and warranties therein; and

                  o        any combination, as and to the extent specified in
                           the related prospectus supplement, of a financial
                           guaranty insurance policy, mortgage pool insurance
                           policy, letter of credit, special hazard insurance
                           policy, or currency or interest rate exchange
                           agreements as described under "Description of Credit
                           Enhancement."

         If provided in the related prospectus supplement, the original
principal amount of a series of bonds may exceed the principal balance of the
mortgage loans or mortgage securities initially being delivered to the trustee.
Cash in an amount equal to this difference will be deposited into a pre- funding
account maintained with the trustee. During the period set forth in the related
prospectus supplement, amounts on deposit in the pre-funding account may be used
to purchase additional mortgage loans or mortgage securities for the related
trust fund. Any amounts remaining in the pre- funding account at the end of the
period will be distributed as a principal prepayment to the holders of the
related series of bonds at the time and in the manner set forth in the related
prospectus supplement.

         Each series of bonds may consist of any one or a combination of the
following:

                  o        a single class of bonds;

                  o        two or more classes of bonds, one or more classes of
                           which will be senior in right of payment to one or
                           more of the other classes, and as to which some
                           classes of senior (or subordinate) bonds may be
                           senior to other classes of senior (or subordinate)
                           bonds, as described in the respective prospectus
                           supplement;

                  o        two or more classes of bonds, one or more classes of
                           which will be Strip Bonds;

                  o        two or more classes of bonds 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 a 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, and which classes may include one
                           or more classes of Accrual Bonds; or

                  o        other types of classes of bonds, as described in the
                           related prospectus supplement.

         With respect to any series of bonds, the related Equity Certificates,
insofar as they represent the beneficial ownership interest in the Issuer, will
be subordinate to the related bonds. As to each series, the offered bonds will
be rated in one of the four highest rating categories by one or more Rating
Agencies. Credit support for the offered bonds of each series may be provided by
a financial guaranty insurance policy, mortgage pool insurance policy, letter of
credit, reserve fund, overcollateralization, and currency or interest rate
exchange agreements as described under "Description of Credit Enhancement," by
the subordination of one or more other classes of bonds as described under
"--Subordinate Bonds" or by any combination of the foregoing.



                                       22




FORM OF BONDS

         Except as described below, the offered bonds of each series will be
issued as physical bonds 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 registrar named in the related
prospectus supplement. No service charge will be made for any registration of
exchange or transfer of offered bonds, but the trustee may require payment of a
sum sufficient to cover any tax or other governmental charge. A "bondholder" or
"holder" is the entity whose name appears on the records of the registrar
(consisting of or including the bond register) as the registered holder of a
bond.

         If so specified in the related prospectus supplement, specified classes
of a series of bonds will be initially issued through the book-entry facilities
of the DTC. As to any class of DTC Registered Bonds, the record holder of the
bonds will be DTC's nominee. DTC is a limited-purpose trust company organized
under the laws of the State of New York, which holds bonds for its participants
and facilitates the clearance and settlement of bonds transactions between
participants through electronic book-entry changes in the accounts of
participants. Intermediaries have indirect access to DTC's clearance system.

         No Beneficial Owner will be entitled to receive a bond representing its
interest in registered, certificated form, unless either (1) DTC ceases to act
as depository in respect thereof and a successor depository is not obtained, or
(2) the company elects in its sole discretion to discontinue the registration of
the bonds through DTC. Prior to one of these events, Beneficial Owners will not
be recognized by the trustee or the master servicer as holders of the related
bonds for purposes of the related indenture, and Beneficial Owners will be able
to exercise their rights as owners of the bonds only indirectly through DTC,
participants and Intermediaries. Any Beneficial Owner that desires to purchase,
sell or otherwise transfer any interest in DTC Registered Bonds may do so only
through DTC,either directly if the Beneficial Owner is a participant or
indirectly through participants and, if applicable, Intermediaries. Pursuant to
the procedures of DTC, transfers of the beneficial ownership of any DTC
Registered Bonds will be required to be made in minimum denominations specified
in the related prospectus supplement. The ability of a Beneficial Owner to
pledge DTC Registered Bonds to persons or entities that are not participants in
the DTC system, or to otherwise act with respect to the bonds, may be limited
because of the lack of physical bonds evidencing the bonds and because DTC may
act only on behalf of participants.

         Distributions in respect of the DTC Registered Bonds will be forwarded
by the trustee or other specified person to DTC, and DTC will be responsible for
forwarding the payments to participants, each of which will be responsible for
disbursing the payments to the Beneficial Owners it represents or, if
applicable, to Intermediaries. Accordingly, Beneficial Owners may experience
delays in the receipt of payments in respect of their bonds. Under DTC's
procedures, DTC will take actions permitted to be taken by holders of any class
of DTC Registered Bonds under the indenture only at the direction of one or more
participants to whose account the DTC Registered Bonds 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 holders of bonds of any class to the extent that
participants authorize these actions. None of the master servicer, the company,
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 DTC Registered Bonds, or for maintaining, supervising
or reviewing any records relating to the beneficial ownership interests.

GLOBAL BONDS

         Some of the offered bonds may be Global Bonds. Except in some limited
circumstances, the Global Bonds will be available only in book-entry form.
Investors in the Global Bonds may hold those Global Bonds through any of DTC,
Clearstream Banking, societe anonyme, formerly known as Cedelbank SA, or
Euroclear. The Global Bonds will be traceable as home market instruments in both
the European and U.S. domestic markets. Initial settlement and all secondary
trades will settle in same-day funds.



                                       23




         Secondary market trading between investors through Clearstream and
Euroclear will be conducted in the ordinary way in accordance with the normal
rules and operating procedures of Clearstream and Euroclear and in accordance
with conventional eurobond practice (i.e., seven calendar day settlement).

         Secondary market trading between investors through DTC will be
conducted according to DTC's rules and procedures applicable to U.S. corporate
debt obligations.

         Secondary cross-market trading between Clearstream or Euroclear and DTC
participants holding Bonds will be effected on a delivery-against-payment basis
through the respective Depositaries of Clearstream and Euroclear (in that
capacity) and as DTC participants.

         Non-U.S. holders (as described below) of Global Bonds will be subject
to U.S. withholding taxes unless those holders meet various requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.

         All Global Bonds will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Bonds will be
represented through financial institutions acting on their behalf as direct and
indirect participants in DTC. As a result, Clearstream and Euroclear will hold
positions on behalf of their participants through their relevant depositary
which in turn will hold those positions in their accounts as DTC participants.

         Investors electing to hold their Global Bonds through DTC will follow
DTC settlement practices. Investor securities custody accounts will be credited
with their holdings against payment in same-day funds on the settlement date.

         Investors electing to hold their Global Bonds through Clearstream or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global bond and
no "lock-up" or restricted period. Global Bonds will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.

         Since the purchaser determines the place of delivery, it is important
to establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.

         Secondary market trading between DTC participants will be settled using
the procedures applicable to prior mortgage loan asset-backed bonds issues in
same-day funds. Secondary market trading between Clearstream participants or
Euroclear participants will be settled using the procedures applicable to
conventional eurobonds in same-day funds. When Global Bonds are to be
transferred from the account of a DTC participant to the account of a
Clearstream participant or a Euroclear participant, the purchaser will send
instructions to Clearstream or Euroclear through a Clearstream participant or
Euroclear participant at least one business day prior to settlement. Clearstream
or Euroclear will instruct the relevant depositary, as the case may be, to
receive the Global Bonds against payment. Payment will include interest accrued
on the Global Bonds from and including the last coupon payment date to and
excluding the settlement date, on the basis of the actual number of days in that
accrual period and a year assumed to consist of 360 days. For transactions
settling on the 31st of the month, payment will include interest accrued to and
excluding the first day of the following month. Payment will then be made by the
relevant depositary to the DTC participant's account against delivery of the
Global Bonds. After settlement has been completed, the Global Bonds will be
credited to the respective clearing system and by the clearing system, in
accordance with its usual procedures, to the Clearstream participant's or
Euroclear participant's account. The securities credit will appear the next day
(European time) and the cash debt will be back-valued to, and the interest on
the Global Bonds will accrue from, the value date (which would be the preceding
day when settlement occurred in New York). If settlement is not completed on the
intended value date (i.e., the trade fails), the Clearstream or Euroclear cash
debt will be valued instead as of the actual settlement date.

         Clearstream participants and Euroclear participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most


                                       24




direct means of doing so is to preposition funds for settlement, either from
cash on hand or existing lines of credit, as they would for any settlement
occurring within Clearstream or Euroclear. Under this approach, they may take on
credit exposure to Clearstream or Euroclear until the Global Bonds are credited
to their account one day later. As an alternative, if Clearstream or Euroclear
has extended a line of credit to them, Clearstream participants or Euroclear
participants can elect not to preposition funds and allow that credit line to be
drawn upon to finance settlement. Under this procedure, Clearstream participants
or Euroclear participants purchasing Global Bonds would incur overdraft charges
for one day, assuming they cleared the overdraft when the Global Bonds were
credited to their accounts. However, interest on the Global Bonds would accrue
from the value date. Therefore, in many cases the investment income on the
Global Bonds earned during that one-day period may substantially reduce or
offset the amount of those overdraft charges, although the result will depend on
each Clearstream participant's or Euroclear participant's particular cost of
funds. Since the settlement is taking place during New York business hours, DTC
participants can employ their usual procedures for crediting Global Bonds to the
respective European depositary for the benefit of Clearstream participants or
Euroclear participants. The sale proceeds will be available to the DTC seller on
the settlement date. Thus, to the DTC participants a cross-market transaction
will settle no differently than a trade between two DTC participants.

         Due to time zone differences in their favor, Clearstream participants
and Euroclear participants may employ their customary procedures for
transactions in which Global Bonds are to be transferred by the respective
clearing system, through the respective depositary, to a DTC participant. The
seller will send instructions to Clearstream or Euroclear through a Clearstream
participant or Euroclear participant at least one business day prior to
settlement. In these cases Clearstream or Euroclear will instruct the respective
depositary, as appropriate, to credit the Global Bonds to the DTC participant's
account against payment. Payment will include interest accrued on the Global
Bonds from and including the last coupon payment to and excluding the settlement
date on the basis of the actual number of days in that accrual period and a year
assumed to consist to 360 days. For transactions settling on the 31st of the
month, payment will include interest accrued to and excluding the first day of
the following month. The payment will then be reflected in the account of
Clearstream participant or Euroclear participant the following day, and receipt
of the cash proceeds in the Clearstream participant's or Euroclear participant's
account would be back-valued to the value date (which would be the preceding
day, when settlement occurred in New York). Should the Clearstream participant
or Euroclear participant have a line of credit with its respective clearing
system and elect to be in debt in anticipation of receipt of the sale proceeds
in its account, the back- valuation will extinguish any overdraft incurred over
that one-day period. If settlement is not completed on the intended value date
(i.e., the trade fails), receipt of the cash proceeds in the Clearstream
participant's or Euroclear participant's account would instead be valued as of
the actual settlement date.

         Finally, day traders that use Clearstream or Euroclear and that
purchase Global Bonds from DTC participants for delivery to Clearstream
participants or Euroclear participants should note that these trades would
automatically fail on the sale side unless affirmative action is taken. At least
three techniques should be readily available to eliminate this potential
problem:

         o        borrowing through Clearstream or Euroclear for one day (until
                  the purchase side of the trade is reflected in their
                  Clearstream or Euroclear accounts) in accordance with the
                  clearing system's customary procedures;

         o        borrowing the Global Bonds in the U.S. from a DTC participant
                  no later than one day prior to settlement, which would give
                  the Global Bonds sufficient time to be reflected in their
                  Clearstream or Euroclear account in order to settle the sale
                  side of the trade; or

         o        staggering the value dates for the buy and sell sides of the
                  trade so that the value date for the purchase from the DTC
                  participant is at least one day prior to the value date for
                  the sale to the Clearstream participant or Euroclear
                  participant.



                                       25




         A beneficial owner of Global Bonds holding bonds through Clearstream or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
Persons (as defined below), unless (i) each clearing system, bank or other
financial institution that holds customers' bonds in the ordinary course of its
trade or business in the chain of intermediaries between that beneficial owner
and the U.S. entity required to withhold tax complies with applicable
certification requirements and (ii) that beneficial owner takes one of the
following steps to obtain an exemption or reduced tax rate: Exemption for
Non-U.S. Persons (Form W-8). Beneficial holders of Global Bonds that are
Non-U.S. Persons (as defined below) can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the information shown on Form W-8 changes, a new Form W-8 must be filed within
30 days of that change.

         A Non-U.S. Person (as defined below), including a non-U.S. corporation
or bank with a U.S. branch, for which the interest income is effectively
connected with its conduct of a trade or business in the United States, can
obtain an exemption from the withholding tax by filing Form 4224 (Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a Trade
or Business in the United States).

         Non-U.S. Persons residing in a country that has a tax treaty with the
United States can obtain an exemption or reduced tax rate (depending on the
treaty terms) by filing Form 1001 (Holdership, Exemption or Reduced Rate
Certificate). If the treaty provides only for a reduced rate, withholding tax
will be imposed at that rate unless the filer alternatively files Form W-8. Form
1001 may be filed by Bondholders or their agent.

         U.S.Persons can obtain a complete exemption from the withholding tax by
filing Form W-9 (Payer's Request for Taxpayer Identification Number and
Certification).

         The holder of a Global Bond or, in the case of a Form 1001 or a Form
4224 filer, his agent, files by submitting the appropriate form to the person
through whom it holds the bond (the clearing agency, in the case of persons
holding directly on the books of the clearing agency). Form W-8 and Form 1001
are effective for three calendar years and Form 4224 is effective for one
calendar year. The term "U.S. Person" means a citizen or resident of the United
States, a corporation, partnership or other entity created or organized in, or
under the laws of, the United States or any political subdivision thereof
(except, in the case of a partnership, to the extent provided in regulations),
or an estate whose income is subject to United States federal income tax
regardless of its source, or a trust if a court within the United States is able
to exercise primary supervision over the administration of the trust and one or
more United States Persons have the authority to control all substantial
decisions of the trust. The term "Non-U.S. Person" means any person who is not a
U.S. Person. This summary does not deal with all aspects of U.S. Federal income
tax withholding that may be relevant to foreign holders of the Global Bonds.
Investors are advised to consult their own tax advisors for specific tax advice
concerning their holding and disposing of the Global Bonds.

ASSIGNMENT OF TRUST FUND ASSETS

         At the time of issuance of a series of bonds, the company will assign,
or cause to be assigned, to the related trustee (or its nominee), without
recourse, the mortgage loans or mortgage securities being included in the
related trust fund, together with, all principal and interest received on or
with respect to the mortgage loans or mortgage securities after the cut-off
date, other than principal and interest due on or before the cut-off date. If
specified in the related prospectus supplement, the company or any of its
affiliates may retain an interest in the trust fund assets, if any, for itself
or transfer the same to others. The trustee will, concurrently with the
assignment, deliver the bonds of the series to or at the direction of the
company in exchange for the mortgage loans and/or mortgage securities in the
related trust fund. Each mortgage loan will be identified in a schedule
appearing as an exhibit to the related servicing agreement. The schedule will
include, among other things, information as to the principal balance of each
mortgage loan in the related trust fund 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 at origination or modification (without regard to any
secondary financing).


                                       26




         In addition, the company will, as to each mortgage loan, other than
mortgage loans underlying any mortgage securities and other than Contracts,
deliver, or cause to be delivered, to the related trustee (or to the custodian
described below) the following documents:

         o        the mortgage note endorsed, without recourse, either in blank
                  or to the order of the trustee (or its nominee),

         o        the mortgage with evidence of recording indicated on the
                  mortgage (except for any mortgage not returned from the public
                  recording office) or, in the case of a cooperative mortgage
                  loan, on the related financing statement,

         o        an assignment of the mortgage in blank or to the trustee (or
                  its nominee) in recordable form (or, with respect to a
                  cooperative mortgage 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),

         o        any intervening assignments of the mortgage with evidence of
                  recording on the assignment (except for any assignment not
                  returned from the public recording office),

         o        if applicable, any riders or modifications to the mortgage
                  note and mortgage, and

         o        any other documents set forth in the related mortgage loan
                  purchase agreement or servicing agreement.

The assignments may be blanket assignments covering mortgages on mortgaged
properties located in the same county, if permitted by law.

         Notwithstanding the foregoing, a trust fund may include mortgage loans
where the original mortgage note is not delivered to the trustee if the company
delivers, or causes to be delivered, to the related trustee (or the custodian) a
copy or a duplicate original of the mortgage note, together with an affidavit
certifying that the original thereof has been lost or destroyed. In addition, if
the company cannot deliver, with respect to any mortgage loan, the mortgage or
any intervening assignment with evidence of recording on the assignment
concurrently with the execution and delivery of the related servicing agreement
because of a delay caused by the public recording office, the company will
deliver, or cause to be delivered, to the related trustee (or the custodian) a
true and correct photocopy of the mortgage or assignment as submitted for
recording within one year. The company will deliver, or cause to be delivered,
to the related trustee (or the custodian) the mortgage or assignment with
evidence of recording indicated on the assignment after receipt thereof from the
public recording office. If the company cannot deliver, with respect to any
mortgage loan, the mortgage or any intervening assignment with evidence of
recording on the mortgage or assignment concurrently with the execution and
delivery of the related servicing agreement because the mortgage or assignment
has been lost, the company will deliver, or cause to be delivered, to the
related trustee (or the custodian) a true and correct photocopy of the mortgage
or assignment with evidence of recording on the mortgage or assignment.
Assignments of the mortgage loans to the trustee (or its nominee) will be
recorded in the appropriate public recording office, except in states where, in
the opinion of counsel acceptable to the trustee, 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 the mortgage loan.

         As to each Contract, the company will deliver, or cause to be
delivered, to the related trustee (or the custodian) the following documents:

         o        the original Contract endorsed, without recourse, to the order
                  of the trustee,

         o        copies of documents and instruments related to the Contract
                  and the security interest in the Manufactured Home securing
                  the Contract, and



                                       27




         o        a blanket assignment to the trustee of all Contracts in the
                  related trust fund and the related documents and instruments.

In order to give notice of the right, title and interest of the bondholders to
the Contracts, the company will cause to be executed and delivered to the
trustee a UCC-1 financing statement identifying the trustee as the secured party
and identifying all Contracts as collateral.

         The company will, as to each mortgage security included in a mortgage
pool, deliver, or cause to be delivered, to the related trustee (or the
custodian), a physical bond evidencing the mortgage security, registered in the
name of the related trustee (or its nominee), or endorsed in blank or to the
related trustee (or its nominee), or accompanied by transfer documents
sufficient to effect a transfer to the trustee (or its nominee).

         The trustee (or the custodian) will hold the documents in trust for the
benefit of the related bondholders, and generally will review the documents
within 120 days after receipt thereof in the case of documents delivered
concurrently with the execution and delivery of the related indenture, and
within the time period specified in the related indenture in the case of all
other documents delivered. If any document is found to be missing or defective
in any material respect, the trustee (or the custodian) will be required to
promptly so notify the master servicer, the company, and the related Seller. If
the related Seller does not cure the omission or defect within a specified
period after notice is given thereto by the trustee, and the omission or defect
materially and adversely affects the interests of bondholders in the affected
mortgage loan or mortgage security, then, the related Seller will be obligated
to purchase the mortgage loan or mortgage security from the trustee at its
purchase price (or, if and to the extent it would otherwise be permitted to do
so for a breach of representation and warranty as described under "The Mortgage
Pools--Representations of Sellers," to substitute for themortgage loan or
mortgage security). The trustee will be obligated to enforce this obligation of
the Seller to the extent described above under "The Mortgage
Pools--Representations by Sellers," but there can be no assurance that the
applicable Seller will fulfill its obligation to purchase (or substitute for)
the affected mortgage loan or mortgage security as described above. The company
will not be obligated to purchase or substitute for the mortgage loan or
mortgage security if the Seller defaults on its obligation to do so. This
purchase or substitution obligation constitutes the sole remedy available to the
related bondholders and the related trustee for omission of, or a material
defect in, a constituent document. Any affected mortgage loan or mortgage
security not so purchased or substituted for shall remain in the related trust
fund.

         The trustee will be authorized at any time to appoint one or more
custodians pursuant to a custodial agreement to hold title to the mortgage loans
and/or mortgage securities in any mortgage pool, and to maintain possession of
and, if applicable, to review, the documents relating to the mortgage loans
and/or mortgage securities, in any case as the agent of the trustee. The
identity of any custodian to be appointed on the date of initial issuance of the
bonds will be set forth in the related prospectus supplement. A custodian may be
an affiliate of the company or the master servicer.

         Except in the case of a Designated Seller Transaction or as to mortgage
loans underlying any mortgage securities, the company will make representations
and warranties as to the types and geographical concentrations of the mortgage
loans and as to the accuracy of some of the information furnished to the related
trustee in respect of each mortgage loan (for example, the original Loan-to-
Value Ratio, the principal balance as of the cut-off date, the mortgage rate and
maturity). Upon a breach of any of these representations which materially and
adversely affects the interests of the bondholders in a mortgage loan, the
company will be obligated to cure the breach in all material respects, to
purchase the mortgage loan at its purchase price or, to substitute for the
mortgage loan a Qualified Substitute Mortgage Loan in accordance with the
provisions for substitution by Affiliated Sellers as described above under "The
Mortgage Pools--Representations by Sellers." However, the company will not be
required to repurchase or substitute for any mortgage loan in connection with a
breach of a representation and warranty if the substance of the breach also
constitutes fraud in the origination of the related mortgage loan. This purchase
or substitution obligation constitutes the sole remedy available to bondholders
or the trustee for a breach of a representation by the company. Any mortgage
loan not so purchased or substituted for shall remain in the related trust fund.



                                       28




         Pursuant to the related servicing agreement, the master servicer for
any mortgage pool, either directly or through subservicers, will service and
administer the mortgage loans included in the mortgage pool and assigned to the
related trustee as more fully set forth under "Servicing of Mortgage Loans." The
master servicer will make representations and warranties regarding its authority
to enter into, and its ability to perform its obligations under, the servicing
agreement.

                                 PAYMENT ACCOUNT

         GENERAL. The master servicer and/or the trustee will, as to each trust
fund, establish and maintain or cause to be established and maintained a Payment
Account, which will be established so as to comply with the standards of each
Rating Agency that has rated any one or more classes of bonds of the related
series. A Payment Account shall be maintained as an Eligible Account, and the
funds held therein may be held as cash or invested in Permitted Investments. Any
Permitted Investments shall not cause the company to register under the
Investment Company Act of 1940. Any interest or other income earned on funds in
the Payment Account will be paid to the related master servicer or trustee as
additional compensation. If permitted by the Rating Agency or Agencies and so
specified in the related prospectus supplement, a Payment Account may contain
funds relating to more than one series of collateralized asset-backed bonds and
may contain other funds representing payments on mortgage loans owned by the
related master servicer or serviced by it on behalf of others.

         DEPOSITS. With respect to each series of bonds, the related master
servicer, trustee or special servicer will be required to deposit or cause to be
deposited in the Payment Account for the related trust fund within a period
following receipt (in the case of collections and payments), the following
payments and collections received, or advances made, by the master servicer, the
trustee or any special servicer subsequent to the cut-off date with respect to
the mortgage loans and/or mortgage securities in the trust fund (other than
payments due on or before the cut-off date):

         o        all payments on account of principal, including principal
                  prepayments, on the mortgage loans;

         o        all payments on account of interest on the mortgage loans,
                  including any default interest collected, in each case net of
                  any portion thereof retained by the master servicer, any
                  special servicer or subservicer as its servicing compensation
                  or as compensation to the trustee, and further net of any
                  retained interest of the company;

         o        all payments on the mortgage securities;

         o        all Insurance Proceeds and Liquidation Proceeds;

         o        any amounts paid under any instrument or drawn from any fund
                  that constitutes credit enhancement for the related series of
                  bonds as described under "Description of Credit Enhancement";

         o        any advances made as described under "--Advances" below;

         o        any Buydown Funds (and, if applicable, investment earnings on
                  the Buydown Funds) required to be paid to bondholders, as
                  described below;

         o        any amounts paid by the master servicer to cover Prepayment
                  Interest Shortfalls arising out of the prepayment of mortgage
                  loans as described under "Servicing of Mortgage
                  Loans--Servicing and Other Compensation and Payment of
                  Expenses; Retained Interest";

         o        to the extent that any item does not constitute additional
                  servicing compensation to the master servicer or a special
                  servicer, any payments on account of modification or
                  assumption fees, late payment charges or prepayment premiums
                  on the mortgage loans;



                                       29




         o        any amount required to be deposited by the master servicer or
                  the trustee in connection with losses realized on investments
                  for the benefit of the master servicer or the trustee, as the
                  case may be, of funds held in the Payment Account; and

         o        any other amounts required to be deposited in the Payment
                  Account as provided in the related servicing agreement and
                  indenture and described in this prospectus or in the related
                  prospectus supplement.

         With respect to each buydown mortgage loan, the master servicer will be
required to deposit the related Buydown Funds provided to it in a Buydown
Account which will comply with the requirements set forth in this prospectus
with respect to the Payment Account. The terms of all buydown mortgage loans
provide for the contribution of Buydown Funds in an amount equal to or exceeding
either (1) the total payments to be made from the funds pursuant to the related
buydown plan or (2) if the Buydown Funds are to be deposited on a discounted
basis, that amount of Buydown Funds which, together with investment earnings on
the Buydown Funds at a rate as will support the scheduled level of payments due
under the buydown mortgage loan. Neither the master servicer nor the company
will be obligated to add to any discounted Buydown Funds any of its own funds
should investment earnings prove insufficient to maintain the scheduled level of
payments. To the extent that any insufficiency is not recoverable from the
mortgagor or, in an appropriate case, from the Seller, distributions to
bondholders may be affected. With respect to each buydown mortgage loan, the
master servicer will be required monthly to withdraw from the Buydown Account
and deposit in the Payment Account as described above the amount, if any, of the
Buydown Funds (and, if applicable, investment earnings on the Buydown Funds) for
each buydown mortgage loan that, when added to the amount due from the mortgagor
on the buydown mortgage loan, equals the full monthly payment which would be due
on the buydown mortgage loan if it were not subject to the buydown plan. The
Buydown Funds will in no event be a part of the related trust fund.

         If the mortgagor on a buydown mortgage loan prepays the mortgage loan
in its entirety during the Buydown Period, the master servicer will be required
to withdraw from the Buydown Account and remit to the mortgagor or the other
designated party in accordance with the related buydown plan any Buydown Funds
remaining in the Buydown Account. If a prepayment by a mortgagor during the
Buydown Period together with Buydown Funds will result in full prepayment of a
buydown mortgage loan, the master servicer generally will be required to
withdraw from the Buydown Account and deposit in the Payment Account the Buydown
Funds and investment earnings on the Buydown Funds, if any, which together with
the prepayment will result in a prepayment in full; provided that Buydown Funds
may not be available to cover a prepayment under some mortgage loan programs.
Any Buydown Funds so remitted to the master servicer in connection with a
prepayment described in the preceding sentence will be deemed to reduce the
amount that would be required to be paid by the mortgagor to repay fully the
related mortgage loan if the mortgage loan were not subject to the buydown plan.
Any investment earnings remaining in the Buydown Account after prepayment or
after termination of the Buydown Period will be remitted to the related
mortgagor or the other designated party pursuant to the Buydown Agreement
relating to each buydown mortgage loan. If the mortgagor defaults during the
Buydown Period with respect to a buydown mortgage loan and the property securing
the buydown mortgage loan is sold in liquidation (either by the master servicer,
the primary insurer, any pool insurer or any other insurer), the master servicer
will be required to withdraw from the Buydown Account the Buydown Funds and all
investment earnings on the Buydown Funds, if any, and either deposit the same in
the Payment Account or, alternatively, pay the same to the primary insurer or
the pool insurer, as the case may be, if the mortgaged property is transferred
to the insurer and the insurer pays all of the loss incurred in respect of the
default.

         WITHDRAWALS. With respect to each series of bonds, the master servicer,
trustee or special servicer may make withdrawals from the Payment Account for
the related trust fund for any of the following purposes, unless otherwise
provided in the related agreement and described in the related prospectus
supplement:

         (1)      to make distributions to the related bondholders on each
                  distribution date;

         (2)      to reimburse the master servicer or any other specified person
                  for unreimbursed amounts advanced by it in respect of mortgage
                  loans in the trust fund as described


                                       30




                  under "--Advances" below, these reimbursement to be made out
                  of amounts received which were identified and applied by the
                  master servicer as late collections of interest (net of
                  related servicing fees) on and principal of the particular
                  mortgage loans with respect to which the advances were made or
                  out of amounts drawn under any form of credit enhancement with
                  respect to the mortgage loans;

         (3)      to reimburse the master servicer or a special servicer for
                  unpaid servicing fees earned by it and some unreimbursed
                  servicing expenses incurred by it with respect to mortgage
                  loans in the trust fund and properties acquired in respect
                  thereof, these reimbursement to be made out of amounts that
                  represent Liquidation Proceeds and Insurance Proceeds
                  collected on the particular mortgage loans and properties, and
                  net income collected on the particular properties, with
                  respect to which the fees were earned or the expenses were
                  incurred or out of amounts drawn under any form of credit
                  enhancement with respect to the mortgage loans and properties;

         (4)      to reimburse the master servicer or any other specified person
                  for any advances described in clause (2) above made by it and
                  any servicing expenses referred to in clause (3) above
                  incurred by it which, in the good faith judgment of the master
                  servicer or the other person, will not be recoverable from the
                  amounts described in clauses (2) and (3), respectively, the
                  reimbursement to be made from amounts collected on other
                  mortgage loans in the trust fund or, if and to the extent so
                  provided by the related servicing agreement and indenture and
                  described in the related prospectus supplement, only from that
                  portion of amounts collected on the other mortgage loans that
                  is otherwise distributable on one or more classes of
                  subordinate bonds of the related series;

         (5)      if and to the extent described in the related prospectus
                  supplement, to pay the master servicer, a special servicer or
                  another specified entity (including a provider of credit
                  enhancement) interest accrued on the advances described in
                  clause (2) above made by it and the servicing expenses
                  described in clause (3) above incurred by it while these
                  remain outstanding and unreimbursed;

         (6)      to reimburse the master servicer, the company, or any of their
                  respective directors, officers, employees and agents, as the
                  case may be, for expenses, costs and liabilities incurred
                  thereby, as and to the extent described under "The
                  Agreements--Certain Matters Regarding the Master Servicer and
                  the Company";

         (7)      if and to the extent described in the related prospectus
                  supplement, to pay the fees of the trustee;

         (8)      to reimburse the trustee or any of its directors, officers,
                  employees and agents, as the case may be, for expenses, costs
                  and liabilities incurred thereby, as and to the extent
                  described under "The Agreements--The Trustee";

         (9)      to pay the master servicer or the trustee, as additional
                  compensation, interest and investment income earned in respect
                  of amounts held in the Payment Account;

         (10)     to pay (generally from related income) the master servicer or
                  a special servicer for costs incurred in connection with the
                  operation, management and maintenance of any mortgaged
                  property acquired by the trust fund by foreclosure or by deed
                  in lieu of foreclosure;

         (11)     to pay for the cost of an independent appraiser or other
                  expert in real estate matters retained to determine a fair
                  sale price for a defaulted mortgage loan or a property
                  acquired in respect thereof in connection with the liquidation
                  of the mortgage loan or property;

         (12)     to pay for the cost of various opinions of counsel obtained
                  pursuant to the related servicing agreement and indenture for
                  the benefit of the related bondholders;


                                       31




         (13)     to pay to itself, the company, a Seller or any other
                  appropriate person all amounts received with respect to each
                  mortgage loan purchased, repurchased or removed from the trust
                  fund pursuant to the terms of the related servicing agreement
                  and indenture and not required to be distributed as of the
                  date on which the related purchase price is determined;

         (14)     to make any other withdrawals permitted by the related
                  servicing agreement and indenture and described in the related
                  prospectus supplement;

         (15)     to pay for costs and expenses incurred by the trust fund for
                  environmental site assessments performed with respect to
                  multifamily or commercial properties that constitute security
                  for defaulted mortgage loans, and for any containment,
                  clean-up or remediation of hazardous wastes and materials
                  present on that mortgaged properties, as described under
                  "Servicing of Mortgage Loans--Realization Upon or Sale of
                  Defaulted Mortgage Loans"; and

         (16)     to clear and terminate the Payment Account upon the
                  termination of the trust fund.

DISTRIBUTIONS

         Distributions on the bonds of each series will be made by or on behalf
of the related trustee or master servicer on each distribution date as specified
in the related prospectus supplement from the available distribution amount for
the series and the distribution date. The available distribution amount for any
series of bonds and any distribution date will generally refer to the total of
all payments or other collections (or advances in lieu thereof) on, under or in
respect of the mortgage loans and/or mortgage securities and any other assets
included in the related trust fund that are available for distribution to the
bondholders of the series on that date. The particular components of the
available distribution amount for any series on each distribution date will be
more specifically described in the related prospectus supplement.

         Distributions on the bonds of each series (other than the final
distribution in retirement of any bond) will be made to the persons in whose
names the bonds are registered on the Record Date, and the amount of each
distribution will be determined as of the Determination Date. All distributions
with respect to each class of bonds on each distribution date will be allocated
in equal proportion among the outstanding bonds in the class. Payments will be
made either by wire transfer in immediately available funds to the account of a
bondholder at a bank or other entity having appropriate facilities therefor, if
the bondholder has provided the trustee or other person required to make the
payments with wiring instructions no later than five business days prior to the
related Record Date or other date specified in the related prospectus supplement
(and, if so provided in the related prospectus supplement, the bondholder holds
bonds in the requisite amount or denomination specified therein), or by check
mailed to the address of the bondholder as it appears on the bond register;
provided, however, that the final distribution in retirement of any class of
bonds will be made only upon presentation and surrender of the bonds at the
location specified in the notice to bondholders of the final distribution.
Payments will be made to each bondholder in accordance with the holder's
Percentage Interest in a particular class.

DISTRIBUTIONS OF INTEREST AND PRINCIPAL ON THE BONDS

         Each class of bonds of each series, other than Strip Bonds that have no
bond interest rate, may have a different per annum rate at which interest
accrues on that class of bonds, which may be fixed, variable or adjustable, or
any combination of rates. The related prospectus supplement will specify the
bond interest rate or, in the case of a variable or adjustable bond interest
rate, the method for determining the bond interest rate, for each class. The
related prospectus supplement will specify whether interest on the bonds of the
series will be calculated on the basis of a 360-day year consisting of twelve
30-day months or on a different method.

         Distributions of interest in respect of the bonds of any class, other
than any class of Accrual Bonds or Strip Bonds that is not entitled to any
distributions of interest, will be made on each distribution date based on the
accrued interest for the class and the distribution date, subject to the


                                       32




sufficiency of the portion of the available distribution amount allocable to the
class on the distribution date. Prior to the time interest is distributable on
any class of Accrual Bonds, the amount of accrued interest otherwise
distributable on the class will be added to the principal balance thereof on
each distribution date. With respect to each class of interest-bearing bonds,
accrued interest for each distribution date will be equal to interest at the
applicable bond interest rate accrued for a specified period (generally one
month) on the outstanding principal balance thereof immediately prior to the
distribution date. Accrued interest for each distribution date on Strip Bonds
entitled to distributions of interest will be similarly calculated except that
it will accrue on a notional amount that is based on either (1) based on the
principal balances of some or all of the mortgage loans and/or mortgage
securities in the related trust fund or (2) equal to the principal balances of
one or more other classes of bonds of the same series. Reference to a notional
amount with respect to a class of Strip Bonds is solely for convenience in
making calculations of accrued interest and does not represent the right to
receive any distribution of principal. If so specified in the related prospectus
supplement, the amount of accrued interest that is otherwise distributable on
(or, in the case of Accrual Bonds, that may otherwise be added to the principal
balance of) one or more classes of the bonds of a series will be reduced to the
extent that any Prepayment Interest Shortfalls, as described under "Yield
Considerations", exceed the amount of any sums (including, if and to the extent
specified in the related prospectus supplement, the master servicer's servicing
compensation) that are applied to offset the shortfalls. The particular manner
in which the shortfalls will be allocated among some or all of the classes of
bonds of that series will be specified in the related prospectus supplement. The
related prospectus supplement will also describe the extent to which the amount
of accrued interest that is otherwise distributable on (or, in the case of
Accrual Bonds, that may otherwise be added to the principal balance of) a class
of offered bonds may be reduced as a result of any other contingencies,
including delinquencies, losses and Deferred Interest on or in respect of the
related mortgage loans or application of the Relief Act with respect to the
mortgage loans. Any reduction in the amount of accrued interest otherwise
distributable on a class of bonds by reason of the allocation to the class of a
portion of any Deferred Interest on or in respect of the related mortgage loans
will result in a corresponding increase in the principal balance of the class.

         As and to the extent described in the related prospectus supplement,
distributions of principal with respect to a series of bonds will be made on
each distribution date to the holders of the class or classes of bonds of the
series entitled thereto until the principal balance(s) of the bonds have been
reduced to zero. In the case of a series of bonds which includes two or more
classes of bonds, 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 bonds or subordinate bonds), shall be as set
forth in the related prospectus supplement. Distributions of principal with
respect to one or more classes of bonds may be made at a rate that is faster
(and, in some cases, substantially faster) than the rate at which payments or
other collections of principal are received on the mortgage loans and/or
mortgage securities in the related trust fund, may not commence until the
occurrence of events such as the retirement of one or more other classes of
bonds of the same series, or may be made at a rate that is slower (and, in some
cases, substantially slower) than the rate at which payments or other
collections of principal are received on the mortgage loans and/or mortgage
securities. In addition, distributions of principal with respect to one or more
classes of bonds may be made, subject to available funds, based on a specified
principal payment schedule and, with respect to one or more classes of bonds,
may be contingent on the specified principal payment schedule for another class
of the same series and the rate at which payments and other collections of
principal on the mortgage loans and/or mortgage securities in the related trust
fund are received.

PRE-FUNDING ACCOUNT

         If so specified in the related prospectus supplement, the agreements
may provide for the transfer by the Sellers of additional mortgage loans to the
related trust after the Closing Date. The additional mortgage loans will be
required to conform to the requirements set forth in the related Agreement or
other agreement providing for the transfer, and will be underwritten to the same
standards as the mortgage loans initially included in the trust fund as
described in the prospectus supplement. As specified in the related prospectus
supplement, the transfer may be funded by the establishment of a pre- funding
account with the trustee. If a pre-funding account is established, all or a
portion of the proceeds of the sale of one or more classes of bonds of the
related series will be


                                       33




deposited in the account to be released as additional mortgage loans are
transferred. A pre-funding account will be required to be maintained as an
Eligible Account, the amounts therein may be required to be invested in
Permitted Investments and the amount held therein shall at no time exceed 40% of
the aggregate outstanding principal balance of the related bonds. The related
Agreement or other agreement providing for the transfer of additional mortgage
loans generally will provide that the transfers must be made within up to one
year after the Closing Date, and that amounts set aside to fund the transfers
(whether in a pre-funding account or otherwise) and not so applied within the
required period of time will be deemed to be principal prepayments and applied
in the manner set forth in the prospectus supplement. To the extent amounts in
any pre-funding account have not been used to purchase additional mortgage
loans, holders of the bonds may receive an additional prepayment, which may
affect their yield to maturity. In addition, bondholders may not be able to
reinvest amounts received from any pre-funding account in comparable bonds, or
may only be able to do so at a lower interest rate.

DISTRIBUTIONS ON THE BONDS IN RESPECT OF PREPAYMENT PREMIUMS

         Prepayment premiums will generally be retained by the master servicer
or by the Seller as additional compensation. However, if so provided in the
related prospectus supplement, prepayment premiums received on or in connection
with the mortgage loans or mortgage securities in any trust fund will be
distributed on each distribution date to the holders of the class or classes of
bonds of the related series entitled thereto in accordance with the provisions
described in the prospectus supplement.

ALLOCATION OF LOSSES AND SHORTFALLS

         The amount of any losses or shortfalls in collections on the mortgage
loans and/or mortgage securities in any trust fund (to the extent not covered or
offset by draws on any reserve fund or under any instrument of credit
enhancement) will be allocated among the respective classes of bonds of the
related series in the priority and manner, and subject to the limitations,
specified in the related prospectus supplement. As described in the related
prospectus supplement, these allocations may result in reductions in the
entitlements to interest and/or principal balances of one or more classes of
bonds, or may be effected simply by a prioritization of payments among classes
of bonds.

ADVANCES

         If and to the extent provided in the related prospectus supplement, and
subject to any limitations specified therein, the related master servicer may be
obligated to advance, or have the option of advancing, on or before each
distribution date, from its or their own funds or from excess funds held in the
related Payment Account that are not part of the available distribution amount
for the related series of bonds for the distribution date, an amount up to the
aggregate of any payments of interest (and, if specified in the related
prospectus supplement, principal) that were due on or in respect of the mortgage
loans during the related Due Period and were delinquent on the related
Determination Date. No notice will be given to the bondholders of these
advances. Scheduled payments on the mortgage loans in any trust fund that became
due during a given Due Period will, to the extent received by the related
Determination Date or advanced by the related master servicer or other specified
person, be distributed on the distribution date next succeeding the
Determination Date.

         Advances are intended to maintain a regular flow of scheduled interest
and principal payments to holders of the class or classes of bonds entitled
thereto, rather than to guarantee or insure against losses. Accordingly, all
advances made from the master servicer's own funds will be reimbursable out of
related recoveries on the mortgage loans (including amounts received under any
fund or instrument constituting credit enhancement) respecting which advances
were made and other specific sources as may be identified in the related
prospectus supplement, including amounts which would otherwise be payable to the
offered bonds. No Nonrecoverable Advance will be required to be made by the
master servicer; and, if previously made by a master servicer, a Nonrecoverable
Advance will be reimbursable from any amounts in the related Payment Account
prior to any distributions being made to the related series of bondholders.



                                       34




         If advances have been made from excess funds in a Payment Account, the
master servicer that advanced the funds will be required to replace the funds in
the Payment Account on any future distribution date to the extent that funds
then in the Payment Account are insufficient to permit full distributions to
bondholders on that date. If so specified in the related prospectus supplement,
the obligation of a master servicer to make advances may be secured by a cash
advance reserve fund or a surety bond. If applicable, information regarding the
characteristics of, and the identity of any obligor on, a surety bond, will be
set forth in the related prospectus supplement.

         If any person other than the master servicer has any obligation to make
advances as described above, the related prospectus supplement will identify the
person.

         If and to the extent so provided in the related prospectus supplement,
any entity making advances will be entitled to receive interest on the advances
for the period that the advances are outstanding at the rate specified in the
prospectus supplement, and the entity will be entitled to payment of the
interest periodically from general collections on the mortgage loans in the
related trust fund prior to any payment to bondholders or as otherwise provided
in the related servicing agreement and described in the prospectus supplement.

         As specified in the related prospectus supplement with respect to any
series of bonds as to which the trust fund includes mortgage securities, the
advancing obligations with respect to the underlying mortgage loans will be
pursuant to the terms of the mortgage securities, as may be supplemented by the
terms of the applicable servicing agreement, and may differ from the provisions
described above.

REPORTS TO BONDHOLDERS

         With each distribution to bondholders of a particular class of offered
bonds, the related master servicer or trustee will forward or cause to be
forwarded to each holder of record of the class of bonds a statement or
statements with respect to the related trust fund setting forth the information
specifically described in the related servicing agreement or indenture, which
generally will include the following as applicable except as otherwise provided
therein:

         o        the amount, if any, of the distribution allocable to
                  principal;

         o        the amount, if any, of the distribution allocable to interest;

         o        the amount, if any, of the distribution allocable to
                  prepayment premiums;

         o        with respect to a series consisting of two or more classes,
                  the outstanding principal balance or notional amount of each
                  class after giving effect to the distribution of principal on
                  the distribution date;

         o        the amount of servicing compensation received by the related
                  master servicer (and, if payable directly out of the related
                  trust fund, by any special servicer and any subservicer);

         o        the aggregate amount of advances included in the distributions
                  on the distribution date, and the aggregate amount of
                  unreimbursed advances at the close of business on the
                  distribution date;

         o        the aggregate principal balance of the mortgage loans in the
                  related mortgage pool on, or as of a specified date shortly
                  prior to, the distribution date;

         o        the number and aggregate principal balance of any mortgage
                  loans in the related mortgage pool in respect of which (A) one
                  scheduled payment is delinquent, (B) two scheduled payments
                  are delinquent, (C) three or more scheduled payments are
                  delinquent and (D) foreclosure proceedings have been
                  commenced;



                                       35




         o        the book value of any real estate acquired the trust fund by
                  foreclosure or by a deed in lieu of foreclosure;

         o        the balance of the reserve fund, if any, at the close of
                  business on the distribution date;

         o        the amount of coverage under any financial guaranty insurance
                  policy, mortgage pool insurance policy or letter of credit
                  covering default risk as of the close of business on the
                  applicable Determination Date and a description of any credit
                  enhancement substituted therefor;

         o        the amount of any Special Hazard Losses, Fraud Losses and
                  Bankruptcy Losses as of the close of business on the
                  applicable distribution date and a description of any change
                  in the calculation of these amounts;

         o        with respect to any series of bonds as to which the trust fund
                  includes mortgage securities, additional information as
                  required under the related servicing agreement and specified
                  in the related prospectus supplement; and

         o        any other material information as required under the related
                  servicing agreement or indenture.

         In the case of information furnished pursuant to the first three items
above, the amounts will be expressed as a dollar amount per minimum denomination
of the relevant class of offered bonds or per a specified portion of the minimum
denomination. In addition to the information described above, reports to
bondholders will contain other information as is set forth in the applicable
servicing agreement or indenture, which may include prepayments, reimbursements
to subservicers 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 trustee will furnish a report to each
holder of record of a class of offered bonds at any time during the calendar
year which, for example, will include information as to the aggregate of amounts
reported pursuant to the first three items above for the calendar year or, in
the event the person was a holder of record of a class of bonds during a portion
of the calendar year, for the applicable portion of the year.

                        DESCRIPTION OF CREDIT ENHANCEMENT

GENERAL

         Credit support with respect to the offered bonds of each series may be
comprised of one or more of the following components. Each component will have
limitations and will provide coverage with respect to Realized Losses on the
related mortgage loans. Credit support will cover Defaulted Mortgage Losses, but
coverage may be limited or unavailable with respect to Special Hazard Losses,
Fraud Losses, Bankruptcy Losses and Extraordinary Losses. To the extent that the
credit support for the offered bonds of any series is exhausted, the holders
thereof will bear all further risk of loss.

         As set forth below and in the applicable prospectus supplement,
coverage with respect to Realized Losses may be provided by one or more of a
financial guaranty insurance policy, a special hazard insurance policy, a
mortgage pool insurance policy or a letter of credit. In addition, if provided
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 the losses, in the form of subordination of one or more
classes of subordinate bonds to provide credit support to one or more classes of
senior bonds, in the form of overcollateralization, or in the form of a
combination of the foregoing. The credit support may be provided by an
assignment of the right to receive specified 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 applicable prospectus
supplement.



                                       36




         The amounts and type of credit enhancement arrangement as well as the
provider thereof, if applicable, with respect to the offered bonds of each
series will be set forth in the related prospectus supplement. To the extent
provided in the applicable prospectus supplement and the indenture, the credit
enhancement arrangements may be periodically modified, reduced and substituted
for based on the aggregate outstanding principal balance of the mortgage loans
covered thereby. See "Description of Credit Enhancement--Reduction or
Substitution of Credit Enhancement." If specified in the applicable prospectus
supplement, credit support for the offered bonds of one series may cover the
offered bonds of one or more other series.

         In general, references to "mortgage loans" under this "Description of
Credit Enhancement" section are to mortgage loans in a trust fund. However, if
so provided in the prospectus supplement for a series of bonds, any mortgage
securities included in the related trust fund and/or the related underlying
mortgage loans may be covered by one or more of the types of credit support
described inthis prospectus. The related prospectus supplement will specify, as
to each form of credit support, the information indicated below with respect
thereto, to the extent the information is material and available.

SUBORDINATE BONDS

         If so specified in the related prospectus supplement, one or more
classes of bonds of a series may be subordinate bonds. To the extent specified
in the related prospectus supplement, the rights of the holders of subordinate
bonds to receive distributions from the Payment Account on any distribution date
will be subordinated to the corresponding rights of the holders of senior bonds.
If so provided in the related prospectus supplement, the subordination of a
class may apply only in the event of (or may be limited to) some types of losses
or shortfalls. The related prospectus supplement will set forth information
concerning the manner and amount of subordination provided by a class or classes
of subordinate bonds in a series and the circumstances under which the
subordination will be available. The offered bonds of any series may include one
or more classes of subordinate bonds.

CROSS-SUPPORT

         If the mortgage loans and/or mortgage securities in any trust fund are
divided into separate groups, each supporting a separate class or classes of
bonds of the related series, credit enhancement may be provided by cross-support
provisions requiring that distributions be made on senior bonds evidencing
interests in one group of mortgage loans and/or mortgage securities prior to
distributions on subordinate bonds evidencing interests in a different group of
mortgage loans and/or mortgage securities within the trust fund. The prospectus
supplement for a series that includes a cross-support provision will describe
the manner and conditions for applying the provisions.

OVERCOLLATERALIZATION

         If so specified in the related prospectus supplement, interest
collections on the mortgage loans may exceed interest payments on the bonds for
the related distribution date. The excess interest may be deposited into a
reserve fund or applied as a payment of principal on the bonds. To the extent
excess interest is applied as principal payments on the bonds, the effect will
be to reduce the principal balance of the bonds relative to the outstanding
balance of the mortgage loans, thereby creating overcollateralization and
additional protection to the bondholders, as specified in the related prospectus
supplement. If so provided in the related prospectus supplement,
overcollateralization may also be provided as to any series of bonds by the
issuance of bonds in an initial aggregate principal amount which is less than
the aggregate principal amount of the related mortgage loans.

FINANCIAL GUARANTY INSURANCE POLICY

         If so specified in the related prospectus supplement, a financial
guaranty insurance policy may be obtained and maintained for a class or series
of bonds. The insurer with respect to a financial guaranty insurance policy will
be described in the related prospectus supplement and a copy of the form of
financial guaranty insurance policy will be filed with the related Current
Report on Form 8- K.



                                       37




         A financial guaranty insurance policy will be unconditional and
irrevocable and will guarantee to holders of the applicable bonds that an amount
equal to the full amount of payments due to the holders will be received by the
trustee or its agent on behalf of the holders for payment on each distribution
date. The specific terms of any financial guaranty insurance policy will be set
forth in the related prospectus supplement. A financial guaranty insurance
policy may have limitations and generally will not insure the obligation of the
Sellers or the master servicer to purchase or substitute for a defective
mortgage loan and will not guarantee any specific rate of principal prepayments.
The insurer will be subrogated to the rights of each holder to the extent the
insurer makes payments under the financial guaranty insurance policy.

MORTGAGE POOL INSURANCE POLICIES

         Any mortgage pool insurance policy obtained by the company for each
trust fund will be issued by the pool insurer named in the applicable prospectus
supplement. Each mortgage pool insurance policy will, subject to the limitations
described below, cover Defaulted Mortgage Losses in an amount equal to a
percentage specified in the applicable prospectus supplement of the aggregate
principal balance of the mortgage loans on the cut-off date. As set forth under
"-- Maintenance of Credit Enhancement" below, the master servicer will use
reasonable efforts to maintain the mortgage pool insurance policy and to present
claims thereunder to the pool insurer on behalf of itself, the related trustee
and the related bondholders. 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 the
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 generally provide that no
claims may be validly presented thereunder unless, among other things:

         o        any required Primary Insurance Policy is in effect for the
                  defaulted mortgage loan and a claim thereunder has been
                  submitted and settled,

         o        hazard insurance on the property securing the mortgage loan
                  has been kept in force and real estate taxes and other
                  protection and preservation expenses have been paid by the
                  master servicer,

         o        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

         o        the insured has acquired good and merchantable title to the
                  mortgaged property free and clear of liens, except for
                  permitted encumbrances.

Upon satisfaction of these conditions, the pool insurer will have the option
either (1) to purchase the property securing the defaulted mortgage loan at a
price equal to the principal balance thereof plus accrued and unpaid interest at
the applicable mortgage rate to the date of purchase and expenses incurred by
the master servicer, special servicer or subservicer on behalf of the related
trustee and bondholders, or (2) to pay the amount by which the sum of the
principal balance of the defaulted mortgage loan plus accrued and unpaid
interest at the mortgage rate to the date of payment of the claim and the
aforementioned expenses exceeds the proceeds received from an approved sale of
the mortgaged property, in either case net of amounts paid or assumed to have
been paid under any related Primary Insurance Policy. Bondholders will
experience a shortfall in the amount of interest payable on the related bonds 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 the claim
is paid. In addition, the bondholders will also experience losses with respect
to the related bonds in connection with payments made under a mortgage pool
insurance policy to the extent that the master 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 the policy and will be reimbursable to the master
servicer from funds otherwise payable to the


                                       38




bondholders. 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 the policies), from the related hazard
insurance policy or applicable special hazard insurance policy are insufficient
to restore the damaged property to a condition sufficient to permit recovery
under the mortgage pool insurance policy, the master servicer is not required to
expend its own funds to restore the damaged property unless it determines (x)
that the restoration will increase the proceeds to one or more classes of
bondholders on liquidation of the mortgage loan after reimbursement of the
master servicer for its expenses and (y) that the expenses will be recoverable
by it through Liquidation Proceeds or Insurance Proceeds.

         A mortgage pool insurance policy (and most Primary Insurance Policies)
will likely not insure against loss sustained by reason of a default arising
from, among other things, (1) fraud or negligence in the origination or
servicing of a mortgage loan, including misrepresentation by the mortgagor, the
Seller or other persons involved in the origination thereof, or (2) 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
Seller may also have occurred. This breach, if it materially and adversely
affects the interests of bondholders and cannot be cured, would give rise to a
purchase obligation on the part of the Seller, as more fully described under
"The Mortgage Pools--Representations by Sellers." However, this event would not
give rise to a breach of a representation and warranty or a purchase obligation
on the part of the company or master servicer.

         The original amount of coverage under each mortgage pool insurance
policy will be reduced over the life of the related series of bonds by the
aggregate dollar amount of claims paid less the aggregate of the net amounts
realized by the pool insurer upon disposition of all foreclosed properties. The
amount of claims paid includes expenses incurred by the master servicer, special
servicer or subservicer as well as accrued interest on delinquent mortgage loans
to the date of payment of the claim. 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 holders of the related series of bonds. In
addition, unless the master 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 the mortgage loan or otherwise, the master servicer would not
be obligated to make an advance respecting the 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
Bonds--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, the policy will not
provide coverage against hazard losses. As set forth under "Primary Mortgage
Insurance, Hazard Insurance; Claims Thereunder," 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 the
losses. Further, no coverage in respect of Special Hazard Losses, Fraud Losses
or Bankruptcy Losses will cover all risks, and the amount of the coverage will
be limited. See "--Special Hazard Insurance Policies" below. As a result, some
hazard risks will not be insured against and will therefore be borne by the
related bondholders.

LETTER OF CREDIT

         If any component of credit enhancement as to the offered bonds of any
series is to be provided by a letter of credit, a bank will deliver to the
related trustee an irrevocable letter of credit. The letter ofcredit may provide
direct coverage with respect to the mortgage loans. The bank that delivered the
letter of credit, as well as the amount available under the letter of credit
with respect to each component of credit enhancement, will be specified in the
applicable prospectus supplement. If so specified in the related prospectus
supplement, the letter of credit may permit draws only in the event of some
types of losses and shortfalls. The letter of credit may also provide for the
payment of advances which the master servicer would be obligated to make with
respect to delinquent monthly mortgage payments. The amount available under the
letter of credit will, in all cases, be reduced to the extent of the
unreimbursed payments thereunder and may otherwise be reduced as described in


                                       39




the related prospectus supplement. The letter of credit will expire on the
expiration date set forth in the related prospectus supplement, unless earlier
terminated or extended in accordance with its terms.

SPECIAL HAZARD INSURANCE POLICIES

         Any special hazard insurance policy covering Special Hazard Losses
obtained by the company for a trust fund will be issued by the insurer named in
the applicable prospectus supplement. Each special hazard insurance policy will,
subject to limitations described below, protect holders of the related series of
bonds from Special Hazard Losses. See "Primary Mortgage Insurance, Hazard
Insurance; Claims Thereunder." However, a special hazard insurance policy will
not cover losses occasioned by war, civil insurrection, some governmental
actions, errors in design, faulty workmanship or materials (except under some
circumstances), nuclear reaction, chemical contamination, waste by the mortgagor
and other risks. Aggregate claims under a special hazard insurance policy will
be limited to the amount set forth in the related prospectus supplement and will
be subject to reduction as described in the related prospectus supplement. 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 has been kept in force and other protection and preservation expenses have
been paid by the master 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 the damage is not covered by the hazard insurance policy or flood
insurance policy, if any, maintained by the mortgagor or the master servicer,
special servicer or the subservicer, the insurer will pay the lesser of (1) the
cost of repair or replacement of the property or (2) upon transfer of the
property to the insurer, the unpaid principal balance of the mortgage loan at
the time of acquisition of the property by foreclosure or deed in lieu of
foreclosure, plus accrued interest at the mortgage rate to the date of claim
settlement and expenses incurred by the master servicer, special servicer or
subservicer with respect to the property. If the property is transferred to a
third party in a sale approved by the issuer of the special hazard insurance
policy, the amount that the issuer will pay will be the amount under (ii) above
reduced by the net proceeds of the sale of the property. No claim may be validly
presented under the special hazard insurance policy unless hazard insurance on
the property securing a defaulted mortgage loan has been kept in force and other
reimbursable protection, preservation and foreclosure expenses have been paid
(all of which must be approved in advance by the issuer of the special hazard
insurance policy). If the unpaid principal balance plus accrued interest and
expenses is paid by the insurer, the amount of further coverage under the
related special hazard insurance policy will be reduced by that 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 that amount. Restoration
of the property with the proceeds described under (1) above will satisfy the
condition under each mortgage pool insurance policy that the property be
restored before a claim under the mortgage pool insurance policy may be validly
presented with respect to the defaulted mortgage loan secured by the property.
The payment described under (2) above will render presentation of a claim in
respect of the mortgage loan under the related mortgage pool insurance policy
unnecessary. Therefore, so long as a mortgage 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 plus accrued interest and expenses will not affect the total Insurance
Proceeds paid to bondholders, but will affect the relative amounts of coverage
remaining under the related special hazard insurance policy and mortgage pool
insurance policy.

         As and to the extent set forth in the applicable prospectus supplement,
coverage in respect of Special Hazard Losses for a series of bonds may be
provided, in whole or in part, by a type of instrument other than a special
hazard insurance policy or by means of a special hazard representation of the
Seller or the company.

RESERVE FUNDS

         If so provided in the related prospectus supplement, the company will
deposit or cause to be deposited in a reserve fund account any combination of
cash, one or more irrevocable letters of credit or one or more Permitted
Investments in specified amounts, or any other instrument satisfactory to


                                       40




the relevant Rating Agency or Agencies, which will be applied and maintained in
the manner and under the conditions specified in the prospectus supplement. In
the alternative or in addition to the 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
bonds, from the retained interest of the company or otherwise. To the extent
that the funding of the reserve fund is dependent on amounts otherwise payable
on related subordinate bonds, any retained interest of the company 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 the funding is dependent are lower than
anticipated. In addition, with respect to any series of bonds as to which credit
enhancement includes a letter of credit, if so specified in the related
prospectus supplement, if specified conditions are met, 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 bondholders, or applied to
reimburse the master servicer for outstanding advances, or may be used for other
purposes, in the manner and to the extent specified in the related prospectus
supplement. The related prospectus supplement will disclose whether a reserve
fund is part of the related trust fund. If set forth in the related prospectus
supplement, a reserve fund may provide coverage to more than one series of
bonds.

         In connection with the establishment of any reserve fund, the reserve
fund will be structured so that the trustee will have a perfected security
interest for the benefit of the bondholders 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 that entity, there could be delays in withdrawals
from the reserve fund and corresponding payments to the bondholders which could
adversely affect the yield to investors on the related bonds.

         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 the
master servicer or any other person named in the related prospectus supplement.

CASH FLOW AGREEMENTS

         If so provided in the related prospectus supplement, the trust fund may
include guaranteed investment contracts pursuant to which moneys held in the
funds and accounts established for the related series will be invested at a
specified rate. The principal terms of a guaranteed investment contract or other
cash flow agreement, and the identity of the obligor, will be described in the
prospectus supplement for a series of bonds.

MAINTENANCE OF CREDIT ENHANCEMENT

         To the extent that the applicable prospectus supplement does not
expressly provide for alternative credit enhancement arrangements in lieu of
some or all of the arrangements mentioned below, the following paragraphs shall
apply.

         If a financial guaranty insurance policy has been obtained for a series
of bonds, the master servicer will be obligated to exercise reasonable efforts
to keep the financial guaranty insurance policy in full force and effect
throughout the term of the applicable indenture, unless coverage thereunder has
been exhausted through payment of claims or until the financial guaranty
insurance policy is replaced in accordance with the terms of the applicable
indenture. The master servicer will agree to pay the premiums for each financial
guaranty insurance policy on a timely basis. In the event the insurer ceases to
be a qualified insurer as described in the related prospectus supplement, or
fails to make a required payment under the related financial guaranty insurance
policy, the master servicer will have no obligation to replace the insurer. Any
losses associated with any reduction or withdrawal in rating by an applicable
Rating Agency shall be borne by the related bondholders.

         If a mortgage pool insurance policy has been obtained for a series of
bonds, the master servicer will be obligated to exercise reasonable efforts to
keep the mortgage pool insurance policy (or an alternate form of credit support)
in full force and effect throughout the term of the applicable servicing
agreement, unless coverage thereunder has been exhausted through payment of
claims or until the mortgage pool insurance policy is replaced in accordance
with the terms of the applicable


                                       41




servicing agreement. The master servicer will agree to pay the premiums for each
mortgage pool insurance policy on a timely basis. In the event the pool insurer
ceases to be a qualified insurer because it ceases to be qualified by law to
transact pool insurance business or coverage is terminated for any reason other
than exhaustion of the coverage, the master servicer will use reasonable efforts
to obtain from another qualified insurer a replacement insurance policy
comparable to the mortgage pool insurance policy with a total coverage equal to
the then outstanding coverage of the mortgage pool insurance policy, provided
that, if the cost of the replacement policy is greater than the cost of the
mortgage pool insurance policy, the coverage of the replacement policy 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 mortgage pool insurance
policy. In the event that the pool insurer ceases to be aqualified insurer
because it ceases to be approved as an insurer by Freddie Mac, Fannie Mae or any
successor entity, the master servicer will be obligated to 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
are jeopardized for reasons related to the financial condition of the pool
insurer. If the master servicer determines that recoveries are so jeopardized,
it will be obligated to 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 associated with any reduction or
withdrawal in rating by an applicable Rating Agency shall be borne by the
related bondholders.

         If a letter of credit or alternate form of credit enhancement has been
obtained for a series of bonds, the master servicer will be obligated to
exercise reasonable efforts cause to be kept or to keep the letter of credit (or
an alternate form of credit support) in full force and effect throughout the
term of the applicable indenture, 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."
Unless otherwise specified in the applicable prospectus supplement, if a letter
of credit obtained for a series of bonds is scheduled to expire prior to the
date the final distribution on the bonds is made and coverage under the letter
of credit has not been exhausted and no substitution has occurred, the trustee
will draw the amount available under the letter of credit and maintain the
amount in trust for the bondholders.

         In lieu of the master servicer's obligation to maintain a financial
guaranty insurance policy, mortgage pool insurance policy or letter of credit as
provided above, the master servicer may obtain a substitute financial guaranty
insurance policy, mortgage pool insurance policy or letter of credit. If the
master servicer obtains a substitute, it will maintain and keep the substitute
in full force and effect as provided in this prospectus. Prior to its obtaining
any substitute financial guaranty insurance policy, mortgage pool insurance
policy or letter of credit, the master servicer will obtain written confirmation
from the Rating Agency or Agencies that rated the related series of bonds that
the substitution of the financial guaranty insurance policy, mortgage pool
insurance policy or letter of credit for the existing credit enhancement will
not adversely affect the then-current ratings assigned to the bonds by the
Rating Agency or Agencies.

         If a special hazard insurance policy has been obtained for a series of
bonds, the master servicer will also be obligated to exercise reasonable efforts
to maintain and keep the policy in full force and effect throughout the term of
the applicable servicing 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." If coverage for Special Hazard Losses takes the form of a special
hazard insurance policy, the policy will provide coverage against risks of the
type described in this prospectus under "Description of Credit
Enhancement--Special Hazard Insurance Policies." The master servicer may obtain
a substitute policy for the existing special hazard insurance policy if prior to
the substitution the master servicer obtains written confirmation from the
Rating Agency or Agencies that rated the related bonds that the substitution
shall not adversely affect the then-current ratings assigned to the bonds by the
Rating Agency or Agencies.

         The master servicer, on behalf of itself, the trustee and bondholders,
will provide the trustee information required for the trustee to draw under the
letter of credit and will present claims to each pool insurer, to the issuer of
each special hazard insurance policy, and, in respect of defaulted mortgage
loans for which there is no subservicer, to each primary insurer and take any
reasonable


                                       42




steps as are necessary to permit recovery under the letter of credit, insurance
policies or comparable coverage respecting defaulted mortgage loans or mortgage
loans which are the subject of a bankruptcy proceeding. As set forth above, all
collections by the master servicer under any mortgage pool insurance policy or
any Primary Insurance Policy and, where the related property has not been
restored, any special hazard insurance policy, are to be deposited in the
related Payment Account, subject to withdrawal as described above. All draws
under any letter of credit are also to be deposited in the related Payment
Account. In those cases in which a mortgage loan is serviced by a subservicer,
the subservicer, on behalf of itself, the trustee and the bondholders will
present claims to the primary insurer, and all paid claims shall initially be
deposited in a subservicing account that generally meets the requirements for
the Payment Account prior to being delivered to the master servicer for deposit
in the related Payment Account.

         If any property securing a defaulted mortgage loan 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 financial guaranty
insurance policy, mortgage pool insurance policy, letter of credit or any
related Primary Insurance Policy, the master servicer is not required to expend
its own funds to restore the damaged property unless it determines (1) that the
restoration will increase the proceeds to one or more classes of bondholders on
liquidation of the mortgage loan after reimbursement of the master servicer for
its expenses and (2) that the expenses will be recoverable by it through
Liquidation Proceeds or Insurance Proceeds. If recovery under any financial
guaranty insurance policy, mortgage pool insurance policy, letter of credit or
any related Primary Insurance Policy is not available because the master
servicer has been unable to make the above determinations, has made the
determinations incorrectly or recovery is not available for any other reason,
the master servicer is nevertheless obligated to follow the 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 the
determination has been incorrectly made, is entitled to reimbursement of its
expenses in connection with the restoration.

REDUCTION OR SUBSTITUTION OF CREDIT ENHANCEMENT

         The amount of credit support provided pursuant to any form of credit
enhancement may be reduced. In most cases, the amount available pursuant to any
form of credit enhancement will be subject to periodic reduction in accordance
with a schedule or formula on a nondiscretionary basis pursuant to the terms of
the related indenture. Additionally, in most cases, the form of credit support
(and any replacements therefor) 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 bondholders, upon the written assurance from each applicable
Rating Agency that the then-current rating of the related series of bonds will
not be adversely affected. Furthermore, in the event that the credit rating of
any obligor under any applicable credit enhancement is downgraded, the credit
rating(s) of the related series of bonds may be downgraded to a corresponding
level, and, the master servicer will not be obligated to obtain replacement
credit support in order to restore the rating(s) of the related series of bonds.
The master servicer will also be permitted to replace the credit support with
other credit enhancement instruments issued by obligors whose credit ratings are
equivalent to the downgraded level and in lower amounts which would satisfy the
downgraded level, provided that the then-current rating(s) of the related series
of bonds are 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 the other person that is entitled thereto. Any assets so
released will not be available for distributions in future periods.

                OTHER FINANCIAL OBLIGATIONS RELATED TO THE BONDS

SWAPS AND YIELD SUPPLEMENT AGREEMENTS

         The trustee on behalf of a trust fund may enter into interest rate
swaps and related caps, floors and collars to minimize the risk of bondholders
from adverse changes in interest rates, which are collectively referred to as
swaps, and other yield supplement agreements or similar yield maintenance


                                       43




arrangements that do not involve swap agreements or other notional principal
contracts, which are collectively referred to as yield supplement agreements.

         An interest rate swap is an agreement between two parties to exchange a
stream of interest payments on an agreed hypothetical or "notional" principal
amount. No principal amount is exchanged between the counterparties to an
interest rate swap. In the typical swap, one party agrees to pay a fixed rate on
a notional principal amount, while the counterparty pays a floating rate based
on one or more reference interest rates including the London Interbank Offered
Rate, or LIBOR, a specified bank's prime rate or U.S. Treasury Bill rates.
Interest rate swaps also permit counterparties to exchange a floating rate
obligation based upon one reference interest rate, such as LIBOR, for a floating
rate obligation based upon another referenced interest rate, such as U.S.
Treasury Bill rates.

         Yield supplement agreements may be entered into to supplement the
interest rate or other rates on one or more classes of the bonds of any series.
Additionally, agreements relating to other types of derivative products that are
designed to provide credit enhancement to the related series may be entered into
by a trustee and one or more counterparties. The terms of any derivative product
agreement and any counterparties will be described in the accompanying
prospectus supplement.

         There can be no assurance that the trustee will be able to enter into
or offset swaps or enter into yield supplement agreements or derivative product
agreements at any specific time or at prices or on other terms that are
advantageous. In addition, although the terms of the swaps and yield supplement
agreements may provide for termination under various circumstances, there can be
no assurance that the trustee will be able to terminate a swap or yield
supplement agreement when it would be economically advantageous to the trust
fund to do so.

PURCHASE OBLIGATIONS

         Some types of trust assets and some classes of bonds of any series, as
specified in the accompanying prospectus supplement, may be subject to a
purchase obligation that would become applicable on one or more specified dates,
or upon the occurrence of one or more specified events, or on demand made by or
on behalf of the applicable bondholders. A purchase obligation may be in the
form of a conditional or unconditional purchase commitment, liquidity facility,
remarketing agreement, maturity guaranty, put option or demand feature. The
terms and conditions of each purchase obligation, including the purchase price,
timing and payment procedure, will be described in the accompanying prospectus
supplement. A purchase obligation relating to trust assets may apply to those
trust assets or to the related bonds. Each purchase obligation may be a secured
or unsecured obligation of the provider thereof, which may include a bank or
other financial institution or an insurance company. Each purchase obligation
will be evidenced by an instrument delivered to the trustee for the benefit of
the applicable bondholders of the related series. As specified in the
accompanying prospectus supplement, each purchase obligation relating to trust
assets will be payable solely to the trustee for the benefit of the bondholders
of the related series. Other purchase obligations may be payable to the trustee
or directly to the holders of the bonds to which that obligation relate.

                  PRIMARY MORTGAGE INSURANCE, HAZARD INSURANCE;
                                CLAIMS THEREUNDER

GENERAL

         The mortgaged property with respect to each mortgage loan will be
required to be covered by a hazard insurance policy and, if required as
described below, a Primary Insurance Policy. The following is only a brief
description of these insurance policies and does not purport to summarize or
describe all of the provisions of these policies. The insurance is subject to
underwriting and approval of individual mortgage loans by the respective
insurers.

PRIMARY MORTGAGE INSURANCE POLICIES

         In a securitization of single family loans, single family loans
included in the related mortgage pool having a loan-to-value ratio at
origination of over 80% (or other percentage as described in the


                                       44




related prospectus supplement) may be required by the company to be covered by a
Primary Insurance Policy. The Primary Insurance Policy will insure against
default on a mortgage loan as to at least the principal amount thereof exceeding
75% of the Value of the related mortgaged property (or other percentage as
described in the related prospectus supplement) 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 at least
80% (or other percentage as described in the prospectus supplement). The company
will represent and warrant that, to the best of the company's knowledge,
mortgage loans of this type are so covered. This type of mortgage loan will not
be considered to be an exception to the foregoing standard if no Primary
Insurance Policy was obtained at origination but the mortgage loan has amortized
to below the above loan-to-value ratio percentage as of the applicable cut-off
date. Mortgage loans which are subject to negative amortization will only be
covered by a Primary Insurance Policy if the coverage was so required upon their
origination, notwithstanding that subsequent negative amortization may cause the
mortgage loan's loan-to-value ratio, based on the then-current balance, to
subsequently exceed the limits which would have required the coverage upon their
origination. Multifamily, commercial and mixed-use loans will not be covered by
a Primary Insurance Policy, regardless of the related loan-to-value ratio.

         While the terms and conditions of the Primary Insurance Policies issued
by a primary insurer will differ from those in Primary Insurance Policies issued
by other primary insurers, each Primary Insurance Policy will in general cover
the Primary Insurance Covered Loss. The primary insurer generally will be
required to pay:

         o        the insured percentage of the Primary Insurance Covered Loss;

         o        the entire amount of the Primary Insurance Covered Loss, after
                  receipt by the primary insurer of good and merchantable title
                  to, and possession of, the mortgaged property; or

         o        at the option of the Primary Insurer, 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 (1) the date the mortgage loan would have been
                  discharged in full if the default had not occurred or (2) an
                  approved sale.

         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:

         o        advance or discharge (1) hazard insurance premiums and (2) as
                  necessary and approved in advance by the primary insurer, real
                  estate taxes, protection and preservation expenses and
                  foreclosure and related costs;

         o        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

         o        tender to the primary insurer good and merchantable title to,
                  and possession of, the mortgaged property.

         For any single family loan for which the coverage is required under the
standard described above, the master servicer will maintain or cause each
subservicer to maintain, as the case may be, in full force and effect and to the
extent coverage is available a Primary Insurance Policy with regard to each
single family loan, provided that the Primary Insurance Policy was in place as
of the cut-off date and the company had knowledge of the Primary Insurance
Policy. In the event the company gains knowledge that as of the Closing Date, a
mortgage loan which required a Primary Insurance Policy did not have one, then
the master servicer is required to use reasonable efforts to obtain and maintain
a Primary Insurance Policy to the extent that the policy is obtainable at a
reasonable price. The master servicer or the Seller will not cancel or refuse to
renew a Primary Insurance Policy in effect


                                       45




at the time of the initial issuance of a series of bonds that is required to be
kept in force under the applicable indenture unless the replacement Primary
Insurance Policy for the canceled or non- renewed policy is maintained with an
insurer whose claims-paying ability is acceptable to the Rating Agency or
Agencies that rated the series of bonds for collateralized asset-backed bonds
having a rating equal to or better than the highest then-current rating of any
class of the series of bonds. For further information regarding the extent of
coverage under any mortgage pool insurance policy or Primary Insurance Policy,
see "Description of Credit Enhancement--Mortgage Pool Insurance Policies."

HAZARD INSURANCE POLICIES

         The terms of the mortgage loans require each mortgagor to maintain a
hazard insurance policy for their mortgage loan. Additionally, the servicing
agreement will require the master servicer to cause to be maintained for each
mortgage loan a hazard insurance policy providing for no less than the coverage
of the standard form of fire insurance policy with extended coverage customary
in the state in which the property is located. The coverage generally will be in
an amount equal to the lesser of the principal balance owing on the mortgage
loan or 100% of the insurable value of the improvements securing the mortgage
loan except that, if generally available, the coverage must not be less than the
minimum amount required under the terms thereof to fully compensate for any
damage or loss on a replacement cost basis. The ability of the master 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
by mortgagors or subservicers.

         As set forth above, all amounts collected by the master servicer under
any hazard policy (except for amounts to be applied to the restoration or repair
of the mortgaged property or released to the mortgagor in accordance with the
master servicer's normal servicing procedures) will be deposited in the related
Payment Account. The servicing agreement will provide that the master servicer
may satisfy its obligation to cause hazard policies to be maintained by
maintaining a blanket policy insuring against losses on the mortgage loans. If
the blanket policy contains a deductible clause, the master servicer will
deposit in the applicable Payment Account all sums which would have been
deposited therein but for the clause.

         In general, the standard form of fire and extended coverage policy
covers physical damage to or destruction of the improvements on the property by
fire, lightning, explosion, smoke, windstorm, hail, riot, strike and civil
commotion, subject to the conditions and exclusions specified in each policy.
Although the policies relating to the mortgage loans will be underwritten by
different insurers under different state laws in accordance with different
applicable state forms and therefore will not contain identical terms and
conditions, the basic terms thereof are dictated by respective state laws, and
most of these 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, depending on the case, vandalism. The foregoing
list is merely indicative of the 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 the mortgage
loan, the servicing agreement requires the master servicer to cause to be
maintained for this mortgage loan, flood insurance (to the extent available)
inan 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.

         The hazard insurance policies covering the mortgaged properties
typically contain a co- insurance clause which in effect requires the insured at
all times to carry insurance of a specified percentage (generally 80% to 90%) of
the full replacement value of the improvements on the property in order to
recover the full amount of any partial loss. If the insured's coverage falls
below this specified percentage, the clause generally provides that the
insurer's liability in the event of partial loss does not exceed the greater of
(1) the replacement cost of the improvements damaged or


                                       46




destroyed less physical depreciation or (2) the proportion of the loss as the
amount of insurance carried bears to the specified percentage of the full
replacement cost of the improvements.

         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 of the related mortgage loans 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 "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 (including losses caused by the application of the
co-insurance clause described in the preceding paragraph).

         Under the terms of the mortgage loans, mortgagors are generally
required to present claims to insurers under hazard insurance policies
maintained on the mortgaged properties. The master servicer, on behalf of the
trustee and bondholders, is obligated to present claims under any special hazard
insurance policy and any blanket insurance policy insuring against hazard losses
on the mortgaged properties. However, the ability of the master servicer to
present the claims is dependent upon the extent to which information in this
regard is furnished to the master servicer or the subservicers by mortgagors.

FHA INSURANCE

         The FHA is responsible for administering various federal programs,
including mortgage insurance, authorized under The Housing Act and the United
States Housing Act of 1937, as amended.

         There are two primary FHA insurance programs that are available for
multifamily mortgage loans. Sections 221(d)(3) and (d)(4) of the Housing Act
allow HUD to insure mortgage loans that are secured by newly constructed and
substantially rehabilitated multifamily rental projects. Section 244 of the
Housing Act provides for co-insurance of such mortgage loans made under Sections
221 (d)(3) and (d)(4) by HUD/FHA and a HUD-approved co-insurer. Generally the
term of such a mortgage loan may be up to 40 years and the ratio of the loan
amount to property replacement cost can be up to 90%.

         Section 223(f) of the Housing Act allows HUD to insure mortgage loans
made for the purchase or refinancing of existing apartment projects which are at
least three years old. Section 244 also provides for co-insurance of mortgage
loans made under Section 223(f). Under Section 223(f), the loan proceeds cannot
be used for substantial rehabilitation work, but repairs may be made for up to,
in general, the greater of 15% of the value of the project or a dollar amount
per apartment unit established from time to time by HUD. In general the loan
term may not exceed 35 years and a loan to value ratio of no more than 85% is
required for the purchase of a project and 70% for the refinancing of a project.

         HUD has the option, in most cases, to pay insurance claims in cash or
in debentures issued by HUD. Presently, claims are being paid in cash, and
claims have not been paid in debentures since 1965. HUD debentures issued in
satisfaction of FHA insurance claims bear interest at the applicable HUD
debenture interest rate. The master servicer will be obligated to purchase a
debenture issued in satisfaction of a defaulted FHA insured mortgage loan
serviced by it for an amount equal to the principal amount of any the debenture.

         The master servicer will be required to take steps reasonably necessary
to keep FHA insurance in full force and effect.

VA MORTGAGE GUARANTY

         The Servicemen's Readjustment Act of 1944, as amended, permits a
veteran or, in some 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


                                       47




payment for 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 dollar limit established
by the VA. The liability on the guaranty is reduced or increased pro rata with
any reduction or increase in 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 amounts specified by the VA.
The amount of the additional coverage will be set forth in the related
prospectus supplement. Any VA guaranty relating to Contracts underlying a series
of bonds will be described in the related prospectus supplement.

                                   THE COMPANY

         The company is a wholly-owned subsidiary of Impac Mortgage Holdings,
Inc. The company was incorporated in the State of California on April 12, 1996.
The company was organized for the purpose of serving as a private secondary
mortgage market conduit.

         The company maintains its principal office at 1401 Dove Street, Newport
Beach, California 92660, and its telephone number is (949) 475-3700.

                            IMPAC FUNDING CORPORATION

         Impac Funding Corporation, an affiliate of the company, may be a Seller
and may act as master servicer with respect to a mortgage pool. Impac Funding is
a mortgage banking conduit that acquires conventional one- to four-family
residential mortgage loans nationwide and has, from time to time, acquired
condominium conversion loans. Impac Funding is a non-consolidating subsidiary of
Impac Mortgage Holdings, Inc. Impac Funding primarily acquires mortgage loans
from approved correspondents.

         Prior to November 1995, Impac Funding was a division of Imperial Credit
Industries, Inc. In November 1995, Imperial Credit Industries, Inc. restructured
its operations pursuant to which Impac Funding became a separate corporation and
Imperial Credit Industries, Inc. contributed, among other things, all of the
outstanding nonvoting preferred stock of Impac Funding, which represents 99% of
the economic interest in Impac Funding, to Impac Mortgage Holdings, Inc., in
exchange for approximately 10% of the common stock of Impac Mortgage Holdings,
Inc. The common stock of Impac Funding was retained by Imperial Credit
Industries, Inc. until March 1997 when it was distributed to certain officers
and/or directors of Impac Funding who are also officers and/or directors of
Impac Mortgage Holdings, Inc.

         Impac Funding's executive offices are located at 1401 Dove Street,
Newport Beach, California 92660, and its telephone number is (949) 475-3700.

                          IMPAC MORTGAGE HOLDINGS, INC.

         Impac Mortgage Holdings, Inc. is a publicly traded, recently formed
specialty finance company which operates three businesses: (1) long-term
investment operations, (2) conduit operations, and (3) warehouse lending
operations. The long-term investment operations is a recently- created business
that invests primarily in nonconforming residential mortgage loans and bonds
backed by such loans. The conduit operations, conducted by Impac Funding,
primarily purchases and sells or securitizes non-conforming mortgage loans, and
the warehouse lending operations provides short-term lines of credit to
originators of mortgage loans. These two businesses include certain


                                       48




ongoing operations contributed to Impac Mortgage Holdings by Imperial Credit
Industries, Inc., a leading specialty finance company, in November 1995. Impac
Mortgage Holdings is organized as a real estate investment trust for tax
purposes, which allows it generally to pass through earnings to stockholders
without federal income tax at the corporate level.

         Impac Mortgage Holdings, Inc.'s executive offices are located at 1401
Dove Street, Newport Beach, California 92660, and its telephone number is (949)
475-3700.

                                 THE AGREEMENTS

GENERAL

         Each series of bonds will be issued pursuant to an indenture. The
parties to each indenture will be the related Issuer and the trustee. The Issuer
will be created pursuant to an owner trust agreement between the company and the
owner trustee.

         Forms of the Agreements have been filed as exhibits to the registration
statement of which this prospectus is a part. However, the provisions of each
Agreement will vary depending upon the nature of the related bonds and the
nature of the related trust fund. The following summaries describe provisions
that may appear in either the servicing agreement or indenture. The prospectus
supplement for a series of bonds will describe any provision of the related
Agreements that materially differs from the description thereof set forth below.
The company will provide a copy of the Agreement (without exhibits) that relates
to any series of bonds without charge upon written request of a holder of an
offered bond of the series addressed to it at its principal executive offices
specified in this prospectus under "The Company".

CERTAIN MATTERS REGARDING THE MASTER SERVICER AND THE COMPANY

         The servicing agreement for each series of bonds will provide that the
master servicer may not resign from its obligations and duties except upon a
determination that performance of the duties is no longer permissible under
applicable law or except (1) in connection with a permitted transfer of
servicing or (2) upon appointment of a successor servicer reasonably acceptable
to the trustee and upon receipt by the trustee of a letter from each Rating
Agency generally to the effect that the resignation and appointment will not, in
and of itself, result in a downgrading of the bonds. No resignation will become
effective until the trustee or a successor servicer has assumed the master
servicer's responsibilities, duties, liabilities and obligations under the
servicing agreement.

         Each servicing agreement and servicing agreement will also provide that
the master servicer, the company and their directors, officers, employees or
agents will not be under any liability to the trust fund or the bondholders for
any action taken or for refraining from the taking of any action in good faith,
or for errors in judgment, unless the liability which would otherwise be imposed
was by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties. Each servicing agreement will further provide that the master servicer,
the company, and any director, officer, employee or agent of the master servicer
or the company are entitled to indemnification by the trust fund and will be
held harmless against any loss, liability or expense incurred in connection with
any legal action relating to the servicing agreement or the related series of
bonds, other than any loss, liability or expense related to any specific
mortgage loan or mortgage loans (except a loss, liability or expense otherwise
reimbursable pursuant to the servicing agreement) and any loss, liability or
expense incurred by reason of willful misfeasance, bad faith or gross negligence
in the performance of its duties or by reason of reckless disregard of
obligations and duties. In addition, each servicing agreement will provide that
neither the master servicer nor the company will be under any obligation to
appear in, prosecute or defend any legal or administrative action that is not
incidental to its respective duties under the servicing agreement and which in
its opinion may involve it in any expense or liability. The master servicer or
the company may, however, in its discretion undertake any action which it may
deem necessary or desirable with respect to the servicing agreement and the
rights and duties of the parties to that agreement and the interests of the
bondholders. The legal expenses and costs of the action and any resulting
liability will be expenses, costs and liabilities of the trust fund, and the
master servicer or


                                       49




the company, as the case may be, will be entitled reimbursement from funds
otherwise distributable to bondholders.

         Any person into which the master servicer may be merged or
consolidated, any person resulting from any merger or consolidation to which the
master servicer is a party or any person succeeding to the business of the
master servicer will be the successor of the master servicer under the related
servicing agreement, provided that (1) the person is qualified to service
mortgage loans on behalf of Fannie Mae or Freddie Mac and (2) the merger,
consolidation or succession does not adversely affect the then-current ratings
of the classes of bonds of the related series that have been rated. In addition,
notwithstanding the prohibition on its resignation, the master servicer may
assign its rights under a servicing agreement to any person to whom the master
servicer is transferring a substantial portion of its mortgage servicing
portfolio, provided clauses (1) and (2) above are satisfied and the person is
reasonably satisfactory to the company and the trustee. In the case of an
assignment, the master servicer will be released from its obligations under the
servicing agreement, exclusive of liabilities and obligations incurred by it
prior to the time of the assignment.

EVENTS OF DEFAULT AND RIGHTS UPON EVENT DEFAULT

         SERVICING AGREEMENT

         For a series of bonds, a servicing default under the related servicing
agreement generally will include:

         o        any failure by the master servicer to make a required deposit
                  to the Payment Account or, if the master servicer is so
                  required, to distribute to the holders of any class of bonds
                  or Equity Certificates of the series any required payment
                  which continues unremedied for 5 business days (or other
                  period of time described in the related prospectus supplement)
                  after the giving of written notice of the failure to the
                  master servicer by the trustee or the Issuer;

         o        any failure by the master servicer duly to observe or perform
                  in any material respect any other of its covenants or
                  agreements in the servicing agreement with respect to the
                  series of bonds which continues unremedied for 45 days after
                  the giving of written notice of the failure to the master
                  servicer by the trustee or the Issuer;

         o        events of insolvency, readjustment of debt, marshaling of
                  assets and liabilities or similar proceedings regarding the
                  master servicer and some actions by the master servicer
                  indicating its insolvency or inability to pay its obligations,
                  as specified in the related servicing agreement; and

         o        any other servicing default as set forth in the servicing
                  agreement.

         So long as a servicing default remains unremedied, either the company
or the trustee may, by written notification to the master servicer and to the
Issuer or the trustee or trust fund, as applicable, terminate all of the rights
and obligations of the master servicer under the servicing agreement (other than
any right of the master servicer as bondholder or as holder of the Equity
Certificates and other than the right to receive servicing compensation and
expenses for servicing the mortgage loans during any period prior to the date of
the termination), whereupon the trustee will succeed to all responsibilities,
duties and liabilities of the master servicer under the servicing agreement
(other than any obligation to purchase mortgage loans) 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 an approved mortgage servicing
institution with a net worth of at least $15,000,000 to act as successor to the
master servicer under the servicing agreement (unless otherwise set forth in the
servicing agreement). Pending the appointment, the trustee is obligated to act
in the capacity. The trustee and the 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 under the servicing agreement.



                                       50




         INDENTURE

         An event of default under the indenture generally will include:

         o        a default for five days or more (or other period of time
                  described in the related prospectus supplement) in the payment
                  of any principal of or interest on any bond of the series;

         o        failure to perform any other covenant of the company or the
                  trust fund in the indenture which continues for a period of
                  thirty days after notice thereof is given in accordance with
                  the procedures described in the related prospectus supplement;

         o        any representation or warranty made by the company or the
                  trust fund in the indenture or in any certificate or other
                  writing delivered pursuant thereto or in connection therewith
                  with respect to or affecting the series having been incorrect
                  in a material respect as of the time made, and the breach is
                  not cured within thirty days after notice thereof is given in
                  accordance with the procedures described in the related
                  prospectus supplement;

         o        events of bankruptcy, insolvency, receivership or liquidation
                  of the company or the trust fund, as specified in the
                  indenture; or

         o        any other event of default provided with respect to bonds of
                  that series.

         If an event of default with respect to the bonds of any series at the
time outstanding occurs and is continuing, the trustee or the holders of a
majority of the then aggregate outstanding amount of the bonds of the series may
declare the principal amount of all the bonds of the series to be due and
payable immediately. The declaration may, in some circumstances, be rescinded
and annulled by the holders of a majority in aggregate outstanding amount of the
related bonds.

         If following an event of default with respect to any series of bonds,
the bonds of the series have been declared to be due and payable, the trustee
may, in its discretion, notwithstanding the acceleration, elect to maintain
possession of the collateral securing the bonds of the series and to continue to
apply payments on the collateral as if there had been no declaration of
acceleration if the collateral continues to provide sufficient funds for the
payment of principal of and interest on the bonds of the series as they would
have become due if there had not been a declaration. In addition, the trustee
may not sell or otherwise liquidate the collateral securing the bonds of a
series following an event of default, unless (1) the holders of 100% of the then
aggregate outstanding amount of the bonds of the series consent to the sale, (2)
the proceeds of the sale or liquidation are sufficient to pay in full the
principal of and accrued interest, due and unpaid, on the outstanding bonds of
the series at the date of the sale or (3) the trustee determines that the
collateral would not be sufficient on an ongoing basis to make all payments on
the bonds as the payments would have become due if the bonds had not been
declared due and payable, and the trustee obtains the consent of the holders of
66 2/3% of the then aggregate outstanding amount of the bonds of the series.

         In the event that the trustee liquidates the collateral in connection
with an event of default, the indenture provides that the trustee will have a
prior lien on the proceeds of the liquidation for unpaid fees and expenses. As a
result, upon the occurrence of the event of default, the amount available for
payments to the bondholders would be less than would otherwise be the case.
However, the trustee may not institute a proceeding for the enforcement of its
lien except in connection with a proceeding for the enforcement of the lien of
the indenture for the benefit of the bondholders after the occurrence of the
event of default.

         In the event the principal of the bonds of a series is declared due and
payable, as described above, the holders of the bonds issued at a discount from
par may be entitled to receive no more than an amount equal to the unpaid
principal amount thereof less the amount of the discount that is unamortized.



                                       51




         No bondholder or holder of an Equity Certificate generally will have
any right under an owner trust agreement or indenture to institute any
proceeding with respect to the Agreement unless (1) that holder previously has
given to the trustee written notice of default and the continuance thereof, (2)
the holders of bonds or Equity Certificates of any class evidencing not less
than 25% of the aggregate Percentage Interests constituting that class (a) have
made written request upon the trustee to institute the proceeding in its own
name as trustee and (b) have offered to the trustee reasonable security or
indemnity against the costs, expenses and liabilities that may be incurred in or
because of the proceeding, (3) the trustee has neglected or refused to institute
the proceeding for 60 days after receipt of the request and indemnity and (4) no
direction inconsistent with the written request has been given to the trustee
during the 60 day period by the holders of a majority of the bond balances of
that class.

AMENDMENT

         With respect to each series of bonds, each related servicing agreement
or indenture may be amended by the parties thereto without the consent of any of
the holders of the bonds covered by the Agreement, to cure any ambiguity, to
correct, modify or supplement any provision therein, or to make any other
provisions with respect to matters or questions arising under the Agreement
which are not inconsistent with the provisions thereof, provided that the action
will not adversely affect in any material respect the interests of any holder of
bonds covered by the Agreement. Each Agreement may also be amended by the
parties thereto with the consent of the holders of bonds evidencing not less
than 66% of the voting rights, for any purpose; provided, however, that the
amendment may not:

         (1)      reduce in any manner the amount of or delay the timing of,
                  payments received on trust fund assets which are required to
                  be distributed on any bond without the consent of the holder
                  of the bond,

         (2)      adversely affect in any material respect the interests of the
                  holders of any class of bonds in a manner other than as
                  described in (1), without the consent of the holders of bonds
                  of the class evidencing not less than 66% of the aggregate
                  voting rights of the class or

         (3)      reduce the aforesaid percentage of voting rights required for
                  the consent to the amendment without the consent of the
                  holders of all bonds covered by the Agreement then
                  outstanding.

The voting rights evidenced by any bond will be the portion of the voting rights
of all of the bonds in the related series allocated in the manner described in
the related prospectus supplement.

TERMINATION; RETIREMENT OF BONDS

         The obligations created by the related Agreements for each series of
bonds (other than the limited payment and notice obligations of the trustee and
the company, respectively) will terminate upon the payment to bondholders of
that series of all amounts held in the Payment Account or by the master servicer
and required to be paid to them pursuant to the Agreements following the earlier
of (1)the final payment or other liquidation or disposition (or any advance with
respect thereto) of the last mortgage loan, REO property and/or mortgage
security subject thereto and (2) the purchase by the master servicer or the
company or if specified in the prospectus supplement, by the holder of the
Equity Certificates, from the trust fund for the series of all remaining
mortgage loans, REO properties and/or mortgage securities. In addition to the
foregoing, the master servicer or the company will have the option to purchase,
in whole but not in part, the bonds specified in the related prospectus
supplement in the manner set forth in the related prospectus supplement. With
respect to any series of bonds, the purchase shall not be made unless the
aggregate principal balance of the bonds as of the date is equal to or less than
the percentage specified in the related prospectus supplement (which shall not
be greater than 25%) of the aggregate principal balance of the bonds as of the
Closing Date or a period specified in the related prospectus supplement (which
shall not be shorter than seven years) has elapsed since the initial
distribution date. Upon the purchase of the bonds or at any time thereafter, at
the option of the master servicer or the company, the assets of the trust fund
may be sold, thereby effecting a retirement of the bonds and the termination of
the trust fund, or the bonds


                                       52




so purchased may be held or resold by the master servicer or the company. In no
event, however, will the trust created by the indenture continue beyond the
expiration of 21 years from the death of the survivor of the persons named in
the indenture. Written notice of termination of the indenture will be given to
each bondholder, and the final distribution will be made only upon surrender and
cancellation of the bonds at an office or agency appointed by the trustee which
will be specified in the notice of termination. If the bondholders are permitted
to terminate the trust under the applicable indenture, a penalty may be imposed
upon the bondholders based upon the fee that would be foregone by the master
servicer because of the termination.

         The purchase of mortgage loans and property acquired in respect of
mortgage loans evidenced by a series of bonds shall be made at the option of the
master servicer, the company or the holder of the Equity Certificates at the
price specified in the related prospectus supplement. The exercise of the right
will effect early retirement of the bonds of that series, but the right of the
master servicer, the company or, if applicable, the holder to so purchase is
subject to the aggregate principal balance of the mortgage loans and/or mortgage
securities in the trust fund for that series as of the distribution date on
which the purchase proceeds are to be distributed to bondholders being less than
the percentage specified in the related prospectus supplement of the aggregate
principal balance of the mortgage loans and/or mortgage securities at the
cut-off date for that series. The prospectus supplement for each series of bonds
will set forth the amounts that the holders of the bonds will be entitled to
receive upon the early retirement. The early termination may adversely affect
the yield to holders of the bonds.

         Following any optional termination, there will be no continuing direct
or indirect liability of the trust fund or any bondholder as sellers of the
assets of the trust fund.

THE TRUSTEE

         The trustee under each indenture will be named in the related
prospectus supplement. The commercial bank, national banking association,
banking corporation or trust company that serves as trustee may have typical
banking relationships with the company and its affiliates. The trustee shall at
all times be a corporation or an association organized and doing business under
the laws of any stateor the United States of America, authorized under the laws
to exercise corporate trust powers, having a combined capital and surplus of at
least $15,000,000 and subject to supervision or examination by federal or state
authority.

DUTIES OF THE TRUSTEE

         The trustee for each series of bonds will make no representation as to
the validity or sufficiency of the related Agreements, the bonds or any
underlying mortgage loan, mortgage security or related document and will not be
accountable for the use or application by or on behalf of any master servicer or
special servicer of any funds paid to the master servicer or special servicer in
respect of the bonds or the underlying mortgage loans or mortgage securities, or
any funds deposited into or withdrawn from the Payment Account for the series or
any other account by or on behalf of the master servicer or special servicer. If
no event of default has occurred and is continuing, the trustee for each series
of bonds will be required to perform only those duties specifically required
under the related indenture. However, upon receipt of any of the various
certificates, reports or other instruments required to be furnished to it
pursuant to the related Agreement, a trustee will be required to examine the
documents and to determine whether they conform to the requirements of the
agreement.

SOME MATTERS REGARDING THE TRUSTEE

         As and to the extent described in the related prospectus supplement,
the fees and normal disbursements of any trustee may be the expense of the
related master servicer or other specified person or may be required to be borne
by the related trust fund.

         The trustee for each series of bonds generally will be entitled to
indemnification, from amounts held in the Payment Account for the series, for
any loss, liability or expense incurred by the trustee in connection with the
trustee's acceptance or administration of its trusts under the related


                                       53




indenture unless the loss, liability, cost or expense was incurred by reason of
willful misfeasance, bad faith or gross negligence on the part of the trustee in
the performance of its obligations and duties, or by reason of its reckless
disregard of its obligations or duties.

                     RESIGNATION AND REMOVAL OF THE TRUSTEE

         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 under the indenture or
if the trustee becomes insolvent. Upon becoming aware of the circumstances, the
company will be obligated to appoint a successor trustee. The trustee may also
be removed at any time by the holders of bonds evidencing not less than 51% of
the aggregate undivided interests (or, if applicable, 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 an offered bond will depend on the price paid
by the holder for the bond, the bond interest rate on a bond entitled to
payments of interest (which bond interest 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
loans and the allocation thereof to reduce the principal balance of the bond (or
notional amount thereof if applicable) and other factors.

         A class of bonds may be entitled to payments of interest at a fixed
bond interest rate, a variable bond interest rate or adjustable bond interest
rate, or any combination of the bond interest rates, each as specified in the
related prospectus supplement. A variable bond interest rate may be calculated
based on the weighted average of the Net Mortgage Rates of the related mortgage
loans for the month preceding the distribution date if so specified in the
related prospectus supplement. As will be described in the related prospectus
supplement, the aggregate payments of interest on a class of bonds, and their
yield to maturity, will be affected by the rate of payment of principal on the
bonds (or the rate of reduction in the notional balance of bonds entitled only
to payments of interest) and, in the case of bonds 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 bonds will also be affected
by liquidations of mortgage loans following mortgagor defaults and by purchases
of mortgage loans in the event of breaches of representations made in respect of
the mortgage loans by the company, the master servicer and others, or
conversions of ARM Loans to a fixed interest rate. See "The Mortgage
Pools--Representations by Sellers" and "Descriptions of the Bonds--Assignment of
Trust Fund Assets" above. Holders of Strip Bonds or a class of bonds having a
bond interest rate that varies based on the weighted average mortgage rate of
the underlying mortgage loans may be affected by disproportionate prepayments
and repurchases of mortgage loans having higher Net Mortgage Rates or rates
applicable to the Strip Bonds, as applicable.

         With respect to any series of bonds, a period of time will elapse
between the date upon which payments on the related mortgage loans are due and
the distribution date on which the payments are passed through to bondholders.
That delay will effectively reduce the yield that would otherwise be produced if
payments on the mortgage loans were distributed to bondholders on or near the
date they were due.

         In general, if a class of bonds is purchased at initial issuance at a
premium and payments of principal on the related mortgage loans 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. Similarly, if
a class of bonds is purchased at initial issuance at a discount and payments of
principal on the related mortgage loans 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. The effect of principal prepayments,
liquidations and purchases on yield will be particularly significant in the case
of a series of bonds having a class entitled to payments of interest only or to
payments of interest that are disproportionately high relative to the principal
payments to which the class is entitled. This class will likely be sold at a
substantial premium to its principal balance and any faster than anticipated


                                       54




rate of prepayments will adversely affect the yield to holders thereof.
Extremely rapid prepayments may result in the failure of the holders to recoup
their original investment. In addition, the yield to maturity on other types of
classes of bonds, including Accrual Bonds and bonds with a bond interest rate
which fluctuates inversely with or at a multiple of an index, may be relatively
more sensitive to the rate of prepayment on the related mortgage loans than
other classes of bonds.

         The timing of changes in the rate of principal payments on or
repurchases of the mortgage loans 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 underlying mortgage loans 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 bonds would
not be fully offset by a subsequent like reduction (or increase) in the rate of
principal payments.

         When a principal prepayment in full is made on a mortgage loan, the
borrower is generally charged interest only for the period from the due date of
the preceding scheduled payment up to the date of the prepayment, instead of for
the full accrual period, that is, the period from the due date of the preceding
scheduled payment up to the due date for the next scheduled payment. In
addition, a partial principal prepayment may likewise be applied as of a date
prior to the next scheduled due date (and, accordingly, be accompanied by
accrued interest for less than the full accrual period). However, interest
accrued and distributable on any series of bonds on any distribution date will
generally correspond to interest accrued on the principal balance of mortgage
loans for their respective full accrual periods. Consequently, if a prepayment
on any mortgage loan is distributable to bondholders on a particular
distribution date, but the prepayment is not accompanied by accrued interest for
the full accrual period, the interest charged to the borrower (net of servicing
and administrative fees and any retained interest of the company) may be less
than the corresponding amount of interest accrued and otherwise payable on the
related mortgage loan, and a Prepayment Interest Shortfall will result. Ifand to
the extent that the shortfall is allocated to a class of offered bonds, its
yield will be adversely affected. The prospectus supplement for a series of
bonds will describe the manner in which the shortfalls will be allocated among
the classes of the bonds. If so specified in the related prospectus supplement,
the master servicer will be required to apply some or all of its servicing
compensation for the corresponding period to offset the amount of the
shortfalls. The related prospectus supplement will also describe any other
amounts available to offset the shortfalls. See "Servicing of Mortgage
Loans--Servicing and Other Compensation and Payment of Expenses; Retained
Interest".

         The trust fund with respect to any series may include convertible ARM
Loans. As is the case with conventional, fixed-rate mortgage loans originated in
a high interest rate environment which may be subject to a greater rate of
principal prepayments when interest rates decrease, convertible ARM Loans may be
subject to a greater rate of principal prepayments (or purchases by the related
subservicer or the master servicer) due to their refinancing or conversion to
fixed interest rate loans in a low interest rate environment. For example, if
prevailing interest rates fall significantly, convertible ARM Loans could be
subject to higher prepayment and conversion rates than if prevailing interest
rates remain constant because the availability of fixed-rate or other
adjustable-rate mortgage loans at competitive interest rates may encourage
mortgagors to refinance their adjustable-rate mortgages to "lock in" a lower
fixed interest rate or to take advantage of the availability of other
adjustable-rate mortgage loans, or, in the case of convertible adjustable-rate
mortgage loans, to exercise their option to convert the adjustable interest
rates to fixed interest rates. The conversion feature may also be exercised in a
rising interest rate environment as mortgagors attempt to limit their risk of
higher rates. A rising interest rate environment may also result in an increase
in the rate of defaults on the mortgage loans. If the related subservicer or the
master servicer purchases convertible ARM Loans, a mortgagor's exercise of the
conversion option will result in a distribution of the principal portion thereof
to the bondholders, as described in this prospectus. Alternatively, to the
extent subservicers or the master servicer fail to purchase converting ARM
Loans, the mortgage pool will include fixed-rate mortgage loans.



                                       55




         The rate of defaults on the mortgage loans will also affect the rate
and timing of principal payments on the mortgage loans and thus the yield on the
bonds. In general, defaults on single family loans are expected to occur with
greater frequency in their early years. However, there is a risk that mortgage
loans, including multifamily loans, that require balloon payments may default at
maturity, or that the maturity of such a mortgage loan may be extended in
connection with a workout. The rate of default on single family loans which are
refinance or limited documentation mortgage loans, and on mortgage loans,
including multifamily loans, with high loan-to- value ratios, may be higher than
for other types of mortgage loans. 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.

         With respect to some mortgage loans in a mortgage pool, the mortgage
rate at origination may be below the rate that would result if the index and
margin relating thereto were applied at origination. Under the applicable
underwriting standards, the mortgagor under each mortgage loan generally will be
qualified, or the mortgage loan otherwise approved, on the basis of the mortgage
rate in effect at origination. The repayment of the mortgage loan 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 buydown mortgage loan during
or at the end of the applicable Buydown Period may create a greater financial
burden for the mortgagor, who might not have otherwise qualified for a mortgage
under applicable underwriting guidelines, and may accordingly increase the risk
of default with respect to the related mortgage loan.

         The mortgage rates on ARM Loans subject to negative amortization
generally adjust monthly and their amortization schedules adjust less
frequently. During a period of rising interest rates as well as immediately
after origination (initial mortgage rates are generally lower than the sum of
the Indices applicable at origination and the related Note Margins), the amount
of interest accruing on the principal balance of the mortgage loans may exceed
the amount of their minimum scheduled monthly payment. As a result, a portion of
the accrued interest on negatively amortizing mortgage 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 the Deferred Interest
to the principal balance of any related class or classes of bonds will lengthen
the weighted average life thereof and may adversely affect yield to holders
thereof, depending upon the price at which the bonds were purchased. In
addition, with respect to ARM Loans subject to negative amortization, during a
period ofdeclining interest rates, it might be expected that each minimum
scheduled monthly payment on the mortgage loan would exceed the amount of
scheduled principal and accrued interest on the principal balance thereof, and
since the excess will be applied to reduce the principal balance of the related
class or classes of bonds, the weighted average life of the bonds will be
reduced and may adversely affect yield to holders thereof, depending upon the
price at which the bonds were purchased.

                     MATURITY AND PREPAYMENT CONSIDERATIONS

         As indicated above under "The Mortgage Pools," the original terms to
maturity of the mortgage loans in a given mortgage pool will vary depending upon
the type of mortgage loans included in the mortgage pool. The prospectus
supplement for a series of bonds will contain information with respect to the
types and maturities of the mortgage loans in the related mortgage pool. All of
the mortgage loans may be prepaid without penalty in full or in part at any
time. The prepayment experience with respect to the mortgage loans in a mortgage
pool will affect the life and yield of the related series of bonds.

         With respect to balloon loans, payment of the balloon payment (which,
based on the amortization schedule of the mortgage loans, is expected to be a
substantial amount) will generally depend on the mortgagor's ability to obtain
refinancing of the mortgage loans 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 real estate values, the mortgagor's financial situation, prevailing
mortgage loan interest rates, the mortgagor's equity


                                       56




in the related mortgaged property, tax laws and prevailing general economic
conditions. None of the company, the master servicer, or any of their affiliates
will be obligated to refinance or repurchase any mortgage loan or to sell the
mortgaged property.

         The extent of prepayments of principal of the mortgage loans may be
affected by a number of factors, including solicitations and the availability of
mortgage credit, the relative economic vitality of the area in which the
mortgaged properties are located and, in the case of multifamily, commercial and
mixed-use loans, the quality of management of the mortgage properties, the
servicing of the mortgage loans, possible changes in tax laws and other
opportunities for investment. In addition, the rate of principal payments on the
mortgage loans may be affected by the existence of lock-out periods and
requirements that principal prepayments be accompanied by prepayment premiums,
as well as due-on- sale and due-on-encumbrance provisions, and by the extent to
which the provisions may be practicably enforced. See "Servicing of Mortgage
Loans--Collection and Other Servicing Procedures; Mortgage Loan Modifications"
and "Legal Aspects of the Mortgage Loans--Enforceability of Some Provisions" for
a description of provisions of the servicing agreement and legal aspects of
mortgage loans that may affect the prepayment experience on the mortgage loans.

         The rate of prepayment on a pool of mortgage loans is also affected by
prevailing market interest rates for mortgage loans of a comparable type, term
and risk level. When the prevailing market interest rate is below a mortgage
coupon, a borrower may have an increased incentive to refinance its mortgage
loan. In addition, as prevailing market interest rates decline, even borrowers
with ARM Loans that have experienced a corresponding interest rate decline may
have an increased incentive to refinance for purposes of either (1) converting
to a fixed rate loan and thereby "locking in" the rate or (2) taking advantage
of the initial "teaser rate" (a mortgage interest rate below what it would
otherwise be if the applicable index and gross margin were applied) on another
adjustable rate mortgage loan. Moreover, although the mortgage rates on ARM
Loans will be subject to periodic adjustments, the adjustments generally will
not increase or decrease the mortgage rates by more than a fixed percentage
amount on each adjustment date, will not increase the mortgage rates over a
fixed percentage amount during the life of any ARM Loan and will be based on an
index (which may not rise and fall consistently with mortgage interest rates)
plus the related Note 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 at any time may not equal the prevailing rates
for similar, newly originated adjustable rate mortgage loans. In high interest
rate environments, the prevailing rates on fixed-rate mortgage loans may be
sufficiently high in relation to the then-current mortgage rates on newly
originated ARM Loans that the rate of prepayment may increase as a result of
refinancings. There can be no assurance as to the rate of prepayments on the
mortgage loans during any period or over the life of any series of bonds.

         If the applicable servicing agreement for a series of bonds provides
for a pre-funding account or other means of funding the transfer of additional
mortgage loans to the related trust fund, as described under "Description of the
Bonds--Pre-Funding Account" in this prospectus, and the trust fund is unable to
acquire the additional mortgage loans within any applicable time limit, the
amounts set aside for the purpose may be applied as principal payments on one or
more classes of bonds of the series. See "Yield Considerations."

         There can be no assurance as to the rate of prepayment of the mortgage
loans. The company is not aware of any publicly available statistics relating to
the principal prepayment experience of diverse portfolios of mortgage loans such
as the mortgage loans over an extended period of time. All statistics known to
the company that have been compiled with respect to prepayment experience on
mortgage loans indicate that while some mortgage loans may remain outstanding
until their stated maturities, a substantial number will be paid prior to their
respective stated maturities. No representation is made as to the particular
factors that will affect the prepayment of the mortgage loans or as to the
relative importance of these factors.

         As described in this prospectus and in the prospectus supplement, the
master servicer, the company or a person specified in the related prospectus
supplement (other than the holder of any class of offered bonds) may have the
option to purchase the assets in a trust fund and effect early retirement of the
related series of bonds. See "The Agreements--Termination; Retirement of Bonds."



                                       57




                         LEGAL ASPECTS OF MORTGAGE LOANS

         The following discussion summarizes legal aspects of mortgage loans
that is general in nature. The summaries do not purport to be complete. They do
not reflect the laws of any particular state nor the laws of all states in which
the mortgaged properties may be situated. This is because these legal aspects
are governed in part by the law of the state that applies to a particular
mortgaged property and the laws of the states may vary substantially. You should
refer to the applicable federal and state laws governing the mortgage loans.

MORTGAGES

         Each single family, multifamily, commercial and mixed-use loan and, if
applicable, the Contracts (in each case other than cooperative mortgage loans),
will be evidenced by a note or bond and secured by an instrument granting a
security interest in real property, which may be a mortgage, deed of trust or a
deed to secure debt, depending upon the prevailing practice and law in the state
in which the related mortgaged property is located, and may have first, second
or third priority. Mortgages and deeds to secure debt are referred to as
"mortgages." Contracts evidence both the obligation of the obligor to repay the
loan evidenced thereby and grant a security interest in the related Manufactured
Homes to secure repayment of the loan. However, as Manufactured Homes have
become larger and often have been attached to their sites without any apparent
intention by the borrowers to move them, courts in many states have held that
Manufactured Homes may become subject to real estate title and recording laws.
See "--Contracts" below. In some states, a mortgage or deed of trust creates a
lien upon the real property encumbered by the mortgage or deed of trust.
However, in other states, the mortgage or deed of trust conveys legal title to
the property respectively, to the mortgagee or to a trustee for the benefit of
the mortgagee subject to a condition subsequent (i.e., the payment of the
indebtedness secured thereby). The lien created by the mortgage or deed of trust
is not prior to the lien for real estate taxes and assessments and other charges
imposed under governmental police powers. Priority between mortgages depends on
their terms or on the terms of separate subordination or inter-creditor
agreements, the knowledge of the parties in some cases 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. The trustee's authority under a
deed of trust, the grantee's authority under a deed to secure debt and the
mortgagee's authority under a mortgage are governed by the law of the state in
which the real property is located, the express provisions of the deed of trust
or mortgage, and, in deed of trust transactions, the directions of the
beneficiary.

COOPERATIVE MORTGAGE LOANS

         If specified in the prospectus supplement relating to a series of
certificates, the mortgage loans and Contracts may include cooperative mortgage
loans. Each mortgage note evidencing a cooperative mortgage loan will be secured
by a security interest in shares issued by the related Cooperative, 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 the shares of the Cooperative, the priority of
which will depend on, among other things, the terms of the particular security
agreement as well as the order of recordation and/or filing of the agreement (or
financing statements related thereto) in the appropriate recording office.

         All Cooperative buildings relating to the cooperative mortgage loans
are located primarily in the State of New York. Generally, each Cooperative owns
in fee or has a long-term 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


                                       58




of real estate taxes, other governmental impositions and hazard and liability
insurance. If there is an underlying mortgage (or mortgages) on the
Cooperative's 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,
as mortgagor or lessor, as the case may be, is also responsible for fulfilling
the mortgage or rental obligations. An underlying mortgage loan is ordinarily
obtained by the Cooperative in connection with either the construction or
purchase of the Cooperative's 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 an underlying mortgage and to the interest of
the holder of a land lease. If the Cooperative is unable to meet the payment
obligations (1) arising under an underlying mortgage, the mortgagee holding an
underlying mortgage could foreclose on that mortgage and terminate all
subordinate proprietary leases and occupancy agreements or (2) 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, an underlying 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 the
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
an underlying mortgage or the termination of the underlying lease could
eliminate or significantly diminish the value of any collateral held by the
mortgagee who financed the purchase by an individual tenant-stockholder of
shares of the Cooperative or, in the case of the mortgage loans, the collateral
securing the cooperative mortgage loans.

         Each Cooperative is owned by shareholders (referred to as
tenant-stockholders) who, through ownership of stock or shares in the
Cooperative, receive proprietary leases or occupancy agreements which confer
exclusive rights to occupy specific dwellings. Generally, a tenant-stockholder
of a Cooperative must make a monthly payment to the Cooperative pursuant to the
proprietary lease, which payment represents the tenant-stockholder's
proportional share of the Cooperative's payments for its underlying mortgage,
real property taxes, maintenance expenses and other capital or ordinary
expenses. An ownership interest in a Cooperative and accompanying occupancy
rights may be financed through a cooperative mortgage loan evidenced by a
mortgage 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
shares of the related Cooperative. The mortgagee generally takes possession
ofthe 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 mortgagee'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 mortgage 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.

TAX ASPECTS OF COOPERATIVE OWNERSHIP

         In general, a "tenant-stockholder" (as defined in Section 216(b)(2) of
the Code) of a corporation that qualifies as a "cooperative housing corporation"
within the meaning of Section 216(b)(1) of the Code is allowed a deduction for
amounts paid or accrued within his taxable year to the corporation representing
his proportionate share of interest expenses and real estate taxes allowable as
a deduction under Section 216(a) of the Code to the corporation under Sections
163 and 164 of the Code. In order for a corporation to qualify under Section
216(b)(1) of the Code for its taxable year in which the items are allowable as a
deduction to the corporation, the section requires, among other things, that at
least 80% of the gross income of the corporation be derived from its
tenant-stockholders. By virtue of this requirement, the status of a corporation
for purposes of Section 216(b)(1) of the Code must be determined on a
year-to-year basis. Consequently, there can be no assurance that Cooperatives
relating to the cooperative mortgage loans will qualify under the section for
any particular year. In the event that the Cooperative fails to qualify for one
or more years, the value of the collateral securing any related cooperative
mortgage loans could be significantly


                                       59




impaired because no deduction would be allowable to tenant- stockholders under
Section 216(a) of the Code with respect to those years. In view of the
significance of the tax benefits accorded tenant- stockholders of a corporation
that qualifies under Section 216(b)(1) of the Code, the likelihood that a
failure would be permitted to continue over a period of years appears remote.

LEASES AND RENTS

         Mortgages that encumber income-producing multifamily and commercial
properties often contain an assignment of rents and leases, pursuant to which
the borrower assigns to the lender the borrower's right, title and interest as
landlord under each lease and the income derived therefrom, while (unless rents
are to be paid directly to the lender) retaining a revocable license to collect
the rents for so long as there is no default. If the borrower defaults, the
license terminates and the lender is entitled to collect the rents. Local law
may require that the lender take possession of the property and/or obtain a
court-appointed receiver before becoming entitled to collect the rents.

CONTRACTS

         Under the laws of most states, manufactured housing constitutes
personal property and is subject to the motor vehicle registration laws of the
state or other jurisdiction in which the unit is located. In a few states, where
certificates of title are not required for manufactured homes, security
interests are perfected by the filing of a financing statement under Article 9
of the UCC which has been adopted by all states. Financing statements are
effective for five years and must be renewed prior to the end of each five year
period. The certificate of title laws adopted by the majority of states provide
that ownership of motor vehicles and manufactured housing shall be evidenced by
a certificate of title issued by the motor vehicles department (or a similar
entity) of the state. In the states that have enacted certificate of title laws,
a security interest in a unit of manufactured housing, so long as it is not
attached to land in so permanent a fashion as to become a fixture, is generally
perfected by the recording of the interest on the certificate of title to the
unit in the appropriate motor vehicle registration office or by delivery of the
required documents and payment of a fee to the office, depending on state law.

         The master servicer will be required under the related servicing
agreement to effect the notation or delivery of the required documents and fees,
and to obtain possession of the certificate of title, as appropriate under the
laws of the state in which any Manufactured Home is registered. In the event the
master servicer fails, due to clerical errors or otherwise, to effect the
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 trustee 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 by
the borrowers to move them, courts in many states have held that manufactured
homes 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 file
either a "fixture filing" under the provisions of the UCC ora real estate
mortgage under the real estate laws of the state where the home is located.
These filings must be made in the real estate records office of the county where
the home is located. Generally, Contracts will contain provisions prohibiting
the obligor from permanently attaching the Manufactured Home to its site. So
long as the obligor does not violate this agreement, a security interest in the
Manufactured Home will be governed by the certificate of title laws or the UCC,
and the notation of the security interest on the certificate of title or the
filing of a UCC financing statement will be effective to maintain the priority
of the security interest in the Manufactured Home. If, however, a Manufactured
Home is permanently attached to its site, other parties could obtain an interest
in the Manufactured Home that is prior to the security interest originally
retained by the Seller and transferred to the company.

         The company will assign or cause to be assigned a security interest in
the Manufactured Homes to the trustee, on behalf of the bondholders. Neither the
company, the master servicer nor the trustee will amend the certificates of
title to identify the trustee, on behalf of the bondholders, as the new secured
party and, accordingly, the company or the Seller will continue to be named as
the


                                       60




secured party on the certificates of title relating to the Manufactured Homes.
In most states, the assignment is an effective conveyance of the security
interest without amendment of any lien noted on the related certificate of title
and the new secured party succeeds to the company's rights as the secured party.
However, in some states there exists a risk that, in the absence of an amendment
to the certificate of title, the assignment of the security interest might not
be held effective against creditors of the company or Seller.

         In the absence of fraud, forgery or permanent affixation of the
Manufactured Home to its site by the Manufactured Home owner, or administrative
error by state recording officials, the notation of the lien of the company on
the certificate of title or delivery of the required documents and fees will be
sufficient to protect the trustee against the rights of subsequent purchasers of
a Manufactured Home or subsequent lenders who take a security interest in the
Manufactured Home. If there are any Manufactured Homes as to which the company
has failed to perfect or cause to be perfected the security interest assigned to
the trust fund, the security interest would be subordinate to, among others,
subsequent purchasers for value of Manufactured Homes and holders of perfected
security interests. There also exists a risk in not identifying the trustee, on
behalf of the bondholders, as the new secured party on the certificate of title
that, through fraud or negligence, the security interest of the trustee could be
released.

         In the event that the owner of a Manufactured Home moves it to a state
other than the state in which the Manufactured Home initially is registered,
under the laws of most states the perfected security interest in the
Manufactured Home would continue for four months after the relocation and
thereafter until the owner re-registers the Manufactured Home in the state. If
the owner were to relocate a Manufactured Home to another state and re-register
the Manufactured Home in the state, and if the company did not take steps to
re-perfect its security interest in the state, the security interest in the
Manufactured Home would cease to be perfected. A majority of states generally
require surrender of a certificate of title to re-register a Manufactured Home;
accordingly, the company must surrender possession if it holds the certificate
of title to the Manufactured Home or, in the case of Manufactured Homes
registered in states that provide for notation of lien, the company would
receive notice of surrender if the security interest in the Manufactured Home is
noted on the certificate of title. Accordingly, the company would have the
opportunity to re-perfect its security interest in the Manufactured Home in the
state of relocation. In states that do not require a certificate of title for
registration of a manufactured home, re-registration could defeat perfection.
Similarly, when an obligor under a manufactured housing conditional sales
contract sells a manufactured home, the obligee must surrender possession of the
certificate of title or it will receive notice as a result of its lien noted
thereon and accordingly will have an opportunity to require satisfaction of the
related manufactured housing conditional sales contract before release of the
lien. Under each related servicing agreement, the master servicer will be
obligated to take these steps, at the master servicer's expense, as are
necessary to maintain perfection of security interests in the Manufactured
Homes.

         Under the laws of most states, liens for repairs performed on a
Manufactured Home take priority even over a perfected security interest. The
company will obtain the representation of the related Seller that it has no
knowledge of any of these liens with respect to any Manufactured Home securing a
Contract. However, these liens could arise at any time during the term of a
Contract. No notice will be given to the trustee or bondholders in the event
this type of lien arises.

FORECLOSURE ON MORTGAGES AND SOME CONTRACTS

         Foreclosure of a deed of trust is generally accomplished by a
non-judicial trustee's sale under a specific provision in the deed of trust
which authorizes the trustee to sell the property upon any default by the
borrower under the terms of the note or deed of trust. In 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, the trustee must provide notice in some states to any other
individual having an interest of record in the real property, including any
junior lienholders. If the deed of trust is not reinstated within 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 a specified
manner prior to the date of trustee's sale. In addition, some state laws require
that a


                                       61




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.

         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 these 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.

         Foreclosure of a mortgage is generally accomplished by judicial action.
Generally, the action is initiated by the service of legal pleadings upon all
parties having an interest of record in the real property. Delays in completion
of the foreclosure may occasionally result from difficulties in locating
necessary parties. Judicial foreclosure proceedings are often not contested by
any of the applicable parties. If the mortgagee's right to foreclose is
contested, the legal proceedings necessary to resolve the issue can be
time-consuming.

         In the case of foreclosure under either a mortgage or a deed of trust,
the sale by the referee or other designated officer or by the trustee is a
public sale. However, because of the difficulty 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 note plus the accrued and unpaid interest and the
expense of foreclosure, in which case the mortgagor's debt will be extinguished
unless the lender purchases the property for a lesser amount in order to
preserve its right against a borrower to seek a deficiency judgment and the
remedy is available under state law and the related loan documents. In the same
states, there is a statutory minimum purchase price which the lender may offer
for the property and 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, paying taxes and
making the 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. Any loss may be
reduced by the receipt of any mortgage insurance proceeds or other forms of
credit enhancement for a series of bonds. See "Description of Credit
Enhancement".

         A junior mortgagee may not foreclose on the property securing a junior
mortgage unless it forecloses subject to the senior mortgages. The junior
mortgagee must either pay the entire amount due on the senior mortgages prior to
or at the time of the foreclosure sale or undertake to pay on any senior
mortgages that the mortgagor is currently in a state of default under. Under
either course of action, the junior mortgagee may add the amounts paid 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 of a junior
mortgage triggers the enforcement of a "due-on-sale" clause, the junior
mortgagee may be required to pay the full amount of the senior mortgages to the
senior mortgagees. Accordingly, with respect to those single family loans and
multifamily loans which are junior mortgage loans, if the lender purchases the
property, the lender's title will be subject to all senior liens and claims and
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 proceeds.

         In foreclosure, courts have imposed general equitable principles. The
equitable principles are generally designed to relieve the borrower from the
legal effect of its defaults under the loan


                                       62




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
substituted their judgment for the lender's judgment and have required that
lenders reinstate loans or recast payment schedules in order to accommodate
borrowers who are suffering from temporary financial disability. In other cases,
courts have limited the right of a lender to foreclose if the default under the
mortgage instrument is not monetary, such as the borrower's failure to
adequately maintain the property or the borrower's execution of a second
mortgage or deed of trust affecting the property. Finally, some courts have been
faced with the issue of whether or not federal or state constitutional
provisions reflecting due process concerns for adequate notice require that
borrowers under deeds of trust or mortgages receive notices in addition to the
statutorily-prescribed minimums. For the most part, these cases have upheld the
notice provisions as being reasonable or have found that the sale by a trustee
under a deed of trust, or under a mortgage having a power of sale, does not
involve sufficient state action to afford constitutional protection to the
borrower.

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 Cooperative may cancel the proprietary lease or occupancy
agreement, even while pledged, for failure by the tenant- stockholder to pay its
obligations or charges owed by the tenant-stockholder, including mechanics'
liens against the Cooperative's building incurred by the tenant-stockholder.
Generally, 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 Cooperative may generally terminate a proprietary lease or
occupancy agreement in the event the borrower breaches its covenants in the
proprietary lease or occupancy agreement. Typically, the lender and the
Cooperative enter into a recognition agreement which, together with any lender
protection provisions contained in the proprietary lease or occupancy agreement,
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 the 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 shares and the
proprietary lease or occupancy agreement allocated to the dwelling, subject,
however, to the Cooperative's right to sums due under the 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
mortgage loan and accrued and unpaid interest on the loan.

         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 mortgage loan, the lender must obtain the approval or consent of the
board of directors of the Cooperative as required by the proprietary lease
before transferring the Cooperative shares or assigning the proprietary lease.
The 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.



                                       63




         Because of the nature of cooperative mortgage loans, lenders do not
require the tenant- stockholder (i.e., the borrower) to obtain title insurance
of any type. Consequently, the existence of anyprior liens or other
imperfections of title affecting the Cooperative's building or real estate also
may adversely affect the marketability of the shares allocated to the dwelling
unit in the event of foreclosure.

         In New York, foreclosure on the Cooperative shares is accomplished by
public sale in accordance with the provisions of Article 9 of the New York UCC
and the security agreement relating to those shares. Article 9 of the New York
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 banks selling similar collateral in the same
area will be considered reasonably conducted.

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

REPOSSESSION WITH RESPECT TO CONTRACTS

         GENERAL. Repossession of manufactured housing is governed by state law.
A few states have enacted legislation that requires that the debtor be given an
opportunity to cure its default (typically 30 days to bring the account current)
before repossession can commence. So long as a manufactured home has not become
so attached to real estate that it would be treated as a part of the real estate
under the law of the state where it is located, repossession of the home in the
event of a default by the obligor generally will be governed by the UCC (except
in Louisiana). Article 9 of the UCC provides the statutory framework for the
repossession of manufactured housing. While the UCC as adopted by the various
states may vary in small particulars, the general repossession procedure
established by the UCC is as follows:

         o        Except in those states where the debtor must receive notice of
                  the right to cure a default, repossession can commence
                  immediately upon default without prior notice. Repossession
                  may be effected either through self-help (peaceable retaking
                  without court order), voluntary repossession or through
                  judicial process (repossession pursuant to court-issued writ
                  of replevin). The self-help and/or voluntary repossession
                  methods are more commonly employed, and are accomplished
                  simply by retaking possession of the manufactured home. In
                  cases in which the debtor objects or raises a defense to
                  repossession, a court order must be obtained from the
                  appropriate state court, and the manufactured home must then
                  be repossessed in accordance with that order. Whether the
                  method employed is self-help, voluntary repossession or
                  judicial repossession, the repossession can be accomplished
                  either by an actual physical removal of the manufactured home
                  to a secure location for refurbishment and resale or by
                  removing the occupants and their belongings from the
                  manufactured home and maintaining possession of the
                  manufactured home on the location where the occupants were
                  residing. Various factors may affect whether the manufactured
                  home is physically removed or left on location, such as the
                  nature and term of the lease of the site on which it is
                  located and the condition of the unit. In many cases, leaving
                  the manufactured home on location is preferable, in the event
                  that the home is already set up, because the expenses of
                  retaking and redelivery will be saved. However, in those cases
                  where the home is left on location, expenses for site rentals
                  will usually be incurred.



                                       64




         o        Once repossession has been achieved, preparation for the
                  subsequent disposition of the manufactured home can commence.
                  The disposition may be by public or private sale provided the
                  method, manner, time, place and terms of the sale are
                  commercially reasonable.

         o        Sale proceeds are to be applied first to repossession expenses
                  (expenses incurred in retaking, storage, preparing for sale to
                  include refurbishing costs and selling) and then to
                  satisfaction of the indebtedness. While some states impose
                  prohibitions or limitations on deficiency judgments if the net
                  proceeds from resale do not cover the full amount of the
                  indebtedness, the remainder may be sought from the debtor in
                  the form of a deficiency judgement in those states that do not
                  prohibit or limit the judgments. The deficiency judgment is a
                  personal judgment against the debtor for the shortfall.
                  Occasionally, after resale of a manufactured home and payment
                  of all expenses and indebtedness, there is a surplus of funds.
                  In that case, the UCC requires the party suing for the
                  deficiency judgment to remit the surplus to the debtor.
                  Because the defaulting owner of a manufactured home generally
                  has very little capital or income available following
                  repossession, a deficiency judgment may not be sought in many
                  cases or, if obtained, will be settled at a significant
                  discount in light of the defaulting owner's strained financial
                  condition.

         LOUISIANA LAW. Any contract secured by a manufactured home located in
Louisiana will be governed by Louisiana law rather than Article 9 of the UCC.
Louisiana laws provide similar mechanismsfor perfection and enforcement of
security interests in manufactured housing used as collateral for an installment
sale contract or installment loan agreement.

         Under Louisiana law, a manufactured home that has been permanently
affixed to real estate will nevertheless remain subject to the motor vehicle
registration laws unless the obligor and any holder of a security interest in
the property execute and file in the real estate records for the parish in which
the property is located a document converting the unit into real property. A
manufactured home that is converted into real property but is then removed from
its site can be converted back to personal property governed by the motor
vehicle registration laws if the obligor executes and files various documents in
the appropriate real estate records and all mortgagees under real estate
mortgages on the property and the land to which it was affixed file releases
with the motor vehicle commission.

         So long as a manufactured home remains subject to the Louisiana motor
vehicle laws, liens are recorded on the certificate of title by the motor
vehicle commissioner and repossession can be accomplished by voluntary consent
of the obligor, executory process (repossession proceedings which must be
initiated through the courts but which involve minimal court supervision) or a
civil suit for possession. In connection with a voluntary surrender, the obligor
must be given a full release from liability for all amounts due under the
contract. In executory process repossessions, a sheriff's sale (without court
supervision) is permitted, unless the obligor brings suit to enjoin the sale,
and the lender is prohibited from seeking a deficiency judgment against the
obligor unless the lender obtained an appraisal of the manufactured home prior
to the sale and the property was sold for at least two- thirds of its appraised
value.

RIGHTS OF REDEMPTION

         SINGLE FAMILY, MULTIFAMILY AND COMMERCIAL PROPERTIES. The purposes of a
foreclosure action in respect of a mortgaged property is to enable the lender to
realize upon its security and to bar the borrower, and all persons who have
interests in the property that are subordinate to that of the foreclosing
lender, from exercise of their "equity of redemption". The doctrine of equity of
redemption provides that, until the property encumbered by a mortgage has been
sold in accordance with a properly conducted foreclosure and foreclosure sale,
those having interests that are subordinate to that of the foreclosing lender
have an equity of redemption and may redeem the property by paying the entire
debt with interest. Those having an equity of redemption must generally be made
parties and joined in the foreclosure proceeding in order for their equity of
redemption to be terminated.



                                       65




         The equity of redemption is a common-law (non-statutory) right which
should be distinguished from post-sale statutory rights of redemption. In some
states, after sale pursuant to a deed of trust or foreclosure of a mortgage, the
borrower and foreclosed junior lienors are given a statutory period in which to
redeem the property. In some states, statutory redemption may occur only upon
payment of the foreclosure sale price. In other states, redemption may be
permitted 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 because the exercise of a right of redemption would
defeat the title of any purchase through a foreclosure. 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. In some states, a post-sale statutory right of redemption may exist
following a judicial foreclosure, but not following a trustee's sale under a
deed of trust.

         MANUFACTURED HOMES. While state laws do not usually require notice to
be given to debtors prior to repossession, many states do require delivery of a
notice of default and of the debtor's right to cure defaults before
repossession. The law in most states also requires that the debtor be given
notice of sale prior to the resale of the home so that the owner may redeem at
or before resale. In addition, the sale must comply with the requirements of the
UCC.

ANTI-DEFICIENCY LEGISLATION AND OTHER LIMITATIONS ON LENDERS

         SINGLE FAMILY, MULTIFAMILY AND COMMERCIAL LOANS. Some states have
imposed statutory prohibitions which limit the remedies of a beneficiary under a
deed of trust or a mortgagee under a mortgage. In some states (including
California), statutes limit the right of the beneficiary or mortgagee to obtain
a deficiency judgment against the borrower following non-judicial foreclosure by
power of sale. 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 the deficiency judgment
may be executed. Some state statutes require the beneficiary or mortgagee to
exhaust the security afforded under a deed of trust or mortgage by foreclosure
in an attempt to satisfy the full debt before bringing a personal action against
the borrower. In other states, the lender has the option of bringing a personal
action against the borrower on the debt without first exhausting the security;
however in some of these states, the lender, following judgment on the 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 the election, is
that lenders will usually proceed against the security first rather than
bringing a personal action against the borrower. Finally, in some 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.

         Generally, Article 9 of the UCC governs foreclosure on Cooperative
shares and the related proprietary lease or occupancy agreement. Some courts
have interpreted Article 9 to prohibit or limit a deficiency award in some
circumstances, including circumstances where the disposition of the collateral
(which, in the case of a cooperative mortgage loan, would be the shares of the
Cooperative and the related proprietary lease or occupancy agreement) 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, under the federal Bankruptcy
Code, virtually all actions (including foreclosure actions and deficiency
judgment proceedings) to collect a debt are automatically stayed upon the filing
of the bankruptcy petition and, often, no interest or principal payments are
made during the course of the bankruptcy case. The delay and the


                                       66




consequences thereof caused by the automatic stay can be significant. Also,
under the Bankruptcy Code, the filing of a petition in a bankruptcy by or on
behalf of a junior lienor may stay the senior lender from taking action to
foreclose out the junior lien. Moreover, with respect to federal bankruptcy law,
a court with federal bankruptcy jurisdiction may permit a debtor through his or
her Chapter 11 or Chapter 13 rehabilitative plan to cure a monetary default in
respect of a mortgage loan on a debtor's residence by paying arrearage within a
reasonable time period and reinstating the original mortgage loan payment
schedule even though the lender accelerated the mortgage loan and final judgment
of foreclosure had been entered in state court (provided no sale of the
residence had yet occurred) prior to the filing of the debtor's petition. Some
courts with federal bankruptcy jurisdiction have approved plans, based on the
particular facts of the reorganization case, that effected the curing of a
mortgage loan default by paying arrearage 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.

         In the case of income-producing multifamily properties, federal
bankruptcy law may also have the effect of interfering with or affecting the
ability of the secured lender to enforce the borrower's assignment of rents and
leases related to the mortgaged property. Under Section 362 of the Bankruptcy
Code, the lender will be stayed from enforcing the assignment, and the legal
proceedings necessary to resolve the issue could be time-consuming, with
resulting delays in the lender's receipt of the rents.

CONSUMER COMPLIANCE LAWS AND REGULATIONS

         Tax liens arising under the Code may have priority over the lien of a
mortgage 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 TILA, as implemented by Regulation Z, Real Estate Settlement
Procedures Act, as implemented by Regulation X, Equal Credit Opportunity Act, as
implemented by Regulation B, 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. In particular, an originator's failure to comply with certain
requirements of the federal TILA, as implemented by Regulation Z, could subject
both originators and assignees of such obligations to monetary penalties and
could result in obligors' rescinding the mortgage loans either against the
originators or assignees.

         Some of the mortgage loans may High Cost Loans be subject to the Home
Ownership and Equity Protection Act of 1994, or Homeownership Act, which amended
TILA to provide new requirements applicable to loans that exceed certain
interest rates and/or points and fees thresholds. Purchasers or assignees of any
High Cost Loan, including any trust, could be liable under federal law for all
claims and subject to all defenses that the borrower could assert against the
originator of the High Cost Loan. Remedies available to the borrower include
monetary penalties, as well as rescission rights if the appropriate disclosures
were not given as required. The maximum damages that may be recovered under
these provisions from an assignee, including the trust, is the remaining amount
of indebtedness plus the total amount paid by the borrower in connection with
the mortgage loan.

         In addition to the Homeownership Act, a number of legislative proposals
have been introduced at both the federal and state level that are designed to
discourage predatory lending practices. Some states have enacted, or may enact,
laws or regulations that prohibit inclusion of some provisions in mortgage loans
that have interest rates or origination costs in excess of prescribed levels,
and require that borrowers be given certain disclosures prior to the
consummation of the


                                       67




mortgage loans. In some cases, state law may impose requirements and
restrictions greater than those in the Homeownership Act. An originators'
failure to comply with these laws could subject the trust (and other assignees
of the mortgage loans) to monetary penalties and could result in the borrowers
rescinding the mortgage loans against either the trust or subsequent holders of
the mortgage loans.

         Lawsuits have been brought in various states making claims against
assignees of High Cost Loans for violations of state law allegedly committed by
the originator. Named defendants in these cases include numerous participants
within the secondary mortgage market, including some securitization trusts.

         CONTRACTS. In addition to the laws limiting or prohibiting deficiency
judgments, numerous other statutory provisions, including federal bankruptcy
laws and related state laws, may interfere withor affect the ability of a lender
to realize upon collateral and/or enforce a deficiency judgment. For example, in
a Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
lender from repossessing a home, and, as part of the rehabilitation plan, reduce
the amount of the secured indebtedness to the market value of the home at the
time of bankruptcy (as determined by the court), leaving the party providing
financing as a general unsecured creditor for the remainder of the indebtedness.
A bankruptcy court may also reduce the monthly payments due under a contract or
change the rate of interest and time of repayment of the indebtedness.

ENVIRONMENTAL LEGISLATION

         Under CERCLA, and under state law in some states, a secured party which
takes a deed-in- lieu of foreclosure, purchases a mortgaged property at a
foreclosure sale, or operates a mortgaged property may become liable for the
costs of cleaning up hazardous substances regardless of whether they have
contaminated the property. CERCLA imposes strict, as well as joint and several,
liability on several classes of potentially responsible parties, including
current owners and operators of the property who did not cause or contribute to
the contamination. Furthermore, liability under CERCLA is not limited to the
original or unamortized principal balance of a loan or to the value of the
property securing a loan. Lenders may be held liable under CERCLA as owners or
operators unless they qualify for the secured creditor exemption to CERCLA. This
exemption exempts from the definition of owners and operators those who, without
participating in the management of a facility, hold indicia of ownership
primarily to protect a security interest in the facility.

         The Conservation Act amended, among other things, the provisions of
CERCLA with respect to lender liability and the secured creditor exemption. The
Conservation Act offers substantial protection to lenders by defining the
activities in which a lender can engage and still have the benefit of the
secured creditor exemption. In order for lender to be deemed to have
participated in the management of a mortgaged property, the lender must actually
participate in the operational affairs of the property of the borrower. The
Conservation Act provides that "merely having the capacity to influence, or
unexercised right to control" operations does not constitute participation in
management. A lender will lose the protection of the secured creditor exemption
only if it exercises decision-making control over the borrower's environmental
compliance and hazardous substance handling and disposal practices, or assumes
day-to-day management of all operational functions of the mortgaged property.
The Conservation Act also provides that a lender will continue to have the
benefit of the secured creditor exemption even if it forecloses on a mortgaged
property, purchases it at a foreclosure sale or accepts a deed-in-lieu of
foreclosure provided that the lender seeks to sell the mortgaged property at the
earliest practicable commercially reasonable time on commercially reasonable
terms.

         Other federal and state laws may impose liability on a secured party
which takes a deed-in- lieu of foreclosure, purchases a mortgaged property at a
foreclosure sale, or operates a mortgaged property on which contaminants other
than CERCLA hazardous substances are present, including petroleum, agricultural
chemicals, hazardous wastes, asbestos, radon, and lead-based paint. The cleanup
costs may be substantial. It is possible that the cleanup costs could become a
liability of a trust fund and reduce the amounts otherwise distributable to the
holders of the related series of bonds. Moreover, federal statutes and states by
statute may impose a lien for any cleanup costs incurred by the state on the
property that is the subject of the cleanup costs. All subsequent liens on the
property generally are subordinated to the lien and, in some states, even prior
recorded liens are


                                       68




subordinated to such lien. In the latter states, the security interest of the
trustee in a related parcel of real property that is subject to the lien could
be adversely affected.

         Traditionally, many residential mortgage lenders have not taken steps
to evaluate whether contaminants are present with respect to any mortgaged
property prior to the origination of the mortgage loan or prior to foreclosure
or accepting a deed-in-lieu of foreclosure. Accordingly, the company has not
made and will not make the evaluations prior to the origination of the mortgage
loans. Neither the company nor any replacement servicer will be required by any
Agreement to undertake these evaluations prior to foreclosure or accepting a
deed-in-lieu of foreclosure. The company does not make any representations or
warranties or assume any liability with respect to the absence or effect of
contaminants on any related real property or any casualty resulting from the
presence or effect of contaminants. However, the company will not be obligated
to foreclose on related real property or accept a deed-in-lieu of foreclosure if
it knows or reasonably believes that there are material contaminated conditions
on the property. A failure so to foreclose may reduce the amounts otherwise
available to bondholders of the related series.

CONSUMER PROTECTION LAWS WITH RESPECT TO CONTRACTS

         Numerous federal and state consumer protection laws impose substantial
requirements upon creditors involved in consumer finance which are described in
"--Anti-Deficiency Legislation and Other Limitations on Lenders" above.

         Manufactured housing contracts often contain provisions obligating the
obligor to pay late charges if payments are not timely made. Federal and state
law may specifically limit the amount of late charges that may be collected.
Under the related servicing agreement, late charges will be retained by the
master servicer as additional servicing compensation, and any inability to
collect these amounts will not affect payments to bondholders.

         Courts have imposed general equitable principles upon repossession and
litigation involving deficiency balances. These equitable principles are
generally designed to relieve a consumer from the legal consequences of a
default.

         In several cases, consumers have asserted that the remedies provided to
secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to the Constitution of the United
States. For the most part, courts have upheld the notice provisions of the UCC
and related laws as reasonable or have found that the repossession and resale by
the creditor does not involve sufficient state action to afford constitutional
protection to consumers.

         The FTC Rule has the effect of subjecting a seller (and some related
creditors and their assignees) in a consumer credit transaction and any assignee
of the creditor to all claims and defenses which the debtor in the transaction
could assert against the seller of the goods. Liability under the FTC Rule is
limited to the amounts paid by a debtor on the contract, and the holder of the
contract may also be unable to collect amounts still due under the contract.
Most of the Contracts in a trust fund will be subject to the requirements of the
FTC Rule. Accordingly, the trust fund, as holder of theContracts, will be
subject to any claims or defenses that the purchaser of the related manufactured
home may assert against the seller of the manufactured home, subject to a
maximum liability equal tothe amounts paid by the obligor on the Contract. If an
obligor is successful in asserting the claim or defense, and if the Seller had
or should have had knowledge of the claim or defense, the master servicer will
have the right to require the Seller to repurchase the Contract because of a
breach of its Seller's representation and warranty that no claims or defenses
exist that would affect the obligor's obligation to make the required payments
under the Contract. The Seller would then have the right to require the
originating dealer to repurchase the Contract from it and might also have the
right to recover from the dealer any losses suffered by the Seller with respect
to which the dealer would have been primarily liable to the obligor.

ENFORCEABILITY OF SOME PROVISIONS

         TRANSFER OF MORTGAGED PROPERTIES. Unless the related prospectus
supplement indicates otherwise, the mortgage loans generally contain due-on-sale
clauses. These clauses permit the lender


                                       69




to accelerate the maturity of the loan if the borrower sells, transfers or
conveys the property without the prior consent of the lender. 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 was limited or
denied. However, Garn-St Germain Act preempts state constitutional, statutory
and case law that prohibits the enforcement of due-on-sale clauses and permits
lenders to enforce these clauses in accordance with their terms, subject to
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 thata transfer of the property may
have occurred. These include intra-family transfers, some 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 the
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.

         TRANSFER OF MANUFACTURED HOMES. Generally, manufactured housing
contracts contain provisions prohibiting the sale or transfer of the related
manufactured homes without the consent of the obligee on the contract and
permitting the acceleration of the maturity of the contracts by the obligee on
the contract upon the sale or transfer that is not consented to. The master
servicer will, to the extent it has knowledge of the conveyance or proposed
conveyance, exercise or cause to be exercised its rights to accelerate the
maturity of the related Contracts through enforcement of due-on- sale clauses,
subject to applicable state law. In some cases, the transfer may be made by a
delinquent obligor in order to avoid a repossession proceeding with respect to a
Manufactured Home.

         In the case of a transfer of a Manufactured Home as to which the master
servicer desires to accelerate the maturity of the related Contract, the master
servicer'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. Consequently, in some cases the
master servicer may be prohibited from enforcing a due-on-sale clause in respect
of a Manufactured Home.

         LATE PAYMENT CHARGES AND PREPAYMENT RESTRICTIONS. Notes and mortgages,
as well as manufactured housing conditional sales contracts and installment loan
agreements, 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 some states, there are or may be specific limitations upon the
late charges which a lender may collect from a borrower for delinquent payments
or the amounts that a lender may collect from a borrower as an additional charge
if the loan is prepaid even when the loans expressly provide for thecollection
of those charges. Although the Parity Act permits the collection of prepayment
charges and late fees in connection with some types of eligible loans preempting
any contrary state law prohibitions, some states may not recognize the
preemptive authority of the Parity Act or have formally opted out of the Parity
Act. As a result, it is possible that prepayment charges and late fees may not
be collected even on loans that provide for the payment of those charges unless
otherwise specified in the accompanying prospectus supplement. The master
servicer or another entity identified in the accompanying prospectus supplement
will be entitled to all prepayment charges and late payment charges received on
the loans and those amounts will not be available for payment on the bonds. The
OTS, the agency that administers the Parity Act for unregulated housing
creditors, withdrew its favorable Parity Act regulations and Chief Counsel
Opinions that previously authorized lenders to charge prepayment charges and
late fees in certain circumstances notwithstanding contrary state law, effective
with respect to loans originated on or after July 1, 2003. However, the OTS's
ruling does not retroactively affect loans originated before July 1, 2003.



                                       70




         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.

SUBORDINATE FINANCING

         When the mortgagor encumbers mortgaged property with one or more junior
liens, the senior lender is subjected to additional risk. First, the mortgagor
may have difficulty servicing and repaying multiple loans. In addition, if the
junior loan permits recourse to the mortgagor (as junior loans often do) and the
senior loan does not, a mortgagor may be more likely to repay sums due on the
junior loan than those on the senior loan. Second, acts of the senior lender
that prejudice the junior lender or impair the junior lender's security may
create a superior equity in favor of the junior lender. For example, if the
mortgagor and the senior lender agree to an increase in the principal amount of
or the interest rate payable on the senior loan, the senior lender may lose its
priority to the extent an existing junior lender is harmed or the mortgagor is
additionally burdened. Third, if the mortgagor defaults on the senior loan
and/or any junior loan or loans, the existence of junior loans and actions taken
by junior lenders can impair the security available to the senior lender and can
interfere with or delay the taking of action by the senior lender. Moreover, the
bankruptcy of a junior lender may operate to stay foreclosure or similar
proceedings by the senior lender.

INSTALLMENT CONTRACTS

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

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

APPLICABILITY OF USURY LAWS

         Title V provides that state usury limitations shall not apply to some
types of residential first mortgage loans originated by some 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 OTS is


                                       71




authorized to issue rules and regulations and to publish interpretations
governing implementation of Title V. The statute authorized any state to
reimpose 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. Some states have taken action to reimpose
interest rate limits or to limit discount points or other charges.

         Title V also provides that, subject to the following conditions, state
usury limitations shall not apply to any loan that is secured by a first lien on
some kinds of manufactured housing. Contracts would be covered if they satisfy
conditions including, among other things, terms governing any prepayments, late
charges and deferral fees and requiring a 30-day notice period prior to
instituting any action leading to repossession of or foreclosure with respect to
the related unit. Title V authorized any state to reimpose limitations on
interest rates and finance charges by adopting before April 1, 1983 a law or
constitutional provision which expressly rejects application of the federal law.
Fifteen states adopted this type of law prior to the April 1, 1983 deadline. In
addition, even where Title V was not so rejected, any state is authorized by the
law to adopt a provision limiting discount points or other charges on loans
covered by Title V. In any state in which application of Title V was expressly
rejected or a provision limiting discount points or other charges has been
adopted, no Contract which imposes finance charges or provides for discount
points or charges in excess of permitted levels has been included in the trust
fund.

         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 for ARM Loans, as set forth in the related prospectus
supplement.

         As indicated above under "The Mortgage Pools--Representations by
Sellers," each Seller of a mortgage loan will have represented that the 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 historically have been subjected to a variety of restrictions. The
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. Title VIII provides that, notwithstanding any state law to the contrary,
(1) state-chartered banks may originate alternative mortgage instruments in
accordance with regulations promulgated by the Comptroller of the Currency with
respect to origination of alternative mortgage instruments by national banks,
(2) 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 (3) 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
OTS, with respect to origination of alternative mortgage instruments by federal
savings and loan associations. Title VIII 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
the provisions. Some states have taken this action.

FORMALDEHYDE LITIGATION WITH RESPECT TO CONTRACTS

         A number of lawsuits are pending in the United States alleging personal
injury from exposure to the chemical formaldehyde, which is present in many
building materials, including components of manufactured housing such as plywood
flooring and wall paneling. Some of these lawsuits are pending against
manufacturers of manufactured housing, suppliers of component parts, and related


                                       72




persons in the distribution process. The company is aware of a limited number of
cases in which plaintiffs have won judgments in these lawsuits.

         Under the FTC Rule, which is described above under "Consumer Protection
Laws", the holder of any Contract secured by a Manufactured Home with respect to
which a formaldehyde claim has been successfully asserted may be liable to the
obligor for the amount paid by the obligor on the related Contract and may be
unable to collect amounts still due under the Contract. In the event an obligor
is successful in asserting this claim, the related bondholders could suffer a
loss if (1) the related Seller fails or cannot be required to repurchase the
affected Contract for a breach of representation and warranty and (2) the master
servicer or the trustee were unsuccessful in asserting any claim of contribution
or subrogation on behalf of the bondholders against the manufacturer or other
persons who were directly liable to the plaintiff for the damages. Typical
products liability insurance policies held by manufacturers and component
suppliers of manufactured homes may not cover liabilities arising from
formaldehyde in manufactured housing, with the result that recoveries from these
manufacturers, suppliers or other persons may be limited to their corporate
assets without the benefit of insurance.

SERVICEMEMBERS' CIVIL RELIEF ACT OF 1940

         Under the terms of the Relief Act, a mortgagor who enters military
service after the origination of the mortgagor's mortgage loan (including a
mortgagor who was in reserve status and iscalled to active duty after
origination of the mortgage loan), may not be charged interest (including fees
and charges) above an annual rate of 6% during the period of the mortgagor's
active duty status, unless a court orders otherwise upon application of the
lender. A court may grant a lender relief from the requirements of the Relief
Act if, in the court's opinion, the servicemember's ability to pay interest upon
the loan at a rate in excess of 6% percent is not materially affected by reason
of the servicemembers' military service. The Relief Act applies to mortgagors
who are members of the Army, Navy, Air Force, Marines, National Guard, Reserves,
Coast Guard, officers of the U.S. Public Health Service, officers of the
National Oceanic and Atmosphere Administration and draftees under an induction
order assigned to duty with the military. Because the Relief Act applies to
mortgagors who enter military service, including reservists who are called to
active duty, after origination of the related mortgage loan, no information can
be provided as to the number of loans that may be affected by the Relief Act.
Application of the Relief Act would adversely affect, for an indeterminate
period of time, the ability of the master servicer to collect full amounts of
interest on the mortgage loans subject to the Relief Act. 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, would result in a reduction of the amounts distributable to the
holders of the related bonds, and would not be covered by advances by the master
servicer or other entity or by any form of credit enhancement provided in
connection with the related series of bonds, unless described in the prospectus
supplement. In addition, the Relief Act imposes limitations that would impair
the ability of the master servicer to foreclose on an affected single family
loan or enforce rights under a Contract during the mortgagor's period of active
duty status, and, under some 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 which goes into default, there may
be delays in payment and losses on the related bonds in connection therewith.
Any other interest shortfalls, deferrals or forgiveness of payments on the
mortgage loans resulting from similar legislation or regulations may result in
delays in payments or losses to bondholders of the related series.

FORFEITURES IN DRUG AND RICO PROCEEDINGS

         Federal law provides that property owned by persons convicted of
drug-related crimes or of criminal violations of RICO can be seized by the
government if the property was used in, or purchased with the proceeds of, these
crimes. Under procedures contained in 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: (1) its mortgage was executed and recorded before commission
of the crime upon which the forfeiture is


                                       73




based, or (2) 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.

JUNIOR MORTGAGES

         Some of the mortgage loans may be secured by mortgages or deeds of
trust which are junior to senior mortgages or deeds of trust which are not part
of the trust fund. The rights of the bondholders, 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 some cases, either reinitiates 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 the 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 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 or deed of trust do not require notice of
default to the junior mortgagee, the lack of this 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 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 the proceeds and awards
to any indebtedness secured by the mortgage or deed of trust, in the order 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 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 some 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.

NEGATIVE AMORTIZATION LOANS

         A recent case decided by the United States Court of Appeals, First
Circuit, held that state restrictions on the compounding of interest are not
preempted by the provisions of the DIDMC and as a result, a mortgage loan that
provided for negative amortization violated New Hampshire's requirement that
first mortgage loans provide for computation of interest on a simple interest
basis. The holding was limited to the effect of DIDMC on state laws regarding
the compounding of interest and the court did not address the applicability of
the Parity Act, which authorizes lenders to make residential mortgage loans that
provide for negative amortization. The First Circuit's decision is binding
authority only on Federal District Courts in Maine, New Hampshire,
Massachusetts, Rhode Island and Puerto Rico.



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                         FEDERAL INCOME TAX CONSEQUENCES

GENERAL

         The following discussion is the opinion of Thacher Proffitt & Wood LLP,
counsel to the company, with respect to the anticipated material federal income
tax consequences of the purchase, ownership and disposition of offered bonds
offered under this prospectus and the prospectus supplement insofar as it
relates to matters of law or legal conclusions with respect thereto. This
discussion is directed solely to bondholders that hold the bonds 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 the
individual circumstances of particular categories of investors, some of which
(such as banks, insurance companies and foreign investors) may be subject to
special treatment under the Code. Further, 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. Prospective
investors should note that no rulings have been or will be sought from the IRS
with respect to any of the federal income tax consequences discussed below, and
no assurance can be given the IRS will not take contrary positions. Taxpayers
and preparers of tax returns (including those filed by any 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 (1) 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 (2) is directly relevant to the determination of an
entry on a tax return. Accordingly, taxpayers should consult their own 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 in this
prospectus. In addition to the federal income tax consequences described in this
prospectus, potential investors should consider the state and local tax
consequences, if any, of the purchase, ownership and disposition of the bonds.
See "State and Other Tax Consequences."

         The following discussion is based in part upon the OID Regulations. The
OID Regulations do not adequately address issues relevant to bonds such as the
offered bonds. In some instances, the OID Regulations provide that they are not
applicable to bonds such as the offered bonds.

         On or prior to the date of the related prospectus supplement with
respect to the proposed issuance of each series of bonds, Thacher Proffitt &
Wood LLP, counsel to the company, will deliver its opinion to the effect that,
assuming compliance with all provisions of the indenture, owner trust agreement
and other related documents, for federal income tax purposes (1) the bonds will
be treated as indebtedness to a bondholder other than the owner of the Equity
Certificates and (2) the Issuer, as created pursuant to the terms and conditions
of the owner trust agreement, will not be characterized as an association (or
publicly traded partnership) taxable as a corporation or as a taxable mortgage
pool. For purposes of this tax discussion, references to a "bondholder" or a
"holder" are to the beneficial owner of a bond.

         STATUS AS REAL PROPERTY LOANS

         (1) Bonds held by a domestic building and loan association will not
constitute "loans . . . secured by an interest in real property" within the
meaning of Code section 7701(a)(19)(C)(v); and (2)bonds held by a real estate
investment trust will not constitute "real estate assets" within the meaning of
Code section 856(c)(4)(A) and interest on bonds will not be considered "interest
on obligations secured by mortgages on real property" within the meaning of Code
section 856(c)(3)(B). In addition, the bonds will not be "qualified mortgages"
within the meaning of Section 860G(a)(3) of the Code.

         TAXATION OF OWNERS OF BONDS.

         INTEREST AND ORIGINAL ISSUE DISCOUNT. A bond may be issued with
"original issue discount" within the meaning of Section 1273(a) of the Code. Any
holder of a bond issued with original issue discount generally will be required
to include original issue discount in income as it accrues, in accordance with
the "constant yield" method described below, in advance of the receipt of the
cash attributable to that income. In addition, Section 1272(a)(6) of the Code
provides special rules


                                       75




applicable to bonds and some other debt instruments issued with original issue
discount; regulations have not been issued under that section.

         The Code requires that a reasonable prepayment assumption be used with
respect to mortgage loans held by a trust fund in computing the accrual of
original issue discount on bonds issued by that trust fund, and that adjustments
be made in the amount and rate of accrual of that 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
Committee Report indicates that the regulations will provide that the prepayment
assumption used with respect to a bond must be the same as that used in pricing
the initial offering of the bond. The Prepayment Assumption used in reporting
original issue discount for each series of bonds will be consistent with this
standard and will be disclosed in the related prospectus supplement. However,
none of the company, the master servicer or the trustee will make any
representation that the mortgage loans 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 bond will be the excess of
its stated redemption price at maturity over its issue price. The issue price of
a particular class of bonds will be the first cash price at which a substantial
amount of bonds of that class is sold (excluding sales to bond houses, brokers
and underwriters). If less than a substantial amount of a particular class of
bonds is sold for cash on or prior to the Closing Date, the issue price for that
class will be the fair market value of that class on the Closing Date. Under the
OID Regulations, the stated redemption price of a bond is equal to the total of
all payments to be made on the bond other than "qualified stated interest."
"Qualified stated interest" is interest that is unconditionally payable at least
annually (during the entire term of the instrument) at a single fixed rate, or
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 does not
operate in a manner that accelerates or defers interest payments on the bond.

         In the case of bonds 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 the bonds.
If the original issue discount rules apply to the bonds in a particular series,
the related prospectus supplement will describe the manner in which these rules
will be applied with respect to the bonds in that series that bear an adjustable
interest rate in preparing information returns to the bondholders and the IRS.

         The first interest payment on a bond may be made more than one month
after the date of issuance, which is a period longer than the subsequent monthly
intervals between interest payments. Assuming the "accrual period" (as defined
below) for original issue discount is each monthly period that ends on the day
prior to each 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 bond and accounted for as
original issue discount. Because interest on bonds 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 bonds.

         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 bond will reflect the
accrued interest. In such cases, information returns to the bondholders 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 the bond (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 the bond.
However, the OID Regulations state that all or some portion of the 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 bondholder.



                                       76




         Notwithstanding the general definition of original issue discount,
original issue discount on a bond will be considered to be de minimis if it is
less than 0.25% of the stated redemption price of the bond multiplied by its
weighted average life. For this purpose, the weighted average life of a bond is
computed as the sum of the amounts determined, as to each payment included in
the stated redemption price of the bond, by multiplying (1) the number of
complete years (rounding down for partial years) from the issue date until that
payment is expected to be made (presumably taking into account the Prepayment
Assumption) by (2) 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 the bond. 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 de minimis original issue discount attributable
to that bond and a fraction, the numerator of which is the amount of the
principal payment and the denominator of which is the outstanding stated
principal amount of the bond. The OID Regulations also would permit a bondholder
to elect to accrue de minimis original issue discount into income currently
based on a constant yield method. See "Taxation of Owners of Bonds--Market
Discount" below for a description of this election under the OID Regulations.

         If original issue discount on a bond is in excess of a de minimis
amount, the holder of the bond 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 the bond, including the purchase date but excluding the
disposition date. In the case of an original holder of a bond, the daily
portions of original issue discount will be determined as follows.

         As to each "accrual period," that is, each period that ends on a date
that corresponds to the day prior to each 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 the accrual
period. The portion of original issue discount that accrues in any accrual
period will equal the excess, if any, of (1) 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 bond, if any, in future periods and (b) the distributions made on
the bond during the accrual period of amounts included in the stated redemption
price, over (2) the adjusted issue price of the bond 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
bond will be received in future periods based on the mortgage loans being
prepaid at a rate equal to the Prepayment Assumption, (2) using a discount rate
equal to the original yield to maturity of the bond and (3) taking into account
events (including actual prepayments) that have occurred before the close of the
accrual period. For these purposes, the original yield to maturity of the bond
will be calculated based on its issue price and assuming that distributions on
the bond will be made in all accrual periods based on the mortgage loans being
prepaid at a rate equal to the Prepayment Assumption. The adjusted issue price
of a bond at the beginning of any accrual period will equal the issue price of
the bond, increased by the aggregate amount of original issue discount that
accrued with respect to the bond in prior accrual periods, and reduced by the
amount of any distributions made on the bond in prior accrual periods of amounts
included in the 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 that day.

         A subsequent purchaser of a bond that purchases a bond that is treated
as having been issued with original issue discount at a cost (excluding any
portion of the 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 the
bond. However, each such daily portion will be reduced, if the cost of the bond
is in excess of its "adjusted issue price," in proportion to the ratio the
excess bears to the aggregate original issue discount remaining to be accrued on
the bond. The adjusted issue price of a bond on any given day equals the sum of
(1) the adjusted issue price (or, in the case of the first accrual period, the
issue price) of the bond at the beginning of the accrual period which includes
that day and (2) the daily portions of original issue discount for all days
during the accrual period prior to that day.



                                       77




         MARKET DISCOUNT. A bondholder that purchases a bond at a market
discount, that is, in the case of a bond issued without original issue discount,
at a purchase price less than its remaining stated principal amount, or in the
case of a bond issued with original issue discount, at a purchase price less
than its adjusted issue price will recognize gain upon receipt of each
distribution representing stated redemption price. In particular, under Section
1276 of the Code such a bondholder generally will be required to allocate the
portion of each distribution representing stated redemption price first to
accrued market discount not previously included in income, and to recognize
ordinary income to that extent. A bondholder 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, the election will
apply to all market discount bonds acquired by the bondholder on or after the
first day of the first taxable year to which the election applies. In addition,
the OID Regulations permit a bondholder to elect to accrue all interest,
discount (including de minimis market or original issue discount) in income as
interest, and to amortize premium, based on a constant yield method. If such an
election were made with respect to a bond with market discount, the bondholder
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
the bondholder acquires during the taxable year of the election or thereafter,
and possibly previously acquired instruments. Similarly, a bondholder that made
this election for a bond 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 the bondholder owns or acquires. See
"Taxation of Owners of Bonds--Premium" below. Each of these elections to accrue
interest, discount and premium with respect to a bond on a constant yield method
or as interest would be irrevocable, except with the approval of the IRS.

         However, market discount with respect to a bond will be considered to
be de minimis for purposes of Section 1276 of the Code if the market discount is
less than 0.25% of the remaining stated redemption price of the bond 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 "Taxation of
Owners of Bonds--Interest and Original Issue Discount" above. This 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, the rules
described in the Committee Report apply. The Committee Report indicates that in
each accrual period market discount on bonds should accrue, at the bondholder's
option: (1) on the basis of a constant yield method, (2) in the case of a bond
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 bond as of the beginning of the accrual period, or (3) in the case of a
bond 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
bond at the beginning of the accrual period. Moreover, the Prepayment Assumption
used in calculating the accrual of original issue discount is also 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 these regulations might have on the tax treatment of a bond purchased at
a discount in the secondary market.

         To the extent that bonds 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 the discount would accrue if it were original
issue discount. Moreover, in any event a holder of a bond generally will be
required to treat a portion of any gain on the sale or exchange of the bond as
ordinary income to the extent of the market


                                       78




discount accrued to the date of disposition under one of the foregoing methods,
less any accrued market discount previously reported as ordinary income.

         Further, under Section 1277 of the Code a holder of a bond 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
bond 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 the taxable year and is, in general,
allowed as a deduction not later than the year in which the market discount is
includible in income. If a holder elects to include market discount in income
currently as it accrues on all market discount instruments acquired by the
holder in that taxable year or thereafter, the interest deferral rule described
above will not apply.

         PREMIUM. A bond purchased at a cost (excluding any portion of the 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 a bond may elect under Section 171 of the Code to amortize the premium
under the constant yield method over the life of the bond. If made, the 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 debt instrument, rather than as a
separate interest deduction. The OID Regulations also permit bondholders to
elect to include all interest, discount and premium in income based on a
constant yield method, further treating the bondholder as having made the
election to amortize premium generally. See "Taxation of Owners of Bonds--Market
Discount" above. 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 bonds without regard to
whether the bonds have original issue discount) will also apply in amortizing
bond premium under Section 171 of the Code. The use of an assumption that there
will be no prepayments might be required.

         REALIZED LOSSES. Under Section 166 of the Code, both corporate holders
of the bonds and noncorporate holders of the bonds that acquire the bonds 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 bonds become
wholly or partially worthless as the result of one or more realized losses on
the mortgage loans. However, it appears that a noncorporate holder that does not
acquire a bond in connection with a trade or business will not be entitled to
deduct a loss under Section 166 of the Code until the holder's bond 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 bond will be required to accrue interest and original
issue discount with respect to the bond, without giving effect to any reductions
in distributions attributable to defaults or delinquencies on the mortgage loans
or the bond underlying the bonds, as the case may be, until it can be
established this the reduction ultimately will not be recoverable. As a result,
the amount of taxable income reported in any period by the holder of a bond
could exceed the amount of economic income actually realized by that holder in
the period. Although the holder of a bond 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 this loss or reduction in
income.

         SALES OF BONDS. If a bond is sold, the selling bondholder will
recognize gain or loss equal to the difference between the amount realized on
the sale and its adjusted basis in the bond. The adjusted basis of a bond
generally will equal the cost of the bond to the bondholder, increased by income
reported by the bondholder with respect to the bond (including original issue
discount and market discount income) and reduced (but not below zero) by
distributions on the bond received by the bondholder and by any amortized
premium. Except as provided in the following three paragraphs, any such gain or
loss will be capital gain or loss, provided the bond is held as a capital asset
(generally, property held for investment) within the meaning of Section 1221 of
the Code.

         Gain recognized on the sale of a bond by a seller who purchased the
bond at a market discount will be taxable as ordinary income in an amount not
exceeding the portion of the discount that accrued during the period the bond
was held by the holder, reduced by any market discount included


                                       79




in income under the rules described above under "--Taxation of Owners of
Bonds--Market Discount" and "Premium."

         A portion of any gain from the sale of a bond that might otherwise be
capital gain may be treated as ordinary income to the extent that the bond 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 the same 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 the
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 the
net capital gain in total net investment income for the taxable year, for
purposes of the rule that limits the deduction of interest on indebtedness
incurred to purchase or carry property held for investment to a taxpayer's net
investment income.

         INFORMATION REPORTING. The Servicer is required to furnish or cause to
be furnished to each bondholder with each payment a statement setting forth the
amount of that payment allocable to principal on the bond and to interest
thereon. In addition, the Servicer is required to furnish or cause to be
furnished, within a reasonable time after the end of each calendar year, to each
bondholder who was a holder at any time during that year, a report indicating
such other customary factual information as the Servicer deems necessary to
enable holders of bonds to prepare their tax returns and will furnish comparable
information to the IRS as and when required by law to do so. If the bonds are
issued with OID, the Servicer will provide or cause to be provided to the IRS
and, as applicable, to the bondholder information statements with respect to OID
as required by the Code or as holders of those bonds may reasonably request from
time to time. If the bonds are issued with OID, those information reports, even
if otherwise accepted as accurate by the IRS, will in any event be accurate only
as to an initial bondholder which purchased its bond at the initial offering
price used in preparing those reports. Bondholders should consult their own tax
advisors to determine the amount of any OID and market discount includible in
income during a calendar year.

         As applicable, the bond information reports will include a statement of
the adjusted issue price of the bonds at the beginning of each Collection
Period. In addition, the reports will include information required by
regulations for computing the accrual of any market discount. Because exact
computation of the accrual of market discount on a constant yield method would
require information relating to the bondholder's purchase price that the
Servicer will not have, such regulations only require that information
pertaining to the appropriate proportionate method of accruing market discount
be provided. See "MARKET DISCOUNT" above.

         As applicable, the bond information reports will include a statement of
the adjusted issue price of the bond 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 would
require information relating to the holder's purchase price that the trust fund
may not have, Treasury regulations only require that information pertaining to
the appropriate proportionate method of accruing market discount be provided.
See "--Taxation of Owners of Bonds--Market Discount."

         BACKUP WITHHOLDING WITH RESPECT TO BONDS. Payments of interest and
principal, as well as payments of proceeds from the sale of the bonds, may be
subject to the "backup withholding tax" under Section 3406 of the Code if
recipients of the payments fail to furnish to the payor certain information,
including their taxpayer identification numbers, or otherwise fail to establish
an exemption from the backup withholding tax. Any amounts deducted and withheld
from a distribution to a recipient would be allowed as a credit against the
recipient's federal income tax. Furthermore, 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.


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         FOREIGN INVESTORS IN BONDS. A bondholder 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 bond
will not be subject to United States federal income or withholding tax in
respect of a distribution on a bond, provided that the holder complies to the
extent necessary with certain identification requirements, including delivery of
a statement, signed by the bondholder under penalties of perjury, certifying
that the bondholder is not a United States person and providing the name and
address of the bondholder and provided further that the non-United States Person
(i) does not own directly or indirectly 10% or more of the voting power of all
classes of stock in the Issuer entitled to vote, (ii) is not a bank that is
treated as receiving that interest "on an extension of credit made under a loan
agreement entered into in the ordinary course of its trade or business", or
(iii) is not a "controlled foreign corporation", within the meaning of section
957 of the Code, with respect to which the Issuer is a "related person", within
the meaning of section 881(c)(3)(C) of the Code. If the holder does not qualify
for exemption, distributions of interest, including distributions in respect of
accrued original issue discount, to the holder may be subject to a tax rate of
30%, subject to reduction under any applicable tax treaty, provided the
bondholder supplies at the time of its initial purchase, and at all subsequent
times as are required under the Treasury regulations, a properly executed IRS
Form W-8BEN to report its eligibility for that reduced rate or exemption.

         A bondholder that is not a U.S. Person will not be subject to U.S.
federal income tax on the gain realized on the sale, exchange or other
disposition of the bond unless (i) that bondholder is an individual who is
present in the United States for 183 days or more in the taxable year of sale,
exchange or other disposition and certain other conditions are met; (ii) the
gain is effectively connected with the conduct by the bondholder of a trade or
business within the United States and, if an income tax treaty applies, is
attributable to a United States permanent establishment of the bondholder; or
(iii) the bondholder is subject to certain rules applicable to expatriates.

         Interest on or gain from the sale, exchange of other disposition of a
bond received by a bondholder that is not a United States Person, which
constitutes income that is effectively connected with a United States trade or
business carried on by the bondholder, will not be subject to withholding tax,
but rather will be subject to United States federal income tax at the graduated
rates applicable to U.S. persons, PROVIDED the bondholder provides a properly
executed IRS Form W-8ECI, certifying that the income is, or is expected to be,
effectively connected with the conduct of a trade or business within the United
States of that bondholder and that this income is includible in the bondholder's
gross income for the taxable year. This statement must include, among other
things, the name and address of the bondholder, the bondholder's identifying
number and the trade or business with which the income is, or is expected to be,
effectively connected.

         Special rules apply to partnerships, estates and trusts, and in certain
circumstances certifications as to foreign status and other matters may be
required to be provided by partners and beneficiaries thereof.

         In addition, the foregoing rules will not apply to exempt a United
States shareholder of a controlled foreign corporation from taxation on the
United States shareholder's allocable portion of the interest income received by
the controlled foreign corporation.

         Further, it appears that a bond would not be included in the estate of
a non-resident alien individual and would not be subject to United States estate
taxes. However, bondholders who are non-resident alien individuals should
consult their tax advisors concerning this question.

GRANTOR TRUST FUNDS

         CLASSIFICATION OF GRANTOR TRUST FUNDS. On or prior to the date of the
related prospectus supplement with respect to the proposed issuance of each
series of Grantor Trust Certificates, Thacher Proffitt & Wood LLP, counsel to
the company, will deliver its opinion generally to the effect that, assuming
compliance with all provisions of the related indenture and servicing agreement,
the related Grantor Trust Fund will be classified as a grantor trust under
subpart E, part I of subchapter J of Chapter 1 of the Code and not as a
partnership or an association taxable as a corporation.



                                       81




         CHARACTERIZATION OF INVESTMENTS IN GRANTOR TRUST CERTIFICATES.

         GRANTOR TRUST FRACTIONAL INTEREST CERTIFICATES. In the case of Grantor
Trust Fractional Interest Certificates, except as disclosed in the related
prospectus supplement, counsel to the company will deliver an opinion that, in
general, Grantor Trust Fractional Interest Certificates will represent interests
in (1) "loans . . . secured by an interest in real property" within the meaning
of Section 7701(a)(19)(C)(v) of the Code; (2) "obligation[s] (including any
participation or Certificate of beneficial ownership therein) which [are]
principally secured by an interest in real property" within the meaning of
Section 860G(a)(3) of the Code; and (3) "real estate assets" within the meaning
of Section 856(c)(4)(A) of the Code. In addition, counsel to the company will
deliver an opinion that interest on Grantor Trust Fractional Interest
Certificates will to the same extent be considered "interest on obligations
secured by mortgages on real property or on interests in real property" within
the meaning of Section 856(c)(3)(B) of the Code.

         GRANTOR TRUST STRIP CERTIFICATES. Even if Grantor Trust Strip
Certificates evidence an interest in a Grantor Trust Fund consisting of mortgage
loans that are "loans . . . secured by an interest in real property" within the
meaning of Section 7701(a)(19)(C)(v) of the Code, and "real estate assets"
within the meaning of Section 856(c)(4)(A) of the Code, and the interest on
which is "interest on obligations secured by mortgages on real property" within
the meaning of Section 856(c)(3)(B) of the Code, it is unclear whether the
Grantor Trust Strip Certificates, and the income therefrom, will be so
characterized. However, the policies underlying these sections (namely, to
encourage or require investments in mortgage loans by thrift institutions and
real estate investment trusts) may suggest that this characterization is
appropriate. Counsel to the company will not deliver any opinion on these
questions. Prospective purchasers to which the characterization of an investment
in Grantor Trust Strip Certificates is material should consult their tax
advisors regarding whether the Grantor Trust Strip Certificates, and the income
therefrom, will be so characterized.

         The Grantor Trust Strip Certificates will be "obligation[s] (including
any participation or Certificate of beneficial ownership therein) which . .
..[are] principally secured by an interest in real property" within the meaning
of Section 860G(a)(3)(A) of the Code.

         TAXATION OF OWNERS OF GRANTOR TRUST FRACTIONAL INTEREST CERTIFICATES.
Holders of a particular series of Grantor Trust Fractional Interest Certificates
generally will be required to report on their federal income tax returns their
shares of the entire income from the mortgage loans (including amounts used to
pay reasonable servicing fees and other expenses) and will be entitled to deduct
their shares of any such reasonable servicing fees and other expenses. Because
of stripped interests, market or original issue discount, or premium, the amount
includible in income on account of a Grantor Trust Fractional Interest
Certificate may differ significantly from the amount distributable thereon
representing interest on the mortgage loans. Under Section 67 of the Code, an
individual, estate or trust holding a Grantor Trust Fractional Interest
Certificate directly or through some pass-through entities will be allowed a
deduction for the reasonable servicing fees and expenses only to the extent that
the aggregate of the holder's miscellaneous itemized deductions exceeds two
percent of the holder'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 (1) 3% of the excess of the individual's adjusted gross
income over the amount or (2) 80% of the amount of itemized deductions otherwise
allowable for the taxable year. The amount of additional taxable income
reportable by holders of Grantor Trust Fractional Interest Certificates who are
subject to the limitations of either Section 67 or Section 68 of the Code may be
substantial. Further, certificateholders (other than corporations) subject to
the alternative minimum tax may not deduct miscellaneous itemized deductions in
determining the holder's alternative minimum taxable income. Although it is not
entirely clear, it appears that in transactions in which multiple classes of
Grantor Trust Certificates (including Grantor Trust Strip Certificates) are
issued, the fees and expenses should be allocated among the classes of Grantor
Trust Certificates using a method that recognizes that each such class benefits
from the related services. In the absence of statutory or administrative
clarification as to the method to be used, it currently is intended to base
information returns or reports to the IRS and certificateholders on a method
that allocates the expenses among classes of Grantor Trust Certificates with
respect to each period based on the distributions made to each such class during
that period.



                                       82




         The federal income tax treatment of Grantor Trust Fractional Interest
Certificates of any series will depend on whether they are subject to the
"stripped bond" rules of Section 1286 of the Code. Grantor Trust Fractional
Interest Certificates may be subject to those rules if (1) a class of Grantor
Trust Strip Certificates is issued as part of the same series of certificates
or(2) the company or any of its affiliates retains (for its own account or for
purposes of resale) a right to receive a specified portion of the interest
payable on the mortgage loans. Further, the IRS has ruled that an unreasonably
high servicing fee retained by a seller or servicer will be treated as a
retained ownership interest in mortgages that constitutes a stripped coupon. For
purposes of determining what constitutes reasonable servicing fees for various
types of mortgages the IRS has established "safe harbors." The servicing fees
paid with respect to the mortgage loans for a series of Grantor Trust
Certificates may be higher than the "safe harbors" and, accordingly, may not
constitute reasonable servicing compensation. The related prospectus supplement
will include information regarding servicing fees paid to the master servicer,
any subservicer or their respective affiliates necessary to determine whether
the preceding "safe harbor" rules apply.

         IF STRIPPED BOND RULES APPLY. If the stripped bond rules apply, each
Grantor Trust Fractional Interest Certificate will be treated as having been
issued with "original issue discount" within the meaning of Section 1273(a) of
the Code, subject, however, to the discussion below regarding the treatment of
some stripped bonds as market discount bonds and the discussion regarding de
minimis market discount. See "--Taxation of Owners of Grantor Trust Fractional
Interest Certificates--Market Discount" below. Under the stripped bond rules,
the holder of a Grantor Trust Fractional Interest Certificate (whether a cash or
accrual method taxpayer) will be required to report interest income from its
Grantor Trust Fractional Interest Certificate for each month in an amount equal
to the income that accrues on the certificate in that month calculated under a
constant yield method, in accordance with the rules of the Code relating to
original issue discount.

         The original issue discount on a Grantor Trust Fractional Interest
Certificate will be the excess of the certificate's stated redemption price over
its issue price. The issue price of a Grantor Trust Fractional Interest
Certificate as to any purchaser will be equal to the price paid by the purchaser
for the Grantor Trust Fractional Interest Certificate. The stated redemption
price of a Grantor Trust Fractional Interest Certificate will be the sum of all
payments to be made on the certificate, other than "qualified stated interest,"
if any, as well as the certificate's share of reasonable servicing fees and
other expenses. See "--Taxation of Owners of Grantor Trust Fractional Interest
Certificates--If Stripped Bond Rules Do Not Apply" for a definition of
"qualified stated interest." In general, the amount of the income that accrues
in any month would equal the product of the holder's adjusted basis in the
Grantor Trust Fractional Interest Certificate at the beginning of the month (see
"Sales of Grantor Trust Certificates") and the yield of the Grantor Trust
Fractional Interest Certificate to the holder. This yield would be computed at
the rate (compounded based on the regular interval between distribution dates)
that, if used to discount the holder's share of future payments on the mortgage
loans, would cause the present value of those future payments to equal the price
at which the holder purchased the certificate. In computing yield under the
stripped bond rules, a certificateholder's share of future payments on the
mortgage loans will not include any payments made in respect of any ownership
interest in the mortgage loans retained by the company, the master servicer, any
subservicer or their respective affiliates, but will include the
certificateholder's share of any reasonable servicing fees and other expenses.

         To the extent the Grantor Trust Fractional Interest Certificates
represent an interest in any pool of debt instruments the yield on which may be
affected by reason of prepayments, Section 1272(a)(6) of the Code requires (1)
the use of a reasonable prepayment assumption in accruing original issue
discount and (2) adjustments in the accrual of original issue discount when
prepayments do not conform to the prepayment assumption. It is unclear whether
those provisions would be applicable to the Grantor Trust Fractional Interest
Certificates that do not represent an interest in any pool of debt instruments
the yield on which may be affected by reason of prepayments. It is also
uncertain, if a prepayment assumption is used, whether the assumed prepayment
rate would be determined based on conditions at the time of the first sale of
the Grantor Trust Fractional Interest Certificate or, with respect to any
holder, at the time of purchase of the Grantor Trust Fractional Interest
Certificate by that holder. Certificateholders are advised to consult their own
tax advisors concerning reporting original issue discount with respect to
Grantor Trust Fractional Interest


                                       83




Certificates and, in particular, whether a prepayment assumption should be used
in reporting original issue discount.

         In the case of a Grantor Trust Fractional Interest Certificate acquired
at a price equal to the principal amount of the mortgage loans allocable to the
certificate, the use of a prepayment assumption generally would not have any
significant effect on the yield used in calculating accruals of interest income.
In the case, however, of a Grantor Trust Fractional Interest Certificate
acquired at a discount or premium (that is, at a price less than or greater than
the principal amount, respectively), the use of a reasonable prepayment
assumption would increase or decrease the yield, and thus accelerate or
decelerate, respectively, the reporting of income.

         If a prepayment assumption is not used, then when a mortgage loan
prepays in full, the holder of a Grantor Trust Fractional Interest Certificate
acquired at a discount or a premium generally will recognize ordinary income or
loss equal to the difference between the portion of the prepaid principal amount
of the mortgage loan that is allocable to the certificate and the portion of the
adjusted basis of the certificate that is allocable to the certificateholder's
interest in the mortgage loan. If a prepayment assumption is used, it appears
that no separate item of income or loss should be recognized upon a prepayment.
Instead, a prepayment should be treated as a partial payment of the stated
redemption price of the Grantor Trust Fractional Interest Certificate and
accounted for under a method similar to that described for taking account of
original issue discount on Bonds. See "--General--Taxation of Owners of
Bonds--Interest and Original Issue Discount." It is unclear whether any other
adjustments would be required to reflect differences between an assumed
prepayment rate and the actual rate of prepayments.

         It is currently intended to base information reports or returns to the
IRS and certificateholders in transactions subject to the stripped bond rules on
a Prepayment Assumption that will be disclosed in the related prospectus
supplement and on a constant yield computed using a representative initial
offering price for each class of certificates. However, none of the company, the
master servicer or the trustee will make any representation that the mortgage
loans will in fact prepay at a rate conforming to the Prepayment Assumption or
any other rate and certificateholders should bear in mind that the use of a
representative initial offering price will mean that the information returns or
reports, even if otherwise accepted as accurate by the IRS, will in any event be
accurate only as to the initial certificateholders of each series who bought at
that price.

         Under Treasury regulation Section 1.1286-1, some stripped bonds are to
be treated as market discount bonds and, accordingly, any purchaser of such a
bond is to account for any discount on the bond as market discount rather than
original issue discount. This treatment only applies, however, if immediately
after the most recent disposition of the bond by a person stripping one or more
coupons from the bond and disposing of the bond or coupon (1) there is no
original issue discount (or only a de minimis amount of original issue discount)
or (2) the annual stated rate of interest payable on the original bond is no
more than one percentage point lower than the gross interest rate payable on the
original mortgage loan (before subtracting any servicing fee or any stripped
coupon). If interest payable on a Grantor Trust Fractional Interest Certificate
is more than one percentage point lower than the gross interest rate payable on
the mortgage loans, the related prospectus supplement will disclose that fact.
If the original issue discount or market discount on a Grantor Trust Fractional
Interest Certificate determined under the stripped bond rules is less than 0.25%
of the stated redemption price multiplied by the weighted average maturity of
the mortgage loans, then that original issue discount or market discount will be
considered to be de minimis. Original issue discount or market discount of only
a de minimis amount will be included in income in the same manneras de minimis
original issue and market discount described in "Characteristics of Investments
in Grantor Trust Certificates--If Stripped Bond Rules Do Not Apply" and"--Market
Discount" below.

         IF STRIPPED BOND RULES DO NOT APPLY. Subject to the discussion below on
original issue discount, if the stripped bond rules do not apply to a Grantor
Trust Fractional Interest Certificate, the certificateholder will be required to
report its share of the interest income on the mortgage loans in accordance with
the certificateholder's normal method of accounting. The original issue discount
rules will apply to a Grantor Trust Fractional Interest Certificate to the
extent it evidences an interest in mortgage loans issued with original issue
discount.


                                       84




         The original issue discount, if any, on the mortgage loans will equal
the difference between the stated redemption price of the mortgage loans and
their issue price. Under the OID Regulations, the stated redemption price is
equal to the total of all payments to be made on the mortgage loan other than
"qualified stated interest." "Qualified stated interest" is interest that is
unconditionally payable at least annually at a single fixed rate, or 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 does not
operate in a manner that accelerates or defers interest payments on the mortgage
loan. In general, the issue price of a mortgage loan will be the amount received
by the borrower from the lender under the terms of the mortgage loan, less any
"points" paid by the borrower, and the stated redemption price of a mortgage
loan will equal its principal amount, unless the mortgage loan provides for an
initial below-market rate of interest or the acceleration or the deferral of
interest payments. The determination as to whether original issue discount will
be considered to be de minimis will be calculated using the same test described
in the discussion of the Bonds. See "--General--Taxation of Owners of
Bonds--Interest and Original Issue Discount" above.

         In the case of mortgage loans bearing adjustable or variable interest
rates, the related prospectus supplement will describe the manner in which the
rules will be applied with respect to those mortgage loans by the master
servicer or the trustee in preparing information returns to the
certificateholders and the IRS.

         If original issue discount is in excess of a de minimis amount, all
original issue discount with respect to a mortgage loan will be required to be
accrued and reported in income each month, based on a constant yield.
Section1272(a)(6) of the Code requires that a prepayment assumption be made in
computing yield with respect to any pool of debt instruments the yield on which
may be affected by reason of prepayments. Accordingly, for certificates backed
by these pools, it is intended to base information reports and returns to the
IRS and certificateholders on the use of a prepayment assumption.
Certificateholders are advised to consult their own tax advisors concerning
whether a prepayment assumption should be used in reporting original issue
discount with respect to Grantor Trust Fractional Interest Certificates.
Certificateholders should refer to the related prospectus supplement with
respect to each series to determine whether and in what manner the original
issue discount rules will apply to mortgage loans in the series.

         A purchaser of a Grantor Trust Fractional Interest Certificate that
purchases the Grantor Trust Fractional Interest Certificate at a cost less than
the certificate's allocable portion of the aggregate remaining stated redemption
price of the mortgage loans held in the related trust fund will also be required
to include in gross income the certificate's daily portions of any original
issue discount with respect to the mortgage loans. However, each such daily
portion will be reduced, if the cost of the Grantor Trust Fractional Interest
Certificate to the purchaser is in excess of the certificate's allocable portion
of the aggregate "adjusted issue prices" of the mortgage loans held in the
related trust fund, approximately in proportion to the ratio the excess bears to
the certificate's allocable portion of the aggregate original issue discount
remaining to be accrued on the mortgage loans. The adjusted issue price of a
mortgage loan on any given day equals the sum of (1) the adjusted issue price
(or, in the case of the first accrual period, the issue price) of the mortgage
loan at the beginning of the accrual period that includes the day and (2) the
daily portions of original issue discount for all days during the accrual period
prior to the day. The adjusted issue price of a mortgage loan at the beginning
of any accrual period will equal the issue price of the mortgage loan, increased
by the aggregate amount of original issue discount with respect to the mortgage
loan that accrued in prior accrual periods, and reduced by the amount of any
payments made on the mortgage loan in prior accrual periods of amounts included
in its stated redemption price.

         In addition to its regular reports, the master servicer or the trustee,
except as provided in the related prospectus supplement, will provide to any
holder of a Grantor Trust Fractional Interest Certificate such information as
the holder may reasonably request from time to time with respect to original
issue discount accruing on Grantor Trust Fractional Interest Certificates. See
"Grantor Trust Reporting" below.

         MARKET DISCOUNT. If the stripped bond rules do not apply to the Grantor
Trust Fractional Interest Certificate, a certificateholder may be subject to the
market discount rules of Sections 1276


                                       85




through 1278 of the Code to the extent an interest in a mortgage loan is
considered to have been purchased at a "market discount," that is, in the case
of a mortgage loan issued without original issue discount, at a purchase price
less than its remaining stated redemption price (as defined above), or in the
case of a mortgage loan issued with original issue discount, at a purchase price
less than its adjusted issue price (as defined above). If market discount is in
excess of a de minimis amount (as described below), the holder generally will be
required to include in income in each month the amount of the discount that has
accrued (under the rules described in the next paragraph) through the month that
has not previously been included in income, but limited, in the case of the
portion of the discount that is allocable to any mortgage loan, to the payment
of stated redemption price on the mortgage loan that is received by (or, in the
case of accrual basis certificateholders, due to) the trust fund in that month.
A certificateholder may elect to include market discount in income currently as
it accrues (under a constant yield method based on the yield of the certificate
to the holder) rather than including it on a deferred basis in accordance with
the foregoing under rules similar to those described in "--Taxation of Owners of
Bonds--Market Discount" above.

         Section 1276(b)(3) of the Code authorized 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 such time as regulations are issued by the Treasury Department, some rules
described in the Committee Report will apply. Under those rules, in each accrual
period market discount on the mortgage loans should accrue, at the
certificateholder's option: (1) on the basis of a constant yield method, (2) in
the case of a mortgage loan 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 stated interest remaining
to be paid on the mortgage loan as of the beginning of the accrual period, or(3)
in the case of a mortgage loan 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 at the beginning of the accrual period. The prepayment
assumption, if any, used in calculating the accrual of original issue discount
is to be used in calculating the accrual of market discount. The effect of using
a prepayment assumption could be to accelerate the reporting of the discount
income. Because the regulations referred to in this paragraph have not been
issued, it is not possible to predict what effect the regulations might have on
the tax treatment of a mortgage loan purchased at a discount in the secondary
market.

         Because the mortgage loans will provide for periodic payments of stated
redemption price, the market discount may be required to be included in income
at a rate that is not significantly slower than the rate at which the discount
would be included in income if it were original issue discount.

         Market discount with respect to mortgage loans may be considered to be
de minimis and, if so, will be includible in income under de minimis rules
similar to those described above in "--General--Taxation of Owners of
Bonds--Interest and Original Issue Discount" with the exception that it is less
likely that a prepayment assumption will be used for purposes of these rules
with respect to the mortgage loans.

         Further, under the rules described in "--General--Taxation of Owners of
Bonds--Market Discount," above, any discount that is not original issue discount
and exceeds a de minimis amount may require the deferral of interest expense
deductions attributable to accrued market discount not yet includible in income,
unless an election has been made to report market discount currently as it
accrues. This rule applies without regard to the origination dates of the
mortgage loans.

         PREMIUM. If a certificateholder is treated as acquiring the underlying
mortgage loans at a premium, that is, at a price in excess of their remaining
stated redemption price, the certificateholder may elect under Section 171 of
the Code to amortize using a constant yield method the portion of the premium
allocable to mortgage loans. Amortizable premium is treated as an offset to
interest income on the related debt instrument, rather than as a separate
interest deduction. However, premium allocable to mortgage loans for which an
amortization election is not made, should be allocated among the payments of
stated redemption price on the mortgage loan and be allowed as a deduction as
these payments are made (or, for a certificateholder using the accrual method of
accounting, when the payments of stated redemption price are due).



                                       86




         It is unclear whether a prepayment assumption should be used in
computing amortization of premium allowable under Section 171 of the Code. If
premium is not subject to amortization using a prepayment assumption and a
mortgage loan prepays in full, the holder of a Grantor Trust Fractional Interest
Certificate acquired at a premium should recognize a loss, equal to the
difference between the portion of the prepaid principal amount of the mortgage
loan that is allocable to the certificate and the portion of the adjusted basis
of the certificate that is allocable to the mortgage loan. If a prepayment
assumption is used to amortize premium, it appears that such a loss would be
unavailable. Instead, if a prepayment assumption is used, a prepayment should be
treated as a partial payment of the stated redemption price of the Grantor Trust
Fractional Interest Certificate and accounted for under a method similar to that
described for taking account of original issue discount on the Bonds. See
"General--Taxation of Owners of Bonds--Interest and Original Issue discount." It
is unclear whether any other adjustments would be required to reflect
differences between the prepayment assumption used, and the actual rate of
prepayments.

         TAXATION OF OWNERS OF GRANTOR TRUST STRIP CERTIFICATES. The "stripped
coupon" rules of Section 1286 of the Code will apply to the Grantor Trust Strip
Certificates. Except as described above in "Characterization of Investments in
Grantor Trust Certificates--If Stripped Bond Rules Apply," no regulations or
published rulings under Section 1286 of the Code have been issued and some
uncertainty exists as to how it will be applied to securities such as the
Grantor Trust Strip Certificates. Accordingly, holders of Grantor Trust Strip
Certificates should consult their own tax advisors concerning the method to be
used in reporting income or loss with respect to the certificates.

         The OID Regulations do not apply to "stripped coupons," although they
provide general guidance as to how the original issue discount sections of the
Code will be applied. In addition, the discussion below is subject to the
discussion under "--Possible Application of Contingent Payment Rules" and
assumes that the holder of a Grantor Trust Strip Certificate will not own any
Grantor Trust Fractional Interest Certificates.

         Under the stripped coupon rules, it appears that original issue
discount will be required to be accrued in each month on the Grantor Trust Strip
Certificates based on a constant yield method. In effect, each holder of Grantor
Trust Strip Certificates would include as interest income in each month an
amount equal to the product of the holder's adjusted basis in the Grantor Trust
Strip Certificate at the beginning of that month and the yield of the Grantor
Trust Strip Certificate to the holder. The yield would be calculated based on
the price paid for that Grantor Trust Strip Certificate by its holder and the
payments remaining to be made thereon at the time of the purchase, plus an
allocable portion of the servicing fees and expenses to be paid with respect to
the mortgage loans. See "Characterization of Investments in Grantor Trust
Certificates--If Stripped Bond Rules Apply" above.

         As noted above, Section 1272(a)(6) of the Code requires that a
prepayment assumption be used in computing the accrual of original issue
discount with respect to some categories of debt instruments, and that
adjustments be made in the amount and rate of accrual of the discount when
prepayments do not conform to the prepayment assumption. To the extent the
Grantor Trust Strip Certificates represent an interest in any pool of debt
instruments the yield on which may be affected byreason of prepayments, those
provisions will apply to the Grantor Trust Strip Certificates for taxable years
beginning after August 5, 1997. It is unclear whether those provisions would be
applicable to the Grantor Trust Strip Certificates that do not represent an
interest in any such pool or for taxable years beginning prior to August 5,
1997, or whether use of a prepayment assumption may be required or permitted in
the absence of these provisions. It is also uncertain, if a prepayment
assumption is used, whether the assumed prepayment rate would be determined
based on conditions at the time of the first sale of the Grantor Trust Strip
Certificate or, with respect to any subsequent holder, at the time of purchase
of the Grantor Trust Strip Certificate by that holder.

         The accrual of income on the Grantor Trust Strip Certificates will be
significantly slower if a prepayment assumption is permitted to be made than if
yield is computed assuming no prepayments. It currently is intended to base
information returns or reports to the IRS and certificateholders on the
prepayment Assumption disclosed in the related prospectus supplement and on a
constant yield computed using a representative initial offering price for each
class of certificates. However, none of the company, the master servicer or the
trustee will make any representation that the mortgage


                                       87




loans will in fact prepay at a rate conforming to the Prepayment Assumption or
at any other rate and certificateholders should bear in mind that the use of a
representative initial offering price will mean that the information returns or
reports, even if otherwise accepted as accurate by the IRS, will in any event be
accurate only as to the initial certificateholders of each series who bought at
that price. Prospective purchasers of the Grantor Trust Strip Certificates
should consult their own tax advisors regarding the use of the Prepayment
Assumption.

         It is unclear under what circumstances, if any, the prepayment of a
mortgage loan will give rise to a loss to the holder of a Grantor Trust Strip
Certificate. If a Grantor Trust Strip Certificate is treated as a single
instrument (rather than an interest in discrete mortgage loans) and the effect
of prepayments is taken into account in computing yield with respect to the
Grantor Trust Strip Certificate, it appears that no loss may be available as a
result of any particular prepayment unless prepayments occur at a rate faster
than the Prepayment Assumption. However, if a Grantor Trust Strip Certificate is
treated as an interest in discrete mortgage loans, or if the Prepayment
Assumption is not used, then when a mortgage loan is prepaid, the holder of a
Grantor Trust Strip Certificate should be able to recognize a loss equal to the
portion of the adjusted issue price of the Grantor Trust Strip Certificate that
is allocable to the mortgage loan.

         POSSIBLE APPLICATION OF CONTINGENT PAYMENT RULES. The coupon stripping
rules' general treatment of stripped coupons is to regard them as newly issued
debt instruments in the hands of each purchaser. To the extent that payments on
the Grantor Trust Strip Certificates would cease if the mortgage loans were
prepaid in full, the Grantor Trust Strip Certificates could be considered to be
debt instruments providing for contingent payments. Under the OID Regulations,
debt instruments providing for contingent payments are not subject to the same
rules as debt instruments providing for noncontingent payments. Regulations were
promulgated on June 14, 1996, regarding contingent payment debt instruments (the
"Contingent Payment Regulations"), but it appears that Grantor Trust Strip
Certificates, to the extent subject to Section 1272(a)(6) of the Code, as
described above, or due to their similarity to other mortgage-backed securities
(such as debt instruments subject to Section 1272(a)(6) of the Code) that are
expressly excepted from the application of the Contingent Payment Regulations,
are or may be excepted from these regulations. Like the OID Regulations, the
Contingent Payment Regulations do not specifically address securities, such as
the Grantor Trust Strip Certificates, that are subject to the stripped bond
rules of Section 1286 of the Code.

         If the contingent payment rules under the Contingent Payment
Regulations were to apply, the holder of a Grantor Trust Strip Certificate would
be required to apply the "noncontingent bond method." Under the "noncontingent
bond method," the issuer of a Grantor Trust Strip Certificate determines a
projected payment schedule on which interest will accrue. Holders of Grantor
Trust Strip Certificates are bound by the issuer's projected payment schedule.
The projected payment schedule consists of all noncontingent payments and a
projected amount for each contingent payment based on the projected yield (as
described below) of the Grantor Trust Strip Certificate. The projected amount of
each payment is determined so that the projected payment schedule reflects the
projected yield. The projected amount of each payment must reasonably reflect
the relative expected values of the payments to be received by the holder of a
Grantor Trust Strip Certificate. The projected yield referred to above is a
reasonable rate, not less than the "applicable Federal rate" that, as of the
issue date, reflects general market conditions, the credit quality of the
issuer, and the terms and conditions of the mortgage loans. The holder of a
Grantor Trust Strip Certificate would be required to include as interest income
in each month the adjusted issue price of the Grantor Trust Strip Certificate at
the beginning of the period multiplied by the projected yield, and would add to,
or subtract from, the income any variation between the payment actually received
in that month and the payment originally projected to be made in that month.

         Assuming that a prepayment assumption were used, if the Contingent
Payment Regulations or their principles were applied to Grantor Trust Strip
Certificates, the amount of income reported with respect thereto would be
substantially similar to that described under "Taxation of Owners of Grantor
Trust Strip Certificates". Certificateholders should consult their tax advisors
concerning the possible application of the contingent payment rules to the
Grantor Trust Strip Certificates.

         SALES OF GRANTOR TRUST CERTIFICATES. Any gain or loss equal to the
difference between the amount realized on the sale or exchange of a Grantor
Trust Certificate and its adjusted basis,


                                       88




recognized on the sale or exchange of a Grantor Trust Certificate by an investor
who holds the Grantor Trust Certificate as a capital asset, will be capital gain
or loss, except to the extent of accrued and unrecognized market discount, which
will be treated as ordinary income, and (in the case of banks and other
financial institutions)except as provided under Section 582(c) of the Code. The
adjusted basis of a Grantor Trust Certificate generally will equal its cost,
increased by any income reported by the seller (including original issue
discount and market discount income) and reduced (but not below zero) by any
previously reported losses, any amortized premium and by any distributions with
respect to the Grantor Trust Certificate.

         Gain or loss from the sale of a Grantor Trust Certificate may be
partially or wholly ordinary and not capital in some circumstances. Gain
attributable to accrued and unrecognized market discount will be treated as
ordinary income, as will gain or loss recognized by banks and other financial
institutions subject Section 582(c) of the Code. Furthermore, a portion of any
gain that might otherwise be capital gain may be treated as ordinary income to
the extent that the Grantor Trust 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 the same 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 the transaction. The amount of gain 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 the net capital gain
in total net investment income for that taxable year, for purposes of the rule
that limits the deduction of interest on indebtedness incurred to purchase or
carry property held for investment to a taxpayer's net investment income.

         GRANTOR TRUST REPORTING. The master servicer or the trustee will
furnish to each holder of a Grantor Trust Fractional Interest Certificate with
each distribution a statement setting forth the amount of the distribution
allocable to principal on the underlying mortgage loans and to interest thereon
at the related pass-through rate. In addition, the master servicer or the
trustee will furnish, within a reasonable time after the end of each calendar
year, to each holder of a Grantor Trust Certificate who was a holder at any time
during that year, information regarding the amount of servicing compensation
received by the master servicer and subservicer (if any) and any other customary
factual information as the master servicer or the trustee deems necessary or
desirable to enable holders of Grantor Trust Certificates to prepare their tax
returns and will furnish comparable information to the IRS as and when required
by law to do so. Because the rules for accruing discount and amortizing premium
with respect to the Grantor Trust Certificates are uncertain in various
respects, there is no assurance the IRS will agree with the trust fund's
information reports of these items of income and expense. Moreover, these
information reports, even if otherwise accepted as accurate by the IRS, will in
any event be accurate only as to the initial certificateholders that bought
their certificates at the representative initial offering price used in
preparing the reports.

         Except as disclosed in the related prospectus supplement, the
responsibility for complying with the foregoing reporting rules will be borne by
the master servicer or the trustee.

         BACKUP WITHHOLDING. In general, the rules described in
"--General--Backup Withholding with Respect to the Bonds" will also apply to
Grantor Trust Certificates.

         FOREIGN INVESTORS. In general, the discussion with respect to the Bonds
in "General--Foreign Investors in Bonds" applies to Grantor Trust Certificates
except that Grantor Trust Certificates will, except as disclosed in the related
prospectus supplement, be eligible for exemption from U.S. withholding tax,
subject to the conditions described in the discussion.

         To the extent that interest on a Grantor Trust Certificate would be
exempt under Sections 871(h)(1) and 881(c) of the Code from United States
withholding tax, and the Grantor Trust Certificate is not held in connection
with a certificateholder's trade or business in the United States,


                                       89




the Grantor Trust Certificate will not be subject to United States estate taxes
in the estate of a non- resident alien individual.

                        STATE AND OTHER TAX CONSEQUENCES

         In addition to the federal income tax consequences described in
"Federal Income Tax Consequences", potential investors should consider the state
and local tax consequences of the acquisition, ownership, and disposition of the
bonds offered under this prospectus and the prospectus supplement. 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 own tax advisors with respect to the various state and other tax
consequences of investments in the bonds offered under this prospectus and the
prospectus supplement.

                              ERISA CONSIDERATIONS

         Sections 404 and 406 of ERISA impose fiduciary and prohibited
transaction restrictions on ERISA Plans and on various other retirement plans
and arrangements, including bank collective investment funds and insurance
company general and separate accounts in which ERISA Plans are invested. Section
4975 of the Code imposes essentially the same prohibited transaction
restrictions on Tax Favored Plans. ERISA and the Code prohibit a broad range of
transactions involving assets of Plans and Parties in Interest, unless a
statutory or administrative exemption is available with respect to any such
transaction.

         Some employee benefit plans, including governmental plans (as defined
in Section 3(32) of ERISA), and, if no election has been made under Section
410(d) of the Code, church plans (as defined in Section 3(33) of ERISA) are not
subject to the ERISA requirements. Accordingly, assets of these plans may be
invested in the bonds without regard to the ERISA considerations described
below, subject to the provisions of other applicable federal, state and local
law. Any such plan which is qualified 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.

         ERISA generally imposes on Plan fiduciaries general fiduciary
requirements, including those of investment prudence and diversification and the
requirement that a Plan's investments be made in accordance with the documents
governing the Plan. Any person who has discretionary authority or control with
respect to the management or disposition of Plan Assets and any person who
provides investment advice with respect to Plan Assets for a fee is a fiduciary
of the investing Plan. If the mortgage loans and other assets included in the
trust fund were to constitute Plan Assets, then any party exercising management
or discretionary control with respect to those Plan Assets may be deemed to be a
Plan "fiduciary," and thus subject to the fiduciary responsibility provisions of
ERISA and the prohibited transaction provisions of ERISA and Section 4975 of the
Code with respect to any investing Plan. In addition, the acquisition or holding
of bonds by or on behalf of a Plan 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 unless a statutory or administrative exemption is available.
Further, ERISA and the Code prohibit a broad range of transactions involving
Plan Assets and persons, called Parties in Interest unless a statutory or
administrative exemption is available. Some Parties in Interest that participate
in a prohibited transaction may be subject to a penalty (or an excise tax)
imposed under Section 502(i) of ERISA or Section 4975 of the Code, unless a
statutory or administrative exemption is available with respect to any
transaction of this sort.

         Some transactions involving the trust fund might be deemed to
constitute prohibited transactions under ERISA and the Code with respect to a
Plan that purchases the bonds, if the mortgage loans and other assets included
in a trust fund are deemed to be assets of the Plan. The DOL has promulgated the
DOL Regulations concerning whether or not a Plan's assets, or "Plan Assets"
would be deemed to include an interest in the underlying assets of an entity,
including a trust fund, for purposes of applying the general fiduciary
responsibility provisions of ERISA and the prohibited transaction provisions of
ERISA and the Code. Under the DOL Regulations, generally, when a Plan acquires
an "equity interest" in another entity (such as the trust fund), the underlying
assets of that entity may be considered to be Plan Assets unless an exception
applies. Exceptions contained in the


                                       90




DOL Regulations provide that a Plan's assets will not include an undivided
interest in each asset of an entity in which the Plan makes an equity investment
if: (1) the entity is an operating company; (2) the equity investment made by
the Plan is either a "publicly-offered security" that is "widely held," both as
defined in the DOL Regulations, or a security issued by an investment company
registered under the Investment Company Act of 1940, as amended; or (3) Benefit
Plan Investors do not own 25% or more in value of any class of equity securities
issued by the entity. In addition, the DOL Regulations provide that the term
"equity interest" means any interest in an entity other than an instrument which
is treated as indebtedness under applicable local law and which has no
"substantial equity features." Under the DOL Regulations, Plan Assets will be
deemed to include an interest in the instrument evidencing the equity interest
of a Plan (such as a bond with "substantial equity features"), and, because of
the factual nature of some of the rules set forth in the DOL Regulations, Plan
Assets may be deemed to include an interest in the underlying assets of the
entity in which a Plan acquires an interest (such as the trust fund). Without
regard to whether the bonds are characterized as equity interests, the purchase,
sale and holding of bonds by or on behalf of a Plan could be considered to give
rise to a prohibited transaction if the Issuer, the trustee or any of their
respective affiliates is or becomes a Party in Interest with respect to the
Plan. Neither Plans nor persons investing Plan Assets should acquire or hold
bonds in reliance upon the availability of any exception under the DOL
Regulations.

         The DOL has issued Exemptions to some underwriters, which generally
exempts from the application of the prohibited transaction provisions of Section
406 of ERISA, and the excise taxes imposed on those prohibited transactions
pursuant to Section 4975(a) and (b) of the Code, some transactions, among
others, relating to the servicing and operation of mortgage pools and the
initial purchase, holding and subsequent resale of mortgage-backed bonds or
other "securities" underwritten by an Underwriter, as defined below, provided
that the conditions set forth in the Exemption are satisfied. For purposes of
this Section "ERISA Considerations", the term "Underwriter" shall include (1)
the underwriter, (2) any person directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control with the
underwriter and (3) any member of the underwriting syndicate or selling group of
which a person described in (1) or (2) is a manager or co- manager with respect
to a class of securities.

         The Exemption sets forth seven general conditions which must be
satisfied for the Exemption to apply. First, the acquisition of bonds 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 bonds evidencing rights and interests that are not
subordinated to the rights and interests evidenced by other bonds of the same
trust, unless none of the mortgage loans has a loan-to- value ratio or combined
loan-to-value ratio at the date of issuance of the bonds that exceeds 100%.
Third, the bonds at the time of acquisition by a Plan or with Plan Assets must
be rated in one of the four highest generic rating categories by an Exemption
Rating Agency. However, the bonds must be rated in one of the two highest
generic categories by an Exemption Rating Agency if the loan-to-value ratio or
combined loan-to-value ratio of any one- to four-family residential mortgage
loan or home equity loan held in the trust exceeds 100% but does not exceed 125%
at the date of issuance of the bonds, and in that case the Exemption will not
apply: (1) to any of the bonds if any mortgage loan or other asset held in the
trust (other than a one- to four-family residential mortgage loan or home equity
loan) has a loan-to-value ratio or combined loan-to-value ratio that exceeds
100% at the Closing Date or (2) to any subordinate bonds. Fourth, the trustee
cannot be an affiliate of any member of the Restricted Group (which consists of
any Underwriter, the master servicer, the special servicer, any subservicer, the
company and any officer with respect to assets included in the trust fund
consisting of more than 5% of the aggregate unamortized principal balance of the
assets in the trust fund as of the date of initial issuance of the securities)
other than the underwriter. Fifth, the sum of all payments made to and retained
by the Underwriter(s) must represent not more than reasonable compensation for
underwriting the bonds; 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 the obligations; and the sum of
all payments made to and retained by the master servicer, the special servicer
and any subservicer must represent not more than reasonable compensation for the
person's services under the related Agreement and reimbursement of the person's
reasonable expenses in connection therewith. Sixth, 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. Seventh, for Issuers
other than certain trusts, the


                                       91




documents establishing the Issuer and governing the transaction must contain
certain provisions as described in the Exemption intended to protect the assets
of the Issuer from creditors of the Company. In addition, except as otherwise
specified in the accompanying prospectus supplement, the exemptive relief
afforded by the Exemption may not apply to any bonds where the related trust
contains a swap, a yield maintenance agreement or a pre-funding arrangement
unless they meet certain conditions.

         The Exemption also requires that the trust fund meet the following
requirements: (1) the trust fund must consist solely of assets of the type that
have been included in other investment pools; (2) bonds evidencing interests in
the other investment pools must have been rated in one of the four highest
generic categories of one of the Exemption Rating Agencies for at least one year
prior to the acquisition of bonds by or on behalf of a Plan or with Plan Assets;
and (3) bonds evidencing interests in the other investment pools must have been
purchased by investors other than Plans for at least one year prior to any
acquisition of bonds by or on behalf of a Plan or with Plan Assets.

         A fiduciary of a Plan or any person investing Plan Assets to purchase a
bond must make its own determination that the conditions set forth above will be
satisfied with respect to the bond.

         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(a) of ERISA, and 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 or transfer of bonds in the initial
issuance of the bonds or the direct or indirect acquisition or disposition in
the secondary market of bonds by a Plan or with Plan Assets or the continued
holding of bonds acquired by a Plan or with Plan Assets pursuant to either of
the foregoing. However, no exemption is provided from the restrictions of
Sections 406(a)(1)(E), 406(a)(2) and 407 of ERISA for the acquisition or holding
of a bond on behalf of an "Excluded Plan" by any person who has discretionary
authority or renders investment advice with respect to the assets of an Excluded
Plan. For purposes of the bonds, an Excluded Plan is a Plan sponsored by any
member of the Restricted Group.

         If the 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 excise taxes imposed by Sections 4975(a)
and (b) of the Code by reason of Section 4975(c)(1)(E) of the Code, in
connection with (1) the direct or indirect sale, exchange or transfer of bonds
in the initial issuance of bonds 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 Plan Assets in the securities is (a) a
mortgagor with respect to 5% or less of the fair market value of the trust fund
assets or (b) an affiliate of such a person, (2) the direct or indirect
acquisition or disposition in the secondary market of securities by a Plan or
with Plan Assets and (3) the continued holding of securities acquired by a Plan
or with Plan Assets pursuant to either of the foregoing.

         Further, if the 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 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
trust fund. The company expects that the specific conditions of the Exemption
required for this purpose will be satisfied with respect to the securities 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 trust fund, provided that the general conditions of the Exemption are
satisfied.

         The Exemption also may provide an exemption from the application of the
prohibited transaction provisions of Sections 406(a) and 407(a) of ERISA, and
the excise 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 the restrictions are deemed to
otherwise apply merely because a person is deemed to be a Party in Interest with
respect to an investing Plan by virtue of providing services to the Plan (or by
virtue of having a specified relationship to such a person) solely as a result
of the Plan's ownership of securities.


                                       92




         The Exemptions extend exemptive relief to mortgage-backed and
asset-backed bonds transactions using pre-funding accounts for trusts issuing
bonds. With respect to the bonds, the Exemptions will generally allow mortgage
loans supporting payments to bondholders, and having a value equal to no more
than 25% of the total principal amount of the bonds being offered by a trust
fund, to be transferred to the trust fund within the Pre-Funding Period instead
of requiring that all the mortgage loans be either identified or transferred on
or before the Closing Date. In general, the relief applies to the purchase, sale
and holding of bonds which otherwise qualify for the Exemption, provided that
the following general conditions are met:

         o        the ratio of the amount allocated to the pre-funding account
                  to the total principal amount of the bonds being offered must
                  be less than or equal to 25%;

         o        all additional mortgage loans transferred to the related trust
                  fund after the Closing Date must meet the same terms and
                  conditions for eligibility as the original mortgage loans used
                  to create the trust fund, which terms and conditions have been
                  approved by one of the Exemption Rating Agencies;

         o        the transfer of the additional mortgage loans to the trust
                  fund during the Pre-Funding Period must not result in the
                  bonds to be covered by the Exemptions receiving a lower credit
                  rating from an Exemption Rating Agency upon termination of the
                  Pre-Funding Period than the rating that was obtained at the
                  time of the initial issuance of the bonds by the trust fund;

         o        solely as a result of the use of pre-funding, the weighted
                  average annual percentage interest rate for the mortgage loans
                  included in the related trust fund on the Closing Date and all
                  additional mortgage loans transferred to the related trust
                  fund after the Closing Date at the end of the Pre- Funding
                  Period must not be more than 100 basis points lower than the
                  rate for the mortgage loans which were transferred to the
                  trust fund on the Closing Date;

         o        either:

                           (1) the characteristics of the additional mortgage
                  loans transferred to the related trust fund after the Closing
                  Date must be monitored by an insurer or other credit support
                  provider which is independent of the company; or

                           (2) an independent accountant retained by the company
                  must provide the company with a letter (with copies provided
                  to the Exemption Rating Agency rating the bonds, the
                  Underwriter and the trustee) stating whether or not the
                  characteristics of the additional mortgage loans transferred
                  to the related trust fund after the Closing Date conform to
                  the characteristics described in the prospectus or prospectus
                  supplement and/or agreement. In preparing the letter, the
                  independent accountant must use the same type of procedures as
                  were applicable to the mortgage loans which were transferred
                  to the trust fund as of the Closing Date;

         o        the Pre-Funding Period must end no later than three months or
                  90 days after the Closing Date or earlier in some
                  circumstances if the pre-funding accounts falls below the
                  minimum level specified in the Agreement or an event of
                  default occurs;

         o        amounts transferred to any pre-funding accounts and/or
                  capitalized interest account used in connection with the
                  pre-funding may be invested only in investments which are
                  permitted by the Exemption Rating Agencies rating the bonds
                  and must:

                           (1) be direct obligations of, or obligations fully
                  guaranteed as to timely payment of principal and interest by,
                  the United States or any agency or instrumentality thereof
                  (provided that the obligations are backed by the full faith
                  and credit of the United States); or



                                       93




                           (2) have been rated (or the obligor has been rated)
                  in one of the three highest generic rating categories by one
                  of the Exemption Rating Agencies ("ERISA Permitted
                  Investments");

         o        the prospectus or prospectus supplement must describe the
                  duration of the Pre- Funding Period;

         o        the trustee (or any agent with which the trustee contracts to
                  provide trust services) must be a substantial financial
                  institution or trust company experienced in trust activities
                  and familiar with its duties, responsibilities and liabilities
                  with ERISA. The trustee, as legal owner of the trust fund,
                  must enforce all the rights created in favor of bondholders of
                  the trust fund, including employee benefit plans subject to
                  ERISA.

         In addition to the Exemption, a Plan fiduciary or other Plan Asset
investor should consider any available class exemptions granted by the DOL,
which may provide relief from some of the prohibited transaction provisions of
ERISA and the related excise tax provisions of the Code, including PTCE 83-1,
regarding transactions involving mortgage pool investment trusts; PTCE 84-14,
regarding transactions effected by a "qualified professional asset manager";
PTCE 90-1, regarding transactions by insurance company pooled separate accounts;
PTCE 91-38, regarding investments by bank collective investment funds; PTCE
95-60, regarding transactions by insurance company general accounts; and PTCE
96-23, regarding transactions effected by an "in-house asset manager."

         Insurance companies contemplating the investment of general account
assets in the bonds should consult with their legal advisors with respect to the
applicability of Section 401(c) of ERISA. The DOL issued final regulations under
Section 401(c) which became effective on July 5, 2001.

REPRESENTATION FROM PLANS INVESTING IN BONDS WITH "SUBSTANTIAL EQUITY FEATURES"
OR NON- EXEMPT BONDS

         Except as otherwise provided in the prospectus supplement, because the
exemptive relief afforded by the Exemption (or any similar exemption that might
be available) will not apply to the purchase, sale or holding of certain bonds,
such as bonds with "substantial equity features," subordinate bonds in trusts
containing mortgage loans with loan-to-value ratios in excess of 100% and any
bonds which are not rated in one of the four highest generic rating categories
by the Exemption Rating Agencies, the prospectus supplement may provide that
transfers of any the bonds to a Plan, to a trustee or other person acting on
behalf of any Plan, or to any other person investing Plan Assets to effect the
acquisition will not be registered by the trustee unless the transferee provides
the company, the trustee and the master servicer with an opinion of counsel
satisfactory to the company, the trustee (or Indenture Trustee in the case of
transfer of bonds) and the master servicer, which opinion will not be at the
expense of the company, the trustee (or the Indenture Trustee in the case of the
transfer of bonds) or the master servicer, that the purchase of the bonds by or
on behalf of the Plan is permissible under applicable law, will not constitute
or result in any non- exempt prohibited transaction under ERISA or Section 4975
of the Code and will not subject the company, the trustee (or the indenture
trustee in the case of the transfer of bonds) or the master servicer to any
obligation in addition to those undertaken in the related Agreement.

TAX EXEMPT INVESTORS

         A Plan that is exempt from federal income taxation pursuant to Section
501 of the Code nonetheless will be subject to federal income taxation to the
extent that its income is "unrelated business taxable income" within the meaning
of Section 512 of the Code.

CONSULTATION WITH COUNSEL

         There can be no assurance that the Exemptions or any other DOL
exemption will apply with respect to any particular Plan that acquires the bonds
or, even if all the conditions specified therein were satisfied, that any such
exemption would apply to transactions involving the trust fund. Prospective Plan
investors should consult with their legal counsel concerning the impact of ERISA
and the Code and the potential consequences to their specific circumstances
prior to making an


                                       94




investment in the bonds. Neither the company, the trustees, the master servicer
nor any of their respective affiliates will make any representation to the
effect that the bonds satisfy all legal requirements with respect to the
investment therein by Plans generally or any particular Plan or to the effect
that the bonds are an appropriate investment for Plans generally or any
particular Plan.

         BEFORE PURCHASING A BOND, A FIDUCIARY OF A PLAN OR OTHER PLAN ASSET
INVESTOR SHOULD ITSELF CONFIRM THAT (A) ALL THE SPECIFIC AND GENERAL CONDITIONS
SET FORTH IN THE EXEMPTION, ONE OF THE CLASS EXEMPTIONS OR SECTION 401(C) OF
ERISA WOULD BE SATISFIED AND (B) IN THE CASE OF A BOND PURCHASED UNDER THE
EXEMPTION, THE BOND CONSTITUTES A "CERTIFICATE" FOR PURPOSES OF THE EXEMPTION.
IN ADDITION TO MAKING ITS OWN DETERMINATION AS TO THE AVAILABILITY OF THE
EXEMPTIVE RELIEF PROVIDED IN THE EXEMPTION, ONE OF THE CLASS EXEMPTIONS OR
SECTION 401(C) OF ERISA, THE PLAN FIDUCIARY SHOULD CONSIDER ITS GENERAL
FIDUCIARY OBLIGATIONS UNDER ERISA IN DETERMINING WHETHER TO PURCHASE THE BONDS
ON BEHALF OF A PLAN.

                            LEGAL INVESTMENT MATTERS

         Each class of bonds offered by this prospectus 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. If so specified in the
related prospectus supplement, each such class 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 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
theentities. 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 the legislation only to the
extent provided therein. Some States have 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 the securities, so long
as the contractual commitment was made or the securities acquired prior to the
enactment of the 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 the
securities, and national banks may purchase the securities for their own account
without regard to the limitations generally applicable to investment securities
set forth in 12 U.S.C. 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 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
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 offered bonds
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


                                       95




established guidelines for the investment by savings institutions in certain
"high-risk" mortgage derivative securities and limitations on the use of the
securities by insolvent, undercapitalized or otherwise "troubled" institutions.
According to the bulletin, such "high-risk" mortgage derivative securities
include securities having specified characteristics, which may include some
classes of offered bonds. In addition, the National Credit Union Administration
has issued regulations governing federal credit union investments which prohibit
investment in specified types of securities, which may include some classes of
offered bonds. Similar policy statements have been issued by regulators having
jurisdiction over other types of depository institutions.

         Any class of bonds that is not rated in one of the two highest rating
categories by at least one Rating Agency, and any other class of bonds specified
in the related prospectus supplement, will not constitute "mortgage related
securities" for purposes of SMMEA. Prospective investors in these classes of
bonds, in particular, should consider the matters discussed in the following
paragraph.

         There may be other restrictions on the ability of investors either to
purchase some classes of offered bonds or to purchase any class of offered bonds
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 offered bonds for legal investment or other purposes, or as to the
ability of particular investors to purchase any class of bonds under applicable
legal investment restrictions. These uncertainties may adversely affect the
liquidity of any class of bonds. 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 offered
bonds of any class thereof 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 the investor.

                                 USE OF PROCEEDS

         Substantially all of the net proceeds to be received from the sale of
bonds 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 loans and/or
mortgage securities in the respective mortgage pools and to pay other expenses.
The company expects that it will make additional sales of bonds similar to the
offered bonds 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 purchased by the company, prevailing interest rates,
availability of funds and general market conditions.

                             METHODS OF DISTRIBUTION

         The bonds offered by this prospectus 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 the sale.

         The company intends that offered bonds 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 the offered bonds
of a particular series may be made through a combination of two or more of these
methods. The methods are as follows:

         o        By negotiated firm commitment or best efforts underwriting and
                  public re-offering by underwriters;

         o        By placements by the company with institutional investors
                  through dealers; and

         o        By direct placements by the company with institutional
                  investors.

         If underwriters are used in a sale of any offered bonds (other than in
connection with an underwriting on a best efforts basis), the bonds 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


                                       96




or at the time of commitment therefor. The 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 the offered
bonds of a particular series will be set forth on the cover of the prospectus
supplement relating to the series and the members of the underwriting syndicate,
if any, will be named in the prospectus supplement.

         In connection with the sale of the offered bonds, underwriters may
receive compensation from the company or from purchasers of the bonds in the
form of discounts, concessions or commissions. Underwriters and dealers
participating in the distribution of the offered bonds may be deemed to be
underwriters in connection with the bonds, and any discounts or commissions
received by them from the company and any profit on the resale of offered bonds
by them may be deemed to be underwriting discounts and commissions under the
Securities Act.

         It is anticipated that the underwriting agreement pertaining to the
sale of offered bonds of any series will provide that the obligations of the
underwriters will be subject to conditions precedent, that the underwriters will
be obligated to purchase all such bonds 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 specified civil liabilities,
including liabilities under the Securities Act 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 the
offering and any agreements to be entered into between the company and
purchasers of offered bonds of the series.

         The company anticipates that the bonds offered by this prospectus and
the prospectus supplement will be sold primarily to institutional investors or
sophisticated non-institutional investors. Purchasers of offered bonds,
including dealers, may, depending on the facts and circumstances of the
purchases, be deemed to be "underwriters" within the meaning of the Securities
Act in connection with reoffers and sales by them of the bonds. Holders of
offered bonds should consult with their legal advisors in this regard prior to
any such reoffer or sale.

                                  LEGAL MATTERS

         Legal matters, including federal income tax matters, in connection with
the bonds of each series will be passed upon for the company by Thacher Proffitt
& Wood, New York, New York. With respect to each series of bonds, a copy of this
opinion will be filed with the Commission on Form 8-K within 15 days after the
Closing Date.

                              FINANCIAL INFORMATION

         With respect to each series of bonds, a new trust fund will be formed,
and no trust fund will engage in any business activities or have any assets or
obligations prior to the issuance of the related series of bonds. Accordingly,
no financial statements with respect to any trust fund related to a series of
bonds will be included in this prospectus or in the related prospectus
supplement.

         With respect to each series of bonds, where the issuer is a statutory
business trust or a limited liability company, financial statements will be
filed as required by the Exchange Act. Each such issuer will suspend filing the
reports if and when the reports are no longer required under the Exchange Act.

                                     RATINGS

         It is a condition to the issuance of any class of offered bonds that
they shall have been rated not lower than investment grade, that is, in one of
the four highest rating categories, by at least one Rating Agency.



                                       97




         Ratings on collateralized asset-backed bonds address the likelihood of
receipt by the holders thereof of all collections on the underlying mortgage
assets to which the holders are entitled. These ratings address the structural,
legal and issuer-related aspects associated with the bonds, the nature of the
underlying mortgage assets and the credit quality of the guarantor, if any.
Ratings on collateralized asset- backed bonds do not represent any assessment of
the likelihood of principal prepayments by borrowers or of the degree by which
the prepayments might differ from those originally anticipated. As a result,
bondholders might suffer a lower than anticipated yield, and, in addition,
holders of stripped interest bonds in extreme cases might fail to recoup their
initial investments.

         A bond rating is not a recommendation to buy, sell or hold bonds and
may be subject to revision or withdrawal at any time by the assigning rating
organization.

                              AVAILABLE INFORMATION

         The company is subject to the informational requirements of the
Exchange Act and in accordance therewith files reports and other information
with the Commission. Reports and other information filed by the company 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 its Regional
Offices located as follows: Chicago Regional Office, 500 West Madison, 14th
Floor, Chicago, Illinois 60661; New York Regional Office, 233 Broadway, New
York, New York 10279. Copies of the 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 and electronically through the Commission's
Electronic Data Gathering, Analysis and Retrieval system at the Commission's Web
site (http://www.sec.gov). The company does not intend to send any financial
reports to bondholders.

         This prospectus does not contain all of the information set forth in
the registration statement (of which this prospectus forms a part) and exhibits
thereto which the company has filed with the Commission under the Securities Act
and to which reference is hereby made.

                             REPORTS TO BONDHOLDERS

         The master servicer or another designated person will be required to
provide periodic unaudited reports concerning each trust fund to all registered
holders of offered bonds of the related series with respect to each trust fund
as are required under the Exchange Act and the Commission's related rules and
regulations. See "Description of the Bonds--Reports to Bondholders."

                    INCORPORATION OF INFORMATION BY REFERENCE

         There are incorporated in this prospectus and in the related prospectus
supplement by reference all documents and reports filed or caused to be filed by
the company with respect to a trust fund pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act, prior to the termination of the offering of the
offered bonds of the related series. The company will provide or cause to be
provided without charge to each person to whom this prospectus is delivered in
connection with the offering of one or more classes of offered bonds, upon
written or oral request of the person, a copy ofany or all the reports
incorporated in this prospectus by reference, in each case to the extent the
reports relate to one or more of such classes of the offered bonds, other than
the exhibits to the documents, unless the exhibits are specifically incorporated
by reference in the documents. Requests should be directed in writing to IMH
Assets Corp., 1401 Dove Street, Newport Beach, California 92660, and its
telephone number is (949) 475-3700. The company has determined that its
financial statements will not be material to the offering of any offered bonds.


                                       98




                                    GLOSSARY

         ACCRUAL BOND -- A bond with respect to which some or all of its 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.

         AFFILIATED SELLER-- Impac Mortgage Holdings, Inc., the parent of the
company, and their respective affiliates.

         AGREEMENT -- An owner trust agreement, servicing agreement or
indenture.

         ARM LOAN -- A mortgage loan with an adjustable interest rate.

         BANKRUPTCY CODE -- Title 11 of the United States Code, as amended from
time to time.

         BANKRUPTCY LOSS -- A Realized Loss 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 an extension of its maturity.

         BENEFICIAL OWNER -- A person acquiring an interest in any DTC
Registered Bond.

         BENEFIT PLAN INVESTORS -- Plans, as well as any "employee benefit plan"
(as defined in Section 3(3) or ERISA) which is not subject to Title I of ERISA,
such as governmental plans (as defined in Section 3(32) of ERISA) and church
plans (as defined in Section 3(33) of ERISA) which have not made an election
under Section 410(d) of the Code, and any entity whose underlying assets include
Plan Assets by reason of a Plan's investment in the entity.

         BUYDOWN ACCOUNT -- With respect to a buydown mortgage loan, the
custodial account where the Buydown Funds are placed.

         BUYDOWN FUNDS -- With respect a buydown mortgage loan, the amount
contributed by the seller of the mortgaged property or another source and placed
in the Buydown Account.

         BUYDOWN PERIOD -- The period during which funds on a buydown mortgage
loan are made up for from the Buydown Account.

         CERCLA -- The federal Comprehensive Environmental Response,
Compensation and Liability Act, as amended.

         CLOSING DATE -- With respect to any series of bonds, the date on which
the bonds are issued.

         CODE-- The Internal Revenue Code of 1986.

         COMMISSION-- The Securities and Exchange Commission.

         COMMITTEE REPORT -- The Conference Committee Report accompanying the
Tax Reform Act of 1986.

         CONSERVATION ACT -- The Asset Conservation, Lender Liability and
Deposit Insurance Act of 1996.

         CONTRACT -- Manufactured housing conditional sales contracts and
installment loan agreements each secured by a Manufactured Home.

         COOPERATIVE -- With respect to a cooperative mortgage loan, the
corporation that owns the related apartment building.

         CRIME CONTROL ACT-- The Comprehensive Crime Control Act of 1984.



                                       99




         DEFAULTED MORTGAGE LOSS -- A Realized Loss other than a Special Hazard
Loss, Extraordinary Loss or other losses resulting from damage to a mortgaged
property, Bankruptcy Loss or Fraud Loss.

         DEFERRED INTEREST -- If an adjustment to the mortgage rate on a
mortgage loan has caused the amount of accrued interest on the mortgage loan in
any month to exceed the scheduled monthly payment on the mortgage loan, the
resulting amount of interest that has accrued but is not then payable;

         DELETED MORTGAGE LOAN -- A mortgage loan which has been removed from
the related trust fund.

         DESIGNATED SELLER TRANSACTION -- A series of bonds where the related
mortgage loans are provided either directly or indirectly to the company by one
or more Sellers identified in the related prospectus supplement.

         DETERMINATION DATE -- The close of business on the date on which the
amount of each distribution to bondholders will be determined, which shall be
stated in each prospectus supplement.

         DIDMC -- The Depository Institutions Deregulation and Monetary Control
Act of 1980.

         DOL-- The U.S. Department of Labor.

         DOL REGULATIONS-- Regulations by the DOL promulgated at 29
C.F.R.ss.2510.3-101.

         DTC REGISTERED BOND -- Any bond initially issued through the book-entry
facilities of the DTC.

         DUE PERIOD -- The period between distribution dates.

         ELIGIBLE ACCOUNT -- An account maintained with a federal or state
chartered depository institution (i) the short-term obligations of which are
rated by each of the Rating Agencies in its highest rating at the time of any
deposit therein, or (ii) insured by the FDIC (to the limits established by the
FDIC), the uninsured deposits in which account are otherwise secured such that,
as evidenced by an opinion of counsel (obtained by and at the expense of the
person requesting that the account be held pursuant to this clause (ii))
delivered to the trustee prior to the establishment of the account, the
bondholders will have a claim with respect to the funds in the account and a
perfected first priority security interest against any collateral (which shall
be limited to Permitted Instruments) securing the funds that is superior to
claims of any other depositors or general creditors of the depository
institution with which the account is maintained or (iii) a trust account or
accounts maintained with a federal or state chartered depository institution or
trust company with trust powers acting in its fiduciary capacity or (iv) an
account or accounts of a depository institution acceptable to the Rating
Agencies (as evidenced in writing by the Rating Agencies that use of any such
account as the Payment Account will not have an adverse effect on the
then-current ratings assigned to the classes of the bonds then rated by the
Rating Agencies). Eligible Accounts may or may not bear interest.

         EQUITY CERTIFICATES -- With respect to any series of bonds, the
certificate or certificates representing a beneficial ownership interest in the
related issuer.

         ERISA -- The Employee Retirement Income Security Act of 1974, as
amended.

         ERISA PLANS -- Employee pension and welfare benefit plans subject to
ERISA.

         EXCHANGE ACT -- The Securities Exchange Act of 1934, as amended.

         EXEMPTION-- An individual prohibited transactions exemption issued by
the DOL to an underwriter, as amended by PTE 97-34, 62 Fed. Reg. 39021 (July 21,
1997), and PTE 2000-58, 65 Fed. Reg. 67765 (November 13, 2000).


                                       100




         EXEMPTION RATING AGENCY-- Standard & Poor's, a division of The
McGraw-Hill Companies, Inc., Moody's Investors Service, Inc., or Fitch, Inc.

         EXTRAORDINARY LOSS -- Any Realized Loss occasioned by war, civil
insurrection, certain governmental actions, nuclear reaction and certain other
risks.

         FRAUD LOSS -- A Realized Loss incurred on a defaulted mortgage loan as
to which there was fraud in the origination of the mortgage loan.

         FTC RULE -- The so-called "Holder-in-Due-Course" Rule of the Federal
Trade Commission.

         GARN-ST GERMAIN ACT -- The Garn-St Germain Depository Institutions Act
of 1982.

         GLOBAL BONDS -- The globally offered bonds of the classes specified in
the related prospectus supplement.

         GRANTOR TRUST CERTIFICATE -- A certificate representing an interest in
a Grantor Trust Fund.

         GRANTOR TRUST FRACTIONAL INTEREST CERTIFICATE -- A Grantor Trust
Certificate representing an undivided equitable ownership interest in the
principal of the mortgage loans constituting the related Grantor Trust Fund,
together with interest on the Grantor Trust Certificates at a pass-through rate.

         GRANTOR TRUST STRIP CERTIFICATE -- A certificate representing ownership
of all or a portion of the difference between interest paid on the mortgage
loans constituting the related Grantor Trust Fund (net of normal administration
fees and any retained interest of the company) and interest paid to the holders
of Grantor Trust Fractional Interest Certificates issued with respect to the
Grantor Trust Fund. A Grantor Trust Strip Certificate may also evidence a
nominal ownership interest in the principal of the mortgage loans constituting
the related Grantor Trust Fund.

         GRANTOR TRUST FUND -- A trust fund which qualifies as a "grantor trust"
within the meaning of Subpart E, part I of subchapter J of the Code.

         HIGH COST LOANS -- Mortgage loans subject to the Homeownership Act,
which amended TILA to provide new requirements applicable to loans that exceed
certain interest rate and/or points and fees thresholds.

         HIGH LTV LOANS -- Mortgage loans with loan-to-value ratios in excess of
80% and as high as 150% and which are not be insured by a Primary Insurance
Policy.

         HOUSING ACT-- The National Housing Act of 1934, as amended.

         INDEX -- With respect to an ARM Loan, the related index, which will be
specified in the related prospectus supplement and may include one of the
following indexes: (1) the weekly average yield on U.S. Treasury securities
adjusted to a constant maturity of either six months or one year, (2) the weekly
auction average investment yield of U.S. Treasury bills of six months, (3) the
daily Bank Prime Loan rate made available by the Federal Reserve Board, (4) the
cost of funds of member institutions for the Federal Home Loan Bank of San
Francisco, (5) the interbank offered rates for U.S. dollar deposits in the
London market, each calculated as of a date prior to each scheduled interest
rate adjustment date which will be specified in the related prospectus
supplement or (6) any other index described in the related prospectus
supplement.

         INSURANCE PROCEEDS -- Proceeds received under any hazard, title,
primary mortgage, FHA or other insurance policy that provides coverage with
respect to a particular mortgaged property or the related mortgage loan (other
than proceeds applied to the restoration of the property or released to the
related borrower in accordance with the customary servicing practices of the
master servicer (or, if applicable, a special servicer) and/or the terms and
conditions of the related mortgage.



                                       101




         INTERMEDIARY-- An institution that is not a participant in the DTC but
clears through or maintains a custodial relationship with a participant.

         IRS -- The Internal Revenue Service.

         ISSUER -- The Delaware business trust or other trust, created pursuant
to the owner trust agreement, that issues the bonds.

         LIQUIDATION PROCEEDS -- (1) All amounts, other than Insurance Proceeds
received and retained in connection with the liquidation of defaulted mortgage
loans or property acquired in respect thereof, by foreclosure or otherwise,
together with the net operating income (less reasonable reserves for future
expenses) derived from the operation of any mortgaged properties acquired by the
trust fund through foreclosure or otherwise and (2) all proceeds of any mortgage
loan or mortgage security purchased (or, in the case of a substitution, amounts
representing a principal adjustment) by the master servicer, the company, a
Seller or any other person pursuant to the terms of the related servicing
agreement as described under "The Mortgage Pools--Representations by Sellers,"
"Servicing of Mortgage Loans--Realization Upon and Sale of Defaulted Mortgage
Loans," "--Assignment of Trust Fund Assets" above and "The
Agreements--Termination."

         LOAN-TO-VALUE RATIO -- With respect to any mortgage loan, the ratio of
the original outstanding principal amount of the mortgage loan and, with respect
to any second lien mortgage loan, the outstanding principal amount of any
related first lien as of the date of origination of such mortgage loan, to (i)
the appraised value of the related mortgaged property at origination with
respect to a refinanced mortgage loan, and (ii) the lesser of the appraised
value of the related mortgaged property at origination or the purchase price of
the related mortgaged property with respect to all other mortgage loans.

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

         NET MORTGAGE RATE -- With respect to a mortgage loan, the mortgage rate
net of the per annum rate or rates applicable to the calculation of servicing
and administrative fees and any retained interest of the company.

         NONRECOVERABLE ADVANCE -- An advance which, in the good faith judgment
of the master servicer, will not be recoverable from recoveries on the related
mortgage loan or another specifically identified source.

         NOTE MARGIN -- With respect to an ARM Loan, the fixed percentage set
forth in the related mortgage note, which when added to the related Index,
provides the mortgage rate for the ARM Loan.

         OID -- Original issue discount, within the meaning of the OID
Regulations.

         OID REGULATIONS -- The rules governing original issue discount that are
set forth in Sections 1271- 1273 and 1275 of the Code and in the related
Treasury regulations.

         OTS -- The Office of Thrift Supervision.

         PARITY ACT-- The Alternative Mortgage Transaction Parity Act of 1982.



                                       102




         PARTIES IN INTEREST -- With respect to a Plan, persons who have
specified relationships to the Plans, either "Parties in Interest" within the
meaning of ERISA or "Disqualified Persons" within the meaning of the Code.

         PAYMENT ACCOUNT -- One or more separate accounts for the collection of
payments on the related mortgage loans and/or mortgage securities constituting
the related trust fund.

         PERCENTAGE INTEREST -- With respect to a bond of a particular class,
the percentage obtained by dividing the initial principal balance or notional
amount of the bond by the aggregate initial amount or notional balance of all
the bonds of the class.

         PERMITTED INVESTMENTS -- United States government securities and other
investment grade obligations specified in the related servicing agreement and
indenture.

         PLAN ASSETS -- "Plan assets" of a Plan within the meaning of the DOL
Regulations.

         PLANS-- ERISA Plans and Tax Favored Plans.

         PREPAYMENT ASSUMPTION -- With respect to a bond, the prepayment
assumption used in pricing the initial offering of that bond.

         PREPAYMENT INTEREST SHORTFALL -- With respect to any mortgage loan with
a prepayment in part or in full the excess, if any, of interest accrued and
otherwise payable on the related mortgage loan over the interest charged to the
borrower (net of servicing and administrative fees and any retained interest of
the company).

         PRIMARY INSURANCE COVERED LOSS -- With respect to a mortgage loan
covered by a Primary Insurance Policy, the amount of the related loss covered
pursuant to the terms of the Primary Insurance Policy, which will generally
consist of the unpaid principal amount of the mortgage loan and accrued and
unpaid interest on the mortgage loan and reimbursement of specific expenses,
less (1) rents or other payments collected or received by the insured (other
than the proceeds of hazard insurance) that are derived from the related
mortgaged property, (2) hazard insurance proceeds in excess of the amount
required to restore the related mortgaged property and which have not been
applied to the payment of the mortgage loan, (3) amounts expended but not
approved by the primary insurer, (4) claim payments previously made on the
mortgage loan and (5) unpaid premiums and other specific amounts.

         PRIMARY INSURANCE POLICY -- A primary mortgage guaranty insurance
policy.

         PRIMARY INSURER -- An issuer of a Primary Insurance Policy.

         PTCE-- Prohibited Transaction Class Exemption.

         QUALIFIED SUBSTITUTE MORTGAGE LOAN -- A mortgage loan substituted for a
Deleted Mortgage Loan, meeting the requirements described under "The Mortgage
Pools-- Representations by Sellers" in this prospectus.

         RATING AGENCY -- A "nationally recognized statistical rating
organization" within the meaning of Section 3(a)(41) of the Exchange Act.

         REALIZED LOSS -- Any loss on a mortgage loan attributable to the
mortgagor's failure to make any payment of principal or interest as required
under the mortgage note.

         RECORD DATE -- The close of business on the last business day of the
month preceding the month in which the applicable distribution date occurs.

         RELIEF ACT -- The Servicemembers' Civil Relief Act of 1940, as amended.



                                       103




         REO MORTGAGE LOAN -- A mortgage loan where title to the related
mortgaged property has been obtained by the trustee or to its nominee on behalf
of bondholders of the related series.

         RESTRICTED GROUP -- The group consisting of the Underwriter, the
company, the master servicer, the special servicer, any subservicer and any
obligor with respect to assets included in the trust fund constituting more than
5% of the aggregate unamortized principal balance of the assets in the trust
fund as of the date of initial issuance of the bonds.

         RICO-- The Racketeer Influenced and Corrupt Organizations statute.

         SECURITIES ACT -- The Securities Act of 1933, as amended.

         SELLER -- The seller of the mortgage loans or mortgage securities
included in a trust fund to the company with respect a series of bonds, who
shall be an Affiliated Seller or an Unaffiliated Seller.

         SINGLE FAMILY PROPERTY -- An attached or detached one-family dwelling
unit, two- to four- family dwelling unit, condominium, townhouse, row house,
individual unit in a planned-unit development and other individual dwelling
units.

         SMMEA-- The Secondary Mortgage Market Enhancement Act of 1984.

         SPECIAL HAZARD LOSS -- (1) 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 (2) losses from partial
damage caused by reason of the application of the co-insurance clauses contained
in hazard insurance policies.

         STRIP BOND -- A bond which will be entitled to (1) principal
distributions, with disproportionate, nominal or no interest distributions or
(2) interest distributions, with disproportionate, nominal or no principal
distributions.

         TAXFAVORED PLANS -- Tax-qualified retirement plans described in Section
401(a) of the Code and on individual retirement accounts described in Section
408 of the Code.

         TILA -- The Federal Truth-in-Lending Act

         TITLE V -- Title V of the Depository Institutions Deregulation and
Monetary Control Act of 1980, enacted in March 1980.

         TITLE VIII -- Title VIII of the Garn-St Germain Act.

         UNAFFILIATED SELLERS -- Banks, savings and loan associations, mortgage
bankers, mortgage brokers, investment banking firms, the Resolution Trust
Corporation, the FDIC and other mortgage loan originators or sellers not
affiliated with the company.

         UNITED STATES PERSON -- A citizen or resident of the United States, a
corporation or partnership (including an entity treated as a corporation or
partnership for federal income tax purposes) created or organized in, or under
the laws of, the United States or any state thereof or the District of Columbia
(except, in the case of a partnership, to the extent provided in regulations),
or an estate whose income is subject to United States federal income tax
regardless of its source, or a trust if a court within the United States is able
to exercise primary supervision over the administration of the trust and one or
more United States persons have the authority to control all substantial
decisions of the trust. To the extent prescribed in regulations by the Secretary
of the Treasury, which have not yet been issued, a trust which was in existence
on August 20, 1996 (other than a trust treated as owned by the grantor under
subpart E of part I of subchapter J of chapter 1 of the Code), and which was
treated as a United States person on August 20, 1996 may elect to continue to be
treated as a United States person notwithstanding the previous sentence.



                                       104



         VALUE -- With respect to a mortgaged property securing a single family,
multifamily, commercial or mixed-use loan, the lesser of (x) the appraised value
determined in an appraisal obtained at origination of the mortgage loan, if any,
or, if the related mortgaged property has been appraised subsequent to
origination, the value determined in the subsequent appraisal and (y) the sales
price for the related mortgaged property (except in circumstances in which there
has been a subsequent appraisal). However, in the case of refinanced, modified
or converted single family, multifamily, commercial or mixed-use loans, the
"Value" of the related mortgaged property will be equal to the lesser of (x) the
appraised value of the related mortgaged property determined at origination or
in an appraisal, if any, obtained at the time of refinancing, modification or
conversion and (y) the sales price of the related mortgaged property or, if the
mortgage loan is not a rate and term refinance mortgage loan and if the
mortgaged property was owned for a relatively short period of time prior to
refinancing, modification or conversion, the sum of the sales price of the
related mortgaged property plus the added value of any improvements. With
respect to a new Manufactured Home, the "Value" is no greater than the sum of a
fixed percentage of the list price of the unit actually billed by the
manufacturer to the dealer (exclusive of freight to the dealer site), including
"accessories" identified in the invoice, plus the actual cost of any accessories
purchased from the dealer, a delivery and set-up allowance, depending on the
size of the unit, and the cost of state and local taxes, filing fees and up to
three years prepaid hazard insurance premiums. With respect to a used
Manufactured Home, the "Value" is the least of the sale price, the appraised
value, and the National Automobile Dealer's Association book value plus prepaid
taxes and hazard insurance premiums. The appraised value of a Manufactured Home
is based upon the age and condition of the manufactured housing unit and the
quality and condition of the mobile home park in which it is situated, if
applicable.


                                       105

You should rely only on the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus. We have not authorized anyone to provide you with different information.

We are not offering the bonds offered hereby in any state where the offer is not permitted.

Dealers will be required to deliver a prospectus supplement and prospectus when acting as underwriters of the bonds offered hereby and with respect to their unsold allotments or subscriptions. In addition, all dealers selling the bonds, whether or not participating in this offering, may be required to deliver a prospectus supplement and prospectus until 90 days after the date hereof.


		Page
SUMMARY OF PROSPECTUS SUPPLEMENT		S-3
RISK FACTORS		S-10
THE MORTGAGE POOL		S-21
YIELD ON THE BONDS		S-58
THE ISSUER		S-69
THE OWNER TRUSTEE		S-69
THE INDENTURE TRUSTEE		S-70
THE BOND INSURER		S-70
DESCRIPTION OF THE BONDS		S-72
DESCRIPTION OF THE SERVICING AGREEMENT		S-89
THE INDENTURE		S-90
FEDERAL INCOME TAX CONSEQUENCES		S-92
METHOD OF DISTRIBUTION		S-92
SECONDARY MARKET		S-93
EXPERTS		S-93
LEGAL OPINIONS		S-93
RATINGS		S-93
LEGAL INVESTMENT		S-94
ERISA CONSIDERATIONS		S-94
GLOSSARY		S-96
ANNEX I		I-1


Class	Bond Interest Rate	Initial Bond Principal Balance			Initial Rating (S&P/Moody’s/DBRS)	Designation
Class A Bonds:
A-1	Floating Rate	$	567,000,000		AAA/Aaa/AAA	Super Senior/Floating Rate
A-2	Floating Rate	$	63,000,000		AAA/Aaa/AAA	Senior Support/Floating Rate
A-3	Floating Rate	$	150,000,000		AAA/Aaa/AAA	Senior/Insured/Floating Rate
Total Class A Bonds:		$	780,000,000
Class A-IO Bonds:
A-IO	(2)		(3	)	AAA/Aaa/AAA	Senior/Interest Only/Floating Rate
Class M Bonds:
M-1	Floating Rate	$	95,000,000		AA+/Aa1/AA (high)	Floating Rate Mezzanine
M-2	Floating Rate	$	45,000,000		AA/Aa2/AA	Floating Rate Mezzanine
M-3	Floating Rate	$	24,000,000		AA-/Aa3/AA (low)	Floating Rate Mezzanine
M-4	Floating Rate	$	16,000,000		A+/A1/A (high)	Floating Rate Mezzanine
M-5	Floating Rate	$	17,500,000		A/A2/A	Floating Rate Mezzanine
M-6	Floating Rate	$	10,000,000		A-/A3/A (low)	Floating Rate Mezzanine
Total Class M Bonds:		$	207,500,000
Class B Bonds:
B	Floating Rate	$	12,500,000		BBB+/Baa2/BBB (high)	Floating Rate Subordinate
Total Bonds:		$	1,000,000,000


Range of mortgage rates (approximate):		2.990% to 16.770%
Weighted average mortgage rate (approximate):		6.092%
Weighted average remaining term to stated maturity (approximate):		356 months
Range of principal balances (approximate):		$8,886 to $1,100,000
Average principal balance:		$218,017
Range of loan-to-value ratios and combined loan-to-value ratios (approximate):		2.65% to 125.00%
Weighted average loan-to-value ratio and combined loan-to-value ratios (approximate):		75.37%


Month	1997		1998		1999		2000		2001		2002		2003		2004		2005
January	5.71	%	5.75	%	5.04	%	6.23	%	5.36	%	1.99	%	1.35	%	1.21	%	2.96	%
February	5.68		5.78		5.17		6.32		4.96		2.06		1.34		1.17		3.15
March	5.96		5.80		5.08		6.53		4.71		2.33		1.26		1.16		3.39
April	6.08		5.87		5.08		6.61		4.23		2.10		1.29		1.37
May	6.01		5.81		5.19		7.06		3.91		2.09		1.22		1.58
June	5.94		5.87		5.62		7.01		3.83		1.95		1.12		1.94
July	5.83		5.82		5.65		6.88		3.70		1.86		1.15		1.99
August	5.86		5.69		5.90		6.83		3.48		1.82		1.21		1.99
September	5.85		5.36		5.96		6.76		2.53		1.75		1.18		2.17
October	5.81		5.13		6.13		6.72		2.17		1.62		1.22		2.30
November	6.04		5.28		6.04		6.68		2.10		1.47		1.25		2.62
December	6.01		5.17		6.13		6.20		1.98		1.38		1.22		2.78


Loan Programs	Current Balance		No. of Loans	% of Total		Average Balance		Weighted Average Gross WAC		Weighted Average Remg. Term (Months)	Weighted Average Credit Score	Weighted Average Original LTV
15Yr Fixed	$	4,023,317	50	0.46	%	$	80,466	7.867	%	164.50	675	73.63	%
30/15 Fixed Balloon		6,712,149	97	0.77			69,197	11.348		176.93	668	98.13
20Yr Fixed		2,074,992	40	0.24			51,875	10.911		193.47	664	86.14
30/20 Fixed Balloon		258,796	3	0.03			86,265	12.238		237.11	655	97.28
25Yr Fixed		148,319	2	0.02			74,160	10.811		269.92	708	50.89
30Yr Fixed		104,675,640	556	11.99			188,266	6.978		358.48	681	74.13
30Yr Fixed - IO		32,073,130	142	3.67			225,867	6.967		359.38	694	75.92
30Y LIB1M		149,000	1	0.02			149,000	5.250		360.00	700	83.71
30Y LIB1M - IO		1,515,900	5	0.17			303,180	5.350		358.91	664	66.32
30Y LIB6M		3,335,947	13	0.38			256,611	5.460		358.95	680	72.21
30Y LIB6M - IO		51,887,454	205	5.94			253,110	5.266		359.07	704	75.14
30Y LIB12M		3,209,983	13	0.37			246,922	5.373		359.07	685	75.14
30Y LIB12M - IO		91,762,816	324	10.51			283,219	5.327		358.48	702	78.52
2/28 LIB6M		70,046,228	402	8.02			174,244	6.346		358.62	658	77.62
2/28 LIB6M - IO		228,217,853	1,001	26.13			227,990	6.144		358.84	677	77.11
3/27 LIB6M		31,280,812	173	3.58			180,814	5.988		358.22	656	78.27
3/27 LIB6M - IO		92,950,356	403	10.64			230,646	5.819		359.06	693	73.74
3/1 LIB12M		347,708	1	0.04			347,708	6.875		359.00	705	80.00
5/25 LIB6M		15,691,870	75	1.80			209,225	6.023		359.06	691	72.92
5/25 LIB6M - IO		114,752,729	457	13.14			251,100	5.655		359.52	715	69.70
5/1 LIB12M - IO		455,000	1	0.05			455,000	5.625		360.00	664	72.80
7/23 LIB6M		2,260,935	8	0.26			282,617	5.698		354.35	705	70.55
7/23 LIB6M - IO		8,195,800	20	0.94			409,790	5.620		358.48	726	65.09
7/1 LIB12M - IO		400,000	1	0.05			400,000	5.500		356.00	790	80.00
10/20 LIB6M		905,762	3	0.10			301,921	5.875		353.40	747	73.62
10/20 LIB6M - IO		6,043,077	10	0.69			604,308	5.915		355.89	735	72.25

Total	$	873,375,574	4,006	100.00	%	$	218,017	6.092	%	356.09	688	75.37	%


Issuer		Impac CMB Trust Series 2005-3.

Title of Series		Collateralized Asset-Backed Bonds, Series 2005-3.

Cut-off Date		With respect to the initial mortgage loans, March 1, 2005. With respect to the subsequent mortgage loans, the applicable subsequent cut-off date.

Closing Date		April 6, 2005.

Mortgage Loans		The mortgage loans will be one- to four-family, adjustable and fixed-rate, first lien residential mortgage loans and one- to four-family, fixed-rate, second lien residential mortgage loans.

Company		IMH Assets Corp., an affiliate of the Master Servicer and Seller.

Master Servicer		Impac Funding Corporation.

Seller		Impac Mortgage Holdings, Inc., an affiliate of the Company and the Master Servicer.

Subservicer		With respect to substantially all of the mortgage loans, Countrywide Home Loans Servicing LP.

Indenture Trustee		Wells Fargo Bank, N.A.

Owner Trustee		Wilmington Trust Company.

Bond Insurer		Financial Guaranty Insurance Company.

Payment Date		The 25^th of each month or, if the 25^th is not a business day, on the next business day, beginning in April 2005.

Bonds		The classes of bonds and their bond interest rates and bond principal balances are set forth in the table below.


Class	(1)		(2)
A-1	0.240	%	0.480	%
A-2	0.300	%	0.600	%
A-3	0.180	%	0.360	%
M-1	0.420	%	0.630	%
M-2	0.450	%	0.675	%
M-3	0.500	%	0.750	%
M-4	0.650	%	0.975	%
M-5	0.700	%	1.050	%
M-6	0.750	%	1.125	%
B	1.350	%	2.025	%


Range of Mortgage Loan Principal Balances	Current Balance		No. of Loans	% of Total		Average Balance		Weighted Average Gross WAC		Weighted Average Remg. Term (Months)	Weighted Average Credit Score	Weighted Average Original LTV
0.01 - 50,000.00	$	3,488,500	108	0.40	%	$	32,301	12.005	%	174.21	663	97.01	%
50,000.01 - 100,000.00		35,757,328	432	4.09			82,772	6.880		338.78	678	75.00
100,000.01 - 150,000.00		114,744,772	911	13.14			125,955	6.464		353.04	677	76.70
150,000.01 - 200,000.00		125,729,599	716	14.40			175,600	6.113		357.66	682	76.03
200,000.01 - 250,000.00		128,366,033	570	14.70			225,204	6.109		358.28	685	75.64
250,000.01 - 300,000.00		114,037,697	416	13.06			274,129	5.995		358.60	685	76.91
300,000.01 - 350,000.00		106,154,501	328	12.15			323,642	5.873		358.31	690	75.71
350,000.01 - 400,000.00		74,825,302	199	8.57			376,007	5.849		359.02	694	75.57
400,000.01 - 450,000.00		44,120,198	104	5.05			424,233	5.965		358.87	699	75.09
450,000.01 - 500,000.00		39,809,820	84	4.56			473,926	5.840		359.03	698	71.57
500,000.01 - 550,000.00		20,367,416	39	2.33			522,241	6.100		359.14	701	74.87
550,000.01 - 600,000.00		19,006,870	33	2.18			575,966	5.745		353.53	706	73.54
600,000.01 - 650,000.00		18,994,322	30	2.17			633,144	5.779		358.83	719	71.26
650,000.01 - 700,000.00		9,542,200	14	1.09			681,586	5.723		359.21	710	69.44
700,000.01 - 750,000.00		8,176,063	11	0.94			743,278	5.420		359.27	693	62.50
750,000.01 - 800,000.00		798,000	1	0.09			798,000	5.625		360.00	650	70.00
800,000.01 - 850,000.00		2,464,000	3	0.28			821,333	5.870		359.34	726	64.93
850,000.01 - 900,000.00		853,053	1	0.10			853,053	2.990		359.00	777	64.60
950,000.01 - 1,000,000.00		3,989,900	4	0.46			997,475	5.561		356.99	701	63.00
1,000,000.01 - 1,050,000.00		1,050,000	1	0.12			1,050,000	6.000		359.00	708	75.00
1,050,000.01 - 1,100,000.00		1,100,000	1	0.13			1,100,000	5.375		360.00	761	57.71

Total	$	873,375,574	4,006	100.00	%	$	218,017	6.092	%	356.09	688	75.37	%


Range of Mortgage Rates (%)	Current Balance		No. of Loans	% of Total		Average Balance		Weighted Average Gross WAC		Weighted Average Remg. Term (Months)	Weighted Average Credit Score	Weighted Average Original LTV
2.500 - 2.999	$	1,798,373	4	0.21	%	$	449,593	2.990	%	359.00	756	70.70	%
3.000 - 3.499		370,000	1	0.04			370,000	3.490		359.00	722	70.07
3.500 - 3.999		1,315,679	4	0.15			328,920	3.888		357.56	714	75.21
4.000 - 4.499		7,100,840	29	0.81			244,857	4.240		359.09	715	70.74
4.500 - 4.999		58,548,469	229	6.70			255,670	4.792		358.84	713	72.83
5.000 - 5.499		151,971,169	592	17.40			256,708	5.238		358.79	709	72.00
5.500 - 5.999		253,787,821	1,082	29.06			234,554	5.736		358.24	687	74.14
6.000 - 6.499		157,623,802	731	18.05			215,628	6.207		358.16	682	75.85
6.500 - 6.999		123,419,207	600	14.13			205,699	6.697		356.38	676	76.93
7.000 - 7.499		51,025,177	249	5.84			204,920	7.180		358.40	673	78.91
7.500 - 7.999		33,375,782	178	3.82			187,504	7.647		357.06	674	82.27
8.000 - 8.499		6,707,308	37	0.77			181,279	8.180		358.27	662	82.03
8.500 - 8.999		10,125,460	65	1.16			155,776	8.711		340.53	657	81.45
9.000 - 9.499		4,020,918	27	0.46			148,923	9.198		355.03	618	78.48
9.500 - 9.999		2,696,285	20	0.31			134,814	9.644		351.50	663	78.56
10.000 - 10.499		542,809	7	0.06			77,544	10.051		324.70	604	75.36
10.500 - 10.999		1,344,417	19	0.15			70,759	10.710		246.00	671	88.80
11.000 - 11.499		1,155,393	18	0.13			64,189	11.203		200.59	694	88.39
11.500 - 11.999		1,759,036	24	0.20			73,293	11.778		181.18	667	98.02
12.000 - 12.499		2,083,944	27	0.24			77,183	12.105		201.25	655	98.68
12.500 - 12.999		1,171,639	16	0.13			73,227	12.659		204.95	652	98.96
13.000 - 13.499		98,692	3	0.01			32,897	13.171		104.81	687	112.53
13.500 - 13.999		563,556	18	0.06			31,309	13.804		109.89	666	122.52
14.000 - 14.499		198,433	6	0.02			33,072	14.294		112.56	673	113.91
14.500 - 14.999		256,474	7	0.03			36,639	14.824		137.74	658	116.75
15.000 - 15.499		93,076	4	0.01			23,269	15.238		79.52	641	120.99
15.500 - 15.999		134,483	5	0.02			26,897	15.662		147.67	647	119.99
16.500 - 16.999		87,330	4	0.01			21,832	16.546		99.09	643	119.53

Total	$	873,375,574	4,006	100.00	%	$	218,017	6.092	%	356.09	688	75.37	%


Next Adjustment Date	Current Balance		No. of Loans	% of Total		Average Balance		Weighted Average Gross WAC		Weighted Average Remg. Term (Months)	Weighted Average Credit Score	Weighted Average Original LTV
April 1, 2005	$	379,900	2	0.05	%	$	189,950	6.909	%	356.14	738	83.79	%
May 1, 2005		2,394,400	7	0.33			342,057	4.777		357.72	692	68.44
June 1, 2005		771,550	4	0.11			192,888	6.129		357.58	720	83.10
July 1, 2005		9,328,293	36	1.29			259,119	5.680		357.50	702	72.96
August 1, 2005		21,494,726	88	2.97			244,258	5.086		359.00	705	76.52
September 1, 2005		20,821,958	79	2.88			263,569	5.286		360.00	696	74.05
October 1, 2005		1,697,474	8	0.23			212,184	5.413		360.00	726	74.18
December 1, 2005		13,448,750	49	1.86			274,464	5.139		357.00	695	80.00
January 1, 2006		32,580,767	115	4.50			283,311	5.294		358.01	703	79.21
February 1, 2006		36,907,525	128	5.10			288,340	5.401		359.00	706	78.66
March 1, 2006		10,206,287	39	1.41			261,700	5.373		360.00	695	74.01
April 1, 2006		1,829,471	6	0.25			304,912	5.623		360.00	685	71.76
May 1, 2006		145,972	1	0.02			145,972	7.500		350.00	514	80.00
August 1, 2006		144,900	1	0.02			144,900	6.250		353.00	660	90.00
September 1, 2006		867,550	2	0.12			433,775	5.293		354.00	690	82.63
November 1, 2006		4,242,959	20	0.59			212,148	6.205		356.10	681	80.83
December 1, 2006		18,114,315	106	2.50			170,890	6.050		357.40	661	78.10
January 1, 2007		99,656,420	512	13.78			194,641	6.171		358.05	659	79.57
February 1, 2007		95,669,334	420	13.22			227,784	6.309		359.00	679	77.09
March 1, 2007		66,002,279	286	9.12			230,777	6.133		360.00	688	74.65
April 1, 2007		13,420,352	55	1.86			244,006	6.019		360.00	675	70.64
October 1, 2007		558,815	2	0.08			279,408	5.500		355.00	672	80.00
November 1, 2007		2,953,668	18	0.41			164,093	5.718		356.65	651	77.99
December 1, 2007		13,903,304	76	1.92			182,938	5.737		357.22	652	77.82
January 1, 2008		31,795,694	156	4.40			203,819	5.906		358.05	661	78.75
February 1, 2008		30,258,133	135	4.18			224,134	5.852		359.00	708	74.20
March 1, 2008		35,196,111	153	4.87			230,040	5.894		360.00	698	71.91
April 1, 2008		9,913,150	37	1.37			267,923	5.909		360.00	692	69.94
June 1, 2009		228,264	1	0.03			228,264	7.625		351.00	588	84.00
August 1, 2009		123,526	1	0.02			123,526	7.375		353.00	709	90.00
November 1, 2009		372,149	3	0.05			124,050	5.477		356.00	715	76.42
December 1, 2009		2,091,837	11	0.29			190,167	5.717		357.00	714	71.82
January 1, 2010		9,973,959	51	1.38			195,568	5.661		358.03	714	70.00
February 1, 2010		39,520,545	167	5.46			236,650	5.617		359.00	719	70.02
March 1, 2010		64,152,042	244	8.87			262,918	5.744		360.00	708	70.28
April 1, 2010		14,437,276	55	2.00			262,496	5.710		360.00	709	68.80
October 1, 2010		315,750	1	0.04			315,750	5.375		343.00	778	75.23
June 1, 2011		213,750	1	0.03			213,750	5.250		351.00	782	95.00
July 1, 2011		228,000	1	0.03			228,000	6.125		352.00	762	80.00
September 1, 2011		456,668	1	0.06			456,668	5.875		354.00	744	80.00
October 1, 2011		1,465,630	3	0.20			488,543	5.517		355.00	712	51.39
November 1, 2011		400,000	1	0.06			400,000	5.500		356.00	790	80.00
December 1, 2011		605,000	1	0.08			605,000	5.500		357.00	768	77.07
January 1, 2012		1,229,469	2	0.17			614,734	5.750		358.00	662	49.80
February 1, 2012		1,772,967	6	0.25			295,495	5.423		359.00	741	69.70
March 1, 2012		3,366,500	9	0.47			374,056	5.680		360.00	723	67.38
April 1, 2012		803,000	3	0.11			267,667	6.004		360.00	687	75.37
June 1, 2014		600,000	1	0.08			600,000	6.125		351.00	796	80.00
July 1, 2014		1,142,097	2	0.16			571,048	5.766		352.00	722	64.27
August 1, 2014		259,475	1	0.04			259,475	5.875		353.00	741	90.00
September 1, 2014		1,846,691	4	0.26			461,673	5.999		354.00	727	74.85
January 1, 2015		307,777	1	0.04			307,777	5.750		358.00	675	80.00
February 1, 2015		2,792,800	4	0.39			698,200	5.883		359.00	743	70.06

Total	$	723,409,230	3,116	100.00	%	$	232,160	5.850	%	358.86	689	75.29	%


Range of Gross Margins (%)	Current Balance		No. of Loans	% of Total		Average Balance		Weighted Average Gross WAC		Weighted Average Remg. Term (Months)	Weighted Average Credit Score	Weighted Average Original LTV
1.500 - 1.749	$	300,000	1	0.04	%	$	300,000	5.250	%	360.00	688	57.14	%
2.000 - 2.249		90,415	1	0.01			90,415	5.750		359.00	691	69.61
2.250 - 2.499		23,271,411	73	3.22			318,786	5.715		357.06	731	70.34
2.500 - 2.749		40,045,766	136	5.54			294,454	5.212		358.53	716	78.16
2.750 - 2.999		10,366,679	35	1.43			296,191	5.322		359.12	709	74.38
3.000 - 3.249		109,065,944	431	15.08			253,053	5.433		358.98	718	75.55
3.250 - 3.499		100,721,686	412	13.92			244,470	5.614		359.08	733	72.46
3.500 - 3.749		119,537,789	476	16.52			251,130	5.884		359.69	678	72.28
3.750 - 3.999		100,171,788	425	13.85			235,698	5.878		359.06	682	72.52
4.000 - 4.249		5,503,823	24	0.76			229,326	6.240		359.61	639	71.87
4.250 - 4.499		7,713,644	29	1.07			265,988	6.391		359.05	645	71.18
4.500 - 4.749		3,791,727	20	0.52			189,586	5.763		358.53	652	76.84
4.750 - 4.999		6,886,431	35	0.95			196,755	5.345		357.94	646	79.09
5.000 - 5.249		47,137,576	220	6.52			214,262	6.428		358.81	684	79.76
5.250 - 5.499		22,160,087	116	3.06			191,035	5.778		358.11	644	78.82
5.500 - 5.749		37,258,995	212	5.15			175,750	6.077		358.09	642	79.88
5.750 - 5.999		45,825,258	222	6.33			206,420	6.318		358.18	659	79.98
6.000 - 6.249		25,764,804	137	3.56			188,064	6.495		358.34	640	80.35
6.250 - 6.499		10,219,459	65	1.41			157,222	6.859		358.30	637	82.21
6.500 - 6.749		3,650,228	22	0.50			165,919	6.953		357.77	639	83.27
6.750 - 6.999		1,442,528	10	0.20			144,253	7.231		358.43	636	82.26
7.000 - 7.249		818,538	5	0.11			163,708	7.526		358.09	637	81.52
7.250 - 7.499		938,919	6	0.13			156,486	8.138		358.76	635	81.04
7.500 - 7.749		603,708	2	0.08			301,854	8.744		359.43	673	84.05
8.250 - 8.499		122,026	1	0.02			122,026	8.500		357.00	513	75.00

Total	$	723,409,230	3,116	100.00	%	$	232,160	5.850	%	358.86	689	75.29	%


Range of Maximum Mortgage Rates (%)	Current Balance		No. of Loans	% of Total		Average Balance		Weighted Average Gross WAC		Weighted Average Remg. Term (Months)	Weighted Average Credit Score	Weighted Average Original LTV
8.500 - 8.999	$	1,798,373	4	0.25	%	$	449,593	2.990	%	359.00	756	70.70	%
9.000 - 9.499		370,000	1	0.05			370,000	3.490		359.00	722	70.07
9.500 - 9.999		3,296,329	11	0.46			299,666	4.764		356.90	696	71.51
10.000 - 10.499		10,623,852	40	1.47			265,596	4.583		358.73	723	68.51
10.500 - 10.999		63,743,337	246	8.81			259,119	4.887		358.64	714	73.22
11.000 - 11.499		149,813,568	589	20.71			254,352	5.253		358.82	708	72.18
11.500 - 11.999		238,359,141	1,028	32.95			231,867	5.737		358.89	686	74.40
12.000 - 12.499		125,875,495	593	17.40			212,269	6.219		358.91	675	77.74
12.500 - 12.999		77,871,774	353	10.76			220,600	6.688		358.90	672	79.30
13.000 - 13.499		28,537,543	129	3.94			221,221	7.169		359.07	673	79.90
13.500 - 13.999		12,950,456	68	1.79			190,448	7.645		358.82	666	82.20
14.000 - 14.499		3,354,147	16	0.46			209,634	8.128		359.12	682	82.19
14.500 - 14.999		4,582,314	24	0.63			190,930	8.537		358.86	678	83.84
15.000 - 15.499		727,993	6	0.10			121,332	9.207		357.42	625	87.57
15.500 - 15.999		632,317	3	0.09			210,772	9.452		358.61	685	77.78
16.000 - 16.499		511,934	3	0.07			170,645	9.191		360.00	532	65.98
16.500 - 16.999		147,000	1	0.02			147,000	9.875		360.00	552	70.00
17.000 - 17.499		213,655	1	0.03			213,655	10.000		359.00	501	65.77

Total	$	723,409,230	3,116	100.00	%	$	232,160	5.850	%	358.86	689	75.29	%


Initial Fixed Period	Current Balance		No. of Loans	% of Total		Average Balance		Weighted Average Gross WAC		Weighted Average Remg. Term (Months)	Weighted Average Credit Score	Weighted Average Original LTV
**Three Months	$	1,664,900	6	0.23	%	$	277,483	5.341	%	359.00	667	67.87	%
Six Months		55,223,401	218	7.63			253,318	5.278		359.06	703	74.97
One Year		94,972,799	337	13.13			281,818	5.328		358.50	702	78.41
Two Years		298,264,081	1,403	41.23			212,590	6.191		358.79	673	77.23
Three Years		124,578,876	577	17.22			215,908	5.864		358.85	684	74.90
Five Years		130,899,599	533	18.09			245,590	5.699		359.47	712	70.10
Seven Years		10,856,735	29	1.50			374,370	5.631		357.53	724	66.77
Ten Years		6,948,839	13	0.96			534,526	5.909		355.56	737	72.43

Total	$	723,409,230	3,116	100.00	%	$	232,160	5.850	%	358.86	689	75.29	%


Initial Cap (%)	Current Balance		No. of Loans	% of Total		Average Balance		Weighted Average Gross WAC		Weighted Average Remg. Term (Months)	Weighted Average Credit Score	Weighted Average Original LTV
1.000	$	59,323,332	231	8.20	%	$	256,811	5.277	%	359.08	702	74.52	%
1.500		211,649	2	0.03			105,824	7.597		358.77	570	61.74
2.000		92,368,277	328	12.77			281,611	5.333		358.48	702	78.73
3.000		437,184,833	1,843	60.43			237,214	6.013		359.21	694	73.81
4.625		600,000	1	0.08			600,000	6.125		351.00	796	80.00
5.000		13,649,621	38	1.89			359,201	5.784		357.27	722	69.92
6.000		120,071,519	673	16.60			178,412	5.941		357.95	651	79.05

Total	$	723,409,230	3,116	100.00	%	$	232,160	5.850	%	358.86	689	75.29	%


Subsequent Cap (%)	Current Balance		No. of Loans	% of Total		Average Balance		Weighted Average Gross WAC		Weighted Average Remg. Term (Months)	Weighted Average Credit Score	Weighted Average Original LTV
1.000	$	615,328,774	2,733	85.06	%	$	225,148	5.922	%	358.95	687	74.90	%
1.500		1,787,321	14	0.25			127,666	8.601		359.50	564	65.56
2.000		106,098,535	368	14.67			288,311	5.383		358.28	706	77.75
6.000		194,600	1	0.03			194,600	5.000		359.00	769	70.00

Total	$	723,409,230	3,116	100.00	%	$	232,160	5.850	%	358.86	689	75.29	%


Range of Loan-to-Value Ratios (%)	Current Balance		No. of Loans	% of Total		Average Balance		Weighted Average Gross WAC		Weighted Average Remg. Term (Months)	Weighted Average Credit Score	Weighted Average Original LTV
0.01 - 20.00	$	1,321,373	18	0.15	%	$	73,410	7.509	%	319.12	709	18.62	%
20.01 - 25.00		1,406,691	8	0.16			175,836	6.810		352.85	688	23.31
25.01 - 30.00		1,623,372	9	0.19			180,375	6.085		355.97	720	27.60
30.01 - 35.00		3,579,874	22	0.41			162,722	6.106		349.50	675	32.29
35.01 - 40.00		3,390,466	21	0.39			161,451	5.801		331.89	700	37.94
40.01 - 45.00		4,379,658	21	0.50			208,555	5.978		359.36	696	42.83
45.01 - 50.00		9,927,678	40	1.14			248,192	5.649		359.14	694	48.14
50.01 - 55.00		5,529,567	24	0.63			230,399	6.127		356.86	695	52.21
55.01 - 60.00		19,594,248	68	2.24			288,151	5.606		358.32	690	58.09
60.01 - 65.00		33,047,154	129	3.78			256,179	5.741		358.97	687	63.39
65.01 - 70.00		227,444,527	975	26.04			233,276	5.663		357.81	706	69.60
70.01 - 75.00		43,393,890	171	4.97			253,765	6.204		357.73	682	73.92
75.01 - 80.00		448,619,099	2,027	51.37			221,322	6.100		358.35	681	79.87
80.01 - 85.00		11,232,792	56	1.29			200,586	6.468		356.43	663	84.34
85.01 - 90.00		34,672,246	188	3.97			184,427	7.085		355.92	683	89.74
90.01 - 95.00		15,936,565	90	1.82			177,073	7.979		348.36	689	94.79
95.01 - 100.00		6,660,212	90	0.76			74,002	10.880		205.43	668	99.89
100.01 - 105.00		213,401	3	0.02			71,134	12.013		146.52	766	100.19
105.01 - 110.00		108,659	4	0.01			27,165	15.050		127.73	647	106.91
110.01 - 115.00		118,544	4	0.01			29,636	14.300		132.11	650	114.26
115.01 - 120.00		145,723	5	0.02			29,145	14.455		126.98	658	118.77
120.01 - 125.00		1,029,833	33	0.12			31,207	14.298		116.98	665	123.90

Total	$	873,375,574	4,006	100.00	%	$	218,017	6.092	%	356.09	688	75.37	%


Occupancy	Current Balance		No. of Loans	% of Total		Average Balance		Weighted Average Gross WAC		Weighted Average Remg. Term (Months)	Weighted Average Credit Score	Weighted Average Original LTV
Owner Occupied	$	693,075,640	3,073	79.36	%	$	225,537	6.093	%	355.69	682	76.20	%
Investment		151,573,295	812	17.35			186,667	6.101		357.39	713	72.04
Second Home		28,726,640	121	3.29			237,410	6.047		358.88	721	73.10

Total	$	873,375,574	4,006	100.00	%	$	218,017	6.092	%	356.09	688	75.37	%


Document Type	Current Balance		No. of Loans	% of Total		Average Balance		Weighted Average Gross WAC		Weighted Average Remg. Term (Months)	Weighted Average Credit Score	Weighted Average Original LTV
Progressive Series Program (Limited (Stated) Documentation)	$	533,780,802	2,230	61.12	%	$	239,364	6.031	%	355.93	695	74.78	%
Progressive Series Program (Full Documentation)		244,088,126	1,320	27.95			184,915	5.947		356.39	676	76.36
Progressive Express Program (Non Verified Assets)		37,202,228	182	4.26			204,408	7.057		354.41	674	76.74
Progressive Express No Doc Program (No Documentation)		27,258,554	138	3.12			197,526	6.808		357.47	694	77.34
Progressive Express Program (Verified Assets)		25,449,986	104	2.91			244,711	6.404		359.24	684	75.21
Progressive Express Program No Doc Program (Verified Assets)		3,760,882	19	0.43			197,941	6.928		359.42	683	77.77
Progressive Series Program (Full Income/Stated Assets Documentation)		1,417,808	8	0.16			177,226	6.545		336.17	695	63.75
Progressive Series Program (Lite/Reduced Documentation (SE))		243,493	3	0.03			81,164	9.750		350.50	677	25.00
Progressive Series Program (Lite Income/Stated Asset Documentation)		122,251	1	0.01			122,251	5.990		178.00	723	35.18
Progressive Express Program (Express Priority Refinance)		51,445	1	0.01			51,445	10.000		348.00	757	15.00

Total	$	873,375,574	4,006	100.00	%	$	218,017	6.092	%	356.09	688	75.37	%


Credit Grade Category	Current Balance		No. of Loans	% of Total		Average Balance		Weighted Average Gross WAC		Weighted Average Remg. Term (Months)	Weighted Average Credit Score	Weighted Average Original LTV
A+	$	427,705,073	1,779	48.97	%	$	240,419	5.763	%	358.02	727	73.71	%
A		338,819,373	1,672	38.79			202,643	6.252		353.57	652	76.92
A-		44,485,091	243	5.09			183,066	6.403		356.76	611	75.94
B		944,834	4	0.11			236,209	8.361		354.80	576	65.09
C		1,796,145	9	0.21			199,572	8.749		358.23	581	67.94
CX		389,611	3	0.04			129,870	8.551		349.18	527	66.03
Progressive Express I		29,147,884	140	3.34			208,199	6.934		355.99	717	79.92
Progressive Express II		24,361,019	119	2.79			204,714	7.286		355.58	656	78.75
Progressive Express III		1,328,729	9	0.15			147,637	7.348		359.58	612	76.75
Progressive Express IV		1,224,140	6	0.14			204,023	7.413		358.37	605	74.96
Progressive Express V		1,286,647	10	0.15			128,665	8.061		359.32	567	70.28
Progressive Express VI		1,887,027	12	0.22			157,252	9.004		359.37	523	62.57

Total	$	873,375,574	4,006	100.00	%	$	218,017	6.092	%	356.09	688	75.37	%


Property Type	Current Balance		No. of Loans	% of Total		Average Balance ($)		Weighted Average Gross WAC		Weighted Average Remg. Term (Months)	Weighted Average Credit Score	Weighted Average Original LTV
Single Family Residence	$	556,644,944	2,590	63.73	%	$	214,921	6.088	%	355.94	683	75.73	%
Condominium		88,791,483	473	10.17			187,720	6.077		356.15	697	76.43
Planned Unit Development		76,355,164	342	8.74			223,261	5.856		357.32	693	77.23
De minimis PUD		65,132,133	266	7.46			244,858	6.133		354.84	698	74.66
Two Family		35,374,225	135	4.05			262,031	6.420		358.18	690	71.24
Three Family		18,273,006	66	2.09			276,864	6.370		355.28	696	68.94
Four Family		15,547,938	55	1.78			282,690	6.264		354.63	719	70.94
Hi Rise Condominium		13,844,676	55	1.59			251,721	5.917		359.38	713	71.01
Townhouse		3,412,005	24	0.39			142,167	6.780		351.55	678	76.56

Total	$	873,375,574	4,006	100.00	%	$	218,017	6.092	%	356.09	688	75.37	%


State	Current Balance		No. of Loans	% of Total		Average Balance		Weighted Average Gross WAC		Weighted Average Remg. Term (Months)	Weighted Average Credit Score	Weighted Average Original LTV
Alaska	$	39,099	1	0.00	%	$	39,099	15.500	%	147.00	649	123.48	%
Alabama		1,216,256	6	0.14			202,709	5.754		359.49	734	67.36
Arkansas		253,698	3	0.03			84,566	8.331		340.00	666	87.10
Arizona		36,596,252	223	4.19			164,109	6.203		357.42	688	77.16
California		393,952,560	1,393	45.11			282,809	5.830		356.46	696	74.26
Colorado		10,242,891	57	1.17			179,700	6.137		354.81	671	77.66
Connecticut		4,118,671	22	0.47			187,212	6.051		358.10	689	69.88
District of Columbia		1,414,353	6	0.16			235,726	6.172		358.89	654	72.67
Delaware		1,191,312	8	0.14			148,914	5.917		358.49	661	78.06
Florida		107,092,903	598	12.26			179,085	6.429		355.05	691	75.41
Georgia		14,591,566	102	1.67			143,055	6.554		353.60	672	80.17
Hawaii		3,349,117	9	0.38			372,124	6.065		358.79	706	73.27
Iowa		955,035	8	0.11			119,379	6.059		357.71	649	79.14
Idaho		925,828	8	0.11			115,728	6.214		358.76	729	77.24
Illinois		18,744,576	106	2.15			176,836	6.380		357.74	669	76.64
Indiana		1,764,933	18	0.20			98,052	6.137		348.85	660	79.84
Kansas		1,155,620	10	0.13			115,562	6.434		359.16	686	78.54
Kentucky		1,502,822	14	0.17			107,344	5.994		346.41	659	78.45
Louisiana		457,261	3	0.05			152,420	6.894		358.61	652	85.54
Massachusetts		7,857,654	34	0.90			231,107	6.509		346.64	672	76.66
Maryland		29,297,490	130	3.35			225,365	6.135		357.02	675	75.85
Maine		707,721	4	0.08			176,930	5.878		358.79	669	77.71
Michigan		9,320,361	64	1.07			145,631	6.387		357.59	672	78.30
Minnesota		12,759,030	69	1.46			184,913	6.249		358.65	665	79.62
Missouri		3,869,727	30	0.44			128,991	6.328		358.08	674	79.88
Mississippi		1,215,923	7	0.14			173,703	5.981		357.67	648	78.99
Montana		200,800	1	0.02			200,800	6.125		359.00	643	80.00
North Carolina		8,714,051	80	1.00			108,926	7.127		335.06	678	81.62
Nebraska		268,089	2	0.03			134,044	7.161		312.27	676	89.41
New Hampshire		1,239,671	8	0.14			154,959	6.733		340.86	649	75.69
New Jersey		38,549,635	150	4.41			256,998	6.546		357.88	682	73.45
New Mexico		481,832	3	0.06			160,611	6.883		358.53	659	82.05
Nevada		25,794,102	118	2.95			218,594	6.209		355.87	697	77.25
New York		18,364,795	66	2.10			278,254	6.428		357.65	692	69.78
Ohio		7,703,710	54	0.88			142,661	5.759		357.94	671	74.90
Oklahoma		599,039	5	0.07			119,808	8.498		350.30	679	85.94
Oregon		9,855,544	61	1.13			161,566	6.058		358.77	668	77.80
Pennsylvania		5,904,900	38	0.68			155,392	6.554		356.85	681	78.73
Rhode Island		1,537,797	7	0.18			219,685	6.671		359.29	693	72.38
South Carolina		3,966,671	27	0.45			146,914	6.618		353.70	666	75.75
South Dakota		183,022	2	0.02			91,511	5.927		358.49	715	75.14
Tennessee		3,582,857	30	0.41			119,429	6.500		348.03	656	79.34
Texas		11,621,074	83	1.33			140,013	6.345		352.08	678	77.41
Utah		7,101,838	46	0.81			154,388	6.161		355.48	683	75.69
Virginia		41,111,667	164	4.71			250,681	6.049		357.21	675	77.27
Vermont		201,147	2	0.02			100,573	7.366		359.00	658	78.00
Washington		18,521,446	102	2.12			181,583	5.764		358.10	689	76.48
Wisconsin		2,972,301	21	0.34			141,538	6.478		358.15	642	79.32
Wyoming		306,931	3	0.04			102,310	6.258		358.00	643	80.00

Total	$	873,375,574	4,006	100.00	%	$	218,017	6.092	%	356.09	688	75.37	%


Range of Debt-to-Income Ratio (%)	Current Balance		No. of Loans	% of Total		Average Balance		Weighted Average Gross WAC		Weighted Average Remg. Term (Months)	Weighted Average Credit Score	Weighted Average Original LTV
0.01 - 5.00	$	871,643	3	0.10	%	$	290,548	6.147	%	358.42	712	59.65	%
5.01 - 10.00		2,946,826	11	0.34			267,893	5.822		359.48	710	69.36
10.01 - 15.00		7,227,279	35	0.83			206,494	5.550		355.51	733	70.16
15.01 - 20.00		17,032,618	70	1.95			243,323	6.063		358.75	701	72.38
20.01 - 25.00		21,405,221	120	2.45			178,377	6.097		357.54	691	72.64
25.01 - 30.00		42,240,012	205	4.84			206,049	5.921		356.67	697	73.83
30.01 - 35.00		76,335,025	345	8.74			221,261	6.015		357.03	690	73.65
35.01 - 40.00		124,889,344	578	14.30			216,072	6.101		356.41	685	75.29
40.01 - 45.00		156,852,185	730	17.96			214,866	6.084		356.08	685	76.65
45.01 - 50.00		193,380,373	922	22.14			209,740	6.124		355.68	676	77.49
50.01 - 55.00		12,784,315	53	1.46			241,213	6.122		358.68	694	67.75
Greater than 55.00		3,047,063	16	0.35			190,441	6.907		359.31	669	75.30
Not Required		214,363,670	918	24.54			233,512	6.137		355.25	698	74.78

Total	$	873,375,574	4,006	100.00	%	$	218,017	6.092	%	356.09	688	75.37	%


Number of Months	Current Balance		No. of Loans	% of Total		Average Balance	Weighted Average Gross WAC		Weighted Average Remg. Term (Months)	Weighted Average Credit Score	Weighted Average Original LTV
0	$	248,860,891	1,166	28.49	%	213,431	6.369	%	352.81	693	75.44	%
6		5,806,485	27	0.66		215,055	6.177		355.41	721	73.97
12		118,624,861	454	13.58		261,288	5.899		355.92	697	73.62
24		207,604,958	1,063	23.77		195,301	6.178		357.66	671	77.01
36		207,501,657	905	23.76		229,284	5.747		358.05	688	75.98
42		438,010	2	0.05		219,005	5.781		359.15	715	74.27
48		116,000	1	0.01		116,000	7.000		360.00	656	76.32
60		82,735,193	381	9.47		217,153	6.182		357.33	701	72.08
72		1,687,519	7	0.19		241,074	6.251		359.11	719	79.29

Total	$	873,375,574	4,006	100.00	%	218,017	6.092	%	356.09	688	75.37	%


Range of Months	Current Balance		No. of Loans	% of Total		Average Balance		Weighted Average Gross WAC		Weighted Average Remg. Term (Months)	Weighted Average Credit Score	Weighted Average Original LTV
1 - 120	$	776,304	30	0.09	%	$	25,877	14.369	%	86.97	663	119.15	%
121 - 180		10,941,700	141	1.25			77,601	10.038		175.55	672	89.08
181 - 240		1,508,515	21	0.17			71,834	9.347		233.01	662	69.60
241 - 300		104,655	1	0.01			104,655	8.750		297.00	732	20.00
301 - 360		860,044,400	3,813	98.47			225,556	6.029		358.86	688	75.18

Total	$	873,375,574	4,006	100.00	%	$	218,017	6.092	%	356.09	688	75.37	%


Range of Credit Scores	Current Balance		No. of Loans	% of Total		Average Balance		Weighted Average Gross WAC		Weighted Average Remg. Term (Months)	Weighted Average Credit Score	Weighted Average Original LTV
Not Required	$	1,187,220	7	0.14	%	$	169,603	6.457	%	359.03	N/A	70.77	%
Greater than 820		187,726	1	0.02			187,726	7.540		357.00	850	80.00
801 - 820		9,129,092	36	1.05			253,586	5.848		356.21	808	72.28
781 - 800		24,606,712	102	2.82			241,242	5.641		357.43	789	73.62
761 - 780		52,440,503	207	6.00			253,336	5.596		357.84	770	72.35
741 - 760		63,645,097	276	7.29			230,598	5.702		358.63	749	72.68
721 - 740		71,086,276	298	8.14			238,545	5.862		357.92	730	74.40
701 - 720		114,112,657	471	13.07			242,277	5.944		357.70	710	74.35
681 - 700		121,682,237	537	13.93			226,596	5.970		357.20	690	75.66
661 - 680		129,788,954	593	14.86			218,868	6.236		354.26	671	76.72
641 - 660		134,903,860	678	15.45			198,973	6.406		350.91	651	77.33
621 - 640		95,027,396	491	10.88			193,538	6.289		357.33	631	76.83
601 - 620		43,893,106	239	5.03			183,653	6.340		357.53	611	76.62
581 - 600		6,422,423	35	0.74			183,498	7.306		358.10	595	71.52
561 - 580		2,022,009	13	0.23			155,539	8.156		357.24	573	66.85
541 - 560		1,079,258	7	0.12			154,180	9.010		353.58	549	67.61
521 - 540		887,119	6	0.10			147,853	8.857		357.95	533	68.62
501 - 520		1,273,929	9	0.15			141,548	8.911		358.06	509	61.42

Total	$	873,375,574	4,006	100.00	%	$	218,017	6.092	%	356.09	688	75.37	%


Loan Purpose	Current Balance		No. of Loans	% of Total		Average Balance		Weighted Average Gross WAC		Weighted Average Remg. Term (Months)	Weighted Average Credit Score	Weighted Average Original LTV
Purchase	$	510,616,517	2,362	58.46	%	$	216,180	6.092	%	356.81	696	77.69	%
Refinance-Cash Out		276,070,861	1215	31.61			227,219	6.173		354.72	677	71.84
Refinance		86,688,197	429	9.93			202,070	5.834		356.26	680	73.00

Total	$	873,375,574	4,006	100.00	%	$	218,017	6.092	%	356.09	688	75.37	%


	At December 31, 2000					At December 31, 2001					At December 31, 2002					At December 31, 2003					At December 31, 2004
	Number of Loans		Principal Amount			Number of Loans		Principal Amount			Number of Loans		Principal Amount			Number of Loans		Principal Amount			Number of Loans		Principal Amount
	(Dollars in thousands)					(Dollars in thousands)					(Dollars in thousands)					(Dollars in thousands)					(Dollars in thousands)
Total Loans Outstanding	31,971		$	4,042,859		37,972		$	5,568,740		48,520		$	8,694,474		65,256		$	13,919,693		120,889		$	28,404,008
DELINQUENCY ¹
Period of Delinquency:
30-59 Days	1,941		$	242,081		2,064		$	287,616		2,331		$	383,855		2,432		$	419,202		2,451		$	1,235,080
60-89 Days	529			65,809		531			72,460		644			100,878		601			105,455		1,003			205,486
90- Days or More	266			25,952		705			72,544		616			71,466		560			87,297		646			87,227

Total Delinquencies	2,736		$	333,842		3,300		$	432,620		3,591		$	556,200		3,593		$	611,954		4,100		$	1,527,793

Delinquencies as a Percentage of Total Loans Outstanding	8.56	%		8.26	%	8.69	%		7.77	%	7.40	%		6.40	%	5.51	%		4.40	%	3.39	%		5.38	%


	Twelve Months Ended December 31, 2000			Twelve Months Ended December 31, 2001			Twelve Months Ended December 31, 2002			Twelve Months Ended December 31, 2003			Twelve Months Ended December 31, 2004
	(Dollars in thousands)			(Dollars in thousands)			(Dollars in thousands)			(Dollars in thousands)			(Dollars in thousands)
Charge-offs:
Mortgage Loan Properties	$	12,785		$	6,475		$	2,416		$	3,049		$	1,524
REO Properties		4,779			4,584			4,043			10,687			6,356

Recoveries:
Mortgage Loan Properties		409			849			1,509			913			2,564
REO Properties		0			0			0			0			0

Net charge-offs	$	17,155		$	10,210		$	4,950		$	12,823		$	5,316
Ratio of net charge-offs to average loans outstanding during the indicated period*.		0.51	%		0.21	%		0.07	%		0.12	%		0.02	%


Loan Number	Principal Balance ($)	Mortgage Rate (%)	Net Mortgage Rate (%)	Age (in Months)	Remaining Amortization Term (in Months)	Remaining Term to Maturity (in Months)	Original Interest Only Period (in Months)
1	621,830.33	6.169785	5.761885	4	356	356	24
2	170,380.57	5.250000	4.842100	3	357	357	36
3	1,026,219.82	6.687768	6.279868	1	359	359	36
4	751,084.57	6.000000	5.592100	1	359	359	60
5	203,193,631.71	6.149329	5.729833	1	359	359	60
6	72,849,487.37	5.790787	5.379370	1	359	359	60
7	45,612,515.39	5.327694	4.919794	2	358	358	60
8	169,088.03	7.375000	6.967100	2	358	358	60
9	33,587,238.94	5.371433	4.963533	1	359	359	60
10	534,642.49	5.625000	5.217100	0	360	360	60
11	88,711,743.71	5.555792	5.147892	1	359	359	60
12	3,534,045.62	5.507144	5.099244	0	360	360	60
13	6,349,763.38	5.904428	5.496528	5	355	355	60
14	60,337,354.54	6.147420	5.730214	1	359	359	60
15	26,862,698.39	5.928331	5.520431	1	359	359	60
16	19,250,859.28	5.305473	4.897573	1	359	359	60
17	22,899,105.71	5.104048	4.696148	1	359	359	60
18	42,353,909.36	5.844551	5.436651	1	359	359	60
19	5,466,513.85	5.590747	5.182847	3	357	357	60
20	470,015.38	5.500000	5.092100	4	356	356	84
21	3,841,553.18	5.828125	5.420225	1	359	359	120
22	8,481,836.40	5.608886	5.200986	1	359	359	120
23	1,612,152.74	5.137125	4.729225	1	359	359	120
24	2,407,820.63	5.300888	4.892988	2	358	358	120
25	3,773,215.30	5.867308	5.459408	1	359	359	120
26	629,820.61	6.500000	6.092100	0	360	360	120
27	42,961,461.81	5.335216	4.927316	2	358	358	120
28	2,075,587.91	5.307362	4.899462	2	358	358	120
29	70,221,566.65	6.277455	5.834365	2	358	358	n/a
30	408,569.84	6.875000	6.467100	1	359	359	n/a
31	33,819,445.43	5.942013	5.534113	2	358	358	n/a
32	1,589,083.50	5.915071	5.507171	1	359	359	n/a
33	175,080.73	5.250000	4.842100	0	360	360	n/a
34	2,350,160.33	6.083466	5.675566	1	359	359	n/a
35	13,822,750.75	6.089654	5.681754	1	359	359	n/a
36	599,135.72	5.671151	5.263251	1	359	359	n/a
37	1,064,305.57	5.875000	5.467100	8	352	352	n/a
38	12,085,443.90	6.742130	6.334230	1	359	359	n/a
39	2,936,711.47	6.519469	6.111569	1	359	359	n/a
40	2,182,770.06	4.978117	4.570217	2	358	358	n/a
41	1,569,705.26	4.525691	4.117791	2	358	358	n/a
42	4,615,799.80	5.823632	5.415732	1	359	359	n/a
43	2,057,549.47	5.705341	5.297441	8	352	352	n/a
44	763,091.99	13.700979	12.918079	76	101	101	n/a
45	1,060,609.08	13.690267	12.907367	72	159	159	n/a
46	43,664.18	15.750000	14.967100	84	205	205	n/a
47	259,750.08	11.168127	10.385227	4	356	356	n/a


Loan Number	Principal Balance ($)	Mortgage Rate (%)	Net Mortgage Rate (%)	Age (in Months)	Remaining Amortization Term (in Months)	Remaining Term to Maturity (in Months)	Original Interest Only Period (in Months)
48	22,042.45	14.990000	14.207100	92	146	146	n/a
49	6,712,149.05	11.348411	10.565511	3	357	177	n/a
50	258,796.23	12.237953	11.455053	3	357	237	n/a
51	19,052,566.00	7.039220	6.683488	1	359	359	60
52	12,043,464.00	6.895263	6.539462	1	359	359	60
53	977,100.00	6.446986	6.164086	2	358	358	120
54	2,078,498.52	6.505869	6.222969	0	180	180	n/a
55	992,340.72	7.813544	7.530644	4	232	232	n/a
56	104,655.10	8.750000	8.467100	3	297	297	n/a
57	64,944,445.78	7.115379	6.752610	1	359	359	n/a
58	1,181,726.78	6.493875	6.210975	1	179	179	n/a
59	39,471,444.54	6.725325	6.405976	1	359	359	n/a


Loan Number	Index	Gross Margin (%)	Months to Next Rate Adjustment Date	Months Between Rate Adjustment Dates	Initial Rate Cap(%)	Subsequent Periodic Rate Cap (%)	Maximum Mortgage Rate (%)	Minimum Mortgage Rate (%)	Pre-Funding Term (in Months)
1	6 Month LIBOR	4.300359	20	6	3.000000	1.000000	12.169785	4.630574	n/a
2	6 Month LIBOR	2.250000	21	6	3.000000	1.000000	10.250000	2.250000	n/a
3	6 Month LIBOR	3.604926	35	6	3.000000	1.000000	12.687768	3.604926	n/a
4	6 Month LIBOR	3.250000	119	6	5.000000	1.000000	12.000000	6.000000	n/a
5	6 Month LIBOR	4.828199	23	6	3.656767	1.005627	12.141570	5.222016	n/a
6	6 Month LIBOR	4.106510	35	6	3.861214	1.005636	11.786602	4.266446	n/a
7	1 Year LIBOR	3.097565	10	12	1.929846	1.929846	11.317699	4.836328	n/a
8	1 Month LIBOR	3.250000	1	1	1.000000	1.000000	9.999000	3.250000	n/a
9	6 Month LIBOR	3.213419	5	6	1.021379	1.000000	11.371433	3.923122	n/a
10	1 Year LIBOR	2.750000	60	12	5.000000	2.000000	10.625000	2.750000	n/a
11	6 Month LIBOR	3.479029	59	6	3.017752	1.000000	11.554991	3.585058	n/a
12	6 Month LIBOR	3.450492	84	6	3.000000	1.000000	11.507144	3.450492	n/a
13	6 Month LIBOR	2.583094	115	6	5.253957	1.406625	11.491479	3.447057	1
14	6 Month LIBOR	3.848591	23	6	3.000000	1.000000	12.147847	4.161159	1
15	6 Month LIBOR	3.662933	35	6	3.000000	1.000000	11.928331	3.819494	1
16	1 Year LIBOR	3.135574	11	12	2.000000	2.000000	11.305473	4.802657	1
17	6 Month LIBOR	3.073229	5	6	1.000000	1.000000	11.104129	4.146619	1
18	6 Month LIBOR	3.483328	59	6	3.023998	1.000000	11.837035	3.575793	1
19	6 Month LIBOR	2.660881	81	6	4.581435	1.094955	11.106041	3.020952	1
20	1 Year LIBOR	2.250000	80	12	5.000000	2.000000	10.500000	2.250000	n/a
21	6 Month LIBOR	3.149887	23	6	3.000000	1.000000	11.828125	3.149887	n/a
22	6 Month LIBOR	2.440430	35	6	5.228244	1.711347	11.320233	2.440430	n/a
23	1 Month LIBOR	3.009111	2	1	1.000000	1.000000	9.999000	3.009111	n/a
24	6 Month LIBOR	3.042033	4	6	1.000000	1.000000	11.300888	3.042033	n/a
25	6 Month LIBOR	2.591302	59	6	5.544931	1.544931	11.412239	2.591302	n/a
26	6 Month LIBOR	3.250000	84	6	3.000000	1.000000	12.500000	3.250000	n/a
27	1 Year LIBOR	2.504765	10	12	2.000000	2.000000	11.335216	2.504765	1
28	6 Month LIBOR	3.299083	4	6	1.000000	1.000000	11.307362	3.299083	1
29	6 Month LIBOR	4.981907	22	6	4.617373	1.003727	12.248259	5.237594	n/a
30	1 Year LIBOR	2.250000	35	12	2.000000	2.000000	11.875000	2.250000	n/a
31	6 Month LIBOR	5.052948	34	6	5.233945	1.020233	11.931100	5.290341	n/a
32	1 Year LIBOR	3.583920	11	12	1.830667	1.830667	11.915071	4.003823	n/a
33	1 Month LIBOR	4.250000	3	1	1.000000	1.000000	9.999000	4.250000	n/a
34	6 Month LIBOR	3.683310	5	6	1.032450	1.032450	12.148367	3.920880	n/a
35	6 Month LIBOR	3.659040	59	6	3.246357	1.041350	12.028500	3.713771	n/a
36	6 Month LIBOR	3.377349	83	6	3.900274	1.000000	11.671151	4.502692	n/a
37	6 Month LIBOR	2.250000	112	6	5.443352	1.443352	11.318352	2.250000	1
38	6 Month LIBOR	4.269560	23	6	3.097064	1.040346	12.822972	4.853213	1
39	6 Month LIBOR	4.164868	35	6	3.227125	1.037577	12.594622	4.393825	1
40	1 Year LIBOR	2.924232	10	12	2.000000	2.000000	10.978117	3.341457	1
41	6 Month LIBOR	3.021478	4	6	1.030632	1.030632	10.586956	3.472224	1
42	6 Month LIBOR	3.425246	59	6	3.000000	1.000000	11.823632	3.425246	1
43	6 Month LIBOR	2.377995	76	6	5.540418	1.906913	11.367240	2.377995	1
44	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a
45	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a


	Bonds
Prepayment Assumption	0%		80%		100%		150%		180%
Payment Date
Initial Percentage	100	%	100	%	100	%	100	%	100	%
March 25, 2006	99		77		72		58		49
March 25, 2007	99		59		50		32		23
March 25, 2008	99		45		35		18		11
March 25, 2009	98		34		25		10		5
March 25, 2010	98		26		18		5		2
March 25, 2011	97		20		12		3		1
March 25, 2012	95		15		8		1		*
March 25, 2013	93		11		6		1		0
March 25, 2014	92		8		4		*		0
March 25, 2015	90		6		3		0		0
March 25, 2016	88		4		2		0		0
March 25, 2017	85		3		1		0		0
March 25, 2018	83		2		1		0		0
March 25, 2019	80		2		*		0		0
March 25, 2020	77		1		*		0		0
March 25, 2021	74		1		0		0		0
March 25, 2022	71		*		0		0		0
March 25, 2023	67		*		0		0		0
March 25, 2024	64		*		0		0		0
March 25, 2025	60		0		0		0		0
March 25, 2026	55		0		0		0		0
March 25, 2027	51		0		0		0		0
March 25, 2028	46		0		0		0		0
March 25, 2029	40		0		0		0		0
March 25, 2030	35		0		0		0		0
March 25, 2031	29		0		0		0		0
March 25, 2032	22		0		0		0		0
March 25, 2033	15		0		0		0		0
March 25, 2034	7		0		0		0		0
March 25, 2035	0		0		0		0		0
Weighted Average Life To Maturity (in years)**	20.6		3.6		2.9		1.8		1.4
Weighted Average Life To Call (in years)**	9.6		3.0		2.4		1.4		1.1


	December 31, 2003		December 31, 2004
Unearned Premiums	$	919	$	1,043
Other Liabilities		86		121
Stockholder’s Equity
Common Stock		15		15
Additional Paid-in Capital		1,858		1,883
Accumulated Other Comprehensive Income		2		15
Retained Earnings		94		265

Total Stockholder’s Equity		1,969		2,178

Total Liabilities and Stockholder’s Equity	$	2,974	$	3,342


Month of Payment Date	Scheduled Principal Balance ($)	Swap Agreement Fixed- rate (%)
April 25, 2005	190,000,000	3.66042
May 25, 2005	345,459,336	3.70927
June 25, 2005	344,136,862	3.70932
July 25, 2005	342,196,364	3.70937
August 25, 2005	339,634,658	3.70942
September 25, 2005	336,451,669	3.70947
October 25, 2005	332,650,575	3.70952
November 25, 2005	328,237,886	3.70958
December 25, 2005	323,223,495	3.70963
January 25, 2006	317,620,697	3.70969
February 25, 2006	311,446,220	3.70975
March 25, 2006	304,720,211	3.70981
April 25, 2006	297,466,172	3.70987
May 25, 2006	290,080,152	3.70987
June 25, 2006	282,875,613	3.70987
July 25, 2006	275,848,151	3.70987
August 25, 2006	268,993,444	3.70987
September 25, 2006	262,307,258	3.70987
October 25, 2006	255,785,482	3.70987
November 25, 2006	249,424,126	3.70987
December 25, 2006	243,219,264	3.70987
January 25, 2007	237,167,081	3.70987
February 25, 2007	231,263,859	3.70987
March 25, 2007	225,505,954	3.70987
April 25, 2007	100,515,901	3.76860


Payment Date	Notional Balances ($)
April 2005	$	1,000,000,000
May 2005	$	941,840,272
June 2005	$	862,724,294
July 2005	$	790,253,002
August 2005	$	723,868,448
September 2005	$	663,059,493
October 2005	$	607,358,095
November 2005	$	556,335,300
December 2005	$	509,598,034
January 2006	$	466,786,407
February 2006	$	427,570,746
March 2006	$	391,649,098