8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

April 29, 2003
Date of Report (Date of Earliest Event Reported)

SEQUOIA RESIDENTIAL FUNDING, INC.

(as Depositor with respect to the issuance of Sequoia Mortgage Trust 2003-2,
Mortgage Pass-Through Certificates)

SEQUOIA RESIDENTIAL FUNDING, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	333-103634	35-2170972
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

591 Redwood Highway, Suite 3160

Mill Valley, CA 94941

(Address of Principal Executive Offices)

(415) 389-7373

(Registrant’s Telephone Number,
Including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

TABLE OF CONTENTS

INFORMATION TO BE INCLUDED IN THE REPORT
	Item 5. Other Events
	Item 7(c). Exhibits
SIGNATURE
EXHIBIT INDEX
Exhibit 99.1
Exhibit 99.2

INFORMATION TO BE INCLUDED IN THE REPORT

Item 5. Other Events

          On April 1, 2003, Sequoia Residential Funding, Inc. (the “Depositor”), Wells Fargo Bank Minnesota, National Association (the “Master Servicer” and “Securities Administrator”), and HSBC Bank USA (the “Trustee”) entered into a Pooling and Servicing Agreement (the “Pooling and Servicing Agreement”), pursuant to which the Sequoia Mortgage Trust 2003-2 Mortgage Pass-Through Certificates in the approximate aggregate principal amount of $820,000,000 were issued. In connection with the offering of Mortgage Pass-Through Certificates, RWT Holdings, Inc. (the “RWT”) and the Depositor entered into a Mortgage Loan Purchase and Sale Agreement dated April 1, 2003, pursuant to which RWT conveyed to the Depositor as of the initial closing on April 29, 2003, all of its interest in the Initial Mortgage Loans. The Pooling and Servicing Agreement, with accompanying Exhibits, is annexed hereto as Exhibit 99.1. The Opinion as to federal income tax matters in connection with the issuance of the Sequoia Mortgage Trust 2003-2 Mortgage Pass-Through Certificates is attached hereto as Exhibit 99.2.

Item 7(c).	Exhibits
	99.1	Pooling and Servicing Agreement dated April 1, 2003, by and among Sequoia Residential Funding, Inc., as Depositor, Wells Fargo Bank Minnesota, National Association, as Master Servicer and Securities Administrator, and HSBC Bank USA, as Trustee.
	99.2	Opinion of GnazzoThill, A Professional Corporation, dated April 29, 2003, as to federal income tax matters in connection with the issuance of the Sequoia Mortgage Trust 2003-2 Mortgage Pass-Through Certificates.

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: April 29, 2003

SEQUOIA RESIDENTIAL FUNDING, INC.
By:	/s/  Harold F. Zagunis
	Harold F. Zagunis Secretary

EXHIBIT INDEX

Exhibit Number
99.1	Pooling and Servicing Agreement dated April 1, 2003, by and among Sequoia Residential Funding, Inc., as Depositor, Wells Fargo Bank Minnesota, National Association, as Master Servicer and Securities Administrator, and HSBC Bank USA, as Trustee.
99.2	Opinion of GnazzoThill, a Professional Corporation, dated April 29, 2003, as to federal income tax matters in connection with the issuance of the Sequoia Mortgage Trust 2003-2 Mortgage Pass-Through Certificates.

EX-99.1 3 f90056exv99w1.txt EXHIBIT 99.1 EXHIBIT 99.1 EXECUTION SEQUOIA RESIDENTIAL FUNDING, INC. Depositor WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION Master Servicer and Securities Administrator and HSBC BANK USA Trustee --------------------------- POOLING AND SERVICING AGREEMENT Dated as of April 1, 2003 --------------------------- SEQUOIA MORTGAGE TRUST 2003-2 TABLE OF CONTENTS

Page ARTICLE I DEFINITIONS.......................................................................................... 6 Section 1.01. Definitions.................................................................................. 6 Section 1.02. Calculations Respecting Mortgage Loans....................................................... 36 ARTICLE II DECLARATION OF TRUST; ISSUANCE OF CERTIFICATES...................................................... 36 Section 2.01. Creation and Declaration of Trust Fund; Conveyance of Mortgage Loans......................... 36 Section 2.02. Acceptance of Trust Fund by Trustee; Review of Documentation for Trust Fund.................. 39 Section 2.03. Representations and Warranties of the Depositor.............................................. 40 Section 2.04. Discovery of Breach; Repurchase or Substitution of Mortgage Loans............................ 42 Section 2.05 Delivery of Subsequent Mortgage Loans........................................................ 45 Section 2.06. Grant Clause................................................................................. 47 ARTICLE III THE CERTIFICATES................................................................................... 48 Section 3.01. The Certificates............................................................................. 48 Section 3.02. Registration................................................................................. 49 Section 3.03. Transfer and Exchange of Certificates........................................................ 49 Section 3.04. Cancellation of Certificates................................................................. 53 Section 3.05. Replacement of Certificates.................................................................. 53 Section 3.06. Persons Deemed Owners........................................................................ 53 Section 3.07. Temporary Certificates....................................................................... 54 Section 3.08. Appointment of Paying Agent.................................................................. 54 Section 3.09. Book-Entry Certificates...................................................................... 54 ARTICLE IV ADMINISTRATION OF THE TRUST FUND.................................................................... 56 Section 4.01. Custodial Accounts; Distribution Account..................................................... 56 Section 4.02 The Pre-Funding Accounts..................................................................... 57 Section 4.03. Reports to Trustee and Certificateholders.................................................... 59 ARTICLE V DISTRIBUTIONS TO HOLDERS OF CERTIFICATES............................................................. 61 Section 5.01. Distributions Generally...................................................................... 61 Section 5.02. Distributions from the Distribution Account.................................................. 62 Section 5.03. Allocation of Losses......................................................................... 65 Section 5.04. Advances by Master Servicer.................................................................. 66 Section 5.05. Compensating Interest Payments............................................................... 66 Section 5.06. Reserve Fund................................................................................. 66

i ARTICLE VI CONCERNING THE TRUSTEE AND THE SECURITIES ADMINISTRATOR; EVENTS OF DEFAULT.......................... 67 Section 6.01. Duties of Trustee and the Securities Administrator........................................... 67 Section 6.02. Certain Matters Affecting the Trustee and the Securities Administrator....................... 70 Section 6.03. Trustee and Securities Administrator Not Liable for Certificates............................. 71 Section 6.04. Trustee and the Securities Administrator May Own Certificates................................ 72 Section 6.05. Eligibility Requirements for Trustee......................................................... 72 Section 6.06. Resignation and Removal of Trustee and the Securities Administrator.......................... 72 Section 6.07. Successor Trustee and Successor Securities Administrator..................................... 73 Section 6.08. Merger or Consolidation of Trustee or the Securities Administrator........................... 74 Section 6.09. Appointment of Co-Trustee, Separate Trustee or Custodian..................................... 74 Section 6.10. Authenticating Agents........................................................................ 76 Section 6.11. Indemnification of the Trustee and the Securities Administrator.............................. 76 Section 6.12. Fees and Expenses of Securities Administrator and the Trustee................................ 77 Section 6.13. Collection of Monies......................................................................... 77 Section 6.14. Events of Default; Trustee To Act; Appointment of Successor.................................. 77 Section 6.15. Additional Remedies of Trustee Upon Event of Default......................................... 81 Section 6.16. Waiver of Defaults........................................................................... 81 Section 6.17. Notification to Holders...................................................................... 82 Section 6.18. Directions by Certificateholders and Duties of Trustee During Event of Default............... 82 Section 6.19. Action Upon Certain Failures of the Master Servicer and Upon Event of Default................ 82 Section 6.20. Preparation of Tax Returns and Other Reports................................................. 82 ARTICLE VII PURCHASE OF MORTGAGE LOANS AND TERMINATION OF THE TRUST FUND....................................... 84 Section 7.01. Purchase of Mortgage Loans; Termination of Trust Fund Upon Purchase or Liquidation of All Mortgage Loans ........................................................ 84 Section 7.02. Procedure Upon Termination of Trust Fund..................................................... 85 Section 7.03. Additional Trust Fund Termination Requirements............................................... 86 ARTICLE VIII RIGHTS OF CERTIFICATEHOLDERS...................................................................... 87 Section 8.01. Limitation on Rights of Holders.............................................................. 87 Section 8.02. Access to List of Holders.................................................................... 87 Section 8.03. Acts of Holders of Certificates.............................................................. 88 ARTICLE IX ADMINISTRATION AND SERVICING OF MORTGAGE LOANS BY THE MASTER SERVICER............................... 89 Section 9.01. Duties of the Master Servicer; Enforcement of Servicer's and Master Servicer's Obligations... 89 Section 9.02 Assumption of Master Servicing by Trustee.................................................... 90 Section 9.03. Representations and Warranties of the Master Servicer........................................ 91 ii Section 9.04. Compensation to the Master Servicer.......................................................... 93 Section 9.05. Merger or Consolidation...................................................................... 93 Section 9.06. Resignation of Master Servicer............................................................... 94 Section 9.07. Assignment or Delegation of Duties by the Master Servicer.................................... 94 Section 9.08. Limitation on Liability of the Master Servicer and Others.................................... 94 Section 9.09. Indemnification; Third-Party Claims.......................................................... 95 ARTICLE X REMIC ADMINISTRATION................................................................................. 95 Section 10.01. REMIC Administration......................................................................... 95 Section 10.02. Prohibited Transactions and Activities....................................................... 98 Section 10.03. Indemnification with Respect to Prohibited Transactions or Loss of REMIC Status.............. 98 Section 10.04. REO Property................................................................................. 98 ARTICLE XI MISCELLANEOUS PROVISIONS............................................................................ 99 Section 11.01. Binding Nature of Agreement; Assignment...................................................... 99 Section 11.02. Entire Agreement............................................................................. 99 Section 11.03. Amendment.................................................................................... 100 Section 11.04. Voting Rights................................................................................ 101 Section 11.05. Provision of Information..................................................................... 101 Section 11.06. Governing Law................................................................................ 102 Section 11.07. Notices...................................................................................... 102 Section 11.08. Severability of Provisions................................................................... 102 Section 11.09. Indulgences; No Waivers...................................................................... 102 Section 11.10. Headings Not To Affect Interpretation........................................................ 103 Section 11.11. Benefits of Agreement........................................................................ 103 Section 11.12. Special Notices to the Rating Agencies....................................................... 103 Section 11.13. Conflicts.................................................................................... 104 Section 11.14. Counterparts................................................................................. 104 Section 11.15 No Petitions................................................................................. 104 iii ATTACHMENTS Exhibit A Forms of Certificates Exhibit B Form of Residual Certificate Transfer Affidavit (Transferee) Exhibit C Form of Residual Certificate Transfer Affidavit (Transferor) Exhibit D Form of Custody Agreement Exhibit E List of Servicing Agreements Exhibit F List of Purchase Agreements Exhibit G List of Limited Purpose Surety Bonds Exhibit H Form of Rule 144A Transfer Certificate Exhibit I Form of Purchaser's Letter for Institutional Accredited Investors Exhibit J Form of ERISA Transfer Affidavit Exhibit K Form of Letter of Representations with the Depository Trust Company Exhibit L [Reserved] Exhibit M Form of Certification to be Provided to the Depositor by the Securities Administrator Schedule A Mortgage Loan Schedule iv This POOLING AND SERVICING AGREEMENT, dated as of April 1, 2003 (the "Agreement"), by and among SEQUOIA RESIDENTIAL FUNDING, INC., a Delaware corporation, as depositor (the "Depositor"), HSBC Bank USA, a New York banking corporation, as trustee (the "Trustee"), and WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, in its dual capacities as master servicer (the "Master Servicer") and securities administrator (the "Securities Administrator") and acknowledged by RWT HOLDINGS, INC., a Delaware corporation, as seller (the "Seller"), for purposes of Section 2.04. PRELIMINARY STATEMENT The Depositor has acquired the Initial Mortgage Loans from the Seller and at the Closing Date is the owner of the Initial Mortgage Loans and the other property being conveyed by the Depositor to the Trustee hereunder for inclusion in the Trust Fund. On the Closing Date, the Depositor will acquire the Certificates from the Trustee as consideration for the Depositor's transfer to the Trust Fund of the Initial Mortgage Loans, an initial deposit to each Pre-Funding Account of the Original Pre-Funded Amount with respect to the related Mortgage Pool, an initial deposit to the Capitalized Interest Account in an amount sufficient to satisfy the aggregate Capitalized Interest Requirement on the Certificates during the Pre-Funding Period, and the other property constituting the Trust Fund. The Depositor has duly authorized the execution and delivery of this Agreement to provide for the conveyance to the Trustee of the Initial Mortgage Loans any Subsequent Mortgage Loans and the other property constituting the Trust Fund. All covenants and agreements made by the Seller in the Mortgage Loan Purchase Agreement and in this Agreement and by the Depositor, the Master Servicer, the Securities Administrator and the Trustee herein with respect to the Mortgage Loans and the other property constituting the Trust Fund are for the benefit of the Holders from time to time of the Certificates. The Depositor, the Trustee, the Master Servicer and the Securities Administrator are entering into this Agreement, and the Trustee is accepting the Trust Fund created hereby, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged. As provided herein, the Trustee shall elect that the Trust Fund (exclusive of the Additional Collateral, the assets held in the Reserve Fund, the Capitalized Interest Account and the Pre-Funding Accounts) be treated for federal income tax purposes as comprising two real estate mortgage investment conduits (each a "REMIC" or, in the alternative, the "Lower Tier REMIC" and the "Upper Tier REMIC," respectively). Each Certificate, other than the Class R Certificate and the Class LT-R Certificate, shall represent ownership of a regular interest in the Upper Tier REMIC. In addition, each of the Class A-1, Class A-2, Class M-1, Class M-2 and Class X Certificates represent the right to receive payments from the Reserve Fund as provided in Section 5.06. The owners of the Class X Certificates beneficially own the Reserve Fund. The Class R Certificate represents the sole class of residual interest in the Upper Tier REMIC. The Class LT-R Certificate represents the sole class of residual interest in the Lower Tier REMIC. The Lower Tier REMIC shall issue several classes of uncertificated Lower Tier Interests and each such uncertificated Lower Tier Interest is hereby designated as a regular interest in the Lower Tier REMIC for purposes of the REMIC Provisions. The Upper Tier REMIC will hold as its assets the entire beneficial interest in each Class of uncertificated Lower Tier Interests. The Lower Tier REMIC shall also issue the Class LT-R Certificate, which is hereby designated as the sole class of residual interest in the Lower Tier REMIC for purposes of the REMIC Provisions. The Lower Tier REMIC shall hold as its assets the property of the Trust Fund other than the Lower Tier Interests, the Additional Collateral, the Reserve Fund, the Capitalized Interest Account, and the Pre-Funding Accounts. THE LOWER TIER REMIC INTERESTS The following table sets forth (or describes) the class designation, interest rate, and initial principal amount for each class of Lower Tier REMIC Interests.

Corresponding Class of Lower Tier Class Lower Tier Initial Class Certificate(s) Designation Interest Rate Principal Amount or Component - ------------------ ------------- ---------------- ---------------------- Class LT-A1 (1) $ 125,000,000.00 Class A1 Class LT-A2 (1) $ 75,900,000.00 Class A2 Class LT-M1 (1) $ 2,870,000.00 Class M1 Class LT-M2 (1) $ 1,230,000.00 Class M2 Class LT-Pool 1PSA (2) $ 102,041.08 N/A Class LT-Pool 1N (2) $ 127,448,986.03 N/A Class LT-Pool 2PSA (3) $ 61,958.92 N/A Class LT-Pool 2N (3) $ 77,387,013.97 N/A Class LT-Q (1) $ 410,000,000.02 N/A Class LT-R (4) (4) Class LT-R

- --------------------------- (1) The interest rate with respect to any Distribution Date (and the related Accrual Period) for each of these Lower Tier Interests is a per annum rate equal to the Net WAC. (2) The interest rate with respect to any Distribution Date (and the related Accrual Period) for each of these Lower Tier Interests is a per annum rate equal to the Pool 1 Net WAC. (3) The interest rate with respect to any Distribution Date (and the related Accrual Period) for each of these Lower Tier Interests is a per annum rate equal to the Pool 2 Net WAC. (4) The Class LT-R Certificate is the sole class of residual interests in the Lower Tier REMIC. It does not have an interest rate or a principal balance. On each Distribution Date interest shall be distributed with respect to each of the Lower Tier Interests based on the above-described interest rates, provided however, that interest that accrues on the Class LT-Q Interest shall be deferred in an amount equal to 25% of the increase for such Distribution Date in the Overcollateralization Amount and the interest so deferred shall be applied to make the principal distributions described below for such Distribution Date. Any interest so deferred shall itself bear interest at the interest rate for the Class LT-Q Interest. On each Distribution Date the principal (including the amount of interest deferred on the Class LT-Q Interest for such Distribution Date) shall be distributed, and Realized Losses shall be allocated, among the Lower Tier Interests in the following order of priority: (i) First, to the Class LT-Pool 1PSA Interest until its principal balance equals one percent of the Pool 1 Subordinate Amount after such Distribution Date; 2 (ii) Second, to the Class LT-Pool 2PSA Interest until its principal balance equals one percent of the Pool 2 Subordinate Amount after such Distribution Date; (iii) Third, to the Class LT-Pool 1PSA or Class LT-Pool 2PSA Interests the minimum amount necessary to cause the ratio of the principal balance of the Class LT-Pool 1PSA Interest to the principal balance of the Class LT-Pool 2PSA Interest to equal the ratio of the Pool 1 Subordinate Amount to the Pool 2 Subordinate Amount immediately after such Distribution Date; (iv) Fourth, to the Class LT-Pool 1N Interest until the aggregate principal balances of the Class LT-Pool 1N Interest and the Class LT-Pool 1PSA Interest equals one-quarter of the Assumed Principal Balance for Pool 1 immediately after such Distribution Date; (v) Fifth, to the Class LT-Pool 2N Interest until the aggregate principal balances of the Class LT-Pool 2N Interest and the Class LT-Pool 2PSA Interest equals one-quarter of the Assumed Principal Balance for Pool 2 immediately after such Distribution Date; (vi) Sixth, to the Class LT-A1 Interest and the Class LT-A2 Interest until the principal balance of each such Lower Tier Interest equals one-quarter of the Class Principal Amount of the Corresponding Class of Certificates for such Interest immediately after such Distribution Date; (vii) Seventh, to the Class LT2-M1 Interest until its principal balance equals one-quarter of the Class Principal Amount of the Class M1 Certificates immediately after such Distribution Date; (viii) Eighth, to the Class LT2-M2 Interest until its principal balance equals one-quarter of the Class Principal Amount of the Class M2 Certificates immediately after such Distribution Date; (ix) Finally, to the Class LT-Q Interest, any remaining amounts. THE CERTIFICATES The following table sets forth (or describes) the Class designation, Certificate Interest Rate, initial Class Principal Amount (or initial Class Notional Amount), and minimum denomination for each Class of Certificates comprising interests in the Trust Fund created hereunder. Each Class of Certificates, other than the Class LT-R and Class R Certificates, is hereby designated as representing ownership of regular interests in the Upper Tier REMIC. 3

INITIAL CLASS PRINCIPAL AMOUNT MINIMUM CLASS CERTIFICATE INTEREST OR CLASS NOTIONAL DENOMINATIONS OR DESIGNATION RATE AMOUNT PERCENTAGE INTEREST - ----------- -------------------- ----------------- ------------------- Class A-1 (1) $ 500,000,000 $ 25,000.00 Class A-2 (2) $ 303,600,000 $ 25,000.00 Class M-1 (3) $ 11,480,000 $ 25,000.00 Class M-2 (4) $ 4,920,000 $ 25,000.00 Class X (5) (6) 100% Class R (7) (7) 100% Class LT-R (7) (7) 100%

- ---------------------- (1) The Certificate Interest Rate with respect to any Distribution Date (and the related Accrual Period) for the Class A-1 Certificates will be the least of (i) One-Month LIBOR plus 0.330%, (ii) the Pool 1 Net WAC (i.e., the weighted average of the rates on the Class LT-Pool 1PSA and Class LT-Pool 1N Interests in the Lower Tier REMIC) and (iii) 11.500%; provided, however, if the Mortgage Loans and related property are not purchased pursuant to Section 7.01(b) on the Initial Optional Purchase Date, then with respect to each subsequent Distribution Date the per annum rate calculated pursuant to clause (i) above with respect to the Class A-1 Certificates will be One-Month LIBOR plus 0.660%. (2) The Certificate Interest Rate with respect to any Distribution Date (and the related Accrual Period) for the Class A-2 Certificates will be the least of (i) Six-Month LIBOR plus 0.340%, (ii) the Pool 2 Net WAC (i.e., the weighted average of the rates on the Class LT-Pool 2PSA and Class LT-Pool 2N Interests in the Lower Tier REMIC) and (iii) 11.500%; provided, however, if the Mortgage Loans and related property are not purchased pursuant to Section 7.01(b) on the Initial Optional Purchase Date, then with respect to each subsequent Distribution Date the per annum rate calculated pursuant to clause (i) above with respect to the Class A-2 Certificates will be Six-Month LIBOR plus 0.680%. (3) The Certificate Interest Rate with respect to any Distribution Date (and the related Accrual Period) for the Class M-1 Certificates will be the least of (i) One-Month LIBOR plus 0.650%, (ii) the Subordinate Net WAC (i.e., the weighted average of the rates on the Class LT-Pool 1PSA and Class LT-Pool 2PSA Interests in the Lower Tier REMIC) and (iii) 11.500%; provided, however, if the Mortgage Loans and related property are not purchased pursuant to Section 7.01(b) on the Initial Optional Purchase Date, then with respect to each subsequent Distribution Date the per annum rate calculated pursuant to clause (i) above with respect to the Class M-1 Certificates will be One-Month LIBOR plus 0.975%. (4) The Certificate Interest Rate with respect to any Distribution Date (and the related Accrual Period) for the Class M-2 Certificates will be the least of (i) One-Month LIBOR plus 1.430%, (ii) the Subordinate Net WAC (i.e., the weighted average of the rates on the Class LT-Pool 1PSA and Class LT-Pool 2PSA Interests in the Lower Tier REMIC) and (iii) 11.500%. (5) The "Class X Pass-Through Rate" with respect to any Distribution Date (and the related Accrual Period) for the Class X Certificate shall be a pass-through rate equal to the excess of (a) the weighted average of the interest rates on the regular interests in the Lower Tier REMIC, weighted on the basis of the principal balance of each such Lower Tier Interest (i.e., the Net WAC), over (b) the Adjusted Lower Tier WAC (for 4 the first Distribution Date only, multiplied by a fraction, the numerator of which is the actual number of days in the initial Accrual Period and the denominator of which is 30). For any Distribution Date, interest that accrues on the Class X Certificate shall be deferred to the extent of any increase in the Overcollateralization Amount on such date. Such deferred interest shall not itself bear interest. (6) The Class X Certificate is an interest-only Class and for any Distribution Date, the Class X Certificate shall bear interest at the Class X Pass-Through Rate described above on a Class Notional Amount equal to the aggregate of the principal balances of the regular interests in the Lower Tier REMIC (i.e., the Assumed Principal Balance). (7) The Class R and Class LT-R Certificates will be issued without a Certificate Interest Rate or a Class Principal Amount or Class Notional Amount. As of the Cut-off Date, the Mortgage Loans had an aggregate Scheduled Principal Balance of $692,169,302.96. 5 In consideration of the mutual agreements herein contained, the Depositor, the Master Servicer, the Securities Administrator and the Trustee hereby agree as follows: ARTICLE I DEFINITIONS Section 1.01 Definitions. The following words and phrases, unless the context otherwise requires, shall have the following meanings: 1M Sub-account: The Sub-account established under the Pool 1 Pre-Funding Account for the acquisition of Subsequent Mortgage Loans which are One-Month LIBOR Loans. 6M Sub-account: The Sub-account established under the Pool 1 Pre-Funding Account for the acquisition of Subsequent Mortgage Loans which are Six-Month LIBOR Loans. Accountant: A Person engaged in the practice of accounting who (except when this Agreement provides that an Accountant must be Independent) may be employed by or affiliated with the Depositor or an Affiliate of the Depositor. Accrual Period: With respect to any Distribution Date and any Class of LIBOR Certificates, the period commencing on the 20th day of the month preceding the month in which the Distribution Date occurs and ending on the 19th day of the month in which the Distribution Date occurs; provided, however, that the first Accrual Period with respect to the LIBOR Certificates shall be the period beginning on the Closing Date and ending on May 19, 2003. The Accrual Period for each Lower Tier Interest is the calendar month preceding the month in which the Distribution Date occurs. Interest shall accrue on the LIBOR Certificates on the basis of a 360-day year consisting of twelve 30-day months. Acknowledgements: The Assignment, Assumption and Recognition Agreements, each dated April 29, 2003, assigning rights under the Purchase Agreements and the Servicing Agreements from the Seller to the Depositor and from the Depositor to the Trustee for the benefit of Certificateholders. Act: The Securities Act of 1933, as amended. Additional Collateral: With respect to any Additional Collateral Mortgage Loan, the marketable securities and other acceptable collateral pledged as collateral pursuant to the related pledge agreements. Additional Collateral Mortgage Loan: Each Mortgage Loan identified as such in the Mortgage Loan Schedule. Adjusted Lower Tier WAC: For any Accrual Period, the product of (a) four, and (b) the weighted average of the interest rates on the LT-Q, LT-A1, LT-A2, LT-M1, LT-M2, LT-Pool 1PSA, LT-Pool 1N, LT-Pool 2PSA, and LT-Pool 2N Interests determined for this purpose by 6 first subjecting the rate payable on each of the Class LT-Q, LT-Pool 1PSA, LT-Pool 1N, LT-Pool 2PSA and LT-Pool 2N Interests to a cap of zero, and subjecting the rate payable on each of the Class LT-A1, LT-A2, Class LT-M1, and LT-M2 Interests to a cap that corresponds to the Certificate Interest Rate for the Corresponding Class of Certificates for such Accrual Period. Adjustment Date: As to any Mortgage Loan, the date on which the related Mortgage Rate adjusts in accordance with the terms of the related Mortgage Note. Advance: With respect to a Mortgage Loan, the payments required to be made by the Master Servicer or the applicable Servicer with respect to any Distribution Date pursuant to this Agreement or the Servicing Agreements, as applicable, the amount of any such payment being equal to the aggregate of the payments of principal and interest (net of the Master Servicing Fee and/or the applicable Servicing Fee and net of any net income in the case of any REO Property) on the Mortgage Loans that were due on the related Due Date and not received as of the close of business on the related Determination Date, less the aggregate amount of any such delinquent payments that the Master Servicer or the Servicers have determined would constitute Nonrecoverable Advances if advanced. Affiliate: With respect to any specified Person, any other Person controlling or controlled by or under common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. Aggregate Expense Rate: With respect to any Mortgage Loan, the sum of the Master Servicing Fee Rate and the applicable Servicing Fee Rate. Aggregate Overcollateralization Release Amount: With respect to any Distribution Date, the amount, if any, by which (i) the Overcollateralization Amount for such date exceeds (ii) the Targeted Overcollateralization Amount for such date. Aggregate Stated Principal Balance: As to any Distribution Date, the aggregate of the Stated Principal Balances for all Mortgage Loans (and when such term is used with respect to a particular Mortgage Pool, the aggregate of the Stated Principal Balances of the Mortgage Loans in such Mortgage Pool) which were outstanding on the Due Date in the month preceding the month of such Distribution Date. Aggregate Voting Interests: The aggregate of the Voting Interests of all the Certificates under this Agreement. Agreement: This Pooling and Servicing Agreement and all amendments and supplements hereto. Applied Loss Amount: With respect to any Distribution Date, the amount, if any, by which (x) the aggregate Certificate Principal Amount of the Certificates after giving effect to all distributions in respect of principal on such Distribution Date, exceeds (y) the Assumed Principal 7 Balance for such Distribution Date, after giving effect to all Realized Losses incurred with respect to the Mortgage Loans during the related Due Period. Appraised Value: With respect to any Mortgage Loan, the Appraised Value of the related Mortgaged Property shall be: (i) with respect to a Mortgage Loan other than a Refinancing Mortgage Loan, the lesser of (a) the value of the Mortgaged Property based upon the appraisal made at the time of the origination of such Mortgage Loan and (b) the sales price of the Mortgaged Property at the time of the origination of such Mortgage Loan; and (ii) with respect to a Refinancing Mortgage Loan, the value of the Mortgaged Property based upon the appraisal made at the time of the origination of such Refinancing Mortgage Loan. Assignment of Mortgage: An assignment of the Mortgage, notice of transfer or equivalent instrument, in recordable form, sufficient under the laws of the jurisdiction wherein the related Mortgaged Property is located to reflect the sale of the Mortgage to the Trustee, which assignment, notice of transfer or equivalent instrument may be in the form of one or more blanket assignments covering the Mortgage Loans secured by Mortgaged Properties located in the same jurisdiction, if permitted by law; provided, however, that the Trustee shall not be responsible for determining whether any such assignment is in recordable form. Assumed Principal Balance: As of any date of determination (and with respect to any Distribution Date, determined as of the Due Date immediately preceding such Distribution Date), the sum of (a) the Aggregate Stated Principal Balance and (b) the Pre-Funded Amount. Authenticating Agent: Any authenticating agent appointed by the Trustee pursuant to Section 6.10 until any successor authenticating agent for the Certificates is named, and thereafter "Authenticating Agent" shall mean any such successor. The Authenticating Agent shall be Wells Fargo Bank Minnesota, National Association for so long as it is acting as Securities Administrator under this Agreement. Authorized Officer: Any Person who may execute an Officer's Certificate on behalf of the Depositor. Bankruptcy: As to any Person, the making of an assignment for the benefit of creditors, the filing of a voluntary petition in bankruptcy, adjudication as a bankrupt or insolvent, the entry of an order for relief in a bankruptcy or insolvency proceeding, the seeking of reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief, or seeking, consenting to or acquiescing in the appointment of a trustee, receiver or liquidator, dissolution, or termination, as the case may be, of such Person pursuant to the provisions of either the Bankruptcy Code or any other similar state laws. Bankruptcy Code: The United States Bankruptcy Code of 1986, as amended. BBA: The British Banker's Association. Benefit Plan Opinion: An Opinion of Counsel satisfactory to the Trustee and Certificate Registrar to the effect that any proposed transfer will not (i) cause the assets of the Trust Fund to 8 be regarded as plan assets for purposes of the Plan Asset Regulations or (ii) give rise to any fiduciary duty on the part of the Depositor or the Trustee. Book-Entry Certificates: Beneficial interests in Certificates designated as "Book-Entry Certificates" in this Agreement, ownership and transfers of which shall be evidenced or made through book entries by a Clearing Agency as described in Section 3.09; provided, that after the occurrence of a Book-Entry Termination whereupon book-entry registration and transfer are no longer permitted and Definitive Certificates are to be issued to Certificate Owners, such Book-Entry Certificates shall no longer be "Book-Entry Certificates." As of the Closing Date, the following Classes of Certificates constitute Book-Entry Certificates: the Class A-1, Class A-2, Class M-1 and Class M-2. Book-Entry Termination: The occurrence of any of the following events: (i) the Clearing Agency is no longer willing or able to properly discharge its responsibilities with respect to the Book Entry Certificates, and the Depositor is unable to locate a qualified successor; or (ii) the Depositor at its option advises the Trustee and the Certificate Registrar in writing that it elects to terminate the book-entry system through the Clearing Agency. Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a day on which banking institutions in New York, New York or, if other than New York, the city in which the Corporate Trust Office of the Trustee is located, or the States of Maryland or Minnesota, are authorized or obligated by law or executive order to be closed. Capitalized Interest Account: The account created and maintained by the Securities Administrator on behalf of the Trustee and the Certificateholders pursuant to Section 4.03, which account is not an asset of any of the REMICs. Capitalized Interest Requirement: As to any Distribution date and each Mortgage Pool up to and including the Distribution Date immediately following the close of the Pre-Funding Period, the product of (x) the excess of (a) the Original Pre-Funded Amount for such Mortgage Pool over (b) the aggregate of the Stated Principal Balances of the Subsequent Mortgage Loans transferred to the Trust Fund for inclusion in such Mortgage Pool prior to such Distribution Date that have a Scheduled Payment that will be included in the amounts distributed to such Mortgage Pool's Related Certificate Group on such Distribution Date, (y) the Pool 1 Net WAC (in the case of Pool 1 ) or Pool 2 Net WAC (in the case of Pool 2) and (z) a fraction, the numerator of which is 30 and the denominator of which is 360. The Capitalized Interest Requirement for a Mortgage Pool shall be reduced by any investment earnings on deposit in such Pool's Pre-Funding Account which have been transferred to the Distribution Account for inclusion in such Pool's Interest Remittance Amount for distribution to Certificateholders on such Distribution Date. Carryforward Interest: With respect to each Class of LIBOR Certificates and any Distribution Date, an amount equal to the sum of (i) the amount, if any, by which (x) the sum of (A) Current Interest for such Class for the immediately preceding Distribution Date and (B) any unpaid Carryforward Interest from previous Distribution Dates exceeds (y) the amount distributed in respect of interest on such Class on such immediately preceding Distribution Date and (ii) interest on such amount for the related Accrual Period at the applicable Certificate Interest Rate. 9 Certificate: Any one of the certificates signed by the Trustee and authenticated by the Securities Administrator as Authenticating Agent in substantially the forms attached hereto as Exhibit A. Certificate Group: Each of the Group 1 Certificates and the Group 2 Certificates. Certificate Interest Rate: With respect to each Class of Certificates and any Distribution Date, the applicable per annum rate described in the Preliminary Statement hereto. Certificate Owner: With respect to a Book-Entry Certificate, the Person who is the owner of such Book-Entry Certificate, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly or as an indirect participant, in accordance with the rules of such Clearing Agency). Certificate Principal Amount: With respect to any Certificate (other than a Notional Certificate), at the time of determination, the maximum specified dollar amount of principal to which the Holder thereof is then entitled hereunder, such amount being equal to the initial principal amount set forth on the face of such Certificate, less (i) the amount of all principal distributions previously made with respect to such Certificate; and (ii) in the case of a Subordinate Certificate, any Applied Loss Amount allocated to such Certificates. For purposes of Article V hereof, unless specifically provided to the contrary, Certificate Principal Amounts shall be determined as of the close of business of the immediately preceding Distribution Date, after giving effect to all distributions made on such date. Notional Certificates are issued without Certificate Principal Amounts. Distribution of any Deferred Amount to the Certificates, will not reduce the Certificate Principal Amount of the related Certificates. Certificate Register and Certificate Registrar: The register maintained and the registrar appointed pursuant to Section 3.02. Wells Fargo National Bank Minnesota, National Association will act as Certificate Registrar for so long as it is the Securities Administrator under this Agreement. Certificateholder: The meaning provided in the definition of "Holder." Civil Relief Act: The Soldiers' and Sailors' Civil Relief Act of 1940, as amended. Class: Collectively, Certificates bearing the same class designation. In the case of the Lower-Tier REMIC, the term "Class" refers to all Lower-Tier Interests having the same alphanumeric designation. Class LT-R Certificate: The Class LT-R Certificate executed by the Trustee and authenticated and delivered by the Authenticating Agent, substantially in the form annexed as Exhibit A and evidencing ownership of the residual interest in the Lower-Tier REMIC. Class Notional Amount: With respect to any Class of Notional Certificates, the applicable class notional amount calculated as provided in the Preliminary Statement hereto. 10 Class Principal Amount: With respect to each Class of Certificates (other than a Notional Certificate) the aggregate of the Certificate Principal Amounts of all Certificates of such Class at the date of determination. Class R Certificate: The Class R Certificate executed by the Trustee, and authenticated and delivered by the Authenticating Agent, substantially in the form annexed hereto as Exhibit A, and evidencing the ownership of the residual interest in the Upper Tier REMIC. Class X Certificate: The Class X Certificate executed by the Trustee and authenticated and delivered by the Authenticating Agent, substantially in the form annexed as Exhibit A. Class X Distributable Amount: With respect to any Distribution Date, the excess of (a) interest accrued for the related Accrual Period and for all prior Accrual Periods on the Class X Notional Amount at the Class X Pass-Through Rate in effect for each such Accrual Period, over (b) the sum of (i) all amounts distributed on all prior Distribution Dates pursuant to Section 5.02(c)(v) hereof and (ii) all amounts deemed distributed with respect to the Class X Certificate and deposited into the Reserve Fund on all prior Distribution Dates pursuant to Section 5.02(c)(iii) hereof. Class X Pass-Through Rate: As described in the Preliminary Statement. Clearing Agency: An organization registered as a "clearing agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. As of the Closing Date, the Clearing Agency shall be The Depository Trust Company. Clearing Agency Participant: A broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects book-entry transfers and pledges of securities deposited with the Clearing Agency. Closing Date: April 29, 2003. Code: The Internal Revenue Code of 1986, as amended, and as it may be further amended from time to time, any successor statutes thereto, and applicable U.S. Department of Treasury regulations issued pursuant thereto in temporary or final form. Compensating Interest Payment: As to any Distribution Date, the lesser of (1) the Master Servicing Fee for such date and (2) any Prepayment Interest Shortfall for such date. Cooperative Corporation: The entity that holds title (fee or an acceptable leasehold estate) to the real property and improvements constituting the Cooperative Property and which governs the Cooperative Property, which Cooperative Corporation must qualify as a Cooperative Housing Corporation under Section 216 of the Code. Cooperative Loan: Any Mortgage Loan secured by Cooperative Shares and a Proprietary Lease. 11 Cooperative Property: The real property and improvements owned by the Cooperative Corporation, that includes the allocation of individual dwelling units to the holders of the shares of the Cooperative Corporation. Cooperative Shares: Shares issued by a Cooperative Corporation. Corporate Trust Office: With respect to the Trustee, the principal corporate trust office of the Trustee located at 452 Fifth Avenue, New York, New York 10018, Attention: Trustee Sequoia Mortgage Trust 2003-2, or at such other address as the Trustee may designate from time to time by notice to the Certificateholders, the Depositor, the Master Servicer and the Securities Administrator or the principal corporate trust office of any successor Trustee. With respect to the Certificate Registrar and presentment of Certificates for registration of transfer, exchange or final payment, Wells Fargo Bank Minnesota, National Association, 6th Avenue and Marquette, Minneapolis, Minnesota 55479, Attention: Corporate Trust, Sequoia Mortgage Trust 2003-2. Corresponding Classes Of Certificates: With respect to each Lower-Tier Interest, the Class or Classes of Certificates appearing opposite such Lower-Tier Interest as described in the Preliminary Statement. Cumulative Loss Trigger Event: If, as to any Distribution Date, the fraction, expressed as a percentage, obtained by dividing (x) the aggregate amount of cumulative Realized Losses incurred on the Mortgage Loans from the Cut-off Date through the last day of the related Due Period by (y) the aggregate Assumed Principal Balance of both Mortgage Pools as of the Cut-off Date, exceeds the applicable percentages described below with respect to such Distribution Date:

Distribution Date Loss Percentage ----------------- --------------- May 2006 through April 2007................... 0.40% May 2007 through April 2008................... 0.55% May 2008 through April 2009................... 0.65% May 2009 and thereafter....................... 0.70%

Current Interest: With respect to each Class of Certificates and any Distribution Date, the aggregate amount of interest accrued at the applicable Certificate Interest Rate during the related Accrual Period on the Class Principal Amount (or Class Notional Amount) of such Class immediately prior to such Distribution Date; provided, however, that Current Interest for each Class of Certificates shall be reduced by such Class's share of Net Interest Shortfalls with respect to Mortgage Loans (a) in the related Mortgage Pool, in the case of the Senior Certificates and (b) in both Mortgage Pools, in the case of the Subordinate Certificates, which shortfalls shall be allocated among the related Class of Senior Certificates and all Classes of Subordinate Certificates proportionately based on Current Interest calculated without regard to this proviso. Custodial Accounts: Each custodial account (other than an Escrow Account) established and maintained by a Servicer pursuant to a Servicing Agreement. Custodian: A Person who is at anytime appointed by the Trustee and the Depositor as a custodian of the Mortgage Documents and the Trustee Mortgage Files. The initial Custodian is Deutsche Bank National Trust Company. 12 Custody Agreement: The Custody Agreement, dated as of April 1, 2003, among the Depositor, the Seller, the Trustee and Deutsche Bank National Trust Company, as Custodian. Cut-off Date: April 1, 2003. Cut-off Date Balance: With respect to the Mortgage Loans in the Trust Fund on the Closing Date, the Aggregate Stated Principal Balance as of the Cut-off Date. Debt Service Reduction: With respect to any Mortgage Loan, a reduction by a court of competent jurisdiction in a proceeding under the Bankruptcy Code in the Scheduled Payment for such Mortgage Loan which became final and non-appealable, except such a reduction resulting from a Deficient Valuation or any reduction that results in a permanent forgiveness of principal. Defective Mortgage Loan: The meaning specified in Section 2.04. Deferred Amount: With respect to any Distribution Date and the Class M-1 and Class M-2 Certificates, the aggregate of Applied Loss Amounts previously applied in reduction of the Certificate Principal Amount thereof, less any amounts previously reimbursed in respect thereof. Deficient Valuation: With respect to any Mortgage Loan, a valuation of the related Mortgaged Property by a court of competent jurisdiction in an amount less than the then outstanding indebtedness under the Mortgage Loan, or any reduction in the amount of principal to be paid in connection with any Scheduled Payment that results in a permanent forgiveness of principal, which valuation or reduction results from an order of such court which is final and non-appealable in a proceeding under the Bankruptcy Code. Definitive Certificate: A Certificate of any Class issued in definitive, fully registered, certificated form. Deleted Mortgage Loan: As defined in the applicable Purchase Agreement. Delinquency Event: If, as to any Distribution Date, the Rolling Three Month Delinquency Rate as of the last day of the immediately preceding calendar month equals or exceeds 50% of the Senior Enhancement Percentage for such Distribution Date. Delinquency Rate: As to any date of determination, the fraction, expressed as a percentage, the numerator of which is the aggregate Stated Principal Balance of all Mortgage Loans 60 or more days delinquent (including all foreclosures, bankruptcies and REO Properties) as of the close of business on the last day of such month, and the denominator of which is the aggregate Assumed Principal Balance of both Mortgage Pools as of the close of business on the last day of such month. Delinquent: Any Mortgage Loan with respect to which the Scheduled Payment due on a Due Date is not received. Depositor: Sequoia Residential Funding, Inc., a Delaware corporation having its principal place of business in California ,or its successors in interest. 13 Determination Date: With respect to each Distribution Date, the 10th day of the month in which such Distribution Date occurs, or, if such 10th day is not a Business Day, the next succeeding Business Day. Disqualified Organization: A "disqualified organization" as defined in Section 860E(e)(5) of the Code. Distribution Account: The separate Eligible Account created and maintained by the Securities Administrator, on behalf of the Trustee, pursuant to Section 4.01. Funds in the Distribution Account (exclusive of any earnings on investments made with funds deposited in the Distribution Account) shall be held in trust for the Trustee and the Certificateholders for the uses and purposes set forth in this Agreement. Distribution Account Deposit Date: The 18th day of each calendar month after the initial issuance of the Certificates or, if such 18th day is not a Business Day, the immediately preceding Business Day, commencing in May 2003. Distribution Date: The 20th day of each month or, if such 20th day is not a Business Day, the next succeeding Business Day, commencing in May 2003. Due Date: With respect to any Mortgage Loan, the date on which a Scheduled Payment is due under the related Mortgage Note as indicated in the applicable Servicing Agreement. Due Period: As to any Distribution Date, the period beginning on the second day of the month preceding the month of such Distribution Date, and ending on the first day of the month of such Distribution Date. Effective Loan-to-Value Ratio: A fraction, expressed as a percentage, the numerator of which is the original Stated Principal Balance of the Mortgage Loan, less the amount of Additional Collateral required to secure such Mortgage Loan at the time of origination, if any, and the denominator of which is the Appraised Value of the related Mortgage Property at such date. Eligible Account: Any of (i) an account or accounts maintained with a federal or state chartered depository institution or trust company the short-term unsecured debt obligations of which (or, in the case of a depository institution or trust company that is the principal subsidiary of a holding company, the debt obligations of such holding company) have the highest short-term ratings of each Rating Agency at the time any amounts are held on deposit therein, or (ii) an account or accounts in a depository institution or trust company in which such accounts are insured by the FDIC or the SAIF (to the limits established by the FDIC or the SAIF) and the uninsured deposits in which accounts are otherwise secured such that, as evidenced by an Opinion of Counsel delivered to the Trustee and to each Rating Agency, the Certificateholders have a claim with respect to the funds in such account or a perfected first priority security interest against any collateral (which shall be limited to Permitted Investments) securing such funds that is superior to claims of any other depositors or creditors of the depository institution or trust company in which such account is maintained, or (iii) a trust account or accounts maintained with the trust department of a federal or state chartered depository institution or trust 14 company, acting in its fiduciary capacity or (iv) any other account acceptable to each Rating Agency. Eligible Accounts may bear interest, and may include, if otherwise qualified under this definition, accounts maintained with the Trustee, the Paying Agent, the Securities Administrator or the Master Servicer. ERISA: The Employee Retirement Income Security Act of 1974, as amended. ERISA-Qualifying Underwriting: A best efforts or firm commitment underwriting or private placement that meets the requirements of an Underwriter's Exemption. ERISA-Restricted Certificate: The Class X, Class R and Class LT-R Certificates, and any Certificate that does not satisfy the applicable rating requirement under the Underwriter's Exemption. Escrow Account: As defined in Section 1 of each Servicing Agreement. Event of Default: Any one of the conditions or circumstances enumerated in Section 6.14. Extra Principal Distribution Amount: With respect to each Distribution Date, an amount equal to the lesser of (i) the aggregate Monthly Excess Cashflow for such date and (ii) the Overcollateralization Deficiency for such date. Fannie Mae: The entity formerly known as the Federal National Mortgage Association, a federally chartered and privately owned corporation organized and existing under the Federal National Mortgage Association Charter Act, or any successor thereto. FDIC: The Federal Deposit Insurance Corporation or any successor thereto. FHLMC: The Federal Home Loan Mortgage Corporation, a corporate instrumentality of the United States created and existing under Title III of the Emergency Home Finance Act of 1970, as amended, or any successor thereto. Global Securities: The global certificates representing the Book-Entry Certificates. Group 1 Certificate: Any Class A-1 Certificate. Group 2 Certificate: Any Class A-2 Certificate. Holder or Certificateholder: The registered owner of any Certificate as recorded on the books of the Certificate Registrar except that, solely for the purposes of taking any action or giving any consent pursuant to this Agreement, any Certificate registered in the name of the Depositor, the Trustee, the Master Servicer, the Securities Administrator and any Servicer, or any Affiliate thereof shall be deemed not to be outstanding in determining whether the requisite percentage necessary to effect any such consent has been obtained, except that, in determining whether the Trustee shall be protected in relying upon any such consent, only Certificates which a Responsible Officer of the Trustee knows to be so owned shall be disregarded. The Trustee may request and conclusively rely on certifications by the Depositor, the Master Servicer, the 15 Securities Administrator or any Servicer in determining whether any Certificates are registered to an Affiliate of the Depositor, the Master Servicer, the Securities Administrator or any Servicer. HUD: The United States Department of Housing and Urban Development, or any successor thereto. Independent: When used with respect to any Accountants, a Person who is "independent" within the meaning of Rule 2-01(b) of the Securities and Exchange Commission's Regulation S-X. When used with respect to any other Person, a Person who (a) is in fact independent of another specified Person and any Affiliate of such other Person, (b) does not have any material direct financial interest in such other Person or any Affiliate of such other Person, and (c) is not connected with such other Person or any Affiliate of such other Person as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions. Index: As to each Mortgage Loan, the index from time to time in effect for adjustment of the Mortgage Rate as set forth as such on the related Mortgage Note. Initial Mortgage Loan: Any Mortgage Loan acquired by the Trust Fund on the Closing Date for inclusion in Pool 1 or Pool 2 as indicated on the Mortgage Loan Schedule. Initial One-Month LIBOR Rate: 1.31781%. Initial Six-Month LIBOR Rate: 1.29313%. Initial Optional Purchase Date: The first Distribution Date following the date on which the Aggregate Stated Principal Balance is less than 20.00% of the Assumed Principal Balance as of the Cut-off Date. Initial Trust Receipt. As defined in the Custody Agreement. Insurance Policy: With respect to any Mortgage Loan, any insurance policy, including all names and endorsements thereto in effect, including any replacement policy or policies for any Insurance Policies. Insurance Proceeds: Proceeds paid by any Insurance Policy (excluding proceeds required to be applied to the restoration and repair of the related Mortgaged Property or released to the Mortgagor), in each case other than any amount included in such Insurance Proceeds in respect of Insured Expenses and (i) the proceeds from any Limited Purpose Surety Bond. Insured Expenses: Expenses covered by an Insurance Policy or any other insurance policy with respect to the Mortgage Loans. Interest Remittance Amount: With respect to any Mortgage Pool and any Distribution Date, all amounts in respect of interest received by the Master Servicer on the Mortgage Loans in such Mortgage Pool from each Servicer or otherwise through the Distribution Account Deposit Date for deposit into the Distribution Account in respect of such Distribution Date, including (1) 16 all interest (net of the related Servicing Fees and Master Servicing Fees) collected on the related Mortgage Loans and due during the Due Period related to such Distribution Date, together with the interest portion of any Advances in respect thereof, (2) the interest portion of all Insurance Proceeds, Liquidation Proceeds and the interest portion of any proceeds of any Additional Collateral from the related Mortgage Loans, in each case for such Distribution Date, (3) any amounts paid by the Master Servicer and/or received from the Servicers in respect of Prepayment Interest Shortfalls with respect to the related Mortgage Loans; (4) that portion of the Purchase Price representing interest of all Defective Mortgage Loans in such Mortgage Pool purchased from the Trust Fund during the related Prepayment Period; and (5) any investment earnings in amounts on deposit in the Pre-Funding Account which have been transferred to the Distribution Account for distribution on Distribution Date, minus the Pool Percentage of: (A) all related fees, charges and other amounts payable or reimbursable to the Master Servicer, the Securities Administrator or the Trustee under this Agreement, up to an aggregate maximum amount equal to the product of (i) the applicable Pool Percentage and (ii) $200,000 annually, or to the Servicers under the Servicing Agreements; (B) in the case of (2), (3) and (4) above, any related unreimbursed expenses incurred by the related Servicers in connection with a liquidation or foreclosure and any unreimbursed Advances or Servicing Advances due to the Master Servicer or the related Servicers; (C) any related unreimbursed Nonrecoverable Advances due to the Master Servicer or the Servicers; and (D) in the case of (1) through (3) above, any related amounts collected which are determined to be attributable to a subsequent Due Period or Prepayment Period. Intervening Assignments: The original intervening assignments of the Mortgage, notices of transfer or equivalent instrument. Latest Possible Maturity Date: The Distribution Date occurring in June 2033. LIBOR: As applicable, One-Month LIBOR or Six-Month LIBOR. LIBOR Business Day: Any day on which banks in London, England and The City of New York are open and conducting transactions in foreign currency and exchange. LIBOR Certificate: Any Class A-1, Class A-2, Class M-1 and Class M-2 Certificate. LIBOR Determination Date: For the Class A-1, Class M-1 and Class M-2 Certificates, the second LIBOR Business Day immediately preceding the commencement of each Accrual Period for such Certificates. For the Class A-2 Certificates, the second LIBOR Business Day immediately preceding the commencement of the Accrual Period relating to the Distribution Date in May and November (other than May 2003) of each year. Limited Purpose Surety Bond: Any Limited Purpose Surety Bond listed in Exhibit G. 17 Liquidated Mortgage Loan: With respect to any Distribution Date, a defaulted Mortgage Loan (including any REO Property) which was liquidated in the calendar month preceding the month of such Distribution Date and as to which the related Servicer has certified (in accordance with its Servicing Agreement) that it has received all amounts it expects to receive in connection with the liquidation of such Mortgage Loan including the final disposition of an REO Property. Liquidation Proceeds: Amounts, including Insurance Proceeds, received in connection with the partial or complete liquidation of defaulted Mortgage Loans, whether through trustee's sale, foreclosure sale or otherwise or amounts received in connection with any condemnation or partial release of a Mortgaged Property and any other proceeds received in connection with an REO Property. Loan-To-Value Ratio: With respect to any Mortgage Loan and as to any date of determination, the fraction (expressed as a percentage) the numerator of which is the principal balance of the related Mortgage Loan at such date of determination and the denominator of which is the Appraised Value of the related Mortgaged Property. Lower Tier Interest: As described in the Preliminary Statement. Lower Tier REMIC: As described in the Preliminary Statement. M-1 Principal Distribution Amount: With respect to any Distribution Date, an amount equal, on or after the Stepdown Date and as long as a Trigger Event is not in effect with respect to such Distribution Date, to the amount, if any, by which (x) the sum of (i) the aggregate Class Principal Amounts of the Senior Certificates, after giving effect to distributions on such Distribution Date and (ii) the Class Principal Amount of the Class M-1 Certificates immediately prior to such Distribution Date exceeds (y) the M-1 Target Amount. M-1 Target Amount: With respect to any Distribution Date, an amount equal to the lesser of (a) the product of (i) 98.30% and (ii) the aggregate Assumed Principal Balance of both Mortgage Pools and (b) the amount, if any, by which (i) the aggregate Assumed Principal Balances of both Mortgage Pools for such Distribution Date exceeds (ii) 0.25% of the aggregate Assumed Principal Balance of both Mortgage Pools as of the Cut-off Date. M-2 Principal Distribution Amount: With respect to any Distribution Date, an amount equal, on or after the Stepdown Date and as long as a Trigger Event is not in effect with respect to such Distribution Date, to the amount, if any, by which (x) the sum of (i) the aggregate Class Principal Amounts of the Senior Certificates and the Class M-1 Certificates, in each case after giving effect to distributions on such Distribution Date and (ii) the Class Principal Amount of the Class M-2 Certificates immediately prior to such Distribution Date exceeds (y) the M-2 Target Amount. M-2 Target Amount: With respect to any Distribution Date, an amount equal to the lesser of (a) the product of (i) 99.50% and (ii) the aggregate Assumed Principal Balance of both Mortgage Pools and (b) the amount, if any, by which (i) the aggregate Assumed Principal Balance of both Mortgage Pools for such Distribution Date exceeds (ii) 0.25% of the aggregate Assumed Principal Balance of both Mortgage Pools as of the Cut-off Date. 18 Margin: As to each Mortgage Loan, the percentage amount set forth on the related Mortgage Note added to the Index in calculating the Mortgage Rate thereon. Master Servicer: Wells Fargo Bank Minnesota, National Association, a national banking association organized under the laws of the United States in its capacity as Master Servicer and any Person succeeding as Master Servicer hereunder or any successor in interest, or if any successor master servicer shall be appointed as herein provided, then such successor master servicer. Master Servicing Fee: With respect to any Distribution Date, an amount equal to the product of one-twelfth of the Master Servicing Fee Rate and the Stated Principal Balance of each Mortgage Loan as of the first day of the related Due Period. Master Servicing Fee Rate: 0.007% per annum. Maximum Rate: As to any Mortgage Loan, the maximum rate set forth on the related Mortgage Note at which interest can accrue on such Mortgage Loan. Monthly Excess Cashflow: With respect to any Distribution Date, the sum of the Monthly Excess Interest and the Aggregate Overcollateralization Release Amount for such date. Monthly Excess Interest: With respect to any Distribution Date, the amount of any Interest Remittance Amount remaining after application pursuant to clauses (i) through (iv) of Section 5.02(a) on such date. Moody's: Moody's Investors Service, Inc., or any successor in interest. Mortgage: A mortgage, deed of trust or other instrument encumbering a fee simple interest in real property securing a Mortgage Note, together with improvements thereto. Mortgage Documents: With respect to each Mortgage Loan, the mortgage documents required to be delivered to the Custodian pursuant to the Custody Agreement. Mortgage Loan: A Mortgage and the related notes or other evidences of indebtedness secured by each such Mortgage conveyed, transferred, sold, assigned to or deposited with the Trustee pursuant to Section 2.01 or Section 2.05 (including any Replacement Loan and REO Property), including without limitation, each Mortgage Loan listed on the Mortgage Loan Schedule, as amended from time to time. The term "Mortgage Loans" shall collectively refer to the Initial Mortgage Loans and any Subsequent Mortgage Loans. Mortgage Loan Purchase and Sale Agreement: The mortgage loan purchase and sale agreement, dated as of April 1, 2003, between the Seller and the Depositor. Mortgage Loan Schedule: The schedule attached hereto as Schedule A, which shall identify each Mortgage Loan, as such schedule may be amended by the Depositor or the Servicer from time to time to reflect the addition of Replacement Mortgage Loans or Subsequent Mortgage Loans to, or the deletion of Deleted Mortgage Loans from, the Trust Fund. Such 19 schedule shall, among other things (i) designate the Servicer servicing such Mortgage Loan and the applicable Servicing Fee Rate; (ii) identify the designated Mortgage Pool in which such Mortgage Loan is included; (iii) separately identify One-Month LIBOR Loans and Six-Month LIBOR Loans; and (iv) separately identify Additional Collateral Mortgage Loans. Mortgage Note: The original executed note or other evidence of the indebtedness of a Mortgagor secured by a Mortgage under a Mortgage Loan. Mortgage Pool: Each of Pool 1 and Pool 2. Mortgaged Property: The underlying property, including any Additional Collateral, securing a Mortgage Loan which, with respect to a Cooperative Loan, is the related Cooperative Shares and Property Lease. Mortgage Rate: As to any Mortgage Loan, the annual rate of interest borne by the related Mortgage Notes. Mortgagor: The obligor on a Mortgage Note. Net Interest Shortfall: As to any Class of Certificates and any Distribution Date, the sum of Net Prepayment Interest Shortfalls and Relief Act Shortfalls for such Class on such Distribution Date. Net Liquidation Proceeds: With respect to any Liquidated Mortgage Loan or any other disposition of related Mortgaged Property, the related Liquidation Proceeds net of Advances, Servicer Advances, related Servicing Fees and/or Master Servicing Fees and any other accrued and unpaid servicing fees received and retained in connection with the liquidation of such Mortgage Loan or Mortgaged Property. Net Mortgage Rate: With respect to any Mortgage Loan and any Distribution Date, the related Mortgage Rate as of the Due Date in the month preceding the month of such Distribution Date reduced by the Aggregate Expense Rate for such Mortgage Loan. Net Prepayment Interest Shortfall: With respect to any Mortgage Loan and any Distribution Date, the amount by which any Prepayment Interest Shortfall for such date exceeds the amount payable by the Master Servicer and/or the related Servicers in respect of such shortfall. Net WAC: As to any Distribution Date, the weighted average of the Net Mortgage Rates of the Mortgage Loans as of the Due Date of the month preceding the month of such Distribution Date, weighted on the basis of their outstanding Stated Principal Balances (after giving effect to the Scheduled Payments due on or before such Due Date and Principal Prepayments received prior to such Due Date) at such time. Net WAC Shortfall. For any Class of LIBOR Certificates and any Distribution Date, the sum of: 20 (i) the excess, if any, of the amount that would have been the Current Interest for such Class if the Certificate Interest Rate for such Class were calculated without regard to clause (ii) in the definition thereof, over the actual Current Interest for such Class for such Distribution Date; (ii) any excess described in clause (i) above remaining unpaid from prior Distribution Dates; and (iii) interest for the applicable Accrual Period on the amount described in clause (ii) above based on the applicable Certificate Interest Rate (determined without regard to clause (ii) in the definition thereof). Non-Book-Entry Certificate: Any Certificate other than a Book-Entry Certificate. Non-permitted Foreign Holder: As defined in Section 3.03(f). Nonrecoverable Advance: Any portion of an Advance or Servicer Advance previously made or proposed to be made by the Master Servicer and/or a Servicer (as certified in an Officer's Certificate of the Servicer), which in the good faith judgment of such party, shall not be ultimately recoverable by such party from the related Mortgagor, related Liquidation Proceeds or otherwise. Non-U.S. Person: Any person other than a "United States person" within the meaning of Section 7701(a)(30) of the Code. Notional Amount: With respect to any Notional Certificate and any Distribution Date, such Certificate's Percentage Interest of the Class Notional Amount of such Class of Certificates for such Distribution Date. Notional Certificate: The Class X Certificate. Offering Document: The Prospectus. Officer's Certificate: A certificate signed by two Authorized Officers of the Depositor or the Chairman of the Board, any Vice Chairman, the President, any Vice President or any Assistant Vice President of the Master Servicer or the Securities Administrator, and in each case delivered to the Trustee. Officer's Certificate of the Servicer: A certificate (i) signed by the Chairman of the Board, the Vice Chairman of the Board, the President, a Managing Director, a Vice President (however denominated), an Assistant Vice President, the Treasurer, the Secretary, or one of the Assistant Treasurers or Assistant Secretaries of a Servicer, or (ii) if provided for herein, signed by a Servicing Officer, as the case may be, and delivered to the Trustee or the Master Servicer, as required hereby. One-Month LIBOR: With respect to the first Accrual Period, the Initial One-Month LIBOR Rate. With respect to each subsequent Accrual Period, a per annum rate determined on 21 the LIBOR Determination Date for the Class A-1, Class M-1 and Class M-2 Certificates in the following manner by the Securities Administrator on the basis of the "Interest Settlement Rate" set by the BBA for one-month United States dollar deposits, as such rates appear on the Telerate Page 3750, as of 11:00 a.m. (London time) on such LIBOR Determination Date. (a If on such a LIBOR Determination Date, the BBA's Interest Settlement Rate does not appear on the Telerate Page 3750 as of 11:00 a.m. (London time), or if the Telerate Page 3750 is not available on such date, the Securities Administrator will obtain such rate from Reuters' "page LIBOR 01" or Bloomberg's page "BBAM." If such rate is not published for such LIBOR Determination Date, One-Month LIBOR for such date will be the most recently published Interest Settlement Rate. In the event that the BBA no longer sets an Interest Settlement Rate, the Securities Administrator will designate an alternative index that has performed, or that the Securities Administrator expects to perform, in a manner substantially similar to the BBA's Interest Settlement Rate. The Securities Administrator will select a particular index as the alternative index only if it receives an Opinion of Counsel, which opinion shall be an expense reimbursed from the Distribution Account, that the selection of such index will not cause any of the REMICs to lose their classification as REMICs for federal income tax purposes. (b) The establishment of One-Month LIBOR by the Securities Administrator and the Securities Administrator's subsequent calculation of the Certificate Interest Rate applicable to the Class A-1, Class M-1 and Class M-2 Certificates for the relevant Accrual Period, in the absence of manifest error, will be final and binding. One-Month LIBOR Loan: Each Mortgage Loan bearing a Mortgage Rate that adjusts in accordance with LIBOR for one-month U.S. dollar deposits. Opinion of Counsel: A written opinion of counsel, reasonably acceptable in form and substance to the Trustee, the Securities Administrator or the Master Servicer, as required hereby, and who may be in-house or outside counsel to the Depositor, the Master Servicer, the Securities Administrator or the Trustee but which must be Independent outside counsel with respect to any such opinion of counsel concerning the transfer of any Residual Certificate or concerning certain matters with respect to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the taxation, or the federal income tax status, of each REMIC. Original Capitalized Interest Amount: $241,972.86. Original Pre-Funded Amount: With respect to Pool 1, $79,536,812.16 and with respect to Pool 2, $48,293,884.88. Overcollateralization Amount: With respect to any Distribution Date, an amount equal to the amount, if any, by which (x) the aggregate Assumed Principal Balance for such Distribution Date exceeds (y) the sum of the aggregate Class Principal Amounts of the LIBOR Certificates after giving effect to distributions in respect of principal on such Distribution Date. Overcollateralization Deficiency: With respect to any Distribution Date, an amount equal to the amount, if any, by which (x) the Targeted Overcollateralization Amount for such 22 Distribution Date exceeds (y) the Overcollateralization Amount for such Distribution Date, calculated for this purpose after giving effect to the reduction on such Distribution Date of the Certificate Principal Amounts of the Certificates resulting from the distribution of the Principal Remittance Amount on such Distribution Date, but prior to allocation of any Applied Loss Amount on such Distribution Date. Paying Agent: Any paying agent appointed pursuant to Section 3.08. The initial Paying Agent shall be Wells Fargo Bank Minnesota, National Association, for so long as it is acting as Securities Administrator under this Agreement. Percentage Interest: With respect to any Certificate, its percentage interest in the undivided beneficial ownership interest in the Trust Fund evidenced by all Certificates of the same Class as such Certificate. With respect to any Certificate other than a Notional Certificate or the Class R and Class LT-R Certificates, the Percentage Interest evidenced thereby shall equal the initial Certificate Principal Amount thereof divided by the initial Class Principal Amount of all Certificates of the same Class. With respect to each of the Class R and the Class LT-R Certificates, the Percentage Interest evidenced thereby shall be as specified on the face thereof, or otherwise, be equal to 100%. With respect to any Notional Certificate, the Percentage Interest evidenced thereby shall equal its initial Notional Amount as set forth on the face thereof divided by the initial Class Notional Amount of such Class. Permitted Investments: At any time, any one or more of the following obligations and securities: (i) obligations of the United States or any agency thereof, provided that such obligations are backed by the full faith and credit of the United States; (ii) general obligations of or obligations guaranteed by any state of the United States or the District of Columbia receiving the highest long-term debt rating of each Rating Agency, or such lower rating as shall not result in the downgrading or withdrawal of the ratings then assigned to the Certificates by the Rating Agencies, as evidenced by a signed writing delivered by each Rating Agency; (iii) commercial or finance company paper which is then receiving the highest commercial or finance company paper rating of each Rating Agency rating such paper, or such lower rating as shall not result in the downgrading or withdrawal of the ratings then assigned to the Certificates by the Rating Agencies, as evidenced by a signed writing delivered by each Rating Agency; (iv) certificates of deposit, demand or time deposits, or bankers' acceptances issued by any depository institution or trust company incorporated under the laws of the United States or of any state thereof and subject to supervision and examination by federal and/or state banking authorities, provided that the commercial paper and/or long-term unsecured debt obligations of such depository institution or trust company (or in the case of the principal depository institution in a holding company system, the commercial paper or long-term unsecured debt obligations of such holding company, but only if Moody's is not the applicable Rating Agency) are then rated one of the two highest long- 23 term and the highest short-term ratings of each Rating Agency for such securities, or such lower ratings as shall not result in the downgrading or withdrawal of the ratings then assigned to the Certificates by the Rating Agencies, as evidenced by a signed writing delivered by each Rating Agency; (v) demand or time deposits or certificates of deposit issued by any bank or trust company or savings institution to the extent that such deposits are fully insured by the FDIC; (vi) guaranteed reinvestment agreements issued by any bank, insurance company or other corporation acceptable to the Rating Agencies at the time of the issuance of such agreements, as evidenced by a signed writing delivered by each Rating Agency; (vii) repurchase obligations with respect to any security described in clauses (i) and (ii) above, in either case entered into with a depository institution or trust company (acting as principal) described in clause (iv) above; (viii) securities (other than stripped bonds, stripped coupons or instruments sold at a purchase price in excess of 115% of the face amount thereof) bearing interest or sold at a discount issued by any corporation incorporated under the laws of the United States or any state thereof which, at the time of such investment, have one of the two highest ratings of each Rating Agency (except if the Rating Agency is Moody's, such rating shall be the highest commercial paper rating of Moody's for any such series), or such lower rating as shall not result in the downgrading or withdrawal of the ratings then assigned to the Certificates by the Rating Agencies, as evidenced by a signed writing delivered by each Rating Agency; (ix) interests in any money market fund which at the date of acquisition of the interests in such fund and throughout the time such interests are held in such fund has the highest applicable rating by each Rating Agency rating such fund or such lower rating as shall not result in a change in the rating then assigned to the Certificates by each Rating Agency including funds for which the Trustee, the Master Servicer, the Securities Administrator or any of its Affiliates is investment manager or adviser; (x) short-term investment funds sponsored by any trust company or national banking association incorporated under the laws of the United States or any state thereof which on the date of acquisition has been rated by each applicable Rating Agency in their respective highest applicable rating category or such lower rating as shall not result in a change in the rating then specified stated maturity and bearing interest or sold at a discount acceptable to each Rating Agency as shall not result in the downgrading or withdrawal of the ratings then assigned to the Certificates by the Rating Agencies; and (xi) such other investments having a specified stated maturity and bearing interest or sold at a discount acceptable to the Rating Agencies as shall not result in the downgrading or withdrawal of the ratings then assigned to the Certificates by the Rating Agencies; 24 provided, that no such instrument shall be a Permitted Investment if (i) such instrument evidences the right to receive interest only payments with respect to the obligations underlying such instrument or (ii) such instrument would require the Depositor to register as an investment company under the Investment Company Act of 1940, as amended. Person: Any individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization or government or any agency or political subdivision thereof. Plan Asset Regulations: The Department of Labor regulations set forth in 29 C.F.R. 2510.3-101. Pool 1: The aggregate of Mortgage Loans identified on the Mortgage Loan Schedule as being included in Pool 1. Pool 1 Mortgage Loans: Any Mortgage Loan in Pool 1. Pool 1 Net WAC: With respect to any Distribution Date, the weighted average of the Net Mortgage Rates of the Pool 1 Mortgage Loans as of the first day of the calendar month immediately preceding the calendar month of such Distribution Date, weighted on the basis of their Stated Principal Balances. Pool 1 Pre-Funded Amount: As of any date of determination, the aggregate outstanding balance on deposit in the Pool 1 Pre-Funding Account (exclusive of any investment earnings thereon). Pool 1 Pre-Funding Account: The account established and maintained by the Securities Administrator pursuant to Section 4.02, consisting of the 1M Sub-account and the 6M Sub-account, holding the Pool 1 Pre-Funded Amount. Pool 1 Subordinate Amount: For any Distribution Date, the excess of the sum of (a) the Aggregate Stated Principal Balances of the Pool 1 Mortgage Loans and (b) the Pool 1 Pre-Funded Amount immediately prior to such Distribution Date over (c) the Class Principal Amount of the Class A-1 Certificates immediately before such Distribution Date. Pool 2: The aggregate of Mortgage Loans identified on the Mortgage Loan Schedule as being included in Pool 2. Pool 2 Mortgage Loans: Any Mortgage Loan in Pool 2. Pool 2 Net WAC: With respect to any Distribution Date, the weighted average of the Net Mortgage Rates of the Pool 2 Mortgage Loans as of the first day of the calendar month immediately preceding the calendar month of such Distribution Date, weighted on the basis of their Stated Principal Balances. Pool 2 Pre-Funded Amount: As of any date of determination, the outstanding balance on deposit in the Pool 2 Pre-Funding Account (exclusive of any investment earnings thereon). 25 Pool 2 Pre-Funding Account: The account established and maintained by the Securities Administrator pursuant to Section 4.02 holding the Pool 2 Pre-Funded Amount. Pool 2 Subordinate Amount: For any Distribution Date, the excess of the sum of (a) the Aggregate Stated Principal Balance of the Pool 2 Mortgage Loans and (b) the Pool 2 Pre-Funded Amount immediately prior to such Distribution Date over (c) the Class Principal Amount of the Class A-2 Certificates immediately before such Distribution Date. Pool Percentage: With respect to each Mortgage Pool and any Distribution Date, a fraction, expressed as a percentage, the numerator of which is the sum of (a) the Aggregate Stated Principal Balance of such Mortgage Pool as of such date and (b) the Pool 1 Pre-Funded Amount, in the case of Pool 1, and the Pool 2 Pre-Funded Amount, in the case of Pool 2, and the denominator of which is the Assumed Principal Balance as of such date. Pool Subordinate Amount: Either of the Pool 1 Subordinate Amount or the Pool 2 Subordinate Amount. Pre-Funding Accounts: Each of the Pool 1 Pre-Funding Account and the Pool 2 Pre-Funding Account. Pre-Funded Amount: As of any date of determination, the sum of the Pool 1 Pre-Funded Amount and the Pool 2 Pre-Funded Amount. Pre-Funding Period: The period commencing on the Closing Date and ending on the earlier of (a) June 1, 2003 and (b) the date the last Subsequent Mortgage Loan is acquired. Prepayment Interest Shortfall: With respect to any full or partial Principal Prepayment of a Mortgage Loan, the excess, if any, of (i) one full month's interest at the applicable Mortgage Rate on the Stated Principal Balance of such Mortgage Loan immediately prior to such Principal Prepayment over (ii) the amount of interest actually received with respect to such Mortgage Loan in connection with such Principal Prepayment. Prepayment Period: With respect to each Distribution Date, the calendar month immediately preceding the month in which the Distribution Date occurs. Primary Mortgage Insurance Policy: Each policy of primary mortgage guaranty insurance or any replacement policy therefor with respect to any Mortgage Loan. Principal Distribution Amount: With respect to any Mortgage Pool and any Distribution Date, the sum of (i) the Principal Remittance Amount for such Mortgage Pool for such date minus the related Principal Percentage of the Aggregate Overcollateralization Release Amount, if any, for such Distribution Date and (ii) the Extra Principal Distribution Amount, if any, for such date, multiplied by the related Principal Percentage for such date. Principal Percentage: With respect to any Mortgage Pool and any Distribution Date, the percentage equivalent of a fraction, the numerator of which is the Principal Remittance Amount 26 for such Mortgage Pool and date and the denominator of which is aggregate of the Principal Remittance Amounts for both Mortgage Pools on such date. Principal Remittance Amount: With respect to any Mortgage Pool and any Distribution Date, the sum of (a) each Scheduled Payment of principal collected or advanced on the related Mortgage Loans (before taking into account any Deficient Valuations or Debt Service Reductions) and due during the related Due Period, (b) that portion of the Purchase Price representing principal of any Mortgage Loans in such Mortgage Pool purchased in accordance with Section 2.04 hereof and received during the related Prepayment Period, (c) the principal portion of any related Substitution Amount received during the related Prepayment Period, (d) the principal portion of all Insurance Proceeds received during the related Prepayment Period with respect to Mortgage Loans in such Mortgage Pool that are not yet Liquidated Mortgage Loans, (e) the principal portion of all Net Liquidation Proceeds received during the related Prepayment Period with respect to Liquidated Mortgage Loans in such Mortgage Pool, (f) the principal portion of the proceeds of any Additional Collateral with respect to the Mortgage Loans in such Mortgage Pool, (g) the principal portion of all partial and full principal prepayments of Mortgage Loans in such Mortgage Pool applied by the Servicers during the related Prepayment Period and (h) on the Distribution Date on which the Trust Fund is to be terminated pursuant to Article X hereof, that portion of the Redemption Price in respect of principal for such Mortgage Pool. Principal Prepayment: Any Mortgagor payment of principal or other recovery of principal on a Mortgage Loan that is recognized as having been received or recovered in advance of its scheduled Due Date and applied to reduce the principal balance of the Mortgage Loan in accordance with the terms of the Mortgage Note or the Servicing Agreement. Principal Prepayment In Full: Any Principal Prepayment of the entire principal balance of the Mortgage Loans. Proceeding: Any suit in equity, action at law or other judicial or administrative proceeding. Proprietary Lease: With respect to any Cooperative Property, a lease or occupancy agreement between a Cooperative Corporation and a holder of related Cooperative Shares. Prospectus: The prospectus supplement dated April 24, 2003, together with the accompanying prospectus dated March 21, 2003 relating to the Certificates. Purchase Agreements: The mortgage purchase agreements listed in Exhibit F hereto, as each such agreement may be amended or supplemented from time to time as permitted hereunder. Purchase Price: With respect to any Mortgage Loan required or permitted to be purchased by the Seller or Depositor pursuant to this Agreement, by the Servicers pursuant to the Servicing Agreements, or by the Seller pursuant to the Purchase Agreements, an amount equal to the sum of (i) 100% of the unpaid principal balance of the Mortgage Loan on the date of such purchase, (ii) accrued interest thereon at the applicable Net Mortgage Rate from the date through 27 which interest was last paid by the Mortgagor to the Due Date in the month in which the Purchase Price is to be distributed to Certificateholders and (iii) the amount of any costs and damages incurred by the Trust Fund as a result of any violation of any applicable federal, state, or local predatory or abusive lending law arising from or in connection with the origination of such Mortgage Loan. Rating Agency: Each of Moody's and S&P. Realized Loss: With respect to each Liquidated Mortgage Loan, an amount (not less than zero or more than the Stated Principal Balance of the Mortgage Loan) as of the date of such liquidation, equal to (i) the Stated Principal Balance of the Liquidated Mortgage Loan as of the date of such liquidation, plus (ii) interest at the Net Mortgage Rate from the Due Date as to which interest was last paid or advanced (and not reimbursed) to Certificateholders up to the Due Date in the month in which Liquidation Proceeds are required to be distributed on the Stated Principal Balance of such Liquidated Mortgage Loan from time to time, minus (iii) the Liquidation Proceeds and the proceeds of any Additional Collateral, if any, received during the month in which such liquidation occurred, to the extent applied as recoveries of interest at the Net Mortgage Rate and to principal of the Liquidated Mortgage Loan. With respect to each Mortgage Loan which has become the subject of a Deficient Valuation, if the principal amount due under the related Mortgage Note has been reduced, the difference between the principal balance of the Mortgage Loan outstanding immediately prior to such Deficient Valuation and the principal balance of the Mortgage Loan as reduced by the Deficient Valuation. Record Date: As to any Distribution Date (i) with respect to the LIBOR Certificates, the last Business Day preceding such Distribution Date (or the Closing Date, in the case of the first Distribution Date) unless such Certificates shall no longer be Book-Entry Certificates, in which case the Record Date shall be the last Business Day of the month preceding the month of such Distribution Date and (ii) in the case of all other Certificates (including LIBOR Certificates that are subsequently reissued as Definitive Certificates), the last Business Day of the month preceding the month of each Distribution Date. Redemption Date: Any Distribution Date on which Certificates may be redeemed. Redemption Price: With respect to any Class of LIBOR Certificates to be redeemed, an amount equal to 100% of the related Class Principal Amount of the LIBOR Certificates to be so redeemed, together with interest on such amount at the applicable Certificate Interest Rate through the related Accrual Period (excluding any Net WAC Shortfalls), and including, in the case of the Redemption Price payable in connection with the redemption and retirement of all of the Certificates, the payment of all amounts (including, without limitation, all previously unreimbursed Advances and Servicing Advances and accrued and unpaid Servicing Fees) payable or reimbursable to the Trustee, the Master Servicer and the Servicers pursuant to this Agreement and the Servicing Agreements, or to the Custodian under the Custody Agreement (to the extent such amounts are not paid to the Custodian by the Seller). With respect to the Class X Certificate, the Class X Distributable Amount for the Redemption Date. Refinancing Mortgage Loan: Any Mortgage Loan originated in connection with the refinancing of an existing mortgage loan. 28 Related Certificate Group: The Certificate Group related to a particular Mortgage Pool as indicated by the same numerical designation (i.e., Group 1 Certificates are related to Pool 1 and Group 2 Certificates are related to Pool 2). Relief Act Shortfalls: With respect to any Distribution Date and any Mortgage Loan as to which there has been a reduction in the amount of interest collectible thereon for the most recently ended calendar month as a result of the application of the Civil Relief Act, the amount, if any, by which (i) interest collectible on such Mortgage Loan for the most recently ended calendar month is less than (ii) interest accrued thereon for such month pursuant to the Mortgage Note. REMIC: Each pool of assets in the Trust Fund designated as a REMIC as described in the Preliminary Statement. REMIC Provisions: The provisions of the federal income tax law relating to real estate mortgage investment conduits, which appear at sections 860A through 860G of the Code, and related provisions, and regulations, including proposed regulations and rulings, and administrative pronouncements promulgated thereunder, as the foregoing may be in effect from time to time. REO Property: A Mortgaged Property acquired by the Trust Fund through foreclosure or deed-in-lieu of foreclosure in connection with a defaulted Mortgage Loan or otherwise treated as having been acquired pursuant to the REMIC Provisions. Replacement Mortgage Loan: A mortgage loan substituted by the Seller for a Deleted Mortgage Loan which must, on the date of such substitution, as confirmed in a Request for Release, substantially in the form attached to the Custody Agreement, (i) have a Stated Principal Balance, after deduction of the principal portion of the Scheduled Payment due in the month of substitution, not in excess of, and not more than 10% less than, the Stated Principal Balance of the Deleted Mortgage Loan; (ii) have a Maximum Rate not less than (and not more than two percentage points greater than) the Maximum Rate of the Deleted Mortgage Loan; (iii) have a gross margin not less than that of the Deleted Mortgage Loan and, if Mortgage Loans equal to 1% or more of the balance of the related Mortgage Pool as of the Cut-off Date have become Deleted Mortgage Loans, not more than two percentage points more than that of the Deleted Mortgage Loan; (iv) have an Effective Loan-to-Value Ratio no higher than that of the Deleted Mortgage Loan; (v) have Adjustment Dates that are no more or less frequent than the Deleted Mortgage Loan; (vi) have a remaining term to maturity no greater than (and not more than one year less than that of) the Deleted Mortgage Loan; (vii) not permit conversion of the related Mortgage Rate to a permanent fixed Mortgage Rate; (viii) not be a Cooperative Loan unless the Deleted Mortgage Loan was a Cooperative Loan; (ix) have the same or better FICO credit score; (x) have an initial interest adjustment date no earlier than five months before (and no later than five months after) the initial adjustment date of the Deleted Mortgage Loan, (xi) comply with each representation and warranty set forth in Article III of each Purchase Agreement; and (xii) shall be accompanied by an Opinion of Counsel that such Replacement Mortgage Loan would not adversely affect the REMIC status of the Trust Estate or would not otherwise be prohibited by this Indenture. 29 Required Reserve Fund Deposit: With respect to any Distribution Date, an amount equal to the lesser of (i) the amount required to cause the balance on deposit in the Reserve Fund to equal the sum of (a) any Net WAC Shortfalls for such Distribution Date with respect to the LIBOR Certificates and (b) $10,000 and (ii) the Class X Distributable Amount (the amount of Monthly Excess Cashflow available after satisfying distribution priorities (i) and (ii) under Section 5.02(c)). Reserve Fund: A fund created as part of the Trust Fund pursuant to Section 5.06 of this Agreement but which is not an asset of any of the REMICs. Residual Certificate: Each of the Class R and Class LT-R Certificates. Responsible Officer: With respect to the Trustee, any officer in the corporate trust department or similar group of the Trustee with direct responsibility for the administration of this Agreement and also, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject. Restricted Certificate: Any Class R or Class LT-R Certificates. Restricted Global Security: As defined in Section 3.01(c). Rolling Three Month Delinquency Rate: With respect to any Distribution Date, the fraction, expressed as a percentage, equal to the average of the Delinquency Rates for each of the three (or one and two, in the case of the first and second Distribution Dates, respectively) immediately preceding calendar months. S&P: Standard & Poor's Rating Services, a division of The McGraw-Hill Companies, Inc., or any successor in interest. SAIF: The Saving's Association Insurance Fund, or any successor thereto. Schedule of Exceptions: As defined in the Custody Agreement. Scheduled Payment: The scheduled monthly payment on a Mortgage Loan due on any Due Date allocable to principal and/or interest on such Mortgage Loan which, unless otherwise specified in the Servicing Agreements, shall give effect to any related Debt Service Reduction and any Deficient Valuation that affects the amount of the monthly payment due on such Mortgage Loan. Securities Administrator: Wells Fargo Bank Minnesota, National Association, not in its individual capacity but solely as Securities Administrator, or any successor in interest, or if any successor Securities Administrator shall be appointed as herein provided, then such successor Securities Administrator. Seller: RWT Holdings, Inc., a Delaware corporation. Senior Certificate: Any one of the Class A-1 or Class A-2 Certificates. 30 Senior Enhancement Percentage: With respect to any Distribution Date, the percentage equivalent of a fraction, the numerator of which is the sum of the aggregate Class Principal Amounts of the Subordinate Certificates and the Overcollateralization Amount (which, for purposes of this definition only, will not be less than zero) and the denominator of which is the aggregate Assumed Principal Balance of both Mortgage Pools for such Distribution Date, in each case after giving effect to distributions on such Distribution Date. Senior Principal Distribution Amount: With respect to each Mortgage Pool and any Distribution Date, an amount equal to (i) prior to the Stepdown Date or if a Trigger Event is in effect with respect to such Distribution Date, 100% of the Principal Distribution Amount for such Mortgage Pool and (ii) on or after the Stepdown Date and as long as a Trigger Event is not in effect with respect to such Distribution Date the amount, if any, by which (x) the aggregate Class Principal Amount of the Class A-1 Certificates (in the case of Pool 1) or the Class A-2 Certificates (in the case of Pool 2) immediately prior to that Distribution Date exceeds (y) the Senior Target Amount for such Mortgage Pool. Senior Target Amount: With respect to each Mortgage Pool and any Distribution Date, an amount equal to the lesser of (a) the product of (i) 95.50% and (ii) the Assumed Principal Balance of such Mortgage Pool and (b) the amount, if any, by which (i) the Assumed Principal Balance of such Mortgage Pool and such Distribution Date exceeds (ii) 0.25% of the Assumed Principal Balance for such Mortgage Pool as of the Cut-off Date. Servicers: Each Servicer under a Servicing Agreement. Servicer Advance: A "Servicing Advance" as defined in the applicable Servicing Agreement. Servicing Agreement: The agreements listed in Exhibit E, as each such agreement has been modified by the related Acknowledgement and as it may be amended or supplemented from time to time as permitted thereby. Servicing Fee: As to any Distribution Date and each Mortgage Loan, an amount equal to the product of (a) one-twelfth of the Servicing Fee Rate and (b) the Stated Principal Balance of such Mortgage Loan as of the first day of the related Due Period. Servicing Fee Rate: With respect to each Mortgage Loan and any Distribution Date, the rate specified in the related Servicing Agreement. Servicing Officer: Any officer of the Servicers involved in, or responsible for, the administration and servicing of the Mortgage Loans whose name and facsimile signature appear on a list of servicing officers furnished to the Master Servicer by the Servicers on the Closing Date pursuant to the Servicing Agreements, as such list may from time to time be amended. Six-Month LIBOR: With respect to the first Accrual Period, the Initial Six-Month LIBOR Rate. With respect to each subsequent Accrual Period, a per annum rate determined on the immediately preceding LIBOR Determination Date for the Class A-2 Certificates in the following manner by the Securities Administrator on the basis of the "Interest Settlement Rate" 31 set by the BBA for six-month United States dollar deposits, as such rates appear on the Telerate Page 3750, as of 11:00 a.m. (London time) on such LIBOR Determination Date. (a) If on such a LIBOR Determination Date, the BBA's Interest Settlement Rate does not appear on the Telerate Page 3750 as of 11:00 a.m. (London time), or if the Telerate Page 3750 is not available on such date, the Securities Administrator will obtain such rate from Reuters' "page LIBOR 01" or Bloomberg's page "BBAM." If such rate is not published for such LIBOR Determination Date, Six-Month LIBOR for such date will be the most recently published Interest Settlement Rate. In the event that the BBA no longer sets an Interest Settlement Rate, the Securities Administrator will designate an alternative index that has performed, or that the Securities Administrator expects to perform, in a manner substantially similar to the BBA's Interest Settlement Rate. The Securities Administrator will select a particular index as the alternative index only if it receives an Opinion of Counsel, which opinion shall be an expense reimbursed from the Distribution Account, that the selection of such index will not cause any of the REMICs to lose their classification as REMICs for federal income tax purposes. (b) The establishment of Six-Month LIBOR by the Securities Administrator and the Securities Administrator's subsequent calculation of the Certificate Interest Rate applicable to the Class A-2 Certificates for the relevant Accrual Period, in the absence of manifest error, will be final and binding. Six-Month LIBOR Loan: Each Mortgage Loan bearing a Mortgage Rate that adjusts in accordance with LIBOR for six-month U.S. dollar deposits. Startup Day: The day designated as such pursuant to Section 10.01(b) hereof. Stated Principal Balance: As to any Mortgage Loan and Due Date, the unpaid principal balance of such Mortgage Loan as of such Due Date as specified in the amortization schedule at the time relating thereto (before any adjustment to such amortization schedule by reason of any moratorium or similar waiver or grace period) after giving effect to any previous partial Principal Prepayments and Liquidation Proceeds allocable to principal (other than with respect to any Liquidated Mortgage Loan) and to the payment of principal due on such Due Date and irrespective of any delinquency in payment by the related Mortgagor. Stepdown Date: The earlier to occur of (i) the Distribution Date on which the Class Principal Amount of each Class of Senior Certificates has been reduced to zero and (ii) the later to occur of (x) the Distribution Date in May 2006 and (y) the first Distribution Date on which the Senior Enhancement Percentage (calculated for this purpose after giving effect to payments or other recoveries in respect of the Mortgage Loans during the related Due Period but before giving effect to distributions on any Certificates on such Distribution Date) is greater than or equal to 4.50%. Sub-account: Each of the Class 1M Sub-account and 6M Sub-account constituting the Pool 1 Pre-Funding Account. 32 Subordinate Certificate: Any of the Class M-1, Class M-2, Class X, Class R or Class LT-R Certificates. Subordinate Net WAC: For any Distribution Date, the weighted average of the Pool 1 Net WAC and the Pool 2 Net WAC, in each case weighted on the basis of the relative Pool Subordinate Amounts for Pool 1 and Pool 2, respectively, immediately prior to such Distribution Date. Subsequent Cut-Off Date: With respect to any Subsequent Mortgage Loan, the first day of the calendar month in which the related Subsequent Transfer Date occurs. Subsequent Delivery Requirements: After giving effect to the acquisition of all Subsequent Mortgage Loans by a Mortgage Pool, the Mortgage Loans in such Pool (which shall all be Mortgage Loans bearing interest at an adjustable rate of interest) shall: With respect to Pool 1: (i) have a weighted average Margin of not less than 1.76%; (ii) have a weighted average Effective Loan-to-Value Ratio (after giving effect to the value of any Additional Collateral) not in excess of 68.00%; (iii) consist of Six-Month LIBOR Loans having an aggregate Stated Principal Balance of not more than $56,964,309.58 greater than the aggregate Stated Principal Balance of Six-Month LIBOR Loans in Pool 1 on the Closing Date, and One-Month LIBOR Loans having an aggregate Stated Principal Balance of not more than $22,572,502.58 greater than the aggregate Stated Principal Balance of One-Month LIBOR Loans in Pool 1 on the Closing Date; (iv) have a remaining term to maturity of not greater than 360 months; and (v) have a Loan-to-Value Ratio not greater than 100.00%. With respect to Pool 2: (i) have a weighted average Margin of not less than 1.83%; (ii) have a weighted average Effective Loan-to-Value Ratio (after giving effect to the value of any Additional Collateral) not in excess of 68.00%; (iii) shall consist of Six-Month LIBOR Loans having an aggregate Stated Principal Balance of not more than $48,293,884.88 greater than the aggregate Stated Principal Balance of Six-Month LIBOR Loans in Pool 2 on the Closing Date; (iv) have a remaining term to maturity of not greater than 360 months; (v) have a Loan-to-Value Ratio not greater than 100.00%; 33 Subsequent Mortgage Loan: Any Mortgage Loan conveyed to the Trust Fund and delivered to the Custodian on behalf of Trustee on a Subsequent Transfer Date. Subsequent Transfer Date: The date on which any Subsequent Mortgage Loan is conveyed by the Depositor to the Trust Fund. Subsequent Transfer Date Notice: The form of Notice of Subsequent Transfer Date attached as Exhibit A to each Mortgage Loan Purchase and Sale Agreement, specifying the date on which a Subsequent Mortgage Loan will be conveyed to the Trust Fund. Substitution Amount: As defined in the second paragraph of Section 2.04(b). Targeted Overcollateralization Amount: With respect to any Distribution Date, an amount equal to 0.25% of the aggregate Assumed Principal Balance of both Mortgage Pools as of the Cut-off Date. Tax Matters Person: The "tax matters person" as specified in the REMIC Provisions which shall initially be the Holder of the Class LT-R Certificate. Telerate Page 3750: The display currently so designated as "Page 3750" on the Bridge Telerate Service (or such other page selected by the Securities Administrator as may replace Page 3750 on that service for the purpose of displaying daily comparable rates on prices). Transfer Price: With respect to any Subsequent Mortgage Loan, the price specified in the Subsequent Transfer Date Notice which shall be no less than the Stated Principal Balance of the Subsequent Mortgage Loan, as increased by any amount of principal and interest received on such Subsequent Mortgage Loan from and after the related Subsequent Cut-off Date specified in the Subsequent Transfer Date Notice. Trigger Event: If, as to any Distribution Date, either a Delinquency Event or a Cumulative Loss Trigger Event is in effect for such Distribution Date. Trust Fund: The corpus of the trust created pursuant to this Agreement, consisting of the Mortgage Loans and all interest and principal received thereon on or after the Cut-off Date (other than Scheduled Payments due on or prior to the Cut-off Date), the Depositor's rights assigned to the Trustee under the Purchase Agreements and the Servicing Agreements, as modified by the Acknowledgements and the Mortgage Loan Purchase and Sale Agreement, the Insurance Policies relating to the Mortgage Loans, all cash, instruments or property held or required to be held in the Custodial Accounts, the Distribution Account, the Capitalized Interest Account and the Pre-Funding Accounts, property that secured a Mortgage Loan, the pledge, control and guaranty agreements and Limited Purpose Surety Bond relating to the Additional Collateral Mortgage Loans, and the Reserve Fund. Trustee: HSBC Bank USA, a New York banking corporation organized and existing under the laws of the State of New York and any Person succeeding the Trustee hereunder, or if any successor trustee or any co-trustee shall be appointed as herein provided, then such successor trustee and such co-trustee, as the case may be. 34 Trustee Mortgage Files: With respect to each Mortgage Loan, the Mortgage Documents to be retained in the custody and possession of the Trustee or Custodian on behalf of the Trustee. UCC: The Uniform Commercial Code as enacted in the relevant jurisdiction. Underwriters: Greenwich Capital Markets, Inc., Morgan Stanley & Co. Incorporated, Banc of America Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated. Underwriter's Exemption: Prohibited Transaction Exemption ("PTE") 90-59 as most recently amended and restated by PTE 2002-41 or any substantially similar administrative exemption granted by the U.S. Department of Labor to the Underwriters. Underwriting Agreement: The Underwriting Agreement, dated April 24, 2003, among the Seller, the Depositor and the Underwriters. Uniform Commercial Code: The Uniform Commercial Code as in effect in any applicable jurisdiction from time to time. Upper Tier REMIC: As described in the Preliminary Statement. Voting Interests: The portion of the voting rights of all the Certificates that is allocated to any Certificate for purposes of the voting provisions of this Agreement. At all times during the term of this Agreement, 98.00% of all Voting Interests shall be allocated to the Class A-1, Class A-2, Class M-1 and Class M-2 Certificates. Voting Interests shall be allocated among such Certificates based on the product of (i) 98% and (ii) the fraction, expressed as a percentage, the numerator of which is the aggregate Class Principal Amounts for each Class then outstanding and the denominator of which is the Assumed Principal Balance outstanding. At all times during the term of this Agreement, 1.00% of all Voting Interests shall be allocated to the Class X Certificate and 0.50% of all Voting Interests shall be allocated to each of the Class R and the Class LT-R Certificates. Voting Interests shall be allocated among the Certificates within each such Class in proportion to their Certificate Principal Amounts or Percentage Interests. 35 Section 1.02 Calculations Respecting Mortgage Loans. Calculations required to be made pursuant to this Agreement with respect to any Mortgage Loan in the Trust Fund shall be made based upon current information as to the terms of the Mortgage Loans and reports of payments received from the Mortgagor on such Mortgage Loans and payments to be made to the Securities Administrator as supplied to the Securities Administrator by the Master Servicer. The Securities Administrator shall not be required to recompute, verify or recalculate the information supplied to it by the Master Servicer or any Servicer. ARTICLE II DECLARATION OF TRUST; ISSUANCE OF CERTIFICATES Section 2.01 Creation and Declaration of Trust Fund; Conveyance of Mortgage Loans. (a) Concurrently with the execution and delivery of this Agreement, the Depositor does hereby transfer, assign, set over, deposit with and otherwise convey to the Trustee, without recourse, subject to Sections 2.02, 2.04 and 2.05, in trust, all the right, title and interest of the Depositor in and to the Trust Fund. Such conveyance includes, without limitation, (i) the Initial Mortgage Loans, including the right to all payments of principal and interest received on or with respect to the Initial Mortgage Loans on and after the Cut-off Date (other than Scheduled Payments due on or before such date), and all such payments due after such date but received prior to such date and intended by the related Mortgagors to be applied after such date; (ii) all of the Depositor's right, title and interest in and to all amounts from time to time credited to and the proceeds of the Distribution Account, any Custodial Accounts or any Escrow Account established with respect to the Initial Mortgage Loans; (iii) all of the Depositor's rights under the Purchase Agreements and the Servicing Agreements as modified by the Acknowledgements and the Mortgage Loan Purchase and Sale Agreements; (iv) all of the Depositor's right, title or interest in REO Property and the proceeds thereof; (v) all of the Depositor's rights under any Insurance Policies related to the Initial Mortgage Loans; and (vi) the Depositor's security interest in any collateral pledged to secure the Initial Mortgage Loans, including the Mortgaged Properties and any Additional Collateral relating to the Additional Collateral Mortgage Loans, including, but not limited to, the pledge, control and guaranty agreements and the Limited Purpose Surety Bond, to have and to hold, in trust; and the Trustee declares that, subject to the review provided for in Section 2.02, it has received and shall hold the Trust Fund, as trustee, in trust, for the benefit and use of the Holders of the Certificates and for the purposes and subject to the terms and conditions set forth in this Agreement, and, concurrently with such receipt, has caused to be executed, authenticated and delivered to or upon the order of the Depositor, in exchange for the Trust Fund, Certificates in the authorized denominations evidencing the entire ownership of the Trust Fund. The foregoing sale, transfer, assignment, set-over, deposit and conveyance does not and is not intended to result in the creation or assumption by the Trustee of any obligation of the 36 Depositor, the Seller or any other Person in connection with the Initial Mortgage Loans or any other agreement or instrument relating thereto except as specifically set forth therein. In connection with such transfer and assignment of the Initial Mortgage Loans, the Depositor does hereby deliver to, and deposit with, or cause to be delivered to and deposited with, the Custodian acting on the Trustee's behalf, the following documents or instruments with respect to each Initial Mortgage Loan (each a "Trustee Mortgage File") so transferred and assigned: (i) with respect to each Initial Mortgage Loan, the original Mortgage Note endorsed without recourse in proper form to the order of the Trustee, or in blank (in each case, with all necessary intervening endorsements, as applicable); (ii) with respect to each Initial Mortgage Loan (other than a Cooperative Loan), the original mortgage, deed of trust or other instrument creating a first lien on the underlying property securing the Initial Mortgage Loan and bearing evidence that such instrument has been recorded in the appropriate jurisdiction where the Mortgaged Property is located (or, in lieu of the original of the Mortgage, a true copy of the Mortgage certified by the originator, or a duplicate or conformed copy of the Mortgage, together with a certificate of either the closing attorney or an officer of the title insurer that issued the related title insurance policy, certifying that such copy represents a true and correct copy of the original and that such original has been or is currently submitted to be recorded in the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located); (iii) with respect to each Initial Mortgage Loan (other than a Cooperative Loan), the Assignment of Mortgage in form and substance acceptable for recording in the relevant jurisdiction, such assignment being either (A) in blank, without recourse, or (B) or endorsed to "HSBC Bank USA, as Trustee of the Sequoia Mortgage Trust 2003-2, Mortgage Pass-Through Certificates, without recourse." (iv) with respect to each Initial Mortgage Loan (other than a Cooperative Loan), the originals or certified copies of all Intervening Assignments of the Mortgage, if any, with evidence of recording thereon, showing a complete chain of title to the last endorsee, including any warehousing assignment; (v) with respect to each Initial Mortgage Loan (other than a Cooperative Loan), any assumption, modification, written assurance, substitution, consolidation, extension or guaranty agreement, if applicable; (vi) with respect to each Initial Mortgage Loan (other than a Cooperative Loan), the original policy of title insurance (or a true copy thereof) with respect to any such Initial Mortgage Loan, or, if such policy has not yet been delivered by the insurer, the title commitment or title binder to issue same; and (vii) if the Mortgage Note or Mortgage or any other material document or instrument relating to the Initial Mortgage Loan has been signed by a person on behalf of 37 the Mortgagor, the original power of attorney or other instrument that authorized and empowered such person to sign bearing evidence that such instrument has been recorded, if so required, in the appropriate jurisdiction where the Mortgaged Property is located (or, in lieu thereof, a duplicate or conformed copy of such instrument, together with a certificate of receipt from the recording office, certifying that such copy represents a true and complete copy of the original and that such original has been or is currently submitted to be recorded in the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located). (viii) with respect to each Initial Mortgage Loan which constitutes a Cooperative Mortgage Loan: (a) the original loan and security agreement; (b) the original Cooperative Shares; (c) a stock power executed in blank by the person in whose name the Cooperative Shares are issued; (d) the Proprietary Lease or occupancy agreement accompanied by an assignment in blank of such proprietary lease; (e) the recognition agreement executed by the Cooperative Corporation, which requires the Cooperative Corporation to recognize the rights of the lender and its successors in interest and assigns, under the cooperative; (f) UCC-1 financing statements with recording information thereon from the appropriate governmental recording offices if necessary to perfect the security interest of the Cooperative Mortgage Loan under the Uniform Commercial Code in the jurisdiction in which the cooperative project is located, accompanied by UCC-3 financing statements executed in blank for recordation of the change in the secured party thereunder; (g) the original policy of title insurance or with respect to any such Cooperative Mortgage Loan, if such policy has not yet been delivered by the insurer, the title commitment or title binder to issue same; and (h) Any guarantees, if applicable. The foregoing document delivery requirements with respect to each Trustee Mortgage File set forth in this Section 2.01 shall equally apply to the transfer and assignment to the Trust Fund of any Subsequent Mortgage Loan pursuant to Section 2.05 hereof; provided that for purposes of applying such requirements to Subsequent Mortgage Loans, references in this Section 2.01 to "Initial Mortgage Loans" shall be replaced by "Subsequent Mortgage Loans" and references to "Closing Date" shall be replaced by "Subsequent Transfer Date." 38 (b) The Depositor shall cause Assignments of Mortgage with respect to each Initial Mortgage Loan other than a Cooperative Mortgage Loan to be completed in the form specified in Sections 2.01(a)(iii) above within 30 days of the Closing Date for purpose of their recording; provided, however, that such Assignments need not be recorded if, on or prior to the Closing Date, the Depositor delivers, at its own expense, an Opinion of Counsel (which must be Independent counsel) acceptable to the Trustee, and the Rating Agencies, to the effect that recording in such states is not required to protect the Trustee's interest in the related Initial Mortgage Loans. Subject to the preceding sentence, as soon as practicable after the Closing Date (but in no event more than 270 days thereafter except to the extent delays are caused by the applicable recording office), the Depositor at its own expense and with the cooperation of the applicable Servicer, shall cause to be properly recorded by each Servicer in each public recording office where the related Mortgages are recorded each Assignment of Mortgage endorsed in the form described in Section 2.01(a)(iii) above with respect to each such Initial Mortgage Loan. (c) In instances where a title insurance policy is required to be delivered to the Trustee or the applicable Custodian on behalf of the Trustee under Sections 2.01(a)(vi) or 2.01(a)(viii)(g) above and is not so delivered, the Depositor will provide a copy of such title insurance policy to the Trustee, or to the Custodian on behalf of the Trustee, as promptly as practicable after the execution and delivery hereof, but in any case within 180 days of the Closing Date. (d) For Initial Mortgage Loans (if any) that have been prepaid in full after the Cut-off Date and prior to the Closing Date, the Depositor, in lieu of delivering the above documents, herewith delivers to the Trustee, or to the Custodian on behalf of the Trustee, an Officer's Certificate which shall include a statement to the effect that all amounts received in connection with such prepayment that are required to be deposited in the Distribution Account pursuant to Section 4.01 have been so deposited. All original documents that are not delivered to the Trustee or the Custodian on behalf of the Trustee shall be held by the Master Servicer or the applicable Servicer in trust for the benefit of the Trustee and the Certificateholders. (e) The requirements set forth in paragraphs (b), (c) and (d) of this Section 2.01 shall equally apply upon the transfer and assignment to the Trust Fund of any Subsequent Mortgage Loans pursuant to Section 2.05; provided that for purposes of applying such requirements to Subsequent Mortgage Loans, references therein to "Initial Mortgage Loans" shall be replaced by "Subsequent Mortgage Loans" and references to "Cut-off Date" and "Closing Date" shall be replaced by "Subsequent Cut-off Date" and "Subsequent Transfer Date," respectively. Section 2.02 Acceptance of Trust Fund by Trustee; Review of Documentation for Trust Fund. (a) The Trustee, by execution and delivery hereof, acknowledges receipt by it or by the Custodian on its behalf of the Trustee Mortgage Files pertaining to the Initial Mortgage Loans listed on the Mortgage Loan Schedule, subject to review thereof by the Custodian on behalf of the Trustee in accordance with Section 4(a) of the Custody Agreement (a form of which is attached hereto as Exhibit D). The Custodian on behalf of the Trustee, will execute and deliver to the Trustee and the Depositor an Initial Trust Receipt and Schedule of Exceptions, on the Closing Date in the forms required by the Custody Agreement. 39 (b) Within 270 days after the Closing Date, the Custodian on behalf of the Trustee, will, for the benefit of Holders of the Certificates, review each Trustee Mortgage File to ascertain that all required documents set forth in Section 2.01 have been received and appear on their face to conform with the requirements set forth in Section 4A and 4B of the Custody Agreement. (c) Nothing in this Agreement shall be construed to constitute an assumption by the Trust Fund, the Trustee, any Custodian or the Certificateholders of any unsatisfied duty, claim or other liability on any Initial Mortgage Loan or to any Mortgagor. (d) Each of the parties hereto acknowledges that the Custodian shall perform the applicable review of the Initial Mortgage Loans and respective certifications as provided in the Custody Agreement. (e) Upon execution of this Agreement, the Depositor hereby delivers to the Trustee and the Trustee acknowledges receipt of the Acknowledgements, together with the related Purchase Agreements, Servicing Agreements and the Mortgage Loan Purchase and Sale Agreements. (f) The requirements set fort in paragraphs (a) through (d) of this Section 2.02 with respect to the review of the documentation of each Trustee Mortgage File shall equally apply to the transfer and assignment to the Trust Fund of any Subsequent Mortgage Loans; provided that for purposes of applying such requirements to Subsequent Mortgage Loans, any references to "Initial Mortgage Loans" and "Closing Date" in this Section 2.02 shall be replaced by "Subsequent Mortgage Loans" and "Subsequent Transfer Date," respectively. In addition, upon the transfer of any Subsequent Mortgage Loan on a Subsequent Transfer Date, the Depositor shall be required to deliver to the Trustee the related Acknowledgements, together with the underlying Purchase Agreement and Servicing Agreements related to the Subsequent Mortgage Loans, unless such documents were previously delivered to the Trustee on the Closing Date. Section 2.03 Representations and Warranties of the Depositor. (a) The Depositor hereby represents and warrants to the Trustee, for the benefit of the Certificateholders and to the Master Servicer and the Securities Administrator as of the Closing Date (solely with respect to the Initial Mortgage Loans in the case of paragraphs (vi) through (xi) below) and each Subsequent Transfer Date (solely with respect to the Subsequent Mortgage Loans being transferred on such Subsequent Transfer Date in the case of paragraphs (vi) through (xi) below) or such other date as is specified, that: (i) the Depositor is a corporation duly organized, validly existing and in good standing under the laws governing its creation and existence and has full corporate power and authority to own its property, to carry on its business as presently conducted, to enter into and perform its obligations under this Agreement, and to create the trust pursuant hereto; (ii) the execution and delivery by the Depositor of this Agreement have been duly authorized by all necessary corporate action on the part of the Depositor; neither the 40 execution and delivery of this Agreement, nor the consummation of the transactions herein contemplated, nor compliance with the provisions hereof, will conflict with or result in a breach of, or constitute a default under, any of the provisions of any law, governmental rule, regulation, judgment, decree or order binding on the Depositor or its properties or the certificate of incorporation or bylaws of the Depositor; (iii) the execution, delivery and performance by the Depositor of this Agreement and the consummation of the transactions contemplated hereby do not require the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any state, federal or other governmental authority or agency, except such as has been obtained, given, effected or taken prior to the date hereof; (iv) this Agreement has been duly executed and delivered by the Depositor and, assuming due authorization, execution and delivery by the Trustee, the Master Servicer and the Securities Administrator, constitutes a valid and binding obligation of the Depositor enforceable against it in accordance with its terms except as such enforceability may be subject to (A) applicable bankruptcy and insolvency laws and other similar laws affecting the enforcement of the rights of creditors generally and (B) general principles of equity regardless of whether such enforcement is considered in a proceeding in equity or at law; (v) there are no actions, suits or proceedings pending or, to the knowledge of the Depositor, threatened or likely to be asserted against or affecting the Depositor, before or by any court, administrative agency, arbitrator or governmental body (A) with respect to any of the transactions contemplated by this Agreement or (B) with respect to any other matter which in the judgment of the Depositor will be determined adversely to the Depositor and will if determined adversely to the Depositor materially and adversely affect it or its business, assets, operations or condition, financial or otherwise, or adversely affect its ability to perform its obligations under this Agreement; (vi) immediately prior to the transfer and assignment of the Mortgage Loans to the Trustee, the Depositor was the sole owner of record and holder of each Mortgage Loan, and the Depositor had good and marketable title thereto, and had full right to transfer and sell each Mortgage Loan to the Trustee free and clear, subject only to (1) liens of current real property taxes and assessments not yet due and payable and, if the related Mortgaged Property is a condominium unit, any lien for common charges permitted by statute, (2) covenants, conditions and restrictions, rights of way, easements and other matters of public record as of the date of recording of such Mortgage acceptable to mortgage lending institutions in the area in which the related Mortgaged Property is located and specifically referred to in the lender's title insurance policy or attorney's opinion of title and abstract of title delivered to the originator of such Mortgage Loan, and (3) such other matters to which like properties are commonly subject which do not, individually or in the aggregate, materially interfere with the benefits of the security intended to be provided by the Mortgage, of any encumbrance, equity, participation interest, lien, pledge, charge, claim or security interest, and had full right 41 and authority, subject to no interest or participation of, or agreement with, any other party, to sell and assign each Mortgage Loan pursuant to this Agreement; (vii) This Agreement creates a valid and continuing security interest (as defined in the applicable Uniform Commercial Code (the "UCC"), in the Mortgage Loans in favor of the Trustee, which security interest is prior to all other liens, and is enforceable as such against creditors of and purchasers from the Depositor; (viii) The Mortgage Loans constitute "instruments" within the meaning of the applicable UCC; (ix) Other than the security interest granted to the Trustee pursuant to this Agreement, the Depositor has not pledged, assigned, sold, granted a security interest in, or otherwise conveyed any of the Mortgage Loans. The Depositor has not authorized the filing of and is not aware of any financing statement against the Depositor that includes a description of the collateral covering the Mortgage Loans other than a financing statement relating to the security interest granted to the Trustee hereunder or that has been terminated. The Depositor is not aware of any judgment or tax lien filings against the Depositor; (x) None of the Mortgage Loans have any marks or notations indicating that such Mortgage Loans have been pledged, assigned or otherwise conveyed to any Person other than the Trustee; and (xi) The Depositor has received all consents and approvals required by the terms of the Mortgage Loans to convey the Mortgage Loans hereunder to the Trustee. The foregoing representations made in this Section 2.03 shall survive the termination of this Agreement and shall not be waived by any party hereto Section 2.04 Discovery of Breach; Repurchase or Substitution of Mortgage Loans. (a) Pursuant to Sections 2(b) and 2(d) of the Mortgage Loan Purchase and Sale Agreement, the Seller has made certain representations and warranties as to the characteristics of the Initial Mortgage Loans as of the Closing Date (and will be deemed to have made the same representations and warranties with respect to the Subsequent Mortgage Loan as of the applicable Subsequent Transfer Date). The Depositor, for the benefit of the Trustee and the Certificateholders hereby assigns any such rights against the Seller to the Trustee and the Seller acknowledges that it has agreed to comply with the provisions of this Section 2.04 in respect of a breach of any of such representations and warranties. It is understood and agreed that such representations and warranties set forth in Section 2(b) and 2(d) of the Mortgage Loan Purchase and Sale Agreements shall survive delivery of the Trustee Mortgage Files and the Assignment of Mortgage of each Mortgage Loan to the Trustee and shall continue throughout the term of this Agreement. Upon discovery by the Depositor or receipt of written notice of any materially defective document in, or, following the date of delivery to the Trustee of the Custodian's Final Trust Receipt as required under the Custody 42 Agreement, that a document is missing from, a Trustee Mortgage File, or discovery by the Depositor, the Seller of the breach by the Seller of any representation or warranty under the Mortgage Loan Purchase and Sale Agreements in respect of any Mortgage Loan which materially adversely affects the value of that Mortgage Loan or the interest therein of the Certificateholders (a "Defective Mortgage Loan") (each of such parties hereby agreeing to give written notice thereof to the Trustee and the other of such parties), the Trustee, or its designee, shall promptly notify the Depositor in writing of such defective or missing document or breach and request that the Depositor deliver such missing document or cure or cause the cure of such defect or breach within 90 days from the date that the Depositor discovered or was notified of such missing document, defect or breach, and if the Depositor does not deliver such missing document or cure such defect or breach in all material respects during such period, the Trustee shall enforce the Seller's obligation under the Mortgage Loan Purchase and Sale Agreements and cause the Seller to repurchase that Mortgage Loan from the Trust Fund at the Purchase Price on or prior to the Determination Date following the expiration of such 90-day period (subject to Section 2.04(b) below); provided, however, that, in connection with any such breach that could not reasonably have been cured within such 90-day period, if the Seller shall have commenced to cure such breach within such 90-day period, the Seller shall be permitted to proceed thereafter diligently and expeditiously to cure the same within an additional 90-day period. The Purchase Price for the repurchased Mortgage Loan shall be deposited in the related Distribution Account, and the Trustee, or its designee, upon receipt of written certification from the Securities Administrator of such deposit, shall release to the Seller, the related Trustee Mortgage File and shall execute and deliver such instruments of transfer or assignment, in each case without recourse, representation or warranties, as either party shall furnish to it and as shall be necessary to vest in such party any Mortgage Loan released pursuant hereto and the Trustee, or its designee, shall have no further responsibility with regard to such Trustee Mortgage File (it being understood that the Trustee shall have no responsibility for determining the sufficiency of such assignment for its intended purpose). In lieu of repurchasing any such Mortgage Loan as provided above, either party may cause such Mortgage Loan to be removed from the Trust Fund (in which case it shall become a Deleted Mortgage Loan) and substitute one or more Replacement Mortgage Loans in the manner and subject to the limitations set forth in Section 2.04(b) below. It is understood and agreed that the obligation of the Seller to cure or to repurchase (or to substitute for) any Mortgage Loan as to which a document is missing, a material defect in a constituent document exists or as to which such a breach has occurred and is continuing shall constitute the sole remedy against the such party respecting such omission, defect or breach available to the Trustee on behalf of the Certificateholders. (b) Any substitution of Replacement Mortgage Loans for Deleted Mortgage Loans made pursuant to Section 2.04(a) above must be effected prior to the last Business Day that is within two years after the Closing Date. As to any Deleted Mortgage Loan for which the Seller substitutes a Replacement Mortgage Loan or Loans, such substitution shall be effected by delivering to the Custodian, on behalf of the Trustee, for such Replacement Mortgage Loan or Loans, the Mortgage Note, the Mortgage, the Assignment to the Trustee, and such other documents and agreements, with all necessary endorsements thereon, together with an Officers' Certificate stating that each such Replacement Mortgage Loan satisfies the definition thereof and specifying the Substitution Amount (as described below), if any, in connection with such substitution. The Custodian shall acknowledge receipt for such Replacement Mortgage Loan 43 and, within 45 days thereafter, shall review such Mortgage Documents as specified in the Custody Agreement and deliver to the Trustee and the Depositor, with respect to such Replacement Mortgage Loans, a certification substantially in the form of a revised Trust Receipt, with any exceptions noted thereon. Within one year of the date of substitution, the Custodian shall deliver to the Trustee and the Depositor a certification substantially in the form of a revised Final Trust Receipt, with respect to such Replacement Mortgage Loans, with any exceptions noted thereon. Monthly Payments due with respect to Replacement Mortgage Loans in the month of substitution shall not be included as part of the Trust Fund and shall be retained by the Seller, as applicable. For the month of substitution, distributions to Certificateholders shall reflect the collections and recoveries in respect of such Deleted Mortgage in the Due Period preceding the month of substitution and the Seller shall thereafter be entitled to retain all amounts subsequently received in respect of such Deleted Mortgage Loan. Upon such substitution, such Replacement Mortgage Loan shall constitute part of the Trust Fund and shall be subject in all respects to the terms of this Agreement and the Mortgage Loan Purchase and Sale Agreement, including all representations and warranties thereof included in the Mortgage Loan Purchase and Sale Agreement, in each case as of the date of substitution. For any month in which the Seller substitutes one or more Replacement Mortgage Loans for one or more Deleted Mortgage Loans, the related Servicer shall determine the excess (each, a "Substitution Amount"), if any, by which the aggregate Purchase Price of all such Deleted Mortgage Loans exceeds the aggregate Stated Principal Balance of the Replacement Mortgage Loans replacing such Deleted Mortgage Loans, together with one month's interest on such excess amount at the applicable Net Mortgage Rate. On the date of such substitution, the Seller, as applicable, shall deliver or cause to be delivered to the Servicer for deposit in the Custodial Account an amount equal to the related Substitution Amount, if any, and the Custodian, on behalf of the Trustee, upon receipt of the related Replacement Mortgage Loan or Loans and certification by the Servicer of such deposit, shall release to the Seller, as applicable, the related Trustee Mortgage File or Files and shall execute and deliver such instruments of transfer or assignment, in each case without recourse, as the Seller shall deliver to it and as shall be necessary to vest therein any Deleted Mortgage Loan released pursuant hereto. In addition, the Seller shall obtain at its own expense and deliver to the Trustee and the Securities Administrator an Opinion of Counsel to the effect that such substitution (either specifically or as a class of transactions) shall not cause (a) any federal tax to be imposed on the Trust Fund, including without limitation, any federal tax imposed on "prohibited transactions" under Section 860F(a)(l) of the Code or on "contributions after the startup date" under Section 860G(d)(l) of the Code, or (b) either REMIC created hereunder to fail to qualify as a REMIC at any time that any Certificate is outstanding. If such Opinion of Counsel can not be delivered, then such substitution may only be effected at such time as the required Opinion of Counsel can be given. (c) Upon discovery by the Seller, the Depositor or the Trustee that any Mortgage Loan does not constitute a "qualified mortgage" within the meaning of Section 860G(a)(3) of the Code, the party discovering such fact shall within two Business Days give written notice thereof to the other parties. In connection therewith, the applicable party shall repurchase or, subject to the limitations set forth in Section 2.04(b), substitute one or more Replacement Mortgage Loans 44 for the affected Mortgage Loan within 90 days of the earlier of discovery or receipt of such notice with respect to such affected Mortgage Loan. Any such repurchase or substitution shall be made in the same manner as set forth in Section 2.04(a) above, if made by the Seller. The Trustee shall re-convey to the Seller the Mortgage Loan to be released pursuant hereto in the same manner, and on the same terms and conditions, as it would a Mortgage Loan repurchased for breach of a representation or warranty. (d) The Seller indemnifies and holds the Trust Fund, the Master Servicer, the Securities Administrator, the Trustee, the Depositor and each Certificateholder harmless against any and all taxes, claims, losses, penalties, fines, forfeitures, reasonable legal fees and related costs, judgments, and any other costs, fees and expenses that the Trust Fund, the Trustee, the Master Servicer, the Securities Administrator, the Depositor and any Certificateholder may sustain in connection with any actions of such party relating to a repurchase of a Mortgage Loan other than in compliance with the terms of this Section 2.04 and the Mortgage Loan Purchase and Sale Agreement, to the extent that any such action causes (i) any federal or state tax to be imposed on the Trust Fund, including without limitation, any federal tax imposed on "prohibited transactions" under Section 860F(a)(1) of the Code or on "contributions after the startup date" under Section 860G(d)(1) of the Code, or (ii) any REMIC formed hereby to fail to qualify as a REMIC at any time that any Certificate is outstanding. Section 2.05 Delivery of Subsequent Mortgage Loans. (a) On each Subsequent Transfer Date occurring during the Pre-Funding Period, provided that each condition set forth in this Section 2.05 is satisfied, the Depositor shall convey to the Trust Fund and the Trustee shall purchase on behalf of the Trust Fund for inclusion in Pool 1 or Pool 2, as applicable, at the applicable Transfer Price set forth in the related Subsequent Transfer Date Notice, all Subsequent Mortgage Loans which satisfy the criteria set forth in this Section 2.05 then offered for sale by the Depositor; provided, however, that the related aggregate purchase price paid for the Subsequent Mortgage Loans shall not exceed the Original Pre-Funded Amount related to Pool 1 or Pool 2, as applicable; provided, further, that in the case of Pool 1, the aggregate purchase price paid for Subsequent Mortgage Loans which (x) constitute One-Month LIBOR Loans shall not exceed the initial deposit made to the 1M Sub-Account of the Pool 1 Pre-Funding Account and (y) constitute Six-Month LIBOR Loans shall not exceed the initial deposit made to the 6M Sub-Account of the Pool 1 Pre-Funding Account, in each case as provided in Section 4.02. (b) Subject to satisfaction of the conditions set forth in Section 2.05(c), in consideration of the Securities Administrator's delivery on the related Subsequent Transfer Date to the Depositor or its designee, or upon the order of the Depositor, of the Transfer Price for the related Subsequent Mortgage Loans from amounts on deposit in the applicable Pre-Funding Account, the Depositor, on each Subsequent Transfer Date, shall sell, transfer, assign, set over and otherwise convey to the Trustee on behalf of the Trust Fund for inclusion in the related Mortgage Pool, without recourse, but subject to the other terms and provisions of this Agreement, all of the right, title and interest of the Depositor in and to each Subsequent Mortgage Loan (including all interest and principal thereon received after the related Subsequent Cut-off Date) identified in the related Subsequent Transfer Date Notice delivered by the Depositor prior to such Subsequent 45 Transfer Date and all items in the related Trustee Mortgage File. In connection therewith, the Depositor shall amend the Mortgage Loan Schedule to reflect the inclusion of the Subsequent Mortgage Loan in the applicable Mortgage Pool as part of the assets of the Trust Fund. The Depositor shall promptly deliver to the Trustee and the Master Servicer a copy of the Mortgage Loan Schedule as so amended. (c) The obligation of the Securities Administrator to release funds from the Pool 1 Pre-Funding Account or the Pool 2 Pre-Funding Account, as applicable, in respect of any Subsequent Mortgage Loans is subject to satisfaction of each of the following conditions on or prior to the related Subsequent Transfer Date: (i) at least ten (10) days prior to the Subsequent Transfer Date, the Depositor shall have delivered to the Trustee, the Securities Administrator and the Master Servicer a duly executed written Subsequent Transfer Date Notice which shall include a schedule of Subsequent Mortgage Loans specifying the related Mortgage Pool to which such Subsequent Mortgage Loans relate and the Transfer Price to be released from the related Pre-Funding Account or Sub-account. (ii) after giving effect to the acquisition of such Subsequent Mortgage Loans, the Mortgage Loans shall conform to the Subsequent Delivery Requirements applicable to such Mortgage Pool. (iii) no Subsequent Mortgage Loan shall have been selected in a manner adverse to the interest of Certificateholders; (iv) the weighted average Mortgage Rate for all the Mortgage Loans in the Trust Fund at the close of the Pre-Funding Period shall not be more than 100 basis points lower than the weighted average Mortgage Rate for the Initial Mortgage Loans transferred to the Trust Fund on the Closing Date; (v) the addition of the Subsequent Mortgage Loans shall not result in the reduction, qualification or withdrawal of the then current rating of the Certificates as evidenced by a letter from each Rating Agency rating the Certificate delivered by the Depositor to the Trustee and the Securities Administrator dated the applicable Subsequent Transfer Date; (vi) each Subsequent Mortgage Loan shall be underwritten in accordance with the applicable underwriting guidelines for the related originator. (vii) the Depositor shall have delivered to the Trustee and the Securities Administrator a letter from an independent accountant stating whether or not the characteristics of the Subsequent Mortgage Loans conform to the characteristics of the Mortgage Loans required in this Section 2.05(b); (viii) as of each Transfer Date, neither the Depositor nor the Seller shall be insolvent, nor will either of them be made insolvent by such transfer; 46 (ix) the Pre-Funding Period shall not have ended; (x) the Depositor shall have delivered to the Master Servicer a copy of the related Servicing Agreement and executed Acknowledgement (if not previously delivered to the Master Servicer on or before the Closing Date) in respect of each such Subsequent Mortgage Loan, and such loan level data, in electronic or other format acceptable to the Master Servicer and the Depositor, as shall be necessary for the proper master servicing of such Subsequent Mortgage Loans by the Master Servicer; (xi) the Depositor shall have delivered to the Trustee and the Securities Administrator an Officer's Certificate confirming the satisfaction of each condition precedent specified in the Section 2.05 and Opinions of Counsel with respect to corporate, bankruptcy and tax matters relating to the transfer of Subsequent Mortgage Loans in the form substantially similar to those delivered on the Closing Date pursuant to the Underwriting Agreement; and (xii) the Depositor shall have delivered to the Trustee, the Master Servicer, the Securities Administrator and each Rating Agency such additional information reasonably requested by any of them with respect to the Subsequent Mortgage Loans to be sold to the Trust on the Subsequent Transfer Date. The Depositor shall cause the applicable Servicer to deposit in the Custodial Account within two Business Days following each Subsequent Transfer Date all collections in respect to the related Subsequent Mortgage Loans received after the related Subsequent Cut-off Date. Section 2.06 Grant Clause. (a) It is intended that the conveyance of the Depositor's right, title and interest in and to property constituting the Trust Fund pursuant to this Agreement shall constitute, and shall be construed as, a sale of such property and not a grant of a security interest to secure a loan. However, if such conveyance is deemed to be in respect of a loan, it is intended that: (1) the rights and obligations of the parties shall be established pursuant to the terms of this Agreement; (2) the Depositor hereby grants to the Trustee for the benefit of the Holders of the Certificates a first priority security interest in all of the Depositor's right, title and interest in, to and under, whether now owned or hereafter acquired, the Trust Fund and all proceeds of any and all property constituting the Trust Fund to secure payment of the Certificates; and (3) this Agreement shall constitute a security agreement under applicable law. If such conveyance is deemed to be in respect of a loan and the trust created by this Agreement terminates prior to the satisfaction of the claims of any Person holding any Certificate, the security interest created hereby shall continue in full force and effect and the Trustee shall be deemed to be the collateral agent for the benefit of such Person, and all proceeds shall be distributed as herein provided. (b) The Depositor shall, to the extent consistent with this Agreement, take such reasonable actions as may be necessary to ensure that, if this Agreement were deemed to create a security interest in the Mortgage Loans and the other property described above, such security interest would be deemed to be a perfected security interest of first priority under applicable law and will be maintained as such throughout the term of this Agreement. The Depositor will, at its 47 own expense, make all initial filings on or about the Closing Date and shall forward a copy of such filing or filings to the Trustee. Without limiting the generality of the foregoing, the Depositor shall prepare and forward for filing, or shall cause to be forwarded for filing, at the expense of the Depositor, all filings necessary to maintain the effectiveness of any original filings necessary under the relevant UCC to perfect the Trustee's security interest in or lien on the Mortgage Loans, including without limitation (x) continuation statements, and (y) such other statements as may be occasioned by (1) any change of name of the Seller, the Depositor or the Trustee, (2) any change of location of the place of business or the chief executive office of the Seller or the Depositor, (3) any transfer of any interest of the Seller or the Depositor in any Mortgage Loan or (4) any change under the relevant UCC or other applicable laws. Neither of the Seller nor the Depositor shall organize under the law of any jurisdiction other than the State under which each is organized as of the Closing Date (whether changing its jurisdiction of organization or organizing under an additional jurisdiction) without giving 30 days prior written notice of such action to its immediate and intermediate transferee, including the Trustee. Before effecting such change, the Seller or the Depositor proposing to change its jurisdiction of organization shall prepare and file in the appropriate filing office any financing statements or other statements necessary to continue the perfection of the interests of its immediate and mediate transferees, including the Trustee, in the Mortgage Loans. In connection with the transactions contemplated by this Agreement, each of the Seller and the Depositor authorizes its immediate or mediate transferee to file in any filing office any initial financing statements, any amendments to financing statements, any continuation statements, or any other statements or filings described in this paragraph (b). ARTICLE III THE CERTIFICATES Section 3.01 The Certificates. (a) The Certificates shall be issuable in registered form only and shall be securities governed by Article 8 of the New York Uniform Commercial Code. The Book-Entry Certificates will be evidenced by one or more certificates, beneficial ownership of which will be held in the dollar denominations in Certificate Principal Amount, or Notional Amount, as applicable, or in the Percentage Interests, specified herein. Each Class of Book-Entry Certificates will be issued in the minimum denominations in Certificate Principal Amount (or Notional Amount) specified in the Preliminary Statement hereto and in integral multiples of $1 in excess thereof. Each Class of Non-Book-Entry Certificates other than the Residual Certificates shall be issued in definitive, fully registered form in the minimum denominations in Certificate Principal Amount specified in the Preliminary Statement hereto and in integral multiples of $1 in excess thereof. The Residual Certificates shall be issued as single Certificates and maintained in definitive, fully registered form in a denomination equal to 100% of the Percentage Interest of each such Class. The Class X Certificate shall be issued as a single Certificate in a denomination equal to 100% of the Percentage Interest of such Class. 48 (b) The Certificates shall be executed by manual or facsimile signature on behalf of the Trustee by an authorized officer. Each Certificate shall, on original issue, be authenticated by the Authenticating Agent upon the order of the Depositor upon receipt by the Trustee of the Trustee Mortgage Files described in Section 2.01. No Certificate shall be entitled to any benefit under this Agreement, or be valid for any purpose, unless there appears on such Certificate a certificate of authentication substantially in the form provided for herein, executed by an authorized officer of the Authenticating Agent, by manual signature, and such certification upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly authenticated and delivered hereunder. All Certificates shall be dated the date of their authentication. At any time and from time to time after the execution and delivery of this Agreement, the Depositor may deliver Certificates executed by the Trustee to the Authenticating Agent for authentication and the Authenticating Agent shall authenticate and deliver such Certificates as in this Agreement provided and not otherwise. (c) The Class R and Class LT-R Certificates offered and sold in reliance on the exemption from registration under Rule 144A under the Act shall be issued initially in definitive, fully registered form without interest coupons with the applicable legends set forth in Exhibit A added to the forms of such Certificates (each, a "Restricted Global Security"). Section 3.02 Registration. The Securities Administrator is hereby appointed, and the Securities Administrator hereby accepts its appointment as, initial Certificate Registrar in respect of the Certificates and shall maintain books for the registration and for the transfer of Certificates (the "Certificate Register"). The Trustee may appoint a bank or trust company to act as successor Certificate Registrar. A registration book shall be maintained for the Certificates collectively. The Certificate Registrar may resign or be discharged or removed and a new successor may be appointed in accordance with the procedures and requirements set forth in Sections 6.06 and 6.07 hereof with respect to the resignation, discharge or removal of the Securities Administrator and the appointment of a successor Securities Administrator. The Certificate Registrar may appoint, by a written instrument delivered to the Holders and the Master Servicer, any bank or trust company to act as co-registrar under such conditions as the Certificate Registrar may prescribe; provided, however, that the Certificate Registrar shall not be relieved of any of its duties or responsibilities hereunder by reason of such appointment. Section 3.03 Transfer and Exchange of Certificates. (a) A Certificate (other than Book-Entry Certificates which shall be subject to Section 3.09 hereof) may be transferred by the Holder thereof only upon presentation and surrender of such Certificate at the office of the Certificate Registrar duly endorsed or accompanied by an assignment duly executed by such Holder or his duly authorized attorney in such form as shall be satisfactory to the Certificate Registrar. Upon the transfer of any Certificate in accordance with the preceding sentence, the Trustee shall execute, and the Authenticating Agent shall authenticate and deliver to the transferee, one or more new Certificates of the same Class and evidencing, in the aggregate, the same aggregate Certificate Principal Amount (or Notional Amount) as the Certificate being transferred. No service charge shall be made to a Certificateholder for any registration of transfer of Certificates, but the Certificate Registrar may 49 require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any registration of transfer of Certificates. (b) A Certificate may be exchanged by the Holder thereof for any number of new Certificates of the same Class, in authorized denominations, representing in the aggregate the same Certificate Principal Amount (or Notional Amount) as the Certificate surrendered, upon surrender of the Certificate to be exchanged at the office of the Certificate Registrar duly endorsed or accompanied by a written instrument of transfer duly executed by such Holder or his duly authorized attorney in such form as is satisfactory to the Certificate Registrar. Certificates delivered upon any such exchange will evidence the same obligations, and will be entitled to the same rights and privileges, as the Certificates surrendered. No service charge shall be made to a Certificateholder for any exchange of Certificates, but the Certificate Registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any exchange of Certificates. Whenever any Certificates are so surrendered for exchange, the Trustee shall execute, and the Authenticating Agent shall authenticate, date and deliver the Certificates which the Certificateholder making the exchange is entitled to receive. (c) By acceptance of a Restricted Certificate, whether upon original issuance or subsequent transfer, each Holder of such a Certificate acknowledges the restrictions on the transfer of such Certificate set forth thereon and agrees that it will transfer such a Certificate only as provided herein. The following restrictions shall apply with respect to the transfer and registration of transfer of a Restricted Certificate to a transferee that takes delivery in the form of a Definitive Certificate: (i) The Certificate Registrar shall register the transfer of a Restricted Certificate if the requested transfer is (x) to the Depositor or an affiliate (as defined in Rule 405 under the 1933 Act) of the Depositor or (y) being made to a "qualified institutional buyer" (a "QIB") as defined in Rule 144A under the Securities Act of 1933, as amended (the "Act") by a transferor that has provided the Certificate Registrar with a certificate in the form of Exhibit H hereto; and (ii) The Certificate Registrar shall register the transfer of a Restricted Certificate if the requested transfer is being made to an "accredited investor" under Rule 501(a)(1), (2), (3) or (7) under the Act, or to any Person all of the equity owners in which are such accredited investors, by a transferor who furnishes to the Certificate Registrar a letter of the transferee substantially in the form of Exhibit I hereto. (d) No transfer of an ERISA-Restricted Certificate in the form of a Definitive Certificate shall be made to any Person or shall be effective unless the Certificate Registrar, on behalf of the Trustee, has received (A) a certificate substantially in the form of Exhibit J hereto (or Exhibit B, in the case of a Residual Certificate) from such transferee or (B) an Opinion of Counsel satisfactory to the Certificate Registrar to the effect that the purchase and holding of such a Certificate will not constitute or result in prohibited transactions under Title I of ERISA or Section 4975 of the Code and will not subject the Certificate Registrar, the Trustee, the Master Servicer, the Depositor or the Securities Administrator to any obligation in addition to those 50 undertaken in the Agreement; provided, however, that the Certificate Registrar will not require such certificate or opinion in the event that, as a result of a change of law or otherwise, counsel satisfactory to the Certificate Registrar has rendered an opinion to the effect that the purchase and holding of an ERISA-Restricted Certificate by a Plan or a Person that is purchasing or holding such a Certificate with the assets of a Plan will not constitute or result in a prohibited transaction under Title I of ERISA or Section 4975 of the Code. Each Transferee of an ERISA-Restricted Certificate that is a Book-Entry Certificate shall be deemed to have made the representations set forth in Exhibit J. The preparation and delivery of the certificate and opinions referred to above shall not be an expense of the Trust Fund, Certificate Registrar, the Trustee, the Master Servicer, the Depositor or the Securities Administrator. Notwithstanding the foregoing, no opinion or certificate shall be required for the initial issuance of the ERISA-Restricted Certificates. The Certificate Registrar shall have no obligation to monitor transfers of Book-Entry Certificates that are ERISA-Restricted Certificates and shall have no liability for transfers of such Certificates in violation of the transfer restrictions. The Certificate Registrar shall be under no liability to any Person for any registration of transfer of any ERISA-Restricted Certificate that is in fact not permitted by this Section 3.03(d) and none of the Securities Administrator, the Trustee or the Paying Agent shall have any liability for making any payments due on such Certificate to the Holder thereof or taking any other action with respect to such Holder under the provisions of this Agreement so long as the transfer was registered by the Certificate Registrar in accordance with the foregoing requirements. The Securities Administrator, on behalf of the Trustee, shall be entitled, but not obligated, to recover from any Holder of any ERISA-Restricted Certificate that was in fact a Plan or a Person acting on behalf of a Plan any payments made on such ERISA-Restricted Certificate at and after either such time. Any such payments so recovered by the Securities Administrator, on behalf of the Trustee, shall be paid and delivered by the Securities Administrator, on behalf of the Trustee, to the last preceding Holder of such Certificate that is not such a Plan or Person acting on behalf of a Plan. (e) As a condition of the registration of transfer or exchange of any Certificate, the Certificate Registrar may require the certified taxpayer identification number of the owner of the Certificate and the payment of a sum sufficient to cover any tax or other governmental charge imposed in connection therewith; provided, however, that the Certificate Registrar shall have no obligation to require such payment or to determine whether or not any such tax or charge may be applicable. No service charge shall be made to the Certificateholder for any registration, transfer or exchange of a Certificate. (f) Notwithstanding anything to the contrary contained herein, no Residual Certificate may be owned, pledged or transferred, directly or indirectly, by or to (i) a Disqualified Organization or (ii) an individual, corporation or partnership or other person unless such person is (A) not a Non-U.S. Person or (B) is a Non-U.S. Person that holds a Residual Certificate in connection with the conduct of a trade or business within the United States and has furnished the transferor and the Certificate Registrar with an effective Internal Revenue Service Form W-8ECI or successor form at the time and in the manner required by the Code (any such person who is not covered by clause (A) or (B) above is referred to herein as a "Non-permitted Foreign Holder"). 51 Prior to and as a condition of the registration of any transfer, sale or other disposition of a Residual Certificate, the proposed transferee shall deliver to the Trustee and the Certificate Registrar an affidavit in substantially the form attached hereto as Exhibit B representing and warranting, among other things, that such transferee is neither a Disqualified Organization, an agent or nominee acting on behalf of a Disqualified Organization, nor a Non-permitted Foreign Holder (any such transferee, a "Permitted Transferee"), and the proposed transferor shall deliver to the Trustee and the Certificate Registrar an affidavit in substantially the form attached hereto as Exhibit C. In addition, the Trustee or the Certificate Registrar may (but shall have no obligation to) require, prior to and as a condition of any such transfer, the delivery by the proposed transferee of an Opinion of Counsel, addressed to the Trustee and the Certificate Registrar, that such proposed transferee or, if the proposed transferee is an agent or nominee, the proposed beneficial owner, is not a Disqualified Organization, agent or nominee thereof, or a Non-permitted Foreign Holder. Notwithstanding the registration in the Certificate Register of any transfer, sale, or other disposition of a Residual Certificate to a Disqualified Organization, an agent or nominee thereof, or Non-permitted Foreign Holder, such registration shall be deemed to be of no legal force or effect whatsoever and such Disqualified Organization, agent or nominee thereof, or Non-permitted Foreign Holder shall not be deemed to be a Certificateholder for any purpose hereunder, including, but not limited to, the receipt of distributions on such Residual Certificate. The Depositor, the Certificate Registrar and the Trustee shall be under no liability to any Person for any registration or transfer of a Residual Certificate to a Disqualified Organization, agent or nominee thereof or Non-permitted Foreign Holder or for the Paying Agent making any payments due on such Residual Certificate to the Holder thereof or for taking any other action with respect to such Holder under the provisions of the Agreement, so long as the transfer was effected in accordance with this Section 3.03(f), unless the Certificate Registrar shall have actual knowledge at the time of such transfer or the time of such payment or other action that the transferee is a Disqualified Organization, or an agent or nominee thereof, or Non-permitted Foreign Holder. The Certificate Registrar shall be entitled to recover from any Holder of a Residual Certificate that was a Disqualified Organization, agent or nominee thereof, or Non-permitted Foreign Holder at the time it became a Holder or any subsequent time it became a Disqualified Organization, agent or nominee thereof, or Non-permitted Foreign Holder, all payments made on such Residual Certificate at and after either such times (and all costs and expenses, including but not limited to attorneys' fees, incurred in connection therewith). Any payment (not including any such costs and expenses) so recovered by the Certificate Registrar shall be paid and delivered to the last preceding Holder of such Residual Certificate. If any purported transferee shall become a registered Holder of a Residual Certificate in violation of the provisions of this Section 3.03(f), then upon receipt of written notice to the Trustee that the registration of transfer of such Residual Certificate was not in fact permitted by this Section 3.03(f), the last preceding Permitted Transferee shall be restored to all rights as Holder thereof retroactive to the date of such registration of transfer of such Residual Certificate. The Depositor, the Certificate Registrar and the Trustee shall be under no liability to any Person for any registration of transfer of a Residual Certificate that is in fact not permitted by this Section 3.03(f), or for the Paying Agent making any payment due on such Certificate to the registered Holder thereof or for taking any other action with respect to such Holder under the provisions of this Agreement so long as the transfer was registered upon receipt of the affidavit described in the preceding paragraph of this Section 3.03(f). 52 (g) Each Holder or Certificate Owner of a Restricted Certificate, ERISA-Restricted Certificate or Residual Certificate, or an interest therein, by such Holder's or Owner's acceptance thereof, shall be deemed for all purposes to have consented to the provisions of this section. Section 3.04 Cancellation of Certificates. Any Certificate surrendered for registration of transfer or exchange shall be cancelled and retained in accordance with normal retention policies with respect to cancelled certificates maintained by the Trustee or the Certificate Registrar. Section 3.05 Replacement of Certificates. If (i) any Certificate is mutilated and is surrendered to the Trustee or the Certificate Registrar or (ii) the Trustee or the Certificate Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Certificate, and there is delivered to the Trustee and the Certificate Registrar such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Depositor, the Trustee or the Certificate Registrar that such destroyed, lost or stolen Certificate has been acquired by a protected purchaser, the Trustee shall execute and the Authenticating Agent shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like tenor and Certificate Principal Amount. Upon the issuance of any new Certificate under this Section 3.05, the Trustee, the Depositor or the Certificate Registrar may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee, the Depositor or the Certificate Registrar) connected therewith. Any replacement Certificate issued pursuant to this Section 3.05 shall constitute complete and indefeasible evidence of ownership in the applicable Trust Fund, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. If after the delivery of such new Certificate, a protected purchaser of the original Certificate in lieu of which such new Certificate was issued presents for payment such original Certificate, the Depositor, the Certificate Registrar and the Trustee or any agent shall be entitled to recover such new Certificate from the Person to whom it was delivered or any Person taking therefrom, except a protected purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expenses incurred by the Depositor, the Certificate Registrar, the Trustee or any agent in connection therewith. Section 3.06 Persons Deemed Owners. Subject to the provisions of Section 3.09 with respect to Book-Entry Certificates, the Depositor, the Master Servicer, the Trustee, the Certificate Registrar, the Paying Agent and any agent of any of them shall treat the Person in whose name any Certificate is registered upon the books of the Certificate Registrar as the owner of such Certificate for the purpose of receiving distributions pursuant to Sections 5.01 and 5.02 and for all other purposes whatsoever, and neither the Depositor, the Master Servicer, the Trustee, the Certificate Registrar, the Paying Agent nor any agent of any of them shall be affected by notice to the contrary. 53 Section 3.07 Temporary Certificates. (a) Pending the preparation of definitive Certificates, upon the order of the Depositor, the Trustee shall execute and the Authenticating Agent shall authenticate and deliver temporary Certificates that are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Certificates in lieu of which they are issued and with such variations as the authorized officers executing such Certificates may determine, as evidenced by their execution of such Certificates. (b) If temporary Certificates are issued, the Depositor will cause definitive Certificates to be prepared without unreasonable delay. After the preparation of definitive Certificates, the temporary Certificates shall be exchangeable for definitive Certificates upon surrender of the temporary Certificates at the office or agency of the Certificate Registrar without charge to the Holder. Upon surrender for cancellation of any one or more temporary Certificates, the Trustee shall execute and the Authenticating Agent shall authenticate and deliver in exchange therefor a like aggregate Certificate Principal Amount of definitive Certificates of the same Class in the authorized denominations. Until so exchanged, the temporary Certificates shall in all respects be entitled to the same benefits under this Agreement as definitive Certificates of the same Class. Section 3.08 Appointment of Paying Agent. The Trustee may appoint a Paying Agent (which may be the Trustee) for the purpose of making distributions to Certificateholders hereunder. The Trustee hereby appoints the Securities Administrator as the initial Paying Agent. The Trustee shall cause any Paying Agent, other than the Securities Administrator, to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee that such Paying Agent will hold all sums held by it for the payment to Certificateholders in an Eligible Account (which shall be the Distribution Account) in trust for the benefit of the Certificateholders entitled thereto until such sums shall be paid to the Certificateholders. All funds remitted by the Trustee to any such Paying Agent for the purpose of making distributions shall be paid to Certificateholders on each Distribution Date and any amounts not so paid shall be returned on such Distribution Date to the Trustee. If the Paying Agent is not the Trustee, the Trustee shall cause to be remitted to the Paying Agent on or before the Business Day prior to each Distribution Date, by wire transfer in immediately available funds, the funds to be distributed on such Distribution Date. Any Paying Agent shall be either a bank or trust company or otherwise authorized under law to exercise corporate trust powers. Section 3.09 Book-Entry Certificates. (a) Each Class of Book-Entry Certificates, upon original issuance, shall be issued in the form of one or more typewritten Certificates representing the Book-Entry Certificates. The Book-Entry Certificates shall initially be registered on the Certificate Register in the name of the nominee of the Clearing Agency, and no Certificate Owner will receive a definitive certificate representing such Certificate Owner's interest in the Book-Entry Certificates, except as provided in Section 3.09(c). Unless Definitive Certificates have been issued to Certificate Owners of Book-Entry Certificates pursuant to Section 3.09(c): 54 (i) the provisions of this Section 3.09 shall be in full force and effect; (ii) the Certificate Registrar, the Paying Agent and the Trustee shall deal with the Clearing Agency for all purposes (including the making of distributions on the Book-Entry Certificates) as the authorized representatives of the Certificate Owners and the Clearing Agency and shall be responsible for crediting the amount of such distributions to the accounts of such Persons entitled thereto, in accordance with the Clearing Agency's normal procedures; (iii) to the extent that the provisions of this Section 3.09 conflict with any other provisions of this Agreement, the provisions of this Section 3.09 shall control; and (iv) the rights of Certificate Owners shall be exercised only through the Clearing Agency and the Clearing Agency Participants and shall be limited to those established by law and agreements between such Certificate Owners and the Clearing Agency and/or the Clearing Agency Participants. Unless and until Definitive Certificates are issued pursuant to Section 3.09(c), the initial Clearing Agency will make book-entry transfers among the Clearing Agency Participants and receive and transmit distributions of principal of and interest on the Book-Entry Certificates to such Clearing Agency Participants. (b) Whenever notice or other communication to the Certificateholders is required under this Agreement, unless and until Definitive Certificates shall have been issued to Certificate Owners pursuant to Section 3.09(c), the Securities Administrator shall give all such notices and communications specified herein to be given to Holders of the Book-Entry Certificates to the Clearing Agency. (c) If (i) (A) the Clearing Agency or the Depositor advises the Paying Agent in writing that the Clearing Agency is no longer willing or able to discharge properly its responsibilities with respect to the Book-Entry Certificates, and (B) the Depositor is unable to locate a qualified successor satisfactory to the Depositor and the Paying Agent, (ii) the Depositor, at its option, advises the Paying Agent in writing that it elects to terminate the book-entry system through the Clearing Agency or (iii) after the occurrence of an Event of Default, Certificate Owners representing beneficial interests aggregating not less than 50% of the Class Principal Amount of a Class of Book-Entry Certificates advise the Paying Agent and the Clearing Agency through the Clearing Agency Participants in writing that the continuation of a book-entry system through the Clearing Agency is no longer in the best interests of the Certificate Owners of a Class of Book-Entry Certificates, the Certificate Registrar shall notify the Clearing Agency to effect notification to all Certificate Owners, through the Clearing Agency, of the occurrence of any such event and of the availability of Definitive Certificates to Certificate Owners requesting the same. Upon surrender to the Certificate Registrar of the Book-Entry Certificates by the Clearing Agency, accompanied by registration instructions from the Clearing Agency for registration, the Certificate Registrar shall issue the Definitive Certificates. Neither the Depositor, the Certificate Registrar nor the Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Upon the issuance of Definitive Certificates all references herein to obligations imposed upon or to be performed by the Clearing Agency shall be deemed to be imposed upon and performed by the Certificate 55 Registrar, to the extent applicable, with respect to such Definitive Certificates and the Certificate Registrar shall recognize the holders of the Definitive Certificates as Certificateholders hereunder. Notwithstanding the foregoing, the Certificate Registrar, upon the instruction of the Depositor, shall have the right to issue Definitive Certificates on the Closing Date in connection with credit enhancement programs. ARTICLE IV ADMINISTRATION OF THE TRUST FUND Section 4.01 Custodial Accounts; Distribution Account. (a) On or prior to the Closing Date, the Master Servicer shall have caused the Servicers to establish and maintain one or more Custodial Accounts, as provided in the related Servicing Agreements, into which all Scheduled Payments and unscheduled payments with respect to the Mortgage Loans, net of any deductions or reimbursements permitted under the related Servicing Agreement, shall be deposited. On each Distribution Account Deposit Date, the Servicers shall remit to the Securities Administrator for deposit into the Distribution Account, all amounts so required to be deposited into such account in accordance with the terms of the related Servicing Agreement. (b) The Securities Administrator, as Paying Agent for the Trustee, shall establish and maintain an Eligible Account entitled "Distribution Account of HSBC Bank, USA, as Trustee for the benefit of Sequoia Mortgage Trust 2003-2 Holders of Mortgage Pass-Through Certificates." The Securities Administrator shall, promptly upon receipt from the Servicers on each Distribution Account Deposit Date, deposit into the Distribution Account and retain on deposit until the related Distribution Date the following amounts: (i) the aggregate of collections with respect to the Mortgage Loans remitted by the Servicers from the related Custodial Accounts in accordance with the Servicing Agreements; (ii) any amounts required to be deposited by the Master Servicer with respect to the Mortgage Loans for the related Due Period pursuant to this Agreement, including the amount of any Advances or Compensation Interest Payments with respect to the Mortgage Loans not paid by the Servicers; and (iii) any other amounts so required to be deposited in the Distribution Account in the related Due Period pursuant to this Agreement. (c) In the event the Master Servicer or a Servicer has remitted in error to the Distribution Account any amount not required to be remitted in accordance with the definition of Interest Remittance Amount or Principal Remittance Amount, it may at any time direct the Securities Administrator to withdraw such amount from the Distribution Account for repayment to the Master Servicer or Servicer, as applicable, by delivery of an Officer's Certificate to the Securities Administrator and the Trustee which describes the amount deposited in error. 56 (d) On each Distribution Date and Redemption Date, the Securities Administrator, as Paying Agent, shall make distributions to the Certificateholders and any other parties entitled thereto in the amounts and priorities set forth in Section 5.02. The Securities Administrator may from time to time withdraw from the Distribution Account and pay the Master Servicer, the Trustee, the Securities Administrator or any Servicer any amounts permitted to be paid or reimbursed to such Person from funds in the Distribution Account pursuant to the clauses (A) through (D) of the definition of Interest Remittance Amount. (e) Funds in the Distribution Account may be invested in Permitted Investments selected by and at the written direction of the Securities Administrator, which shall mature not later than one Business Day prior to the Distribution Date (except that if such Permitted Investment is an obligation of the Securities Administrator, then such Permitted Investment shall mature not later than such applicable Distribution Date) and any such Permitted Investment shall not be sold or disposed of prior to its maturity. All such Permitted Investments shall be made in the name of the Trustee (in its capacity as such) or its nominee. All income and gain realized from any Permitted Investment shall be for the benefit of the Securities Administrator, as additional compensation for its duties hereunder, and shall be subject to its withdrawal or order from time to time, and shall not be part of the Trust Fund. The amount of any losses incurred in respect of any such investments shall be deposited in such Distribution Account by the Securities Administrator out of its own funds, without any right of reimbursement therefor, immediately as realized. Section 4.02 The Pre-Funding Accounts (a) The Securities Administrator, as Paying Agent for the Trustee, shall establish and maintain two Eligible Accounts, each to be held in trust for the benefit of Certificateholders, the first such Eligible Account entitled "Pool 1 Pre-Funding Account of HSBC Bank, USA, as Trustee, for the benefit of Sequoia Mortgage Trust 2003-2 Holders of Mortgage Pass-Through Certificates" and the second entitled "Pool 2 Pre-Funding Account of HSBC Bank, USA, as Trustee, for the benefit of Sequoia Mortgage Trust 2003-2 Holders of Mortgage Pass-Through Certificates." The Pooling 1 Pre-Funding Account shall be comprised of two Sub-accounts, the first entitled the "1M Sub-account" and the second entitled the "6M Sub-account." (b) On the Closing Date, the Depositor will cause to be deposited to the Pool 1 Pre-Funding Account the Original Pre-Funded Amount relating to Pool 1 and to the Pool 2 Pre-Funding Account the Original Pre-Funded Amount relating to Pool 2. The Original Pre-Funded Amount relating to Pool 1 shall be further allocated between the 1M Sub-account and the 6M Sub-account as follows: $22,572,502.58 to the 1M Sub-account; and $56,964,309.58 to the 6M Sub-account. (c) Amounts on deposit in the 1M Sub-account (exclusive of investment earnings thereon) shall solely be applied to acquire Subsequent Mortgage Loans for inclusion in Pool 1 which constitute One-Month LIBOR Loans. Amounts on deposit in the 6M Sub-account (exclusive of investment earnings thereon) shall solely be applied to acquire Subsequent Mortgage Loans for inclusion in Pool 1 which constitute Six-Month LIBOR Loans. Amounts on deposit in the Pool 2 Pre-Funding Account (exclusive of investment earnings thereon) shall solely be applied to acquire Subsequent Mortgage Loans for inclusion in Pool 2. Funds on 57 deposit in either Pre-Funding Account (or Sub-account) may not be commingled with funds on deposit in the other Pre-Funding Account (or Sub-account). (d) On any Subsequent Transfer Date, the Depositor shall instruct the Securities Administrator, in writing, to withdraw funds from the applicable Pre-Funding Account (specifying the applicable Sub-account in the case of Pool 1) in an amount equal to the Transfer Price for the Subsequent Mortgage Loans to be acquired on such Subsequent Transfer Date, and to pay such amount to the order of the Depositor. In no event shall the Securities Administrator withdraw from the related Pre-Funding Account an amount in excess of the Original Pre-Funded Amount (or portion thereof) deposited to such Account (or Sub-account thereof) on the Closing Date. (e) During the Pre-Funding Period, amounts on deposit in the Pre-Funding Accounts may be invested in Permitted Investments by the Securities Administrator at the direction of the Depositor, or in absence of direction from the Depositor, in money market funds described in paragraph (ix) of the definition of Permitted Investments in Article I. All such Permitted Investments shall be made in the name of the Trustee (in it capacity as such) or its nominee. Any investment earnings on such Permitted Investments held in the Pre-Funding Accounts shall be immediately transferred to the Distribution Account and constitute part of the Interest Remittance Amount for distribution to the related Certificateholders on the next succeeding Distribution Date. (f) On the Distribution Date immediately following the close of the Pre-Funding Period, the Securities Administrator, as Paying Agent, shall transfer any remaining Pool 1 Pre-Funded Amount or Pool 2 Pre-Funded Amount on deposit in the related Pre-Funding Account (or Sub-account thereof) to the Distribution Account for distribution to the Related Certificate Group as principal on such Distribution Date in accordance with the priorities set forth in Section 5.02 and terminate such Account. (g) The Pre-Funding Accounts shall not be an asset of any REMIC created under this Agreement. Section 4.03 The Capitalized Interest Account. (a) The Securities Administrator, as Paying Agent, for the Trustee, shall establish and maintain an Eligible Account, to be held in trust for the benefit of Certificateholders, entitled "Capitalized Interest Account of HSBC Bank, USA, as Trustee, for the benefit of Sequoia Mortgage Trust 2003-2 Holders of Mortgage Pass-Through Certificates." On the Closing Date, the Depositor shall cause to be deposited in the Capitalized Interest Account the Original Capitalized Interest Amount. On each Distribution Date, funds in the Capitalized Interest Account equal to the Capitalized Interest Requirement for such Distribution Date shall be withdrawn by the Securities Administrator from the Capitalized Interest Account and deposited into the Distribution Account as required by Section 5.02(a). (b) During the Pre-Funding Period, amounts on deposit in the Capitalized Interest Account may, at the direction of the Depositor, be invested in Permitted Investments, and in the absence of such instructions shall be invested in money market funds as described in paragraph 58 (ix) of the definition of Permitted Investments in Article I. All investment earnings on such Permitted Investments in the Capitalized Interest Account shall be for the benefit of the Depositor. At the close of the Pre-Funding period, all amounts, if any, remaining in the Capitalized Investment Account shall be released to the Depositor and the Securities Administrator shall terminate such Account. (c) The Capitalized Interest Account shall not be the asset of any REMIC created under this Agreement. Section 4.04 Reports to Trustee and Certificateholders. On each Distribution Date, the Securities Administrator shall have prepared and shall make available to the Trustee and each Certificateholder a written report setting forth the following information (on the basis of Mortgage Loan level information obtained from the Master Servicer and the Servicers). (a) the amount of the distributions, separately identified, with respect to each Class of Certificates; (b) the amount of the distributions set forth in the clause (a) allocable to principal, separately identifying the aggregate amount of any Net Interest Shortfall, Monthly Excess Cashflow, Extra Principal Distribution Amount, Principal Prepayments or other unscheduled recoveries of principal included in that amount; (c) the amount of the distributions set forth in the clause (a) allocable to interest and how it was calculated; (d) the amount of any Carryforward Interest and Net WAC Shortfall and the related accrued interest thereon, with respect to each Class of Certificates; (e) the Class Principal Amount of each Class of Certificates after giving effect to the distribution of principal on that Distribution Date; (f) the amount of any Deferred Amounts and any Applied Loss Amounts, separately identified, with respect to each Class of Certificates; (g) The M-1 Target Amount, the M-2 Target Amount, the Senior Target Amount, the Overcollateralization Amount, the Aggregate Overcollateralization Release Amount and the Overcollateralization Deficiency for such Distribution Date; (h) the Aggregate Stated Principal Balance of the Mortgage Loans in each Mortgage Pool and the applicable Net WAC of the Mortgage Loans in each Mortgage Pool at the end of the related Prepayment Period; (i) the Stated Principal Balance of the Mortgage Loans in each Mortgage Pool whose Mortgage Rates adjust on the basis of the One-Month LIBOR index and the Six-Month LIBOR index at the end of the related Prepayment Period; 59 (j) in the aggregate and with respect to each Mortgage Pool, the amount of the Master Servicing Fee and the Servicing Fee paid to or retained by the Master Servicer and by each Servicer, respectively; (k) in the aggregate and with respect to each Mortgage Pool, the amount of Advances for the related Due Period; (l) in the aggregate and with respect to each Mortgage Pool, the number and Stated Principal Balance of the Mortgage Loans that were (A) Delinquent (exclusive of Mortgage Loans in foreclosure) (1) 30 to 59 days, (2) 60 to 89 days and (3) 90 or more days, (B) in foreclosure and Delinquent (1) 30 to 59 days, (2) 60 to 89 days and (3) 90 or more days and (C) in bankruptcy as of the close of business on the last day of the calendar month preceding that Distribution Date; (m) in the aggregate and with respect to each Mortgage Pool, the aggregate principal balance of the Subsequent Mortgage Loans acquired during the preceding calendar month and on a cumulative basis since the Closing Date; (n) in the aggregate and with respect to each Mortgage Pool, for any Mortgage Loan as to which the related Mortgaged Property was an REO Property during the preceding calendar month, the principal balance of that Mortgage Loan as of the close of business on the last day of the related Due Period; (o) in the aggregate and with respect to each Mortgage Pool, the aggregate number and principal balance of any REO Properties as of the close of business on the last day of the preceding Due Period; (p) in the aggregate and with respect to each Mortgage Pool, the amount of Realized Losses incurred during the preceding calendar month; (q) in the aggregate and with respect to each Mortgage Pool, the cumulative amount of Realized Losses incurred since the Closing Date; (r) the Applied Loss Amount, if any, allocated to each Class of Subordinate Certificates on that Distribution Date; (s) the occurrence of a Trigger Event; (t) the occurrence of the Stepdown Date; (u) the Certificate Interest Rate for each Class of Certificates for that Distribution Date; (v) the amount, if any, remaining on deposit in each Pre-Funding Account immediately prior to that Distribution Date; and (w) the amount, if any, on deposit in the Capitalized Interest Account for that Distribution Date. 60 The Securities Administrator shall make such reports available each month via the Master Servicer's website at http://www.ctslink.com. Assistance in using the website may be obtained by calling the Master Servicer's customer service desk at (301) 815-6600. Certificateholders and other parties that are unable to use the website are entitled to have a paper copy mailed to them via first class mail by contacting the Securities Administrator and indicating such. In preparing or furnishing the foregoing information to the Trustee, the Securities Administrator shall be entitled to rely conclusively on the accuracy of the information or data regarding the Mortgage Loans and the related REO Properties that has been provided to the Securities Administrator by the Master Servicer and the Servicers, and the Securities Administrator shall not be obligated to verify, recompute, reconcile or recalculate any such information or data. Upon the reasonable advance written request of any Certificateholder that is a savings and loan, bank or insurance company, which request, if received by the Trustee or any agent thereof, shall be promptly forwarded to the Securities Administrator, the Securities Administrator shall provide, or cause to be provided, (or, to the extent that such information or documentation is not required to be provided by a Servicer under the applicable Servicing Agreement, shall use reasonable efforts to obtain such information and documentation from such Servicer, and provide) to such Certificateholders such reports and access to information and documentation regarding the Mortgage Loans as such Certificateholders may reasonably deem necessary to comply with applicable regulations of the Office of Thrift Supervision or its successor or other regulatory authorities with respect to an investment in the Certificates; provided, however, that the Securities Administrator shall be entitled to be reimbursed by such Certificateholders for the Securities Administrator's actual expenses incurred in providing such reports and access. ARTICLE V DISTRIBUTIONS TO HOLDERS OF CERTIFICATES Section 5.01 Distributions Generally. (a) Subject to Section 7.01 respecting the final distribution on the Certificates, on each Distribution Date the Trustee or the Paying Agent shall make distributions in accordance with this Article V. Such distributions shall be made by check mailed to each Certificateholder's address as it appears on the Certificate Register of the Certificate Registrar or, upon written request made to the Securities Administrator at least five Business Days prior to the related Record Date by any Certificateholder owning an aggregate initial Certificate Principal Amount of at least $1,000,000, or in the case of a Class of Interest-Only Certificates or Residual Certificate, a Percentage Interest of not less than 100%, by wire transfer in immediately available funds to an account specified in the request and at the expense of such Certificateholder; provided, however, that the final distribution in respect of any Certificate shall be made only upon presentation and surrender of such Certificate at the Certificate Registrar's Corporate Trust Office; provided, further, that the foregoing provisions shall not apply to any Class of Certificates as long as such Certificate remains a Book-Entry Certificate in which case all payments made shall be made through the Clearing Agency and its Clearing Agency Participants. Wire transfers will be made at the expense of the Holder requesting such wire 61 transfer by deducting a wire transfer fee from the related distribution. Notwithstanding such final payment of principal of any of the Certificates, each Residual Certificate will remain outstanding until the termination of each REMIC and the payment in full of all other amounts due with respect to the Residual Certificates and at such time such final payment in retirement of any Residual Certificate will be made only upon presentation and surrender of such Certificate at the Certificate Registrar's Corporate Trust Office. If any payment required to be made on the Certificates is to be made on a day that is not a Business Day, then such payment will be made on the next succeeding Business Day. (b) All distributions or allocations made with respect to Certificateholders within each Class on each Distribution Date shall be allocated among the outstanding Certificates in such Class equally in proportion to their respective initial Class Principal Amounts or initial Class Notional Amounts (or Percentage Interests). Section 5.02 Distributions from the Distribution Account. (a) On each Distribution Date, the Securities Administrator shall distribute the Interest Remittance Amount for each Mortgage Pool for such date in the following order of priority: (i) concurrently, to the Class A-1 Certificates, from the Interest Remittance Amount for Pool 1, Current Interest and any Carryforward Interest for such Class and for such Distribution Date and to the Class A-2 Certificates, from the Interest Remittance Amount for Pool 2, Current Interest and any Carryforward Interest for such Class and for such Distribution Date; (ii) to the payment of any remaining Carryforward Interest for the Senior Certificates of either Certificate Group, from the remaining Interest Remittance Amount not relating to such Certificates; (iii) to the Class M-1 Certificates, from the remaining Interest Remittance Amount for Pool 1 and Pool 2, Current Interest for such Class and for such Distribution Date; (iv) to the Class M-2 Certificates, from the remaining Interest Remittance Amount for Pool 1 and Pool 2, Current Interest for such Class and for such Distribution Date; and (v) for application as part of Monthly Excess Cashflow for such Distribution Date, as provided in subsection (c) of this Section, any Interest Remittance Amount for Pool 1 and Pool 2 remaining after application pursuant to clauses (i) through (iv) above. (b) On each Distribution Date, the Trustee shall distribute the Principal Distribution Amount with respect to each Mortgage Pool for such date as follows: (i) On each Distribution Date (a) prior to the Stepdown Date or (b) with respect to which a Trigger Event is in effect, the Principal Distribution Amount for each Mortgage Pool will be distributed in the following order of priority: 62 (A) concurrently, to the Class A-1 and Class A-2 Certificates, from the Principal Distribution Amount for the related Mortgage Pool, until the Class Principal Amount of each such Class has been reduced to zero; (B) if either Class of Senior Certificates of a Certificate Group has been retired, to the remaining Class of Senior Certificates, from the Principal Distribution Amount relating to such retired Class, until the Class Principal Amount of such remaining Class has been reduced to zero; (C) to the Class M-1 Certificates, from the remaining Principal Distribution Amount for both Mortgage Pools, until the Class Principal Amount of such Class has been reduced to zero; (D) to the Class M-2 Certificates, from the remaining Principal Distribution Amount for both Mortgage Pools, until the Class Principal Amount of such Class has been reduced to zero; and (E) for application as part of Monthly Excess Cashflow for such Distribution Date, as provided in subsection (c) of this Section, any Principal Distribution Amounts for Pool 1 and Pool 2 remaining after application pursuant to clauses (A) through (D) above. (ii) On each Distribution Date (a) on or after the Stepdown Date and (b) with respect to which a Trigger Event is not in effect, the Principal Distribution Amount for each Mortgage Pool will be distributed in the following order of priority: (A) so long as the Class M-1 and Class M-2 Certificates are outstanding, to the Class A-1 and Class A-2 Certificates, an amount equal to the lesser of (x) the Principal Distribution Amount for the related Mortgage Pool for such Distribution Date and (y) the Senior Principal Distribution Amount for the related Mortgage Pool for such Distribution Date, until the Class Principal Amount of such Class has been reduced to zero; otherwise to the Class A-1 and the Class A-2 Certificates, the related Principal Distribution Amount for such Distribution Date, until the Class Principal Amount of such Class has been reduced to zero; (B) to the extent that the Senior Principal Distribution Amount for a Class of Senior Certificates has not been fully distributed on such Distribution Date, to such Class from the remaining Principal Distribution Amount not relating to such Class, in an amount up to such undistributed Senior Principal Distribution Amount; (C) if either Class of Senior Certificates of a Certificate Group has been retired, to the remaining Class of Senior Certificates, from the Principal Distribution Amount relating to such retired Class, until the Class Principal Amount of such remaining Class has been reduced to zero. 63 (D) to the Class M-1 Certificates, an amount equal to the lesser of (x) the excess of (a) the Principal Distribution Amounts for both Mortgage Pools for such Distribution Date over (b) the amount distributed to the Senior Certificates on such Distribution Date pursuant to clause (A) above and (y) the M-1 Principal Distribution Amount for such Distribution Date, until the Class Principal Amount of such Class has been reduced to zero; (E) to the Class M-2 Certificates, an amount equal to the lesser of (x) the excess of (a) the Principal Distribution Amounts for both Mortgage Pools for such Distribution Date over (b) the amount distributed to the Senior Certificates and the Class M-1 Certificates on such Distribution Date pursuant to clauses (A) and (B) above, respectively, and (y) the M-2 Principal Distribution Amount for such Distribution Date, until the Class Principal Amount of such Class has been reduced to zero; and (F) for application as part of Monthly Excess Cashflow for such Distribution Date, as provided in subsection (c) of this Section, any Principal Distribution Amount for Pool 1 and Pool 2 remaining after application pursuant to clauses (A) through (E) above. (c) On each Distribution Date, the Securities Administrator shall distribute the Monthly Excess Cashflow for such date in the following order of priority: (i) to the Class A-1, Class A-2, Class M-1 and Class M-2 Certificates, in an amount equal to the Extra Principal Distribution Amount, if any, for such date, distributable to such Certificates as part of the related Principal Distribution Amount, in accordance with Section 5.02(b); (ii) to payment of unpaid Carryforward Interest and Deferred Amounts on the Class A-1, Class A-2, Class M-1 and Class M-2 Certificates in the following order of priority: (A) concurrently, to the Class A-1 and Class A-2 Certificates, any Carryforward Interest for each such Class and such Distribution Date; provided that any shortfalls will be allocated proportionately based on Carryforward Interest otherwise distributable on each such Class on such Distribution Date; (B) to the Class M-1 Certificates, any (i) Carryforward Interest and (ii) Deferred Amount, in that order, for such Class and for such Distribution Date; and (C) to the Class M-2 Certificates, any (i) Carryforward Interest and (ii) Deferred Amount, in that order, for such Class and for such Distribution Date. (iii) to the Reserve Fund, the amount of the Required Reserve Fund Deposit for such Distribution Date, and then from the Reserve Fund, to the extent of amounts on deposit therein, in the following order of priority: 64 (A) concurrently, to the Class A-1 and Class A-2 Certificates, any applicable Net WAC Shortfall for each such Class and such Distribution Date; provided that amounts distributed from the Reserve Fund will be allocated proportionately between the Class A-1 and Class A-2 Certificates based on the relative amounts of Net WAC Shortfalls for such Distribution Date for each such Class; (B) to the Class M-1 Certificates, any Net WAC Shortfalls for such Distribution Date; (C) to the Class M-2 Certificates, any Net WAC Shortfalls for such Distribution Date; and (D) to the Class X Certificate to the extent amounts on deposit in the Reserve Fund after making distributions required under priorities (A) through (C) above exceed $10,000 and, on the Distribution Date on which the Class Principal Amount of each Class of LIBOR Certificates has been reduced to zero, the entire amount then on deposit in the Reserve Fund shall be distributed in respect of the Class X Certificate; (iv) concurrently, to the Master Servicer and the Trustee, any amounts reimbursable pursuant to Section 4.01(d) and not previously reimbursed to such party; (v) to the Class X Certificate, the Class X Distributable Amount for such Distribution Date, to the extent not otherwise deposited in the Reserve Fund pursuant to Section 5.02(c)(iii) hereof; and (vi) to the Class R and Class LT-R Certificate, any amount remaining on such date after application pursuant to clauses (i) through (v) above. Section 5.03 Allocation of Losses. (a) On or prior to each Distribution Date, the Master Servicer shall aggregate the information provided by each Servicer with respect to the aggregate amount of Realized Losses experienced on the Mortgage Loans for the related Distribution Date. (b) On each Distribution Date, the Class Principal Amounts of the Class M-1 and Class M-2 Certificates will be reduced by the amount of any Applied Loss Amount for such date, in the following order of priority: first, to the Class M-2 Certificates, until the Class Principal Amount thereof has been reduced to zero; and second, to the Class M-1 Certificates, until the Class Principal Amount thereof has been reduced to zero. 65 Section 5.04 Advances by Master Servicer. If any Servicer fails to remit any Advance required to be made under the applicable Servicing Agreement, the Master Servicer shall itself make, or shall cause the successor Servicer to make, such Advance. If the Master Servicer determines that an Advance is required, it shall on the Business Day preceding the related Distribution Date immediately following such Determination Date remit to the Securities Administrator from its own funds (or funds advanced by the applicable Servicer) for deposit in the Account immediately available funds in an amount equal to such Advance. The Master Servicer and each Servicer shall be entitled to be reimbursed for all Advances made by it. Notwithstanding anything to the contrary herein, in the event the Master Servicer determines in its reasonable judgment that an Advance is non-recoverable, the Master Servicer shall be under no obligation to make such Advance. If the Master Servicer determines that an Advance is non-recoverable, it shall, on or prior to the related Distribution Date, deliver an Officer's Certificate to the Trustee to such effect. Section 5.05 Compensating Interest Payments. The amount of the aggregate Master Servicing Fees payable to the Master Servicer in respect of any Distribution Date shall be reduced (but not below zero) by the amount of any Compensating Interest Payment for such Distribution Date, but only to the extent that Prepayment Interest Shortfalls relating to such Distribution Date are required to be paid but not actually paid by the Servicers. Such amount shall not be treated as an Advance and shall not be reimbursable to the Master Servicer. Section 5.06 Reserve Fund. (a) On the Closing Date, the Securities Administrator shall establish and maintain in the Trustee's name, in trust for the benefit of the holders of the LIBOR Certificates and the Class X Certificate, a Reserve Fund, into which the Depositor shall deposit $10,000.00. The Reserve Fund shall be an Eligible Account, and funds on deposit therein shall be held separate and apart from, and shall not be commingled with, any other moneys, including, without limitation, other moneys of the Trustee held pursuant to this Agreement. The Reserve Fund shall not be an asset of any REMIC established hereby. (b) Funds in the Reserve Fund shall be invested in Permitted Investments. Any earnings on amounts in the Reserve Fund shall be for the benefit of the Class X Certificateholder. The Class X Certificate shall evidence ownership of the Reserve Fund for federal income tax purposes and the Holder thereof shall direct the Securities Administrator, in writing, as to investment of amounts on deposit therein. The Class X Certificateholder shall be liable for any losses incurred on such investments. In the absence of written instructions from the Class X Certificateholder as to investment of funds on deposit in the Reserve Fund, such funds shall be invested in money market funds as described in paragraph (ix) of the definition of Permitted Investments in Article I. For all Federal income tax purposes, amounts transferred by the Upper-Tier REMIC to the Reserve Fund shall be treated as amounts distributed by the Upper-Tier REMIC to the Class X Certificateholder. 66 (c) Upon termination of the Trust Fund any amounts remaining in the Reserve Fund shall be distributed to the Class X Certificateholder. ARTICLE VI CONCERNING THE TRUSTEE AND THE SECURITIES ADMINISTRATOR; EVENTS OF DEFAULT Section 6.01 Duties of Trustee and the Securities Administrator. (a) The Trustee, except during the continuance of an Event of Default and the Securities Administrator undertakes to perform such duties and only such duties as are specifically set forth in this Agreement. Any permissive right of the Trustee or the Securities Administrator provided for in this Agreement shall not be construed as a duty of the Trustee or the Securities Administrator. If an Event of Default has occurred and has not otherwise been cured or waived, the Trustee or the Securities Administrator shall exercise such of the rights and powers vested in it by this Agreement and use the same degree of care and skill in their exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs, unless the Trustee is acting as Master Servicer, in which case it shall use the same degree of care and skill as the Master Servicer hereunder. (b) Each of the Trustee and the Securities Administrator, upon receipt of all resolutions, certificates, statements, opinions, reports, documents, orders or other instruments furnished to the Trustee or the Securities Administrator which are specifically required to be furnished pursuant to any provision of this Agreement, shall examine them to determine whether they are in the form required by this Agreement; provided, however, that neither the Trustee nor the Securities Administrator shall be responsible for the accuracy or content of any such resolution, certificate, statement, opinion, report, document, order or other instrument furnished by the Master Servicer or any Servicer to the Trustee or the Securities Administrator pursuant to this Agreement, and shall not be required to recalculate or verify any numerical information furnished to the Trustee or the Securities Administrator pursuant to this Agreement. Subject to the immediately preceding sentence, if any such resolution, certificate, statement, opinion, report, document, order or other instrument is found not to conform to the form required by this Agreement in a material manner the Trustee shall take such action as it deems appropriate to cause the instrument to be corrected, and if the instrument is not corrected to the Trustee's satisfaction, the Trustee will provide notice thereof to the Certificateholders and will, at the expense of the Trust Fund, which expense shall be reasonable given the scope and nature of the required action, take such further action as directed by the Certificateholders. (c) Neither the Trustee nor the Securities Administrator shall have any liability arising out of or in connection with this Agreement, except for its negligence or willful misconduct. Notwithstanding anything in this Agreement to the contrary, neither the Trustee nor the Securities Administrator shall be liable for special, indirect or consequential losses or damages of any kind whatsoever (including, but not limited to, lost profits). No provision of this Agreement shall be construed to relieve the Trustee or the Securities Administrator from liability for its own 67 negligent action, its own negligent failure to act or its own willful misconduct; provided, however, that: (i) Neither the Trustee nor the Securities Administrator shall be personally liable with respect to any action taken, suffered or omitted to be taken by it in good faith in accordance with the direction of Holders of Certificates as provided in Section 6.18 hereof; (ii) For all purposes under this Agreement, the Trustee shall not be deemed to have notice of any Event of Default (other than resulting from a failure by the Master Servicer (i) to remit funds (or to make Advances) or (ii) to furnish information to the Trustee when required to do so) unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Holders of the Certificates and this Agreement; (iii) For all purposes under this Agreement, the Securities Administrator shall not be deemed to have notice of any Event of Default (other than resulting from a failure by the Master Servicer to furnish information to the Securities Administrator when required to do so) unless a Responsible Officer of the Securities Administrator has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Securities Administrator at the address provided in Section 11.07, and such notice references the Holders of the Certificates and this Agreement; (iv) No provision of this Agreement shall require the Trustee or the Securities Administrator to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it; and none of the provisions contained in this Agreement shall in any event require the Trustee or the Securities Administrator to perform, or be responsible for the manner of performance of, any of the obligations of the Master Servicer under this Agreement; (v) Neither the Trustee nor the Securities Administrator shall be responsible for any act or omission of the Master Servicer, the Depositor, the Seller or any Custodian. (d) The Trustee shall have no duty hereunder with respect to any complaint, claim, demand, notice or other document it may receive or which may be alleged to have been delivered to or served upon it by the parties as a consequence of the assignment of any Mortgage Loan hereunder; provided, however, that the Trustee shall promptly remit to the applicable Servicer upon receipt any such complaint, claim, demand, notice or other document (i) which is delivered to the Corporate Trust Office of the Trustee, (ii) of which a Responsible Officer has actual knowledge, and (iii) which contains information sufficient to permit the Trustee to make a determination that the real property to which such document relates is a Mortgaged Property. (e) Neither the Trustee nor the Securities Administrator shall be personally liable with respect to any action taken, suffered or omitted to be taken by it in good faith in accordance with 68 the direction of the Certificateholders of any Class holding Certificates which evidence, as to such Class, Percentage Interests aggregating not less than 25% as to the time, method and place of conducting any proceeding for any remedy available to the Trustee or the Securities Administrator or exercising any trust or power conferred upon the Trustee or the Securities Administrator, as applicable, under this Agreement. (f) Neither the Trustee nor the Securities Administrator shall be required to perform services under this Agreement, or to expend or risk its own funds or otherwise incur financial liability for the performance of any of its duties hereunder or the exercise of any of its rights or powers if there is reasonable ground for believing that the timely payment of its fees and expenses or the repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it, and none of the provisions contained in this Agreement shall in any event require the Trustee or the Securities Administrator, as applicable, to perform, or be responsible for the manner of performance of, any of the obligations of the Master Servicer or any Servicer under this Agreement or any Servicing Agreement except during such time, if any, as the Trustee shall be the successor to, and be vested with the rights, duties, powers and privileges of, the Master Servicer in accordance with the terms of this Agreement. (g) The Trustee shall not be held liable by reason of any insufficiency in the Distribution Account or the Reserve Fund resulting from any investment loss on any Permitted Investment included therein (except to the extent that the Trustee is the obligor and has defaulted thereon). (h) Except as otherwise provided herein, neither the Trustee nor the Securities Administrator shall have any duty (A) to see to any recording, filing, or depositing of this Agreement or any agreement referred to herein or any financing statement or continuation statement evidencing a security interest, or to see to the maintenance of any such recording or filing or depositing or to any rerecording, refiling or redepositing of any thereof, (B) to see to any insurance, (C) to see to the payment or discharge of any tax, assessment, or other governmental charge or any lien or encumbrance of any kind owing with respect to, assessed or levied against, any part of the Trust Fund other than from funds available in the Distribution Account, or (D) to confirm or verify the contents of any reports or certificates of the Master Servicer or any Servicer delivered to the Trustee or the Securities Administrator pursuant to this Agreement believed by the Trustee or the Securities Administrator, as applicable, to be genuine and to have been signed or presented by the proper party or parties. (i) Neither the Securities Administrator nor the Trustee shall be liable in its individual capacity for an error of judgment made in good faith by a Responsible Officer or other officers of the Trustee or the Securities Administrator, as applicable, unless it shall be proved that the Trustee or the Securities Administrator, as applicable, was negligent in ascertaining the pertinent facts. (j) Notwithstanding anything in this Agreement to the contrary, neither the Securities Administrator nor the Trustee shall be liable for special, indirect or consequential losses or damages of any kind whatsoever (including, but not limited to, lost profits), even if the Trustee or the Securities Administrator, as applicable, has been advised of the likelihood of such loss or damage and regardless of the form of action. 69 (k) Neither the Securities Administrator nor the Trustee shall be responsible for the acts or omissions of the other, it being understood that this Agreement shall not be construed to render them agents of one another. Section 6.02 Certain Matters Affecting the Trustee and the Securities Administrator. Except as otherwise provided in Section 6.01: (i) Each of the Trustee and the Securities Administrator may request, and may rely and shall be protected in acting or refraining from acting upon any resolution, Officer's Certificate, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (ii) Each of the Trustee and the Securities Administrator may consult with counsel and any advice of its counsel or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel; (iii) Neither the Trustee nor the Securities Administrator shall be personally liable for any action taken, suffered or omitted by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Agreement; (iv) Unless an Event of Default shall have occurred and be continuing, neither the Trustee nor the Securities Administrator shall be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond or other paper or document (provided the same appears regular on its face), unless requested in writing to do so by the Holders of at least a majority in Class Principal Amount (or Percentage Interest) of each Class of Certificates; provided, however, that, if the payment within a reasonable time to the Trustee or the Securities Administrator, as applicable, of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee or the Securities Administrator, as applicable, not reasonably assured to the Trustee or the Securities Administrator by the security afforded to it by the terms of this Agreement, the Trustee or the Securities Administrator, as applicable, may require reasonable indemnity against such expense or liability or payment of such estimated expenses from the Certificateholders as a condition to proceeding. The reasonable expense thereof shall be paid by the party requesting such investigation and if not reimbursed by the requesting party shall be reimbursed to the Trustee by the Trust Fund; (v) Each of the Trustee and the Securities Administrator may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, custodians or attorneys, which agents, custodians or attorneys shall have any and all of the rights, powers, duties and obligations of the Trustee and the Securities 70 Administrator conferred on them by such appointment, provided that each of the Trustee and the Securities Administrator shall continue to be responsible for its duties and obligations hereunder to the extent provided herein, and provided further that neither the Trustee nor the Securities Administrator shall be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by the Trustee or the Securities Administrator, as applicable; (vi) Neither the Trustee nor the Securities Administrator shall be under any obligation to exercise any of the trusts or powers vested in it by this Agreement or to institute, conduct or defend any litigation hereunder or in relation hereto, in each case at the request, order or direction of any of the Certificateholders pursuant to the provisions of this Agreement, unless such Certificateholders shall have offered to the Trustee or the Securities Administrator, as applicable, reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby; (vii) The right of the Trustee and the Securities Administrator to perform any discretionary act enumerated in this Agreement shall not be construed as a duty, and neither the Trustee nor the Securities Administrator shall be answerable for other than its negligence or willful misconduct in the performance of such act; and (viii) Neither the Trustee nor the Securities Administrator shall be required to give any bond or surety in respect of the execution of the Trust Fund created hereby or the powers granted hereunder. Section 6.03 Trustee and Securities Administrator Not Liable for Certificates. The Trustee and the Securities Administrator make no representations as to the validity or sufficiency of this Agreement or of the Certificates (other than the certificate of authentication on the Certificates) or of any Mortgage Loan, or related document save that the Trustee and the Securities Administrator represent that, assuming due execution and delivery by the other parties hereto, this Agreement has been duly authorized, executed and delivered by it and constitutes its valid and binding obligation, enforceable against it in accordance with its terms except that such enforceability may be subject to (A) applicable bankruptcy and insolvency laws and other similar laws affecting the enforcement of the rights of creditors generally, and (B) general principles of equity regardless of whether such enforcement is considered in a proceeding in equity or at law. The Trustee and the Securities Administrator shall not be accountable for the use or application by the Depositor of funds paid to the Depositor in consideration of the assignment of the Mortgage Loans to the Trust Fund by the Depositor or for the use or application of any funds deposited into the Distribution Account or any other fund or account maintained with respect to the Certificates. The Trustee and the Securities Administrator shall not be responsible for the legality or validity of this Agreement or the validity, priority, perfection or sufficiency of the security for the Certificates issued or intended to be issued hereunder. Except as otherwise provided herein, the Trustee and the Securities Administrator shall have no responsibility for filing any financing or continuation statement in any public office at any time or to otherwise perfect or maintain the perfection of any security interest or lien granted to it hereunder or to record this Agreement. 71 Section 6.04 Trustee and the Securities Administrator May Own Certificates. The Trustee and the Securities Administrator and any Affiliate or agent of either of them in its individual or any other capacity may become the owner or pledgee of Certificates and may transact banking and trust business with the other parties hereto and their Affiliates with the same rights it would have if it were not Trustee, Securities Administrator or such agent. Section 6.05 Eligibility Requirements for Trustee. The Trustee hereunder shall at all times be (i) an institution insured by the FDIC, (ii) a corporation or national banking association, organized and doing business under the laws of any State or the United States of America, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by federal or state authority and (iii) not an Affiliate of the Master Servicer or any Servicer. If such corporation or national banking association publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then, for the purposes of this Section, the combined capital and surplus of such corporation or national banking association shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with provisions of this Section, the Trustee shall resign immediately in the manner and with the effect specified in Section 6.06. Section 6.06 Resignation and Removal of Trustee and the Securities Administrator. (a) Each of the Trustee and the Securities Administrator may at any time resign and be discharged from the trust hereby created by giving written notice thereof to the Trustee or the Securities Administrator, as applicable, the Depositor and the Master Servicer. Upon receiving such notice of resignation, the Depositor will promptly appoint a successor trustee or a successor securities administrator, as applicable, by written instrument, one copy of which instrument shall be delivered to the resigning Trustee or resigning Securities Administrator, as applicable, one copy to the successor trustee or successor securities administrator, as applicable, and one copy to the Master Servicer. If no successor trustee or successor securities administrator shall have been so appointed and shall have accepted appointment within 30 days after the giving of such notice of resignation, the resigning Trustee or resigning Securities Administrator, as applicable, may petition any court of competent jurisdiction for the appointment of a successor trustee or successor securities administrator, as applicable. (b) If at any time (i) the Trustee shall cease to be eligible in accordance with the provisions of Section 6.05 and shall fail to resign after written request therefor by the Depositor, (ii) the Trustee or the Securities Administrator shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or the Securities Administrator of its property shall be appointed, or any public officer shall take charge or control of the Trustee or the Securities Administrator or of either of their property or affairs for the purpose of rehabilitation, conservation or liquidation, (iii) a tax is imposed or threatened with respect to the Trust Fund by any state in which the Trustee or the Trust Fund held by the Trustee is located, or (iv) the continued use of the Trustee or Securities Administrator would result in a downgrading of the rating by any Rating Agency of any Class of Certificates with a rating, then the Depositor 72 shall remove the Trustee or the Securities Administrator, as applicable, and the Depositor shall appoint a successor trustee or successor securities administrator, as applicable, acceptable to the Master Servicer by written instrument, one copy of which instrument shall be delivered to the Trustee or Securities Administrator so removed, one copy each to the successor trustee or successor securities Administrator, as applicable, and one copy to the Master Servicer. (c) The Holders of more than 50% of the Class Principal Amount (or Percentage Interest) of each Class of Certificates may at any time upon 30 days' written notice to the Trustee or the Securities Administrator, as applicable, and to the Depositor remove the Trustee or the Securities Administrator, as applicable, by such written instrument, signed by such Holders or their attorney-in-fact duly authorized, one copy of which instrument shall be delivered to the Depositor, one copy to the Trustee or Securities Administrator, as applicable and one copy to the Master Servicer; the Depositor shall thereupon appoint a successor trustee or successor securities administrator, as applicable, in accordance with this Section. (d) Any resignation or removal of the Trustee or the Securities Administrator, as applicable, and appointment of a successor trustee or successor securities administrator pursuant to any of the provisions of this Section shall become effective upon acceptance of appointment by the successor trustee or the successor securities administrator, as applicable, as provided in Section 6.07. Section 6.07 Successor Trustee and Successor Securities Administrator. (a) Any successor trustee or successor securities administrator appointed as provided in Section 6.06 shall execute, acknowledge and deliver to the Depositor and to its predecessor trustee or predecessor securities administrator, as applicable, an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor trustee or predecessor securities administrator, as applicable, shall become effective and such successor trustee or successor securities administrator, as applicable, without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as trustee or securities administrator, as applicable, herein. The predecessor trustee or predecessor securities administrator, as applicable, shall deliver to the successor trustee (or assign to the Trustee its interest under the Custody Agreement, to the extent permitted thereunder) or successor securities administrator, as applicable, all Trustee Mortgage Files and documents and statements related to each Trustee Mortgage File held by it hereunder, and shall duly assign, transfer, deliver and pay over to the successor trustee the entire Trust Fund, together with all necessary instruments of transfer and assignment or other documents properly executed necessary to effect such transfer and such of the records or copies thereof maintained by the predecessor trustee in the administration hereof as may be requested by the successor trustee and shall thereupon be discharged from all duties and responsibilities under this Agreement. In addition, the Depositor and the predecessor trustee or predecessor securities administrator, as applicable, shall execute and deliver such other instruments and do such other things as may reasonably be required to more fully and certainly vest and confirm in the successor trustee or successor securities administrator, as applicable, all such rights, powers, duties and obligations. 73 (b) No successor trustee shall accept appointment as provided in this Section unless at the time of such appointment such successor trustee shall be eligible under the provisions of Section 6.05. (c) Upon acceptance of appointment by a successor trustee or successor securities administrator, as applicable, as provided in this Section, the predecessor trustee or predecessor securities administrator, as applicable, shall mail notice of the succession of such trustee or securities administrator, as applicable, hereunder to all Holders of Certificates at their addresses as shown in the Certificate Register and to any Rating Agency. The expenses of such mailing shall be borne by the Master Servicer. Section 6.08 Merger or Consolidation of Trustee or the Securities Administrator. Any Person into which the Trustee or Securities Administrator may be merged or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee or Securities Administrator shall be a party, or any Persons succeeding to the business of the Trustee or Securities Administrator, shall be the successor to the Trustee or Securities Administrator hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding, provided that, in the case of the Trustee, such Person shall be eligible under the provisions of Section 6.05. Section 6.09 Appointment of Co-Trustee, Separate Trustee or Custodian. (a) Notwithstanding any other provisions hereof, at any time, the Trustee, the Depositor or the Certificateholders evidencing more than 50% of the Class Principal Amount (or Percentage Interest) of every Class of Certificates shall have the power from time to time to appoint one or more Persons, approved by the Trustee, to act either as co-trustees jointly with the Trustee, or as separate trustees, or as custodians, for the purpose of holding title to, foreclosing or otherwise taking action with respect to any Mortgage Loan outside the state where the Trustee has its principal place of business where such separate trustee or co-trustee is necessary or advisable (or the Trustee has been advised by the Master Servicer that such separate trustee or co-trustee is necessary or advisable) under the laws of any state in which a property securing a Mortgage Loan is located or for the purpose of otherwise conforming to any legal requirement, restriction or condition in any state in which a property securing a Mortgage Loan is located or in any state in which any portion of the Trust Fund is located. The separate Trustees, co-trustees, or custodians so appointed shall be trustees or custodians for the benefit of all the Certificateholders and shall have such powers, rights and remedies as shall be specified in the instrument of appointment; provided, however, that no such appointment shall, or shall be deemed to, constitute the appointee an agent of the Trustee. The obligation of the Master Servicer to make Advances pursuant to Section 5.04 hereof shall not be affected or assigned by the appointment of a co-trustee. (b) Every separate trustee, co-trustee, and custodian shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions: 74 (i) all powers, duties, obligations and rights conferred upon the Trustee in respect of the receipt, custody and payment of moneys shall be exercised solely by the Trustee; (ii) all other rights, powers, duties and obligations conferred or imposed upon the Trustee shall be conferred or imposed upon and exercised or performed by the Trustee and such separate trustee, co-trustee, or custodian jointly, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations, including the holding of title to the Trust Fund or any portion thereof in any such jurisdiction, shall be exercised and performed by such separate trustee, co-trustee, or custodian; (iii) no trustee or custodian hereunder shall be personally liable by reason of any act or omission of any other trustee or custodian hereunder; and (iv) the Trustee may at any time, by an instrument in writing executed by it, with the concurrence of the Depositor, accept the resignation of or remove any separate trustee, co-trustee or custodian, so appointed by it or them, if such resignation or removal does not violate the other terms of this Agreement. (c) Any notice, request or other writing given to the Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee, co-trustee or custodian shall refer to this Agreement and the conditions of this Article VI. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Trustee or separately, as may be provided therein, subject to all the provisions of this Agreement, specifically including every provision of this Agreement relating to the conduct of, affecting the liability of, or affording protection to, the Trustee. Every such instrument shall be filed with the Trustee and a copy given to the Master Servicer. (d) Any separate trustee, co-trustee or custodian may, at any time, constitute the Trustee its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Agreement on its behalf and in its name. If any separate trustee, co-trustee or custodian shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Trustee, to the extent permitted by law, without the appointment of a new or successor trustee. (e) No separate trustee, co-trustee or custodian hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 6.05 hereunder and no notice to Certificateholders of the appointment shall be required under Section 6.07 hereof. (f) The Trustee agrees to instruct the co-trustees, if any, to the extent necessary to fulfill the Trustee's obligations hereunder. 75 (g) The Trust shall pay the reasonable compensation of the co-trustees (which compensation shall not reduce any compensation payable to the Trustee under such Section). Section 6.10 Authenticating Agents. (a) The Trustee may appoint one or more Authenticating Agents which shall be authorized to act on behalf of the Trustee in authenticating Certificates. The Trustee hereby appoints the Securities Administrator as initial Authenticating Agent, and the Securities Administrator accepts such appointment. Wherever reference is made in this Agreement to the authentication of Certificates by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent must be a corporation organized and doing business under the laws of the United States of America or of any state, having a combined capital and surplus of at least $15,000,000, authorized under such laws to do a trust business and subject to supervision or examination by federal or state authorities. (b) Any Person into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which any Authenticating Agent shall be a party, or any Person succeeding to the corporate agency business of any Authenticating Agent, shall continue to be the Authenticating Agent without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. (c) Any Authenticating Agent may at any time resign by giving at least 30 days' advance written notice of resignation to the Trustee and the Depositor. The Trustee may at any time terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and the Depositor. Upon receiving a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 6.10, the Trustee may appoint a successor authenticating agent, shall give written notice of such appointment to the Depositor and shall mail notice of such appointment to all Holders of Certificates. Any successor authenticating agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers, duties and responsibilities of its predecessor hereunder, with like effect as if originally named as Authenticating Agent. No successor authenticating agent shall be appointed unless eligible under the provisions of this Section 6.10. No Authenticating Agent shall have responsibility or liability for any action taken by it as such at the direction of the Trustee. Section 6.11 Indemnification of the Trustee and the Securities Administrator. The Trustee and the Securities Administrator and their respective directors, officers, employees and agents shall be entitled to indemnification from the Depositor and the Trust Fund (provided that the Trust Fund's indemnification under this Section 6.11 is limited by Section 4.01(d) for any loss, liability or expense including, without limitation, reasonable attorneys' fees and disbursements and, in the case of the Trustee, in connection with the Custody Agreement, including the reasonable compensation and the expenses and disbursements of its agents or counsel), incurred without negligence or willful misconduct on their part, arising out of, or in 76 connection with, the acceptance or administration of the trusts created hereunder or in connection with the performance of their duties hereunder including the costs and expenses of defending themselves against any claim in connection with the exercise or performance of any of their powers or duties hereunder, provided that: (i) with respect to any such claim, the Trustee or the Securities Administrator, as applicable, shall have given the Depositor written notice thereof promptly after the Trustee, the Securities Administrator, as applicable, shall have knowledge thereof; (ii) while maintaining control over its own defense, the Trustee or the Securities Administrator, as applicable, shall cooperate and consult fully with the Depositor in preparing such defense; and (iii) notwithstanding anything to the contrary in this Section 6.11, the Trust Fund shall not be liable for settlement of any such claim by the Trustee or the Securities Administrator, as applicable, entered into without the prior consent of the Depositor, which consent shall not be unreasonably withheld. The provisions of this Section 6.11 shall survive any termination of this Agreement and the resignation or removal of the Trustee or the Securities Administrator, as applicable, and shall be construed to include, but not be limited to any loss, liability or expense under any environmental law. Section 6.12 Fees and Expenses of Securities Administrator and the Trustee. (a) Compensation for the services of the Securities Administrator hereunder shall be paid by the Master Servicer. The Securities Administrator shall be entitled to all disbursements and advancements incurred or made by the Securities Administrator in accordance with this Agreement (including fees and expenses of its counsel and all persons not regularly in its employment), except any such expenses arising from its negligence, bad faith or willful misconduct. (b) As compensation for its services hereunder, the Trustee shall be entitled to receive a Trustee fee (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) which shall be paid by the Master Servicer pursuant to a separate agreement between the Trustee and the Master Servicer. Any expenses incurred by the Trustee shall be reimbursed in accordance with Section 6.11. Section 6.13 Collection of Monies. Except as otherwise expressly provided in this Agreement, the Trustee may demand payment or delivery of, and shall receive and collect, all money and other property payable to or receivable by the Trustee pursuant to this Agreement. The Trustee shall hold all such money and property received by it as part of the Trust Fund and shall distribute it as provided in this Agreement. Section 6.14 Events of Default; Trustee To Act; Appointment of Successor. 77 (a) The occurrence of any one or more of the following events shall constitute an "Event of Default": (i) Any failure by the Master Servicer to furnish the Securities Administrator the Mortgage Loan data sufficient to prepare the reports described in Section 4.04 which continues unremedied for a period of one Business Day after the date upon which written notice of such failure shall have been given to such Master Servicer by the Trustee or the Securities Administrator or to such Master Servicer, the Securities Administrator and the Trustee by the Holders of not less than 25% of the Class Principal Amount (or Class Notional Amount) of each Class of Certificates affected thereby; or (ii) Any failure on the part of the Master Servicer duly to observe or perform in any material respect any other of the covenants or agreements on the part of the Master Servicer contained in this Agreement which continues unremedied for a period of 30 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Master Servicer by the Trustee or the Securities Administrator, or to the Master Servicer, the Securities Administrator and the Trustee by the Holders of more than 50% of the Aggregate Voting Interests of the Certificates; or (iii) A decree or order of a court or agency or supervisory authority having jurisdiction for the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Master Servicer, and such decree or order shall have remained in force undischarged or unstayed for a period of 60 days or any Rating Agency reduces or withdraws or threatens to reduce or withdraw the rating of the Certificates because of the financial condition or loan servicing capability of such Master Servicer; or (iv) The Master Servicer shall consent to the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities, voluntary liquidation or similar proceedings of or relating to the Master Servicer or of or relating to all or substantially all of its property; or (v) The Master Servicer shall admit in writing its inability to pay its debts generally as they become due, file a petition to take advantage of any applicable insolvency or reorganization statute, make an assignment for the benefit of its creditors or voluntarily suspend payment of its obligations; or (vi) The Master Servicer shall be dissolved, or shall dispose of all or substantially all of its assets, or consolidate with or merge into another entity or shall permit another entity to consolidate or merge into it, such that the resulting entity does not meet the criteria for a successor servicer as specified in Section 9.05 hereof; or (vii) If a representation or warranty set forth in Section 9.03 hereof shall prove to be incorrect as of the time made in any respect that materially and adversely affects the interests of the Certificateholders, and the circumstance or condition in respect of which such representation or warranty was incorrect shall not have been eliminated or cured 78 within 30 days after the date on which written notice of such incorrect representation or warranty shall have been given to the Master Servicer by the Trustee or the Securities Administrator, or to the Master Servicer, the Securities Administrator and the Trustee by the Holders of more than 50% of the Aggregate Voting Interests of the Certificates; or (viii) A sale or pledge of any of the rights of the Master Servicer hereunder or an assignment of this Agreement by the Master Servicer or a delegation of the rights or duties of the Master Servicer hereunder shall have occurred in any manner not otherwise permitted hereunder and without the prior written consent of the Trustee and Certificateholders holding more than 50% of the Aggregate Voting Interests of the Certificates; or (ix) After receipt of notice from the Trustee, any failure of the Master Servicer to make any Advances required to be made hereunder. If an Event of Default described in clauses (i) through (ix) of this Section shall occur, then, in each and every case, subject to applicable law, so long as any such Event of Default shall not have been remedied within any period of time prescribed by this Section, the Trustee, by notice in writing to the Master Servicer may, and shall, if so directed by Certificateholders evidencing more than 50% of the Class Principal Amount (or Class Notional Amount) of each Class of Certificates, terminate all of the rights and obligations of the Master Servicer hereunder and in and to the Mortgage Loans and the proceeds thereof. On or after the receipt by the Master Servicer of such written notice, all authority and power of the Master Servicer, and only in its capacity as Master Servicer under this Agreement, whether with respect to the Mortgage Loans or otherwise, shall pass to and be vested in the Trustee; and the Trustee is hereby authorized and empowered to execute and deliver, on behalf of the defaulting Master Servicer as attorney-in-fact or otherwise, any and all documents and other instruments, and to do or accomplish all other acts or things necessary or appropriate to effect the purposes of such notice of termination, whether to complete the transfer and endorsement or assignment of the Mortgage Loans and related documents or otherwise. The defaulting Master Servicer agrees to cooperate with the Trustee and the Securities Administrator in effecting the termination of the defaulting Master Servicer's responsibilities and rights hereunder as Master Servicer including, without limitation, notifying Servicers of the assignment of the master servicing function and providing the Trustee or its designee all documents and records in electronic or other form reasonably requested by it to enable the Trustee or its designee to assume the defaulting Master Servicer's functions hereunder and the transfer to the Trustee for administration by it of all amounts which shall at the time be or should have been deposited by the defaulting Master Servicer in the Distribution Account and any other account or fund maintained with respect to the Certificates or thereafter received with respect to the Mortgage Loans. The Master Servicer being terminated shall bear all costs of a master servicing transfer, including but not limited to those of the Trustee or Securities Administrator reasonably allocable to specific employees and overhead, legal fees and expenses, accounting and financial consulting fees and expenses, and costs of amending the Agreement, if necessary. 79 Notwithstanding the termination of its activities as Master Servicer, each terminated Master Servicer shall continue to be entitled to reimbursement under this Agreement to the extent such reimbursement relates to the period prior to such Master Servicer's termination. If any Event of Default shall occur, the Trustee, upon becoming aware of the occurrence thereof, shall promptly notify the Securities Administrator and each Rating Agency of the nature and extent of such Event of Default. The Trustee or the Securities Administrator shall immediately give written notice to the Master Servicer upon the Master Servicer's failure to make Advances as required under this Agreement. (b) On and after the time the Master Servicer receives a notice of termination from the Trustee pursuant to Section 6.14(a) or the Trustee receives the resignation of the Master Servicer evidenced by an Opinion of Counsel pursuant to Section 9.06, the Trustee, unless another master servicer shall have been appointed, shall be the successor in all respects to the Master Servicer in its capacity as such under this Agreement and the transactions set forth or provided for herein and shall have all the rights and powers and be subject to all the responsibilities, duties and liabilities relating thereto and arising thereafter placed on the Master Servicer hereunder, including the obligation to make Advances; provided, however, that any failure to perform such duties or responsibilities caused by the Master Servicer's failure to provide information required by this Agreement shall not be considered a default by the Trustee hereunder. In addition, the Trustee shall have no responsibility for any act or omission of the Master Servicer prior to the issuance of any notice of termination. The Trustee shall have no liability relating to the representations and warranties of the Master Servicer set forth in Section 9.03. In the Trustee's capacity as such successor, the Trustee shall have the same limitations on liability herein granted to the Master Servicer. As compensation therefor, the Trustee shall be entitled to receive all compensation payable to the Master Servicer under this Agreement, including the Master Servicing Fee. (c) Notwithstanding the above, the Trustee may, if it shall be unwilling to continue to so act, or shall, if it is unable to so act, petition a court of competent jurisdiction to appoint, or appoint on its own behalf any established housing and home finance institution servicer, master servicer, servicing or mortgage servicing institution having a net worth of not less than $15,000,000 and meeting such other standards for a successor master servicer as are set forth in this Agreement, as the successor to such Master Servicer in the assumption of all of the responsibilities, duties or liabilities of a master servicer, like the Master Servicer. Any entity designated by the Trustee as a successor master servicer may be an Affiliate of the Trustee; provided, however, that, unless such Affiliate meets the net worth requirements and other standards set forth herein for a successor master servicer, the Trustee, in its individual capacity shall agree, at the time of such designation, to be and remain liable to the Trust Fund for such Affiliate's actions and omissions in performing its duties hereunder. In connection with such appointment and assumption, the Trustee may make such arrangements for the compensation of such successor out of payments on Mortgage Loans as it and such successor shall agree; provided, however, that no such compensation shall be in excess of that permitted to the Master Servicer hereunder. The Trustee and such successor shall take such actions, consistent with this Agreement, as shall be necessary to effectuate any such succession and may make other arrangements with respect to the servicing to be conducted hereunder which are not inconsistent 80 herewith. The Master Servicer shall cooperate with the Trustee and any successor master servicer in effecting the termination of the Master Servicer's responsibilities and rights hereunder including, without limitation, notifying Mortgagors of the assignment of the master servicing functions and providing the Trustee and successor master servicer, as applicable, all documents and records in electronic or other form reasonably requested by it to enable it to assume the Master Servicer's functions hereunder and the transfer to the Trustee or such successor master servicer, as applicable, all amounts which shall at the time be or should have been deposited by the Master Servicer in the Distribution Account and any other account or fund maintained with respect to the Certificates or thereafter be received with respect to the Mortgage Loans. Neither the Trustee nor any other successor master servicer shall be deemed to be in default hereunder by reason of any failure to make, or any delay in making, any distribution hereunder or any portion thereof caused by (i) the failure of the Master Servicer to deliver, or any delay in delivering, cash, documents or records to it, (ii) the failure of the Master Servicer to cooperate as required by this Agreement, (iii) the failure of the Master Servicer to deliver the Mortgage Loan data to the Trustee as required by this Agreement or (iv) restrictions imposed by any regulatory authority having jurisdiction over the Master Servicer. No successor master servicer shall be deemed to be in default hereunder by reason of any failure to make, or any delay in making, any distribution hereunder or any portion thereof caused by (i) the failure of the Trustee to deliver, or any delay in delivering cash, documents or records to it related to such distribution, or (ii) the failure of Trustee to cooperate as required by this Agreement. Section 6.15 Additional Remedies of Trustee Upon Event of Default. During the continuance of any Event of Default, so long as such Event of Default shall not have been remedied, the Trustee, in addition to the rights specified in Section 6.14, shall have the right, in its own name and as trustee of the Trust Fund, to take all actions now or hereafter existing at law, in equity or by statute to enforce its rights and remedies and to protect the interests, and enforce the rights and remedies, of the Certificateholders (including the institution and prosecution of all judicial, administrative and other proceedings and the filings of proofs of claim and debt in connection therewith). Except as otherwise expressly provided in this Agreement, no remedy provided for by this Agreement shall be exclusive of any other remedy, and each and every remedy shall be cumulative and in addition to any other remedy, and no delay or omission to exercise any right or remedy shall impair any such right or remedy or shall be deemed to be a waiver of any Event of Default. Section 6.16 Waiver of Defaults. More than 50% of the Aggregate Voting Interests of Certificateholders may waive any default or Event of Default by the Master Servicer in the performance of its obligations hereunder, except that a default in the making of any required deposit to the Distribution Account that would result in a failure of the Trustee to make any required payment of principal of or interest on the Certificates may only be waived with the consent of 100% of the affected Certificateholders. Upon any such waiver of a past default, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been remedied for every purpose of this Agreement. No such waiver shall extend to any subsequent or other default or impair any right consequent thereon except to the extent expressly so waived. 81 Section 6.17 Notification to Holders. Upon termination of the Master Servicer or appointment of a successor to the Master Servicer, in each case as provided herein, the Trustee shall promptly mail notice thereof by first class mail to the Securities Administrator, and the Certificateholders at their respective addresses appearing on the Certificate Register. The Trustee shall also, within 45 days after the occurrence of any Event of Default known to the Trustee, give written notice thereof to the Securities Administrator and the Certificateholders, unless such Event of Default shall have been cured or waived prior to the issuance of such notice and within such 45-day period. Section 6.18 Directions by Certificateholders and Duties of Trustee During Event of Default. Subject to the provisions of Section 8.01 hereof, during the continuance of any Event of Default, Holders of Certificates evidencing not less than 25% of the Class Principal Amount (or Percentage Interest) of each Class of Certificates affected thereby may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Agreement; provided, however, that the Trustee shall be under no obligation to pursue any such remedy, or to exercise any of the trusts or powers vested in it by this Agreement (including, without limitation, (i) the conducting or defending of any administrative action or litigation hereunder or in relation hereto and (ii) the terminating of the Master Servicer or any successor master servicer from its rights and duties as master servicer hereunder) at the request, order or direction of any of the Certificateholders, unless such Certificateholders shall have offered to the Trustee reasonable security or indemnity against the cost, expenses and liabilities which may be incurred therein or thereby; and, provided further, that, subject to the provisions of Section 8.01, the Trustee shall have the right to decline to follow any such direction if the Trustee, in accordance with an Opinion of Counsel, determines that the action or proceeding so directed may not lawfully be taken or if the Trustee in good faith determines that the action or proceeding so directed would involve it in personal liability for which it is not indemnified to its satisfaction or be unjustly prejudicial to the non-assenting Certificateholders. Section 6.19 Action Upon Certain Failures of the Master Servicer and Upon Event of Default. In the event that the Trustee shall have actual knowledge of any action or inaction of the Master Servicer that would become an Event of Default upon the Master Servicer's failure to remedy the same after notice, the Trustee shall give notice thereof to the Master Servicer. Section 6.20 Preparation of Tax Returns and Other Reports. (a) The Securities Administrator shall prepare or cause to be prepared on behalf of the Trust Fund, based upon information calculated in accordance with this Agreement pursuant to instructions given by the Depositor, and the Securities Administrator shall file federal tax returns, all in accordance with Article X hereof. If the Trustee notifies the Securities Administrator in writing that a state tax return or other return is required, then, at the sole expense of the Trust Fund, the Securities Administrator shall prepare and file such state income 82 tax returns and such other returns as may be required by applicable law relating to the Trust Fund, and, if required by state law, and shall file any other documents to the extent required by applicable state tax law (to the extent such documents are in the Securities Administrator's possession). The Securities Administrator shall forward copies to the Depositor of all such returns and Form 1099 supplemental tax information and such other information within the control of the Securities Administrator as the Depositor may reasonably request in writing, and shall forward to the Trustee for distribution to each Certificateholder such forms and furnish such information within the control of the Securities Administrator as are required by the Code and the REMIC Provisions to be furnished to them, and will prepare and disseminate to the Trustee for distribution to Certificateholders Form 1099 (supplemental tax information) (or otherwise furnish information within the control of the Securities Administrator and the Trustee) to the extent required by applicable law. The Master Servicer will indemnify the Securities Administrator and the Trustee for any liability of or assessment against the Securities Administrator and the Trustee, as applicable, resulting from any error in any of such tax or information returns directly resulting from errors in the information provided by such Master Servicer. (b) The Securities Administrator shall prepare and file with the Internal Revenue Service ("IRS"), on behalf of the Trust Fund and each REMIC created hereunder, an application for an employer identification number on IRS Form SS-4 or by any other acceptable method. The Securities Administrator shall also file a Form 8811 as required. The Securities Administrator, upon receipt from the IRS of the Notice of Taxpayer Identification Number Assigned, shall upon request promptly forward a copy of such notice to the Trustee and the Depositor. The Securities Administrator shall furnish any other information that is required by the Code and regulations thereunder to be made available to Certificateholders. The Master Servicer shall cause each Servicer to provide the Securities Administrator with such information as is necessary for the Securities Administrator to prepare such reports. (c) Within 15 days after each Distribution Date, the Depositor shall, on behalf of the Trust and in accordance with industry standards, file with the Securities and Exchange Commission (the "Commission") via the Electronic Data Gathering and Retrieval System (EDGAR), a Form 8-K with a copy of the report to the Certificateholders for such Distribution Date as an exhibit thereto. Prior to March 30, 2004 (and, if applicable, prior to March 30 of each year), the Depositor shall, on behalf of the Trust and in accordance with industry standards, file with the Commission via EDGAR a Form 10-K with respect to the Trust Fund. In addition, the Depositor will cause its senior officer in charge of securitization to execute the certification (the "Form 10-K Certification") required pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended, and to file the same with the Commission prior to March 30, 2004 (and, if applicable, prior to March 30 of each year). To the extent any information or exhibits required to be included in the Form 10-K are not available by March 30, the Depositor shall, on behalf of the Trust, file one or more amended Form 10-Ks to include such missing information or exhibits promptly after receipt thereof by the Depositor. Promptly following the first date legally permissible under applicable regulations and interpretations of the Commission, the Depositor shall, on behalf of the Trust and in accordance with industry standards, file with the Commission via EDGAR a Form 15 Suspension Notification with respect to the Trust Fund, if applicable. Each of the Securities Administrator, the Master Servicer and the Trustee agree to furnish to the 83 Depositor promptly, from time to time upon request, such further information, reports and financial statements within its control related to this Agreement and the Mortgage Loans as the Depositor reasonably deems appropriate to prepare and file all necessary reports with the Commission. The Depositor shall have no responsibility to file any items other than those specified in this section. (d) On or before January 31 of each year, the Depositor, on behalf of the Trust, shall provide the Securities Administrator with a written notice listing all Distribution Date reports to Certificateholders with respect to Distribution Dates occurring in the prior calendar year that were included in a Form 8-K filing pursuant to Section 6.20(c); provided, that if no Form 10-K is required to be filed for such prior calendar year, no written notice shall be required. No later than March 15 of each year in which such written notice is provided by the Depositor to the Securities Administrator, the Securities Administrator shall sign a certification (in the form attached hereto as Exhibit M), for the benefit of the Person(s) signing the Form 10-K Certification, regarding certain aspects of the Form 10-K Certification. ARTICLE VII PURCHASE OF MORTGAGE LOANS AND TERMINATION OF THE TRUST FUND Section 7.01 Purchase of Mortgage Loans; Termination of Trust Fund Upon Purchase or Liquidation of All Mortgage Loans. (a) The respective obligations and responsibilities of the Trustee, the Securities Administrator and the Master Servicer created hereby (other than the obligation of the Securities Administrator to make payments to Certificateholders as set forth in Section 7.02), shall terminate on the earliest of (i) the final payment or other liquidation of the last Mortgage Loan remaining in the Trust Fund and the disposition of all REO Property, (ii) the sale of the property held by the Trust Fund in accordance with Section 7.01(b) and (iii) the Latest Possible Maturity Date; provided, however, that in no event shall the Trust Fund created hereby continue beyond the expiration of 21 years from the death of the last survivor of the descendants of Joseph P. Kennedy, the late Ambassador of the United States to the Court of St. James's, living on the date hereof. Any termination of the Trust Fund shall be carried out in such a manner so that the termination of each REMIC included therein shall qualify as a "qualified liquidation" under the REMIC Provisions. (b) On any Distribution Date occurring on or after the Initial Optional Purchase Date, the Depositor (as Holder of the Class LT-R Certificate) has the option to cause the Trust Fund to adopt a plan of complete liquidation pursuant to Sections 7.02 and 7.03 hereof to sell all of its property. If the Depositor (as Holder of the Class LT-R Certificate) elects to exercise such option, it shall no later than 30 days prior to the Distribution Date selected for purchase of the assets of the Trust Fund (the "Purchase Date") deliver written notice to the Trustee and the Securities Administrator and either (a) deposit in the Distribution Account the Redemption Price or (b) state in such notice that the Redemption Price shall be deposited in the Distribution Account not later than 10:00 a.m., New York City time on the applicable Purchase Date. Upon 84 exercise of such option, the property of the Trust Fund shall be sold to the Depositor (as Holder of the Class LT-R Certificate) at a price equal to the Redemption Price. (c) The Depositor, the Master Servicer, each Servicer, the Securities Administrator and the Custodian shall be reimbursed from the Redemption Price for any Advances, Servicer Advances, accrued and unpaid Servicing Fees and Master Servicing Fees or other amounts with respect to the Mortgage Loans that are reimbursable to such parties under this Agreement, the related Servicing Agreement or the Custody Agreement. Section 7.02 Procedure Upon Redemption Termination of Trust Fund. (a) Notice of any redemption termination pursuant to the provisions of Section 7.01, specifying the Distribution Date upon which the final distribution shall be made or the Redemption Date of the Certificates, shall be given promptly by the Trustee by first class mail to Certificateholders mailed in the case of a redemption of the Certificate, no less than the first day of the month in which the Distribution Date selected for redemption of the Certificates occurs or upon (x) the sale of all of the property of the Trust Fund by the Trustee or in the case of a sale of assets of the Trust Fund, or (y) upon the final payment or other liquidation of the last Mortgage Loan or REO Property in the Trust Fund. Such notice shall specify (A) the Redemption Date, Distribution Date upon which final distribution on the Certificates of all amounts required to be distributed to Certificateholders pursuant to Section 5.02 will be made upon presentation and surrender of the Certificates at the Certificate Registrar's Corporate Trust Office, and (B) that the Record Date otherwise applicable to such Distribution Date is not applicable, distribution being made only upon presentation and surrender of the Certificates at the office or agency of the Trustee therein specified. The Trustee shall give such notice to the Securities Administrator, the Master Servicer and the Certificate Registrar at the time such notice is given to Holders of the Certificates. Upon any such termination, the duties of the Certificate Registrar with respect to the Certificates shall terminate and the Trustee shall terminate or request the Master Servicer to terminate, the Distribution Account and any other account or fund maintained with respect to the Certificates, subject to the Trustee's obligation hereunder to hold all amounts payable to Certificateholders in trust without interest pending such payment. (b) In the event that all of the Holders do not surrender their Certificates for cancellation within three months after the time specified in the above-mentioned written notice, the Trustee shall give a second written notice to the remaining Certificateholders to surrender their Certificates for cancellation and receive the final distribution with respect thereto. If within one year after the second notice any Certificates shall not have been surrendered for cancellation, the Trustee may take appropriate steps to contact the remaining Certificateholders concerning surrender of such Certificates, and the cost thereof shall be paid out of the amounts distributable to such Holders. If within two years after the second notice any Certificates shall not have been surrendered for cancellation, the Trustee shall, subject to applicable state law relating to escheatment, hold all amounts distributable to such Holders for the benefit of such Holders. No interest shall accrue on any amount held by the Trustee and not distributed to a Certificateholder due to such Certificateholder's failure to surrender its Certificate(s) for payment of the final distribution thereon in accordance with this Section. 85 (c) Any reasonable expenses incurred by the Trustee in connection with any redemption or termination or liquidation of the Trust Fund shall be reimbursed from proceeds received from the liquidation of the Trust Fund. Section 7.03 Additional Trust Fund Termination Requirements. (a) Any termination of the Trust Fund shall be effected in accordance with the following additional requirements, unless the Trustee seeks (at the request of the party exercising the option to purchase all of the Mortgage Loans pursuant to Section 7.01(b)), and subsequently receives, an Opinion of Counsel (at the expense of such requesting party), addressed to the Trustee to the effect that the failure of the Trust Fund to comply with the requirements of this Section 7.03 will not (I) result in the imposition of taxes on any REMIC under the REMIC Provisions or (II) cause any REMIC established hereunder to fail to qualify as a REMIC at any time that any Certificates are outstanding: (i) Within 89 days prior to the time of the making of the final payment on the Certificates, upon notification by the Depositor (as the Holder of the Class LT-R Certificate) that it intends to exercise its option to cause the termination of the Trust Fund, the Trustee shall adopt a plan of complete liquidation of the Trust Fund on behalf of each REMIC, meeting the requirements of a qualified liquidation under the REMIC Provisions; (ii) Any sale of the assets of the Trust Fund pursuant to Section 7.02 shall be a sale for cash and shall occur at or after the time of adoption of such a plan of complete liquidation and prior to the time of making of the final payment on the Certificates; (iii) On the date specified for final payment of the Certificates, the Securities Administrator shall make final distributions of principal and interest on the Certificates in accordance with Section 5.02 and, after payment of, or provision for any outstanding expenses, distribute or credit, or cause to be distributed or credited, to the Holders of the Residual Certificates all cash on hand after such final payment (other than cash retained to meet claims), and the Trust Fund (and each REMIC) shall terminate at that time; and (iv) In no event may the final payment on the Certificates or the final distribution or credit to the Holders of the Residual Certificates be made after the 89th day from the date on which the plan of complete liquidation is adopted. (b) By its acceptance of a Residual Certificate, each Holder thereof hereby agrees to accept the plan of complete liquidation adopted by the Trustee under this Section and to take such other action in connection therewith as may be reasonably requested by the Securities Administrator or any Servicer. 86 Section 7.04 [Reserved]. ARTICLE VIII RIGHTS OF CERTIFICATEHOLDERS Section 8.01 Limitation on Rights of Holders. (a) The death or incapacity of any Certificateholder shall not operate to terminate this Agreement or this Trust Fund, nor entitle such Certificateholder's legal representatives or heirs to claim an accounting or take any action or proceeding in any court for a partition or winding up of this Trust Fund, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. Except as otherwise expressly provided herein, no Certificateholder, solely by virtue of its status as a Certificateholder, shall have any right to vote or in any manner otherwise control the Master Servicer or the operation and management of the Trust Fund, or the obligations of the parties hereto, nor shall anything herein set forth, or contained in the terms of the Certificates, be construed so as to constitute the Certificateholders from time to time as partners or members of an association, nor shall any Certificateholder be under any liability to any third person by reason of any action taken by the parties to this Agreement pursuant to any provision hereof. (b) No Certificateholder, solely by virtue of its status as Certificateholder, shall have any right by virtue or by availing of any provision of this Agreement to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Agreement, unless such Holder previously shall have given to the Trustee a written notice of an Event of Default and of the continuance thereof, as hereinbefore provided, and unless also the Holders of Certificates evidencing not less than 25% of the Class Principal Amount or Class Notional Amount (or Percentage Interest) of Certificates of each Class affected thereby shall have made written request upon the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder and shall have offered to the Trustee such reasonable indemnity as it may require against the cost, expenses and liabilities to be incurred therein or thereby, and the Trustee, for sixty days after its receipt of such notice, request and offer of indemnity, shall have neglected or refused to institute any such action, suit or proceeding and no direction inconsistent with such written request has been given such Trustee during such sixty-day period by such Certificateholders; it being understood and intended, and being expressly covenanted by each Certificateholder with every other Certificateholder, the Securities Administrator and the Trustee, that no one or more Holders of Certificates shall have any right in any manner whatever by virtue or by availing of any provision of this Agreement to affect, disturb or prejudice the rights of the Holders of any other of such Certificates, or to obtain or seek to obtain priority over or preference to any other such Holder, or to enforce any right under this Agreement, except in the manner herein provided and for the benefit of all Certificateholders. For the protection and enforcement of the provisions of this Section, each and every Certificateholder and the Trustee shall be entitled to such relief as can be given either at law or in equity. Section 8.02 Access to List of Holders. 87 (a) If the Trustee is not acting as Certificate Registrar, the Certificate Registrar will furnish or cause to be furnished to the Trustee, within fifteen days after receipt by the Certificate Registrar of a request by the Trustee in writing, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Certificateholders of each Class as of the most recent Record Date. (b) If three or more Holders or Certificate Owners (hereinafter referred to as "Applicants") apply in writing to the Trustee, and such application states that the Applicants desire to communicate with other Holders with respect to their rights under this Agreement or under the Certificates and is accompanied by a copy of the communication which such Applicants propose to transmit, then the Trustee shall, within five Business Days after the receipt of such application, afford such Applicants reasonable access during the normal business hours of the Trustee to the most recent list of Certificateholders held by the Trustee or shall, as an alternative, send, at the Applicants' expense, the written communication proffered by the Applicants to all Certificateholders at their addresses as they appear in the Certificate Register. (c) Every Holder or Certificate Owner, if the Holder is a Clearing Agency, by receiving and holding a Certificate, agrees with the Depositor, the Master Servicer, the Securities Administrator, the Certificate Registrar and the Trustee that neither the Depositor, the Master Servicer, the Securities Administrator, the Certificate Registrar nor the Trustee shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Certificateholders hereunder, regardless of the source from which such information was derived. Section 8.03 Acts of Holders of Certificates. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Agreement to be given or taken by Holders or Certificate Owners, if the Holder is a Clearing Agency, may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and the Securities Administrator and, where expressly required herein, to the Master Servicer. Such instrument or instruments (as the action embodies therein and evidenced thereby) are herein sometimes referred to as an "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agents shall be sufficient for any purpose of this Agreement and conclusive in favor of the Trustee, the Securities Administrator and the Master Servicer, if made in the manner provided in this Section. Each of the Trustee, the Securities Administrator and the Master Servicer shall promptly notify the others of receipt of any such instrument by it, and shall promptly forward a copy of such instrument to the others. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other officer authorized by law to take acknowledgments or deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Whenever such execution is by an officer of a corporation or a member of a partnership on 88 behalf of such corporation or partnership, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the individual executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The ownership of Certificates (whether or not such Certificates shall be overdue and notwithstanding any notation of ownership or other writing thereon made by anyone other than the Trustee) shall be proved by the Certificate Register, and neither the Trustee, the Securities Administrator, the Master Servicer, nor the Depositor shall be affected by any notice to the contrary. (d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Certificate shall bind every future Holder of the same Certificate and the Holder of every Certificate issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Trustee or the Master Servicer in reliance thereon, whether or not notation of such action is made upon such Certificate. ARTICLE IX ADMINISTRATION AND SERVICING OF MORTGAGE LOANS BY THE MASTER SERVICER Section 9.01 Duties of the Master Servicer; Enforcement of Servicer's and Master Servicer's Obligations. (a) The Master Servicer, on behalf of the Trustee, the Depositor and the Certificateholders shall monitor the performance of the Servicers under the Servicing Agreements, and shall use its reasonable good faith efforts to cause the Servicers duly and punctually to perform all of their duties and obligations thereunder. Upon the occurrence of a default of which an Authorized Officer of the Master Servicer has actual knowledge under a Servicing Agreement, the Master Servicer shall promptly notify the Trustee thereof, and shall specify in such notice the action, if any, the Master Servicer is taking in respect of such default. So long as any such default shall be continuing, the Master Servicer may, and shall if it determines such action to be in the best interests of Certificateholders, (i) terminate all of the rights and powers of such Servicer pursuant to the applicable provisions of the Servicing Agreement; (ii) exercise any rights it may have to enforce the Servicing Agreement against such Servicer; and/or (iii) waive any such default under the Servicing Agreement or take any other action with respect to such default as is permitted thereunder. Notwithstanding any provision of this Agreement or any Servicing Agreement to the contrary, the Master Servicer shall have no duty or obligation to supervise, monitor or oversee the activities of, or to enforce the obligations of, (i) the Servicer under its Servicing Agreement with respect to any Additional Collateral or any Limited Purpose Surety Bond relating thereto, including, without limitation, the collection of any amounts owing to the Trust Fund in respect thereof (unless and until the Master Servicer shall have assumed the obligations of such Servicer as successor servicer under the related Servicing Agreement pursuant to this Section 9.01, in which case, as successor servicer, it shall 89 be bound to serve and administer the Additional Collateral and any related Limited Purpose Surety Bond in accordance with the provisions of such Servicing Agreement) or (ii) the Servicer under its Servicing Agreement with respect to the servicing or administration of defaulted or delinquent Mortgage Loans and the management and disposition of any REO Properties or for any actions of the Trustee in connection therewith. (b) Upon any termination by the Master Servicer of a Servicer's rights and powers pursuant to its Servicing Agreement, the rights and powers of the Servicer with respect to the Mortgage Loans shall vest in the Master Servicer and the Master Servicer shall be the successor in all respects to such Servicer in its capacity as Servicer with respect to such Mortgage Loans under the related Servicing Agreement, unless or until the Master Servicer shall have appointed, with the consent of the Trustee and the Rating Agencies, such consent not to be unreasonably withheld, and in accordance with the applicable provisions of the Servicing Agreement, a new Fannie Mae- or FHLMC-approved Person to serve as successor to the Servicer; provided, however, that it is understood and agreed by the parties hereto that there will be a period of transition (not to exceed 90 days) before the actual servicing functions can be fully transferred to a successor servicer (including the Master Servicer). With such consent, the Master Servicer may elect to continue to serve as successor servicer under the Servicing Agreement. Upon appointment of a successor servicer, as authorized under this Section 9.01(b), unless the successor servicer shall have assumed the obligation of the terminated Servicer under such Servicing Agreement, the Trustee and such successor servicer shall enter into a servicing agreement in a form substantially similar to the affected Servicing Agreement. In connection with any such appointment, the Master Servicer may make such arrangements for the compensation of such successor as it and such successor shall agree, but in no event shall such compensation of any successor servicer (including the Master Servicer) be in excess of that payable to the Servicer under the affected Servicing Agreement. The Master Servicer shall pay the costs of such enforcement (including the termination of any Servicer, the appointment of a successor servicer or the transfer and assumption of the servicing by the Master Servicer) at its own expense and shall be reimbursed therefor initially (i) by the terminated Servicer, (ii) from a general recovery resulting from such enforcement only to the extent, if any, that such recovery exceeds all amounts due in respect of the related Mortgage Loans, (iii) from a specific recovery of costs, expenses or attorney's fees against the party against whom such enforcement is directed, or (iv) to the extent that such amounts described in (i)-(iii) above are insufficient to reimburse the Master Servicer for such costs of enforcement, from the Trust Fund, as provided in Section 9.04. If the Master Servicer assumes the servicing with respect to any of the Mortgage Loans, it will not assume liability for the representations and warranties of any Servicer it replaces or for the errors or omissions of such Servicer. (c) Upon any termination of a Servicer's rights and powers pursuant to its Servicing Agreement, the Master Servicer shall promptly notify the Trustee and the Rating Agencies, specifying in such notice that the Master Servicer or any successor servicer, as the case may be, has succeeded the Servicer under the Servicing Agreement, which notice shall also specify the name and address of any such successor servicer. 90 (d) Neither the Depositor nor the Trustee shall consent to the assignment by any Servicer of such Servicer's rights and obligations under the Servicing Agreement without the prior written consent of the Master Servicer, which consent shall not be unreasonably withheld. Section 9.02 Assumption of Master Servicing by Trustee. (a) In the event the Master Servicer shall for any reason no longer be the Master Servicer (including by reason of any Event of Default under this Agreement), the Trustee shall thereupon assume all of the rights and obligations of such Master Servicer hereunder and under each Servicing Agreement entered into with respect to the Mortgage Loans or shall appoint a Fannie-Mae or FHLMC-approved server as successor with servicer acceptable to the Depositor and the Rating Agencies. The Trustee, its designee or any successor master servicer appointed by the Trustee shall be deemed to have assumed all of the Master Servicer's interest herein and therein to the same extent as if such Servicing Agreement had been assigned to the assuming party, except that the Master Servicer shall not thereby be relieved of any liability or obligations of the Master Servicer under such Servicing Agreement accruing prior to its replacement as Master Servicer, and shall be liable to the Trustee, and hereby agrees to indemnify and hold harmless the Trustee from and against all costs, damages, expenses and liabilities (including reasonable attorneys' fees) incurred by the Trustee as a result of such liability or obligations of the Master Servicer and in connection with the Trustee's assumption (but not its performance, except to the extent that costs or liability of the Trustee are created or increased as a result of negligent or wrongful acts or omissions of the Master Servicer prior to its replacement as Master Servicer) of the Master Servicer's obligations, duties or responsibilities thereunder. (b) The Master Servicer that has been terminated shall, upon request of the Trustee but at the expense of such Master Servicer, deliver to the assuming party all documents and records relating to each Servicing Agreement and the related Mortgage Loans and an accounting of amounts collected and held by it and otherwise use its best efforts to effect the orderly and efficient transfer of each Servicing Agreement to the assuming party. Section 9.03 Representations and Warranties of the Master Servicer. (a) The Master Servicer hereby represents and warrants to the Depositor, the Securities Administrator and the Trustee, for the benefit of the Certificateholders, as of the Closing Date that: (i) it is validly existing and in good standing under the laws of the United States of America as a national banking association, and as Master Servicer has full power and authority to transact any and all business contemplated by this Agreement and to execute, deliver and comply with its obligations under the terms of this Agreement, the execution, delivery and performance of which have been duly authorized by all necessary corporate action on the part of the Master Servicer; (ii) the execution and delivery of this Agreement by the Master Servicer and its performance and compliance with the terms of this Agreement will not (A) violate the Master Servicer's charter or bylaws, (B) violate any law or regulation or any administrative decree or order to which it is subject or (C) constitute a default (or an 91 event which, with notice or lapse of time, or both, would constitute a default) under, or result in the breach of, any material contract, agreement or other instrument to which the Master Servicer is a party or by which it is bound or to which any of its assets are subject, which violation, default or breach would materially and adversely affect the Master Servicer's ability to perform its obligations under this Agreement; (iii) this Agreement constitutes, assuming due authorization, execution and delivery hereof by the other respective parties hereto, a legal, valid and binding obligation of the Master Servicer, enforceable against it in accordance with the terms hereof, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors' rights in general, and by general equity principles (regardless of whether such enforcement is considered in a proceeding in equity or at law); (iv) the Master Servicer is not in default with respect to any order or decree of any court or any order or regulation of any federal, state, municipal or governmental agency to the extent that any such default would materially and adversely affect its performance hereunder; (v) the Master Servicer is not a party to or bound by any agreement or instrument or subject to any charter provision, bylaw or any other corporate restriction or any judgment, order, writ, injunction, decree, law or regulation that may materially and adversely affect its ability as Master Servicer to perform its obligations under this Agreement or that requires the consent of any third person to the execution of this Agreement or the performance by the Master Servicer of its obligations under this Agreement; (vi) no litigation is pending or, to the best of the Master Servicer's knowledge, threatened against the Master Servicer which would prohibit its entering into this Agreement or performing its obligations under this Agreement; (vii) the Master Servicer, or an affiliate thereof the primary business of which is the servicing of conventional residential mortgage loans, is a Fannie Mae- or FHLMC-approved seller/servicer; (viii) no consent, approval, authorization or order of any court or governmental agency or body is required for the execution, delivery and performance by the Master Servicer of or compliance by the Master Servicer with this Agreement or the consummation of the transactions contemplated by this Agreement, except for such consents, approvals, authorizations and orders (if any) as have been obtained; and (ix) the consummation of the transactions contemplated by this Agreement are in the ordinary course of business of the Master Servicer; (b) It is understood and agreed that the representations and warranties set forth in this Section shall survive the execution and delivery of this Agreement. The Master Servicer shall indemnify the Depositor, the Securities Administrator and the Trustee and hold them harmless 92 against any loss, damages, penalties, fines, forfeitures, legal fees and related costs, judgments, and other costs and expenses resulting from any claim, demand, defense or assertion based on or grounded upon, or resulting from, a material breach of the Master Servicer's representations and warranties contained in Section 9.03(a). It is understood and agreed that the enforcement of the obligation of the Master Servicer set forth in this Section to indemnify the Depositor, the Securities Administrator and the Trustee as provided in this Section constitutes the sole remedy (other than as set forth in Section 6.14) of the Depositor, the Securities Administrator and the Trustee, respecting a breach of the foregoing representations and warranties. Such indemnification shall survive any termination of the Master Servicer as Master Servicer hereunder, and any termination of this Agreement. Any cause of action against the Master Servicer relating to or arising out of the breach of any representations and warranties made in this Section shall accrue upon discovery of such breach by either the Depositor, the Master Servicer or the Trustee or notice thereof by any one of such parties to the other parties. Section 9.04 Compensation to the Master Servicer. The Master Servicer shall be entitled to be paid by the Trust Fund, and either retain or withdraw from the Distribution Account, (i) its Master Servicing Fee with respect to each Distribution Date, (ii) amounts necessary to reimburse itself for any previously unreimbursed Advances, Servicer Advances and Nonrecoverable Advances in accordance with the definition of "Interest Remittance Amount" and (iii) amounts representing assumption fees, late payment charges or other ancillary income not included in the definition of "Interest Remittance Amount" and which are not required to be remitted by the Servicers to the Securities Administrator or deposited by the Securities Administrator into the Distribution Account. The Master Servicer shall be required to pay all expenses incurred by it in connection with its activities hereunder and shall not be entitled to reimbursement therefor except as provided in this Agreement. In addition, Depositor agrees, except as otherwise expressly provided herein, to reimburse the Master Servicer, upon its request, for all reasonable expenses, disbursements and advances incurred or made by the Master Servicer in connection with the performance of its duties hereunder (including the reasonable compensation and the expenses and disbursements of its agents and counsel), to the extent not otherwise reimbursed pursuant to this Agreement, except any such expense, disbursement or advance as may be attributable to its willful misfeasance, bad faith or negligence. Section 9.05 Merger or Consolidation. Any Person into which the Master Servicer may be merged or consolidated, or any Person resulting from any merger, conversion, other change in form or consolidation to which the Master Servicer shall be a party, or any Person succeeding to the business of the Master Servicer, shall be the successor to the Master Servicer hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding; provided, however, that the successor or resulting Person to the Master Servicer shall be a Person that shall be qualified and approved to service mortgage loans for Fannie Mae or FHLMC and shall have a net worth of not less than $15,000,000. 93 Section 9.06 Resignation of Master Servicer. Except as otherwise provided in Sections 9.05 and 9.07 hereof, the Master Servicer shall not resign from the obligations and duties hereby imposed on it unless the Master Servicer's duties hereunder are no longer permissible under applicable law or are in material conflict by reason of applicable law with any other activities carried on by it and cannot be cured. Any such determination permitting the resignation of the Master Servicer shall be evidenced by an Opinion of Counsel that shall be Independent to such effect delivered to the Trustee. No such resignation shall become effective until the Trustee shall have assumed, or a successor master servicer shall have been appointed by the Trustee and until such successor shall have assumed, the Master Servicer's responsibilities and obligations under this Agreement. Notice of such resignation shall be given promptly by the Master Servicer and the Depositor to the Trustee. If, at any time, the Master Servicer resigns under this Section 9.06, or transfers or assigns its rights and obligations under Section 9.07, or is removed as Master Servicer pursuant to Section 6.14, then at such time as Wells Fargo Bank Minnesota, National Association also shall resign (and shall be entitled to resign) as Securities Administrator, Paying Agent, Authenticating Agent and Certificate Registrar under this Agreement. In such event, the obligations of each such party shall be assumed by the Trustee or such successor master servicer appointed by the Trustee (subject to the provisions of Section 9.02(c)). Section 9.07 Assignment or Delegation of Duties by the Master Servicer. Except as expressly provided herein, the Master Servicer shall not assign or transfer any of its rights, benefits or privileges hereunder to any other Person, or delegate to or subcontract with, or authorize or appoint any other Person to perform any of the duties, covenants or obligations to be performed by the Master Servicer hereunder; provided, however, that the Master Servicer shall have the right with the prior written consent of the Trustee and the Depositor (which consent shall not be unreasonably withheld), and upon delivery to the Trustee and the Depositor of a letter from each Rating Agency to the effect that such action shall not result in a downgrading of the Certificates, to delegate or assign to or subcontract with or authorize or appoint any qualified Person to perform and carry out any duties, covenants or obligations to be performed and carried out by the Master Servicer hereunder. Notice of such permitted assignment shall be given promptly by the Master Servicer to the Depositor and the Trustee. If, pursuant to any provision hereof, the duties of the Master Servicer are transferred to a successor master servicer, the entire amount of the Master Servicing Fees and other compensation payable to the Master Servicer pursuant hereto shall thereafter be payable to such successor master servicer. Such successor Master Servicer shall also pay the fees of the Trustee and the Securities Administrator, as provided herein. Section 9.08 Limitation on Liability of the Master Servicer and Others. Neither the Master Servicer nor any of the directors, officers, employees or agents of the Master Servicer shall be under any liability to the Trustee or the Certificateholders for any action taken or for refraining from the taking of any action in good faith pursuant to this Agreement, or for errors in judgment; provided, however, that this provision shall not protect the Master Servicer or any such person against any liability that would otherwise be imposed by reason of 94 willful misfeasance, bad faith or negligence in its performance of its duties or by reason of reckless disregard for its obligations and duties under this Agreement. The Master Servicer and any director, officer, employee or agent of the Master Servicer may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising hereunder. The Master Servicer shall be under no obligation to appear in, prosecute or defend any legal action that is not incidental to its duties to master service the Mortgage Loans in accordance with this Agreement and that in its opinion may involve it in any expenses or liability; provided, however, that the Master Servicer may in its sole discretion undertake any such action that it may deem necessary or desirable in respect to this Agreement and the rights and duties of the parties hereto and the interests of the Certificateholders hereunder. In such event, the legal expenses and costs of such action and any liability resulting therefrom shall be expenses, costs and liabilities of the Trust Fund and the Master Servicer shall be entitled to be reimbursed therefor out of the Distribution Account. The Master Servicer shall not be liable for any acts or omissions of any Servicer except to the extent that damages or expenses are incurred as a result of such act or omissions and such damages and expenses would not have been incurred but for the negligence, willful misfeasance, bad faith or recklessness of the Master Servicer in supervising, monitoring and overseeing the obligations of the Servicers in this Agreement. Section 9.09 Indemnification; Third-Party Claims. The Master Servicer agrees to indemnify the Depositor, the Securities Administrator and the Trustee, and hold them harmless against any and all claims, losses, penalties, fines, forfeitures, legal fees and related costs, judgments, and any other costs, liability, fees and expenses that the Depositor, the Securities Administrator or the Trustee may sustain as a result of the Master Servicer's willful misfeasance, bad faith or negligence in the performance of its duties hereunder or by reason of its reckless disregard for its obligations and duties under this Agreement. The Depositor, the Securities Administrator and the Trustee shall immediately notify the Master Servicer if a claim is made by a third party with respect to this Agreement or the Mortgage Loans entitling the Depositor, the Securities Administrator or the Trustee to indemnification under this Section 9.09, whereupon the Master Servicer shall assume the defense of any such claim and pay all expenses in connection therewith, including counsel fees, and promptly pay, discharge and satisfy any judgment or decree which may be entered against it or them in respect of such claim. ARTICLE X REMIC ADMINISTRATION Section 10.01 REMIC Administration. (a) REMIC elections as set forth in the Preliminary Statement shall be made on Forms 1066 or other appropriate federal tax or information return for the taxable year ending on the last day of the calendar year in which the Certificates are issued. The regular interests and residual interest in each REMIC shall be as designated in the Preliminary Statement. 95 (b) The Closing Date is hereby designated as the "Startup Day" of each REMIC within the meaning of section 86OG(a)(9) of the Code. The latest possible maturity date for purposes of Treasury Regulation 1.86OG-1(a)(4) will be the Latest Possible Maturity Date. (c) The Securities Administrator shall represent the Trust Fund in any administrative or judicial proceeding relating to an examination or audit by any governmental taxing authority with respect thereto. The Securities Administrator shall pay any and all tax related expenses (not including taxes) of each REMIC, including but not limited to any professional fees or expenses related to audits or any administrative or judicial proceedings with respect to such REMIC that involve the Internal Revenue Service or state tax authorities, but only to the extent that (i) such expenses are ordinary or routine expenses, including expenses of a routine audit but not expenses of litigation (except as described in (ii)); or (ii) such expenses or liabilities (including taxes and penalties) are attributable to the negligence or willful misconduct of the Securities Administrator in fulfilling its duties hereunder (including its duties as tax return preparer). The Securities Administrator shall be entitled to reimbursement of expenses to the extent provided in clause (i) above from the Securities Administration Account, provided, however, the Securities Administrator shall not be entitled to reimbursement for expenses incurred in connection with the preparation of tax returns and other reports as required by Section 6.20 and this Section. (d) The Securities Administrator shall prepare, and the Trustee shall sign and file, as instructed by the Securities Administrator, all of each REMIC's federal and appropriate state tax and information returns as such REMIC's direct representative. The expenses of preparing and filing such returns shall be borne by the Securities Administrator. (e) The Securities Administrator or its designee shall perform on behalf of each REMIC all reporting and other tax compliance duties that are the responsibility of such REMIC under the Code, the REMIC Provisions, or other compliance guidance issued by the Internal Revenue Service or any state or local taxing authority. Among its other duties, if required by the Code, the REMIC Provisions, or other such guidance, the Securities Administrator shall provide, upon receipt of additional reasonable compensation, (i) to the Treasury or other governmental authority such information as is necessary for the application of any tax relating to the transfer of a Residual Certificate to any disqualified person or organization pursuant to Treasury Regulation 1.860E-2(a)(5) and any person designated in Section 860E(e)(3) of the Code and (ii) to the Trustee such information as is necessary for the Trustee to provide to the Certificateholders such information or reports as are required by the Code or REMIC Provisions. (f) The Trustee, the Securities Administrator, the Master Servicer and the Holders of Certificates shall take any action or cause any REMIC to take any action necessary to create or maintain the status of any REMIC as a REMIC under the REMIC Provisions and shall assist each other as necessary to create or maintain such status. Neither the Trustee, the Securities Administrator, the Master Servicer nor the Holder of any Residual Certificate shall knowingly take any action, cause any REMIC to take any action or fail to take (or fail to cause to be taken) any action that, under the REMIC Provisions, if taken or not taken, as the case may be, could (i) endanger the status of any REMIC as a REMIC or (ii) result in the imposition of a tax upon any REMIC (including but not limited to the tax on prohibited transactions as defined in Code Section 860F(a)(2) and the tax on prohibited contributions set forth on Section 860G(d) of the 96 Code) (either such event, an "Adverse REMIC Event") unless the Trustee, the Securities Administrator and the Master Servicer have received an Opinion of Counsel (at the expense of the party seeking to take such action) to the effect that the contemplated action will not endanger such status or result in the imposition of such a tax. In addition, prior to taking any action with respect to any REMIC or the assets therein, or causing any REMIC to take any action, which is not expressly permitted under the terms of this Agreement, any Holder of a Residual Certificate will consult with the Trustee, the Securities Administrator, the Master Servicer or their respective designees, in writing, with respect to whether such action could cause an Adverse REMIC Event to occur with respect to any REMIC, and no such Person shall take any such action or cause any REMIC to take any such action as to which the Trustee, the Securities Administrator or the Master Servicer has advised it in writing that an Adverse REMIC Event could occur; provided, however, that if no Adverse REMIC Event would occur but such action could result in the imposition of additional taxes on the Residual Certificateholders, no such Person shall take any such action, or cause any REMIC to take any such action without the written consent of the Residual Certificateholders. (g) Each Holder of a Residual Certificate shall pay when due any and all taxes imposed on the related REMIC by federal or state governmental authorities. To the extent that such taxes are not paid by a Residual Certificateholder, the Trustee or the Paying Agent shall pay any remaining REMIC taxes out of current or future amounts otherwise distributable to the Holder of the Residual Certificate in any such REMIC or, if no such amounts are available, out of other amounts held in the Collection Account, and shall reduce amounts otherwise payable to holders of regular interests in any such REMIC, as the case may be. (h) The Securities Administrator shall, for federal income tax purposes, maintain books and records with respect to each REMIC on a calendar year and on an accrual basis. (i) No additional contributions of assets shall be made to any REMIC, except as expressly provided in this Agreement. (j) Neither the Securities Administrator nor the Master Servicer shall enter into any arrangement by which any REMIC will receive a fee or other compensation for services. (k) The Trustee and the Securities Administrator shall treat the Reserve Fund as an outside reserve fund within the meaning of Treasury Regulation Section 1.860G-2(h) that is owned by the holder of the Class X Certificate and that is not an asset of any REMIC. The Trustee and the Securities Administrator shall treat the rights of the Holders of the LIBOR Certificates to receive distributions from the Reserve Fund to cover Net WAC Shortfalls as payments under a cap contract written by the Holder of the Class X Certificate in favor of the Holders of the LIBOR Certificates. Thus, each Class A-1, Class A-2, Class M-1 and Class M-2 Certificates shall be treated as representing not only ownership of regular interests in a REMIC, but also ownership of an interest in an interest rate cap contract. For purposes of determining the issue prices of the Certificates, the interest rate cap contracts shall be assumed to have a zero value unless and until required otherwise by an applicable taxing authority. (l) The Class LT-R Holder shall act as "tax matters person" with respect to the Lower-Tier REMIC and shall act as agent for the Class R Certificateholder as "tax matters person" with 97 respect to the Upper-Tier REMIC and the Securities Administrator shall act as agent for the Class LT-R Holder in such roles, unless and until another party is so designated by the Class LT-R Holder. Section 10.02 Prohibited Transactions and Activities. Neither the Depositor, the Master Servicer nor the Trustee shall sell, dispose of, or substitute for any of the Mortgage Loans, except in a disposition pursuant to (i) the foreclosure of a Mortgage Loan, (ii) the bankruptcy of the Trust Fund, (iii) the termination of each REMIC pursuant to Article VII of this Agreement, (iv) a substitution pursuant to Article II of this Agreement or (v) a repurchase of Mortgage Loans pursuant to Article II of this Agreement, nor acquire any assets for any REMIC, nor sell or dispose of any investments in the Distribution Account for gain, nor accept any contributions to any REMIC after the Closing Date, unless it has received an Opinion of Counsel (at the expense of the party causing such sale, disposition, or substitution) that such disposition, acquisition, substitution, or acceptance will not (a) affect adversely the status of any such REMIC as a REMIC or of the interests therein other than the Residual Certificate as the regular interests therein, (b) affect the distribution of interest or principal on the Certificates, (c) result in the encumbrance of the assets transferred or assigned to the Trust Fund (except pursuant to the provisions of this Agreement) or (d) cause any such REMIC to be subject to any tax including a tax on prohibited transactions or prohibited contributions pursuant to the REMIC Provisions. Section 10.03 Indemnification with Respect to Prohibited Transactions or Loss of REMIC Status. In the event that a REMIC fails to qualify as a REMIC, loses its status as a REMIC, or incurs federal, state or local taxes as a result of a prohibited transaction or prohibited contribution under the REMIC Provisions due to the negligent performance by the Securities Administrator of its duties and obligations set forth herein, the Securities Administrator shall indemnify the Certificateholders of the related Residual Certificate against any and all losses, claims, damages, liabilities or expenses ("Losses") resulting from such negligence; provided, however, that the Securities Administrator shall not be liable for any such Losses attributable to the action or inaction of the Depositor, the Trustee or the Holder of the Residual Certificate, nor for any such Losses resulting from misinformation provided by any of the foregoing parties on which the Securities Administrator has relied. Notwithstanding the foregoing, however, in no event shall the Securities Administrator have any liability (1) for any action or omission that is taken in accordance with and in compliance with the express terms of, or which is expressly permitted by the terms of, this Agreement or under any Servicing Agreement or under any Acknowledgement, (2) for any Losses other than arising out of malfeasance, willful misconduct or negligent performance by the Service Administrator of its duties and obligations set forth herein, and (3) for any special or consequential damages to Certificateholders of the related Residual Certificate (in addition to payment of principal and interest on the Certificates). Section 10.04 REO Property. (a) Notwithstanding any other provision of this Agreement, the Master Servicer, acting on behalf of the Trustee hereunder, shall not, except to the extent provided in the applicable 98 Servicing Agreement, knowingly permit any Servicer to, rent, lease, or otherwise earn income on behalf of any REMIC with respect to any REO Property which might cause such REO Property to fail to qualify as "foreclosure property" within the meaning of section 860G(a)(8) of the Code or result in the receipt by any REMIC of any "income from non-permitted assets" within the meaning of section 860F(a)(2) of the Code or any "net income from foreclosure property" which is subject to tax under the REMIC Provisions unless the applicable Servicer has provided to the Trustee an Opinion of Counsel concluding that, under the REMIC Provisions, such action would not adversely affect the status of any REMIC as a REMIC and any income generated for any REMIC by the REO Property would not result in the imposition of a tax upon such REMIC. (b) The Depositor shall cause the applicable Servicer (to the extent provided in its Servicing Agreement) to make reasonable efforts to sell any REO Property for its fair market value. In any event, however, the Depositor shall, or shall cause the applicable Servicer (to the extent provided in its Servicing Agreement) to, dispose of any REO Property within three years of its acquisition by the Trust Fund unless the Depositor or the applicable Servicer (on behalf of the Trust Fund) has received a grant of extension from the Internal Revenue Service to the effect that, under the REMIC Provisions and any relevant proposed legislation and under applicable state law, the REMIC may hold REO Property for a longer period without adversely affecting the REMIC status of such REMIC or causing the imposition of a Federal or state tax upon such REMIC. If such an extension has been received, then the Depositor, acting on behalf of the Trustee hereunder, shall, or shall cause the applicable Servicer to, continue to attempt to sell the REO Property for its fair market value for such period longer than three years as such extension permits (the "Extended Period"). If such an extension has not been received and the Depositor or the applicable Servicer, acting on behalf of the Trust Fund hereunder, is unable to sell the REO Property within 33 months after its acquisition by the Trust Fund or if such an extension, has been received and the Depositor or the applicable Servicer is unable to sell the REO Property within the period ending three months before the close of the Extended Period, the Depositor shall cause the applicable Servicer, before the end of the three year period or the Extended Period, as applicable, to (i) purchase such REO Property at a price equal to the REO Property's fair market value or (ii) auction the REO Property to the highest bidder (which may be the applicable Servicer) in an auction reasonably designed to produce a fair price prior to the expiration of the three-year period or the Extended Period, as the case may be. ARTICLE XI MISCELLANEOUS PROVISIONS Section 11.01 Binding Nature of Agreement; Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Section 11.02 Entire Agreement. This Agreement contains the entire agreement and understanding among the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous 99 agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. Section 11.03 Amendment. (a) This Agreement may be amended from time to time by the Depositor, the Master Servicer, the Securities Administrator, and the Trustee, without notice to or the consent of any of the Holders, (i) to cure any ambiguity or mistake, (ii) to cause the provisions herein to conform to or be consistent with or in furtherance of the statements made with respect to the Certificates, the Trust Fund or this Agreement in any Offering Document, or to correct or supplement any provision herein which may be inconsistent with any other provisions herein or with the provisions of any Servicing Agreement, (iii) to make any other provisions with respect to matters or questions arising under this Agreement or (iv) to add, delete, or amend any provisions to the extent necessary or desirable to comply with any requirements imposed by the Code and the REMIC Provisions. No such amendment effected pursuant to the preceding sentence shall, as evidenced by an Opinion of Counsel, adversely affect the status of any REMIC created pursuant to this Agreement, nor shall such amendment effected pursuant to clause (iii) of such sentence adversely affect in any material respect the interests of any Holder. Prior to entering into any amendment without the consent of Holders pursuant to this paragraph, the Trustee shall be provided with an Opinion of Counsel (at the expense of the party requesting such amendment) to the effect that such amendment is permitted under this Section. Any such amendment shall be deemed not to adversely affect in any material respect any Holder, if the Trustee receives written confirmation from each Rating Agency that such amendment will not cause such Rating Agency to reduce the then current rating assigned to the Certificates. (b) This Agreement may also be amended from time to time by the Depositor, the Master Servicer, the Securities Administrator and the Trustee, with the consent of the Holders of not less than 66-2/3% of the Class Principal Amount (or Percentage Interest) of each Class of Certificates affected thereby for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Holders; provided, however, that no such amendment shall be made unless the Trustee receives an Opinion of Counsel, at the expense of the party requesting the change, that such change will not adversely affect the status of any REMIC as a REMIC or cause a tax to be imposed on such REMIC; and provided further, that no such amendment may (i) reduce in any manner the amount of, or delay the timing of, payments received on Mortgage Loans which are required to be distributed on any Certificate, without the consent of the Holder of such Certificate or (ii) reduce the aforesaid percentages of Class Principal Amount or Class Notional Amount (or Percentage Interest) of Certificates of each Class, the Holders of which are required to consent to any such amendment without the consent of the Holders of 100% of the Class Principal Amount or Class Notional Amount (or Percentage Interest) of each Class of Certificates affected thereby. For purposes of this paragraph, references to "Holder" or "Holders" shall be deemed to include, in the case of any Class of Book-Entry Certificates, the related Certificate Owners. 100 (c) Promptly after the execution of any such amendment, the Trustee shall furnish written notification of the substance of such amendment to each Holder, the Depositor and the Rating Agencies. (d) It shall not be necessary for the consent of Holders under this Section 11.03 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents and of evidencing the authorization of the execution thereof by Holders shall be subject to such reasonable regulations as the Trustee may prescribe. (e) Notwithstanding anything to the contrary in any Servicing Agreement, the Trustee shall not consent to any amendment of any Servicing Agreement except pursuant to the standards provided in this Section with respect to amendment of this Agreement. Section 11.04 Voting Rights. Except to the extent that the consent of all affected Certificateholders is required pursuant to this Agreement, with respect to any provision of this Agreement requiring the consent of Certificateholders representing specified percentages of aggregate outstanding Certificate Principal Amount or Class Notional Amount (or Percentage Interest), Certificates owned by the Depositor, the Master Servicer, the Securities Administrator, the Trustee, any Servicer or any Affiliates thereof are not to be counted so long as such Certificates are owned by the Depositor, the Master Servicer, the Securities Administrator, the Trustee, any Servicer or any Affiliate thereof. Section 11.05 Provision of Information. (a) For so long as any of the Certificates of any Series or Class are "restricted securities" within the meaning of Rule 144(a)(3) under the Act, each of the Depositor, the Master Servicer and the Trustee agree to cooperate with each other to provide to any Certificateholders and to any prospective purchaser of Certificates designated by such holder, upon the request of such holder or prospective purchaser, any information required to be provided to such holder or prospective purchaser to satisfy the condition set forth in Rule 144A(d)(4) under the Act. Any reasonable, out-of-pocket expenses incurred by the Trustee, the Master Servicer or the Securities Administrator in providing such information shall be reimbursed by the Depositor. (b) The Securities Administrator shall provide to any person to whom a Prospectus was delivered, upon the request of such person specifying the document or documents requested, (i) a copy (excluding exhibits) of any report on Form 8-K or Form 10-K filed with the Securities and Exchange Commission pursuant to Section 9.23(b) and (ii) a copy of any other document incorporated by reference in the Prospectus. Any reasonable out-of-pocket expenses incurred by the Securities Administrator in providing copies of such documents shall be reimbursed by the Depositor. (c) On each Distribution Date, the Securities Administrator shall deliver or cause to be delivered by first class mail or make available on its website to the Depositor, Attention: Contract Finance, a copy of the report delivered to Certificateholders pursuant to Section 4.02. 101 Section 11.06 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES APPLIED IN NEW YORK. Section 11.07 Notices. All requests, demands, notices, authorizations, directions, consents, waivers and communications hereunder shall be in writing and shall be deemed to have been duly given when received by (a) in the case of the Depositor, Sequoia Residential Funding, Inc., 591 Redwood Highway, Suite 3160, Mill Valley, CA 94941, telecopy number (415) 381-1773, Attention: Sequoia Mortgage Trust 2003-2, (b) in the case of the Seller, RWT Holdings, Inc., 591 Redwood Highway, Suite 3140, Mill Valley, CA 94941, telecopy number (415) 381-1773, Attention: Sequoia Mortgage Trust 2003-2, (c) in the case of the Master Servicer or the Securities Administrator, Wells Fargo Bank Minnesota, National Association, P.O. Box 98, Columbia, Maryland 21046 (or, for overnight deliveries, 9062 Old Annapolis Road, Columbia, Maryland 21045), telecopy number (410) 715-2380, Attention: Sequoia Mortgage Trust 2003-2, and (d) with respect to the Trustee or the Certificate Registrar, its respective Corporate Trust Office, or as to each party such other address as may hereafter be furnished by such party to the other parties in writing. All demands, notices and communications to a party hereunder shall be in writing and shall be deemed to have been duly given when delivered to such party at the relevant address, facsimile number or electronic mail address set forth above or at such other address, facsimile number or electronic mail address as such party may designate from time to time by written notice in accordance with this Section 11.07. Section 11.08 Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement or of the Certificates or the rights of the Holders thereof. Section 11.09 Indulgences; No Waivers. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver. 102 Section 11.10 Headings Not To Affect Interpretation. The headings contained in this Agreement are for convenience of reference only, and they shall not be used in the interpretation hereof. Section 11.11 Benefits of Agreement. Nothing in this Agreement or in the Certificates, express or implied, shall give to any Person, other than the parties to this Agreement and their successors hereunder and the Holders of the Certificates, any benefit or any legal or equitable right, power, remedy or claim under this Agreement, except to the extent specified in Section 11.15. Section 11.12 Special Notices to the Rating Agencies. (a) The Depositor shall give prompt notice to the Rating Agencies of the occurrence of any of the following events of which it has notice: (i) any amendment to this Agreement pursuant to Section 11.03; (ii) any Assignment by the Master Servicer of its rights hereunder or delegation of its duties hereunder; (iii) the occurrence of any Event of Default described in Section 6.14; (iv) any notice of termination given to the Master Servicer pursuant to Section 6.14 and any resignation of the Master Servicer hereunder; (v) the appointment of any successor to any Master Servicer pursuant to Section 6.14; (vi) the making of a final payment pursuant to Section 7.02; and (vii) any termination of the rights and obligations of any Servicer under the applicable Servicing Agreement. (b) All notices to the Rating Agencies provided for this Section shall be in writing and sent by first class mail, telecopy or overnight courier, as follows: If to Moody's, to: Moody's Investors Service, Inc. 99 Church Street New York, New York 10007 Attention: Residential Mortgages 103 If to S&P, to: Standard & Poor's Ratings Service, a Division of The McGraw-Hill Companies, Inc. 55 Water Street New York, New York 10041 Attention: Residential Mortgages (c) The Securities Administrator shall provide or make available to the Rating Agencies reports prepared pursuant to Section 4.02. In addition, the Securities Administrator shall, at the expense of the Trust Fund, make available to each Rating Agency such information as such Rating Agency may reasonably request regarding the Certificates or the Trust Fund, to the extent that such information is reasonably available to the Securities Administrator. (d) The Depositor hereby represents to S&P that, to the Depositor's knowledge, the information provided to such Rating Agency, including the loan level detail, is true and correct according to such Rating Agency's requirements. Section 11.13 Conflicts. To the extent that the terms of this Agreement conflict with the terms of any Servicing Agreement, the related Servicing Agreement shall govern. Section 11.14 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same instrument. Section 11.15 No Petitions. The Trustee and the Master Servicer, by entering into this Agreement, hereby covenant and agree that they shall not at any time institute against the Depositor, or join in any institution against the Depositor of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to this Agreement or any of the documents entered into by the Depositor in connection with the transactions contemplated by this Agreement. 104 IN WITNESS WHEREOF, the parties hereto have caused their names to be signed hereto by their respective officers hereunto duly authorized as of the day and year first above written. SEQUOIA RESIDENTIAL FUNDING, INC., as Depositor By: _________________________________ John H. Isbrandtsen Vice President HSBC BANK USA, as Trustee By: _________________________________ Wendy Zhang Vice President WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Master Servicer By: _________________________________ Peter J. Masterman Vice President WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Securities Administrator By: _________________________________ Stacey Wainwright Assistant Vice President Solely for purposes of Section 2.04 accepted and agreed to by: RWT HOLDINGS, INC. By: ____________________________ John H. Isbrandtsen Authorized Signatory EXHIBIT A FORMS OF CERTIFICATES [See Tab #__] B-1 EXHIBIT B FORM OF RESIDUAL CERTIFICATE TRANSFER AFFIDAVIT (TRANSFEREE) STATE OF ) ) ss.: COUNTY OF ) [NAME OF OFFICER], _________________ being first duly sworn, deposes and says: 1. That he [she] is [title of officer] ________________________ of [name of Purchaser] _________________________________________ (the "Purchaser"), a _______________________ [description of type of entity] duly organized and existing under the laws of the [State of __________] [United States], on behalf of which he [she] makes this affidavit. 2. That the Purchaser's Taxpayer Identification Number is [ ]. 3. That the Purchaser is not a "disqualified organization" within the meaning of Section 860E(e)(5) of the Internal Revenue Code of 1986, as amended (the "Code") and will not be a "disqualified organization" as of [date of transfer], and that the Purchaser is not acquiring a Residual Certificate (as defined in the Agreement) for the account of, or as agent (including a broker, nominee, or other middleman) for, any person or entity from which it has not received an affidavit substantially in the form of this affidavit. For these purposes, a "disqualified organization" means the United States, any state or political subdivision thereof, any foreign government, any international organization, any agency or instrumentality of any of the foregoing (other than an instrumentality if all of its activities are subject to tax and a majority of its board of directors is not selected by such governmental entity), any cooperative organization furnishing electric energy or providing telephone service to persons in rural areas as described in Code Section 1381(a)(2)(C), any "electing large partnership" within the meaning of Section 775 of the Code, or any organization (other than a farmers' cooperative described in Code Section 521) that is exempt from federal income tax unless such organization is subject to the tax on unrelated business income imposed by Code Section 511. 4. That the Purchaser either (x) is not, and on __________________ [date of transfer] will not be, an employee benefit plan or other retirement arrangement subject to Section 406 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code ("Code"), (collectively, a "Plan") or a person acting on behalf of any such Plan or investing the assets of any such Plan to acquire a Residual Certificate; (y) is an insurance company that is purchasing the Certificate with funds contained in an "insurance company general account" as defined in Section V(e) of Prohibited Transaction Class B-2 Exemption ("PTCE") 95-60 and the purchase and holding of the Certificate are covered under Section I and III of PTCE 95-60; or (z) herewith delivers to the Certificate Registrar an opinion of counsel (a "Benefit Plan Opinion") satisfactory to the Certificate Registrar, and upon which the Certificate Registrar, the Trustee, the Master Servicer, the Depositor and Securities Administrator shall be entitled to rely, to the effect that the purchase or holding of such Residual Certificate by the Investor will not result in any non-exempt prohibited transactions under Title I of ERISA or Section 4975 of the Code and will not subject the Certificate Registrar, the Trustee, the Depositor, the Master Servicer or the Securities Administrator to any obligation in addition to those undertaken by such entities in the Pooling and Servicing Agreement, which opinion of counsel shall not be an expense of the Trust Fund or any of the above parties. 5. That the Purchaser hereby acknowledges that under the terms of the Pooling and Servicing Agreement, dated as of April 1, 2003 (the "Agreement"), by and among Sequoia Residential Funding, Inc., as Depositor, Wells Fargo Bank Minnesota, National Association, as Master Servicer and as Securities Administrator and HSBC Bank USA, as Trustee with respect to Sequoia Mortgage Trust 2003-2 Mortgage Pass-Through Certificates, no transfer of the Residual Certificates shall be permitted to be made to any person unless the Certificate Registrar and Trustee have received a certificate from such transferee containing the representations in paragraphs 3 and 4 hereof. 6. That the Purchaser does not hold REMIC residual securities as nominee to facilitate the clearance and settlement of such securities through electronic book-entry changes in accounts of participating organizations (such entity, a "Book-Entry Nominee"). 7. That the Purchaser does not have the intention to impede the assessment or collection of any federal, state or local taxes legally required to be paid with respect to such Residual Certificate. 8. That the Purchaser will not transfer a Residual Certificate to any person or entity (i) as to which the Purchaser has actual knowledge that the requirements set forth in paragraph 3, paragraph 6 or paragraph 10 hereof are not satisfied or that the Purchaser has reason to believe does not satisfy the requirements set forth in paragraph 7 hereof, and (ii) without obtaining from the prospective Purchaser an affidavit substantially in this form and providing to the Trustee and the Certificate Registrar a written statement substantially in the form of Exhibit C to the Agreement. 9. That the Purchaser understands that, as the holder of a Residual Certificate, the Purchaser may incur tax liabilities in excess of any cash flows generated by the interest and that it intends to pay taxes associated with holding such Residual Certificate as they become due. B-3 10. That the Purchaser (i) is not a Non-U.S. Person or (ii) is a Non-U.S. Person that holds a Residual Certificate in connection with the conduct of a trade or business within the United States and has furnished the transferor, the Trustee and the Certificate Registrar with an effective Internal Revenue Service Form W-8ECI (Certificate of Foreign Person's Claim for Exemption From Withholding on Income Effectively Connected With the Conduct of a Trade or Business in the United States) or successor form at the time and in the manner required by the Code or (iii) is a Non-U.S. Person that has delivered to the transferor, the Trustee and the Certificate Registrar an opinion of a nationally recognized tax counsel to the effect that the transfer of such Residual Certificate to it is in accordance with the requirements of the Code and the regulations promulgated thereunder and that such transfer of a Residual Certificate will not be disregarded for federal income tax purposes. "Non-U.S. Person" means an individual, corporation, partnership or other person other than (i) a citizen or resident of the United States; (ii) a corporation, partnership or other entity created or 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 that is subject to U.S. federal income tax regardless of the source of its income; (iv) 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 trustees have authority to control all substantial decisions of the trust; and, (v) to the extent provided in Treasury regulations, certain trusts in existence on June 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. 11. The Purchaser will not cause income from the Residual Certificate to be attributable to a foreign permanent establishment or fixed base of the Purchaser or another U.S. taxpayer. 12. That the Purchaser agrees to such amendments of the Pooling and Servicing Agreement as may be required to further effectuate the restrictions on transfer of any Residual Certificate to such a "disqualified organization," an agent thereof, a Book-Entry Nominee, or a person that does not satisfy the requirements of paragraph 7 and paragraph 10 hereof. 13. That the Purchaser consents to the designation of the Securities Administrator to act as agent for the "tax matters person" of each REMIC created by the Trust Fund pursuant to the Pooling and Servicing Agreement. B-4 IN WITNESS WHEREOF, the Purchaser has caused this instrument to be executed on its behalf, pursuant to authority of its Board of Directors, by its [title of officer] this _____ day of __________ 20__. _________________________________ [name of Purchaser] By:______________________________ Name: Title: Personally appeared before me the above-named [name of officer] ________________, known or proved to me to be the same person who executed the foregoing instrument and to be the [title of officer] _________________ of the Purchaser, and acknowledged to me that he [she] executed the same as his [her] free act and deed and the free act and deed of the Purchaser. Subscribed and sworn before me this _____ day of __________ 20__. NOTARY PUBLIC ______________________________ COUNTY OF_____________________ STATE OF______________________ My commission expires the _____ day of __________ 20__. B-5 EXHIBIT C RESIDUAL CERTIFICATE TRANSFER AFFIDAVIT (TRANSFEROR) ____________________________ Date Re: Sequoia Mortgage Trust 2003-2 Mortgage Pass-Through Certificates _______________________ (the "Transferor") has reviewed the attached affidavit of _____________________________ (the "Transferee"), and has no actual knowledge that such affidavit is not true and has no reason to believe that the information contained in paragraph 7 thereof is not true, and has no reason to believe that the Transferee has the intention to impede the assessment or collection of any federal, state or local taxes legally required to be paid with respect to a Residual Certificate. In addition, the Transferor has conducted a reasonable investigation at the time of the transfer and found that the Transferee had historically paid its debts as they came due and found no significant evidence to indicate that the Transferee will not continue to pay its debts as they become due. Very truly yours, _______________________________ Name: Title: C-1 EXHIBIT D FORM OF CUSTODY AGREEMENT D-1 EXHIBIT E LIST OF SERVICING AGREEMENTS 1. The Master Servicing Agreement between RWT Holdings, Inc. ("RWT") and Morgan Stanley Dean Witter Credit Corporation, dated August 1, 2002, as modified by the related Acknowledgements. 2. The Mortgage Loan Flow Purchase, Sale and Servicing Agreement, dated as of August 1, 2002, between RWT and GreenPoint Mortgage Funding, Inc., as modified by the related Acknowledgements. 3. The Mortgage Loan Flow Purchase, Sale & Servicing Agreement among RWT, Cendant Mortgage Corporation ("Cendant") and Bishop's Gate Residential Mortgage Trust (formerly known as Cendant Residential Mortgage Trust), as Sellers, and Cendant, as Servicer, dated August 1, 2002, and the Additional Collateral Servicing Agreement between RWT and Cendant, dated August 1, 2002, each as modified by the related Acknowledgements. E-1 EXHIBIT F LIST OF PURCHASE AGREEMENTS 1. The Master Mortgage Loan Purchase Agreement between RWT Holdings, Inc. ("RWT") and Morgan Stanley Dean Witter Credit Corporation, dated August 1, 2002, as modified by the related Acknowledgements. 2. The Mortgage Loan Flow Purchase, Sale and Servicing Agreement, dated as of August 1, 2002, between RWT and GreenPoint Mortgage Funding, Inc., as modified by the related Acknowledgements. 3. The Mortgage Loan Flow Purchase, Sale & Servicing Agreement among RWT, Cendant Mortgage Corporation ("Cendant") and Bishop's Gate Residential Mortgage Trust (formerly known as Cendant Residential Mortgage Trust), as Sellers, and Cendant, as Servicer, dated August 1, 2002, as modified by the related Acknowledgements. F-1 EXHIBIT G LIST OF LIMITED PURPOSE SURETY BOND 1. Ambac Assurance Corporation Surety Bond No. AB0240BE, issued March 17, 1999, for Morgan Stanley Dean Witter Credit Corporation loans. 2. Ambac Assurance Corporation Surety Bond No. AB0039BE, issued February 26, 1996, for Merrill Lynch Credit Corporation loans. G-1 EXHIBIT H FORM OF RULE 144A TRANSFER CERTIFICATE Re: Sequoia Mortgage Trust 2003-2 Mortgage Pass-Through Certificates Reference is hereby made to the Pooling and Servicing Agreement, dated as of April 1, 2003 (the "Pooling and Servicing Agreement"), by and among Sequoia Residential Funding, Inc., as Depositor, Wells Fargo Bank Minnesota, National Association, as Master Servicer and as Securities Administrator and HSBC Bank USA, as Trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Pooling and Servicing Agreement. This letter relates to $__________ initial Certificate Balance of Class _____ Certificates which are held in the form of Definitive Certificates registered in the name of ______________ (the "Transferor"). The Transferor has requested a transfer of such Definitive Certificates for Definitive Certificates of such Class registered in the name of [insert name of transferee]. In connection with such request, and in respect of such Certificates, the Transferor hereby certifies that such Certificates are being transferred in accordance with (i) the transfer restrictions set forth in the Pooling and Servicing Agreement and the Certificates and (ii) Rule 144A under the Securities Act to a purchaser that the Transferor reasonably believes is a "qualified institutional buyer" within the meaning of Rule 144A purchasing for its own account or for the account of a "qualified institutional buyer," which purchaser is aware that the sale to it is being made in reliance upon Rule 144A, in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States or any other applicable jurisdiction. This certificate and the statements contained herein are made for your benefit and the benefit of the Underwriters and the Depositor. _____________________________________ [Name of Transferor] By:__________________________________ Name: Title: Dated: ___________, ____ H-1 EXHIBIT I FORM OF PURCHASER'S LETTER FOR INSTITUTIONAL ACCREDITED INVESTOR Date Dear Sirs: In connection with our proposed purchase of $______________ principal amount of Sequoia Mortgage Trust 2003-2 Mortgage Pass-Through Certificates (the "Privately Offered Certificates") of Sequoia Residential Funding, Inc. (the "Depositor"), we confirm that: (1) We understand that the Privately Offered Certificates have not been, and will not be, registered under the Securities Act of 1933, as amended (the "Securities Act"), and may not be sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell any Privately Offered Certificates within two years of the later of the date of original issuance of the Privately Offered Certificates or the last day on which such Privately Offered Certificates are owned by the Depositor or any affiliate of the Depositor we will do so only (A) to the Depositor, (B) to "qualified institutional buyers" (within the meaning of Rule 144A under the Securities Act) in accordance with Rule 144A under the Securities Act ("QIBs"), (C) pursuant to the exemption from registration provided by Rule 144 under the Securities Act, or (D) to an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act that is not a QIB (an "Institutional Accredited Investor") which, prior to such transfer, delivers to the Certificate Registrar under the Pooling and Servicing Agreement, dated as of April 1, 2003, by and among Sequoia Residential Funding, Inc., as Depositor, Wells Fargo Bank Minnesota, National Association, as Master Servicer and as Securities Administrator and HSBC Bank USA, as Trustee, a signed letter in the form of this letter; and we further agree, in the capacities stated above, to provide to any person purchasing any of the Privately Offered Certificates from us a notice advising such purchaser that resales of the Privately Offered Certificates are restricted as stated herein. (2) We understand that, in connection with any proposed resale of any Privately Offered Certificates to an Institutional Accredited Investor, we will be required to furnish to the Certificate Registrar a certification from such transferee in the form hereof to confirm that the proposed sale is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. We further understand that the Privately Offered Certificates purchased by us will bear a legend to the foregoing effect. I-1 (3) We are acquiring the Privately Offered Certificates for investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Privately Offered Certificates, and we and any account for which we are acting are each able to bear the economic risk of such investment. (4) We are an Institutional Accredited Investor and we are acquiring the Privately Offered Certificates purchased by us for our own account or for one or more accounts (each of which is an Institutional Accredited Investor) as to each of which we exercise sole investment discretion. (5) We have received such information as we deem necessary in order to make our investment decision. (6) If we are acquiring ERISA-Restricted Certificates, we understand that in accordance with ERISA, the Code and the Exemption, no Plan and no person acting on behalf of such a Plan may acquire such Certificate except in accordance with Section 3.03(d) of the Pooling and Servicing Agreement. Terms used in this letter which are not otherwise defined herein have the respective meanings assigned thereto in the Pooling and Servicing Agreement. I-2 You are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. Very truly yours, ____________________________________ [Purchaser] By: ________________________________ Name: Title: I-3 EXHIBIT J FORM OF ERISA TRANSFER AFFIDAVIT STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) The undersigned, being first duly sworn, deposes and says as follows: 1. The undersigned is the ______________________ of ______________ (the "Investor"), a [corporation duly organized] and existing under the laws of __________, on behalf of which he makes this affidavit. 2. The Investor either (x) is not, and on ___________ [date of transfer] will not be, an employee benefit plan or other retirement arrangement subject to Section 406 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"), (collectively, a "Plan") or a person acting on behalf of any such Plan or investing the assets of any such Plan; (y) if the Certificate has been the subject of an ERISA-Qualifying Underwriting, is an insurance company that is purchasing the Certificate with funds contained in an "insurance company general account" as defined in Section V(e) of Prohibited Transaction Class Exemption ("PTCE") 95-60 and the purchase and holding of the Certificate are covered under Section I and III of PTCE 95-60; or (z) herewith delivers to the Certificate Registrar an opinion of counsel (a "Benefit Plan Opinion") satisfactory to the Certificate Registrar, and upon which the Certificate Registrar, the Trustee, the Master Servicer, the Depositor and the Securities Administrator shall be entitled to rely, to the effect that the purchase or holding of such Certificate by the Investor will not constitute or result in any non-exempt prohibited transactions under Title I of ERISA or Section 4975 of the Code and will not subject the Certificate Registrar, the Trustee, the Master Servicer, the Depositor or the Securities Administrator to any obligation in addition to those undertaken by such entities in the Pooling and Servicing Agreement, which opinion of counsel shall not be an expense of the Trust Fund or the above parties. 3. The Investor hereby acknowledges that under the terms of the Pooling and Servicing Agreement, dated as of April 1, 2003 (the "Agreement"), by and among Sequoia Residential Funding, Inc., as Depositor, Wells Fargo Bank Minnesota, National Association, as Master Servicer and as Securities Administrator and HSBC Bank USA, as Trustee, no transfer of the ERISA-Restricted Certificates shall be permitted to be made to any person unless the Certificate Registrar has received a certificate from such transferee in the form hereof. J-1 IN WITNESS WHEREOF, the Investor has caused this instrument to be executed on its behalf, pursuant to proper authority, by its duly authorized officer, duly attested, this ____ day of _______________ 20___. _________________________________ [Investor] By:______________________________ Name: Title: ATTEST: _____________________________ STATE OF ) ) ss.: COUNTY OF ) Personally appeared before me the above-named ________________, known or proved to me to be the same person who executed the foregoing instrument and to be the ____________________ of the Investor, and acknowledged that he executed the same as his free act and deed and the free act and deed of the Investor. Subscribed and sworn before me this _____ day of _________ 20___. ______________________________ NOTARY PUBLIC My commission expires the _____ day of __________ 20___. J-2 EXHIBIT K FORM OF LETTER OF REPRESENTATIONS WITH THE DEPOSITORY TRUST COMPANY K-1 EXHIBIT L [RESERVED] M-1 EXHIBIT M FORM OF CERTIFICATION TO BE PROVIDED TO DEPOSITOR BY THE SECURITIES ADMINISTRATOR Sequoia Mortgage Trust 2003-2 (the "Trust") Mortgage Pass-Through Certificates I, ____________________, a ______________ of Wells Fargo Bank Minnesota, National Association ("Wells Fargo"), as Securities Administrator of the Trust, hereby certify to Sequoia Residential Funding, Inc. (the "Depositor"), and its officers, directions and affiliates, and with the knowledge and intent that they will rely upon this certification, that: 1. The Depositor has provided to the Securities Administrator a written notice listing all of the monthly distribution reports that were prepared by the Securities Administrator and that will be included in the Depositor's Form 10-K for the Trust's fiscal year ending on _____________. I have reviewed each of such distribution reports. 2. Based on my knowledge, the information in these distribution reports prepared by the Securities Administrator, taken as a whole, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading as of the last day of the period covered by that annual report. 3. Based on my knowledge, the distribution information required to be provided by the Securities Administrator under the Pooling and Servicing Agreement, dated as of April 1, 2003, among the Depositor, Wells Fargo, as Master Servicer and Securities Administrator and HSBC Bank USA, as Trustee creating the Trust is included in these reports. [SIGNATURE PAGE IMMEDIATELY FOLLOWS] M-1 WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Securities Administrator Dated: _________________ By: _____________________________ Name: Title: M-2 SCHEDULE A MORTGAGE LOAN SCHEDULE EX-99.2 4 f90056exv99w2.txt EXHIBIT 99.2 EXHIBIT 99.2 [Letterhead of GnazzoThill, A Professional Corporation] April 29, 2003 TO THE PARTIES LISTED ON SCHEDULE A HERETO Re: Sequoia Mortgage Trust 2003-2 Ladies and Gentlemen: You have requested our opinion in connection with certain federal income tax matters related to Sequoia Mortgage Trust 2003-2 (the "Trust Fund") and the $820,000,000 Sequoia Mortgage Trust 2003-2 Mortgage Pass-Through Certificates issued with respect thereto (the "Certificates"). The Trust Fund was established by Sequoia Residential Funding, Inc. (the "Depositor") pursuant to the Pooling and Servicing Agreement, dated as of April 1, 2003 (the "Pooling and Servicing Agreement"), among the Depositor, HSBC Bank USA, as Trustee, and Wells Fargo Bank Minnesota, National Association, as Master Servicer and Securities Administrator. The Certificates are being issued pursuant to the Pooling and Servicing Agreement. Reference is hereby made to the Depositor's Universal Shelf Registration Statement on Form S-3 (Registration Statement No. 333-103634), including a prospectus (the "Prospectus"), filed with the Securities and Exchange Commission under the Securities Act of 1933 on March 6, 2003 and declared effective on or about March 21, 2003, along with the Prospectus Supplement, dated April 24, 2003 (the "Prospectus Supplement"). Each capitalized term used but not defined herein has the meaning assigned thereto in the Pooling and Servicing Agreement. We have acted as special tax counsel to the Depositor in connection with the above transaction and have assisted in the preparation of the federal income tax summaries set forth in the Prospectus and the Prospectus Supplement used in connection with the issuance of the Certificates. In formulating our opinions, we have reviewed copies of (i) the Prospectus and Prospectus Supplement, (ii) the Pooling and Servicing Agreement and the forms of Certificates issued pursuant thereto, (iii) the Mortgage Loan Purchase and Sale Agreement, (iv) the Purchase Agreements and the Servicing Agreements, (v) the Acknowledgments, dated as of April 29, 2003, assigning rights under the Purchase Agreements and the Servicing Agreements, and (vi) such resolutions, certificates, records, and other documents provided by the Depositor as we have deemed necessary or appropriate as a basis for the opinions set forth below. In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals or finals, the conformity to original documents of all documents submitted to us as certified, conformed or other copies, and the authenticity of the originals of such copies. In rendering our opinions, we have assumed that the transactions described in or contemplated by the foregoing documents have been and will be consummated in accordance with the terms of such operative documents, and that such documents accurately reflect the material facts of such transactions. TO THE PARTIES LISTED ON SCHEDULE A HERETO April 29, 2003 Page 2 Our opinion is also based on the Internal Revenue Code of 1986, as amended, administrative rulings, judicial decisions, Treasury regulations and other applicable authorities. The statutory provisions, regulations, and interpretations on which our opinion is based are subject to change, possibly retroactively. In addition, there can be no complete assurance that the Internal Revenue Service will not take positions contrary to the conclusions stated in our opinion. Based on the foregoing, we are of the opinion that, assuming (i) the making of a timely election to treat the Trust Fund as consisting of an Upper Tier REMIC and a Lower Tier REMIC, each comprised of the assets and interests specified in the Pooling and Servicing Agreement (and, in particular, excluding from the assets of each of the Upper Tier REMIC and Lower Tier REMIC the Reserve Fund, the Capitalized Interest Account, the Pre-Funding Accounts and the Additional Collateral) and (ii) compliance with the provisions of the Pooling and Servicing Agreement, the Mortgage Loan Purchase and Sale Agreement, the Purchase Agreements, the Servicing Agreements and the Acknowledgments, for federal income tax purposes: 1. the statements in the Prospectus under the heading "Federal Income Tax Consequences," as supplemented or modified by the statements in the Prospectus Supplement under the heading "Federal Income Tax Consequences," to the extent that they constitute matters of law or legal conclusions with respect to federal income tax matters, are correct in all material respects; 2. the Trust Fund will consist of two segregated asset pools, the Lower Tier REMIC and the Upper Tier REMIC, each of which will qualify as a REMIC within the meaning of Section 860D of the Code; 3. the Class A-1, Class A-2, Class M-1, Class M-2 and Class X Certificates will represent "regular interests" in the Upper Tier REMIC, the Class R Certificate will represent the sole "residual interest" in the Upper Tier REMIC and the Class LT-R Certificate will represent the sole "residual interest" in the Lower Tier REMIC, each within the meaning of Section 860G of the Code as in effect on the date hereof; 4. the Reserve Fund is an "outside reserve fund" that is beneficially owned by the Class X Certificate Owners; and 5. the rights of the Certificate Owners with respect to the Reserve Fund represent, for federal income tax purposes, contractual rights that are separate from their regular interests within the meaning of Treasury Regulations Section 1.860G-2(i). Other than as expressly stated above, we express no opinion on any issue relating to the Depositor, the Trust Fund, or to any other securities issued by them, or under any law other than the federal income tax laws. TO THE PARTIES LISTED ON SCHEDULE A HERETO April 29, 2003 Page 3 We are furnishing this opinion to you solely in connection with the initial sale of the Certificates and it is not to be relied upon, used, circulated, quoted or otherwise referred to for any other purpose without our express written permission. Very truly yours, /S/ GnazzoThill, A Professional Corporation SCHEDULE A Redwood Trust, Inc. 591 Redwood Highway Suite 3100 Mill Valley, CA 94941 Sequoia Residential Funding, Inc. 591 Redwood Highway Suite 3160 Mill Valley, CA 94941 Greenwich Capital Markets, Inc. 600 Steamboat Road Greenwich, CT 06830 Morgan Stanley & Co. Incorporated 1585 Broadway New York, NY 10036 Banc of America Securities LLC 214 North Tryon Street NC1-027-21-04 Charlotte, North Carolina 28255 Merrill Lynch, Pierce, Fenner & Smith Incorporated 4 World Financial Center, 10/F New York, NY 10080 Wells Fargo Bank Minnesota, National Association 6th and Marquette Minneapolis, MN 55479 HSBC Bank USA 452 Fifth Avenue New York, NY 10018 -----END PRIVACY-ENHANCED MESSAGE-----

EX-99.1

                                                                    EXHIBIT 99.1

                                                                       EXECUTION

                        SEQUOIA RESIDENTIAL FUNDING, INC.
                                    Depositor

                WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
                  Master Servicer and Securities Administrator

                                       and

                                  HSBC BANK USA
                                     Trustee

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

                         POOLING AND SERVICING AGREEMENT

                            Dated as of April 1, 2003

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

                          SEQUOIA MORTGAGE TRUST 2003-2



                                TABLE OF CONTENTS



                                                                                                                   Page
                                                                                                                
ARTICLE I DEFINITIONS..........................................................................................      6

Section 1.01.     Definitions..................................................................................      6
Section 1.02.     Calculations Respecting Mortgage Loans.......................................................     36

ARTICLE II DECLARATION OF TRUST; ISSUANCE OF CERTIFICATES......................................................     36

Section 2.01.     Creation and Declaration of Trust Fund; Conveyance of Mortgage Loans.........................     36
Section 2.02.     Acceptance of Trust Fund by Trustee; Review of Documentation for Trust Fund..................     39
Section 2.03.     Representations and Warranties of the Depositor..............................................     40
Section 2.04.     Discovery of Breach; Repurchase or Substitution of Mortgage Loans............................     42
Section 2.05      Delivery of Subsequent Mortgage Loans........................................................     45
Section 2.06.     Grant Clause.................................................................................     47

ARTICLE III THE CERTIFICATES...................................................................................     48

Section 3.01.     The Certificates.............................................................................     48
Section 3.02.     Registration.................................................................................     49
Section 3.03.     Transfer and Exchange of Certificates........................................................     49
Section 3.04.     Cancellation of Certificates.................................................................     53
Section 3.05.     Replacement of Certificates..................................................................     53
Section 3.06.     Persons Deemed Owners........................................................................     53
Section 3.07.     Temporary Certificates.......................................................................     54
Section 3.08.     Appointment of Paying Agent..................................................................     54
Section 3.09.     Book-Entry Certificates......................................................................     54

ARTICLE IV ADMINISTRATION OF THE TRUST FUND....................................................................     56

Section 4.01.     Custodial Accounts; Distribution Account.....................................................     56
Section 4.02      The Pre-Funding Accounts.....................................................................     57
Section 4.03.     Reports to Trustee and Certificateholders....................................................     59

ARTICLE V DISTRIBUTIONS TO HOLDERS OF CERTIFICATES.............................................................     61

Section 5.01.     Distributions Generally......................................................................     61
Section 5.02.     Distributions from the Distribution Account..................................................     62
Section 5.03.     Allocation of Losses.........................................................................     65
Section 5.04.     Advances by Master Servicer..................................................................     66
Section 5.05.     Compensating Interest Payments...............................................................     66
Section 5.06.     Reserve Fund.................................................................................     66


                                        i



                                                                                                                 
ARTICLE VI CONCERNING THE TRUSTEE AND THE SECURITIES ADMINISTRATOR; EVENTS OF DEFAULT..........................     67

Section 6.01.     Duties of Trustee and the Securities Administrator...........................................     67
Section 6.02.     Certain Matters Affecting the Trustee and the Securities Administrator.......................     70
Section 6.03.     Trustee and Securities Administrator Not Liable for Certificates.............................     71
Section 6.04.     Trustee and the Securities Administrator May Own Certificates................................     72
Section 6.05.     Eligibility Requirements for Trustee.........................................................     72
Section 6.06.     Resignation and Removal of Trustee and the Securities Administrator..........................     72
Section 6.07.     Successor Trustee and Successor Securities Administrator.....................................     73
Section 6.08.     Merger or Consolidation of Trustee or the Securities Administrator...........................     74
Section 6.09.     Appointment of Co-Trustee, Separate Trustee or Custodian.....................................     74
Section 6.10.     Authenticating Agents........................................................................     76
Section 6.11.     Indemnification of the Trustee and the Securities Administrator..............................     76
Section 6.12.     Fees and Expenses of Securities Administrator and the Trustee................................     77
Section 6.13.     Collection of Monies.........................................................................     77
Section 6.14.     Events of Default; Trustee To Act; Appointment of Successor..................................     77
Section 6.15.     Additional Remedies of Trustee Upon Event of Default.........................................     81
Section 6.16.     Waiver of Defaults...........................................................................     81
Section 6.17.     Notification to Holders......................................................................     82
Section 6.18.     Directions by Certificateholders and Duties of Trustee During Event of Default...............     82
Section 6.19.     Action Upon Certain Failures of the Master Servicer and Upon Event of Default................     82
Section 6.20.     Preparation of Tax Returns and Other Reports.................................................     82

ARTICLE VII PURCHASE OF MORTGAGE LOANS AND TERMINATION OF THE TRUST FUND.......................................     84

Section 7.01.     Purchase of Mortgage Loans; Termination of Trust Fund Upon Purchase
                  or Liquidation of All Mortgage Loans ........................................................     84
Section 7.02.     Procedure Upon Termination of Trust Fund.....................................................     85
Section 7.03.     Additional Trust Fund Termination Requirements...............................................     86

ARTICLE VIII RIGHTS OF CERTIFICATEHOLDERS......................................................................     87

Section 8.01.     Limitation on Rights of Holders..............................................................     87
Section 8.02.     Access to List of Holders....................................................................     87
Section 8.03.     Acts of Holders of Certificates..............................................................     88

ARTICLE IX ADMINISTRATION AND SERVICING OF MORTGAGE LOANS BY THE MASTER SERVICER...............................     89

Section 9.01.     Duties of the Master Servicer; Enforcement of Servicer's and Master Servicer's Obligations...     89
Section 9.02      Assumption of Master Servicing by Trustee....................................................     90
Section 9.03.     Representations and Warranties of the Master Servicer........................................     91



                                       ii



                                                                                                                
Section 9.04.     Compensation to the Master Servicer..........................................................     93
Section 9.05.     Merger or Consolidation......................................................................     93
Section 9.06.     Resignation of Master Servicer...............................................................     94
Section 9.07.     Assignment or Delegation of Duties by the Master Servicer....................................     94
Section 9.08.     Limitation on Liability of the Master Servicer and Others....................................     94
Section 9.09.     Indemnification; Third-Party Claims..........................................................     95

ARTICLE X REMIC ADMINISTRATION.................................................................................     95

Section 10.01.    REMIC Administration.........................................................................     95
Section 10.02.    Prohibited Transactions and Activities.......................................................     98
Section 10.03.    Indemnification with Respect to Prohibited Transactions or Loss of REMIC Status..............     98
Section 10.04.    REO Property.................................................................................     98

ARTICLE XI MISCELLANEOUS PROVISIONS............................................................................     99

Section 11.01.    Binding Nature of Agreement; Assignment......................................................     99
Section 11.02.    Entire Agreement.............................................................................     99
Section 11.03.    Amendment....................................................................................    100
Section 11.04.    Voting Rights................................................................................    101
Section 11.05.    Provision of Information.....................................................................    101
Section 11.06.    Governing Law................................................................................    102
Section 11.07.    Notices......................................................................................    102
Section 11.08.    Severability of Provisions...................................................................    102
Section 11.09.    Indulgences; No Waivers......................................................................    102
Section 11.10.    Headings Not To Affect Interpretation........................................................    103
Section 11.11.    Benefits of Agreement........................................................................    103
Section 11.12.    Special Notices to the Rating Agencies.......................................................    103
Section 11.13.    Conflicts....................................................................................    104
Section 11.14.    Counterparts.................................................................................    104
Section 11.15     No Petitions.................................................................................    104



                                      iii



         ATTACHMENTS

                        
Exhibit A                  Forms of Certificates
Exhibit B                  Form of Residual Certificate Transfer Affidavit
                           (Transferee)
Exhibit C                  Form of Residual Certificate Transfer Affidavit
                           (Transferor)
Exhibit D                  Form of Custody Agreement
Exhibit E                  List of Servicing Agreements
Exhibit F                  List of Purchase Agreements
Exhibit G                  List of Limited Purpose Surety Bonds
Exhibit H                  Form of Rule 144A Transfer Certificate
Exhibit I                  Form of Purchaser's Letter for Institutional
                           Accredited Investors
Exhibit J                  Form of ERISA Transfer Affidavit
Exhibit K                  Form of Letter of Representations with the Depository
                           Trust Company
Exhibit L                  [Reserved]
Exhibit M                  Form of Certification to be Provided to the Depositor
                           by the Securities Administrator

Schedule A                 Mortgage Loan Schedule



                                       iv



         This POOLING AND SERVICING AGREEMENT, dated as of April 1, 2003 (the
"Agreement"), by and among SEQUOIA RESIDENTIAL FUNDING, INC., a Delaware
corporation, as depositor (the "Depositor"), HSBC Bank USA, a New York banking
corporation, as trustee (the "Trustee"), and WELLS FARGO BANK MINNESOTA,
NATIONAL ASSOCIATION, in its dual capacities as master servicer (the "Master
Servicer") and securities administrator (the "Securities Administrator") and
acknowledged by RWT HOLDINGS, INC., a Delaware corporation, as seller (the
"Seller"), for purposes of Section 2.04.

                              PRELIMINARY STATEMENT

         The Depositor has acquired the Initial Mortgage Loans from the Seller
and at the Closing Date is the owner of the Initial Mortgage Loans and the other
property being conveyed by the Depositor to the Trustee hereunder for inclusion
in the Trust Fund. On the Closing Date, the Depositor will acquire the
Certificates from the Trustee as consideration for the Depositor's transfer to
the Trust Fund of the Initial Mortgage Loans, an initial deposit to each
Pre-Funding Account of the Original Pre-Funded Amount with respect to the
related Mortgage Pool, an initial deposit to the Capitalized Interest Account in
an amount sufficient to satisfy the aggregate Capitalized Interest Requirement
on the Certificates during the Pre-Funding Period, and the other property
constituting the Trust Fund. The Depositor has duly authorized the execution and
delivery of this Agreement to provide for the conveyance to the Trustee of the
Initial Mortgage Loans any Subsequent Mortgage Loans and the other property
constituting the Trust Fund. All covenants and agreements made by the Seller in
the Mortgage Loan Purchase Agreement and in this Agreement and by the Depositor,
the Master Servicer, the Securities Administrator and the Trustee herein with
respect to the Mortgage Loans and the other property constituting the Trust Fund
are for the benefit of the Holders from time to time of the Certificates. The
Depositor, the Trustee, the Master Servicer and the Securities Administrator are
entering into this Agreement, and the Trustee is accepting the Trust Fund
created hereby, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged.

         As provided herein, the Trustee shall elect that the Trust Fund
(exclusive of the Additional Collateral, the assets held in the Reserve Fund,
the Capitalized Interest Account and the Pre-Funding Accounts) be treated for
federal income tax purposes as comprising two real estate mortgage investment
conduits (each a "REMIC" or, in the alternative, the "Lower Tier REMIC" and the
"Upper Tier REMIC," respectively). Each Certificate, other than the Class R
Certificate and the Class LT-R Certificate, shall represent ownership of a
regular interest in the Upper Tier REMIC. In addition, each of the Class A-1,
Class A-2, Class M-1, Class M-2 and Class X Certificates represent the right to
receive payments from the Reserve Fund as provided in Section 5.06. The owners
of the Class X Certificates beneficially own the Reserve Fund. The Class R
Certificate represents the sole class of residual interest in the Upper Tier
REMIC. The Class LT-R Certificate represents the sole class of residual interest
in the Lower Tier REMIC.

         The Lower Tier REMIC shall issue several classes of uncertificated
Lower Tier Interests and each such uncertificated Lower Tier Interest is hereby
designated as a regular interest in the Lower Tier REMIC for purposes of the
REMIC Provisions. The Upper Tier REMIC will hold as its assets the entire
beneficial interest in each Class of uncertificated Lower Tier Interests. The
Lower Tier REMIC shall also issue the Class LT-R Certificate, which is hereby
designated as the sole class of residual interest in the Lower Tier REMIC for
purposes of the REMIC Provisions.



The Lower Tier REMIC shall hold as its assets the property of the Trust Fund
other than the Lower Tier Interests, the Additional Collateral, the Reserve
Fund, the Capitalized Interest Account, and the Pre-Funding Accounts.

THE LOWER TIER REMIC INTERESTS

         The following table sets forth (or describes) the class designation,
interest rate, and initial principal amount for each class of Lower Tier REMIC
Interests.



                                                                                 Corresponding Class of
 Lower Tier Class         Lower Tier               Initial Class                     Certificate(s)
   Designation           Interest Rate            Principal Amount                    or Component
- ------------------       -------------            ----------------               ----------------------
                                                                        
Class LT-A1                   (1)                 $ 125,000,000.00                      Class A1
Class LT-A2                   (1)                 $  75,900,000.00                      Class A2
Class LT-M1                   (1)                 $   2,870,000.00                      Class M1
Class LT-M2                   (1)                 $   1,230,000.00                      Class M2
Class LT-Pool 1PSA            (2)                 $     102,041.08                         N/A
Class LT-Pool 1N              (2)                 $ 127,448,986.03                         N/A
Class LT-Pool 2PSA            (3)                 $      61,958.92                         N/A
Class LT-Pool 2N              (3)                 $  77,387,013.97                         N/A
Class LT-Q                    (1)                 $ 410,000,000.02                         N/A
Class LT-R                    (4)                               (4)                     Class LT-R


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

(1)      The interest rate with respect to any Distribution Date (and the
         related Accrual Period) for each of these Lower Tier Interests is a per
         annum rate equal to the Net WAC.

(2)      The interest rate with respect to any Distribution Date (and the
         related Accrual Period) for each of these Lower Tier Interests is a per
         annum rate equal to the Pool 1 Net WAC.

(3)      The interest rate with respect to any Distribution Date (and the
         related Accrual Period) for each of these Lower Tier Interests is a per
         annum rate equal to the Pool 2 Net WAC.

(4)      The Class LT-R Certificate is the sole class of residual interests in
         the Lower Tier REMIC. It does not have an interest rate or a principal
         balance.

         On each Distribution Date interest shall be distributed with respect to
each of the Lower Tier Interests based on the above-described interest rates,
provided however, that interest that accrues on the Class LT-Q Interest shall be
deferred in an amount equal to 25% of the increase for such Distribution Date in
the Overcollateralization Amount and the interest so deferred shall be applied
to make the principal distributions described below for such Distribution Date.
Any interest so deferred shall itself bear interest at the interest rate for the
Class LT-Q Interest.

         On each Distribution Date the principal (including the amount of
interest deferred on the Class LT-Q Interest for such Distribution Date) shall
be distributed, and Realized Losses shall be allocated, among the Lower Tier
Interests in the following order of priority:

                  (i)      First, to the Class LT-Pool 1PSA Interest until its
         principal balance equals one percent of the Pool 1 Subordinate Amount
         after such Distribution Date;

                                       2



                  (ii)     Second, to the Class LT-Pool 2PSA Interest until its
         principal balance equals one percent of the Pool 2 Subordinate Amount
         after such Distribution Date;

                  (iii)    Third, to the Class LT-Pool 1PSA or Class LT-Pool
         2PSA Interests the minimum amount necessary to cause the ratio of the
         principal balance of the Class LT-Pool 1PSA Interest to the principal
         balance of the Class LT-Pool 2PSA Interest to equal the ratio of the
         Pool 1 Subordinate Amount to the Pool 2 Subordinate Amount immediately
         after such Distribution Date;

                  (iv)     Fourth, to the Class LT-Pool 1N Interest until the
         aggregate principal balances of the Class LT-Pool 1N Interest and the
         Class LT-Pool 1PSA Interest equals one-quarter of the Assumed Principal
         Balance for Pool 1 immediately after such Distribution Date;

                  (v)      Fifth, to the Class LT-Pool 2N Interest until the
         aggregate principal balances of the Class LT-Pool 2N Interest and the
         Class LT-Pool 2PSA Interest equals one-quarter of the Assumed Principal
         Balance for Pool 2 immediately after such Distribution Date;

                  (vi)     Sixth, to the Class LT-A1 Interest and the Class
         LT-A2 Interest until the principal balance of each such Lower Tier
         Interest equals one-quarter of the Class Principal Amount of the
         Corresponding Class of Certificates for such Interest immediately after
         such Distribution Date;

                  (vii)    Seventh, to the Class LT2-M1 Interest until its
         principal balance equals one-quarter of the Class Principal Amount of
         the Class M1 Certificates immediately after such Distribution Date;

                  (viii)   Eighth, to the Class LT2-M2 Interest until its
         principal balance equals one-quarter of the Class Principal Amount of
         the Class M2 Certificates immediately after such Distribution Date;

                  (ix)     Finally, to the Class LT-Q Interest, any remaining
         amounts.

         THE CERTIFICATES

         The following table sets forth (or describes) the Class designation,
Certificate Interest Rate, initial Class Principal Amount (or initial Class
Notional Amount), and minimum denomination for each Class of Certificates
comprising interests in the Trust Fund created hereunder. Each Class of
Certificates, other than the Class LT-R and Class R Certificates, is hereby
designated as representing ownership of regular interests in the Upper Tier
REMIC.

                                       3





                                                           INITIAL CLASS
                                                          PRINCIPAL AMOUNT               MINIMUM
  CLASS                    CERTIFICATE INTEREST           OR CLASS NOTIONAL          DENOMINATIONS OR
DESIGNATION                        RATE                         AMOUNT              PERCENTAGE INTEREST
- -----------                --------------------           -----------------         -------------------
                                                                           
Class A-1                          (1)                      $ 500,000,000               $ 25,000.00
Class A-2                          (2)                      $ 303,600,000               $ 25,000.00
Class M-1                          (3)                      $  11,480,000               $ 25,000.00
Class M-2                          (4)                      $   4,920,000               $ 25,000.00
Class X                            (5)                            (6)                           100%
Class R                            (7)                            (7)                           100%
Class LT-R                         (7)                            (7)                           100%


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

(1)      The Certificate Interest Rate with respect to any Distribution Date
         (and the related Accrual Period) for the Class A-1 Certificates will be
         the least of (i) One-Month LIBOR plus 0.330%, (ii) the Pool 1 Net WAC
         (i.e., the weighted average of the rates on the Class LT-Pool 1PSA and
         Class LT-Pool 1N Interests in the Lower Tier REMIC) and (iii) 11.500%;
         provided, however, if the Mortgage Loans and related property are not
         purchased pursuant to Section 7.01(b) on the Initial Optional Purchase
         Date, then with respect to each subsequent Distribution Date the per
         annum rate calculated pursuant to clause (i) above with respect to the
         Class A-1 Certificates will be One-Month LIBOR plus 0.660%.

(2)      The Certificate Interest Rate with respect to any Distribution Date
         (and the related Accrual Period) for the Class A-2 Certificates will be
         the least of (i) Six-Month LIBOR plus 0.340%, (ii) the Pool 2 Net WAC
         (i.e., the weighted average of the rates on the Class LT-Pool 2PSA and
         Class LT-Pool 2N Interests in the Lower Tier REMIC) and (iii) 11.500%;
         provided, however, if the Mortgage Loans and related property are not
         purchased pursuant to Section 7.01(b) on the Initial Optional Purchase
         Date, then with respect to each subsequent Distribution Date the per
         annum rate calculated pursuant to clause (i) above with respect to the
         Class A-2 Certificates will be Six-Month LIBOR plus 0.680%.

(3)      The Certificate Interest Rate with respect to any Distribution Date
         (and the related Accrual Period) for the Class M-1 Certificates will be
         the least of (i) One-Month LIBOR plus 0.650%, (ii) the Subordinate Net
         WAC (i.e., the weighted average of the rates on the Class LT-Pool 1PSA
         and Class LT-Pool 2PSA Interests in the Lower Tier REMIC) and (iii)
         11.500%; provided, however, if the Mortgage Loans and related property
         are not purchased pursuant to Section 7.01(b) on the Initial Optional
         Purchase Date, then with respect to each subsequent Distribution Date
         the per annum rate calculated pursuant to clause (i) above with respect
         to the Class M-1 Certificates will be One-Month LIBOR plus 0.975%.

(4)      The Certificate Interest Rate with respect to any Distribution Date
         (and the related Accrual Period) for the Class M-2 Certificates will be
         the least of (i) One-Month LIBOR plus 1.430%, (ii) the Subordinate Net
         WAC (i.e., the weighted average of the rates on the Class LT-Pool 1PSA
         and Class LT-Pool 2PSA Interests in the Lower Tier REMIC) and (iii)
         11.500%.

(5)      The "Class X Pass-Through Rate" with respect to any Distribution Date
         (and the related Accrual Period) for the Class X Certificate shall be a
         pass-through rate equal to the excess of (a) the weighted average of
         the interest rates on the regular interests in the Lower Tier REMIC,
         weighted on the basis of the principal balance of each such Lower Tier
         Interest (i.e., the Net WAC), over (b) the Adjusted Lower Tier WAC (for

                                       4



         the first Distribution Date only, multiplied by a fraction, the
         numerator of which is the actual number of days in the initial Accrual
         Period and the denominator of which is 30). For any Distribution Date,
         interest that accrues on the Class X Certificate shall be deferred to
         the extent of any increase in the Overcollateralization Amount on such
         date. Such deferred interest shall not itself bear interest.

(6)      The Class X Certificate is an interest-only Class and for any
         Distribution Date, the Class X Certificate shall bear interest at the
         Class X Pass-Through Rate described above on a Class Notional Amount
         equal to the aggregate of the principal balances of the regular
         interests in the Lower Tier REMIC (i.e., the Assumed Principal
         Balance).

(7)      The Class R and Class LT-R Certificates will be issued without a
         Certificate Interest Rate or a Class Principal Amount or Class Notional
         Amount.

         As of the Cut-off Date, the Mortgage Loans had an aggregate Scheduled
Principal Balance of $692,169,302.96.

                                       5



         In consideration of the mutual agreements herein contained, the
Depositor, the Master Servicer, the Securities Administrator and the Trustee
hereby agree as follows:

                                   ARTICLE I

                                   DEFINITIONS

         Section 1.01      Definitions. The following words and phrases, unless
the context otherwise requires, shall have the following meanings:

         1M Sub-account: The Sub-account established under the Pool 1
Pre-Funding Account for the acquisition of Subsequent Mortgage Loans which are
One-Month LIBOR Loans.

         6M Sub-account: The Sub-account established under the Pool 1
Pre-Funding Account for the acquisition of Subsequent Mortgage Loans which are
Six-Month LIBOR Loans.

         Accountant: A Person engaged in the practice of accounting who (except
when this Agreement provides that an Accountant must be Independent) may be
employed by or affiliated with the Depositor or an Affiliate of the Depositor.

         Accrual Period: With respect to any Distribution Date and any Class of
LIBOR Certificates, the period commencing on the 20th day of the month preceding
the month in which the Distribution Date occurs and ending on the 19th day of
the month in which the Distribution Date occurs; provided, however, that the
first Accrual Period with respect to the LIBOR Certificates shall be the period
beginning on the Closing Date and ending on May 19, 2003. The Accrual Period for
each Lower Tier Interest is the calendar month preceding the month in which the
Distribution Date occurs. Interest shall accrue on the LIBOR Certificates on the
basis of a 360-day year consisting of twelve 30-day months.

         Acknowledgements: The Assignment, Assumption and Recognition
Agreements, each dated April 29, 2003, assigning rights under the Purchase
Agreements and the Servicing Agreements from the Seller to the Depositor and
from the Depositor to the Trustee for the benefit of Certificateholders.

         Act: The Securities Act of 1933, as amended.

         Additional Collateral: With respect to any Additional Collateral
Mortgage Loan, the marketable securities and other acceptable collateral pledged
as collateral pursuant to the related pledge agreements.

         Additional Collateral Mortgage Loan: Each Mortgage Loan identified as
such in the Mortgage Loan Schedule.

         Adjusted Lower Tier WAC: For any Accrual Period, the product of (a)
four, and (b) the weighted average of the interest rates on the LT-Q, LT-A1,
LT-A2, LT-M1, LT-M2, LT-Pool 1PSA, LT-Pool 1N, LT-Pool 2PSA, and LT-Pool 2N
Interests determined for this purpose by

                                       6



first subjecting the rate payable on each of the Class LT-Q, LT-Pool 1PSA,
LT-Pool 1N, LT-Pool 2PSA and LT-Pool 2N Interests to a cap of zero, and
subjecting the rate payable on each of the Class LT-A1, LT-A2, Class LT-M1, and
LT-M2 Interests to a cap that corresponds to the Certificate Interest Rate for
the Corresponding Class of Certificates for such Accrual Period.

         Adjustment Date: As to any Mortgage Loan, the date on which the related
Mortgage Rate adjusts in accordance with the terms of the related Mortgage Note.

         Advance: With respect to a Mortgage Loan, the payments required to be
made by the Master Servicer or the applicable Servicer with respect to any
Distribution Date pursuant to this Agreement or the Servicing Agreements, as
applicable, the amount of any such payment being equal to the aggregate of the
payments of principal and interest (net of the Master Servicing Fee and/or the
applicable Servicing Fee and net of any net income in the case of any REO
Property) on the Mortgage Loans that were due on the related Due Date and not
received as of the close of business on the related Determination Date, less the
aggregate amount of any such delinquent payments that the Master Servicer or the
Servicers have determined would constitute Nonrecoverable Advances if advanced.

         Affiliate: With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.

         Aggregate Expense Rate: With respect to any Mortgage Loan, the sum of
the Master Servicing Fee Rate and the applicable Servicing Fee Rate.

         Aggregate Overcollateralization Release Amount: With respect to any
Distribution Date, the amount, if any, by which (i) the Overcollateralization
Amount for such date exceeds (ii) the Targeted Overcollateralization Amount for
such date.

         Aggregate Stated Principal Balance: As to any Distribution Date, the
aggregate of the Stated Principal Balances for all Mortgage Loans (and when such
term is used with respect to a particular Mortgage Pool, the aggregate of the
Stated Principal Balances of the Mortgage Loans in such Mortgage Pool) which
were outstanding on the Due Date in the month preceding the month of such
Distribution Date.

         Aggregate Voting Interests: The aggregate of the Voting Interests of
all the Certificates under this Agreement.

         Agreement: This Pooling and Servicing Agreement and all amendments and
supplements hereto.

         Applied Loss Amount: With respect to any Distribution Date, the amount,
if any, by which (x) the aggregate Certificate Principal Amount of the
Certificates after giving effect to all distributions in respect of principal on
such Distribution Date, exceeds (y) the Assumed Principal

                                       7



Balance for such Distribution Date, after giving effect to all Realized Losses
incurred with respect to the Mortgage Loans during the related Due Period.

         Appraised Value: With respect to any Mortgage Loan, the Appraised Value
of the related Mortgaged Property shall be: (i) with respect to a Mortgage Loan
other than a Refinancing Mortgage Loan, the lesser of (a) the value of the
Mortgaged Property based upon the appraisal made at the time of the origination
of such Mortgage Loan and (b) the sales price of the Mortgaged Property at the
time of the origination of such Mortgage Loan; and (ii) with respect to a
Refinancing Mortgage Loan, the value of the Mortgaged Property based upon the
appraisal made at the time of the origination of such Refinancing Mortgage Loan.

         Assignment of Mortgage: An assignment of the Mortgage, notice of
transfer or equivalent instrument, in recordable form, sufficient under the laws
of the jurisdiction wherein the related Mortgaged Property is located to reflect
the sale of the Mortgage to the Trustee, which assignment, notice of transfer or
equivalent instrument may be in the form of one or more blanket assignments
covering the Mortgage Loans secured by Mortgaged Properties located in the same
jurisdiction, if permitted by law; provided, however, that the Trustee shall not
be responsible for determining whether any such assignment is in recordable
form.

         Assumed Principal Balance: As of any date of determination (and with
respect to any Distribution Date, determined as of the Due Date immediately
preceding such Distribution Date), the sum of (a) the Aggregate Stated Principal
Balance and (b) the Pre-Funded Amount.

         Authenticating Agent: Any authenticating agent appointed by the Trustee
pursuant to Section 6.10 until any successor authenticating agent for the
Certificates is named, and thereafter "Authenticating Agent" shall mean any such
successor. The Authenticating Agent shall be Wells Fargo Bank Minnesota,
National Association for so long as it is acting as Securities Administrator
under this Agreement.

         Authorized Officer: Any Person who may execute an Officer's Certificate
on behalf of the Depositor.

         Bankruptcy: As to any Person, the making of an assignment for the
benefit of creditors, the filing of a voluntary petition in bankruptcy,
adjudication as a bankrupt or insolvent, the entry of an order for relief in a
bankruptcy or insolvency proceeding, the seeking of reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief, or
seeking, consenting to or acquiescing in the appointment of a trustee, receiver
or liquidator, dissolution, or termination, as the case may be, of such Person
pursuant to the provisions of either the Bankruptcy Code or any other similar
state laws.

         Bankruptcy Code: The United States Bankruptcy Code of 1986, as amended.

         BBA: The British Banker's Association.

         Benefit Plan Opinion: An Opinion of Counsel satisfactory to the Trustee
and Certificate Registrar to the effect that any proposed transfer will not (i)
cause the assets of the Trust Fund to

                                       8



be regarded as plan assets for purposes of the Plan Asset Regulations or (ii)
give rise to any fiduciary duty on the part of the Depositor or the Trustee.

         Book-Entry Certificates: Beneficial interests in Certificates
designated as "Book-Entry Certificates" in this Agreement, ownership and
transfers of which shall be evidenced or made through book entries by a Clearing
Agency as described in Section 3.09; provided, that after the occurrence of a
Book-Entry Termination whereupon book-entry registration and transfer are no
longer permitted and Definitive Certificates are to be issued to Certificate
Owners, such Book-Entry Certificates shall no longer be "Book-Entry
Certificates." As of the Closing Date, the following Classes of Certificates
constitute Book-Entry Certificates: the Class A-1, Class A-2, Class M-1 and
Class M-2.

         Book-Entry Termination: The occurrence of any of the following events:
(i) the Clearing Agency is no longer willing or able to properly discharge its
responsibilities with respect to the Book Entry Certificates, and the Depositor
is unable to locate a qualified successor; or (ii) the Depositor at its option
advises the Trustee and the Certificate Registrar in writing that it elects to
terminate the book-entry system through the Clearing Agency.

         Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a
day on which banking institutions in New York, New York or, if other than New
York, the city in which the Corporate Trust Office of the Trustee is located, or
the States of Maryland or Minnesota, are authorized or obligated by law or
executive order to be closed.

         Capitalized Interest Account: The account created and maintained by the
Securities Administrator on behalf of the Trustee and the Certificateholders
pursuant to Section 4.03, which account is not an asset of any of the REMICs.

         Capitalized Interest Requirement: As to any Distribution date and each
Mortgage Pool up to and including the Distribution Date immediately following
the close of the Pre-Funding Period, the product of (x) the excess of (a) the
Original Pre-Funded Amount for such Mortgage Pool over (b) the aggregate of the
Stated Principal Balances of the Subsequent Mortgage Loans transferred to the
Trust Fund for inclusion in such Mortgage Pool prior to such Distribution Date
that have a Scheduled Payment that will be included in the amounts distributed
to such Mortgage Pool's Related Certificate Group on such Distribution Date, (y)
the Pool 1 Net WAC (in the case of Pool 1 ) or Pool 2 Net WAC (in the case of
Pool 2) and (z) a fraction, the numerator of which is 30 and the denominator of
which is 360. The Capitalized Interest Requirement for a Mortgage Pool shall be
reduced by any investment earnings on deposit in such Pool's Pre-Funding Account
which have been transferred to the Distribution Account for inclusion in such
Pool's Interest Remittance Amount for distribution to Certificateholders on such
Distribution Date.

         Carryforward Interest: With respect to each Class of LIBOR Certificates
and any Distribution Date, an amount equal to the sum of (i) the amount, if any,
by which (x) the sum of (A) Current Interest for such Class for the immediately
preceding Distribution Date and (B) any unpaid Carryforward Interest from
previous Distribution Dates exceeds (y) the amount distributed in respect of
interest on such Class on such immediately preceding Distribution Date and (ii)
interest on such amount for the related Accrual Period at the applicable
Certificate Interest Rate.

                                       9



         Certificate: Any one of the certificates signed by the Trustee and
authenticated by the Securities Administrator as Authenticating Agent in
substantially the forms attached hereto as Exhibit A.

         Certificate Group: Each of the Group 1 Certificates and the Group 2
Certificates.

         Certificate Interest Rate: With respect to each Class of Certificates
and any Distribution Date, the applicable per annum rate described in the
Preliminary Statement hereto.

         Certificate Owner: With respect to a Book-Entry Certificate, the Person
who is the owner of such Book-Entry Certificate, as reflected on the books of
the Clearing Agency, or on the books of a Person maintaining an account with
such Clearing Agency (directly or as an indirect participant, in accordance with
the rules of such Clearing Agency).

         Certificate Principal Amount: With respect to any Certificate (other
than a Notional Certificate), at the time of determination, the maximum
specified dollar amount of principal to which the Holder thereof is then
entitled hereunder, such amount being equal to the initial principal amount set
forth on the face of such Certificate, less (i) the amount of all principal
distributions previously made with respect to such Certificate; and (ii) in the
case of a Subordinate Certificate, any Applied Loss Amount allocated to such
Certificates. For purposes of Article V hereof, unless specifically provided to
the contrary, Certificate Principal Amounts shall be determined as of the close
of business of the immediately preceding Distribution Date, after giving effect
to all distributions made on such date. Notional Certificates are issued without
Certificate Principal Amounts. Distribution of any Deferred Amount to the
Certificates, will not reduce the Certificate Principal Amount of the related
Certificates.

         Certificate Register and Certificate Registrar: The register maintained
and the registrar appointed pursuant to Section 3.02. Wells Fargo National Bank
Minnesota, National Association will act as Certificate Registrar for so long as
it is the Securities Administrator under this Agreement.

         Certificateholder: The meaning provided in the definition of "Holder."

         Civil Relief Act: The Soldiers' and Sailors' Civil Relief Act of 1940,
as amended.

         Class: Collectively, Certificates bearing the same class designation.
In the case of the Lower-Tier REMIC, the term "Class" refers to all Lower-Tier
Interests having the same alphanumeric designation.

         Class LT-R Certificate: The Class LT-R Certificate executed by the
Trustee and authenticated and delivered by the Authenticating Agent,
substantially in the form annexed as Exhibit A and evidencing ownership of the
residual interest in the Lower-Tier REMIC.

         Class Notional Amount: With respect to any Class of Notional
Certificates, the applicable class notional amount calculated as provided in the
Preliminary Statement hereto.

                                       10



         Class Principal Amount: With respect to each Class of Certificates
(other than a Notional Certificate) the aggregate of the Certificate Principal
Amounts of all Certificates of such Class at the date of determination.

         Class R Certificate: The Class R Certificate executed by the Trustee,
and authenticated and delivered by the Authenticating Agent, substantially in
the form annexed hereto as Exhibit A, and evidencing the ownership of the
residual interest in the Upper Tier REMIC.

         Class X Certificate: The Class X Certificate executed by the Trustee
and authenticated and delivered by the Authenticating Agent, substantially in
the form annexed as Exhibit A.

         Class X Distributable Amount: With respect to any Distribution Date,
the excess of (a) interest accrued for the related Accrual Period and for all
prior Accrual Periods on the Class X Notional Amount at the Class X Pass-Through
Rate in effect for each such Accrual Period, over (b) the sum of (i) all amounts
distributed on all prior Distribution Dates pursuant to Section 5.02(c)(v)
hereof and (ii) all amounts deemed distributed with respect to the Class X
Certificate and deposited into the Reserve Fund on all prior Distribution Dates
pursuant to Section 5.02(c)(iii) hereof.

         Class X Pass-Through Rate: As described in the Preliminary Statement.

         Clearing Agency: An organization registered as a "clearing agency"
pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. As
of the Closing Date, the Clearing Agency shall be The Depository Trust Company.

         Clearing Agency Participant: A broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.

         Closing Date: April 29, 2003.

         Code: The Internal Revenue Code of 1986, as amended, and as it may be
further amended from time to time, any successor statutes thereto, and
applicable U.S. Department of Treasury regulations issued pursuant thereto in
temporary or final form.

         Compensating Interest Payment: As to any Distribution Date, the lesser
of (1) the Master Servicing Fee for such date and (2) any Prepayment Interest
Shortfall for such date.

         Cooperative Corporation: The entity that holds title (fee or an
acceptable leasehold estate) to the real property and improvements constituting
the Cooperative Property and which governs the Cooperative Property, which
Cooperative Corporation must qualify as a Cooperative Housing Corporation under
Section 216 of the Code.

         Cooperative Loan: Any Mortgage Loan secured by Cooperative Shares and a
Proprietary Lease.

                                       11



         Cooperative Property: The real property and improvements owned by the
Cooperative Corporation, that includes the allocation of individual dwelling
units to the holders of the shares of the Cooperative Corporation.

         Cooperative Shares: Shares issued by a Cooperative Corporation.

         Corporate Trust Office: With respect to the Trustee, the principal
corporate trust office of the Trustee located at 452 Fifth Avenue, New York, New
York 10018, Attention: Trustee Sequoia Mortgage Trust 2003-2, or at such other
address as the Trustee may designate from time to time by notice to the
Certificateholders, the Depositor, the Master Servicer and the Securities
Administrator or the principal corporate trust office of any successor Trustee.
With respect to the Certificate Registrar and presentment of Certificates for
registration of transfer, exchange or final payment, Wells Fargo Bank Minnesota,
National Association, 6th Avenue and Marquette, Minneapolis, Minnesota 55479,
Attention: Corporate Trust, Sequoia Mortgage Trust 2003-2.

         Corresponding Classes Of Certificates: With respect to each Lower-Tier
Interest, the Class or Classes of Certificates appearing opposite such
Lower-Tier Interest as described in the Preliminary Statement.

         Cumulative Loss Trigger Event: If, as to any Distribution Date, the
fraction, expressed as a percentage, obtained by dividing (x) the aggregate
amount of cumulative Realized Losses incurred on the Mortgage Loans from the
Cut-off Date through the last day of the related Due Period by (y) the aggregate
Assumed Principal Balance of both Mortgage Pools as of the Cut-off Date, exceeds
the applicable percentages described below with respect to such Distribution
Date:



            Distribution Date                     Loss Percentage
            -----------------                     ---------------
                                               
May 2006 through April 2007...................         0.40%
May 2007 through April 2008...................         0.55%
May 2008 through April 2009...................         0.65%
May 2009 and thereafter.......................         0.70%


         Current Interest: With respect to each Class of Certificates and any
Distribution Date, the aggregate amount of interest accrued at the applicable
Certificate Interest Rate during the related Accrual Period on the Class
Principal Amount (or Class Notional Amount) of such Class immediately prior to
such Distribution Date; provided, however, that Current Interest for each Class
of Certificates shall be reduced by such Class's share of Net Interest
Shortfalls with respect to Mortgage Loans (a) in the related Mortgage Pool, in
the case of the Senior Certificates and (b) in both Mortgage Pools, in the case
of the Subordinate Certificates, which shortfalls shall be allocated among the
related Class of Senior Certificates and all Classes of Subordinate Certificates
proportionately based on Current Interest calculated without regard to this
proviso.

         Custodial Accounts: Each custodial account (other than an Escrow
Account) established and maintained by a Servicer pursuant to a Servicing
Agreement.

         Custodian: A Person who is at anytime appointed by the Trustee and the
Depositor as a custodian of the Mortgage Documents and the Trustee Mortgage
Files. The initial Custodian is Deutsche Bank National Trust Company.

                                       12



         Custody Agreement: The Custody Agreement, dated as of April 1, 2003,
among the Depositor, the Seller, the Trustee and Deutsche Bank National Trust
Company, as Custodian.

         Cut-off Date: April 1, 2003.

         Cut-off Date Balance: With respect to the Mortgage Loans in the Trust
Fund on the Closing Date, the Aggregate Stated Principal Balance as of the
Cut-off Date.

         Debt Service Reduction: With respect to any Mortgage Loan, a reduction
by a court of competent jurisdiction in a proceeding under the Bankruptcy Code
in the Scheduled Payment for such Mortgage Loan which became final and
non-appealable, except such a reduction resulting from a Deficient Valuation or
any reduction that results in a permanent forgiveness of principal.

         Defective Mortgage Loan: The meaning specified in Section 2.04.

         Deferred Amount: With respect to any Distribution Date and the Class
M-1 and Class M-2 Certificates, the aggregate of Applied Loss Amounts previously
applied in reduction of the Certificate Principal Amount thereof, less any
amounts previously reimbursed in respect thereof.

         Deficient Valuation: With respect to any Mortgage Loan, a valuation of
the related Mortgaged Property by a court of competent jurisdiction in an amount
less than the then outstanding indebtedness under the Mortgage Loan, or any
reduction in the amount of principal to be paid in connection with any Scheduled
Payment that results in a permanent forgiveness of principal, which valuation or
reduction results from an order of such court which is final and non-appealable
in a proceeding under the Bankruptcy Code.

         Definitive Certificate: A Certificate of any Class issued in
definitive, fully registered, certificated form.

         Deleted Mortgage Loan: As defined in the applicable Purchase Agreement.

         Delinquency Event: If, as to any Distribution Date, the Rolling Three
Month Delinquency Rate as of the last day of the immediately preceding calendar
month equals or exceeds 50% of the Senior Enhancement Percentage for such
Distribution Date.

         Delinquency Rate: As to any date of determination, the fraction,
expressed as a percentage, the numerator of which is the aggregate Stated
Principal Balance of all Mortgage Loans 60 or more days delinquent (including
all foreclosures, bankruptcies and REO Properties) as of the close of business
on the last day of such month, and the denominator of which is the aggregate
Assumed Principal Balance of both Mortgage Pools as of the close of business on
the last day of such month.

         Delinquent: Any Mortgage Loan with respect to which the Scheduled
Payment due on a Due Date is not received.

         Depositor: Sequoia Residential Funding, Inc., a Delaware corporation
having its principal place of business in California ,or its successors in
interest.

                                       13



         Determination Date: With respect to each Distribution Date, the 10th
day of the month in which such Distribution Date occurs, or, if such 10th day is
not a Business Day, the next succeeding Business Day.

         Disqualified Organization: A "disqualified organization" as defined in
Section 860E(e)(5) of the Code.

         Distribution Account: The separate Eligible Account created and
maintained by the Securities Administrator, on behalf of the Trustee, pursuant
to Section 4.01. Funds in the Distribution Account (exclusive of any earnings on
investments made with funds deposited in the Distribution Account) shall be held
in trust for the Trustee and the Certificateholders for the uses and purposes
set forth in this Agreement.

         Distribution Account Deposit Date: The 18th day of each calendar month
after the initial issuance of the Certificates or, if such 18th day is not a
Business Day, the immediately preceding Business Day, commencing in May 2003.

         Distribution Date: The 20th day of each month or, if such 20th day is
not a Business Day, the next succeeding Business Day, commencing in May 2003.

         Due Date: With respect to any Mortgage Loan, the date on which a
Scheduled Payment is due under the related Mortgage Note as indicated in the
applicable Servicing Agreement.

         Due Period: As to any Distribution Date, the period beginning on the
second day of the month preceding the month of such Distribution Date, and
ending on the first day of the month of such Distribution Date.

         Effective Loan-to-Value Ratio: A fraction, expressed as a percentage,
the numerator of which is the original Stated Principal Balance of the Mortgage
Loan, less the amount of Additional Collateral required to secure such Mortgage
Loan at the time of origination, if any, and the denominator of which is the
Appraised Value of the related Mortgage Property at such date.

         Eligible Account: Any of (i) an account or accounts maintained with a
federal or state chartered depository institution or trust company the
short-term unsecured debt obligations of which (or, in the case of a depository
institution or trust company that is the principal subsidiary of a holding
company, the debt obligations of such holding company) have the highest
short-term ratings of each Rating Agency at the time any amounts are held on
deposit therein, or (ii) an account or accounts in a depository institution or
trust company in which such accounts are insured by the FDIC or the SAIF (to the
limits established by the FDIC or the SAIF) and the uninsured deposits in which
accounts are otherwise secured such that, as evidenced by an Opinion of Counsel
delivered to the Trustee and to each Rating Agency, the Certificateholders have
a claim with respect to the funds in such account or a perfected first priority
security interest against any collateral (which shall be limited to Permitted
Investments) securing such funds that is superior to claims of any other
depositors or creditors of the depository institution or trust company in which
such account is maintained, or (iii) a trust account or accounts maintained with
the trust department of a federal or state chartered depository institution or
trust

                                       14



company, acting in its fiduciary capacity or (iv) any other account acceptable
to each Rating Agency. Eligible Accounts may bear interest, and may include, if
otherwise qualified under this definition, accounts maintained with the Trustee,
the Paying Agent, the Securities Administrator or the Master Servicer.

         ERISA: The Employee Retirement Income Security Act of 1974, as amended.

         ERISA-Qualifying Underwriting: A best efforts or firm commitment
underwriting or private placement that meets the requirements of an
Underwriter's Exemption.

         ERISA-Restricted Certificate: The Class X, Class R and Class LT-R
Certificates, and any Certificate that does not satisfy the applicable rating
requirement under the Underwriter's Exemption.

         Escrow Account: As defined in Section 1 of each Servicing Agreement.

         Event of Default: Any one of the conditions or circumstances enumerated
in Section 6.14.

         Extra Principal Distribution Amount: With respect to each Distribution
Date, an amount equal to the lesser of (i) the aggregate Monthly Excess Cashflow
for such date and (ii) the Overcollateralization Deficiency for such date.

         Fannie Mae: The entity formerly known as the Federal National Mortgage
Association, a federally chartered and privately owned corporation organized and
existing under the Federal National Mortgage Association Charter Act, or any
successor thereto.

         FDIC: The Federal Deposit Insurance Corporation or any successor
thereto.

         FHLMC: The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created and existing under Title III of the
Emergency Home Finance Act of 1970, as amended, or any successor thereto.

         Global Securities: The global certificates representing the Book-Entry
Certificates.

         Group 1 Certificate: Any Class A-1 Certificate.

         Group 2 Certificate: Any Class A-2 Certificate.

         Holder or Certificateholder: The registered owner of any Certificate as
recorded on the books of the Certificate Registrar except that, solely for the
purposes of taking any action or giving any consent pursuant to this Agreement,
any Certificate registered in the name of the Depositor, the Trustee, the Master
Servicer, the Securities Administrator and any Servicer, or any Affiliate
thereof shall be deemed not to be outstanding in determining whether the
requisite percentage necessary to effect any such consent has been obtained,
except that, in determining whether the Trustee shall be protected in relying
upon any such consent, only Certificates which a Responsible Officer of the
Trustee knows to be so owned shall be disregarded. The Trustee may request and
conclusively rely on certifications by the Depositor, the Master Servicer, the

                                       15



Securities Administrator or any Servicer in determining whether any Certificates
are registered to an Affiliate of the Depositor, the Master Servicer, the
Securities Administrator or any Servicer.

         HUD: The United States Department of Housing and Urban Development, or
any successor thereto.

         Independent: When used with respect to any Accountants, a Person who is
"independent" within the meaning of Rule 2-01(b) of the Securities and Exchange
Commission's Regulation S-X. When used with respect to any other Person, a
Person who (a) is in fact independent of another specified Person and any
Affiliate of such other Person, (b) does not have any material direct financial
interest in such other Person or any Affiliate of such other Person, and (c) is
not connected with such other Person or any Affiliate of such other Person as an
officer, employee, promoter, underwriter, trustee, partner, director or Person
performing similar functions.

         Index: As to each Mortgage Loan, the index from time to time in effect
for adjustment of the Mortgage Rate as set forth as such on the related Mortgage
Note.

         Initial Mortgage Loan: Any Mortgage Loan acquired by the Trust Fund on
the Closing Date for inclusion in Pool 1 or Pool 2 as indicated on the Mortgage
Loan Schedule.

         Initial One-Month LIBOR Rate: 1.31781%.

         Initial Six-Month LIBOR Rate: 1.29313%.

         Initial Optional Purchase Date: The first Distribution Date following
the date on which the Aggregate Stated Principal Balance is less than 20.00% of
the Assumed Principal Balance as of the Cut-off Date.

         Initial Trust Receipt. As defined in the Custody Agreement.

         Insurance Policy: With respect to any Mortgage Loan, any insurance
policy, including all names and endorsements thereto in effect, including any
replacement policy or policies for any Insurance Policies.

         Insurance Proceeds: Proceeds paid by any Insurance Policy (excluding
proceeds required to be applied to the restoration and repair of the related
Mortgaged Property or released to the Mortgagor), in each case other than any
amount included in such Insurance Proceeds in respect of Insured Expenses and
(i) the proceeds from any Limited Purpose Surety Bond.

         Insured Expenses: Expenses covered by an Insurance Policy or any other
insurance policy with respect to the Mortgage Loans.

         Interest Remittance Amount: With respect to any Mortgage Pool and any
Distribution Date, all amounts in respect of interest received by the Master
Servicer on the Mortgage Loans in such Mortgage Pool from each Servicer or
otherwise through the Distribution Account Deposit Date for deposit into the
Distribution Account in respect of such Distribution Date, including (1)

                                       16



all interest (net of the related Servicing Fees and Master Servicing Fees)
collected on the related Mortgage Loans and due during the Due Period related to
such Distribution Date, together with the interest portion of any Advances in
respect thereof, (2) the interest portion of all Insurance Proceeds, Liquidation
Proceeds and the interest portion of any proceeds of any Additional Collateral
from the related Mortgage Loans, in each case for such Distribution Date, (3)
any amounts paid by the Master Servicer and/or received from the Servicers in
respect of Prepayment Interest Shortfalls with respect to the related Mortgage
Loans; (4) that portion of the Purchase Price representing interest of all
Defective Mortgage Loans in such Mortgage Pool purchased from the Trust Fund
during the related Prepayment Period; and (5) any investment earnings in amounts
on deposit in the Pre-Funding Account which have been transferred to the
Distribution Account for distribution on Distribution Date, minus the Pool
Percentage of:

         (A) all related fees, charges and other amounts payable or reimbursable
to the Master Servicer, the Securities Administrator or the Trustee under this
Agreement, up to an aggregate maximum amount equal to the product of (i) the
applicable Pool Percentage and (ii) $200,000 annually, or to the Servicers under
the Servicing Agreements;

         (B) in the case of (2), (3) and (4) above, any related unreimbursed
expenses incurred by the related Servicers in connection with a liquidation or
foreclosure and any unreimbursed Advances or Servicing Advances due to the
Master Servicer or the related Servicers;

         (C) any related unreimbursed Nonrecoverable Advances due to the Master
Servicer or the Servicers; and

         (D) in the case of (1) through (3) above, any related amounts collected
which are determined to be attributable to a subsequent Due Period or Prepayment
Period.

         Intervening Assignments: The original intervening assignments of the
Mortgage, notices of transfer or equivalent instrument.

         Latest Possible Maturity Date: The Distribution Date occurring in June
2033.

         LIBOR: As applicable, One-Month LIBOR or Six-Month LIBOR.

         LIBOR Business Day: Any day on which banks in London, England and The
City of New York are open and conducting transactions in foreign currency and
exchange.

         LIBOR Certificate: Any Class A-1, Class A-2, Class M-1 and Class M-2
Certificate.

         LIBOR Determination Date: For the Class A-1, Class M-1 and Class M-2
Certificates, the second LIBOR Business Day immediately preceding the
commencement of each Accrual Period for such Certificates. For the Class A-2
Certificates, the second LIBOR Business Day immediately preceding the
commencement of the Accrual Period relating to the Distribution Date in May and
November (other than May 2003) of each year.

         Limited Purpose Surety Bond: Any Limited Purpose Surety Bond listed in
Exhibit G.

                                       17



         Liquidated Mortgage Loan: With respect to any Distribution Date, a
defaulted Mortgage Loan (including any REO Property) which was liquidated in the
calendar month preceding the month of such Distribution Date and as to which the
related Servicer has certified (in accordance with its Servicing Agreement) that
it has received all amounts it expects to receive in connection with the
liquidation of such Mortgage Loan including the final disposition of an REO
Property.

         Liquidation Proceeds: Amounts, including Insurance Proceeds, received
in connection with the partial or complete liquidation of defaulted Mortgage
Loans, whether through trustee's sale, foreclosure sale or otherwise or amounts
received in connection with any condemnation or partial release of a Mortgaged
Property and any other proceeds received in connection with an REO Property.

         Loan-To-Value Ratio: With respect to any Mortgage Loan and as to any
date of determination, the fraction (expressed as a percentage) the numerator of
which is the principal balance of the related Mortgage Loan at such date of
determination and the denominator of which is the Appraised Value of the related
Mortgaged Property.

         Lower Tier Interest: As described in the Preliminary Statement.

         Lower Tier REMIC: As described in the Preliminary Statement.

         M-1 Principal Distribution Amount: With respect to any Distribution
Date, an amount equal, on or after the Stepdown Date and as long as a Trigger
Event is not in effect with respect to such Distribution Date, to the amount, if
any, by which (x) the sum of (i) the aggregate Class Principal Amounts of the
Senior Certificates, after giving effect to distributions on such Distribution
Date and (ii) the Class Principal Amount of the Class M-1 Certificates
immediately prior to such Distribution Date exceeds (y) the M-1 Target Amount.

         M-1 Target Amount: With respect to any Distribution Date, an amount
equal to the lesser of (a) the product of (i) 98.30% and (ii) the aggregate
Assumed Principal Balance of both Mortgage Pools and (b) the amount, if any, by
which (i) the aggregate Assumed Principal Balances of both Mortgage Pools for
such Distribution Date exceeds (ii) 0.25% of the aggregate Assumed Principal
Balance of both Mortgage Pools as of the Cut-off Date.

         M-2 Principal Distribution Amount: With respect to any Distribution
Date, an amount equal, on or after the Stepdown Date and as long as a Trigger
Event is not in effect with respect to such Distribution Date, to the amount, if
any, by which (x) the sum of (i) the aggregate Class Principal Amounts of the
Senior Certificates and the Class M-1 Certificates, in each case after giving
effect to distributions on such Distribution Date and (ii) the Class Principal
Amount of the Class M-2 Certificates immediately prior to such Distribution Date
exceeds (y) the M-2 Target Amount.

         M-2 Target Amount: With respect to any Distribution Date, an amount
equal to the lesser of (a) the product of (i) 99.50% and (ii) the aggregate
Assumed Principal Balance of both Mortgage Pools and (b) the amount, if any, by
which (i) the aggregate Assumed Principal Balance of both Mortgage Pools for
such Distribution Date exceeds (ii) 0.25% of the aggregate Assumed Principal
Balance of both Mortgage Pools as of the Cut-off Date.

                                       18



         Margin: As to each Mortgage Loan, the percentage amount set forth on
the related Mortgage Note added to the Index in calculating the Mortgage Rate
thereon.

         Master Servicer: Wells Fargo Bank Minnesota, National Association, a
national banking association organized under the laws of the United States in
its capacity as Master Servicer and any Person succeeding as Master Servicer
hereunder or any successor in interest, or if any successor master servicer
shall be appointed as herein provided, then such successor master servicer.

         Master Servicing Fee: With respect to any Distribution Date, an amount
equal to the product of one-twelfth of the Master Servicing Fee Rate and the
Stated Principal Balance of each Mortgage Loan as of the first day of the
related Due Period.

         Master Servicing Fee Rate: 0.007% per annum.

         Maximum Rate: As to any Mortgage Loan, the maximum rate set forth on
the related Mortgage Note at which interest can accrue on such Mortgage Loan.

         Monthly Excess Cashflow: With respect to any Distribution Date, the sum
of the Monthly Excess Interest and the Aggregate Overcollateralization Release
Amount for such date.

         Monthly Excess Interest: With respect to any Distribution Date, the
amount of any Interest Remittance Amount remaining after application pursuant to
clauses (i) through (iv) of Section 5.02(a) on such date.

         Moody's: Moody's Investors Service, Inc., or any successor in interest.

         Mortgage: A mortgage, deed of trust or other instrument encumbering a
fee simple interest in real property securing a Mortgage Note, together with
improvements thereto.

         Mortgage Documents: With respect to each Mortgage Loan, the mortgage
documents required to be delivered to the Custodian pursuant to the Custody
Agreement.

         Mortgage Loan: A Mortgage and the related notes or other evidences of
indebtedness secured by each such Mortgage conveyed, transferred, sold, assigned
to or deposited with the Trustee pursuant to Section 2.01 or Section 2.05
(including any Replacement Loan and REO Property), including without limitation,
each Mortgage Loan listed on the Mortgage Loan Schedule, as amended from time to
time. The term "Mortgage Loans" shall collectively refer to the Initial Mortgage
Loans and any Subsequent Mortgage Loans.

         Mortgage Loan Purchase and Sale Agreement: The mortgage loan purchase
and sale agreement, dated as of April 1, 2003, between the Seller and the
Depositor.

         Mortgage Loan Schedule: The schedule attached hereto as Schedule A,
which shall identify each Mortgage Loan, as such schedule may be amended by the
Depositor or the Servicer from time to time to reflect the addition of
Replacement Mortgage Loans or Subsequent Mortgage Loans to, or the deletion of
Deleted Mortgage Loans from, the Trust Fund. Such

                                       19



schedule shall, among other things (i) designate the Servicer servicing such
Mortgage Loan and the applicable Servicing Fee Rate; (ii) identify the
designated Mortgage Pool in which such Mortgage Loan is included; (iii)
separately identify One-Month LIBOR Loans and Six-Month LIBOR Loans; and (iv)
separately identify Additional Collateral Mortgage Loans.

         Mortgage Note: The original executed note or other evidence of the
indebtedness of a Mortgagor secured by a Mortgage under a Mortgage Loan.

         Mortgage Pool: Each of Pool 1 and Pool 2.

         Mortgaged Property: The underlying property, including any Additional
Collateral, securing a Mortgage Loan which, with respect to a Cooperative Loan,
is the related Cooperative Shares and Property Lease.

         Mortgage Rate: As to any Mortgage Loan, the annual rate of interest
borne by the related Mortgage Notes.

         Mortgagor: The obligor on a Mortgage Note.

         Net Interest Shortfall: As to any Class of Certificates and any
Distribution Date, the sum of Net Prepayment Interest Shortfalls and Relief Act
Shortfalls for such Class on such Distribution Date.

         Net Liquidation Proceeds: With respect to any Liquidated Mortgage Loan
or any other disposition of related Mortgaged Property, the related Liquidation
Proceeds net of Advances, Servicer Advances, related Servicing Fees and/or
Master Servicing Fees and any other accrued and unpaid servicing fees received
and retained in connection with the liquidation of such Mortgage Loan or
Mortgaged Property.

         Net Mortgage Rate: With respect to any Mortgage Loan and any
Distribution Date, the related Mortgage Rate as of the Due Date in the month
preceding the month of such Distribution Date reduced by the Aggregate Expense
Rate for such Mortgage Loan.

         Net Prepayment Interest Shortfall: With respect to any Mortgage Loan
and any Distribution Date, the amount by which any Prepayment Interest Shortfall
for such date exceeds the amount payable by the Master Servicer and/or the
related Servicers in respect of such shortfall.

         Net WAC: As to any Distribution Date, the weighted average of the Net
Mortgage Rates of the Mortgage Loans as of the Due Date of the month preceding
the month of such Distribution Date, weighted on the basis of their outstanding
Stated Principal Balances (after giving effect to the Scheduled Payments due on
or before such Due Date and Principal Prepayments received prior to such Due
Date) at such time.

         Net WAC Shortfall. For any Class of LIBOR Certificates and any
Distribution Date, the sum of:

                                       20



         (i)      the excess, if any, of the amount that would have been the
                  Current Interest for such Class if the Certificate Interest
                  Rate for such Class were calculated without regard to clause
                  (ii) in the definition thereof, over the actual Current
                  Interest for such Class for such Distribution Date;

         (ii)     any excess described in clause (i) above remaining unpaid from
                  prior Distribution Dates; and

         (iii)    interest for the applicable Accrual Period on the amount
                  described in clause (ii) above based on the applicable
                  Certificate Interest Rate (determined without regard to clause
                  (ii) in the definition thereof).

         Non-Book-Entry Certificate: Any Certificate other than a Book-Entry
Certificate.

         Non-permitted Foreign Holder: As defined in Section 3.03(f).

         Nonrecoverable Advance: Any portion of an Advance or Servicer Advance
previously made or proposed to be made by the Master Servicer and/or a Servicer
(as certified in an Officer's Certificate of the Servicer), which in the good
faith judgment of such party, shall not be ultimately recoverable by such party
from the related Mortgagor, related Liquidation Proceeds or otherwise.

         Non-U.S. Person: Any person other than a "United States person" within
the meaning of Section 7701(a)(30) of the Code.

         Notional Amount: With respect to any Notional Certificate and any
Distribution Date, such Certificate's Percentage Interest of the Class Notional
Amount of such Class of Certificates for such Distribution Date.

         Notional Certificate: The Class X Certificate.

         Offering Document: The Prospectus.

         Officer's Certificate: A certificate signed by two Authorized Officers
of the Depositor or the Chairman of the Board, any Vice Chairman, the President,
any Vice President or any Assistant Vice President of the Master Servicer or the
Securities Administrator, and in each case delivered to the Trustee.

         Officer's Certificate of the Servicer: A certificate (i) signed by the
Chairman of the Board, the Vice Chairman of the Board, the President, a Managing
Director, a Vice President (however denominated), an Assistant Vice President,
the Treasurer, the Secretary, or one of the Assistant Treasurers or Assistant
Secretaries of a Servicer, or (ii) if provided for herein, signed by a Servicing
Officer, as the case may be, and delivered to the Trustee or the Master
Servicer, as required hereby.

         One-Month LIBOR: With respect to the first Accrual Period, the Initial
One-Month LIBOR Rate. With respect to each subsequent Accrual Period, a per
annum rate determined on

                                       21



the LIBOR Determination Date for the Class A-1, Class M-1 and Class M-2
Certificates in the following manner by the Securities Administrator on the
basis of the "Interest Settlement Rate" set by the BBA for one-month United
States dollar deposits, as such rates appear on the Telerate Page 3750, as of
11:00 a.m. (London time) on such LIBOR Determination Date.

         (a       If on such a LIBOR Determination Date, the BBA's Interest
Settlement Rate does not appear on the Telerate Page 3750 as of 11:00 a.m.
(London time), or if the Telerate Page 3750 is not available on such date, the
Securities Administrator will obtain such rate from Reuters' "page LIBOR 01" or
Bloomberg's page "BBAM." If such rate is not published for such LIBOR
Determination Date, One-Month LIBOR for such date will be the most recently
published Interest Settlement Rate. In the event that the BBA no longer sets an
Interest Settlement Rate, the Securities Administrator will designate an
alternative index that has performed, or that the Securities Administrator
expects to perform, in a manner substantially similar to the BBA's Interest
Settlement Rate. The Securities Administrator will select a particular index as
the alternative index only if it receives an Opinion of Counsel, which opinion
shall be an expense reimbursed from the Distribution Account, that the selection
of such index will not cause any of the REMICs to lose their classification as
REMICs for federal income tax purposes.

         (b)      The establishment of One-Month LIBOR by the Securities
Administrator and the Securities Administrator's subsequent calculation of the
Certificate Interest Rate applicable to the Class A-1, Class M-1 and Class M-2
Certificates for the relevant Accrual Period, in the absence of manifest error,
will be final and binding.

         One-Month LIBOR Loan: Each Mortgage Loan bearing a Mortgage Rate that
adjusts in accordance with LIBOR for one-month U.S. dollar deposits.

         Opinion of Counsel: A written opinion of counsel, reasonably acceptable
in form and substance to the Trustee, the Securities Administrator or the Master
Servicer, as required hereby, and who may be in-house or outside counsel to the
Depositor, the Master Servicer, the Securities Administrator or the Trustee but
which must be Independent outside counsel with respect to any such opinion of
counsel concerning the transfer of any Residual Certificate or concerning
certain matters with respect to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or the taxation, or the federal income tax status,
of each REMIC.

         Original Capitalized Interest Amount: $241,972.86.

         Original Pre-Funded Amount: With respect to Pool 1, $79,536,812.16 and
with respect to Pool 2, $48,293,884.88.

         Overcollateralization Amount: With respect to any Distribution Date, an
amount equal to the amount, if any, by which (x) the aggregate Assumed Principal
Balance for such Distribution Date exceeds (y) the sum of the aggregate Class
Principal Amounts of the LIBOR Certificates after giving effect to distributions
in respect of principal on such Distribution Date.

         Overcollateralization Deficiency: With respect to any Distribution
Date, an amount equal to the amount, if any, by which (x) the Targeted
Overcollateralization Amount for such

                                       22



Distribution Date exceeds (y) the Overcollateralization Amount for such
Distribution Date, calculated for this purpose after giving effect to the
reduction on such Distribution Date of the Certificate Principal Amounts of the
Certificates resulting from the distribution of the Principal Remittance Amount
on such Distribution Date, but prior to allocation of any Applied Loss Amount on
such Distribution Date.

         Paying Agent: Any paying agent appointed pursuant to Section 3.08. The
initial Paying Agent shall be Wells Fargo Bank Minnesota, National Association,
for so long as it is acting as Securities Administrator under this Agreement.

         Percentage Interest: With respect to any Certificate, its percentage
interest in the undivided beneficial ownership interest in the Trust Fund
evidenced by all Certificates of the same Class as such Certificate. With
respect to any Certificate other than a Notional Certificate or the Class R and
Class LT-R Certificates, the Percentage Interest evidenced thereby shall equal
the initial Certificate Principal Amount thereof divided by the initial Class
Principal Amount of all Certificates of the same Class. With respect to each of
the Class R and the Class LT-R Certificates, the Percentage Interest evidenced
thereby shall be as specified on the face thereof, or otherwise, be equal to
100%. With respect to any Notional Certificate, the Percentage Interest
evidenced thereby shall equal its initial Notional Amount as set forth on the
face thereof divided by the initial Class Notional Amount of such Class.

         Permitted Investments: At any time, any one or more of the following
obligations and securities:

                  (i)      obligations of the United States or any agency
         thereof, provided that such obligations are backed by the full faith
         and credit of the United States;

                  (ii)     general obligations of or obligations guaranteed by
         any state of the United States or the District of Columbia receiving
         the highest long-term debt rating of each Rating Agency, or such lower
         rating as shall not result in the downgrading or withdrawal of the
         ratings then assigned to the Certificates by the Rating Agencies, as
         evidenced by a signed writing delivered by each Rating Agency;

                  (iii)    commercial or finance company paper which is then
         receiving the highest commercial or finance company paper rating of
         each Rating Agency rating such paper, or such lower rating as shall not
         result in the downgrading or withdrawal of the ratings then assigned to
         the Certificates by the Rating Agencies, as evidenced by a signed
         writing delivered by each Rating Agency;

                  (iv)     certificates of deposit, demand or time deposits, or
         bankers' acceptances issued by any depository institution or trust
         company incorporated under the laws of the United States or of any
         state thereof and subject to supervision and examination by federal
         and/or state banking authorities, provided that the commercial paper
         and/or long-term unsecured debt obligations of such depository
         institution or trust company (or in the case of the principal
         depository institution in a holding company system, the commercial
         paper or long-term unsecured debt obligations of such holding company,
         but only if Moody's is not the applicable Rating Agency) are then rated
         one of the two highest long-

                                       23



         term and the highest short-term ratings of each Rating Agency for such
         securities, or such lower ratings as shall not result in the
         downgrading or withdrawal of the ratings then assigned to the
         Certificates by the Rating Agencies, as evidenced by a signed writing
         delivered by each Rating Agency;

                  (v)      demand or time deposits or certificates of deposit
         issued by any bank or trust company or savings institution to the
         extent that such deposits are fully insured by the FDIC;

                  (vi)     guaranteed reinvestment agreements issued by any
         bank, insurance company or other corporation acceptable to the Rating
         Agencies at the time of the issuance of such agreements, as evidenced
         by a signed writing delivered by each Rating Agency;

                  (vii)    repurchase obligations with respect to any security
         described in clauses (i) and (ii) above, in either case entered into
         with a depository institution or trust company (acting as principal)
         described in clause (iv) above;

                  (viii)   securities (other than stripped bonds, stripped
         coupons or instruments sold at a purchase price in excess of 115% of
         the face amount thereof) bearing interest or sold at a discount issued
         by any corporation incorporated under the laws of the United States or
         any state thereof which, at the time of such investment, have one of
         the two highest ratings of each Rating Agency (except if the Rating
         Agency is Moody's, such rating shall be the highest commercial paper
         rating of Moody's for any such series), or such lower rating as shall
         not result in the downgrading or withdrawal of the ratings then
         assigned to the Certificates by the Rating Agencies, as evidenced by a
         signed writing delivered by each Rating Agency;

                  (ix)     interests in any money market fund which at the date
         of acquisition of the interests in such fund and throughout the time
         such interests are held in such fund has the highest applicable rating
         by each Rating Agency rating such fund or such lower rating as shall
         not result in a change in the rating then assigned to the Certificates
         by each Rating Agency including funds for which the Trustee, the Master
         Servicer, the Securities Administrator or any of its Affiliates is
         investment manager or adviser;

                  (x)      short-term investment funds sponsored by any trust
         company or national banking association incorporated under the laws of
         the United States or any state thereof which on the date of acquisition
         has been rated by each applicable Rating Agency in their respective
         highest applicable rating category or such lower rating as shall not
         result in a change in the rating then specified stated maturity and
         bearing interest or sold at a discount acceptable to each Rating Agency
         as shall not result in the downgrading or withdrawal of the ratings
         then assigned to the Certificates by the Rating Agencies; and

                  (xi)     such other investments having a specified stated
         maturity and bearing interest or sold at a discount acceptable to the
         Rating Agencies as shall not result in the downgrading or withdrawal of
         the ratings then assigned to the Certificates by the Rating Agencies;

                                       24



provided, that no such instrument shall be a Permitted Investment if (i) such
instrument evidences the right to receive interest only payments with respect to
the obligations underlying such instrument or (ii) such instrument would require
the Depositor to register as an investment company under the Investment Company
Act of 1940, as amended.

         Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.

         Plan Asset Regulations: The Department of Labor regulations set forth
in 29 C.F.R. 2510.3-101.

         Pool 1: The aggregate of Mortgage Loans identified on the Mortgage Loan
Schedule as being included in Pool 1.

         Pool 1 Mortgage Loans: Any Mortgage Loan in Pool 1.

         Pool 1 Net WAC: With respect to any Distribution Date, the weighted
average of the Net Mortgage Rates of the Pool 1 Mortgage Loans as of the first
day of the calendar month immediately preceding the calendar month of such
Distribution Date, weighted on the basis of their Stated Principal Balances.

         Pool 1 Pre-Funded Amount: As of any date of determination, the
aggregate outstanding balance on deposit in the Pool 1 Pre-Funding Account
(exclusive of any investment earnings thereon).

         Pool 1 Pre-Funding Account: The account established and maintained by
the Securities Administrator pursuant to Section 4.02, consisting of the 1M
Sub-account and the 6M Sub-account, holding the Pool 1 Pre-Funded Amount.

         Pool 1 Subordinate Amount: For any Distribution Date, the excess of the
sum of (a) the Aggregate Stated Principal Balances of the Pool 1 Mortgage Loans
and (b) the Pool 1 Pre-Funded Amount immediately prior to such Distribution Date
over (c) the Class Principal Amount of the Class A-1 Certificates immediately
before such Distribution Date.

         Pool 2: The aggregate of Mortgage Loans identified on the Mortgage Loan
Schedule as being included in Pool 2.

         Pool 2 Mortgage Loans: Any Mortgage Loan in Pool 2.

         Pool 2 Net WAC: With respect to any Distribution Date, the weighted
average of the Net Mortgage Rates of the Pool 2 Mortgage Loans as of the first
day of the calendar month immediately preceding the calendar month of such
Distribution Date, weighted on the basis of their Stated Principal Balances.

         Pool 2 Pre-Funded Amount: As of any date of determination, the
outstanding balance on deposit in the Pool 2 Pre-Funding Account (exclusive of
any investment earnings thereon).

                                       25



         Pool 2 Pre-Funding Account: The account established and maintained by
the Securities Administrator pursuant to Section 4.02 holding the Pool 2
Pre-Funded Amount.

         Pool 2 Subordinate Amount: For any Distribution Date, the excess of the
sum of (a) the Aggregate Stated Principal Balance of the Pool 2 Mortgage Loans
and (b) the Pool 2 Pre-Funded Amount immediately prior to such Distribution Date
over (c) the Class Principal Amount of the Class A-2 Certificates immediately
before such Distribution Date.

         Pool Percentage: With respect to each Mortgage Pool and any
Distribution Date, a fraction, expressed as a percentage, the numerator of which
is the sum of (a) the Aggregate Stated Principal Balance of such Mortgage Pool
as of such date and (b) the Pool 1 Pre-Funded Amount, in the case of Pool 1, and
the Pool 2 Pre-Funded Amount, in the case of Pool 2, and the denominator of
which is the Assumed Principal Balance as of such date.

         Pool Subordinate Amount: Either of the Pool 1 Subordinate Amount or the
Pool 2 Subordinate Amount.

         Pre-Funding Accounts: Each of the Pool 1 Pre-Funding Account and the
Pool 2 Pre-Funding Account.

         Pre-Funded Amount: As of any date of determination, the sum of the Pool
1 Pre-Funded Amount and the Pool 2 Pre-Funded Amount.

         Pre-Funding Period: The period commencing on the Closing Date and
ending on the earlier of (a) June 1, 2003 and (b) the date the last Subsequent
Mortgage Loan is acquired.

         Prepayment Interest Shortfall: With respect to any full or partial
Principal Prepayment of a Mortgage Loan, the excess, if any, of (i) one full
month's interest at the applicable Mortgage Rate on the Stated Principal Balance
of such Mortgage Loan immediately prior to such Principal Prepayment over (ii)
the amount of interest actually received with respect to such Mortgage Loan in
connection with such Principal Prepayment.

         Prepayment Period: With respect to each Distribution Date, the calendar
month immediately preceding the month in which the Distribution Date occurs.

         Primary Mortgage Insurance Policy: Each policy of primary mortgage
guaranty insurance or any replacement policy therefor with respect to any
Mortgage Loan.

         Principal Distribution Amount: With respect to any Mortgage Pool and
any Distribution Date, the sum of (i) the Principal Remittance Amount for such
Mortgage Pool for such date minus the related Principal Percentage of the
Aggregate Overcollateralization Release Amount, if any, for such Distribution
Date and (ii) the Extra Principal Distribution Amount, if any, for such date,
multiplied by the related Principal Percentage for such date.

         Principal Percentage: With respect to any Mortgage Pool and any
Distribution Date, the percentage equivalent of a fraction, the numerator of
which is the Principal Remittance Amount

                                       26



for such Mortgage Pool and date and the denominator of which is aggregate of the
Principal Remittance Amounts for both Mortgage Pools on such date.

         Principal Remittance Amount: With respect to any Mortgage Pool and any
Distribution Date, the sum of (a) each Scheduled Payment of principal collected
or advanced on the related Mortgage Loans (before taking into account any
Deficient Valuations or Debt Service Reductions) and due during the related Due
Period, (b) that portion of the Purchase Price representing principal of any
Mortgage Loans in such Mortgage Pool purchased in accordance with Section 2.04
hereof and received during the related Prepayment Period, (c) the principal
portion of any related Substitution Amount received during the related
Prepayment Period, (d) the principal portion of all Insurance Proceeds received
during the related Prepayment Period with respect to Mortgage Loans in such
Mortgage Pool that are not yet Liquidated Mortgage Loans, (e) the principal
portion of all Net Liquidation Proceeds received during the related Prepayment
Period with respect to Liquidated Mortgage Loans in such Mortgage Pool, (f) the
principal portion of the proceeds of any Additional Collateral with respect to
the Mortgage Loans in such Mortgage Pool, (g) the principal portion of all
partial and full principal prepayments of Mortgage Loans in such Mortgage Pool
applied by the Servicers during the related Prepayment Period and (h) on the
Distribution Date on which the Trust Fund is to be terminated pursuant to
Article X hereof, that portion of the Redemption Price in respect of principal
for such Mortgage Pool.

         Principal Prepayment: Any Mortgagor payment of principal or other
recovery of principal on a Mortgage Loan that is recognized as having been
received or recovered in advance of its scheduled Due Date and applied to reduce
the principal balance of the Mortgage Loan in accordance with the terms of the
Mortgage Note or the Servicing Agreement.

         Principal Prepayment In Full: Any Principal Prepayment of the entire
principal balance of the Mortgage Loans.

         Proceeding: Any suit in equity, action at law or other judicial or
administrative proceeding.

         Proprietary Lease: With respect to any Cooperative Property, a lease or
occupancy agreement between a Cooperative Corporation and a holder of related
Cooperative Shares.

         Prospectus: The prospectus supplement dated April 24, 2003, together
with the accompanying prospectus dated March 21, 2003 relating to the
Certificates.

         Purchase Agreements: The mortgage purchase agreements listed in Exhibit
F hereto, as each such agreement may be amended or supplemented from time to
time as permitted hereunder.

         Purchase Price: With respect to any Mortgage Loan required or permitted
to be purchased by the Seller or Depositor pursuant to this Agreement, by the
Servicers pursuant to the Servicing Agreements, or by the Seller pursuant to the
Purchase Agreements, an amount equal to the sum of (i) 100% of the unpaid
principal balance of the Mortgage Loan on the date of such purchase, (ii)
accrued interest thereon at the applicable Net Mortgage Rate from the date
through

                                       27



which interest was last paid by the Mortgagor to the Due Date in the month in
which the Purchase Price is to be distributed to Certificateholders and (iii)
the amount of any costs and damages incurred by the Trust Fund as a result of
any violation of any applicable federal, state, or local predatory or abusive
lending law arising from or in connection with the origination of such Mortgage
Loan.

         Rating Agency: Each of Moody's and S&P.

         Realized Loss: With respect to each Liquidated Mortgage Loan, an amount
(not less than zero or more than the Stated Principal Balance of the Mortgage
Loan) as of the date of such liquidation, equal to (i) the Stated Principal
Balance of the Liquidated Mortgage Loan as of the date of such liquidation, plus
(ii) interest at the Net Mortgage Rate from the Due Date as to which interest
was last paid or advanced (and not reimbursed) to Certificateholders up to the
Due Date in the month in which Liquidation Proceeds are required to be
distributed on the Stated Principal Balance of such Liquidated Mortgage Loan
from time to time, minus (iii) the Liquidation Proceeds and the proceeds of any
Additional Collateral, if any, received during the month in which such
liquidation occurred, to the extent applied as recoveries of interest at the Net
Mortgage Rate and to principal of the Liquidated Mortgage Loan. With respect to
each Mortgage Loan which has become the subject of a Deficient Valuation, if the
principal amount due under the related Mortgage Note has been reduced, the
difference between the principal balance of the Mortgage Loan outstanding
immediately prior to such Deficient Valuation and the principal balance of the
Mortgage Loan as reduced by the Deficient Valuation.

         Record Date: As to any Distribution Date (i) with respect to the LIBOR
Certificates, the last Business Day preceding such Distribution Date (or the
Closing Date, in the case of the first Distribution Date) unless such
Certificates shall no longer be Book-Entry Certificates, in which case the
Record Date shall be the last Business Day of the month preceding the month of
such Distribution Date and (ii) in the case of all other Certificates (including
LIBOR Certificates that are subsequently reissued as Definitive Certificates),
the last Business Day of the month preceding the month of each Distribution
Date.

         Redemption Date: Any Distribution Date on which Certificates may be
redeemed.

         Redemption Price: With respect to any Class of LIBOR Certificates to be
redeemed, an amount equal to 100% of the related Class Principal Amount of the
LIBOR Certificates to be so redeemed, together with interest on such amount at
the applicable Certificate Interest Rate through the related Accrual Period
(excluding any Net WAC Shortfalls), and including, in the case of the Redemption
Price payable in connection with the redemption and retirement of all of the
Certificates, the payment of all amounts (including, without limitation, all
previously unreimbursed Advances and Servicing Advances and accrued and unpaid
Servicing Fees) payable or reimbursable to the Trustee, the Master Servicer and
the Servicers pursuant to this Agreement and the Servicing Agreements, or to the
Custodian under the Custody Agreement (to the extent such amounts are not paid
to the Custodian by the Seller). With respect to the Class X Certificate, the
Class X Distributable Amount for the Redemption Date.

         Refinancing Mortgage Loan: Any Mortgage Loan originated in connection
with the refinancing of an existing mortgage loan.

                                       28



         Related Certificate Group: The Certificate Group related to a
particular Mortgage Pool as indicated by the same numerical designation (i.e.,
Group 1 Certificates are related to Pool 1 and Group 2 Certificates are related
to Pool 2).

         Relief Act Shortfalls: With respect to any Distribution Date and any
Mortgage Loan as to which there has been a reduction in the amount of interest
collectible thereon for the most recently ended calendar month as a result of
the application of the Civil Relief Act, the amount, if any, by which (i)
interest collectible on such Mortgage Loan for the most recently ended calendar
month is less than (ii) interest accrued thereon for such month pursuant to the
Mortgage Note.

         REMIC: Each pool of assets in the Trust Fund designated as a REMIC as
described in the Preliminary Statement.

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

         REO Property: A Mortgaged Property acquired by the Trust Fund through
foreclosure or deed-in-lieu of foreclosure in connection with a defaulted
Mortgage Loan or otherwise treated as having been acquired pursuant to the REMIC
Provisions.

         Replacement Mortgage Loan: A mortgage loan substituted by the Seller
for a Deleted Mortgage Loan which must, on the date of such substitution, as
confirmed in a Request for Release, substantially in the form attached to the
Custody Agreement, (i) have a Stated Principal Balance, after deduction of the
principal portion of the Scheduled Payment due in the month of substitution, not
in excess of, and not more than 10% less than, the Stated Principal Balance of
the Deleted Mortgage Loan; (ii) have a Maximum Rate not less than (and not more
than two percentage points greater than) the Maximum Rate of the Deleted
Mortgage Loan; (iii) have a gross margin not less than that of the Deleted
Mortgage Loan and, if Mortgage Loans equal to 1% or more of the balance of the
related Mortgage Pool as of the Cut-off Date have become Deleted Mortgage Loans,
not more than two percentage points more than that of the Deleted Mortgage Loan;
(iv) have an Effective Loan-to-Value Ratio no higher than that of the Deleted
Mortgage Loan; (v) have Adjustment Dates that are no more or less frequent than
the Deleted Mortgage Loan; (vi) have a remaining term to maturity no greater
than (and not more than one year less than that of) the Deleted Mortgage Loan;
(vii) not permit conversion of the related Mortgage Rate to a permanent fixed
Mortgage Rate; (viii) not be a Cooperative Loan unless the Deleted Mortgage Loan
was a Cooperative Loan; (ix) have the same or better FICO credit score; (x) have
an initial interest adjustment date no earlier than five months before (and no
later than five months after) the initial adjustment date of the Deleted
Mortgage Loan, (xi) comply with each representation and warranty set forth in
Article III of each Purchase Agreement; and (xii) shall be accompanied by an
Opinion of Counsel that such Replacement Mortgage Loan would not adversely
affect the REMIC status of the Trust Estate or would not otherwise be prohibited
by this Indenture.

                                       29



         Required Reserve Fund Deposit: With respect to any Distribution Date,
an amount equal to the lesser of (i) the amount required to cause the balance on
deposit in the Reserve Fund to equal the sum of (a) any Net WAC Shortfalls for
such Distribution Date with respect to the LIBOR Certificates and (b) $10,000
and (ii) the Class X Distributable Amount (the amount of Monthly Excess Cashflow
available after satisfying distribution priorities (i) and (ii) under Section
5.02(c)).

         Reserve Fund: A fund created as part of the Trust Fund pursuant to
Section 5.06 of this Agreement but which is not an asset of any of the REMICs.

         Residual Certificate: Each of the Class R and Class LT-R Certificates.

         Responsible Officer: With respect to the Trustee, any officer in the
corporate trust department or similar group of the Trustee with direct
responsibility for the administration of this Agreement and also, with respect
to a particular corporate trust matter, any other officer to whom such matter is
referred because of his or her knowledge of and familiarity with the particular
subject.

         Restricted Certificate: Any Class R or Class LT-R Certificates.

         Restricted Global Security: As defined in Section 3.01(c).

         Rolling Three Month Delinquency Rate: With respect to any Distribution
Date, the fraction, expressed as a percentage, equal to the average of the
Delinquency Rates for each of the three (or one and two, in the case of the
first and second Distribution Dates, respectively) immediately preceding
calendar months.

         S&P: Standard & Poor's Rating Services, a division of The McGraw-Hill
Companies, Inc., or any successor in interest.

         SAIF: The Saving's Association Insurance Fund, or any successor
thereto.

         Schedule of Exceptions: As defined in the Custody Agreement.

         Scheduled Payment: The scheduled monthly payment on a Mortgage Loan due
on any Due Date allocable to principal and/or interest on such Mortgage Loan
which, unless otherwise specified in the Servicing Agreements, shall give effect
to any related Debt Service Reduction and any Deficient Valuation that affects
the amount of the monthly payment due on such Mortgage Loan.

         Securities Administrator: Wells Fargo Bank Minnesota, National
Association, not in its individual capacity but solely as Securities
Administrator, or any successor in interest, or if any successor Securities
Administrator shall be appointed as herein provided, then such successor
Securities Administrator.

         Seller: RWT Holdings, Inc., a Delaware corporation.

         Senior Certificate: Any one of the Class A-1 or Class A-2 Certificates.

                                       30



         Senior Enhancement Percentage: With respect to any Distribution Date,
the percentage equivalent of a fraction, the numerator of which is the sum of
the aggregate Class Principal Amounts of the Subordinate Certificates and the
Overcollateralization Amount (which, for purposes of this definition only, will
not be less than zero) and the denominator of which is the aggregate Assumed
Principal Balance of both Mortgage Pools for such Distribution Date, in each
case after giving effect to distributions on such Distribution Date.

         Senior Principal Distribution Amount: With respect to each Mortgage
Pool and any Distribution Date, an amount equal to (i) prior to the Stepdown
Date or if a Trigger Event is in effect with respect to such Distribution Date,
100% of the Principal Distribution Amount for such Mortgage Pool and (ii) on or
after the Stepdown Date and as long as a Trigger Event is not in effect with
respect to such Distribution Date the amount, if any, by which (x) the aggregate
Class Principal Amount of the Class A-1 Certificates (in the case of Pool 1) or
the Class A-2 Certificates (in the case of Pool 2) immediately prior to that
Distribution Date exceeds (y) the Senior Target Amount for such Mortgage Pool.

         Senior Target Amount: With respect to each Mortgage Pool and any
Distribution Date, an amount equal to the lesser of (a) the product of (i)
95.50% and (ii) the Assumed Principal Balance of such Mortgage Pool and (b) the
amount, if any, by which (i) the Assumed Principal Balance of such Mortgage Pool
and such Distribution Date exceeds (ii) 0.25% of the Assumed Principal Balance
for such Mortgage Pool as of the Cut-off Date.

         Servicers: Each Servicer under a Servicing Agreement.

         Servicer Advance: A "Servicing Advance" as defined in the applicable
Servicing Agreement.

         Servicing Agreement: The agreements listed in Exhibit E, as each such
agreement has been modified by the related Acknowledgement and as it may be
amended or supplemented from time to time as permitted thereby.

         Servicing Fee: As to any Distribution Date and each Mortgage Loan, an
amount equal to the product of (a) one-twelfth of the Servicing Fee Rate and (b)
the Stated Principal Balance of such Mortgage Loan as of the first day of the
related Due Period.

         Servicing Fee Rate: With respect to each Mortgage Loan and any
Distribution Date, the rate specified in the related Servicing Agreement.

         Servicing Officer: Any officer of the Servicers involved in, or
responsible for, the administration and servicing of the Mortgage Loans whose
name and facsimile signature appear on a list of servicing officers furnished to
the Master Servicer by the Servicers on the Closing Date pursuant to the
Servicing Agreements, as such list may from time to time be amended.

         Six-Month LIBOR: With respect to the first Accrual Period, the Initial
Six-Month LIBOR Rate. With respect to each subsequent Accrual Period, a per
annum rate determined on the immediately preceding LIBOR Determination Date for
the Class A-2 Certificates in the following manner by the Securities
Administrator on the basis of the "Interest Settlement Rate"

                                       31



set by the BBA for six-month United States dollar deposits, as such rates appear
on the Telerate Page 3750, as of 11:00 a.m. (London time) on such LIBOR
Determination Date.

         (a)      If on such a LIBOR Determination Date, the BBA's Interest
Settlement Rate does not appear on the Telerate Page 3750 as of 11:00 a.m.
(London time), or if the Telerate Page 3750 is not available on such date, the
Securities Administrator will obtain such rate from Reuters' "page LIBOR 01" or
Bloomberg's page "BBAM." If such rate is not published for such LIBOR
Determination Date, Six-Month LIBOR for such date will be the most recently
published Interest Settlement Rate. In the event that the BBA no longer sets an
Interest Settlement Rate, the Securities Administrator will designate an
alternative index that has performed, or that the Securities Administrator
expects to perform, in a manner substantially similar to the BBA's Interest
Settlement Rate. The Securities Administrator will select a particular index as
the alternative index only if it receives an Opinion of Counsel, which opinion
shall be an expense reimbursed from the Distribution Account, that the selection
of such index will not cause any of the REMICs to lose their classification as
REMICs for federal income tax purposes.

         (b)      The establishment of Six-Month LIBOR by the Securities
Administrator and the Securities Administrator's subsequent calculation of the
Certificate Interest Rate applicable to the Class A-2 Certificates for the
relevant Accrual Period, in the absence of manifest error, will be final and
binding.

         Six-Month LIBOR Loan: Each Mortgage Loan bearing a Mortgage Rate that
adjusts in accordance with LIBOR for six-month U.S. dollar deposits.

         Startup Day: The day designated as such pursuant to Section 10.01(b)
hereof.

         Stated Principal Balance: As to any Mortgage Loan and Due Date, the
unpaid principal balance of such Mortgage Loan as of such Due Date as specified
in the amortization schedule at the time relating thereto (before any adjustment
to such amortization schedule by reason of any moratorium or similar waiver or
grace period) after giving effect to any previous partial Principal Prepayments
and Liquidation Proceeds allocable to principal (other than with respect to any
Liquidated Mortgage Loan) and to the payment of principal due on such Due Date
and irrespective of any delinquency in payment by the related Mortgagor.

         Stepdown Date: The earlier to occur of (i) the Distribution Date on
which the Class Principal Amount of each Class of Senior Certificates has been
reduced to zero and (ii) the later to occur of (x) the Distribution Date in May
2006 and (y) the first Distribution Date on which the Senior Enhancement
Percentage (calculated for this purpose after giving effect to payments or other
recoveries in respect of the Mortgage Loans during the related Due Period but
before giving effect to distributions on any Certificates on such Distribution
Date) is greater than or equal to 4.50%.

         Sub-account: Each of the Class 1M Sub-account and 6M Sub-account
constituting the Pool 1 Pre-Funding Account.

                                       32



         Subordinate Certificate: Any of the Class M-1, Class M-2, Class X,
Class R or Class LT-R Certificates.

         Subordinate Net WAC: For any Distribution Date, the weighted average of
the Pool 1 Net WAC and the Pool 2 Net WAC, in each case weighted on the basis of
the relative Pool Subordinate Amounts for Pool 1 and Pool 2, respectively,
immediately prior to such Distribution Date.

         Subsequent Cut-Off Date: With respect to any Subsequent Mortgage Loan,
the first day of the calendar month in which the related Subsequent Transfer
Date occurs.

         Subsequent Delivery Requirements: After giving effect to the
acquisition of all Subsequent Mortgage Loans by a Mortgage Pool, the Mortgage
Loans in such Pool (which shall all be Mortgage Loans bearing interest at an
adjustable rate of interest) shall:

         With respect to Pool 1:

                  (i)      have a weighted average Margin of not less than
         1.76%;

                  (ii)     have a weighted average Effective Loan-to-Value Ratio
         (after giving effect to the value of any Additional Collateral) not in
         excess of 68.00%;

                  (iii)    consist of Six-Month LIBOR Loans having an aggregate
         Stated Principal Balance of not more than $56,964,309.58 greater than
         the aggregate Stated Principal Balance of Six-Month LIBOR Loans in Pool
         1 on the Closing Date, and One-Month LIBOR Loans having an aggregate
         Stated Principal Balance of not more than $22,572,502.58 greater than
         the aggregate Stated Principal Balance of One-Month LIBOR Loans in Pool
         1 on the Closing Date;

                  (iv)     have a remaining term to maturity of not greater than
         360 months; and

                  (v)      have a Loan-to-Value Ratio not greater than 100.00%.

         With respect to Pool 2:

                  (i)      have a weighted average Margin of not less than
         1.83%;

                  (ii)     have a weighted average Effective Loan-to-Value Ratio
         (after giving effect to the value of any Additional Collateral) not in
         excess of 68.00%;

                  (iii)    shall consist of Six-Month LIBOR Loans having an
         aggregate Stated Principal Balance of not more than $48,293,884.88
         greater than the aggregate Stated Principal Balance of Six-Month LIBOR
         Loans in Pool 2 on the Closing Date;

                  (iv)     have a remaining term to maturity of not greater than
         360 months;

                  (v)      have a Loan-to-Value Ratio not greater than 100.00%;

                                       33



         Subsequent Mortgage Loan: Any Mortgage Loan conveyed to the Trust Fund
and delivered to the Custodian on behalf of Trustee on a Subsequent Transfer
Date.

         Subsequent Transfer Date: The date on which any Subsequent Mortgage
Loan is conveyed by the Depositor to the Trust Fund.

         Subsequent Transfer Date Notice: The form of Notice of Subsequent
Transfer Date attached as Exhibit A to each Mortgage Loan Purchase and Sale
Agreement, specifying the date on which a Subsequent Mortgage Loan will be
conveyed to the Trust Fund.

         Substitution Amount: As defined in the second paragraph of Section
2.04(b).

         Targeted Overcollateralization Amount: With respect to any Distribution
Date, an amount equal to 0.25% of the aggregate Assumed Principal Balance of
both Mortgage Pools as of the Cut-off Date.

         Tax Matters Person: The "tax matters person" as specified in the REMIC
Provisions which shall initially be the Holder of the Class LT-R Certificate.

         Telerate Page 3750: The display currently so designated as "Page 3750"
on the Bridge Telerate Service (or such other page selected by the Securities
Administrator as may replace Page 3750 on that service for the purpose of
displaying daily comparable rates on prices).

         Transfer Price: With respect to any Subsequent Mortgage Loan, the price
specified in the Subsequent Transfer Date Notice which shall be no less than the
Stated Principal Balance of the Subsequent Mortgage Loan, as increased by any
amount of principal and interest received on such Subsequent Mortgage Loan from
and after the related Subsequent Cut-off Date specified in the Subsequent
Transfer Date Notice.

         Trigger Event: If, as to any Distribution Date, either a Delinquency
Event or a Cumulative Loss Trigger Event is in effect for such Distribution
Date.

         Trust Fund: The corpus of the trust created pursuant to this Agreement,
consisting of the Mortgage Loans and all interest and principal received thereon
on or after the Cut-off Date (other than Scheduled Payments due on or prior to
the Cut-off Date), the Depositor's rights assigned to the Trustee under the
Purchase Agreements and the Servicing Agreements, as modified by the
Acknowledgements and the Mortgage Loan Purchase and Sale Agreement, the
Insurance Policies relating to the Mortgage Loans, all cash, instruments or
property held or required to be held in the Custodial Accounts, the Distribution
Account, the Capitalized Interest Account and the Pre-Funding Accounts, property
that secured a Mortgage Loan, the pledge, control and guaranty agreements and
Limited Purpose Surety Bond relating to the Additional Collateral Mortgage
Loans, and the Reserve Fund.

         Trustee: HSBC Bank USA, a New York banking corporation organized and
existing under the laws of the State of New York and any Person succeeding the
Trustee hereunder, or if any successor trustee or any co-trustee shall be
appointed as herein provided, then such successor trustee and such co-trustee,
as the case may be.

                                       34



         Trustee Mortgage Files: With respect to each Mortgage Loan, the
Mortgage Documents to be retained in the custody and possession of the Trustee
or Custodian on behalf of the Trustee.

         UCC: The Uniform Commercial Code as enacted in the relevant
jurisdiction.

         Underwriters: Greenwich Capital Markets, Inc., Morgan Stanley & Co.
Incorporated, Banc of America Securities LLC and Merrill Lynch, Pierce, Fenner &
Smith Incorporated.

         Underwriter's Exemption: Prohibited Transaction Exemption ("PTE") 90-59
as most recently amended and restated by PTE 2002-41 or any substantially
similar administrative exemption granted by the U.S. Department of Labor to the
Underwriters.

         Underwriting Agreement: The Underwriting Agreement, dated April 24,
2003, among the Seller, the Depositor and the Underwriters.

         Uniform Commercial Code: The Uniform Commercial Code as in effect in
any applicable jurisdiction from time to time.

         Upper Tier REMIC: As described in the Preliminary Statement.

         Voting Interests: The portion of the voting rights of all the
Certificates that is allocated to any Certificate for purposes of the voting
provisions of this Agreement. At all times during the term of this Agreement,
98.00% of all Voting Interests shall be allocated to the Class A-1, Class A-2,
Class M-1 and Class M-2 Certificates. Voting Interests shall be allocated among
such Certificates based on the product of (i) 98% and (ii) the fraction,
expressed as a percentage, the numerator of which is the aggregate Class
Principal Amounts for each Class then outstanding and the denominator of which
is the Assumed Principal Balance outstanding. At all times during the term of
this Agreement, 1.00% of all Voting Interests shall be allocated to the Class X
Certificate and 0.50% of all Voting Interests shall be allocated to each of the
Class R and the Class LT-R Certificates. Voting Interests shall be allocated
among the Certificates within each such Class in proportion to their Certificate
Principal Amounts or Percentage Interests.

                                       35



         Section 1.02      Calculations Respecting Mortgage Loans.

         Calculations required to be made pursuant to this Agreement with
respect to any Mortgage Loan in the Trust Fund shall be made based upon current
information as to the terms of the Mortgage Loans and reports of payments
received from the Mortgagor on such Mortgage Loans and payments to be made to
the Securities Administrator as supplied to the Securities Administrator by the
Master Servicer. The Securities Administrator shall not be required to
recompute, verify or recalculate the information supplied to it by the Master
Servicer or any Servicer.

                                   ARTICLE II

                              DECLARATION OF TRUST;
                            ISSUANCE OF CERTIFICATES

         Section 2.01      Creation and Declaration of Trust Fund; Conveyance of
                           Mortgage Loans.

         (a) Concurrently with the execution and delivery of this Agreement, the
Depositor does hereby transfer, assign, set over, deposit with and otherwise
convey to the Trustee, without recourse, subject to Sections 2.02, 2.04 and
2.05, in trust, all the right, title and interest of the Depositor in and to the
Trust Fund. Such conveyance includes, without limitation, (i) the Initial
Mortgage Loans, including the right to all payments of principal and interest
received on or with respect to the Initial Mortgage Loans on and after the
Cut-off Date (other than Scheduled Payments due on or before such date), and all
such payments due after such date but received prior to such date and intended
by the related Mortgagors to be applied after such date; (ii) all of the
Depositor's right, title and interest in and to all amounts from time to time
credited to and the proceeds of the Distribution Account, any Custodial Accounts
or any Escrow Account established with respect to the Initial Mortgage Loans;
(iii) all of the Depositor's rights under the Purchase Agreements and the
Servicing Agreements as modified by the Acknowledgements and the Mortgage Loan
Purchase and Sale Agreements; (iv) all of the Depositor's right, title or
interest in REO Property and the proceeds thereof; (v) all of the Depositor's
rights under any Insurance Policies related to the Initial Mortgage Loans; and
(vi) the Depositor's security interest in any collateral pledged to secure the
Initial Mortgage Loans, including the Mortgaged Properties and any Additional
Collateral relating to the Additional Collateral Mortgage Loans, including, but
not limited to, the pledge, control and guaranty agreements and the Limited
Purpose Surety Bond, to have and to hold, in trust; and the Trustee declares
that, subject to the review provided for in Section 2.02, it has received and
shall hold the Trust Fund, as trustee, in trust, for the benefit and use of the
Holders of the Certificates and for the purposes and subject to the terms and
conditions set forth in this Agreement, and, concurrently with such receipt, has
caused to be executed, authenticated and delivered to or upon the order of the
Depositor, in exchange for the Trust Fund, Certificates in the authorized
denominations evidencing the entire ownership of the Trust Fund.

         The foregoing sale, transfer, assignment, set-over, deposit and
conveyance does not and is not intended to result in the creation or assumption
by the Trustee of any obligation of the

                                       36



Depositor, the Seller or any other Person in connection with the Initial
Mortgage Loans or any other agreement or instrument relating thereto except as
specifically set forth therein.

         In connection with such transfer and assignment of the Initial Mortgage
Loans, the Depositor does hereby deliver to, and deposit with, or cause to be
delivered to and deposited with, the Custodian acting on the Trustee's behalf,
the following documents or instruments with respect to each Initial Mortgage
Loan (each a "Trustee Mortgage File") so transferred and assigned:

                  (i)      with respect to each Initial Mortgage Loan, the
         original Mortgage Note endorsed without recourse in proper form to the
         order of the Trustee, or in blank (in each case, with all necessary
         intervening endorsements, as applicable);

                  (ii)     with respect to each Initial Mortgage Loan (other
         than a Cooperative Loan), the original mortgage, deed of trust or other
         instrument creating a first lien on the underlying property securing
         the Initial Mortgage Loan and bearing evidence that such instrument has
         been recorded in the appropriate jurisdiction where the Mortgaged
         Property is located (or, in lieu of the original of the Mortgage, a
         true copy of the Mortgage certified by the originator, or a duplicate
         or conformed copy of the Mortgage, together with a certificate of
         either the closing attorney or an officer of the title insurer that
         issued the related title insurance policy, certifying that such copy
         represents a true and correct copy of the original and that such
         original has been or is currently submitted to be recorded in the
         appropriate governmental recording office of the jurisdiction where the
         Mortgaged Property is located);

                  (iii)    with respect to each Initial Mortgage Loan (other
         than a Cooperative Loan), the Assignment of Mortgage in form and
         substance acceptable for recording in the relevant jurisdiction, such
         assignment being either (A) in blank, without recourse, or (B) or
         endorsed to "HSBC Bank USA, as Trustee of the Sequoia Mortgage Trust
         2003-2, Mortgage Pass-Through Certificates, without recourse."

                  (iv)     with respect to each Initial Mortgage Loan (other
         than a Cooperative Loan), the originals or certified copies of all
         Intervening Assignments of the Mortgage, if any, with evidence of
         recording thereon, showing a complete chain of title to the last
         endorsee, including any warehousing assignment;

                  (v)      with respect to each Initial Mortgage Loan (other
         than a Cooperative Loan), any assumption, modification, written
         assurance, substitution, consolidation, extension or guaranty
         agreement, if applicable;

                  (vi)     with respect to each Initial Mortgage Loan (other
         than a Cooperative Loan), the original policy of title insurance (or a
         true copy thereof) with respect to any such Initial Mortgage Loan, or,
         if such policy has not yet been delivered by the insurer, the title
         commitment or title binder to issue same; and

                  (vii)    if the Mortgage Note or Mortgage or any other
         material document or instrument relating to the Initial Mortgage Loan
         has been signed by a person on behalf of

                                       37



         the Mortgagor, the original power of attorney or other instrument that
         authorized and empowered such person to sign bearing evidence that such
         instrument has been recorded, if so required, in the appropriate
         jurisdiction where the Mortgaged Property is located (or, in lieu
         thereof, a duplicate or conformed copy of such instrument, together
         with a certificate of receipt from the recording office, certifying
         that such copy represents a true and complete copy of the original and
         that such original has been or is currently submitted to be recorded in
         the appropriate governmental recording office of the jurisdiction where
         the Mortgaged Property is located).

                  (viii)   with respect to each Initial Mortgage Loan which
         constitutes a Cooperative Mortgage Loan:

                           (a)      the original loan and security agreement;

                           (b)      the original Cooperative Shares;

                           (c)      a stock power executed in blank by the
                  person in whose name the Cooperative Shares are issued;

                           (d)      the Proprietary Lease or occupancy agreement
                  accompanied by an assignment in blank of such proprietary
                  lease;

                           (e)      the recognition agreement executed by the
                  Cooperative Corporation, which requires the Cooperative
                  Corporation to recognize the rights of the lender and its
                  successors in interest and assigns, under the cooperative;

                           (f)      UCC-1 financing statements with recording
                  information thereon from the appropriate governmental
                  recording offices if necessary to perfect the security
                  interest of the Cooperative Mortgage Loan under the Uniform
                  Commercial Code in the jurisdiction in which the cooperative
                  project is located, accompanied by UCC-3 financing statements
                  executed in blank for recordation of the change in the secured
                  party thereunder;

                           (g)      the original policy of title insurance or
                  with respect to any such Cooperative Mortgage Loan, if such
                  policy has not yet been delivered by the insurer, the title
                  commitment or title binder to issue same; and

                           (h)      Any guarantees, if applicable.

         The foregoing document delivery requirements with respect to each
Trustee Mortgage File set forth in this Section 2.01 shall equally apply to the
transfer and assignment to the Trust Fund of any Subsequent Mortgage Loan
pursuant to Section 2.05 hereof; provided that for purposes of applying such
requirements to Subsequent Mortgage Loans, references in this Section 2.01 to
"Initial Mortgage Loans" shall be replaced by "Subsequent Mortgage Loans" and
references to "Closing Date" shall be replaced by "Subsequent Transfer Date."

                                       38



         (b) The Depositor shall cause Assignments of Mortgage with respect to
each Initial Mortgage Loan other than a Cooperative Mortgage Loan to be
completed in the form specified in Sections 2.01(a)(iii) above within 30 days of
the Closing Date for purpose of their recording; provided, however, that such
Assignments need not be recorded if, on or prior to the Closing Date, the
Depositor delivers, at its own expense, an Opinion of Counsel (which must be
Independent counsel) acceptable to the Trustee, and the Rating Agencies, to the
effect that recording in such states is not required to protect the Trustee's
interest in the related Initial Mortgage Loans. Subject to the preceding
sentence, as soon as practicable after the Closing Date (but in no event more
than 270 days thereafter except to the extent delays are caused by the
applicable recording office), the Depositor at its own expense and with the
cooperation of the applicable Servicer, shall cause to be properly recorded by
each Servicer in each public recording office where the related Mortgages are
recorded each Assignment of Mortgage endorsed in the form described in Section
2.01(a)(iii) above with respect to each such Initial Mortgage Loan.

         (c) In instances where a title insurance policy is required to be
delivered to the Trustee or the applicable Custodian on behalf of the Trustee
under Sections 2.01(a)(vi) or 2.01(a)(viii)(g) above and is not so delivered,
the Depositor will provide a copy of such title insurance policy to the Trustee,
or to the Custodian on behalf of the Trustee, as promptly as practicable after
the execution and delivery hereof, but in any case within 180 days of the
Closing Date.

         (d) For Initial Mortgage Loans (if any) that have been prepaid in full
after the Cut-off Date and prior to the Closing Date, the Depositor, in lieu of
delivering the above documents, herewith delivers to the Trustee, or to the
Custodian on behalf of the Trustee, an Officer's Certificate which shall include
a statement to the effect that all amounts received in connection with such
prepayment that are required to be deposited in the Distribution Account
pursuant to Section 4.01 have been so deposited. All original documents that are
not delivered to the Trustee or the Custodian on behalf of the Trustee shall be
held by the Master Servicer or the applicable Servicer in trust for the benefit
of the Trustee and the Certificateholders.

         (e) The requirements set forth in paragraphs (b), (c) and (d) of this
Section 2.01 shall equally apply upon the transfer and assignment to the Trust
Fund of any Subsequent Mortgage Loans pursuant to Section 2.05; provided that
for purposes of applying such requirements to Subsequent Mortgage Loans,
references therein to "Initial Mortgage Loans" shall be replaced by "Subsequent
Mortgage Loans" and references to "Cut-off Date" and "Closing Date" shall be
replaced by "Subsequent Cut-off Date" and "Subsequent Transfer Date,"
respectively.

         Section 2.02      Acceptance of Trust Fund by Trustee; Review of
                           Documentation for Trust Fund.

         (a) The Trustee, by execution and delivery hereof, acknowledges receipt
by it or by the Custodian on its behalf of the Trustee Mortgage Files pertaining
to the Initial Mortgage Loans listed on the Mortgage Loan Schedule, subject to
review thereof by the Custodian on behalf of the Trustee in accordance with
Section 4(a) of the Custody Agreement (a form of which is attached hereto as
Exhibit D). The Custodian on behalf of the Trustee, will execute and deliver to
the Trustee and the Depositor an Initial Trust Receipt and Schedule of
Exceptions, on the Closing Date in the forms required by the Custody Agreement.

                                       39



         (b) Within 270 days after the Closing Date, the Custodian on behalf of
the Trustee, will, for the benefit of Holders of the Certificates, review each
Trustee Mortgage File to ascertain that all required documents set forth in
Section 2.01 have been received and appear on their face to conform with the
requirements set forth in Section 4A and 4B of the Custody Agreement.

         (c) Nothing in this Agreement shall be construed to constitute an
assumption by the Trust Fund, the Trustee, any Custodian or the
Certificateholders of any unsatisfied duty, claim or other liability on any
Initial Mortgage Loan or to any Mortgagor.

         (d) Each of the parties hereto acknowledges that the Custodian shall
perform the applicable review of the Initial Mortgage Loans and respective
certifications as provided in the Custody Agreement.

         (e) Upon execution of this Agreement, the Depositor hereby delivers to
the Trustee and the Trustee acknowledges receipt of the Acknowledgements,
together with the related Purchase Agreements, Servicing Agreements and the
Mortgage Loan Purchase and Sale Agreements.

         (f) The requirements set fort in paragraphs (a) through (d) of this
Section 2.02 with respect to the review of the documentation of each Trustee
Mortgage File shall equally apply to the transfer and assignment to the Trust
Fund of any Subsequent Mortgage Loans; provided that for purposes of applying
such requirements to Subsequent Mortgage Loans, any references to "Initial
Mortgage Loans" and "Closing Date" in this Section 2.02 shall be replaced by
"Subsequent Mortgage Loans" and "Subsequent Transfer Date," respectively.

         In addition, upon the transfer of any Subsequent Mortgage Loan on a
Subsequent Transfer Date, the Depositor shall be required to deliver to the
Trustee the related Acknowledgements, together with the underlying Purchase
Agreement and Servicing Agreements related to the Subsequent Mortgage Loans,
unless such documents were previously delivered to the Trustee on the Closing
Date.

         Section 2.03      Representations and Warranties of the Depositor.

         (a) The Depositor hereby represents and warrants to the Trustee, for
the benefit of the Certificateholders and to the Master Servicer and the
Securities Administrator as of the Closing Date (solely with respect to the
Initial Mortgage Loans in the case of paragraphs (vi) through (xi) below) and
each Subsequent Transfer Date (solely with respect to the Subsequent Mortgage
Loans being transferred on such Subsequent Transfer Date in the case of
paragraphs (vi) through (xi) below) or such other date as is specified, that:

                  (i)      the Depositor is a corporation duly organized,
         validly existing and in good standing under the laws governing its
         creation and existence and has full corporate power and authority to
         own its property, to carry on its business as presently conducted, to
         enter into and perform its obligations under this Agreement, and to
         create the trust pursuant hereto;

                  (ii)     the execution and delivery by the Depositor of this
         Agreement have been duly authorized by all necessary corporate action
         on the part of the Depositor; neither the

                                       40



         execution and delivery of this Agreement, nor the consummation of the
         transactions herein contemplated, nor compliance with the provisions
         hereof, will conflict with or result in a breach of, or constitute a
         default under, any of the provisions of any law, governmental rule,
         regulation, judgment, decree or order binding on the Depositor or its
         properties or the certificate of incorporation or bylaws of the
         Depositor;

                  (iii)    the execution, delivery and performance by the
         Depositor of this Agreement and the consummation of the transactions
         contemplated hereby do not require the consent or approval of, the
         giving of notice to, the registration with, or the taking of any other
         action in respect of, any state, federal or other governmental
         authority or agency, except such as has been obtained, given, effected
         or taken prior to the date hereof;

                  (iv)     this Agreement has been duly executed and delivered
         by the Depositor and, assuming due authorization, execution and
         delivery by the Trustee, the Master Servicer and the Securities
         Administrator, constitutes a valid and binding obligation of the
         Depositor enforceable against it in accordance with its terms except as
         such enforceability may be subject to (A) applicable bankruptcy and
         insolvency laws and other similar laws affecting the enforcement of the
         rights of creditors generally and (B) general principles of equity
         regardless of whether such enforcement is considered in a proceeding in
         equity or at law;

                  (v)      there are no actions, suits or proceedings pending
         or, to the knowledge of the Depositor, threatened or likely to be
         asserted against or affecting the Depositor, before or by any court,
         administrative agency, arbitrator or governmental body (A) with respect
         to any of the transactions contemplated by this Agreement or (B) with
         respect to any other matter which in the judgment of the Depositor will
         be determined adversely to the Depositor and will if determined
         adversely to the Depositor materially and adversely affect it or its
         business, assets, operations or condition, financial or otherwise, or
         adversely affect its ability to perform its obligations under this
         Agreement;

                  (vi)     immediately prior to the transfer and assignment of
         the Mortgage Loans to the Trustee, the Depositor was the sole owner of
         record and holder of each Mortgage Loan, and the Depositor had good and
         marketable title thereto, and had full right to transfer and sell each
         Mortgage Loan to the Trustee free and clear, subject only to (1) liens
         of current real property taxes and assessments not yet due and payable
         and, if the related Mortgaged Property is a condominium unit, any lien
         for common charges permitted by statute, (2) covenants, conditions and
         restrictions, rights of way, easements and other matters of public
         record as of the date of recording of such Mortgage acceptable to
         mortgage lending institutions in the area in which the related
         Mortgaged Property is located and specifically referred to in the
         lender's title insurance policy or attorney's opinion of title and
         abstract of title delivered to the originator of such Mortgage Loan,
         and (3) such other matters to which like properties are commonly
         subject which do not, individually or in the aggregate, materially
         interfere with the benefits of the security intended to be provided by
         the Mortgage, of any encumbrance, equity, participation interest, lien,
         pledge, charge, claim or security interest, and had full right

                                       41



         and authority, subject to no interest or participation of, or agreement
         with, any other party, to sell and assign each Mortgage Loan pursuant
         to this Agreement;

                  (vii)    This Agreement creates a valid and continuing
         security interest (as defined in the applicable Uniform Commercial Code
         (the "UCC"), in the Mortgage Loans in favor of the Trustee, which
         security interest is prior to all other liens, and is enforceable as
         such against creditors of and purchasers from the Depositor;

                  (viii)   The Mortgage Loans constitute "instruments" within
         the meaning of the applicable UCC;

                  (ix)     Other than the security interest granted to the
         Trustee pursuant to this Agreement, the Depositor has not pledged,
         assigned, sold, granted a security interest in, or otherwise conveyed
         any of the Mortgage Loans. The Depositor has not authorized the filing
         of and is not aware of any financing statement against the Depositor
         that includes a description of the collateral covering the Mortgage
         Loans other than a financing statement relating to the security
         interest granted to the Trustee hereunder or that has been terminated.
         The Depositor is not aware of any judgment or tax lien filings against
         the Depositor;

                  (x)      None of the Mortgage Loans have any marks or
         notations indicating that such Mortgage Loans have been pledged,
         assigned or otherwise conveyed to any Person other than the Trustee;
         and

                  (xi)     The Depositor has received all consents and approvals
         required by the terms of the Mortgage Loans to convey the Mortgage
         Loans hereunder to the Trustee.

         The foregoing representations made in this Section 2.03 shall survive
the termination of this Agreement and shall not be waived by any party hereto

         Section 2.04      Discovery of Breach; Repurchase or Substitution of
                           Mortgage Loans.

         (a) Pursuant to Sections 2(b) and 2(d) of the Mortgage Loan Purchase
and Sale Agreement, the Seller has made certain representations and warranties
as to the characteristics of the Initial Mortgage Loans as of the Closing Date
(and will be deemed to have made the same representations and warranties with
respect to the Subsequent Mortgage Loan as of the applicable Subsequent Transfer
Date). The Depositor, for the benefit of the Trustee and the Certificateholders
hereby assigns any such rights against the Seller to the Trustee and the Seller
acknowledges that it has agreed to comply with the provisions of this Section
2.04 in respect of a breach of any of such representations and warranties.

         It is understood and agreed that such representations and warranties
set forth in Section 2(b) and 2(d) of the Mortgage Loan Purchase and Sale
Agreements shall survive delivery of the Trustee Mortgage Files and the
Assignment of Mortgage of each Mortgage Loan to the Trustee and shall continue
throughout the term of this Agreement. Upon discovery by the Depositor or
receipt of written notice of any materially defective document in, or, following
the date of delivery to the Trustee of the Custodian's Final Trust Receipt as
required under the Custody

                                       42



Agreement, that a document is missing from, a Trustee Mortgage File, or
discovery by the Depositor, the Seller of the breach by the Seller of any
representation or warranty under the Mortgage Loan Purchase and Sale Agreements
in respect of any Mortgage Loan which materially adversely affects the value of
that Mortgage Loan or the interest therein of the Certificateholders (a
"Defective Mortgage Loan") (each of such parties hereby agreeing to give written
notice thereof to the Trustee and the other of such parties), the Trustee, or
its designee, shall promptly notify the Depositor in writing of such defective
or missing document or breach and request that the Depositor deliver such
missing document or cure or cause the cure of such defect or breach within 90
days from the date that the Depositor discovered or was notified of such missing
document, defect or breach, and if the Depositor does not deliver such missing
document or cure such defect or breach in all material respects during such
period, the Trustee shall enforce the Seller's obligation under the Mortgage
Loan Purchase and Sale Agreements and cause the Seller to repurchase that
Mortgage Loan from the Trust Fund at the Purchase Price on or prior to the
Determination Date following the expiration of such 90-day period (subject to
Section 2.04(b) below); provided, however, that, in connection with any such
breach that could not reasonably have been cured within such 90-day period, if
the Seller shall have commenced to cure such breach within such 90-day period,
the Seller shall be permitted to proceed thereafter diligently and expeditiously
to cure the same within an additional 90-day period. The Purchase Price for the
repurchased Mortgage Loan shall be deposited in the related Distribution
Account, and the Trustee, or its designee, upon receipt of written certification
from the Securities Administrator of such deposit, shall release to the Seller,
the related Trustee Mortgage File and shall execute and deliver such instruments
of transfer or assignment, in each case without recourse, representation or
warranties, as either party shall furnish to it and as shall be necessary to
vest in such party any Mortgage Loan released pursuant hereto and the Trustee,
or its designee, shall have no further responsibility with regard to such
Trustee Mortgage File (it being understood that the Trustee shall have no
responsibility for determining the sufficiency of such assignment for its
intended purpose). In lieu of repurchasing any such Mortgage Loan as provided
above, either party may cause such Mortgage Loan to be removed from the Trust
Fund (in which case it shall become a Deleted Mortgage Loan) and substitute one
or more Replacement Mortgage Loans in the manner and subject to the limitations
set forth in Section 2.04(b) below. It is understood and agreed that the
obligation of the Seller to cure or to repurchase (or to substitute for) any
Mortgage Loan as to which a document is missing, a material defect in a
constituent document exists or as to which such a breach has occurred and is
continuing shall constitute the sole remedy against the such party respecting
such omission, defect or breach available to the Trustee on behalf of the
Certificateholders.

         (b) Any substitution of Replacement Mortgage Loans for Deleted Mortgage
Loans made pursuant to Section 2.04(a) above must be effected prior to the last
Business Day that is within two years after the Closing Date. As to any Deleted
Mortgage Loan for which the Seller substitutes a Replacement Mortgage Loan or
Loans, such substitution shall be effected by delivering to the Custodian, on
behalf of the Trustee, for such Replacement Mortgage Loan or Loans, the Mortgage
Note, the Mortgage, the Assignment to the Trustee, and such other documents and
agreements, with all necessary endorsements thereon, together with an Officers'
Certificate stating that each such Replacement Mortgage Loan satisfies the
definition thereof and specifying the Substitution Amount (as described below),
if any, in connection with such substitution. The Custodian shall acknowledge
receipt for such Replacement Mortgage Loan

                                       43



and, within 45 days thereafter, shall review such Mortgage Documents as
specified in the Custody Agreement and deliver to the Trustee and the Depositor,
with respect to such Replacement Mortgage Loans, a certification substantially
in the form of a revised Trust Receipt, with any exceptions noted thereon.
Within one year of the date of substitution, the Custodian shall deliver to the
Trustee and the Depositor a certification substantially in the form of a revised
Final Trust Receipt, with respect to such Replacement Mortgage Loans, with any
exceptions noted thereon. Monthly Payments due with respect to Replacement
Mortgage Loans in the month of substitution shall not be included as part of the
Trust Fund and shall be retained by the Seller, as applicable. For the month of
substitution, distributions to Certificateholders shall reflect the collections
and recoveries in respect of such Deleted Mortgage in the Due Period preceding
the month of substitution and the Seller shall thereafter be entitled to retain
all amounts subsequently received in respect of such Deleted Mortgage Loan. Upon
such substitution, such Replacement Mortgage Loan shall constitute part of the
Trust Fund and shall be subject in all respects to the terms of this Agreement
and the Mortgage Loan Purchase and Sale Agreement, including all representations
and warranties thereof included in the Mortgage Loan Purchase and Sale
Agreement, in each case as of the date of substitution.

         For any month in which the Seller substitutes one or more Replacement
Mortgage Loans for one or more Deleted Mortgage Loans, the related Servicer
shall determine the excess (each, a "Substitution Amount"), if any, by which the
aggregate Purchase Price of all such Deleted Mortgage Loans exceeds the
aggregate Stated Principal Balance of the Replacement Mortgage Loans replacing
such Deleted Mortgage Loans, together with one month's interest on such excess
amount at the applicable Net Mortgage Rate. On the date of such substitution,
the Seller, as applicable, shall deliver or cause to be delivered to the
Servicer for deposit in the Custodial Account an amount equal to the related
Substitution Amount, if any, and the Custodian, on behalf of the Trustee, upon
receipt of the related Replacement Mortgage Loan or Loans and certification by
the Servicer of such deposit, shall release to the Seller, as applicable, the
related Trustee Mortgage File or Files and shall execute and deliver such
instruments of transfer or assignment, in each case without recourse, as the
Seller shall deliver to it and as shall be necessary to vest therein any Deleted
Mortgage Loan released pursuant hereto.

         In addition, the Seller shall obtain at its own expense and deliver to
the Trustee and the Securities Administrator an Opinion of Counsel to the effect
that such substitution (either specifically or as a class of transactions) shall
not cause (a) any federal tax to be imposed on the Trust Fund, including without
limitation, any federal tax imposed on "prohibited transactions" under Section
860F(a)(l) of the Code or on "contributions after the startup date" under
Section 860G(d)(l) of the Code, or (b) either REMIC created hereunder to fail to
qualify as a REMIC at any time that any Certificate is outstanding. If such
Opinion of Counsel can not be delivered, then such substitution may only be
effected at such time as the required Opinion of Counsel can be given.

         (c) Upon discovery by the Seller, the Depositor or the Trustee that any
Mortgage Loan does not constitute a "qualified mortgage" within the meaning of
Section 860G(a)(3) of the Code, the party discovering such fact shall within two
Business Days give written notice thereof to the other parties. In connection
therewith, the applicable party shall repurchase or, subject to the limitations
set forth in Section 2.04(b), substitute one or more Replacement Mortgage Loans

                                       44



for the affected Mortgage Loan within 90 days of the earlier of discovery or
receipt of such notice with respect to such affected Mortgage Loan. Any such
repurchase or substitution shall be made in the same manner as set forth in
Section 2.04(a) above, if made by the Seller. The Trustee shall re-convey to the
Seller the Mortgage Loan to be released pursuant hereto in the same manner, and
on the same terms and conditions, as it would a Mortgage Loan repurchased for
breach of a representation or warranty.

         (d) The Seller indemnifies and holds the Trust Fund, the Master
Servicer, the Securities Administrator, the Trustee, the Depositor and each
Certificateholder harmless against any and all taxes, claims, losses, penalties,
fines, forfeitures, reasonable legal fees and related costs, judgments, and any
other costs, fees and expenses that the Trust Fund, the Trustee, the Master
Servicer, the Securities Administrator, the Depositor and any Certificateholder
may sustain in connection with any actions of such party relating to a
repurchase of a Mortgage Loan other than in compliance with the terms of this
Section 2.04 and the Mortgage Loan Purchase and Sale Agreement, to the extent
that any such action causes (i) any federal or state tax to be imposed on the
Trust Fund, including without limitation, any federal tax imposed on "prohibited
transactions" under Section 860F(a)(1) of the Code or on "contributions after
the startup date" under Section 860G(d)(1) of the Code, or (ii) any REMIC formed
hereby to fail to qualify as a REMIC at any time that any Certificate is
outstanding.

         Section 2.05      Delivery of Subsequent Mortgage Loans.

         (a) On each Subsequent Transfer Date occurring during the Pre-Funding
Period, provided that each condition set forth in this Section 2.05 is
satisfied, the Depositor shall convey to the Trust Fund and the Trustee shall
purchase on behalf of the Trust Fund for inclusion in Pool 1 or Pool 2, as
applicable, at the applicable Transfer Price set forth in the related Subsequent
Transfer Date Notice, all Subsequent Mortgage Loans which satisfy the criteria
set forth in this Section 2.05 then offered for sale by the Depositor; provided,
however, that the related aggregate purchase price paid for the Subsequent
Mortgage Loans shall not exceed the Original Pre-Funded Amount related to Pool 1
or Pool 2, as applicable; provided, further, that in the case of Pool 1, the
aggregate purchase price paid for Subsequent Mortgage Loans which (x) constitute
One-Month LIBOR Loans shall not exceed the initial deposit made to the 1M
Sub-Account of the Pool 1 Pre-Funding Account and (y) constitute Six-Month LIBOR
Loans shall not exceed the initial deposit made to the 6M Sub-Account of the
Pool 1 Pre-Funding Account, in each case as provided in Section 4.02.

         (b) Subject to satisfaction of the conditions set forth in Section
2.05(c), in consideration of the Securities Administrator's delivery on the
related Subsequent Transfer Date to the Depositor or its designee, or upon the
order of the Depositor, of the Transfer Price for the related Subsequent
Mortgage Loans from amounts on deposit in the applicable Pre-Funding Account,
the Depositor, on each Subsequent Transfer Date, shall sell, transfer, assign,
set over and otherwise convey to the Trustee on behalf of the Trust Fund for
inclusion in the related Mortgage Pool, without recourse, but subject to the
other terms and provisions of this Agreement, all of the right, title and
interest of the Depositor in and to each Subsequent Mortgage Loan (including all
interest and principal thereon received after the related Subsequent Cut-off
Date) identified in the related Subsequent Transfer Date Notice delivered by the
Depositor prior to such Subsequent

                                       45



Transfer Date and all items in the related Trustee Mortgage File. In connection
therewith, the Depositor shall amend the Mortgage Loan Schedule to reflect the
inclusion of the Subsequent Mortgage Loan in the applicable Mortgage Pool as
part of the assets of the Trust Fund. The Depositor shall promptly deliver to
the Trustee and the Master Servicer a copy of the Mortgage Loan Schedule as so
amended.

         (c) The obligation of the Securities Administrator to release funds
from the Pool 1 Pre-Funding Account or the Pool 2 Pre-Funding Account, as
applicable, in respect of any Subsequent Mortgage Loans is subject to
satisfaction of each of the following conditions on or prior to the related
Subsequent Transfer Date:

                  (i)      at least ten (10) days prior to the Subsequent
         Transfer Date, the Depositor shall have delivered to the Trustee, the
         Securities Administrator and the Master Servicer a duly executed
         written Subsequent Transfer Date Notice which shall include a schedule
         of Subsequent Mortgage Loans specifying the related Mortgage Pool to
         which such Subsequent Mortgage Loans relate and the Transfer Price to
         be released from the related Pre-Funding Account or Sub-account.

                  (ii)     after giving effect to the acquisition of such
         Subsequent Mortgage Loans, the Mortgage Loans shall conform to the
         Subsequent Delivery Requirements applicable to such Mortgage Pool.

                  (iii)    no Subsequent Mortgage Loan shall have been selected
         in a manner adverse to the interest of Certificateholders;

                  (iv)     the weighted average Mortgage Rate for all the
         Mortgage Loans in the Trust Fund at the close of the Pre-Funding Period
         shall not be more than 100 basis points lower than the weighted average
         Mortgage Rate for the Initial Mortgage Loans transferred to the Trust
         Fund on the Closing Date;

                  (v)      the addition of the Subsequent Mortgage Loans shall
         not result in the reduction, qualification or withdrawal of the then
         current rating of the Certificates as evidenced by a letter from each
         Rating Agency rating the Certificate delivered by the Depositor to the
         Trustee and the Securities Administrator dated the applicable
         Subsequent Transfer Date;

                  (vi)     each Subsequent Mortgage Loan shall be underwritten
         in accordance with the applicable underwriting guidelines for the
         related originator.

                  (vii)    the Depositor shall have delivered to the Trustee and
         the Securities Administrator a letter from an independent accountant
         stating whether or not the characteristics of the Subsequent Mortgage
         Loans conform to the characteristics of the Mortgage Loans required in
         this Section 2.05(b);

                  (viii)   as of each Transfer Date, neither the Depositor nor
         the Seller shall be insolvent, nor will either of them be made
         insolvent by such transfer;

                                       46



                  (ix)     the Pre-Funding Period shall not have ended;

                  (x)      the Depositor shall have delivered to the Master
         Servicer a copy of the related Servicing Agreement and executed
         Acknowledgement (if not previously delivered to the Master Servicer on
         or before the Closing Date) in respect of each such Subsequent Mortgage
         Loan, and such loan level data, in electronic or other format
         acceptable to the Master Servicer and the Depositor, as shall be
         necessary for the proper master servicing of such Subsequent Mortgage
         Loans by the Master Servicer;

                  (xi)     the Depositor shall have delivered to the Trustee and
         the Securities Administrator an Officer's Certificate confirming the
         satisfaction of each condition precedent specified in the Section 2.05
         and Opinions of Counsel with respect to corporate, bankruptcy and tax
         matters relating to the transfer of Subsequent Mortgage Loans in the
         form substantially similar to those delivered on the Closing Date
         pursuant to the Underwriting Agreement; and

                  (xii)    the Depositor shall have delivered to the Trustee,
         the Master Servicer, the Securities Administrator and each Rating
         Agency such additional information reasonably requested by any of them
         with respect to the Subsequent Mortgage Loans to be sold to the Trust
         on the Subsequent Transfer Date.

         The Depositor shall cause the applicable Servicer to deposit in the
Custodial Account within two Business Days following each Subsequent Transfer
Date all collections in respect to the related Subsequent Mortgage Loans
received after the related Subsequent Cut-off Date.

         Section 2.06      Grant Clause.

         (a) It is intended that the conveyance of the Depositor's right, title
and interest in and to property constituting the Trust Fund pursuant to this
Agreement shall constitute, and shall be construed as, a sale of such property
and not a grant of a security interest to secure a loan. However, if such
conveyance is deemed to be in respect of a loan, it is intended that: (1) the
rights and obligations of the parties shall be established pursuant to the terms
of this Agreement; (2) the Depositor hereby grants to the Trustee for the
benefit of the Holders of the Certificates a first priority security interest in
all of the Depositor's right, title and interest in, to and under, whether now
owned or hereafter acquired, the Trust Fund and all proceeds of any and all
property constituting the Trust Fund to secure payment of the Certificates; and
(3) this Agreement shall constitute a security agreement under applicable law.
If such conveyance is deemed to be in respect of a loan and the trust created by
this Agreement terminates prior to the satisfaction of the claims of any Person
holding any Certificate, the security interest created hereby shall continue in
full force and effect and the Trustee shall be deemed to be the collateral agent
for the benefit of such Person, and all proceeds shall be distributed as herein
provided.

         (b) The Depositor shall, to the extent consistent with this Agreement,
take such reasonable actions as may be necessary to ensure that, if this
Agreement were deemed to create a security interest in the Mortgage Loans and
the other property described above, such security interest would be deemed to be
a perfected security interest of first priority under applicable law and will be
maintained as such throughout the term of this Agreement. The Depositor will, at
its

                                       47



own expense, make all initial filings on or about the Closing Date and shall
forward a copy of such filing or filings to the Trustee. Without limiting the
generality of the foregoing, the Depositor shall prepare and forward for filing,
or shall cause to be forwarded for filing, at the expense of the Depositor, all
filings necessary to maintain the effectiveness of any original filings
necessary under the relevant UCC to perfect the Trustee's security interest in
or lien on the Mortgage Loans, including without limitation (x) continuation
statements, and (y) such other statements as may be occasioned by (1) any change
of name of the Seller, the Depositor or the Trustee, (2) any change of location
of the place of business or the chief executive office of the Seller or the
Depositor, (3) any transfer of any interest of the Seller or the Depositor in
any Mortgage Loan or (4) any change under the relevant UCC or other applicable
laws. Neither of the Seller nor the Depositor shall organize under the law of
any jurisdiction other than the State under which each is organized as of the
Closing Date (whether changing its jurisdiction of organization or organizing
under an additional jurisdiction) without giving 30 days prior written notice of
such action to its immediate and intermediate transferee, including the Trustee.
Before effecting such change, the Seller or the Depositor proposing to change
its jurisdiction of organization shall prepare and file in the appropriate
filing office any financing statements or other statements necessary to continue
the perfection of the interests of its immediate and mediate transferees,
including the Trustee, in the Mortgage Loans. In connection with the
transactions contemplated by this Agreement, each of the Seller and the
Depositor authorizes its immediate or mediate transferee to file in any filing
office any initial financing statements, any amendments to financing statements,
any continuation statements, or any other statements or filings described in
this paragraph (b).

                                  ARTICLE III

                                THE CERTIFICATES

         Section 3.01      The Certificates.

         (a) The Certificates shall be issuable in registered form only and
shall be securities governed by Article 8 of the New York Uniform Commercial
Code. The Book-Entry Certificates will be evidenced by one or more certificates,
beneficial ownership of which will be held in the dollar denominations in
Certificate Principal Amount, or Notional Amount, as applicable, or in the
Percentage Interests, specified herein. Each Class of Book-Entry Certificates
will be issued in the minimum denominations in Certificate Principal Amount (or
Notional Amount) specified in the Preliminary Statement hereto and in integral
multiples of $1 in excess thereof. Each Class of Non-Book-Entry Certificates
other than the Residual Certificates shall be issued in definitive, fully
registered form in the minimum denominations in Certificate Principal Amount
specified in the Preliminary Statement hereto and in integral multiples of $1 in
excess thereof. The Residual Certificates shall be issued as single Certificates
and maintained in definitive, fully registered form in a denomination equal to
100% of the Percentage Interest of each such Class. The Class X Certificate
shall be issued as a single Certificate in a denomination equal to 100% of the
Percentage Interest of such Class.

                                       48



         (b) The Certificates shall be executed by manual or facsimile signature
on behalf of the Trustee by an authorized officer. Each Certificate shall, on
original issue, be authenticated by the Authenticating Agent upon the order of
the Depositor upon receipt by the Trustee of the Trustee Mortgage Files
described in Section 2.01. No Certificate shall be entitled to any benefit under
this Agreement, or be valid for any purpose, unless there appears on such
Certificate a certificate of authentication substantially in the form provided
for herein, executed by an authorized officer of the Authenticating Agent, by
manual signature, and such certification upon any Certificate shall be
conclusive evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered hereunder. All Certificates shall be dated the date
of their authentication. At any time and from time to time after the execution
and delivery of this Agreement, the Depositor may deliver Certificates executed
by the Trustee to the Authenticating Agent for authentication and the
Authenticating Agent shall authenticate and deliver such Certificates as in this
Agreement provided and not otherwise.

         (c) The Class R and Class LT-R Certificates offered and sold in
reliance on the exemption from registration under Rule 144A under the Act shall
be issued initially in definitive, fully registered form without interest
coupons with the applicable legends set forth in Exhibit A added to the forms of
such Certificates (each, a "Restricted Global Security").

         Section 3.02      Registration.

         The Securities Administrator is hereby appointed, and the Securities
Administrator hereby accepts its appointment as, initial Certificate Registrar
in respect of the Certificates and shall maintain books for the registration and
for the transfer of Certificates (the "Certificate Register"). The Trustee may
appoint a bank or trust company to act as successor Certificate Registrar. A
registration book shall be maintained for the Certificates collectively. The
Certificate Registrar may resign or be discharged or removed and a new successor
may be appointed in accordance with the procedures and requirements set forth in
Sections 6.06 and 6.07 hereof with respect to the resignation, discharge or
removal of the Securities Administrator and the appointment of a successor
Securities Administrator. The Certificate Registrar may appoint, by a written
instrument delivered to the Holders and the Master Servicer, any bank or trust
company to act as co-registrar under such conditions as the Certificate
Registrar may prescribe; provided, however, that the Certificate Registrar shall
not be relieved of any of its duties or responsibilities hereunder by reason of
such appointment.

         Section 3.03      Transfer and Exchange of Certificates.

         (a) A Certificate (other than Book-Entry Certificates which shall be
subject to Section 3.09 hereof) may be transferred by the Holder thereof only
upon presentation and surrender of such Certificate at the office of the
Certificate Registrar duly endorsed or accompanied by an assignment duly
executed by such Holder or his duly authorized attorney in such form as shall be
satisfactory to the Certificate Registrar. Upon the transfer of any Certificate
in accordance with the preceding sentence, the Trustee shall execute, and the
Authenticating Agent shall authenticate and deliver to the transferee, one or
more new Certificates of the same Class and evidencing, in the aggregate, the
same aggregate Certificate Principal Amount (or Notional Amount) as the
Certificate being transferred. No service charge shall be made to a
Certificateholder for any registration of transfer of Certificates, but the
Certificate Registrar may

                                       49



require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any registration of transfer of Certificates.

         (b) A Certificate may be exchanged by the Holder thereof for any number
of new Certificates of the same Class, in authorized denominations, representing
in the aggregate the same Certificate Principal Amount (or Notional Amount) as
the Certificate surrendered, upon surrender of the Certificate to be exchanged
at the office of the Certificate Registrar duly endorsed or accompanied by a
written instrument of transfer duly executed by such Holder or his duly
authorized attorney in such form as is satisfactory to the Certificate
Registrar. Certificates delivered upon any such exchange will evidence the same
obligations, and will be entitled to the same rights and privileges, as the
Certificates surrendered. No service charge shall be made to a Certificateholder
for any exchange of Certificates, but the Certificate Registrar may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any exchange of Certificates. Whenever any
Certificates are so surrendered for exchange, the Trustee shall execute, and the
Authenticating Agent shall authenticate, date and deliver the Certificates which
the Certificateholder making the exchange is entitled to receive.

         (c) By acceptance of a Restricted Certificate, whether upon original
issuance or subsequent transfer, each Holder of such a Certificate acknowledges
the restrictions on the transfer of such Certificate set forth thereon and
agrees that it will transfer such a Certificate only as provided herein.

         The following restrictions shall apply with respect to the transfer and
registration of transfer of a Restricted Certificate to a transferee that takes
delivery in the form of a Definitive Certificate:

                  (i)      The Certificate Registrar shall register the transfer
         of a Restricted Certificate if the requested transfer is (x) to the
         Depositor or an affiliate (as defined in Rule 405 under the 1933 Act)
         of the Depositor or (y) being made to a "qualified institutional buyer"
         (a "QIB") as defined in Rule 144A under the Securities Act of 1933, as
         amended (the "Act") by a transferor that has provided the Certificate
         Registrar with a certificate in the form of Exhibit H hereto; and

                  (ii)     The Certificate Registrar shall register the transfer
         of a Restricted Certificate if the requested transfer is being made to
         an "accredited investor" under Rule 501(a)(1), (2), (3) or (7) under
         the Act, or to any Person all of the equity owners in which are such
         accredited investors, by a transferor who furnishes to the Certificate
         Registrar a letter of the transferee substantially in the form of
         Exhibit I hereto.

         (d) No transfer of an ERISA-Restricted Certificate in the form of a
Definitive Certificate shall be made to any Person or shall be effective unless
the Certificate Registrar, on behalf of the Trustee, has received (A) a
certificate substantially in the form of Exhibit J hereto (or Exhibit B, in the
case of a Residual Certificate) from such transferee or (B) an Opinion of
Counsel satisfactory to the Certificate Registrar to the effect that the
purchase and holding of such a Certificate will not constitute or result in
prohibited transactions under Title I of ERISA or Section 4975 of the Code and
will not subject the Certificate Registrar, the Trustee, the Master Servicer,
the Depositor or the Securities Administrator to any obligation in addition to
those

                                       50



undertaken in the Agreement; provided, however, that the Certificate Registrar
will not require such certificate or opinion in the event that, as a result of a
change of law or otherwise, counsel satisfactory to the Certificate Registrar
has rendered an opinion to the effect that the purchase and holding of an
ERISA-Restricted Certificate by a Plan or a Person that is purchasing or holding
such a Certificate with the assets of a Plan will not constitute or result in a
prohibited transaction under Title I of ERISA or Section 4975 of the Code. Each
Transferee of an ERISA-Restricted Certificate that is a Book-Entry Certificate
shall be deemed to have made the representations set forth in Exhibit J. The
preparation and delivery of the certificate and opinions referred to above shall
not be an expense of the Trust Fund, Certificate Registrar, the Trustee, the
Master Servicer, the Depositor or the Securities Administrator.

         Notwithstanding the foregoing, no opinion or certificate shall be
required for the initial issuance of the ERISA-Restricted Certificates. The
Certificate Registrar shall have no obligation to monitor transfers of
Book-Entry Certificates that are ERISA-Restricted Certificates and shall have no
liability for transfers of such Certificates in violation of the transfer
restrictions. The Certificate Registrar shall be under no liability to any
Person for any registration of transfer of any ERISA-Restricted Certificate that
is in fact not permitted by this Section 3.03(d) and none of the Securities
Administrator, the Trustee or the Paying Agent shall have any liability for
making any payments due on such Certificate to the Holder thereof or taking any
other action with respect to such Holder under the provisions of this Agreement
so long as the transfer was registered by the Certificate Registrar in
accordance with the foregoing requirements. The Securities Administrator, on
behalf of the Trustee, shall be entitled, but not obligated, to recover from any
Holder of any ERISA-Restricted Certificate that was in fact a Plan or a Person
acting on behalf of a Plan any payments made on such ERISA-Restricted
Certificate at and after either such time. Any such payments so recovered by the
Securities Administrator, on behalf of the Trustee, shall be paid and delivered
by the Securities Administrator, on behalf of the Trustee, to the last preceding
Holder of such Certificate that is not such a Plan or Person acting on behalf of
a Plan.

         (e) As a condition of the registration of transfer or exchange of any
Certificate, the Certificate Registrar may require the certified taxpayer
identification number of the owner of the Certificate and the payment of a sum
sufficient to cover any tax or other governmental charge imposed in connection
therewith; provided, however, that the Certificate Registrar shall have no
obligation to require such payment or to determine whether or not any such tax
or charge may be applicable. No service charge shall be made to the
Certificateholder for any registration, transfer or exchange of a Certificate.

         (f) Notwithstanding anything to the contrary contained herein, no
Residual Certificate may be owned, pledged or transferred, directly or
indirectly, by or to (i) a Disqualified Organization or (ii) an individual,
corporation or partnership or other person unless such person is (A) not a
Non-U.S. Person or (B) is a Non-U.S. Person that holds a Residual Certificate in
connection with the conduct of a trade or business within the United States and
has furnished the transferor and the Certificate Registrar with an effective
Internal Revenue Service Form W-8ECI or successor form at the time and in the
manner required by the Code (any such person who is not covered by clause (A) or
(B) above is referred to herein as a "Non-permitted Foreign Holder").

                                       51



         Prior to and as a condition of the registration of any transfer, sale
or other disposition of a Residual Certificate, the proposed transferee shall
deliver to the Trustee and the Certificate Registrar an affidavit in
substantially the form attached hereto as Exhibit B representing and warranting,
among other things, that such transferee is neither a Disqualified Organization,
an agent or nominee acting on behalf of a Disqualified Organization, nor a
Non-permitted Foreign Holder (any such transferee, a "Permitted Transferee"),
and the proposed transferor shall deliver to the Trustee and the Certificate
Registrar an affidavit in substantially the form attached hereto as Exhibit C.
In addition, the Trustee or the Certificate Registrar may (but shall have no
obligation to) require, prior to and as a condition of any such transfer, the
delivery by the proposed transferee of an Opinion of Counsel, addressed to the
Trustee and the Certificate Registrar, that such proposed transferee or, if the
proposed transferee is an agent or nominee, the proposed beneficial owner, is
not a Disqualified Organization, agent or nominee thereof, or a Non-permitted
Foreign Holder. Notwithstanding the registration in the Certificate Register of
any transfer, sale, or other disposition of a Residual Certificate to a
Disqualified Organization, an agent or nominee thereof, or Non-permitted Foreign
Holder, such registration shall be deemed to be of no legal force or effect
whatsoever and such Disqualified Organization, agent or nominee thereof, or
Non-permitted Foreign Holder shall not be deemed to be a Certificateholder for
any purpose hereunder, including, but not limited to, the receipt of
distributions on such Residual Certificate. The Depositor, the Certificate
Registrar and the Trustee shall be under no liability to any Person for any
registration or transfer of a Residual Certificate to a Disqualified
Organization, agent or nominee thereof or Non-permitted Foreign Holder or for
the Paying Agent making any payments due on such Residual Certificate to the
Holder thereof or for taking any other action with respect to such Holder under
the provisions of the Agreement, so long as the transfer was effected in
accordance with this Section 3.03(f), unless the Certificate Registrar shall
have actual knowledge at the time of such transfer or the time of such payment
or other action that the transferee is a Disqualified Organization, or an agent
or nominee thereof, or Non-permitted Foreign Holder. The Certificate Registrar
shall be entitled to recover from any Holder of a Residual Certificate that was
a Disqualified Organization, agent or nominee thereof, or Non-permitted Foreign
Holder at the time it became a Holder or any subsequent time it became a
Disqualified Organization, agent or nominee thereof, or Non-permitted Foreign
Holder, all payments made on such Residual Certificate at and after either such
times (and all costs and expenses, including but not limited to attorneys' fees,
incurred in connection therewith). Any payment (not including any such costs and
expenses) so recovered by the Certificate Registrar shall be paid and delivered
to the last preceding Holder of such Residual Certificate.

         If any purported transferee shall become a registered Holder of a
Residual Certificate in violation of the provisions of this Section 3.03(f),
then upon receipt of written notice to the Trustee that the registration of
transfer of such Residual Certificate was not in fact permitted by this Section
3.03(f), the last preceding Permitted Transferee shall be restored to all rights
as Holder thereof retroactive to the date of such registration of transfer of
such Residual Certificate. The Depositor, the Certificate Registrar and the
Trustee shall be under no liability to any Person for any registration of
transfer of a Residual Certificate that is in fact not permitted by this Section
3.03(f), or for the Paying Agent making any payment due on such Certificate to
the registered Holder thereof or for taking any other action with respect to
such Holder under the provisions of this Agreement so long as the transfer was
registered upon receipt of the affidavit described in the preceding paragraph of
this Section 3.03(f).

                                       52



         (g) Each Holder or Certificate Owner of a Restricted Certificate,
ERISA-Restricted Certificate or Residual Certificate, or an interest therein, by
such Holder's or Owner's acceptance thereof, shall be deemed for all purposes to
have consented to the provisions of this section.

         Section 3.04      Cancellation of Certificates.

         Any Certificate surrendered for registration of transfer or exchange
shall be cancelled and retained in accordance with normal retention policies
with respect to cancelled certificates maintained by the Trustee or the
Certificate Registrar.

         Section 3.05      Replacement of Certificates.

         If (i) any Certificate is mutilated and is surrendered to the Trustee
or the Certificate Registrar or (ii) the Trustee or the Certificate Registrar
receives evidence to its satisfaction of the destruction, loss or theft of any
Certificate, and there is delivered to the Trustee and the Certificate Registrar
such security or indemnity as may be required by them to save each of them
harmless, then, in the absence of notice to the Depositor, the Trustee or the
Certificate Registrar that such destroyed, lost or stolen Certificate has been
acquired by a protected purchaser, the Trustee shall execute and the
Authenticating Agent shall authenticate and deliver, in exchange for or in lieu
of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate
of like tenor and Certificate Principal Amount. Upon the issuance of any new
Certificate under this Section 3.05, the Trustee, the Depositor or the
Certificate Registrar may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Trustee, the Depositor or
the Certificate Registrar) connected therewith. Any replacement Certificate
issued pursuant to this Section 3.05 shall constitute complete and indefeasible
evidence of ownership in the applicable Trust Fund, as if originally issued,
whether or not the lost, stolen or destroyed Certificate shall be found at any
time.

         If after the delivery of such new Certificate, a protected purchaser of
the original Certificate in lieu of which such new Certificate was issued
presents for payment such original Certificate, the Depositor, the Certificate
Registrar and the Trustee or any agent shall be entitled to recover such new
Certificate from the Person to whom it was delivered or any Person taking
therefrom, except a protected purchaser, and shall be entitled to recover upon
the security or indemnity provided therefor to the extent of any loss, damage,
cost or expenses incurred by the Depositor, the Certificate Registrar, the
Trustee or any agent in connection therewith.

         Section 3.06      Persons Deemed Owners.

         Subject to the provisions of Section 3.09 with respect to Book-Entry
Certificates, the Depositor, the Master Servicer, the Trustee, the Certificate
Registrar, the Paying Agent and any agent of any of them shall treat the Person
in whose name any Certificate is registered upon the books of the Certificate
Registrar as the owner of such Certificate for the purpose of receiving
distributions pursuant to Sections 5.01 and 5.02 and for all other purposes
whatsoever, and neither the Depositor, the Master Servicer, the Trustee, the
Certificate Registrar, the Paying Agent nor any agent of any of them shall be
affected by notice to the contrary.

                                       53



         Section 3.07      Temporary Certificates.

         (a) Pending the preparation of definitive Certificates, upon the order
of the Depositor, the Trustee shall execute and the Authenticating Agent shall
authenticate and deliver temporary Certificates that are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Certificates in lieu of which they
are issued and with such variations as the authorized officers executing such
Certificates may determine, as evidenced by their execution of such
Certificates.

         (b) If temporary Certificates are issued, the Depositor will cause
definitive Certificates to be prepared without unreasonable delay. After the
preparation of definitive Certificates, the temporary Certificates shall be
exchangeable for definitive Certificates upon surrender of the temporary
Certificates at the office or agency of the Certificate Registrar without charge
to the Holder. Upon surrender for cancellation of any one or more temporary
Certificates, the Trustee shall execute and the Authenticating Agent shall
authenticate and deliver in exchange therefor a like aggregate Certificate
Principal Amount of definitive Certificates of the same Class in the authorized
denominations. Until so exchanged, the temporary Certificates shall in all
respects be entitled to the same benefits under this Agreement as definitive
Certificates of the same Class.

         Section 3.08      Appointment of Paying Agent.

         The Trustee may appoint a Paying Agent (which may be the Trustee) for
the purpose of making distributions to Certificateholders hereunder. The Trustee
hereby appoints the Securities Administrator as the initial Paying Agent. The
Trustee shall cause any Paying Agent, other than the Securities Administrator,
to execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee that such Paying Agent will hold all sums held by
it for the payment to Certificateholders in an Eligible Account (which shall be
the Distribution Account) in trust for the benefit of the Certificateholders
entitled thereto until such sums shall be paid to the Certificateholders. All
funds remitted by the Trustee to any such Paying Agent for the purpose of making
distributions shall be paid to Certificateholders on each Distribution Date and
any amounts not so paid shall be returned on such Distribution Date to the
Trustee. If the Paying Agent is not the Trustee, the Trustee shall cause to be
remitted to the Paying Agent on or before the Business Day prior to each
Distribution Date, by wire transfer in immediately available funds, the funds to
be distributed on such Distribution Date. Any Paying Agent shall be either a
bank or trust company or otherwise authorized under law to exercise corporate
trust powers.

         Section 3.09      Book-Entry Certificates.

         (a) Each Class of Book-Entry Certificates, upon original issuance,
shall be issued in the form of one or more typewritten Certificates representing
the Book-Entry Certificates. The Book-Entry Certificates shall initially be
registered on the Certificate Register in the name of the nominee of the
Clearing Agency, and no Certificate Owner will receive a definitive certificate
representing such Certificate Owner's interest in the Book-Entry Certificates,
except as provided in Section 3.09(c). Unless Definitive Certificates have been
issued to Certificate Owners of Book-Entry Certificates pursuant to Section
3.09(c):

                                       54



                  (i)      the provisions of this Section 3.09 shall be in full
         force and effect;

                  (ii)     the Certificate Registrar, the Paying Agent and the
         Trustee shall deal with the Clearing Agency for all purposes (including
         the making of distributions on the Book-Entry Certificates) as the
         authorized representatives of the Certificate Owners and the Clearing
         Agency and shall be responsible for crediting the amount of such
         distributions to the accounts of such Persons entitled thereto, in
         accordance with the Clearing Agency's normal procedures;

                  (iii)    to the extent that the provisions of this Section
         3.09 conflict with any other provisions of this Agreement, the
         provisions of this Section 3.09 shall control; and

                  (iv)     the rights of Certificate Owners shall be exercised
         only through the Clearing Agency and the Clearing Agency Participants
         and shall be limited to those established by law and agreements between
         such Certificate Owners and the Clearing Agency and/or the Clearing
         Agency Participants. Unless and until Definitive Certificates are
         issued pursuant to Section 3.09(c), the initial Clearing Agency will
         make book-entry transfers among the Clearing Agency Participants and
         receive and transmit distributions of principal of and interest on the
         Book-Entry Certificates to such Clearing Agency Participants.

         (b) Whenever notice or other communication to the Certificateholders is
required under this Agreement, unless and until Definitive Certificates shall
have been issued to Certificate Owners pursuant to Section 3.09(c), the
Securities Administrator shall give all such notices and communications
specified herein to be given to Holders of the Book-Entry Certificates to the
Clearing Agency.

         (c) If (i) (A) the Clearing Agency or the Depositor advises the Paying
Agent in writing that the Clearing Agency is no longer willing or able to
discharge properly its responsibilities with respect to the Book-Entry
Certificates, and (B) the Depositor is unable to locate a qualified successor
satisfactory to the Depositor and the Paying Agent, (ii) the Depositor, at its
option, advises the Paying Agent in writing that it elects to terminate the
book-entry system through the Clearing Agency or (iii) after the occurrence of
an Event of Default, Certificate Owners representing beneficial interests
aggregating not less than 50% of the Class Principal Amount of a Class of
Book-Entry Certificates advise the Paying Agent and the Clearing Agency through
the Clearing Agency Participants in writing that the continuation of a
book-entry system through the Clearing Agency is no longer in the best interests
of the Certificate Owners of a Class of Book-Entry Certificates, the Certificate
Registrar shall notify the Clearing Agency to effect notification to all
Certificate Owners, through the Clearing Agency, of the occurrence of any such
event and of the availability of Definitive Certificates to Certificate Owners
requesting the same. Upon surrender to the Certificate Registrar of the
Book-Entry Certificates by the Clearing Agency, accompanied by registration
instructions from the Clearing Agency for registration, the Certificate
Registrar shall issue the Definitive Certificates. Neither the Depositor, the
Certificate Registrar nor the Trustee shall be liable for any delay in delivery
of such instructions and may conclusively rely on, and shall be protected in
relying on, such instructions. Upon the issuance of Definitive Certificates all
references herein to obligations imposed upon or to be performed by the Clearing
Agency shall be deemed to be imposed upon and performed by the Certificate

                                       55



Registrar, to the extent applicable, with respect to such Definitive
Certificates and the Certificate Registrar shall recognize the holders of the
Definitive Certificates as Certificateholders hereunder. Notwithstanding the
foregoing, the Certificate Registrar, upon the instruction of the Depositor,
shall have the right to issue Definitive Certificates on the Closing Date in
connection with credit enhancement programs.

                                   ARTICLE IV

                        ADMINISTRATION OF THE TRUST FUND

         Section 4.01      Custodial Accounts; Distribution Account.

         (a) On or prior to the Closing Date, the Master Servicer shall have
caused the Servicers to establish and maintain one or more Custodial Accounts,
as provided in the related Servicing Agreements, into which all Scheduled
Payments and unscheduled payments with respect to the Mortgage Loans, net of any
deductions or reimbursements permitted under the related Servicing Agreement,
shall be deposited. On each Distribution Account Deposit Date, the Servicers
shall remit to the Securities Administrator for deposit into the Distribution
Account, all amounts so required to be deposited into such account in accordance
with the terms of the related Servicing Agreement.

         (b) The Securities Administrator, as Paying Agent for the Trustee,
shall establish and maintain an Eligible Account entitled "Distribution Account
of HSBC Bank, USA, as Trustee for the benefit of Sequoia Mortgage Trust 2003-2
Holders of Mortgage Pass-Through Certificates." The Securities Administrator
shall, promptly upon receipt from the Servicers on each Distribution Account
Deposit Date, deposit into the Distribution Account and retain on deposit until
the related Distribution Date the following amounts:

                  (i)      the aggregate of collections with respect to the
         Mortgage Loans remitted by the Servicers from the related Custodial
         Accounts in accordance with the Servicing Agreements;

                  (ii)     any amounts required to be deposited by the Master
         Servicer with respect to the Mortgage Loans for the related Due Period
         pursuant to this Agreement, including the amount of any Advances or
         Compensation Interest Payments with respect to the Mortgage Loans not
         paid by the Servicers; and

                  (iii)    any other amounts so required to be deposited in the
         Distribution Account in the related Due Period pursuant to this
         Agreement.

         (c) In the event the Master Servicer or a Servicer has remitted in
error to the Distribution Account any amount not required to be remitted in
accordance with the definition of Interest Remittance Amount or Principal
Remittance Amount, it may at any time direct the Securities Administrator to
withdraw such amount from the Distribution Account for repayment to the Master
Servicer or Servicer, as applicable, by delivery of an Officer's Certificate to
the Securities Administrator and the Trustee which describes the amount
deposited in error.

                                       56



         (d) On each Distribution Date and Redemption Date, the Securities
Administrator, as Paying Agent, shall make distributions to the
Certificateholders and any other parties entitled thereto in the amounts and
priorities set forth in Section 5.02. The Securities Administrator may from time
to time withdraw from the Distribution Account and pay the Master Servicer, the
Trustee, the Securities Administrator or any Servicer any amounts permitted to
be paid or reimbursed to such Person from funds in the Distribution Account
pursuant to the clauses (A) through (D) of the definition of Interest Remittance
Amount.

         (e) Funds in the Distribution Account may be invested in Permitted
Investments selected by and at the written direction of the Securities
Administrator, which shall mature not later than one Business Day prior to the
Distribution Date (except that if such Permitted Investment is an obligation of
the Securities Administrator, then such Permitted Investment shall mature not
later than such applicable Distribution Date) and any such Permitted Investment
shall not be sold or disposed of prior to its maturity. All such Permitted
Investments shall be made in the name of the Trustee (in its capacity as such)
or its nominee. All income and gain realized from any Permitted Investment shall
be for the benefit of the Securities Administrator, as additional compensation
for its duties hereunder, and shall be subject to its withdrawal or order from
time to time, and shall not be part of the Trust Fund. The amount of any losses
incurred in respect of any such investments shall be deposited in such
Distribution Account by the Securities Administrator out of its own funds,
without any right of reimbursement therefor, immediately as realized.

         Section 4.02      The Pre-Funding Accounts

         (a) The Securities Administrator, as Paying Agent for the Trustee,
shall establish and maintain two Eligible Accounts, each to be held in trust for
the benefit of Certificateholders, the first such Eligible Account entitled
"Pool 1 Pre-Funding Account of HSBC Bank, USA, as Trustee, for the benefit of
Sequoia Mortgage Trust 2003-2 Holders of Mortgage Pass-Through Certificates" and
the second entitled "Pool 2 Pre-Funding Account of HSBC Bank, USA, as Trustee,
for the benefit of Sequoia Mortgage Trust 2003-2 Holders of Mortgage
Pass-Through Certificates." The Pooling 1 Pre-Funding Account shall be comprised
of two Sub-accounts, the first entitled the "1M Sub-account" and the second
entitled the "6M Sub-account."

         (b) On the Closing Date, the Depositor will cause to be deposited to
the Pool 1 Pre-Funding Account the Original Pre-Funded Amount relating to Pool 1
and to the Pool 2 Pre-Funding Account the Original Pre-Funded Amount relating to
Pool 2. The Original Pre-Funded Amount relating to Pool 1 shall be further
allocated between the 1M Sub-account and the 6M Sub-account as follows:
$22,572,502.58 to the 1M Sub-account; and $56,964,309.58 to the 6M Sub-account.

         (c) Amounts on deposit in the 1M Sub-account (exclusive of investment
earnings thereon) shall solely be applied to acquire Subsequent Mortgage Loans
for inclusion in Pool 1 which constitute One-Month LIBOR Loans. Amounts on
deposit in the 6M Sub-account (exclusive of investment earnings thereon) shall
solely be applied to acquire Subsequent Mortgage Loans for inclusion in Pool 1
which constitute Six-Month LIBOR Loans. Amounts on deposit in the Pool 2
Pre-Funding Account (exclusive of investment earnings thereon) shall solely be
applied to acquire Subsequent Mortgage Loans for inclusion in Pool 2. Funds on

                                       57



deposit in either Pre-Funding Account (or Sub-account) may not be commingled
with funds on deposit in the other Pre-Funding Account (or Sub-account).

         (d) On any Subsequent Transfer Date, the Depositor shall instruct the
Securities Administrator, in writing, to withdraw funds from the applicable
Pre-Funding Account (specifying the applicable Sub-account in the case of Pool
1) in an amount equal to the Transfer Price for the Subsequent Mortgage Loans to
be acquired on such Subsequent Transfer Date, and to pay such amount to the
order of the Depositor. In no event shall the Securities Administrator withdraw
from the related Pre-Funding Account an amount in excess of the Original
Pre-Funded Amount (or portion thereof) deposited to such Account (or Sub-account
thereof) on the Closing Date.

         (e) During the Pre-Funding Period, amounts on deposit in the
Pre-Funding Accounts may be invested in Permitted Investments by the Securities
Administrator at the direction of the Depositor, or in absence of direction from
the Depositor, in money market funds described in paragraph (ix) of the
definition of Permitted Investments in Article I. All such Permitted Investments
shall be made in the name of the Trustee (in it capacity as such) or its
nominee. Any investment earnings on such Permitted Investments held in the
Pre-Funding Accounts shall be immediately transferred to the Distribution
Account and constitute part of the Interest Remittance Amount for distribution
to the related Certificateholders on the next succeeding Distribution Date.

         (f) On the Distribution Date immediately following the close of the
Pre-Funding Period, the Securities Administrator, as Paying Agent, shall
transfer any remaining Pool 1 Pre-Funded Amount or Pool 2 Pre-Funded Amount on
deposit in the related Pre-Funding Account (or Sub-account thereof) to the
Distribution Account for distribution to the Related Certificate Group as
principal on such Distribution Date in accordance with the priorities set forth
in Section 5.02 and terminate such Account.

         (g) The Pre-Funding Accounts shall not be an asset of any REMIC created
under this Agreement.

         Section 4.03      The Capitalized Interest Account.

         (a) The Securities Administrator, as Paying Agent, for the Trustee,
shall establish and maintain an Eligible Account, to be held in trust for the
benefit of Certificateholders, entitled "Capitalized Interest Account of HSBC
Bank, USA, as Trustee, for the benefit of Sequoia Mortgage Trust 2003-2 Holders
of Mortgage Pass-Through Certificates." On the Closing Date, the Depositor shall
cause to be deposited in the Capitalized Interest Account the Original
Capitalized Interest Amount. On each Distribution Date, funds in the Capitalized
Interest Account equal to the Capitalized Interest Requirement for such
Distribution Date shall be withdrawn by the Securities Administrator from the
Capitalized Interest Account and deposited into the Distribution Account as
required by Section 5.02(a).

         (b) During the Pre-Funding Period, amounts on deposit in the
Capitalized Interest Account may, at the direction of the Depositor, be invested
in Permitted Investments, and in the absence of such instructions shall be
invested in money market funds as described in paragraph

                                       58



(ix) of the definition of Permitted Investments in Article I. All investment
earnings on such Permitted Investments in the Capitalized Interest Account shall
be for the benefit of the Depositor. At the close of the Pre-Funding period, all
amounts, if any, remaining in the Capitalized Investment Account shall be
released to the Depositor and the Securities Administrator shall terminate such
Account.

         (c) The Capitalized Interest Account shall not be the asset of any
REMIC created under this Agreement.

         Section 4.04      Reports to Trustee and Certificateholders.

         On each Distribution Date, the Securities Administrator shall have
prepared and shall make available to the Trustee and each Certificateholder a
written report setting forth the following information (on the basis of Mortgage
Loan level information obtained from the Master Servicer and the Servicers).

         (a) the amount of the distributions, separately identified, with
respect to each Class of Certificates;

         (b) the amount of the distributions set forth in the clause (a)
allocable to principal, separately identifying the aggregate amount of any Net
Interest Shortfall, Monthly Excess Cashflow, Extra Principal Distribution
Amount, Principal Prepayments or other unscheduled recoveries of principal
included in that amount;

         (c) the amount of the distributions set forth in the clause (a)
allocable to interest and how it was calculated;

         (d) the amount of any Carryforward Interest and Net WAC Shortfall and
the related accrued interest thereon, with respect to each Class of
Certificates;

         (e) the Class Principal Amount of each Class of Certificates after
giving effect to the distribution of principal on that Distribution Date;

         (f) the amount of any Deferred Amounts and any Applied Loss Amounts,
separately identified, with respect to each Class of Certificates;

         (g) The M-1 Target Amount, the M-2 Target Amount, the Senior Target
Amount, the Overcollateralization Amount, the Aggregate Overcollateralization
Release Amount and the Overcollateralization Deficiency for such Distribution
Date;

         (h) the Aggregate Stated Principal Balance of the Mortgage Loans in
each Mortgage Pool and the applicable Net WAC of the Mortgage Loans in each
Mortgage Pool at the end of the related Prepayment Period;

         (i) the Stated Principal Balance of the Mortgage Loans in each Mortgage
Pool whose Mortgage Rates adjust on the basis of the One-Month LIBOR index and
the Six-Month LIBOR index at the end of the related Prepayment Period;

                                       59



         (j) in the aggregate and with respect to each Mortgage Pool, the amount
of the Master Servicing Fee and the Servicing Fee paid to or retained by the
Master Servicer and by each Servicer, respectively;

         (k) in the aggregate and with respect to each Mortgage Pool, the amount
of Advances for the related Due Period;

         (l) in the aggregate and with respect to each Mortgage Pool, the number
and Stated Principal Balance of the Mortgage Loans that were (A) Delinquent
(exclusive of Mortgage Loans in foreclosure) (1) 30 to 59 days, (2) 60 to 89
days and (3) 90 or more days, (B) in foreclosure and Delinquent (1) 30 to 59
days, (2) 60 to 89 days and (3) 90 or more days and (C) in bankruptcy as of the
close of business on the last day of the calendar month preceding that
Distribution Date;

         (m) in the aggregate and with respect to each Mortgage Pool, the
aggregate principal balance of the Subsequent Mortgage Loans acquired during the
preceding calendar month and on a cumulative basis since the Closing Date;

         (n) in the aggregate and with respect to each Mortgage Pool, for any
Mortgage Loan as to which the related Mortgaged Property was an REO Property
during the preceding calendar month, the principal balance of that Mortgage Loan
as of the close of business on the last day of the related Due Period;

         (o) in the aggregate and with respect to each Mortgage Pool, the
aggregate number and principal balance of any REO Properties as of the close of
business on the last day of the preceding Due Period;

         (p) in the aggregate and with respect to each Mortgage Pool, the amount
of Realized Losses incurred during the preceding calendar month;

         (q) in the aggregate and with respect to each Mortgage Pool, the
cumulative amount of Realized Losses incurred since the Closing Date;

         (r) the Applied Loss Amount, if any, allocated to each Class of
Subordinate Certificates on that Distribution Date;

         (s) the occurrence of a Trigger Event;

         (t) the occurrence of the Stepdown Date;

         (u) the Certificate Interest Rate for each Class of Certificates for
that Distribution Date;

         (v) the amount, if any, remaining on deposit in each Pre-Funding
Account immediately prior to that Distribution Date; and

         (w) the amount, if any, on deposit in the Capitalized Interest Account
for that Distribution Date.

                                       60



         The Securities Administrator shall make such reports available each
month via the Master Servicer's website at http://www.ctslink.com. Assistance in
using the website may be obtained by calling the Master Servicer's customer
service desk at (301) 815-6600. Certificateholders and other parties that are
unable to use the website are entitled to have a paper copy mailed to them via
first class mail by contacting the Securities Administrator and indicating such.
In preparing or furnishing the foregoing information to the Trustee, the
Securities Administrator shall be entitled to rely conclusively on the accuracy
of the information or data regarding the Mortgage Loans and the related REO
Properties that has been provided to the Securities Administrator by the Master
Servicer and the Servicers, and the Securities Administrator shall not be
obligated to verify, recompute, reconcile or recalculate any such information or
data.

         Upon the reasonable advance written request of any Certificateholder
that is a savings and loan, bank or insurance company, which request, if
received by the Trustee or any agent thereof, shall be promptly forwarded to the
Securities Administrator, the Securities Administrator shall provide, or cause
to be provided, (or, to the extent that such information or documentation is not
required to be provided by a Servicer under the applicable Servicing Agreement,
shall use reasonable efforts to obtain such information and documentation from
such Servicer, and provide) to such Certificateholders such reports and access
to information and documentation regarding the Mortgage Loans as such
Certificateholders may reasonably deem necessary to comply with applicable
regulations of the Office of Thrift Supervision or its successor or other
regulatory authorities with respect to an investment in the Certificates;
provided, however, that the Securities Administrator shall be entitled to be
reimbursed by such Certificateholders for the Securities Administrator's actual
expenses incurred in providing such reports and access.

                                   ARTICLE V

                    DISTRIBUTIONS TO HOLDERS OF CERTIFICATES

         Section 5.01      Distributions Generally.

         (a) Subject to Section 7.01 respecting the final distribution on the
Certificates, on each Distribution Date the Trustee or the Paying Agent shall
make distributions in accordance with this Article V. Such distributions shall
be made by check mailed to each Certificateholder's address as it appears on the
Certificate Register of the Certificate Registrar or, upon written request made
to the Securities Administrator at least five Business Days prior to the related
Record Date by any Certificateholder owning an aggregate initial Certificate
Principal Amount of at least $1,000,000, or in the case of a Class of
Interest-Only Certificates or Residual Certificate, a Percentage Interest of not
less than 100%, by wire transfer in immediately available funds to an account
specified in the request and at the expense of such Certificateholder; provided,
however, that the final distribution in respect of any Certificate shall be made
only upon presentation and surrender of such Certificate at the Certificate
Registrar's Corporate Trust Office; provided, further, that the foregoing
provisions shall not apply to any Class of Certificates as long as such
Certificate remains a Book-Entry Certificate in which case all payments made
shall be made through the Clearing Agency and its Clearing Agency Participants.
Wire transfers will be made at the expense of the Holder requesting such wire

                                       61



transfer by deducting a wire transfer fee from the related distribution.
Notwithstanding such final payment of principal of any of the Certificates, each
Residual Certificate will remain outstanding until the termination of each REMIC
and the payment in full of all other amounts due with respect to the Residual
Certificates and at such time such final payment in retirement of any Residual
Certificate will be made only upon presentation and surrender of such
Certificate at the Certificate Registrar's Corporate Trust Office. If any
payment required to be made on the Certificates is to be made on a day that is
not a Business Day, then such payment will be made on the next succeeding
Business Day.

         (b) All distributions or allocations made with respect to
Certificateholders within each Class on each Distribution Date shall be
allocated among the outstanding Certificates in such Class equally in proportion
to their respective initial Class Principal Amounts or initial Class Notional
Amounts (or Percentage Interests).

         Section 5.02      Distributions from the Distribution Account.

         (a) On each Distribution Date, the Securities Administrator shall
distribute the Interest Remittance Amount for each Mortgage Pool for such date
in the following order of priority:

                  (i)      concurrently, to the Class A-1 Certificates, from the
         Interest Remittance Amount for Pool 1, Current Interest and any
         Carryforward Interest for such Class and for such Distribution Date and
         to the Class A-2 Certificates, from the Interest Remittance Amount for
         Pool 2, Current Interest and any Carryforward Interest for such Class
         and for such Distribution Date;

                  (ii)     to the payment of any remaining Carryforward Interest
         for the Senior Certificates of either Certificate Group, from the
         remaining Interest Remittance Amount not relating to such Certificates;

                  (iii)    to the Class M-1 Certificates, from the remaining
         Interest Remittance Amount for Pool 1 and Pool 2, Current Interest for
         such Class and for such Distribution Date;

                  (iv)     to the Class M-2 Certificates, from the remaining
         Interest Remittance Amount for Pool 1 and Pool 2, Current Interest for
         such Class and for such Distribution Date; and

                  (v)      for application as part of Monthly Excess Cashflow
         for such Distribution Date, as provided in subsection (c) of this
         Section, any Interest Remittance Amount for Pool 1 and Pool 2 remaining
         after application pursuant to clauses (i) through (iv) above.

         (b) On each Distribution Date, the Trustee shall distribute the
Principal Distribution Amount with respect to each Mortgage Pool for such date
as follows:

                  (i)      On each Distribution Date (a) prior to the Stepdown
         Date or (b) with respect to which a Trigger Event is in effect, the
         Principal Distribution Amount for each Mortgage Pool will be
         distributed in the following order of priority:

                                       62



                           (A)      concurrently, to the Class A-1 and Class A-2
                  Certificates, from the Principal Distribution Amount for the
                  related Mortgage Pool, until the Class Principal Amount of
                  each such Class has been reduced to zero;

                           (B)      if either Class of Senior Certificates of a
                  Certificate Group has been retired, to the remaining Class of
                  Senior Certificates, from the Principal Distribution Amount
                  relating to such retired Class, until the Class Principal
                  Amount of such remaining Class has been reduced to zero;

                           (C)      to the Class M-1 Certificates, from the
                  remaining Principal Distribution Amount for both Mortgage
                  Pools, until the Class Principal Amount of such Class has been
                  reduced to zero;

                           (D)      to the Class M-2 Certificates, from the
                  remaining Principal Distribution Amount for both Mortgage
                  Pools, until the Class Principal Amount of such Class has been
                  reduced to zero; and

                           (E)      for application as part of Monthly Excess
                  Cashflow for such Distribution Date, as provided in subsection
                  (c) of this Section, any Principal Distribution Amounts for
                  Pool 1 and Pool 2 remaining after application pursuant to
                  clauses (A) through (D) above.

                  (ii)     On each Distribution Date (a) on or after the
         Stepdown Date and (b) with respect to which a Trigger Event is not in
         effect, the Principal Distribution Amount for each Mortgage Pool will
         be distributed in the following order of priority:

                           (A)      so long as the Class M-1 and Class M-2
                  Certificates are outstanding, to the Class A-1 and Class A-2
                  Certificates, an amount equal to the lesser of (x) the
                  Principal Distribution Amount for the related Mortgage Pool
                  for such Distribution Date and (y) the Senior Principal
                  Distribution Amount for the related Mortgage Pool for such
                  Distribution Date, until the Class Principal Amount of such
                  Class has been reduced to zero; otherwise to the Class A-1 and
                  the Class A-2 Certificates, the related Principal Distribution
                  Amount for such Distribution Date, until the Class Principal
                  Amount of such Class has been reduced to zero;

                           (B)      to the extent that the Senior Principal
                  Distribution Amount for a Class of Senior Certificates has not
                  been fully distributed on such Distribution Date, to such
                  Class from the remaining Principal Distribution Amount not
                  relating to such Class, in an amount up to such undistributed
                  Senior Principal Distribution Amount;

                           (C)      if either Class of Senior Certificates of a
                  Certificate Group has been retired, to the remaining Class of
                  Senior Certificates, from the Principal Distribution Amount
                  relating to such retired Class, until the Class Principal
                  Amount of such remaining Class has been reduced to zero.

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                           (D)      to the Class M-1 Certificates, an amount
                  equal to the lesser of (x) the excess of (a) the Principal
                  Distribution Amounts for both Mortgage Pools for such
                  Distribution Date over (b) the amount distributed to the
                  Senior Certificates on such Distribution Date pursuant to
                  clause (A) above and (y) the M-1 Principal Distribution Amount
                  for such Distribution Date, until the Class Principal Amount
                  of such Class has been reduced to zero;

                           (E)      to the Class M-2 Certificates, an amount
                  equal to the lesser of (x) the excess of (a) the Principal
                  Distribution Amounts for both Mortgage Pools for such
                  Distribution Date over (b) the amount distributed to the
                  Senior Certificates and the Class M-1 Certificates on such
                  Distribution Date pursuant to clauses (A) and (B) above,
                  respectively, and (y) the M-2 Principal Distribution Amount
                  for such Distribution Date, until the Class Principal Amount
                  of such Class has been reduced to zero; and

                           (F)      for application as part of Monthly Excess
                  Cashflow for such Distribution Date, as provided in subsection
                  (c) of this Section, any Principal Distribution Amount for
                  Pool 1 and Pool 2 remaining after application pursuant to
                  clauses (A) through (E) above.

         (c) On each Distribution Date, the Securities Administrator shall
distribute the Monthly Excess Cashflow for such date in the following order of
priority:

                  (i)      to the Class A-1, Class A-2, Class M-1 and Class M-2
         Certificates, in an amount equal to the Extra Principal Distribution
         Amount, if any, for such date, distributable to such Certificates as
         part of the related Principal Distribution Amount, in accordance with
         Section 5.02(b);

                  (ii)     to payment of unpaid Carryforward Interest and
         Deferred Amounts on the Class A-1, Class A-2, Class M-1 and Class M-2
         Certificates in the following order of priority:

                           (A)      concurrently, to the Class A-1 and Class A-2
                  Certificates, any Carryforward Interest for each such Class
                  and such Distribution Date; provided that any shortfalls will
                  be allocated proportionately based on Carryforward Interest
                  otherwise distributable on each such Class on such
                  Distribution Date;

                           (B)      to the Class M-1 Certificates, any (i)
                  Carryforward Interest and (ii) Deferred Amount, in that order,
                  for such Class and for such Distribution Date; and

                           (C)      to the Class M-2 Certificates, any (i)
                  Carryforward Interest and (ii) Deferred Amount, in that order,
                  for such Class and for such Distribution Date.

                  (iii)    to the Reserve Fund, the amount of the Required
         Reserve Fund Deposit for such Distribution Date, and then from the
         Reserve Fund, to the extent of amounts on deposit therein, in the
         following order of priority:

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                           (A)      concurrently, to the Class A-1 and Class A-2
                  Certificates, any applicable Net WAC Shortfall for each such
                  Class and such Distribution Date; provided that amounts
                  distributed from the Reserve Fund will be allocated
                  proportionately between the Class A-1 and Class A-2
                  Certificates based on the relative amounts of Net WAC
                  Shortfalls for such Distribution Date for each such Class;

                           (B)      to the Class M-1 Certificates, any Net WAC
                  Shortfalls for such Distribution Date;

                           (C)      to the Class M-2 Certificates, any Net WAC
                  Shortfalls for such Distribution Date; and

                           (D)      to the Class X Certificate to the extent
                  amounts on deposit in the Reserve Fund after making
                  distributions required under priorities (A) through (C) above
                  exceed $10,000 and, on the Distribution Date on which the
                  Class Principal Amount of each Class of LIBOR Certificates has
                  been reduced to zero, the entire amount then on deposit in the
                  Reserve Fund shall be distributed in respect of the Class X
                  Certificate;

                  (iv)     concurrently, to the Master Servicer and the Trustee,
         any amounts reimbursable pursuant to Section 4.01(d) and not previously
         reimbursed to such party;

                  (v)      to the Class X Certificate, the Class X Distributable
         Amount for such Distribution Date, to the extent not otherwise
         deposited in the Reserve Fund pursuant to Section 5.02(c)(iii) hereof;
         and

                  (vi)     to the Class R and Class LT-R Certificate, any amount
         remaining on such date after application pursuant to clauses (i)
         through (v) above.

         Section 5.03      Allocation of Losses.

         (a) On or prior to each Distribution Date, the Master Servicer shall
aggregate the information provided by each Servicer with respect to the
aggregate amount of Realized Losses experienced on the Mortgage Loans for the
related Distribution Date.

         (b) On each Distribution Date, the Class Principal Amounts of the Class
M-1 and Class M-2 Certificates will be reduced by the amount of any Applied Loss
Amount for such date, in the following order of priority:

                           first, to the Class M-2 Certificates, until the Class
                  Principal Amount thereof has been reduced to zero; and

                           second, to the Class M-1 Certificates, until the
                  Class Principal Amount thereof has been reduced to zero.

                                       65



         Section 5.04      Advances by Master Servicer.

         If any Servicer fails to remit any Advance required to be made under
the applicable Servicing Agreement, the Master Servicer shall itself make, or
shall cause the successor Servicer to make, such Advance. If the Master Servicer
determines that an Advance is required, it shall on the Business Day preceding
the related Distribution Date immediately following such Determination Date
remit to the Securities Administrator from its own funds (or funds advanced by
the applicable Servicer) for deposit in the Account immediately available funds
in an amount equal to such Advance. The Master Servicer and each Servicer shall
be entitled to be reimbursed for all Advances made by it. Notwithstanding
anything to the contrary herein, in the event the Master Servicer determines in
its reasonable judgment that an Advance is non-recoverable, the Master Servicer
shall be under no obligation to make such Advance. If the Master Servicer
determines that an Advance is non-recoverable, it shall, on or prior to the
related Distribution Date, deliver an Officer's Certificate to the Trustee to
such effect.

         Section 5.05      Compensating Interest Payments.

         The amount of the aggregate Master Servicing Fees payable to the Master
Servicer in respect of any Distribution Date shall be reduced (but not below
zero) by the amount of any Compensating Interest Payment for such Distribution
Date, but only to the extent that Prepayment Interest Shortfalls relating to
such Distribution Date are required to be paid but not actually paid by the
Servicers. Such amount shall not be treated as an Advance and shall not be
reimbursable to the Master Servicer.

         Section 5.06      Reserve Fund.

         (a) On the Closing Date, the Securities Administrator shall establish
and maintain in the Trustee's name, in trust for the benefit of the holders of
the LIBOR Certificates and the Class X Certificate, a Reserve Fund, into which
the Depositor shall deposit $10,000.00. The Reserve Fund shall be an Eligible
Account, and funds on deposit therein shall be held separate and apart from, and
shall not be commingled with, any other moneys, including, without limitation,
other moneys of the Trustee held pursuant to this Agreement. The Reserve Fund
shall not be an asset of any REMIC established hereby.

         (b) Funds in the Reserve Fund shall be invested in Permitted
Investments. Any earnings on amounts in the Reserve Fund shall be for the
benefit of the Class X Certificateholder. The Class X Certificate shall evidence
ownership of the Reserve Fund for federal income tax purposes and the Holder
thereof shall direct the Securities Administrator, in writing, as to investment
of amounts on deposit therein. The Class X Certificateholder shall be liable for
any losses incurred on such investments. In the absence of written instructions
from the Class X Certificateholder as to investment of funds on deposit in the
Reserve Fund, such funds shall be invested in money market funds as described in
paragraph (ix) of the definition of Permitted Investments in Article I. For all
Federal income tax purposes, amounts transferred by the Upper-Tier REMIC to the
Reserve Fund shall be treated as amounts distributed by the Upper-Tier REMIC to
the Class X Certificateholder.

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         (c) Upon termination of the Trust Fund any amounts remaining in the
Reserve Fund shall be distributed to the Class X Certificateholder.

                                   ARTICLE VI

   CONCERNING THE TRUSTEE AND THE SECURITIES ADMINISTRATOR; EVENTS OF DEFAULT

         Section 6.01      Duties of Trustee and the Securities Administrator.

         (a) The Trustee, except during the continuance of an Event of Default
and the Securities Administrator undertakes to perform such duties and only such
duties as are specifically set forth in this Agreement. Any permissive right of
the Trustee or the Securities Administrator provided for in this Agreement shall
not be construed as a duty of the Trustee or the Securities Administrator. If an
Event of Default has occurred and has not otherwise been cured or waived, the
Trustee or the Securities Administrator shall exercise such of the rights and
powers vested in it by this Agreement and use the same degree of care and skill
in their exercise as a prudent Person would exercise or use under the
circumstances in the conduct of such Person's own affairs, unless the Trustee is
acting as Master Servicer, in which case it shall use the same degree of care
and skill as the Master Servicer hereunder.

         (b) Each of the Trustee and the Securities Administrator, upon receipt
of all resolutions, certificates, statements, opinions, reports, documents,
orders or other instruments furnished to the Trustee or the Securities
Administrator which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they are in
the form required by this Agreement; provided, however, that neither the Trustee
nor the Securities Administrator shall be responsible for the accuracy or
content of any such resolution, certificate, statement, opinion, report,
document, order or other instrument furnished by the Master Servicer or any
Servicer to the Trustee or the Securities Administrator pursuant to this
Agreement, and shall not be required to recalculate or verify any numerical
information furnished to the Trustee or the Securities Administrator pursuant to
this Agreement. Subject to the immediately preceding sentence, if any such
resolution, certificate, statement, opinion, report, document, order or other
instrument is found not to conform to the form required by this Agreement in a
material manner the Trustee shall take such action as it deems appropriate to
cause the instrument to be corrected, and if the instrument is not corrected to
the Trustee's satisfaction, the Trustee will provide notice thereof to the
Certificateholders and will, at the expense of the Trust Fund, which expense
shall be reasonable given the scope and nature of the required action, take such
further action as directed by the Certificateholders.

         (c) Neither the Trustee nor the Securities Administrator shall have any
liability arising out of or in connection with this Agreement, except for its
negligence or willful misconduct. Notwithstanding anything in this Agreement to
the contrary, neither the Trustee nor the Securities Administrator shall be
liable for special, indirect or consequential losses or damages of any kind
whatsoever (including, but not limited to, lost profits). No provision of this
Agreement shall be construed to relieve the Trustee or the Securities
Administrator from liability for its own

                                       67



negligent action, its own negligent failure to act or its own willful
misconduct; provided, however, that:

                  (i)      Neither the Trustee nor the Securities Administrator
         shall be personally liable with respect to any action taken, suffered
         or omitted to be taken by it in good faith in accordance with the
         direction of Holders of Certificates as provided in Section 6.18
         hereof;

                  (ii)     For all purposes under this Agreement, the Trustee
         shall not be deemed to have notice of any Event of Default (other than
         resulting from a failure by the Master Servicer (i) to remit funds (or
         to make Advances) or (ii) to furnish information to the Trustee when
         required to do so) unless a Responsible Officer of the Trustee has
         actual knowledge thereof or unless written notice of any event which is
         in fact such a default is received by the Trustee at the Corporate
         Trust Office of the Trustee, and such notice references the Holders of
         the Certificates and this Agreement;

                  (iii)    For all purposes under this Agreement, the Securities
         Administrator shall not be deemed to have notice of any Event of
         Default (other than resulting from a failure by the Master Servicer to
         furnish information to the Securities Administrator when required to do
         so) unless a Responsible Officer of the Securities Administrator has
         actual knowledge thereof or unless written notice of any event which is
         in fact such a default is received by the Securities Administrator at
         the address provided in Section 11.07, and such notice references the
         Holders of the Certificates and this Agreement;

                  (iv)     No provision of this Agreement shall require the
         Trustee or the Securities Administrator to expend or risk its own funds
         or otherwise incur any financial liability in the performance of any of
         its duties hereunder, or in the exercise of any of its rights or
         powers, if it shall have reasonable grounds for believing that
         repayment of such funds or adequate indemnity against such risk or
         liability is not reasonably assured to it; and none of the provisions
         contained in this Agreement shall in any event require the Trustee or
         the Securities Administrator to perform, or be responsible for the
         manner of performance of, any of the obligations of the Master Servicer
         under this Agreement;

                  (v)      Neither the Trustee nor the Securities Administrator
         shall be responsible for any act or omission of the Master Servicer,
         the Depositor, the Seller or any Custodian.

         (d) The Trustee shall have no duty hereunder with respect to any
complaint, claim, demand, notice or other document it may receive or which may
be alleged to have been delivered to or served upon it by the parties as a
consequence of the assignment of any Mortgage Loan hereunder; provided, however,
that the Trustee shall promptly remit to the applicable Servicer upon receipt
any such complaint, claim, demand, notice or other document (i) which is
delivered to the Corporate Trust Office of the Trustee, (ii) of which a
Responsible Officer has actual knowledge, and (iii) which contains information
sufficient to permit the Trustee to make a determination that the real property
to which such document relates is a Mortgaged Property.

         (e) Neither the Trustee nor the Securities Administrator shall be
personally liable with respect to any action taken, suffered or omitted to be
taken by it in good faith in accordance with

                                       68



the direction of the Certificateholders of any Class holding Certificates which
evidence, as to such Class, Percentage Interests aggregating not less than 25%
as to the time, method and place of conducting any proceeding for any remedy
available to the Trustee or the Securities Administrator or exercising any trust
or power conferred upon the Trustee or the Securities Administrator, as
applicable, under this Agreement.

         (f) Neither the Trustee nor the Securities Administrator shall be
required to perform services under this Agreement, or to expend or risk its own
funds or otherwise incur financial liability for the performance of any of its
duties hereunder or the exercise of any of its rights or powers if there is
reasonable ground for believing that the timely payment of its fees and expenses
or the repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it, and none of the provisions contained
in this Agreement shall in any event require the Trustee or the Securities
Administrator, as applicable, to perform, or be responsible for the manner of
performance of, any of the obligations of the Master Servicer or any Servicer
under this Agreement or any Servicing Agreement except during such time, if any,
as the Trustee shall be the successor to, and be vested with the rights, duties,
powers and privileges of, the Master Servicer in accordance with the terms of
this Agreement.

         (g) The Trustee shall not be held liable by reason of any insufficiency
in the Distribution Account or the Reserve Fund resulting from any investment
loss on any Permitted Investment included therein (except to the extent that the
Trustee is the obligor and has defaulted thereon).

         (h) Except as otherwise provided herein, neither the Trustee nor the
Securities Administrator shall have any duty (A) to see to any recording,
filing, or depositing of this Agreement or any agreement referred to herein or
any financing statement or continuation statement evidencing a security
interest, or to see to the maintenance of any such recording or filing or
depositing or to any rerecording, refiling or redepositing of any thereof, (B)
to see to any insurance, (C) to see to the payment or discharge of any tax,
assessment, or other governmental charge or any lien or encumbrance of any kind
owing with respect to, assessed or levied against, any part of the Trust Fund
other than from funds available in the Distribution Account, or (D) to confirm
or verify the contents of any reports or certificates of the Master Servicer or
any Servicer delivered to the Trustee or the Securities Administrator pursuant
to this Agreement believed by the Trustee or the Securities Administrator, as
applicable, to be genuine and to have been signed or presented by the proper
party or parties.

         (i) Neither the Securities Administrator nor the Trustee shall be
liable in its individual capacity for an error of judgment made in good faith by
a Responsible Officer or other officers of the Trustee or the Securities
Administrator, as applicable, unless it shall be proved that the Trustee or the
Securities Administrator, as applicable, was negligent in ascertaining the
pertinent facts.

         (j) Notwithstanding anything in this Agreement to the contrary, neither
the Securities Administrator nor the Trustee shall be liable for special,
indirect or consequential losses or damages of any kind whatsoever (including,
but not limited to, lost profits), even if the Trustee or the Securities
Administrator, as applicable, has been advised of the likelihood of such loss or
damage and regardless of the form of action.

                                       69



         (k) Neither the Securities Administrator nor the Trustee shall be
responsible for the acts or omissions of the other, it being understood that
this Agreement shall not be construed to render them agents of one another.

         Section 6.02      Certain Matters Affecting the Trustee and the
                           Securities Administrator.

         Except as otherwise provided in Section 6.01:

                  (i)      Each of the Trustee and the Securities Administrator
         may request, and may rely and shall be protected in acting or
         refraining from acting upon any resolution, Officer's Certificate,
         certificate of auditors or any other certificate, statement,
         instrument, opinion, report, notice, request, consent, order, approval,
         bond or other paper or document believed by it to be genuine and to
         have been signed or presented by the proper party or parties;

                  (ii)     Each of the Trustee and the Securities Administrator
         may consult with counsel and any advice of its counsel or Opinion of
         Counsel shall be full and complete authorization and protection in
         respect of any action taken or suffered or omitted by it hereunder in
         good faith and in accordance with such advice or Opinion of Counsel;

                  (iii)    Neither the Trustee nor the Securities Administrator
         shall be personally liable for any action taken, suffered or omitted by
         it in good faith and reasonably believed by it to be authorized or
         within the discretion or rights or powers conferred upon it by this
         Agreement;

                  (iv)     Unless an Event of Default shall have occurred and be
         continuing, neither the Trustee nor the Securities Administrator shall
         be bound to make any investigation into the facts or matters stated in
         any resolution, certificate, statement, instrument, opinion, report,
         notice, request, consent, order, approval, bond or other paper or
         document (provided the same appears regular on its face), unless
         requested in writing to do so by the Holders of at least a majority in
         Class Principal Amount (or Percentage Interest) of each Class of
         Certificates; provided, however, that, if the payment within a
         reasonable time to the Trustee or the Securities Administrator, as
         applicable, of the costs, expenses or liabilities likely to be incurred
         by it in the making of such investigation is, in the opinion of the
         Trustee or the Securities Administrator, as applicable, not reasonably
         assured to the Trustee or the Securities Administrator by the security
         afforded to it by the terms of this Agreement, the Trustee or the
         Securities Administrator, as applicable, may require reasonable
         indemnity against such expense or liability or payment of such
         estimated expenses from the Certificateholders as a condition to
         proceeding. The reasonable expense thereof shall be paid by the party
         requesting such investigation and if not reimbursed by the requesting
         party shall be reimbursed to the Trustee by the Trust Fund;

                  (v)      Each of the Trustee and the Securities Administrator
         may execute any of the trusts or powers hereunder or perform any duties
         hereunder either directly or by or through agents, custodians or
         attorneys, which agents, custodians or attorneys shall have any and all
         of the rights, powers, duties and obligations of the Trustee and the
         Securities

                                       70



         Administrator conferred on them by such appointment, provided that each
         of the Trustee and the Securities Administrator shall continue to be
         responsible for its duties and obligations hereunder to the extent
         provided herein, and provided further that neither the Trustee nor the
         Securities Administrator shall be responsible for any misconduct or
         negligence on the part of any such agent or attorney appointed with due
         care by the Trustee or the Securities Administrator, as applicable;

                  (vi)     Neither the Trustee nor the Securities Administrator
         shall be under any obligation to exercise any of the trusts or powers
         vested in it by this Agreement or to institute, conduct or defend any
         litigation hereunder or in relation hereto, in each case at the
         request, order or direction of any of the Certificateholders pursuant
         to the provisions of this Agreement, unless such Certificateholders
         shall have offered to the Trustee or the Securities Administrator, as
         applicable, reasonable security or indemnity against the costs,
         expenses and liabilities which may be incurred therein or thereby;

                  (vii)    The right of the Trustee and the Securities
         Administrator to perform any discretionary act enumerated in this
         Agreement shall not be construed as a duty, and neither the Trustee nor
         the Securities Administrator shall be answerable for other than its
         negligence or willful misconduct in the performance of such act; and

                  (viii)   Neither the Trustee nor the Securities Administrator
         shall be required to give any bond or surety in respect of the
         execution of the Trust Fund created hereby or the powers granted
         hereunder.

         Section 6.03      Trustee and Securities Administrator Not Liable for
                           Certificates.

         The Trustee and the Securities Administrator make no representations as
to the validity or sufficiency of this Agreement or of the Certificates (other
than the certificate of authentication on the Certificates) or of any Mortgage
Loan, or related document save that the Trustee and the Securities Administrator
represent that, assuming due execution and delivery by the other parties hereto,
this Agreement has been duly authorized, executed and delivered by it and
constitutes its valid and binding obligation, enforceable against it in
accordance with its terms except that such enforceability may be subject to (A)
applicable bankruptcy and insolvency laws and other similar laws affecting the
enforcement of the rights of creditors generally, and (B) general principles of
equity regardless of whether such enforcement is considered in a proceeding in
equity or at law. The Trustee and the Securities Administrator shall not be
accountable for the use or application by the Depositor of funds paid to the
Depositor in consideration of the assignment of the Mortgage Loans to the Trust
Fund by the Depositor or for the use or application of any funds deposited into
the Distribution Account or any other fund or account maintained with respect to
the Certificates. The Trustee and the Securities Administrator shall not be
responsible for the legality or validity of this Agreement or the validity,
priority, perfection or sufficiency of the security for the Certificates issued
or intended to be issued hereunder. Except as otherwise provided herein, the
Trustee and the Securities Administrator shall have no responsibility for filing
any financing or continuation statement in any public office at any time or to
otherwise perfect or maintain the perfection of any security interest or lien
granted to it hereunder or to record this Agreement.

                                       71



         Section 6.04      Trustee and the Securities Administrator May Own
                           Certificates.

         The Trustee and the Securities Administrator and any Affiliate or agent
of either of them in its individual or any other capacity may become the owner
or pledgee of Certificates and may transact banking and trust business with the
other parties hereto and their Affiliates with the same rights it would have if
it were not Trustee, Securities Administrator or such agent. Section 6.05
Eligibility Requirements for Trustee.

         The Trustee hereunder shall at all times be (i) an institution insured
by the FDIC, (ii) a corporation or national banking association, organized and
doing business under the laws of any State or the United States of America,
authorized under such laws to exercise corporate trust powers, having a combined
capital and surplus of not less than $50,000,000 and subject to supervision or
examination by federal or state authority and (iii) not an Affiliate of the
Master Servicer or any Servicer. If such corporation or national banking
association publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then,
for the purposes of this Section, the combined capital and surplus of such
corporation or national banking association shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. In case at any time the Trustee shall cease to be eligible in
accordance with provisions of this Section, the Trustee shall resign immediately
in the manner and with the effect specified in Section 6.06.

         Section 6.06      Resignation and Removal of Trustee and the Securities
                           Administrator.

         (a) Each of the Trustee and the Securities Administrator may at any
time resign and be discharged from the trust hereby created by giving written
notice thereof to the Trustee or the Securities Administrator, as applicable,
the Depositor and the Master Servicer. Upon receiving such notice of
resignation, the Depositor will promptly appoint a successor trustee or a
successor securities administrator, as applicable, by written instrument, one
copy of which instrument shall be delivered to the resigning Trustee or
resigning Securities Administrator, as applicable, one copy to the successor
trustee or successor securities administrator, as applicable, and one copy to
the Master Servicer. If no successor trustee or successor securities
administrator shall have been so appointed and shall have accepted appointment
within 30 days after the giving of such notice of resignation, the resigning
Trustee or resigning Securities Administrator, as applicable, may petition any
court of competent jurisdiction for the appointment of a successor trustee or
successor securities administrator, as applicable.

         (b) If at any time (i) the Trustee shall cease to be eligible in
accordance with the provisions of Section 6.05 and shall fail to resign after
written request therefor by the Depositor, (ii) the Trustee or the Securities
Administrator shall become incapable of acting, or shall be adjudged a bankrupt
or insolvent, or a receiver of the Trustee or the Securities Administrator of
its property shall be appointed, or any public officer shall take charge or
control of the Trustee or the Securities Administrator or of either of their
property or affairs for the purpose of rehabilitation, conservation or
liquidation, (iii) a tax is imposed or threatened with respect to the Trust Fund
by any state in which the Trustee or the Trust Fund held by the Trustee is
located, or (iv) the continued use of the Trustee or Securities Administrator
would result in a downgrading of the rating by any Rating Agency of any Class of
Certificates with a rating, then the Depositor

                                       72



shall remove the Trustee or the Securities Administrator, as applicable, and the
Depositor shall appoint a successor trustee or successor securities
administrator, as applicable, acceptable to the Master Servicer by written
instrument, one copy of which instrument shall be delivered to the Trustee or
Securities Administrator so removed, one copy each to the successor trustee or
successor securities Administrator, as applicable, and one copy to the Master
Servicer.

         (c) The Holders of more than 50% of the Class Principal Amount (or
Percentage Interest) of each Class of Certificates may at any time upon 30 days'
written notice to the Trustee or the Securities Administrator, as applicable,
and to the Depositor remove the Trustee or the Securities Administrator, as
applicable, by such written instrument, signed by such Holders or their
attorney-in-fact duly authorized, one copy of which instrument shall be
delivered to the Depositor, one copy to the Trustee or Securities Administrator,
as applicable and one copy to the Master Servicer; the Depositor shall thereupon
appoint a successor trustee or successor securities administrator, as
applicable, in accordance with this Section.

         (d) Any resignation or removal of the Trustee or the Securities
Administrator, as applicable, and appointment of a successor trustee or
successor securities administrator pursuant to any of the provisions of this
Section shall become effective upon acceptance of appointment by the successor
trustee or the successor securities administrator, as applicable, as provided in
Section 6.07.

         Section 6.07      Successor Trustee and Successor Securities
                           Administrator.

         (a) Any successor trustee or successor securities administrator
appointed as provided in Section 6.06 shall execute, acknowledge and deliver to
the Depositor and to its predecessor trustee or predecessor securities
administrator, as applicable, an instrument accepting such appointment
hereunder, and thereupon the resignation or removal of the predecessor trustee
or predecessor securities administrator, as applicable, shall become effective
and such successor trustee or successor securities administrator, as applicable,
without any further act, deed or conveyance, shall become fully vested with all
the rights, powers, duties and obligations of its predecessor hereunder, with
like effect as if originally named as trustee or securities administrator, as
applicable, herein. The predecessor trustee or predecessor securities
administrator, as applicable, shall deliver to the successor trustee (or assign
to the Trustee its interest under the Custody Agreement, to the extent permitted
thereunder) or successor securities administrator, as applicable, all Trustee
Mortgage Files and documents and statements related to each Trustee Mortgage
File held by it hereunder, and shall duly assign, transfer, deliver and pay over
to the successor trustee the entire Trust Fund, together with all necessary
instruments of transfer and assignment or other documents properly executed
necessary to effect such transfer and such of the records or copies thereof
maintained by the predecessor trustee in the administration hereof as may be
requested by the successor trustee and shall thereupon be discharged from all
duties and responsibilities under this Agreement. In addition, the Depositor and
the predecessor trustee or predecessor securities administrator, as applicable,
shall execute and deliver such other instruments and do such other things as may
reasonably be required to more fully and certainly vest and confirm in the
successor trustee or successor securities administrator, as applicable, all such
rights, powers, duties and obligations.

                                       73



         (b) No successor trustee shall accept appointment as provided in this
Section unless at the time of such appointment such successor trustee shall be
eligible under the provisions of Section 6.05.

         (c) Upon acceptance of appointment by a successor trustee or successor
securities administrator, as applicable, as provided in this Section, the
predecessor trustee or predecessor securities administrator, as applicable,
shall mail notice of the succession of such trustee or securities administrator,
as applicable, hereunder to all Holders of Certificates at their addresses as
shown in the Certificate Register and to any Rating Agency. The expenses of such
mailing shall be borne by the Master Servicer.

         Section 6.08      Merger or Consolidation of Trustee or the Securities
                           Administrator.

         Any Person into which the Trustee or Securities Administrator may be
merged or with which it may be consolidated, or any Person resulting from any
merger, conversion or consolidation to which the Trustee or Securities
Administrator shall be a party, or any Persons succeeding to the business of the
Trustee or Securities Administrator, shall be the successor to the Trustee or
Securities Administrator hereunder, without the execution or filing of any paper
or any further act on the part of any of the parties hereto, anything herein to
the contrary notwithstanding, provided that, in the case of the Trustee, such
Person shall be eligible under the provisions of Section 6.05.

         Section 6.09      Appointment of Co-Trustee, Separate Trustee or
                           Custodian.

         (a) Notwithstanding any other provisions hereof, at any time, the
Trustee, the Depositor or the Certificateholders evidencing more than 50% of the
Class Principal Amount (or Percentage Interest) of every Class of Certificates
shall have the power from time to time to appoint one or more Persons, approved
by the Trustee, to act either as co-trustees jointly with the Trustee, or as
separate trustees, or as custodians, for the purpose of holding title to,
foreclosing or otherwise taking action with respect to any Mortgage Loan outside
the state where the Trustee has its principal place of business where such
separate trustee or co-trustee is necessary or advisable (or the Trustee has
been advised by the Master Servicer that such separate trustee or co-trustee is
necessary or advisable) under the laws of any state in which a property securing
a Mortgage Loan is located or for the purpose of otherwise conforming to any
legal requirement, restriction or condition in any state in which a property
securing a Mortgage Loan is located or in any state in which any portion of the
Trust Fund is located. The separate Trustees, co-trustees, or custodians so
appointed shall be trustees or custodians for the benefit of all the
Certificateholders and shall have such powers, rights and remedies as shall be
specified in the instrument of appointment; provided, however, that no such
appointment shall, or shall be deemed to, constitute the appointee an agent of
the Trustee. The obligation of the Master Servicer to make Advances pursuant to
Section 5.04 hereof shall not be affected or assigned by the appointment of a
co-trustee.

         (b) Every separate trustee, co-trustee, and custodian shall, to the
extent permitted by law, be appointed and act subject to the following
provisions and conditions:

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                  (i)      all powers, duties, obligations and rights conferred
upon the Trustee in respect of the receipt, custody and payment of moneys shall
be exercised solely by the Trustee;

                  (ii)     all other rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee, co-trustee, or
custodian jointly, except to the extent that under any law of any jurisdiction
in which any particular act or acts are to be performed the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations, including the holding of title to the
Trust Fund or any portion thereof in any such jurisdiction, shall be exercised
and performed by such separate trustee, co-trustee, or custodian;

                  (iii)    no trustee or custodian hereunder shall be personally
liable by reason of any act or omission of any other trustee or custodian
hereunder; and

                  (iv)     the Trustee may at any time, by an instrument in
writing executed by it, with the concurrence of the Depositor, accept the
resignation of or remove any separate trustee, co-trustee or custodian, so
appointed by it or them, if such resignation or removal does not violate the
other terms of this Agreement.

         (c) Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee, co-trustee or custodian shall refer to this Agreement and the
conditions of this Article VI. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Trustee or
separately, as may be provided therein, subject to all the provisions of this
Agreement, specifically including every provision of this Agreement relating to
the conduct of, affecting the liability of, or affording protection to, the
Trustee. Every such instrument shall be filed with the Trustee and a copy given
to the Master Servicer.

         (d) Any separate trustee, co-trustee or custodian may, at any time,
constitute the Trustee its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. If any separate
trustee, co-trustee or custodian shall die, become incapable of acting, resign
or be removed, all of its estates, properties, rights, remedies and trusts shall
vest in and be exercised by the Trustee, to the extent permitted by law, without
the appointment of a new or successor trustee.

         (e) No separate trustee, co-trustee or custodian hereunder shall be
required to meet the terms of eligibility as a successor trustee under Section
6.05 hereunder and no notice to Certificateholders of the appointment shall be
required under Section 6.07 hereof.

         (f) The Trustee agrees to instruct the co-trustees, if any, to the
extent necessary to fulfill the Trustee's obligations hereunder.

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         (g) The Trust shall pay the reasonable compensation of the co-trustees
(which compensation shall not reduce any compensation payable to the Trustee
under such Section).

         Section 6.10      Authenticating Agents.

         (a) The Trustee may appoint one or more Authenticating Agents which
shall be authorized to act on behalf of the Trustee in authenticating
Certificates. The Trustee hereby appoints the Securities Administrator as
initial Authenticating Agent, and the Securities Administrator accepts such
appointment. Wherever reference is made in this Agreement to the authentication
of Certificates by the Trustee or the Trustee's certificate of authentication,
such reference shall be deemed to include authentication on behalf of the
Trustee by an Authenticating Agent and a certificate of authentication executed
on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent
must be a corporation organized and doing business under the laws of the United
States of America or of any state, having a combined capital and surplus of at
least $15,000,000, authorized under such laws to do a trust business and subject
to supervision or examination by federal or state authorities.

         (b) Any Person into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any Person resulting from any
merger, conversion or consolidation to which any Authenticating Agent shall be a
party, or any Person succeeding to the corporate agency business of any
Authenticating Agent, shall continue to be the Authenticating Agent without the
execution or filing of any paper or any further act on the part of the Trustee
or the Authenticating Agent.

         (c) Any Authenticating Agent may at any time resign by giving at least
30 days' advance written notice of resignation to the Trustee and the Depositor.
The Trustee may at any time terminate the agency of any Authenticating Agent by
giving written notice of termination to such Authenticating Agent and the
Depositor. Upon receiving a notice of resignation or upon such a termination, or
in case at any time any Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section 6.10, the Trustee may appoint a
successor authenticating agent, shall give written notice of such appointment to
the Depositor and shall mail notice of such appointment to all Holders of
Certificates. Any successor authenticating agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers, duties
and responsibilities of its predecessor hereunder, with like effect as if
originally named as Authenticating Agent. No successor authenticating agent
shall be appointed unless eligible under the provisions of this Section 6.10. No
Authenticating Agent shall have responsibility or liability for any action taken
by it as such at the direction of the Trustee.

         Section 6.11      Indemnification of the Trustee and the Securities
                           Administrator.

         The Trustee and the Securities Administrator and their respective
directors, officers, employees and agents shall be entitled to indemnification
from the Depositor and the Trust Fund (provided that the Trust Fund's
indemnification under this Section 6.11 is limited by Section 4.01(d) for any
loss, liability or expense including, without limitation, reasonable attorneys'
fees and disbursements and, in the case of the Trustee, in connection with the
Custody Agreement, including the reasonable compensation and the expenses and
disbursements of its agents or counsel), incurred without negligence or willful
misconduct on their part, arising out of, or in

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connection with, the acceptance or administration of the trusts created
hereunder or in connection with the performance of their duties hereunder
including the costs and expenses of defending themselves against any claim in
connection with the exercise or performance of any of their powers or duties
hereunder, provided that:

                  (i)      with respect to any such claim, the Trustee or the
         Securities Administrator, as applicable, shall have given the Depositor
         written notice thereof promptly after the Trustee, the Securities
         Administrator, as applicable, shall have knowledge thereof;

                  (ii)     while maintaining control over its own defense, the
         Trustee or the Securities Administrator, as applicable, shall cooperate
         and consult fully with the Depositor in preparing such defense; and

                  (iii)    notwithstanding anything to the contrary in this
         Section 6.11, the Trust Fund shall not be liable for settlement of any
         such claim by the Trustee or the Securities Administrator, as
         applicable, entered into without the prior consent of the Depositor,
         which consent shall not be unreasonably withheld.

         The provisions of this Section 6.11 shall survive any termination of
this Agreement and the resignation or removal of the Trustee or the Securities
Administrator, as applicable, and shall be construed to include, but not be
limited to any loss, liability or expense under any environmental law.

         Section 6.12      Fees and Expenses of Securities Administrator and the
                           Trustee.

         (a) Compensation for the services of the Securities Administrator
hereunder shall be paid by the Master Servicer. The Securities Administrator
shall be entitled to all disbursements and advancements incurred or made by the
Securities Administrator in accordance with this Agreement (including fees and
expenses of its counsel and all persons not regularly in its employment), except
any such expenses arising from its negligence, bad faith or willful misconduct.

         (b) As compensation for its services hereunder, the Trustee shall be
entitled to receive a Trustee fee (which shall not be limited by any provision
of law in regard to the compensation of a trustee of an express trust) which
shall be paid by the Master Servicer pursuant to a separate agreement between
the Trustee and the Master Servicer. Any expenses incurred by the Trustee shall
be reimbursed in accordance with Section 6.11.

         Section 6.13      Collection of Monies.

         Except as otherwise expressly provided in this Agreement, the Trustee
may demand payment or delivery of, and shall receive and collect, all money and
other property payable to or receivable by the Trustee pursuant to this
Agreement. The Trustee shall hold all such money and property received by it as
part of the Trust Fund and shall distribute it as provided in this Agreement.

         Section 6.14      Events of Default; Trustee To Act; Appointment of
                           Successor.

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         (a) The occurrence of any one or more of the following events shall
constitute an "Event of Default":

                  (i)      Any failure by the Master Servicer to furnish the
         Securities Administrator the Mortgage Loan data sufficient to prepare
         the reports described in Section 4.04 which continues unremedied for a
         period of one Business Day after the date upon which written notice of
         such failure shall have been given to such Master Servicer by the
         Trustee or the Securities Administrator or to such Master Servicer, the
         Securities Administrator and the Trustee by the Holders of not less
         than 25% of the Class Principal Amount (or Class Notional Amount) of
         each Class of Certificates affected thereby; or

                  (ii)     Any failure on the part of the Master Servicer duly
         to observe or perform in any material respect any other of the
         covenants or agreements on the part of the Master Servicer contained in
         this Agreement which continues unremedied for a period of 30 days after
         the date on which written notice of such failure, requiring the same to
         be remedied, shall have been given to the Master Servicer by the
         Trustee or the Securities Administrator, or to the Master Servicer, the
         Securities Administrator and the Trustee by the Holders of more than
         50% of the Aggregate Voting Interests of the Certificates; or

                  (iii)    A decree or order of a court or agency or supervisory
         authority having jurisdiction for the appointment of a conservator or
         receiver or liquidator in any insolvency, readjustment of debt,
         marshalling of assets and liabilities or similar proceedings, or for
         the winding-up or liquidation of its affairs, shall have been entered
         against the Master Servicer, and such decree or order shall have
         remained in force undischarged or unstayed for a period of 60 days or
         any Rating Agency reduces or withdraws or threatens to reduce or
         withdraw the rating of the Certificates because of the financial
         condition or loan servicing capability of such Master Servicer; or

                  (iv)     The Master Servicer shall consent to the appointment
         of a conservator or receiver or liquidator in any insolvency,
         readjustment of debt, marshalling of assets and liabilities, voluntary
         liquidation or similar proceedings of or relating to the Master
         Servicer or of or relating to all or substantially all of its property;
         or

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

                  (vi)     The Master Servicer shall be dissolved, or shall
         dispose of all or substantially all of its assets, or consolidate with
         or merge into another entity or shall permit another entity to
         consolidate or merge into it, such that the resulting entity does not
         meet the criteria for a successor servicer as specified in Section 9.05
         hereof; or

                  (vii)    If a representation or warranty set forth in Section
         9.03 hereof shall prove to be incorrect as of the time made in any
         respect that materially and adversely affects the interests of the
         Certificateholders, and the circumstance or condition in respect of
         which such representation or warranty was incorrect shall not have been
         eliminated or cured

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         within 30 days after the date on which written notice of such incorrect
         representation or warranty shall have been given to the Master Servicer
         by the Trustee or the Securities Administrator, or to the Master
         Servicer, the Securities Administrator and the Trustee by the Holders
         of more than 50% of the Aggregate Voting Interests of the Certificates;
         or

                  (viii)   A sale or pledge of any of the rights of the Master
         Servicer hereunder or an assignment of this Agreement by the Master
         Servicer or a delegation of the rights or duties of the Master Servicer
         hereunder shall have occurred in any manner not otherwise permitted
         hereunder and without the prior written consent of the Trustee and
         Certificateholders holding more than 50% of the Aggregate Voting
         Interests of the Certificates; or

                  (ix)     After receipt of notice from the Trustee, any failure
         of the Master Servicer to make any Advances required to be made
         hereunder.

         If an Event of Default described in clauses (i) through (ix) of this
Section shall occur, then, in each and every case, subject to applicable law, so
long as any such Event of Default shall not have been remedied within any period
of time prescribed by this Section, the Trustee, by notice in writing to the
Master Servicer may, and shall, if so directed by Certificateholders evidencing
more than 50% of the Class Principal Amount (or Class Notional Amount) of each
Class of Certificates, terminate all of the rights and obligations of the Master
Servicer hereunder and in and to the Mortgage Loans and the proceeds thereof. On
or after the receipt by the Master Servicer of such written notice, all
authority and power of the Master Servicer, and only in its capacity as Master
Servicer under this Agreement, whether with respect to the Mortgage Loans or
otherwise, shall pass to and be vested in the Trustee; and the Trustee is hereby
authorized and empowered to execute and deliver, on behalf of the defaulting
Master Servicer as attorney-in-fact or otherwise, any and all documents and
other instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement or assignment of the Mortgage Loans and
related documents or otherwise. The defaulting Master Servicer agrees to
cooperate with the Trustee and the Securities Administrator in effecting the
termination of the defaulting Master Servicer's responsibilities and rights
hereunder as Master Servicer including, without limitation, notifying Servicers
of the assignment of the master servicing function and providing the Trustee or
its designee all documents and records in electronic or other form reasonably
requested by it to enable the Trustee or its designee to assume the defaulting
Master Servicer's functions hereunder and the transfer to the Trustee for
administration by it of all amounts which shall at the time be or should have
been deposited by the defaulting Master Servicer in the Distribution Account and
any other account or fund maintained with respect to the Certificates or
thereafter received with respect to the Mortgage Loans. The Master Servicer
being terminated shall bear all costs of a master servicing transfer, including
but not limited to those of the Trustee or Securities Administrator reasonably
allocable to specific employees and overhead, legal fees and expenses,
accounting and financial consulting fees and expenses, and costs of amending the
Agreement, if necessary.

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         Notwithstanding the termination of its activities as Master Servicer,
each terminated Master Servicer shall continue to be entitled to reimbursement
under this Agreement to the extent such reimbursement relates to the period
prior to such Master Servicer's termination.

         If any Event of Default shall occur, the Trustee, upon becoming aware
of the occurrence thereof, shall promptly notify the Securities Administrator
and each Rating Agency of the nature and extent of such Event of Default. The
Trustee or the Securities Administrator shall immediately give written notice to
the Master Servicer upon the Master Servicer's failure to make Advances as
required under this Agreement.

         (b) On and after the time the Master Servicer receives a notice of
termination from the Trustee pursuant to Section 6.14(a) or the Trustee receives
the resignation of the Master Servicer evidenced by an Opinion of Counsel
pursuant to Section 9.06, the Trustee, unless another master servicer shall have
been appointed, shall be the successor in all respects to the Master Servicer in
its capacity as such under this Agreement and the transactions set forth or
provided for herein and shall have all the rights and powers and be subject to
all the responsibilities, duties and liabilities relating thereto and arising
thereafter placed on the Master Servicer hereunder, including the obligation to
make Advances; provided, however, that any failure to perform such duties or
responsibilities caused by the Master Servicer's failure to provide information
required by this Agreement shall not be considered a default by the Trustee
hereunder. In addition, the Trustee shall have no responsibility for any act or
omission of the Master Servicer prior to the issuance of any notice of
termination. The Trustee shall have no liability relating to the representations
and warranties of the Master Servicer set forth in Section 9.03. In the
Trustee's capacity as such successor, the Trustee shall have the same
limitations on liability herein granted to the Master Servicer. As compensation
therefor, the Trustee shall be entitled to receive all compensation payable to
the Master Servicer under this Agreement, including the Master Servicing Fee.

         (c) Notwithstanding the above, the Trustee may, if it shall be
unwilling to continue to so act, or shall, if it is unable to so act, petition a
court of competent jurisdiction to appoint, or appoint on its own behalf any
established housing and home finance institution servicer, master servicer,
servicing or mortgage servicing institution having a net worth of not less than
$15,000,000 and meeting such other standards for a successor master servicer as
are set forth in this Agreement, as the successor to such Master Servicer in the
assumption of all of the responsibilities, duties or liabilities of a master
servicer, like the Master Servicer. Any entity designated by the Trustee as a
successor master servicer may be an Affiliate of the Trustee; provided, however,
that, unless such Affiliate meets the net worth requirements and other standards
set forth herein for a successor master servicer, the Trustee, in its individual
capacity shall agree, at the time of such designation, to be and remain liable
to the Trust Fund for such Affiliate's actions and omissions in performing its
duties hereunder. In connection with such appointment and assumption, the
Trustee may make such arrangements for the compensation of such successor out of
payments on Mortgage Loans as it and such successor shall agree; provided,
however, that no such compensation shall be in excess of that permitted to the
Master Servicer hereunder. The Trustee and such successor shall take such
actions, consistent with this Agreement, as shall be necessary to effectuate any
such succession and may make other arrangements with respect to the servicing to
be conducted hereunder which are not inconsistent

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herewith. The Master Servicer shall cooperate with the Trustee and any successor
master servicer in effecting the termination of the Master Servicer's
responsibilities and rights hereunder including, without limitation, notifying
Mortgagors of the assignment of the master servicing functions and providing the
Trustee and successor master servicer, as applicable, all documents and records
in electronic or other form reasonably requested by it to enable it to assume
the Master Servicer's functions hereunder and the transfer to the Trustee or
such successor master servicer, as applicable, all amounts which shall at the
time be or should have been deposited by the Master Servicer in the Distribution
Account and any other account or fund maintained with respect to the
Certificates or thereafter be received with respect to the Mortgage Loans.
Neither the Trustee nor any other successor master servicer shall be deemed to
be in default hereunder by reason of any failure to make, or any delay in
making, any distribution hereunder or any portion thereof caused by (i) the
failure of the Master Servicer to deliver, or any delay in delivering, cash,
documents or records to it, (ii) the failure of the Master Servicer to cooperate
as required by this Agreement, (iii) the failure of the Master Servicer to
deliver the Mortgage Loan data to the Trustee as required by this Agreement or
(iv) restrictions imposed by any regulatory authority having jurisdiction over
the Master Servicer. No successor master servicer shall be deemed to be in
default hereunder by reason of any failure to make, or any delay in making, any
distribution hereunder or any portion thereof caused by (i) the failure of the
Trustee to deliver, or any delay in delivering cash, documents or records to it
related to such distribution, or (ii) the failure of Trustee to cooperate as
required by this Agreement.

         Section 6.15      Additional Remedies of Trustee Upon Event of Default.

         During the continuance of any Event of Default, so long as such Event
of Default shall not have been remedied, the Trustee, in addition to the rights
specified in Section 6.14, shall have the right, in its own name and as trustee
of the Trust Fund, to take all actions now or hereafter existing at law, in
equity or by statute to enforce its rights and remedies and to protect the
interests, and enforce the rights and remedies, of the Certificateholders
(including the institution and prosecution of all judicial, administrative and
other proceedings and the filings of proofs of claim and debt in connection
therewith). Except as otherwise expressly provided in this Agreement, no remedy
provided for by this Agreement shall be exclusive of any other remedy, and each
and every remedy shall be cumulative and in addition to any other remedy, and no
delay or omission to exercise any right or remedy shall impair any such right or
remedy or shall be deemed to be a waiver of any Event of Default.

         Section 6.16      Waiver of Defaults.

         More than 50% of the Aggregate Voting Interests of Certificateholders
may waive any default or Event of Default by the Master Servicer in the
performance of its obligations hereunder, except that a default in the making of
any required deposit to the Distribution Account that would result in a failure
of the Trustee to make any required payment of principal of or interest on the
Certificates may only be waived with the consent of 100% of the affected
Certificateholders. Upon any such waiver of a past default, such default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent thereon
except to the extent expressly so waived.

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         Section 6.17      Notification to Holders.

         Upon termination of the Master Servicer or appointment of a successor
to the Master Servicer, in each case as provided herein, the Trustee shall
promptly mail notice thereof by first class mail to the Securities
Administrator, and the Certificateholders at their respective addresses
appearing on the Certificate Register. The Trustee shall also, within 45 days
after the occurrence of any Event of Default known to the Trustee, give written
notice thereof to the Securities Administrator and the Certificateholders,
unless such Event of Default shall have been cured or waived prior to the
issuance of such notice and within such 45-day period.

         Section 6.18      Directions by Certificateholders and Duties of
                           Trustee During Event of Default.

         Subject to the provisions of Section 8.01 hereof, during the
continuance of any Event of Default, Holders of Certificates evidencing not less
than 25% of the Class Principal Amount (or Percentage Interest) of each Class of
Certificates affected thereby may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred upon the Trustee, under this Agreement; provided,
however, that the Trustee shall be under no obligation to pursue any such
remedy, or to exercise any of the trusts or powers vested in it by this
Agreement (including, without limitation, (i) the conducting or defending of any
administrative action or litigation hereunder or in relation hereto and (ii) the
terminating of the Master Servicer or any successor master servicer from its
rights and duties as master servicer hereunder) at the request, order or
direction of any of the Certificateholders, unless such Certificateholders shall
have offered to the Trustee reasonable security or indemnity against the cost,
expenses and liabilities which may be incurred therein or thereby; and, provided
further, that, subject to the provisions of Section 8.01, the Trustee shall have
the right to decline to follow any such direction if the Trustee, in accordance
with an Opinion of Counsel, determines that the action or proceeding so directed
may not lawfully be taken or if the Trustee in good faith determines that the
action or proceeding so directed would involve it in personal liability for
which it is not indemnified to its satisfaction or be unjustly prejudicial to
the non-assenting Certificateholders.

         Section 6.19      Action Upon Certain Failures of the Master Servicer
                           and Upon Event of Default.

         In the event that the Trustee shall have actual knowledge of any action
or inaction of the Master Servicer that would become an Event of Default upon
the Master Servicer's failure to remedy the same after notice, the Trustee shall
give notice thereof to the Master Servicer.

         Section 6.20      Preparation of Tax Returns and Other Reports.

         (a) The Securities Administrator shall prepare or cause to be prepared
on behalf of the Trust Fund, based upon information calculated in accordance
with this Agreement pursuant to instructions given by the Depositor, and the
Securities Administrator shall file federal tax returns, all in accordance with
Article X hereof. If the Trustee notifies the Securities Administrator in
writing that a state tax return or other return is required, then, at the sole
expense of the Trust Fund, the Securities Administrator shall prepare and file
such state income

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tax returns and such other returns as may be required by applicable law relating
to the Trust Fund, and, if required by state law, and shall file any other
documents to the extent required by applicable state tax law (to the extent such
documents are in the Securities Administrator's possession). The Securities
Administrator shall forward copies to the Depositor of all such returns and Form
1099 supplemental tax information and such other information within the control
of the Securities Administrator as the Depositor may reasonably request in
writing, and shall forward to the Trustee for distribution to each
Certificateholder such forms and furnish such information within the control of
the Securities Administrator as are required by the Code and the REMIC
Provisions to be furnished to them, and will prepare and disseminate to the
Trustee for distribution to Certificateholders Form 1099 (supplemental tax
information) (or otherwise furnish information within the control of the
Securities Administrator and the Trustee) to the extent required by applicable
law. The Master Servicer will indemnify the Securities Administrator and the
Trustee for any liability of or assessment against the Securities Administrator
and the Trustee, as applicable, resulting from any error in any of such tax or
information returns directly resulting from errors in the information provided
by such Master Servicer.

         (b) The Securities Administrator shall prepare and file with the
Internal Revenue Service ("IRS"), on behalf of the Trust Fund and each REMIC
created hereunder, an application for an employer identification number on IRS
Form SS-4 or by any other acceptable method. The Securities Administrator shall
also file a Form 8811 as required. The Securities Administrator, upon receipt
from the IRS of the Notice of Taxpayer Identification Number Assigned, shall
upon request promptly forward a copy of such notice to the Trustee and the
Depositor. The Securities Administrator shall furnish any other information that
is required by the Code and regulations thereunder to be made available to
Certificateholders. The Master Servicer shall cause each Servicer to provide the
Securities Administrator with such information as is necessary for the
Securities Administrator to prepare such reports.

         (c) Within 15 days after each Distribution Date, the Depositor shall,
on behalf of the Trust and in accordance with industry standards, file with the
Securities and Exchange Commission (the "Commission") via the Electronic Data
Gathering and Retrieval System (EDGAR), a Form 8-K with a copy of the report to
the Certificateholders for such Distribution Date as an exhibit thereto. Prior
to March 30, 2004 (and, if applicable, prior to March 30 of each year), the
Depositor shall, on behalf of the Trust and in accordance with industry
standards, file with the Commission via EDGAR a Form 10-K with respect to the
Trust Fund. In addition, the Depositor will cause its senior officer in charge
of securitization to execute the certification (the "Form 10-K Certification")
required pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as
amended, and to file the same with the Commission prior to March 30, 2004 (and,
if applicable, prior to March 30 of each year). To the extent any information or
exhibits required to be included in the Form 10-K are not available by March 30,
the Depositor shall, on behalf of the Trust, file one or more amended Form 10-Ks
to include such missing information or exhibits promptly after receipt thereof
by the Depositor. Promptly following the first date legally permissible under
applicable regulations and interpretations of the Commission, the Depositor
shall, on behalf of the Trust and in accordance with industry standards, file
with the Commission via EDGAR a Form 15 Suspension Notification with respect to
the Trust Fund, if applicable. Each of the Securities Administrator, the Master
Servicer and the Trustee agree to furnish to the

                                       83



Depositor promptly, from time to time upon request, such further information,
reports and financial statements within its control related to this Agreement
and the Mortgage Loans as the Depositor reasonably deems appropriate to prepare
and file all necessary reports with the Commission. The Depositor shall have no
responsibility to file any items other than those specified in this section.

         (d) On or before January 31 of each year, the Depositor, on behalf of
the Trust, shall provide the Securities Administrator with a written notice
listing all Distribution Date reports to Certificateholders with respect to
Distribution Dates occurring in the prior calendar year that were included in a
Form 8-K filing pursuant to Section 6.20(c); provided, that if no Form 10-K is
required to be filed for such prior calendar year, no written notice shall be
required. No later than March 15 of each year in which such written notice is
provided by the Depositor to the Securities Administrator, the Securities
Administrator shall sign a certification (in the form attached hereto as Exhibit
M), for the benefit of the Person(s) signing the Form 10-K Certification,
regarding certain aspects of the Form 10-K Certification.

                                  ARTICLE VII

                         PURCHASE OF MORTGAGE LOANS AND
                          TERMINATION OF THE TRUST FUND

         Section 7.01      Purchase of Mortgage Loans; Termination of Trust Fund
                           Upon Purchase or Liquidation of All Mortgage Loans.

         (a) The respective obligations and responsibilities of the Trustee, the
Securities Administrator and the Master Servicer created hereby (other than the
obligation of the Securities Administrator to make payments to
Certificateholders as set forth in Section 7.02), shall terminate on the
earliest of (i) the final payment or other liquidation of the last Mortgage Loan
remaining in the Trust Fund and the disposition of all REO Property, (ii) the
sale of the property held by the Trust Fund in accordance with Section 7.01(b)
and (iii) the Latest Possible Maturity Date; provided, however, that in no event
shall the Trust Fund created hereby continue beyond the expiration of 21 years
from the death of the last survivor of the descendants of Joseph P. Kennedy, the
late Ambassador of the United States to the Court of St. James's, living on the
date hereof. Any termination of the Trust Fund shall be carried out in such a
manner so that the termination of each REMIC included therein shall qualify as a
"qualified liquidation" under the REMIC Provisions.

         (b) On any Distribution Date occurring on or after the Initial Optional
Purchase Date, the Depositor (as Holder of the Class LT-R Certificate) has the
option to cause the Trust Fund to adopt a plan of complete liquidation pursuant
to Sections 7.02 and 7.03 hereof to sell all of its property. If the Depositor
(as Holder of the Class LT-R Certificate) elects to exercise such option, it
shall no later than 30 days prior to the Distribution Date selected for purchase
of the assets of the Trust Fund (the "Purchase Date") deliver written notice to
the Trustee and the Securities Administrator and either (a) deposit in the
Distribution Account the Redemption Price or (b) state in such notice that the
Redemption Price shall be deposited in the Distribution Account not later than
10:00 a.m., New York City time on the applicable Purchase Date. Upon

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exercise of such option, the property of the Trust Fund shall be sold to the
Depositor (as Holder of the Class LT-R Certificate) at a price equal to the
Redemption Price.

         (c) The Depositor, the Master Servicer, each Servicer, the Securities
Administrator and the Custodian shall be reimbursed from the Redemption Price
for any Advances, Servicer Advances, accrued and unpaid Servicing Fees and
Master Servicing Fees or other amounts with respect to the Mortgage Loans that
are reimbursable to such parties under this Agreement, the related Servicing
Agreement or the Custody Agreement.

         Section 7.02      Procedure Upon Redemption Termination of Trust Fund.

         (a) Notice of any redemption termination pursuant to the provisions of
Section 7.01, specifying the Distribution Date upon which the final distribution
shall be made or the Redemption Date of the Certificates, shall be given
promptly by the Trustee by first class mail to Certificateholders mailed in the
case of a redemption of the Certificate, no less than the first day of the month
in which the Distribution Date selected for redemption of the Certificates
occurs or upon (x) the sale of all of the property of the Trust Fund by the
Trustee or in the case of a sale of assets of the Trust Fund, or (y) upon the
final payment or other liquidation of the last Mortgage Loan or REO Property in
the Trust Fund. Such notice shall specify (A) the Redemption Date, Distribution
Date upon which final distribution on the Certificates of all amounts required
to be distributed to Certificateholders pursuant to Section 5.02 will be made
upon presentation and surrender of the Certificates at the Certificate
Registrar's Corporate Trust Office, and (B) that the Record Date otherwise
applicable to such Distribution Date is not applicable, distribution being made
only upon presentation and surrender of the Certificates at the office or agency
of the Trustee therein specified. The Trustee shall give such notice to the
Securities Administrator, the Master Servicer and the Certificate Registrar at
the time such notice is given to Holders of the Certificates. Upon any such
termination, the duties of the Certificate Registrar with respect to the
Certificates shall terminate and the Trustee shall terminate or request the
Master Servicer to terminate, the Distribution Account and any other account or
fund maintained with respect to the Certificates, subject to the Trustee's
obligation hereunder to hold all amounts payable to Certificateholders in trust
without interest pending such payment.

         (b) In the event that all of the Holders do not surrender their
Certificates for cancellation within three months after the time specified in
the above-mentioned written notice, the Trustee shall give a second written
notice to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
one year after the second notice any Certificates shall not have been
surrendered for cancellation, the Trustee may take appropriate steps to contact
the remaining Certificateholders concerning surrender of such Certificates, and
the cost thereof shall be paid out of the amounts distributable to such Holders.
If within two years after the second notice any Certificates shall not have been
surrendered for cancellation, the Trustee shall, subject to applicable state law
relating to escheatment, hold all amounts distributable to such Holders for the
benefit of such Holders. No interest shall accrue on any amount held by the
Trustee and not distributed to a Certificateholder due to such
Certificateholder's failure to surrender its Certificate(s) for payment of the
final distribution thereon in accordance with this Section.

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         (c) Any reasonable expenses incurred by the Trustee in connection with
any redemption or termination or liquidation of the Trust Fund shall be
reimbursed from proceeds received from the liquidation of the Trust Fund.

         Section 7.03      Additional Trust Fund Termination Requirements.

         (a) Any termination of the Trust Fund shall be effected in accordance
with the following additional requirements, unless the Trustee seeks (at the
request of the party exercising the option to purchase all of the Mortgage Loans
pursuant to Section 7.01(b)), and subsequently receives, an Opinion of Counsel
(at the expense of such requesting party), addressed to the Trustee to the
effect that the failure of the Trust Fund to comply with the requirements of
this Section 7.03 will not (I) result in the imposition of taxes on any REMIC
under the REMIC Provisions or (II) cause any REMIC established hereunder to fail
to qualify as a REMIC at any time that any Certificates are outstanding:

                  (i)      Within 89 days prior to the time of the making of the
         final payment on the Certificates, upon notification by the Depositor
         (as the Holder of the Class LT-R Certificate) that it intends to
         exercise its option to cause the termination of the Trust Fund, the
         Trustee shall adopt a plan of complete liquidation of the Trust Fund on
         behalf of each REMIC, meeting the requirements of a qualified
         liquidation under the REMIC Provisions;

                  (ii)     Any sale of the assets of the Trust Fund pursuant to
         Section 7.02 shall be a sale for cash and shall occur at or after the
         time of adoption of such a plan of complete liquidation and prior to
         the time of making of the final payment on the Certificates;

                  (iii)    On the date specified for final payment of the
         Certificates, the Securities Administrator shall make final
         distributions of principal and interest on the Certificates in
         accordance with Section 5.02 and, after payment of, or provision for
         any outstanding expenses, distribute or credit, or cause to be
         distributed or credited, to the Holders of the Residual Certificates
         all cash on hand after such final payment (other than cash retained to
         meet claims), and the Trust Fund (and each REMIC) shall terminate at
         that time; and

                  (iv)     In no event may the final payment on the Certificates
         or the final distribution or credit to the Holders of the Residual
         Certificates be made after the 89th day from the date on which the plan
         of complete liquidation is adopted.

         (b) By its acceptance of a Residual Certificate, each Holder thereof
hereby agrees to accept the plan of complete liquidation adopted by the Trustee
under this Section and to take such other action in connection therewith as may
be reasonably requested by the Securities Administrator or any Servicer.

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         Section 7.04      [Reserved].

                                  ARTICLE VIII

                          RIGHTS OF CERTIFICATEHOLDERS

         Section 8.01      Limitation on Rights of Holders.

         (a) The death or incapacity of any Certificateholder shall not operate
to terminate this Agreement or this Trust Fund, nor entitle such
Certificateholder's legal representatives or heirs to claim an accounting or
take any action or proceeding in any court for a partition or winding up of this
Trust Fund, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them. Except as otherwise expressly provided herein, no
Certificateholder, solely by virtue of its status as a Certificateholder, shall
have any right to vote or in any manner otherwise control the Master Servicer or
the operation and management of the Trust Fund, or the obligations of the
parties hereto, nor shall anything herein set forth, or contained in the terms
of the Certificates, be construed so as to constitute the Certificateholders
from time to time as partners or members of an association, nor shall any
Certificateholder be under any liability to any third person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.

         (b) No Certificateholder, solely by virtue of its status as
Certificateholder, shall have any right by virtue or by availing of any
provision of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee a written notice of an Event
of Default and of the continuance thereof, as hereinbefore provided, and unless
also the Holders of Certificates evidencing not less than 25% of the Class
Principal Amount or Class Notional Amount (or Percentage Interest) of
Certificates of each Class affected thereby shall have made written request upon
the Trustee to institute such action, suit or proceeding in its own name as
Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the cost, expenses and liabilities to be
incurred therein or thereby, and the Trustee, for sixty days after its receipt
of such notice, request and offer of indemnity, shall have neglected or refused
to institute any such action, suit or proceeding and no direction inconsistent
with such written request has been given such Trustee during such sixty-day
period by such Certificateholders; it being understood and intended, and being
expressly covenanted by each Certificateholder with every other
Certificateholder, the Securities Administrator and the Trustee, that no one or
more Holders of Certificates shall have any right in any manner whatever by
virtue or by availing of any provision of this Agreement to affect, disturb or
prejudice the rights of the Holders of any other of such Certificates, or to
obtain or seek to obtain priority over or preference to any other such Holder,
or to enforce any right under this Agreement, except in the manner herein
provided and for the benefit of all Certificateholders. For the protection and
enforcement of the provisions of this Section, each and every Certificateholder
and the Trustee shall be entitled to such relief as can be given either at law
or in equity.

         Section 8.02      Access to List of Holders.

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         (a) If the Trustee is not acting as Certificate Registrar, the
Certificate Registrar will furnish or cause to be furnished to the Trustee,
within fifteen days after receipt by the Certificate Registrar of a request by
the Trustee in writing, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Certificateholders of each Class as
of the most recent Record Date.

         (b) If three or more Holders or Certificate Owners (hereinafter
referred to as "Applicants") apply in writing to the Trustee, and such
application states that the Applicants desire to communicate with other Holders
with respect to their rights under this Agreement or under the Certificates and
is accompanied by a copy of the communication which such Applicants propose to
transmit, then the Trustee shall, within five Business Days after the receipt of
such application, afford such Applicants reasonable access during the normal
business hours of the Trustee to the most recent list of Certificateholders held
by the Trustee or shall, as an alternative, send, at the Applicants' expense,
the written communication proffered by the Applicants to all Certificateholders
at their addresses as they appear in the Certificate Register.

         (c) Every Holder or Certificate Owner, if the Holder is a Clearing
Agency, by receiving and holding a Certificate, agrees with the Depositor, the
Master Servicer, the Securities Administrator, the Certificate Registrar and the
Trustee that neither the Depositor, the Master Servicer, the Securities
Administrator, the Certificate Registrar nor the Trustee shall be held
accountable by reason of the disclosure of any such information as to the names
and addresses of the Certificateholders hereunder, regardless of the source from
which such information was derived.

         Section 8.03      Acts of Holders of Certificates.

         (a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by
Holders or Certificate Owners, if the Holder is a Clearing Agency, may be
embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by agent duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and
the Securities Administrator and, where expressly required herein, to the Master
Servicer. Such instrument or instruments (as the action embodies therein and
evidenced thereby) are herein sometimes referred to as an "Act" of the Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agents shall be sufficient for
any purpose of this Agreement and conclusive in favor of the Trustee, the
Securities Administrator and the Master Servicer, if made in the manner provided
in this Section. Each of the Trustee, the Securities Administrator and the
Master Servicer shall promptly notify the others of receipt of any such
instrument by it, and shall promptly forward a copy of such instrument to the
others.

         (b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments or deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Whenever
such execution is by an officer of a corporation or a member of a partnership on

                                       88



behalf of such corporation or partnership, such certificate or affidavit shall
also constitute sufficient proof of his authority. The fact and date of the
execution of any such instrument or writing, or the authority of the individual
executing the same, may also be proved in any other manner which the Trustee
deems sufficient.

         (c) The ownership of Certificates (whether or not such Certificates
shall be overdue and notwithstanding any notation of ownership or other writing
thereon made by anyone other than the Trustee) shall be proved by the
Certificate Register, and neither the Trustee, the Securities Administrator, the
Master Servicer, nor the Depositor shall be affected by any notice to the
contrary.

         (d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Certificate shall bind every future
Holder of the same Certificate and the Holder of every Certificate issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof,
in respect of anything done, omitted or suffered to be done by the Trustee or
the Master Servicer in reliance thereon, whether or not notation of such action
is made upon such Certificate.

                                   ARTICLE IX

                 ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
                             BY THE MASTER SERVICER

         Section 9.01      Duties of the Master Servicer; Enforcement of
                           Servicer's and Master Servicer's Obligations.

         (a) The Master Servicer, on behalf of the Trustee, the Depositor and
the Certificateholders shall monitor the performance of the Servicers under the
Servicing Agreements, and shall use its reasonable good faith efforts to cause
the Servicers duly and punctually to perform all of their duties and obligations
thereunder. Upon the occurrence of a default of which an Authorized Officer of
the Master Servicer has actual knowledge under a Servicing Agreement, the Master
Servicer shall promptly notify the Trustee thereof, and shall specify in such
notice the action, if any, the Master Servicer is taking in respect of such
default. So long as any such default shall be continuing, the Master Servicer
may, and shall if it determines such action to be in the best interests of
Certificateholders, (i) terminate all of the rights and powers of such Servicer
pursuant to the applicable provisions of the Servicing Agreement; (ii) exercise
any rights it may have to enforce the Servicing Agreement against such Servicer;
and/or (iii) waive any such default under the Servicing Agreement or take any
other action with respect to such default as is permitted thereunder.
Notwithstanding any provision of this Agreement or any Servicing Agreement to
the contrary, the Master Servicer shall have no duty or obligation to supervise,
monitor or oversee the activities of, or to enforce the obligations of, (i) the
Servicer under its Servicing Agreement with respect to any Additional Collateral
or any Limited Purpose Surety Bond relating thereto, including, without
limitation, the collection of any amounts owing to the Trust Fund in respect
thereof (unless and until the Master Servicer shall have assumed the obligations
of such Servicer as successor servicer under the related Servicing Agreement
pursuant to this Section 9.01, in which case, as successor servicer, it shall

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be bound to serve and administer the Additional Collateral and any related
Limited Purpose Surety Bond in accordance with the provisions of such Servicing
Agreement) or (ii) the Servicer under its Servicing Agreement with respect to
the servicing or administration of defaulted or delinquent Mortgage Loans and
the management and disposition of any REO Properties or for any actions of the
Trustee in connection therewith.

         (b) Upon any termination by the Master Servicer of a Servicer's rights
and powers pursuant to its Servicing Agreement, the rights and powers of the
Servicer with respect to the Mortgage Loans shall vest in the Master Servicer
and the Master Servicer shall be the successor in all respects to such Servicer
in its capacity as Servicer with respect to such Mortgage Loans under the
related Servicing Agreement, unless or until the Master Servicer shall have
appointed, with the consent of the Trustee and the Rating Agencies, such consent
not to be unreasonably withheld, and in accordance with the applicable
provisions of the Servicing Agreement, a new Fannie Mae- or FHLMC-approved
Person to serve as successor to the Servicer; provided, however, that it is
understood and agreed by the parties hereto that there will be a period of
transition (not to exceed 90 days) before the actual servicing functions can be
fully transferred to a successor servicer (including the Master Servicer). With
such consent, the Master Servicer may elect to continue to serve as successor
servicer under the Servicing Agreement. Upon appointment of a successor
servicer, as authorized under this Section 9.01(b), unless the successor
servicer shall have assumed the obligation of the terminated Servicer under such
Servicing Agreement, the Trustee and such successor servicer shall enter into a
servicing agreement in a form substantially similar to the affected Servicing
Agreement. In connection with any such appointment, the Master Servicer may make
such arrangements for the compensation of such successor as it and such
successor shall agree, but in no event shall such compensation of any successor
servicer (including the Master Servicer) be in excess of that payable to the
Servicer under the affected Servicing Agreement.

         The Master Servicer shall pay the costs of such enforcement (including
the termination of any Servicer, the appointment of a successor servicer or the
transfer and assumption of the servicing by the Master Servicer) at its own
expense and shall be reimbursed therefor initially (i) by the terminated
Servicer, (ii) from a general recovery resulting from such enforcement only to
the extent, if any, that such recovery exceeds all amounts due in respect of the
related Mortgage Loans, (iii) from a specific recovery of costs, expenses or
attorney's fees against the party against whom such enforcement is directed, or
(iv) to the extent that such amounts described in (i)-(iii) above are
insufficient to reimburse the Master Servicer for such costs of enforcement,
from the Trust Fund, as provided in Section 9.04.

         If the Master Servicer assumes the servicing with respect to any of the
Mortgage Loans, it will not assume liability for the representations and
warranties of any Servicer it replaces or for the errors or omissions of such
Servicer.

         (c) Upon any termination of a Servicer's rights and powers pursuant to
its Servicing Agreement, the Master Servicer shall promptly notify the Trustee
and the Rating Agencies, specifying in such notice that the Master Servicer or
any successor servicer, as the case may be, has succeeded the Servicer under the
Servicing Agreement, which notice shall also specify the name and address of any
such successor servicer.

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         (d) Neither the Depositor nor the Trustee shall consent to the
assignment by any Servicer of such Servicer's rights and obligations under the
Servicing Agreement without the prior written consent of the Master Servicer,
which consent shall not be unreasonably withheld.

         Section 9.02      Assumption of Master Servicing by Trustee.

         (a) In the event the Master Servicer shall for any reason no longer be
the Master Servicer (including by reason of any Event of Default under this
Agreement), the Trustee shall thereupon assume all of the rights and obligations
of such Master Servicer hereunder and under each Servicing Agreement entered
into with respect to the Mortgage Loans or shall appoint a Fannie-Mae or
FHLMC-approved server as successor with servicer acceptable to the Depositor and
the Rating Agencies. The Trustee, its designee or any successor master servicer
appointed by the Trustee shall be deemed to have assumed all of the Master
Servicer's interest herein and therein to the same extent as if such Servicing
Agreement had been assigned to the assuming party, except that the Master
Servicer shall not thereby be relieved of any liability or obligations of the
Master Servicer under such Servicing Agreement accruing prior to its replacement
as Master Servicer, and shall be liable to the Trustee, and hereby agrees to
indemnify and hold harmless the Trustee from and against all costs, damages,
expenses and liabilities (including reasonable attorneys' fees) incurred by the
Trustee as a result of such liability or obligations of the Master Servicer and
in connection with the Trustee's assumption (but not its performance, except to
the extent that costs or liability of the Trustee are created or increased as a
result of negligent or wrongful acts or omissions of the Master Servicer prior
to its replacement as Master Servicer) of the Master Servicer's obligations,
duties or responsibilities thereunder.

         (b) The Master Servicer that has been terminated shall, upon request of
the Trustee but at the expense of such Master Servicer, deliver to the assuming
party all documents and records relating to each Servicing Agreement and the
related Mortgage Loans and an accounting of amounts collected and held by it and
otherwise use its best efforts to effect the orderly and efficient transfer of
each Servicing Agreement to the assuming party.

         Section 9.03      Representations and Warranties of the Master
                           Servicer.

         (a) The Master Servicer hereby represents and warrants to the
Depositor, the Securities Administrator and the Trustee, for the benefit of the
Certificateholders, as of the Closing Date that:

                  (i)      it is validly existing and in good standing under the
         laws of the United States of America as a national banking association,
         and as Master Servicer has full power and authority to transact any and
         all business contemplated by this Agreement and to execute, deliver and
         comply with its obligations under the terms of this Agreement, the
         execution, delivery and performance of which have been duly authorized
         by all necessary corporate action on the part of the Master Servicer;

                  (ii)     the execution and delivery of this Agreement by the
         Master Servicer and its performance and compliance with the terms of
         this Agreement will not (A) violate the Master Servicer's charter or
         bylaws, (B) violate any law or regulation or any administrative decree
         or order to which it is subject or (C) constitute a default (or an

                                       91



         event which, with notice or lapse of time, or both, would constitute a
         default) under, or result in the breach of, any material contract,
         agreement or other instrument to which the Master Servicer is a party
         or by which it is bound or to which any of its assets are subject,
         which violation, default or breach would materially and adversely
         affect the Master Servicer's ability to perform its obligations under
         this Agreement;

                  (iii)    this Agreement constitutes, assuming due
         authorization, execution and delivery hereof by the other respective
         parties hereto, a legal, valid and binding obligation of the Master
         Servicer, enforceable against it in accordance with the terms hereof,
         except as such enforcement may be limited by bankruptcy, insolvency,
         reorganization, moratorium and other laws affecting the enforcement of
         creditors' rights in general, and by general equity principles
         (regardless of whether such enforcement is considered in a proceeding
         in equity or at law);

                  (iv)     the Master Servicer is not in default with respect to
         any order or decree of any court or any order or regulation of any
         federal, state, municipal or governmental agency to the extent that any
         such default would materially and adversely affect its performance
         hereunder;

                  (v)      the Master Servicer is not a party to or bound by any
         agreement or instrument or subject to any charter provision, bylaw or
         any other corporate restriction or any judgment, order, writ,
         injunction, decree, law or regulation that may materially and adversely
         affect its ability as Master Servicer to perform its obligations under
         this Agreement or that requires the consent of any third person to the
         execution of this Agreement or the performance by the Master Servicer
         of its obligations under this Agreement;

                  (vi)     no litigation is pending or, to the best of the
         Master Servicer's knowledge, threatened against the Master Servicer
         which would prohibit its entering into this Agreement or performing its
         obligations under this Agreement;

                  (vii)    the Master Servicer, or an affiliate thereof the
         primary business of which is the servicing of conventional residential
         mortgage loans, is a Fannie Mae- or FHLMC-approved seller/servicer;

                  (viii)   no consent, approval, authorization or order of any
         court or governmental agency or body is required for the execution,
         delivery and performance by the Master Servicer of or compliance by the
         Master Servicer with this Agreement or the consummation of the
         transactions contemplated by this Agreement, except for such consents,
         approvals, authorizations and orders (if any) as have been obtained;
         and

                  (ix)     the consummation of the transactions contemplated by
         this Agreement are in the ordinary course of business of the Master
         Servicer;

         (b) It is understood and agreed that the representations and warranties
set forth in this Section shall survive the execution and delivery of this
Agreement. The Master Servicer shall indemnify the Depositor, the Securities
Administrator and the Trustee and hold them harmless

                                       92



against any loss, damages, penalties, fines, forfeitures, legal fees and related
costs, judgments, and other costs and expenses resulting from any claim, demand,
defense or assertion based on or grounded upon, or resulting from, a material
breach of the Master Servicer's representations and warranties contained in
Section 9.03(a). It is understood and agreed that the enforcement of the
obligation of the Master Servicer set forth in this Section to indemnify the
Depositor, the Securities Administrator and the Trustee as provided in this
Section constitutes the sole remedy (other than as set forth in Section 6.14) of
the Depositor, the Securities Administrator and the Trustee, respecting a breach
of the foregoing representations and warranties. Such indemnification shall
survive any termination of the Master Servicer as Master Servicer hereunder, and
any termination of this Agreement.

         Any cause of action against the Master Servicer relating to or arising
out of the breach of any representations and warranties made in this Section
shall accrue upon discovery of such breach by either the Depositor, the Master
Servicer or the Trustee or notice thereof by any one of such parties to the
other parties.

         Section 9.04      Compensation to the Master Servicer.

         The Master Servicer shall be entitled to be paid by the Trust Fund, and
either retain or withdraw from the Distribution Account, (i) its Master
Servicing Fee with respect to each Distribution Date, (ii) amounts necessary to
reimburse itself for any previously unreimbursed Advances, Servicer Advances and
Nonrecoverable Advances in accordance with the definition of "Interest
Remittance Amount" and (iii) amounts representing assumption fees, late payment
charges or other ancillary income not included in the definition of "Interest
Remittance Amount" and which are not required to be remitted by the Servicers to
the Securities Administrator or deposited by the Securities Administrator into
the Distribution Account. The Master Servicer shall be required to pay all
expenses incurred by it in connection with its activities hereunder and shall
not be entitled to reimbursement therefor except as provided in this Agreement.

         In addition, Depositor agrees, except as otherwise expressly provided
herein, to reimburse the Master Servicer, upon its request, for all reasonable
expenses, disbursements and advances incurred or made by the Master Servicer in
connection with the performance of its duties hereunder (including the
reasonable compensation and the expenses and disbursements of its agents and
counsel), to the extent not otherwise reimbursed pursuant to this Agreement,
except any such expense, disbursement or advance as may be attributable to its
willful misfeasance, bad faith or negligence.

         Section 9.05      Merger or Consolidation.

         Any Person into which the Master Servicer may be merged or
consolidated, or any Person resulting from any merger, conversion, other change
in form or consolidation to which the Master Servicer shall be a party, or any
Person succeeding to the business of the Master Servicer, shall be the successor
to the Master Servicer hereunder, without the execution or filing of any paper
or any further act on the part of any of the parties hereto, anything herein to
the contrary notwithstanding; provided, however, that the successor or resulting
Person to the Master Servicer shall be a Person that shall be qualified and
approved to service mortgage loans for Fannie Mae or FHLMC and shall have a net
worth of not less than $15,000,000.

                                       93



         Section 9.06      Resignation of Master Servicer.

         Except as otherwise provided in Sections 9.05 and 9.07 hereof, the
Master Servicer shall not resign from the obligations and duties hereby imposed
on it unless the Master Servicer's duties hereunder are no longer permissible
under applicable law or are in material conflict by reason of applicable law
with any other activities carried on by it and cannot be cured. Any such
determination permitting the resignation of the Master Servicer shall be
evidenced by an Opinion of Counsel that shall be Independent to such effect
delivered to the Trustee. No such resignation shall become effective until the
Trustee shall have assumed, or a successor master servicer shall have been
appointed by the Trustee and until such successor shall have assumed, the Master
Servicer's responsibilities and obligations under this Agreement. Notice of such
resignation shall be given promptly by the Master Servicer and the Depositor to
the Trustee.

         If, at any time, the Master Servicer resigns under this Section 9.06,
or transfers or assigns its rights and obligations under Section 9.07, or is
removed as Master Servicer pursuant to Section 6.14, then at such time as Wells
Fargo Bank Minnesota, National Association also shall resign (and shall be
entitled to resign) as Securities Administrator, Paying Agent, Authenticating
Agent and Certificate Registrar under this Agreement. In such event, the
obligations of each such party shall be assumed by the Trustee or such successor
master servicer appointed by the Trustee (subject to the provisions of Section
9.02(c)).

         Section 9.07      Assignment or Delegation of Duties by the Master
                           Servicer.

         Except as expressly provided herein, the Master Servicer shall not
assign or transfer any of its rights, benefits or privileges hereunder to any
other Person, or delegate to or subcontract with, or authorize or appoint any
other Person to perform any of the duties, covenants or obligations to be
performed by the Master Servicer hereunder; provided, however, that the Master
Servicer shall have the right with the prior written consent of the Trustee and
the Depositor (which consent shall not be unreasonably withheld), and upon
delivery to the Trustee and the Depositor of a letter from each Rating Agency to
the effect that such action shall not result in a downgrading of the
Certificates, to delegate or assign to or subcontract with or authorize or
appoint any qualified Person to perform and carry out any duties, covenants or
obligations to be performed and carried out by the Master Servicer hereunder.
Notice of such permitted assignment shall be given promptly by the Master
Servicer to the Depositor and the Trustee. If, pursuant to any provision hereof,
the duties of the Master Servicer are transferred to a successor master
servicer, the entire amount of the Master Servicing Fees and other compensation
payable to the Master Servicer pursuant hereto shall thereafter be payable to
such successor master servicer. Such successor Master Servicer shall also pay
the fees of the Trustee and the Securities Administrator, as provided herein.

         Section 9.08      Limitation on Liability of the Master Servicer and
                           Others.

         Neither the Master Servicer nor any of the directors, officers,
employees or agents of the Master Servicer shall be under any liability to the
Trustee or the Certificateholders for any action taken or for refraining from
the taking of any action in good faith pursuant to this Agreement, or for errors
in judgment; provided, however, that this provision shall not protect the Master
Servicer or any such person against any liability that would otherwise be
imposed by reason of

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willful misfeasance, bad faith or negligence in its performance of its duties or
by reason of reckless disregard for its obligations and duties under this
Agreement. The Master Servicer and any director, officer, employee or agent of
the Master Servicer may rely in good faith on any document of any kind prima
facie properly executed and submitted by any Person respecting any matters
arising hereunder. The Master Servicer shall be under no obligation to appear
in, prosecute or defend any legal action that is not incidental to its duties to
master service the Mortgage Loans in accordance with this Agreement and that in
its opinion may involve it in any expenses or liability; provided, however, that
the Master Servicer may in its sole discretion undertake any such action that it
may deem necessary or desirable in respect to this Agreement and the rights and
duties of the parties hereto and the interests of the Certificateholders
hereunder. In such event, the legal expenses and costs of such action and any
liability resulting therefrom shall be expenses, costs and liabilities of the
Trust Fund and the Master Servicer shall be entitled to be reimbursed therefor
out of the Distribution Account.

         The Master Servicer shall not be liable for any acts or omissions of
any Servicer except to the extent that damages or expenses are incurred as a
result of such act or omissions and such damages and expenses would not have
been incurred but for the negligence, willful misfeasance, bad faith or
recklessness of the Master Servicer in supervising, monitoring and overseeing
the obligations of the Servicers in this Agreement.

         Section 9.09      Indemnification; Third-Party Claims.

         The Master Servicer agrees to indemnify the Depositor, the Securities
Administrator and the Trustee, and hold them harmless against any and all
claims, losses, penalties, fines, forfeitures, legal fees and related costs,
judgments, and any other costs, liability, fees and expenses that the Depositor,
the Securities Administrator or the Trustee may sustain as a result of the
Master Servicer's willful misfeasance, bad faith or negligence in the
performance of its duties hereunder or by reason of its reckless disregard for
its obligations and duties under this Agreement. The Depositor, the Securities
Administrator and the Trustee shall immediately notify the Master Servicer if a
claim is made by a third party with respect to this Agreement or the Mortgage
Loans entitling the Depositor, the Securities Administrator or the Trustee to
indemnification under this Section 9.09, whereupon the Master Servicer shall
assume the defense of any such claim and pay all expenses in connection
therewith, including counsel fees, and promptly pay, discharge and satisfy any
judgment or decree which may be entered against it or them in respect of such
claim.

                                   ARTICLE X

                              REMIC ADMINISTRATION

         Section 10.01     REMIC Administration.

         (a) REMIC elections as set forth in the Preliminary Statement shall be
made on Forms 1066 or other appropriate federal tax or information return for
the taxable year ending on the last day of the calendar year in which the
Certificates are issued. The regular interests and residual interest in each
REMIC shall be as designated in the Preliminary Statement.

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         (b) The Closing Date is hereby designated as the "Startup Day" of each
REMIC within the meaning of section 86OG(a)(9) of the Code. The latest possible
maturity date for purposes of Treasury Regulation 1.86OG-1(a)(4) will be the
Latest Possible Maturity Date.

         (c) The Securities Administrator shall represent the Trust Fund in any
administrative or judicial proceeding relating to an examination or audit by any
governmental taxing authority with respect thereto. The Securities Administrator
shall pay any and all tax related expenses (not including taxes) of each REMIC,
including but not limited to any professional fees or expenses related to audits
or any administrative or judicial proceedings with respect to such REMIC that
involve the Internal Revenue Service or state tax authorities, but only to the
extent that (i) such expenses are ordinary or routine expenses, including
expenses of a routine audit but not expenses of litigation (except as described
in (ii)); or (ii) such expenses or liabilities (including taxes and penalties)
are attributable to the negligence or willful misconduct of the Securities
Administrator in fulfilling its duties hereunder (including its duties as tax
return preparer). The Securities Administrator shall be entitled to
reimbursement of expenses to the extent provided in clause (i) above from the
Securities Administration Account, provided, however, the Securities
Administrator shall not be entitled to reimbursement for expenses incurred in
connection with the preparation of tax returns and other reports as required by
Section 6.20 and this Section.

         (d) The Securities Administrator shall prepare, and the Trustee shall
sign and file, as instructed by the Securities Administrator, all of each
REMIC's federal and appropriate state tax and information returns as such
REMIC's direct representative. The expenses of preparing and filing such returns
shall be borne by the Securities Administrator.

         (e) The Securities Administrator or its designee shall perform on
behalf of each REMIC all reporting and other tax compliance duties that are the
responsibility of such REMIC under the Code, the REMIC Provisions, or other
compliance guidance issued by the Internal Revenue Service or any state or local
taxing authority. Among its other duties, if required by the Code, the REMIC
Provisions, or other such guidance, the Securities Administrator shall provide,
upon receipt of additional reasonable compensation, (i) to the Treasury or other
governmental authority such information as is necessary for the application of
any tax relating to the transfer of a Residual Certificate to any disqualified
person or organization pursuant to Treasury Regulation 1.860E-2(a)(5) and any
person designated in Section 860E(e)(3) of the Code and (ii) to the Trustee such
information as is necessary for the Trustee to provide to the Certificateholders
such information or reports as are required by the Code or REMIC Provisions.

         (f) The Trustee, the Securities Administrator, the Master Servicer and
the Holders of Certificates shall take any action or cause any REMIC to take any
action necessary to create or maintain the status of any REMIC as a REMIC under
the REMIC Provisions and shall assist each other as necessary to create or
maintain such status. Neither the Trustee, the Securities Administrator, the
Master Servicer nor the Holder of any Residual Certificate shall knowingly take
any action, cause any REMIC to take any action or fail to take (or fail to cause
to be taken) any action that, under the REMIC Provisions, if taken or not taken,
as the case may be, could (i) endanger the status of any REMIC as a REMIC or
(ii) result in the imposition of a tax upon any REMIC (including but not limited
to the tax on prohibited transactions as defined in Code Section 860F(a)(2) and
the tax on prohibited contributions set forth on Section 860G(d) of the

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Code) (either such event, an "Adverse REMIC Event") unless the Trustee, the
Securities Administrator and the Master Servicer have received an Opinion of
Counsel (at the expense of the party seeking to take such action) to the effect
that the contemplated action will not endanger such status or result in the
imposition of such a tax. In addition, prior to taking any action with respect
to any REMIC or the assets therein, or causing any REMIC to take any action,
which is not expressly permitted under the terms of this Agreement, any Holder
of a Residual Certificate will consult with the Trustee, the Securities
Administrator, the Master Servicer or their respective designees, in writing,
with respect to whether such action could cause an Adverse REMIC Event to occur
with respect to any REMIC, and no such Person shall take any such action or
cause any REMIC to take any such action as to which the Trustee, the Securities
Administrator or the Master Servicer has advised it in writing that an Adverse
REMIC Event could occur; provided, however, that if no Adverse REMIC Event would
occur but such action could result in the imposition of additional taxes on the
Residual Certificateholders, no such Person shall take any such action, or cause
any REMIC to take any such action without the written consent of the Residual
Certificateholders.

         (g) Each Holder of a Residual Certificate shall pay when due any and
all taxes imposed on the related REMIC by federal or state governmental
authorities. To the extent that such taxes are not paid by a Residual
Certificateholder, the Trustee or the Paying Agent shall pay any remaining REMIC
taxes out of current or future amounts otherwise distributable to the Holder of
the Residual Certificate in any such REMIC or, if no such amounts are available,
out of other amounts held in the Collection Account, and shall reduce amounts
otherwise payable to holders of regular interests in any such REMIC, as the case
may be.

         (h) The Securities Administrator shall, for federal income tax
purposes, maintain books and records with respect to each REMIC on a calendar
year and on an accrual basis.

         (i) No additional contributions of assets shall be made to any REMIC,
except as expressly provided in this Agreement.

         (j) Neither the Securities Administrator nor the Master Servicer shall
enter into any arrangement by which any REMIC will receive a fee or other
compensation for services.

         (k) The Trustee and the Securities Administrator shall treat the
Reserve Fund as an outside reserve fund within the meaning of Treasury
Regulation Section 1.860G-2(h) that is owned by the holder of the Class X
Certificate and that is not an asset of any REMIC. The Trustee and the
Securities Administrator shall treat the rights of the Holders of the LIBOR
Certificates to receive distributions from the Reserve Fund to cover Net WAC
Shortfalls as payments under a cap contract written by the Holder of the Class X
Certificate in favor of the Holders of the LIBOR Certificates. Thus, each Class
A-1, Class A-2, Class M-1 and Class M-2 Certificates shall be treated as
representing not only ownership of regular interests in a REMIC, but also
ownership of an interest in an interest rate cap contract. For purposes of
determining the issue prices of the Certificates, the interest rate cap
contracts shall be assumed to have a zero value unless and until required
otherwise by an applicable taxing authority.

         (l) The Class LT-R Holder shall act as "tax matters person" with
respect to the Lower-Tier REMIC and shall act as agent for the Class R
Certificateholder as "tax matters person" with

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respect to the Upper-Tier REMIC and the Securities Administrator shall act as
agent for the Class LT-R Holder in such roles, unless and until another party is
so designated by the Class LT-R Holder.

         Section 10.02     Prohibited Transactions and Activities.

         Neither the Depositor, the Master Servicer nor the Trustee shall sell,
dispose of, or substitute for any of the Mortgage Loans, except in a disposition
pursuant to (i) the foreclosure of a Mortgage Loan, (ii) the bankruptcy of the
Trust Fund, (iii) the termination of each REMIC pursuant to Article VII of this
Agreement, (iv) a substitution pursuant to Article II of this Agreement or (v) a
repurchase of Mortgage Loans pursuant to Article II of this Agreement, nor
acquire any assets for any REMIC, nor sell or dispose of any investments in the
Distribution Account for gain, nor accept any contributions to any REMIC after
the Closing Date, unless it has received an Opinion of Counsel (at the expense
of the party causing such sale, disposition, or substitution) that such
disposition, acquisition, substitution, or acceptance will not (a) affect
adversely the status of any such REMIC as a REMIC or of the interests therein
other than the Residual Certificate as the regular interests therein, (b) affect
the distribution of interest or principal on the Certificates, (c) result in the
encumbrance of the assets transferred or assigned to the Trust Fund (except
pursuant to the provisions of this Agreement) or (d) cause any such REMIC to be
subject to any tax including a tax on prohibited transactions or prohibited
contributions pursuant to the REMIC Provisions.

         Section 10.03     Indemnification with Respect to Prohibited
                           Transactions or Loss of REMIC Status.

         In the event that a REMIC fails to qualify as a REMIC, loses its status
as a REMIC, or incurs federal, state or local taxes as a result of a prohibited
transaction or prohibited contribution under the REMIC Provisions due to the
negligent performance by the Securities Administrator of its duties and
obligations set forth herein, the Securities Administrator shall indemnify the
Certificateholders of the related Residual Certificate against any and all
losses, claims, damages, liabilities or expenses ("Losses") resulting from such
negligence; provided, however, that the Securities Administrator shall not be
liable for any such Losses attributable to the action or inaction of the
Depositor, the Trustee or the Holder of the Residual Certificate, nor for any
such Losses resulting from misinformation provided by any of the foregoing
parties on which the Securities Administrator has relied. Notwithstanding the
foregoing, however, in no event shall the Securities Administrator have any
liability (1) for any action or omission that is taken in accordance with and in
compliance with the express terms of, or which is expressly permitted by the
terms of, this Agreement or under any Servicing Agreement or under any
Acknowledgement, (2) for any Losses other than arising out of malfeasance,
willful misconduct or negligent performance by the Service Administrator of its
duties and obligations set forth herein, and (3) for any special or
consequential damages to Certificateholders of the related Residual Certificate
(in addition to payment of principal and interest on the Certificates).

         Section 10.04     REO Property.

         (a) Notwithstanding any other provision of this Agreement, the Master
Servicer, acting on behalf of the Trustee hereunder, shall not, except to the
extent provided in the applicable

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Servicing Agreement, knowingly permit any Servicer to, rent, lease, or otherwise
earn income on behalf of any REMIC with respect to any REO Property which might
cause such REO Property to fail to qualify as "foreclosure property" within the
meaning of section 860G(a)(8) of the Code or result in the receipt by any REMIC
of any "income from non-permitted assets" within the meaning of section
860F(a)(2) of the Code or any "net income from foreclosure property" which is
subject to tax under the REMIC Provisions unless the applicable Servicer has
provided to the Trustee an Opinion of Counsel concluding that, under the REMIC
Provisions, such action would not adversely affect the status of any REMIC as a
REMIC and any income generated for any REMIC by the REO Property would not
result in the imposition of a tax upon such REMIC.

         (b) The Depositor shall cause the applicable Servicer (to the extent
provided in its Servicing Agreement) to make reasonable efforts to sell any REO
Property for its fair market value. In any event, however, the Depositor shall,
or shall cause the applicable Servicer (to the extent provided in its Servicing
Agreement) to, dispose of any REO Property within three years of its acquisition
by the Trust Fund unless the Depositor or the applicable Servicer (on behalf of
the Trust Fund) has received a grant of extension from the Internal Revenue
Service to the effect that, under the REMIC Provisions and any relevant proposed
legislation and under applicable state law, the REMIC may hold REO Property for
a longer period without adversely affecting the REMIC status of such REMIC or
causing the imposition of a Federal or state tax upon such REMIC. If such an
extension has been received, then the Depositor, acting on behalf of the Trustee
hereunder, shall, or shall cause the applicable Servicer to, continue to attempt
to sell the REO Property for its fair market value for such period longer than
three years as such extension permits (the "Extended Period"). If such an
extension has not been received and the Depositor or the applicable Servicer,
acting on behalf of the Trust Fund hereunder, is unable to sell the REO Property
within 33 months after its acquisition by the Trust Fund or if such an
extension, has been received and the Depositor or the applicable Servicer is
unable to sell the REO Property within the period ending three months before the
close of the Extended Period, the Depositor shall cause the applicable Servicer,
before the end of the three year period or the Extended Period, as applicable,
to (i) purchase such REO Property at a price equal to the REO Property's fair
market value or (ii) auction the REO Property to the highest bidder (which may
be the applicable Servicer) in an auction reasonably designed to produce a fair
price prior to the expiration of the three-year period or the Extended Period,
as the case may be.

                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS

         Section 11.01     Binding Nature of Agreement; Assignment.

         This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.

         Section 11.02     Entire Agreement.

         This Agreement contains the entire agreement and understanding among
the parties hereto with respect to the subject matter hereof, and supersedes all
prior and contemporaneous

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agreements, understandings, inducements and conditions, express or implied, oral
or written, of any nature whatsoever with respect to the subject matter hereof.
The express terms hereof control and supersede any course of performance and/or
usage of the trade inconsistent with any of the terms hereof.

         Section 11.03     Amendment.

         (a) This Agreement may be amended from time to time by the Depositor,
the Master Servicer, the Securities Administrator, and the Trustee, without
notice to or the consent of any of the Holders, (i) to cure any ambiguity or
mistake, (ii) to cause the provisions herein to conform to or be consistent with
or in furtherance of the statements made with respect to the Certificates, the
Trust Fund or this Agreement in any Offering Document, or to correct or
supplement any provision herein which may be inconsistent with any other
provisions herein or with the provisions of any Servicing Agreement, (iii) to
make any other provisions with respect to matters or questions arising under
this Agreement or (iv) to add, delete, or amend any provisions to the extent
necessary or desirable to comply with any requirements imposed by the Code and
the REMIC Provisions. No such amendment effected pursuant to the preceding
sentence shall, as evidenced by an Opinion of Counsel, adversely affect the
status of any REMIC created pursuant to this Agreement, nor shall such amendment
effected pursuant to clause (iii) of such sentence adversely affect in any
material respect the interests of any Holder. Prior to entering into any
amendment without the consent of Holders pursuant to this paragraph, the Trustee
shall be provided with an Opinion of Counsel (at the expense of the party
requesting such amendment) to the effect that such amendment is permitted under
this Section. Any such amendment shall be deemed not to adversely affect in any
material respect any Holder, if the Trustee receives written confirmation from
each Rating Agency that such amendment will not cause such Rating Agency to
reduce the then current rating assigned to the Certificates.

         (b) This Agreement may also be amended from time to time by the
Depositor, the Master Servicer, the Securities Administrator and the Trustee,
with the consent of the Holders of not less than 66-2/3% of the Class Principal
Amount (or Percentage Interest) of each Class of Certificates affected thereby
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Holders; provided, however, that no such amendment
shall be made unless the Trustee receives an Opinion of Counsel, at the expense
of the party requesting the change, that such change will not adversely affect
the status of any REMIC as a REMIC or cause a tax to be imposed on such REMIC;
and provided further, that no such amendment may (i) reduce in any manner the
amount of, or delay the timing of, payments received on Mortgage Loans which are
required to be distributed on any Certificate, without the consent of the Holder
of such Certificate or (ii) reduce the aforesaid percentages of Class Principal
Amount or Class Notional Amount (or Percentage Interest) of Certificates of each
Class, the Holders of which are required to consent to any such amendment
without the consent of the Holders of 100% of the Class Principal Amount or
Class Notional Amount (or Percentage Interest) of each Class of Certificates
affected thereby. For purposes of this paragraph, references to "Holder" or
"Holders" shall be deemed to include, in the case of any Class of Book-Entry
Certificates, the related Certificate Owners.

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         (c) Promptly after the execution of any such amendment, the Trustee
shall furnish written notification of the substance of such amendment to each
Holder, the Depositor and the Rating Agencies.

         (d) It shall not be necessary for the consent of Holders under this
Section 11.03 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Holders shall be subject to such reasonable regulations as
the Trustee may prescribe.

         (e) Notwithstanding anything to the contrary in any Servicing
Agreement, the Trustee shall not consent to any amendment of any Servicing
Agreement except pursuant to the standards provided in this Section with respect
to amendment of this Agreement.

         Section 11.04     Voting Rights.

         Except to the extent that the consent of all affected
Certificateholders is required pursuant to this Agreement, with respect to any
provision of this Agreement requiring the consent of Certificateholders
representing specified percentages of aggregate outstanding Certificate
Principal Amount or Class Notional Amount (or Percentage Interest), Certificates
owned by the Depositor, the Master Servicer, the Securities Administrator, the
Trustee, any Servicer or any Affiliates thereof are not to be counted so long as
such Certificates are owned by the Depositor, the Master Servicer, the
Securities Administrator, the Trustee, any Servicer or any Affiliate thereof.

         Section 11.05     Provision of Information.

         (a) For so long as any of the Certificates of any Series or Class are
"restricted securities" within the meaning of Rule 144(a)(3) under the Act, each
of the Depositor, the Master Servicer and the Trustee agree to cooperate with
each other to provide to any Certificateholders and to any prospective purchaser
of Certificates designated by such holder, upon the request of such holder or
prospective purchaser, any information required to be provided to such holder or
prospective purchaser to satisfy the condition set forth in Rule 144A(d)(4)
under the Act. Any reasonable, out-of-pocket expenses incurred by the Trustee,
the Master Servicer or the Securities Administrator in providing such
information shall be reimbursed by the Depositor.

         (b) The Securities Administrator shall provide to any person to whom a
Prospectus was delivered, upon the request of such person specifying the
document or documents requested, (i) a copy (excluding exhibits) of any report
on Form 8-K or Form 10-K filed with the Securities and Exchange Commission
pursuant to Section 9.23(b) and (ii) a copy of any other document incorporated
by reference in the Prospectus. Any reasonable out-of-pocket expenses incurred
by the Securities Administrator in providing copies of such documents shall be
reimbursed by the Depositor.

         (c) On each Distribution Date, the Securities Administrator shall
deliver or cause to be delivered by first class mail or make available on its
website to the Depositor, Attention: Contract Finance, a copy of the report
delivered to Certificateholders pursuant to Section 4.02.

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         Section 11.06     Governing Law.

         THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES APPLIED IN NEW YORK.

         Section 11.07     Notices.

         All requests, demands, notices, authorizations, directions, consents,
waivers and communications hereunder shall be in writing and shall be deemed to
have been duly given when received by (a) in the case of the Depositor, Sequoia
Residential Funding, Inc., 591 Redwood Highway, Suite 3160, Mill Valley, CA
94941, telecopy number (415) 381-1773, Attention: Sequoia Mortgage Trust 2003-2,
(b) in the case of the Seller, RWT Holdings, Inc., 591 Redwood Highway, Suite
3140, Mill Valley, CA 94941, telecopy number (415) 381-1773, Attention: Sequoia
Mortgage Trust 2003-2, (c) in the case of the Master Servicer or the Securities
Administrator, Wells Fargo Bank Minnesota, National Association, P.O. Box 98,
Columbia, Maryland 21046 (or, for overnight deliveries, 9062 Old Annapolis Road,
Columbia, Maryland 21045), telecopy number (410) 715-2380, Attention: Sequoia
Mortgage Trust 2003-2, and (d) with respect to the Trustee or the Certificate
Registrar, its respective Corporate Trust Office, or as to each party such other
address as may hereafter be furnished by such party to the other parties in
writing. All demands, notices and communications to a party hereunder shall be
in writing and shall be deemed to have been duly given when delivered to such
party at the relevant address, facsimile number or electronic mail address set
forth above or at such other address, facsimile number or electronic mail
address as such party may designate from time to time by written notice in
accordance with this Section 11.07.

         Section 11.08     Severability of Provisions.

         If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement or of the Certificates or the rights of the Holders thereof.

         Section 11.09     Indulgences; No Waivers.

         Neither the failure nor any delay on the part of a party to exercise
any right, remedy, power or privilege under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, remedy,
power or privilege preclude any other or further exercise of the same or of any
other right, remedy, power or privilege, nor shall any waiver of any right,
remedy, power or privilege with respect to any occurrence be construed as a
waiver of such right, remedy, power or privilege with respect to any other
occurrence. No waiver shall be effective unless it is in writing and is signed
by the party asserted to have granted such waiver.

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         Section 11.10     Headings Not To Affect Interpretation.

         The headings contained in this Agreement are for convenience of
reference only, and they shall not be used in the interpretation hereof.

         Section 11.11     Benefits of Agreement.

         Nothing in this Agreement or in the Certificates, express or implied,
shall give to any Person, other than the parties to this Agreement and their
successors hereunder and the Holders of the Certificates, any benefit or any
legal or equitable right, power, remedy or claim under this Agreement, except to
the extent specified in Section 11.15.

         Section 11.12     Special Notices to the Rating Agencies.

         (a) The Depositor shall give prompt notice to the Rating Agencies of
the occurrence of any of the following events of which it has notice:

                  (i)      any amendment to this Agreement pursuant to Section
         11.03;

                  (ii)     any Assignment by the Master Servicer of its rights
         hereunder or delegation of its duties hereunder;

                  (iii)    the occurrence of any Event of Default described in
         Section 6.14;

                  (iv)     any notice of termination given to the Master
         Servicer pursuant to Section 6.14 and any resignation of the Master
         Servicer hereunder;

                  (v)      the appointment of any successor to any Master
         Servicer pursuant to Section 6.14;

                  (vi)     the making of a final payment pursuant to Section
         7.02; and

                  (vii)    any termination of the rights and obligations of any
         Servicer under the applicable Servicing Agreement.

         (b) All notices to the Rating Agencies provided for this Section shall
be in writing and sent by first class mail, telecopy or overnight courier, as
follows:

         If to Moody's, to:

         Moody's Investors Service, Inc.
         99 Church Street
         New York, New York 10007
         Attention: Residential Mortgages

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         If to S&P, to:

         Standard & Poor's Ratings Service,
           a Division of The McGraw-Hill
           Companies, Inc.
         55 Water Street
         New York, New York 10041
         Attention: Residential Mortgages

         (c) The Securities Administrator shall provide or make available to the
Rating Agencies reports prepared pursuant to Section 4.02. In addition, the
Securities Administrator shall, at the expense of the Trust Fund, make available
to each Rating Agency such information as such Rating Agency may reasonably
request regarding the Certificates or the Trust Fund, to the extent that such
information is reasonably available to the Securities Administrator.

         (d) The Depositor hereby represents to S&P that, to the Depositor's
knowledge, the information provided to such Rating Agency, including the loan
level detail, is true and correct according to such Rating Agency's
requirements.

         Section 11.13     Conflicts.

         To the extent that the terms of this Agreement conflict with the terms
of any Servicing Agreement, the related Servicing Agreement shall govern.

         Section 11.14     Counterparts.

         This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, and all of which together shall
constitute one and the same instrument.

         Section 11.15     No Petitions.

         The Trustee and the Master Servicer, by entering into this Agreement,
hereby covenant and agree that they shall not at any time institute against the
Depositor, or join in any institution against the Depositor of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States federal or state bankruptcy or similar law
in connection with any obligations relating to this Agreement or any of the
documents entered into by the Depositor in connection with the transactions
contemplated by this Agreement.

                                      104



         IN WITNESS WHEREOF, the parties hereto have caused their names to be
signed hereto by their respective officers hereunto duly authorized as of the
day and year first above written.

                                  SEQUOIA RESIDENTIAL FUNDING, INC.,
                                  as Depositor
                                  By: _________________________________
                                      John H. Isbrandtsen
                                      Vice President

                                  HSBC BANK USA,
                                  as Trustee

                                  By: _________________________________
                                      Wendy Zhang
                                      Vice President

                                  WELLS FARGO BANK MINNESOTA,
                                  NATIONAL ASSOCIATION,
                                  as Master Servicer

                                  By: _________________________________
                                      Peter J. Masterman
                                      Vice President

                                  WELLS FARGO BANK MINNESOTA,
                                  NATIONAL ASSOCIATION, as Securities
                                  Administrator

                                  By: _________________________________
                                      Stacey Wainwright
                                      Assistant Vice President



Solely for purposes of Section 2.04
accepted and agreed to by:

RWT HOLDINGS, INC.

By: ____________________________
    John H. Isbrandtsen
    Authorized Signatory



                                    EXHIBIT A

                              FORMS OF CERTIFICATES

                                  [See Tab #__]

                                      B-1



                                    EXHIBIT B

          FORM OF RESIDUAL CERTIFICATE TRANSFER AFFIDAVIT (TRANSFEREE)

STATE OF                   )
                           )       ss.:
COUNTY OF                  )

         [NAME OF OFFICER], _________________ being first duly sworn, deposes
and says:

         1.       That he [she] is [title of officer] ________________________
                  of [name of Purchaser]
                  _________________________________________ (the "Purchaser"), a
                  _______________________ [description of type of entity] duly
                  organized and existing under the laws of the [State of
                  __________] [United States], on behalf of which he [she] makes
                  this affidavit.

         2.       That the Purchaser's Taxpayer Identification Number is [  ].

         3.       That the Purchaser is not a "disqualified organization" within
                  the meaning of Section 860E(e)(5) of the Internal Revenue Code
                  of 1986, as amended (the "Code") and will not be a
                  "disqualified organization" as of [date of transfer], and that
                  the Purchaser is not acquiring a Residual Certificate (as
                  defined in the Agreement) for the account of, or as agent
                  (including a broker, nominee, or other middleman) for, any
                  person or entity from which it has not received an affidavit
                  substantially in the form of this affidavit. For these
                  purposes, a "disqualified organization" means the United
                  States, any state or political subdivision thereof, any
                  foreign government, any international organization, any agency
                  or instrumentality of any of the foregoing (other than an
                  instrumentality if all of its activities are subject to tax
                  and a majority of its board of directors is not selected by
                  such governmental entity), any cooperative organization
                  furnishing electric energy or providing telephone service to
                  persons in rural areas as described in Code Section
                  1381(a)(2)(C), any "electing large partnership" within the
                  meaning of Section 775 of the Code, or any organization (other
                  than a farmers' cooperative described in Code Section 521)
                  that is exempt from federal income tax unless such
                  organization is subject to the tax on unrelated business
                  income imposed by Code Section 511.

         4.       That the Purchaser either (x) is not, and on
                  __________________ [date of transfer] will not be, an employee
                  benefit plan or other retirement arrangement subject to
                  Section 406 of the Employee Retirement Income Security Act of
                  1974, as amended ("ERISA"), or Section 4975 of the Code
                  ("Code"), (collectively, a "Plan") or a person acting on
                  behalf of any such Plan or investing the assets of any such
                  Plan to acquire a Residual Certificate; (y) is an insurance
                  company that is purchasing the Certificate with funds
                  contained in an "insurance company general account" as defined
                  in Section V(e) of Prohibited Transaction Class

                                      B-2



                  Exemption ("PTCE") 95-60 and the purchase and holding of the
                  Certificate are covered under Section I and III of PTCE 95-60;
                  or (z) herewith delivers to the Certificate Registrar an
                  opinion of counsel (a "Benefit Plan Opinion") satisfactory to
                  the Certificate Registrar, and upon which the Certificate
                  Registrar, the Trustee, the Master Servicer, the Depositor and
                  Securities Administrator shall be entitled to rely, to the
                  effect that the purchase or holding of such Residual
                  Certificate by the Investor will not result in any non-exempt
                  prohibited transactions under Title I of ERISA or Section 4975
                  of the Code and will not subject the Certificate Registrar,
                  the Trustee, the Depositor, the Master Servicer or the
                  Securities Administrator to any obligation in addition to
                  those undertaken by such entities in the Pooling and Servicing
                  Agreement, which opinion of counsel shall not be an expense of
                  the Trust Fund or any of the above parties.

         5.       That the Purchaser hereby acknowledges that under the terms of
                  the Pooling and Servicing Agreement, dated as of April 1, 2003
                  (the "Agreement"), by and among Sequoia Residential Funding,
                  Inc., as Depositor, Wells Fargo Bank Minnesota, National
                  Association, as Master Servicer and as Securities
                  Administrator and HSBC Bank USA, as Trustee with respect to
                  Sequoia Mortgage Trust 2003-2 Mortgage Pass-Through
                  Certificates, no transfer of the Residual Certificates shall
                  be permitted to be made to any person unless the Certificate
                  Registrar and Trustee have received a certificate from such
                  transferee containing the representations in paragraphs 3 and
                  4 hereof.

         6.       That the Purchaser does not hold REMIC residual securities as
                  nominee to facilitate the clearance and settlement of such
                  securities through electronic book-entry changes in accounts
                  of participating organizations (such entity, a "Book-Entry
                  Nominee").

         7.       That the Purchaser does not have the intention to impede the
                  assessment or collection of any federal, state or local taxes
                  legally required to be paid with respect to such Residual
                  Certificate.

         8.       That the Purchaser will not transfer a Residual Certificate to
                  any person or entity (i) as to which the Purchaser has actual
                  knowledge that the requirements set forth in paragraph 3,
                  paragraph 6 or paragraph 10 hereof are not satisfied or that
                  the Purchaser has reason to believe does not satisfy the
                  requirements set forth in paragraph 7 hereof, and (ii) without
                  obtaining from the prospective Purchaser an affidavit
                  substantially in this form and providing to the Trustee and
                  the Certificate Registrar a written statement substantially in
                  the form of Exhibit C to the Agreement.

         9.       That the Purchaser understands that, as the holder of a
                  Residual Certificate, the Purchaser may incur tax liabilities
                  in excess of any cash flows generated by the interest and that
                  it intends to pay taxes associated with holding such Residual
                  Certificate as they become due.

                                      B-3



         10.      That the Purchaser (i) is not a Non-U.S. Person or (ii) is a
                  Non-U.S. Person that holds a Residual Certificate in
                  connection with the conduct of a trade or business within the
                  United States and has furnished the transferor, the Trustee
                  and the Certificate Registrar with an effective Internal
                  Revenue Service Form W-8ECI (Certificate of Foreign Person's
                  Claim for Exemption From Withholding on Income Effectively
                  Connected With the Conduct of a Trade or Business in the
                  United States) or successor form at the time and in the manner
                  required by the Code or (iii) is a Non-U.S. Person that has
                  delivered to the transferor, the Trustee and the Certificate
                  Registrar an opinion of a nationally recognized tax counsel to
                  the effect that the transfer of such Residual Certificate to
                  it is in accordance with the requirements of the Code and the
                  regulations promulgated thereunder and that such transfer of a
                  Residual Certificate will not be disregarded for federal
                  income tax purposes. "Non-U.S. Person" means an individual,
                  corporation, partnership or other person other than (i) a
                  citizen or resident of the United States; (ii) a corporation,
                  partnership or other entity created or 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
                  that is subject to U.S. federal income tax regardless of the
                  source of its income; (iv) 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
                  trustees have authority to control all substantial decisions
                  of the trust; and, (v) to the extent provided in Treasury
                  regulations, certain trusts in existence on June 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.

         11.      The Purchaser will not cause income from the Residual
                  Certificate to be attributable to a foreign permanent
                  establishment or fixed base of the Purchaser or another U.S.
                  taxpayer.

         12.      That the Purchaser agrees to such amendments of the Pooling
                  and Servicing Agreement as may be required to further
                  effectuate the restrictions on transfer of any Residual
                  Certificate to such a "disqualified organization," an agent
                  thereof, a Book-Entry Nominee, or a person that does not
                  satisfy the requirements of paragraph 7 and paragraph 10
                  hereof.

         13.      That the Purchaser consents to the designation of the
                  Securities Administrator to act as agent for the "tax matters
                  person" of each REMIC created by the Trust Fund pursuant to
                  the Pooling and Servicing Agreement.

                                      B-4



         IN WITNESS WHEREOF, the Purchaser has caused this instrument to be
executed on its behalf, pursuant to authority of its Board of Directors, by its
[title of officer] this _____ day of __________ 20__.

                                  _________________________________
                                  [name of Purchaser]

                                  By:______________________________
                                     Name:
                                     Title:

         Personally appeared before me the above-named [name of officer]
________________, known or proved to me to be the same person who executed the
foregoing instrument and to be the [title of officer] _________________ of the
Purchaser, and acknowledged to me that he [she] executed the same as his [her]
free act and deed and the free act and deed of the Purchaser.

         Subscribed and sworn before me this _____ day of __________ 20__.

NOTARY PUBLIC

______________________________

COUNTY OF_____________________

STATE OF______________________

My commission expires the _____ day of __________ 20__.

                                      B-5



                                    EXHIBIT C

              RESIDUAL CERTIFICATE TRANSFER AFFIDAVIT (TRANSFEROR)

                                                    ____________________________
                                                               Date

Re:      Sequoia Mortgage Trust 2003-2
         Mortgage Pass-Through Certificates

         _______________________ (the "Transferor") has reviewed the attached
affidavit of _____________________________ (the "Transferee"), and has no actual
knowledge that such affidavit is not true and has no reason to believe that the
information contained in paragraph 7 thereof is not true, and has no reason to
believe that the Transferee has the intention to impede the assessment or
collection of any federal, state or local taxes legally required to be paid with
respect to a Residual Certificate. In addition, the Transferor has conducted a
reasonable investigation at the time of the transfer and found that the
Transferee had historically paid its debts as they came due and found no
significant evidence to indicate that the Transferee will not continue to pay
its debts as they become due.

                                  Very truly yours,

                                  _______________________________
                                  Name:
                                  Title:

                                      C-1



                                    EXHIBIT D

                            FORM OF CUSTODY AGREEMENT

                                      D-1



                                    EXHIBIT E

                          LIST OF SERVICING AGREEMENTS

1.       The Master Servicing Agreement between RWT Holdings, Inc. ("RWT") and
         Morgan Stanley Dean Witter Credit Corporation, dated August 1, 2002, as
         modified by the related Acknowledgements.

2.       The Mortgage Loan Flow Purchase, Sale and Servicing Agreement, dated as
         of August 1, 2002, between RWT and GreenPoint Mortgage Funding, Inc.,
         as modified by the related Acknowledgements.

3.       The Mortgage Loan Flow Purchase, Sale & Servicing Agreement among RWT,
         Cendant Mortgage Corporation ("Cendant") and Bishop's Gate Residential
         Mortgage Trust (formerly known as Cendant Residential Mortgage Trust),
         as Sellers, and Cendant, as Servicer, dated August 1, 2002, and the
         Additional Collateral Servicing Agreement between RWT and Cendant,
         dated August 1, 2002, each as modified by the related Acknowledgements.

                                      E-1



                                    EXHIBIT F

                           LIST OF PURCHASE AGREEMENTS

1.       The Master Mortgage Loan Purchase Agreement between RWT Holdings, Inc.
         ("RWT") and Morgan Stanley Dean Witter Credit Corporation, dated August
         1, 2002, as modified by the related Acknowledgements.

2.       The Mortgage Loan Flow Purchase, Sale and Servicing Agreement, dated as
         of August 1, 2002, between RWT and GreenPoint Mortgage Funding, Inc.,
         as modified by the related Acknowledgements.

3.       The Mortgage Loan Flow Purchase, Sale & Servicing Agreement among RWT,
         Cendant Mortgage Corporation ("Cendant") and Bishop's Gate Residential
         Mortgage Trust (formerly known as Cendant Residential Mortgage Trust),
         as Sellers, and Cendant, as Servicer, dated August 1, 2002, as modified
         by the related Acknowledgements.

                                      F-1



                                    EXHIBIT G

                       LIST OF LIMITED PURPOSE SURETY BOND

1.       Ambac Assurance Corporation Surety Bond No. AB0240BE, issued March 17,
         1999, for Morgan Stanley Dean Witter Credit Corporation loans.

2.       Ambac Assurance Corporation Surety Bond No. AB0039BE, issued February
         26, 1996, for Merrill Lynch Credit Corporation loans.

                                      G-1



                                    EXHIBIT H

                     FORM OF RULE 144A TRANSFER CERTIFICATE

Re:      Sequoia Mortgage Trust 2003-2
         Mortgage Pass-Through Certificates

         Reference is hereby made to the Pooling and Servicing Agreement, dated
as of April 1, 2003 (the "Pooling and Servicing Agreement"), by and among
Sequoia Residential Funding, Inc., as Depositor, Wells Fargo Bank Minnesota,
National Association, as Master Servicer and as Securities Administrator and
HSBC Bank USA, as Trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Pooling and Servicing Agreement.

         This letter relates to $__________ initial Certificate Balance of Class
_____ Certificates which are held in the form of Definitive Certificates
registered in the name of ______________ (the "Transferor"). The Transferor has
requested a transfer of such Definitive Certificates for Definitive Certificates
of such Class registered in the name of [insert name of transferee].

         In connection with such request, and in respect of such Certificates,
the Transferor hereby certifies that such Certificates are being transferred in
accordance with (i) the transfer restrictions set forth in the Pooling and
Servicing Agreement and the Certificates and (ii) Rule 144A under the Securities
Act to a purchaser that the Transferor reasonably believes is a "qualified
institutional buyer" within the meaning of Rule 144A purchasing for its own
account or for the account of a "qualified institutional buyer," which purchaser
is aware that the sale to it is being made in reliance upon Rule 144A, in a
transaction meeting the requirements of Rule 144A and in accordance with any
applicable securities laws of any state of the United States or any other
applicable jurisdiction.

         This certificate and the statements contained herein are made for your
benefit and the benefit of the Underwriters and the Depositor.

                                  _____________________________________
                                  [Name of Transferor]

                                  By:__________________________________
                                     Name:
                                     Title:

Dated: ___________, ____

                                      H-1



                                    EXHIBIT I

                         FORM OF PURCHASER'S LETTER FOR

                        INSTITUTIONAL ACCREDITED INVESTOR

                                                       Date

Dear Sirs:

         In connection with our proposed purchase of $______________ principal
amount of Sequoia Mortgage Trust 2003-2 Mortgage Pass-Through Certificates (the
"Privately Offered Certificates") of Sequoia Residential Funding, Inc. (the
"Depositor"), we confirm that:

(1)      We understand that the Privately Offered Certificates have not been,
         and will not be, registered under the Securities Act of 1933, as
         amended (the "Securities Act"), and may not be sold except as permitted
         in the following sentence. We agree, on our own behalf and on behalf of
         any accounts for which we are acting as hereinafter stated, that if we
         should sell any Privately Offered Certificates within two years of the
         later of the date of original issuance of the Privately Offered
         Certificates or the last day on which such Privately Offered
         Certificates are owned by the Depositor or any affiliate of the
         Depositor we will do so only (A) to the Depositor, (B) to "qualified
         institutional buyers" (within the meaning of Rule 144A under the
         Securities Act) in accordance with Rule 144A under the Securities Act
         ("QIBs"), (C) pursuant to the exemption from registration provided by
         Rule 144 under the Securities Act, or (D) to an institutional
         "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or
         (7) of Regulation D under the Securities Act that is not a QIB (an
         "Institutional Accredited Investor") which, prior to such transfer,
         delivers to the Certificate Registrar under the Pooling and Servicing
         Agreement, dated as of April 1, 2003, by and among Sequoia Residential
         Funding, Inc., as Depositor, Wells Fargo Bank Minnesota, National
         Association, as Master Servicer and as Securities Administrator and
         HSBC Bank USA, as Trustee, a signed letter in the form of this letter;
         and we further agree, in the capacities stated above, to provide to any
         person purchasing any of the Privately Offered Certificates from us a
         notice advising such purchaser that resales of the Privately Offered
         Certificates are restricted as stated herein.

(2)      We understand that, in connection with any proposed resale of any
         Privately Offered Certificates to an Institutional Accredited Investor,
         we will be required to furnish to the Certificate Registrar a
         certification from such transferee in the form hereof to confirm that
         the proposed sale is being made pursuant to an exemption from, or in a
         transaction not subject to, the registration requirements of the
         Securities Act. We further understand that the Privately Offered
         Certificates purchased by us will bear a legend to the foregoing
         effect.

                                      I-1



(3)      We are acquiring the Privately Offered Certificates for investment
         purposes and not with a view to, or for offer or sale in connection
         with, any distribution in violation of the Securities Act. We have such
         knowledge and experience in financial and business matters as to be
         capable of evaluating the merits and risks of our investment in the
         Privately Offered Certificates, and we and any account for which we are
         acting are each able to bear the economic risk of such investment.

(4)      We are an Institutional Accredited Investor and we are acquiring the
         Privately Offered Certificates purchased by us for our own account or
         for one or more accounts (each of which is an Institutional Accredited
         Investor) as to each of which we exercise sole investment discretion.

(5)      We have received such information as we deem necessary in order to make
         our investment decision.

(6)      If we are acquiring ERISA-Restricted Certificates, we understand that
         in accordance with ERISA, the Code and the Exemption, no Plan and no
         person acting on behalf of such a Plan may acquire such Certificate
         except in accordance with Section 3.03(d) of the Pooling and Servicing
         Agreement.

         Terms used in this letter which are not otherwise defined herein have
the respective meanings assigned thereto in the Pooling and Servicing Agreement.

                                      I-2



         You are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.

                                  Very truly yours,

                                  ____________________________________
                                  [Purchaser]

                                  By: ________________________________
                                      Name:
                                      Title:

                                      I-3



                                    EXHIBIT J

                        FORM OF ERISA TRANSFER AFFIDAVIT

STATE OF NEW YORK          )
                           )       ss.:
COUNTY OF NEW YORK         )

         The undersigned, being first duly sworn, deposes and says as follows:

                  1. The undersigned is the ______________________ of
         ______________ (the "Investor"), a [corporation duly organized] and
         existing under the laws of __________, on behalf of which he makes this
         affidavit.

                  2. The Investor either (x) is not, and on ___________ [date of
         transfer] will not be, an employee benefit plan or other retirement
         arrangement subject to Section 406 of the Employee Retirement Income
         Security Act of 1974, as amended ("ERISA"), or Section 4975 of the
         Internal Revenue Code of 1986, as amended (the "Code"), (collectively,
         a "Plan") or a person acting on behalf of any such Plan or investing
         the assets of any such Plan; (y) if the Certificate has been the
         subject of an ERISA-Qualifying Underwriting, is an insurance company
         that is purchasing the Certificate with funds contained in an
         "insurance company general account" as defined in Section V(e) of
         Prohibited Transaction Class Exemption ("PTCE") 95-60 and the purchase
         and holding of the Certificate are covered under Section I and III of
         PTCE 95-60; or (z) herewith delivers to the Certificate Registrar an
         opinion of counsel (a "Benefit Plan Opinion") satisfactory to the
         Certificate Registrar, and upon which the Certificate Registrar, the
         Trustee, the Master Servicer, the Depositor and the Securities
         Administrator shall be entitled to rely, to the effect that the
         purchase or holding of such Certificate by the Investor will not
         constitute or result in any non-exempt prohibited transactions under
         Title I of ERISA or Section 4975 of the Code and will not subject the
         Certificate Registrar, the Trustee, the Master Servicer, the Depositor
         or the Securities Administrator to any obligation in addition to those
         undertaken by such entities in the Pooling and Servicing Agreement,
         which opinion of counsel shall not be an expense of the Trust Fund or
         the above parties.

                  3. The Investor hereby acknowledges that under the terms of
         the Pooling and Servicing Agreement, dated as of April 1, 2003 (the
         "Agreement"), by and among Sequoia Residential Funding, Inc., as
         Depositor, Wells Fargo Bank Minnesota, National Association, as Master
         Servicer and as Securities Administrator and HSBC Bank USA, as Trustee,
         no transfer of the ERISA-Restricted Certificates shall be permitted to
         be made to any person unless the Certificate Registrar has received a
         certificate from such transferee in the form hereof.

                                      J-1



         IN WITNESS WHEREOF, the Investor has caused this instrument to be
executed on its behalf, pursuant to proper authority, by its duly authorized
officer, duly attested, this ____ day of _______________ 20___.

                                  _________________________________
                                  [Investor]

                                  By:______________________________
                                     Name:
                                     Title:

ATTEST:

_____________________________

STATE OF                   )
                           )        ss.:
COUNTY OF                  )

                  Personally appeared before me the above-named
         ________________, known or proved to me to be the same person who
         executed the foregoing instrument and to be the ____________________ of
         the Investor, and acknowledged that he executed the same as his free
         act and deed and the free act and deed of the Investor.

                  Subscribed and sworn before me this _____ day of _________
         20___.

                                  ______________________________
                                  NOTARY PUBLIC

                                  My commission expires the
                                  _____ day of __________ 20___.

                                      J-2



                                    EXHIBIT K

                        FORM OF LETTER OF REPRESENTATIONS
                        WITH THE DEPOSITORY TRUST COMPANY

                                      K-1



                                    EXHIBIT L

                                   [RESERVED]

                                      M-1



                                    EXHIBIT M

                     FORM OF CERTIFICATION TO BE PROVIDED TO
                    DEPOSITOR BY THE SECURITIES ADMINISTRATOR

                   Sequoia Mortgage Trust 2003-2 (the "Trust")
                       Mortgage Pass-Through Certificates

     I, ____________________, a ______________ of Wells Fargo Bank Minnesota,
     National Association ("Wells Fargo"), as Securities Administrator of the
     Trust, hereby certify to Sequoia Residential Funding, Inc. (the
     "Depositor"), and its officers, directions and affiliates, and with the
     knowledge and intent that they will rely upon this certification, that:

         1.       The Depositor has provided to the Securities Administrator a
written notice listing all of the monthly distribution reports that were
prepared by the Securities Administrator and that will be included in the
Depositor's Form 10-K for the Trust's fiscal year ending on _____________. I
have reviewed each of such distribution reports.

         2.       Based on my knowledge, the information in these distribution
reports prepared by the Securities Administrator, taken as a whole, does not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading as of the last day of the period
covered by that annual report.

         3.       Based on my knowledge, the distribution information required
to be provided by the Securities Administrator under the Pooling and Servicing
Agreement, dated as of April 1, 2003, among the Depositor, Wells Fargo, as
Master Servicer and Securities Administrator and HSBC Bank USA, as Trustee
creating the Trust is included in these reports.

[SIGNATURE PAGE IMMEDIATELY FOLLOWS]

                                      M-1



                                  WELLS FARGO BANK MINNESOTA,
                                  NATIONAL ASSOCIATION,
                                  as Securities Administrator

Dated: _________________          By:  _____________________________
                                  Name:
                                  Title:

                                      M-2



                                   SCHEDULE A

                             MORTGAGE LOAN SCHEDULE

EX-99.2

                                                                    EXHIBIT 99.2

             [Letterhead of GnazzoThill, A Professional Corporation]

                                                                  April 29, 2003

TO THE PARTIES LISTED
ON SCHEDULE A HERETO

         Re: Sequoia Mortgage Trust 2003-2

Ladies and Gentlemen:

         You have requested our opinion in connection with certain federal
income tax matters related to Sequoia Mortgage Trust 2003-2 (the "Trust Fund")
and the $820,000,000 Sequoia Mortgage Trust 2003-2 Mortgage Pass-Through
Certificates issued with respect thereto (the "Certificates"). The Trust Fund
was established by Sequoia Residential Funding, Inc. (the "Depositor") pursuant
to the Pooling and Servicing Agreement, dated as of April 1, 2003 (the "Pooling
and Servicing Agreement"), among the Depositor, HSBC Bank USA, as Trustee, and
Wells Fargo Bank Minnesota, National Association, as Master Servicer and
Securities Administrator. The Certificates are being issued pursuant to the
Pooling and Servicing Agreement. Reference is hereby made to the Depositor's
Universal Shelf Registration Statement on Form S-3 (Registration Statement No.
333-103634), including a prospectus (the "Prospectus"), filed with the
Securities and Exchange Commission under the Securities Act of 1933 on March 6,
2003 and declared effective on or about March 21, 2003, along with the
Prospectus Supplement, dated April 24, 2003 (the "Prospectus Supplement"). Each
capitalized term used but not defined herein has the meaning assigned thereto in
the Pooling and Servicing Agreement.

         We have acted as special tax counsel to the Depositor in connection
with the above transaction and have assisted in the preparation of the federal
income tax summaries set forth in the Prospectus and the Prospectus Supplement
used in connection with the issuance of the Certificates. In formulating our
opinions, we have reviewed copies of (i) the Prospectus and Prospectus
Supplement, (ii) the Pooling and Servicing Agreement and the forms of
Certificates issued pursuant thereto, (iii) the Mortgage Loan Purchase and Sale
Agreement, (iv) the Purchase Agreements and the Servicing Agreements, (v) the
Acknowledgments, dated as of April 29, 2003, assigning rights under the Purchase
Agreements and the Servicing Agreements, and (vi) such resolutions,
certificates, records, and other documents provided by the Depositor as we have
deemed necessary or appropriate as a basis for the opinions set forth below.

         In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals or finals, the conformity to original documents of
all documents submitted to us as certified, conformed or other copies, and the
authenticity of the originals of such copies. In rendering our opinions, we have
assumed that the transactions described in or contemplated by the foregoing
documents have been and will be consummated in accordance with the terms of such
operative documents, and that such documents accurately reflect the material
facts of such transactions.



TO THE PARTIES LISTED
ON SCHEDULE A HERETO
April 29, 2003
Page 2

         Our opinion is also based on the Internal Revenue Code of 1986, as
amended, administrative rulings, judicial decisions, Treasury regulations and
other applicable authorities. The statutory provisions, regulations, and
interpretations on which our opinion is based are subject to change, possibly
retroactively. In addition, there can be no complete assurance that the Internal
Revenue Service will not take positions contrary to the conclusions stated in
our opinion.

         Based on the foregoing, we are of the opinion that, assuming (i) the
making of a timely election to treat the Trust Fund as consisting of an Upper
Tier REMIC and a Lower Tier REMIC, each comprised of the assets and interests
specified in the Pooling and Servicing Agreement (and, in particular, excluding
from the assets of each of the Upper Tier REMIC and Lower Tier REMIC the Reserve
Fund, the Capitalized Interest Account, the Pre-Funding Accounts and the
Additional Collateral) and (ii) compliance with the provisions of the Pooling
and Servicing Agreement, the Mortgage Loan Purchase and Sale Agreement, the
Purchase Agreements, the Servicing Agreements and the Acknowledgments, for
federal income tax purposes:

         1.       the statements in the Prospectus under the heading "Federal
                  Income Tax Consequences," as supplemented or modified by the
                  statements in the Prospectus Supplement under the heading
                  "Federal Income Tax Consequences," to the extent that they
                  constitute matters of law or legal conclusions with respect to
                  federal income tax matters, are correct in all material
                  respects;

         2.       the Trust Fund will consist of two segregated asset pools, the
                  Lower Tier REMIC and the Upper Tier REMIC, each of which will
                  qualify as a REMIC within the meaning of Section 860D of the
                  Code;

         3.       the Class A-1, Class A-2, Class M-1, Class M-2 and Class X
                  Certificates will represent "regular interests" in the Upper
                  Tier REMIC, the Class R Certificate will represent the sole
                  "residual interest" in the Upper Tier REMIC and the Class LT-R
                  Certificate will represent the sole "residual interest" in the
                  Lower Tier REMIC, each within the meaning of Section 860G of
                  the Code as in effect on the date hereof;

         4.       the Reserve Fund is an "outside reserve fund" that is
                  beneficially owned by the Class X Certificate Owners; and

         5.       the rights of the Certificate Owners with respect to the
                  Reserve Fund represent, for federal income tax purposes,
                  contractual rights that are separate from their regular
                  interests within the meaning of Treasury Regulations Section
                  1.860G-2(i).

         Other than as expressly stated above, we express no opinion on any
issue relating to the Depositor, the Trust Fund, or to any other securities
issued by them, or under any law other than the federal income tax laws.



TO THE PARTIES LISTED
ON SCHEDULE A HERETO
April 29, 2003
Page 3

         We are furnishing this opinion to you solely in connection with the
initial sale of the Certificates and it is not to be relied upon, used,
circulated, quoted or otherwise referred to for any other purpose without our
express written permission.

                                  Very truly yours,

                                  /S/ GnazzoThill, A Professional Corporation



                                   SCHEDULE A

Redwood Trust, Inc.
591 Redwood Highway
Suite 3100
Mill Valley, CA 94941

Sequoia Residential Funding, Inc.
591 Redwood Highway
Suite 3160
Mill Valley, CA 94941

Greenwich Capital Markets, Inc.
600 Steamboat Road
Greenwich, CT 06830

Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036

Banc of America Securities LLC
214 North Tryon Street
NC1-027-21-04
Charlotte, North Carolina 28255

Merrill Lynch, Pierce, Fenner
  & Smith Incorporated
4 World Financial Center, 10/F
New York, NY 10080

Wells Fargo Bank Minnesota,
  National Association
6th and Marquette
Minneapolis, MN 55479

HSBC Bank USA
452 Fifth Avenue
New York, NY 10018