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                       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


       Date of Report (Date of earliest event reported): October 13, 2004




                     FRANKLIN CREDIT MANAGEMENT CORPORATION
             (Exact name of registrant as specified in its charter)

                                    Delaware
         (State or other jurisdiction of incorporation or organization)


                                   75-2243266
                      (I.R.S. employer identification no.)

                                     0-17771
                            Commission file number)

                               Six Harrison Street
                               New York, New York
                         (Address of principal executive
                                    offices)

                                      10013
                                   (Zip code)

       Registrant's telephone number, including area code: (212) 925-8745



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Check  the  appropriate  box  below  if the  Form  8-K  filing  is  intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):

     Written  communications  pursuant to Rule 425 under the  Securities Act
     (17 CFR 230.425)

     Soliciting material pursuant to Rule 14a-12 under the Exchange Act
     (17 CFR 240.14a-12)

     Pre-commencement communications pursuant to Rule 14d-2(b) under the
     Exchange Act (17 CFR 240.14d-2(b))

     Pre-commencement communications pursuant to Rule 13e-4(c) under the
     Exchange Act (17 CFR 240.13e-4(c))


<PAGE>


Item 2.01   Completion of Acquisition or Disposition of Assets

On  September  24,  2004  and  October  13,  2004,  Franklin  Credit Management
Corporation (the "Company"),through four wholly owned subsidiaries, consummated
the  acquisition  of a mixed pool of  $99,361,251 in face amount of performing,
sub-performing  and  nonperforming  mortgage  loans secured  by  single  family
residences, from Master Financial Corporation, N.A., a national mortgage banking
company,  as seller (the "Seller"), pursuant to a Mortgage Loan Purchase and
Sale Agreement with Seller for a purchase price of $82,214,418 plus accrued
interest in the amount of $1,123,254. The purchase price was determined through
competitive bidding and arms'-length negotiations between the Company and the
Seller.

The purchase price was funded by the extentsion of the senior debt (the "Senior
Debt") by Sky Financial Bank, an Ohio corporation (the "Bank") pursuant to
Company's Master Credit and Security Agreement with the Bank. The new Senior
Debt bears interest at a rate initially equal to 5.5% adjusted monthly as
provided in the Master Credit Agreement.

The foregoing description is qualified in its entirety by reference to the full
text of the Mortgage Loan Purchase and Sale Agreement, dated as of September 24,
2004 between the Company and the Seller,  which is filed herewith as
Exhibit 10.1.



Item 9.01.  Financial Statements and Exhibits.

Pro forma financial statements required to be filed not later than 71 calender
days after the date of the original report will be filed by amendment.

(a)      Financial Statements of Assets Acquired
         See reference above.

(b)      Pro Forma Financial Information
         See reference above

(c)      Exhibits.

The following exhibits are filed as part of this report:

2.2   Mortgage Loan Purchase and Sale Agreement, dated as of September 24, 2004
      by and between Franklin Credit Management Corporation and Master Financial
      Incorporated.



<PAGE>





                                   SIGNATURES



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 hereunto duly authorized.

                                       FRANKLIN CREDIT MANAGEMENT CORPORATION

                                               By: /s/ Thomas J. Axon

                                                       Thomas J. Axon
                                                       Chairman

October 19, 2004


<PAGE>





Exhibits Index


10.1   Mortgage Loan Purchase and Sale Agreement, dated as of September 24, 2004
       by and between Franklin Credit Management Corporation and Master
       Financial Inc, Inc.




                                Exhibit 10.1

                 MORTGAGE LOAN PURCHASE AND WARRANTIES AGREEMENT



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                     FRANKLIN CREDIT MANAGEMENT CORPORATION,




                                    Purchaser




                             MASTER FINANCIAL, INC.,




                                     Seller



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                         Dated as of September ~ 24, 2004




                      Fixed Rate Residential Mortgage Loans




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<PAGE>






                                TABLE OF CONTENTS

                                                                        Page

SECTION 1.  Definitions..................................................1

SECTION 2.  Agreement to Purchase........................................8

SECTION 3.  Mortgage Schedules...........................................8

SECTION 4.  Purchase Price...............................................8

SECTION 5.  Examination of Mortgage Files................................9

SECTION 6.  Conveyance from Seller to Purchaser..........................9

SECTION 7.  Servicing of the Mortgage Loans..............................11

SECTION 8.  Transfer of Servicing........................................11

SECTION 9.  Representations, Warranties and Covenants of the Seller;
            Remedies for Breach..........................................13

SECTION 10. Closing......................................................20

SECTION 11. Closing Documents............................................21

SECTION 12. Costs........................................................22

SECTION 13. Cooperation of Seller with a Reconstitution..................22

SECTION 14. The Seller...................................................23

SECTION 15. Financial Statements.........................................24

SECTION 16. [Reserved]...................................................25

SECTION 17.  Notices.....................................................25

SECTION 18.  Severability Clause.........................................25

SECTION 19.  Counterparts................................................26

SECTION 20.  Governing Law...............................................26

SECTION 21.  Intention of the Parties....................................26

SECTION 22.  Successors and Assigns; Assignment of
             Purchase Agreement..........................................26

SECTION 23.  Waivers.....................................................27

SECTION 24.  Exhibits....................................................27

SECTION 25.  General Interpretive Principles.............................27

SECTION 26.  Reproduction of Documents...................................27

SECTION 27.  Further Agreements..........................................28

SECTION 28.  [Reserved]..................................................28

SECTION 29.  No Solicitation.............................................28

SECTION 30.  Waiver of Trial by Jury.....................................28

SECTION 31.  Governing Law Jurisdiction; Consent
             to Service of Process.......................................29


                                    EXHIBITS

EXHIBIT A         CONTENTS OF EACH MORTGAGE FILE

EXHIBIT B         FORM OF SELLER'S OFFICER'S CERTIFICATE

EXHIBIT C         FORM OF OPINION OF COUNSEL TO THE SELLER

EXHIBIT D         FORM OF ASSIGNMENT AND CONVEYANCE AGREEMENT

<PAGE>




                 MORTGAGE LOAN PURCHASE AND WARRANTIES AGREEMENT

     This MORTGAGE LOAN PURCHASE AND  WARRANTIES  AGREEMENT  (the  "Agreement"),
dated as of  September~24,  2004,  by and  between  Franklin  Credit  Management
Corporation,  a Delaware  corporation (the  "Purchaser"),  and Master Financial,
Inc., a California corporation (the "Seller").


                              W~I~T~N~E~S~S~E~T~H:


     WHEREAS,  the Seller desires to sell,  from time to time, to the Purchaser,
and the  Purchaser  desires to  purchase,  from time to time,  from the  Seller,
certain  first and second lien or  unsecured,  fixed-rate  residential  mortgage
loans,  certain of which are  insured by FHA (as defined  below) (the  "Mortgage
Loans") on a servicing  released basis as described  herein,  and which shall be
delivered in pools of whole loans (each,  a "Mortgage  Loan Package") on various
dates as provided herein (each, a "Closing Date");


     WHEREAS,  each Mortgage Loan is either  unsecured or secured by a mortgage,
deed of trust or other security  instrument creating a first or second lien on a
residential dwelling located in the jurisdiction  indicated on the Mortgage Loan
Schedule for the related Mortgage Loan Package;

     WHEREAS,  the  Purchaser and the Seller wish to prescribe the manner of the
conveyance, servicing by the Interim Servicer and control of the Mortgage Loans;
and

     NOW, THEREFORE,  in consideration of the premises and mutual agreements set
forth  herein,  and for other good and valuable  consideration,  the receipt and
sufficiency of which are hereby acknowledged, the Purchaser and the Seller agree
as follows:

SECTION 1. Definitions.

     For purposes of this Agreement the following  capitalized  terms shall have
the respective meanings set forth below.

     Accepted  Servicing  Practices:  With respect to any Mortgage  Loan,  those
mortgage  servicing  practices of prudent  mortgage lending  institutions  which
service  mortgage  loans  of  the  same  type  as  such  Mortgage  Loan  in  the
jurisdiction where the related Mortgaged Property is located.

     Act: The National Housing Act, as amended from time to time.

     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.

     Agreement:  This Mortgage Loan  Purchase and  Warranties  Agreement and all
amendments hereof and supplements hereto.

     Assignment and Conveyance Agreement: As defined in Subsection~6.01.

     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 Purchaser.

     Balloon Mortgage Loan: Any Mortgage Loan which by its original terms or any
modifications  thereof provides for amortization  beyond its scheduled  maturity
date.
     Business  Day: Any day other than (i)~a  Saturday or Sunday,  (ii)~a day on
which banking and savings and loan institutions, in the State of New York or the
State in which the  Interim  Servicer's  servicing  operations  are  located  or
(iii)~the state in which the Custodian's  operations are located, are authorized
or obligated by law or executive order to be closed.

     Closing Date:  The date or dates on which the  Purchaser  from time to time
shall purchase,  and the Seller from time to time shall sell, the Mortgage Loans
listed on the  related  Mortgage  Loan  Schedule  with  respect  to the  related
Mortgage Loan Package.

     Code: Internal Revenue Code of 1986, as amended.

     Collection  Account:  The separate  trust  account  created and  maintained
pursuant to the Interim Servicing Agreement (with respect to each Mortgage Loan,
as specified therein).

     Condemnation  Proceeds: All awards or settlements in respect of a Mortgaged
Property, whether permanent or temporary,  partial or entire, by exercise of the
power of  eminent  domain or  condemnation,  to the extent  not  required  to be
released to a Mortgagor  in  accordance  with the terms of the related  Mortgage
Loan Documents.

     Custodial  Agreement:  The  agreement(s)  governing  the  retention  of the
originals of each  Mortgage  Note,  Mortgage,  Assignment  of Mortgage and other
Mortgage Loan  Documents.  If more than one Custodial  Agreement is in effect at
any given time, all of the individual Custodial Agreements shall collectively be
referred to as the "Custodial Agreement".

     Custodian: U.S. Bank, National Association,  and its successors in interest
or any  successor  to the  Custodian  under the  Custodial  Agreement as therein
provided.

     Cut-off Date: The date or dates  designated as such on the related Mortgage
Loan Schedule with respect to the related Mortgage Loan Package.

     Deleted Mortgage Loan: A Mortgage Loan that is repurchased by the Seller in
accordance with the terms of this Agreement.

     Determination  Date: The date specified in the Interim Servicing  Agreement
(with  respect to each  Mortgage  Loan,  for an  interim  period,  as  specified
therein).
     Due Date:  The day of the month on which the  Monthly  Payment  is due on a
Mortgage Loan, exclusive of any days of grace.

     Fannie Mae: The Federal  National  Mortgage  Association,  or any successor
thereto.

     FHA: The Federal Housing Administration, an agency within the United States
Department  of Housing  and Urban  Development,  or any  successor  thereto  and
including  the Federal  Housing  Commissioner  and the  Secretary of Housing and
Urban Development where appropriate under the FHA Regulations.

     FHA Contract of Insurance: The contract of insurance under Title I covering
the related FHA Mortgage Loan.

     FHA  Insurance:  The  insurance  proved by FHA  pursuant  to Title I of the
National Housing Act, as evidenced by the FHA Contract of Insurance.

     FHA Mortgage  Loan:  Each  Mortgage  Loan  eligible for FHA  Insurance,  as
indicated on the related Mortgage Loan Schedule.

     First Lien Loan: A Mortgage  Loan  secured by a first lien  Mortgage on the
related Mortgaged Property.

     Freddie Mac: The Federal Home Loan Mortgage  Corporation,  or any successor
thereto.

     HUD: The Department of Housing and Urban Development, or any federal agency
or official thereof which may from time to time succeed to the functions thereof
with  regard to  mortgage  insurance  issued  by the FHA.  The term  "HUD",  for
purposes of this Agreement,  is also deemed to include subdivisions thereof such
as the FHA and Government  National Mortgage  Association.  Insurance  Proceeds:
With respect to each Mortgage Loan, proceeds of insurance policies  insuring the
Mortgage Loan or the related  Mortgaged  Property, including any applicable FHA
insurance policies.

     Interim Servicer:  The servicer under the Interim Servicing  Agreement,  or
its successor in interest or assigns,  or any successor to the Interim  Servicer
under the  Interim  Servicing  Agreement,  as therein  provided.  Initially  the
Interim Servicer shall be the Seller.

     Interim  Servicing  Agreement:  The  agreement  to be  entered  into by the
Purchaser  and the  Interim  Servicer,  providing  for the  Interim  Servicer to
service the Mortgage Loans as specified by the
Interim Servicing Agreement.

     Liquidated  Mortgage  Loan:  Each Mortgage Loan  identified as a Liquidated
Mortgage Loan on the related Mortgage Loan Schedule.

     Liquidation Proceeds: Cash received in connection with the liquidation of a
defaulted Mortgage Loan, whether through the sale or assignment of such Mortgage
Loan,  trustee's sale,  foreclosure sale or otherwise or the sale of the related
Mortgaged  Property if the Mortgaged Property is acquired in satisfaction of the
Mortgage Loan.
     Manufactured  Home: A single family residential unit that is constructed in
a  factory  in  sections  in  accordance  with  the  Federal  Manufactured  Home
Construction and Safety Standards adopted on July~15, 1976, by the Department of
Housing and Urban  Development  ("HUD Code"), as amended in 2000, which preempts
state and local building codes. Each unit is identified by the presence of a HUD
Plate/Compliance  Certificate  label.  The sections are then  transported to the
site and joined together and affixed to a pre-built permanent  foundation (which
satisfies  the  manufacturer's  requirements  and all state,  county,  and local
building  codes  and   regulations).   The  manufactured  home  is  built  on  a
non-removable, permanent frame chassis that supports the complete unit of walls,
floors, and roof. The underneath part of the home may have running gear (wheels,
axles,  and brakes) that enable it to be transported to the permanent  site. The
wheels  and hitch  are  removed  prior to  anchoring  the unit to the  permanent
foundation.  The  manufactured  home must be classified as real estate and taxed
accordingly.  The permanent  foundation may be on land owned by the mortgager or
may be on leased land.

     Monthly Payment: The scheduled monthly payment of principal and interest on
a Mortgage Loan.

     Mortgage:  The  mortgage,  deed of  trust or other  instrument  securing  a
Mortgage Note,  which creates a first lien, in the case of a First Lien Loan, or
a second lien, in the case of a Second Lien Loan, on the Mortgaged Property.

     Mortgage File: The items pertaining to a particular  Mortgage Loan referred
to in Exhibit~A  annexed  hereto,  and any additional  documents  required to be
added to the Mortgage File pursuant to this Agreement.

     Mortgage  Interest  Rate:  The annual rate of interest  borne on a Mortgage
Note with respect to each Mortgage Loan.

     Mortgage  Loan:  An  individual  Mortgage Loan which is the subject of this
Agreement,  each Mortgage  Loan  originally  sold and subject to this  Agreement
being identified on the applicable  Mortgage Loan Schedule,  which Mortgage Loan
includes without  limitation the Mortgage File, the Monthly Payments,  Principal
Prepayments,  Liquidation Proceeds,  Condemnation Proceeds,  Insurance Proceeds,
Servicing  Rights  and all other  rights,  benefits,  proceeds  and  obligations
arising from or in connection  with such Mortgage  Loan,  excluding  replaced or
repurchased mortgage loans.

     Mortgage  Loan  Documents:  The  documents  required to be delivered to the
Custodian pursuant to Subsection~6.03 hereof with respect to any Mortgage Loan.

     Mortgage  Loan  Package:  Each  pool of  Mortgage  Loans,  which  shall  be
purchased  by the  Purchaser  from the Seller from time to time on each  Closing
Date.

     Mortgage Loan  Schedule:  The schedule of Mortgage  Loans setting forth the
following information with respect to each Mortgage Loan in the related Mortgage
Loan  Package:  (1)~the  Seller's  Mortgage  Loan  identifying  number;  (2)~the
Mortgagor's name; (3)~the street address of the Mortgaged Property including the
city, state and zip code; (4)~a code indicating  whether the Mortgaged  Property
is owner-occupied; (5)~the number and type of residential units constituting the
Mortgaged Property;  (6)~the original months to maturity or the remaining months
to maturity  from the related  Cut-off  Date,  in any case based on the original
amortization  schedule  and, if  different,  the maturity  expressed in the same
manner but based on the actual amortization schedule;  (7)~the amount of monthly
principal  and  interest  collected on such  Mortgage  Loan during each of the 3
months preceding the related Cut-off Date;  (8)~the Mortgage Interest Rate as of
the related  Cut-off Date;  (9)~the date on which the Monthly Payment was due on
the  Mortgage  Loan  and,  if such  date is not  consistent  with  the Due  Date
currently in effect,  such Due Date;  (10)~the  stated  maturity date;  (11)~the
first payment  date;  (12)~the  amount of the Monthly  Payment as of the related
Cut-off Date; (13)~the last payment date on which a payment was actually applied
to the outstanding  principal balance or interest;  (14)~the original  principal
amount of the Mortgage Loan;  (15)~the principal balance of the Mortgage Loan as
of the close of  business  on the  related  Cut-off  Date,  after  deduction  of
payments of principal due and  collected on or before the related  Cut-off Date;
(16)~a code indicating  whether the Mortgage Loan is an FHA Mortgage Loan (i.e.,
Title~I loan); (17)~whether such Mortgage Loan provides for a Prepayment Penalty
and, if applicable,  the Prepayment  Penalty period;  (18)~the credit risk score
(FICO score);  (19)~the date of origination;  (20)~a code indicating whether the
Mortgage  Loan is a  Balloon  Mortgage  Loan;  (21)~the  Due Date for the  first
Monthly  Payment;  (22)~the  original  Monthly  Payment due;  (23)~whether  such
Mortgage  Loan was  modified;  (24)~whether  such  Mortgage Loan is a liquidated
Mortgage  Loan;  (25)~the  property  type,  if any,  securing such Mortgage Loan
(i.e.,  single  family,  Manufactured  Home,  cooperative,  condominium,  etc.);
(26)~whether  such  Mortgage  Loan is a First  Lien  Loan,  Second  Lien Loan or
unsecured;  (27)~whether such Mortgage Loan is subject to bankruptcy and, if so,
the type (i.e.,  Chapter~7 or Chapter~13) and the pre-petition and post-petition
amounts  outstanding  under such Mortgage  Loan;  and  (28)~whether  the related
Mortgagor requested relief under the Servicemember's Relief Act. With respect to
the Mortgage Loans in the aggregate,  the Mortgage Loan Schedule shall set forth
the following  information,  as of the related  Cut-off Date:  (1)~the number of
Mortgage Loans; (2)~the current aggregate  outstanding  principal balance of the
Mortgage Loans;  (3)~the weighted average Mortgage Interest Rate of the Mortgage
Loans;  (4)~the  weighted  average  maturity  of  the  Mortgage  Loans;  (5)~the
applicable Cut-off Date; and (6)~the applicable Closing Date.

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

     Mortgaged  Property:  With respect to each Mortgage Loan,  the  Mortgagor"s
real property  securing  repayment of a related Mortgage Note,  consisting of an
unsubordinated estate in fee simple or, with respect to real property located in
jurisdictions in which the use of leasehold  estates for residential  properties
is a  widely-accepted  practice,  a  leasehold  estate,  in a single  parcel  or
multiple parcels of real property improved by a Residential Dwelling.

    Mortgagor: The obligor on a Mortgage Note.

     Officer's Certificate: A certificate signed by the Chairman of the Board or
the  Vice  Chairman  of the  Board or a  President  or a Vice  President  or the
Secretary or one of the  Assistant  Treasurers or Assistant  Secretaries  of the
Seller, and delivered to the Purchaser as required by this Agreement.

     Opinion of Counsel:  A written  opinion of counsel,  who may be counsel for
the Seller, reasonably acceptable to the Purchaser.

     Person:  Any  individual,   corporation,   partnership,  limited  liability
company, joint venture, association,  joint-stock company, trust, unincorporated
organization,  government  or  any  agency  or  political  subdivision  thereof.
Preliminary Mortgage Schedule: As defined in Section~3.

     Prepayment Penalty:  With respect to each Mortgage Loan, the penalty if the
Mortgagor prepays such Mortgage Loan as provided in the related Mortgage Note or
Mortgage.

     Principal  Prepayment:  Any payment or other recovery of principal on a
Mortgage Loan which is received in advance of its scheduled Due Date, including
any prepayment penalty or premium thereon, and which is not accompanied by an
amount of interest  representing  scheduled interest due on any date or dates
in any month or months subsequent to the month of prepaymen

      Purchase Price: The price paid on the related Closing Date by the
Purchaser to the Seller in exchange for the Mortgage Loans purchased on such
Closing Date as calculated in Section~4 of this Agreement.

       Purchaser: Franklin Credit ManagementCorporation, a Delaware corporation,
and its successors in interest and assigns,  or any successor to the Purchaser
under this Agreement as herein provided.

       Reconstitution:  A Whole Loan Transfer or a Securitization Transfer.

       Reconstitution Date:  As defined in Section~13.

       Relief Act:  The Servicemembers' Civil Relief Act.

       Remittance  Date: The date specified in the Interim Servicing Agreement
(with respect to each Mortgage Loan, as specified therein).

       Repurchase  Price:  With respect to any Mortgage Loan, a price equal to
the Purchase Price with respect to such  Mortgage  Loan (reduced by all amounts
previously  received by the Purchaser  with respect to the Mortgage Loan
representing payments or recoveries of principal made by the Seller prior to the
Cut-off Date) plus accrued  and unpaid interest at the Mortgage  Note rate from
and after the related  Closing Date through the re-purchase date, plus any
advances,  costs,  expenses, and out of pocket costs incurred by Purchaser in
connection with such Mortgage Loan.

        Residential  Dwelling:  Any one of the following: (i)~a  detached
one-family  dwelling,  (ii)~a detached  two- to  four-family  dwelling, (iii)~a
one-family dwelling unit in a condominium project or (iv)~a one-family dwelling
in a planned unit development, none of which is a dwelling unit in a residential
cooperative housing corporation, mobile home or Manufactured Home.

         RESPA:  Real Estate Settlement Procedures Act, as amended from time to
time.
         Second  Lien Loan:  A  Mortgage  Loan  secured  by a second  lien
          Mortgage on the related Mortgaged Property.

         Securitization  Transfer:  The sale or transfer of some or all of the
Mortgage Loans to a trust or other entity as part of a publicly-issued or
privately-placed, rated or unrated mortgage pass-through or other
mortgage-backed securities transaction.

         Seller:  As  defined  in the  initial  paragraph  of the  Agreement,
together with its successors in interest.

         Servicing  Fee:  With respect to each  Mortgage  Loan  subject to the
Interim  Servicing Agreement,  a fee payable  monthly equal to  one-twelfth  of
the product of (a)~the Servicing Fee Rate and (b)~the outstanding  principal
balance of such  Mortgage  Loan.  Such fee shall be payable  monthly and shall
be pro-rated for any portion of a month  during which the Mortgage  Loan is
serviced by the Interim  Servicer  under the Interim Servicing  Agreement.  The
obligation  of the  Purchaser to pay the Servicing Fee is limited to, and the
Servicing Fee is payable solely from, the interest portion (including recoveries
with respect to interest from Liquidation Proceeds,  to the extent permitted by
this Agreement) of such Monthly Payment collected by the Interim Servicer,or as
otherwise provided under this Agreement.

         Servicing  Fee  Rate:  An amount per annum as set forth in the Interim
 Servicing Agreement.

         Servicing  File:  With respect to each Mortgage  Loan, the file
retained by the Interim Servicer  consisting  of originals or copies of all
documents in the Mortgage  File which are not delivered to the Purchaser or the
Custodian.

         Servicing  Rights:  Any and all of the  following:  (a)~any  and all
rights to service the  Mortgage  Loans;  (b)~any  payments to or monies
received by the Seller for  servicing  the  Mortgage  Loans; (c)~any late fees,
penalties  or similar  payments  with respect to the Mortgage  Loans;  (d)~all
agreements or documents  creating,  defining or evidencing any such servicing
rights to the extent they relate to such servicing rights and all rights of the
Seller  thereunder;  (e)~all  accounts and other  rights to payment  related to
any of the  property  described  in this  paragraph;  and (f)~any and all
documents,  files,  records,  servicing  files, servicing  documents, servicing
records, data tapes, computer records,  or other information  pertaining to the
Mortgage Loans or pertaining to the past, present or prospective servicing of
the Mortgage Loans.

          Stated  Principal  Balance:  As to  each  Mortgage  Loan on any  date
 of  determination,(i)~the  principal  balance of such  Mortgage  Loan at the
related  Cut-off Date after giving effect to payments of principal  due on or
before  such  date,  to the  extent  actually  received,  minus  (ii)~all
amounts  previously distributed  to the  Purchaser  with respect to the related
Mortgage Loan representing  payments or recoveries of principal on such
Mortgage Loan.

           Successor  Servicer:  Any servicer of one or more Mortgage Loans
designated by the  Purchaser as being  entitled to the benefits of the
indemnifications set forth in Subsections 9.03 and 14.01.

       Whole Loan Transfer:  The sale or transfer by Purchaser of some or all
of the Mortgage Loans in a whole loan or participation format pursuant to a
Reconstitution Agreement.


SECTION 2.        Agreement to Purchase.

               The Seller  agrees to sell from time to time,  and the  Purchaser
          agrees  to  purchase  from  time to time,  Mortgage  Loans  having  an
          aggregate  principal  balance on the related Cut-off Date in an amount
          agreed to by the  Purchaser  and the Seller as evidenced by the actual
          aggregate  principal  balance of the  Mortgage  Loans  accepted by the
          Purchaser on each Closing Date. The price for each Mortgage Loan shall
          be the related  Purchase  Price as set forth in Section~4.

 SECTION 3.       Mortgage Schedules.

               The Seller  from time to time shall  provide the  Purchaser  with
          certain information constituting a preliminary listing of the Mortgage
          Loans to be  purchased on each  Closing  Date in  accordance  with the
          instructions   of  the  Purchaser   (each,  a "Preliminary   Mortgage
          Schedule").

             The Seller shall  deliver the related  Mortgage Loan Schedule for
          the Mortgage Loans to be purchased on a particular Closing Date to the
          Purchaser at least two (2) Business Days prior to the related  Closing
          Date.
SECTION 4.        Purchase Price.

               The  "Purchase Price"  for  each  Mortgage  Loan  shall  be  the
          percentage of par as stated in the related  Assignment  and Conveyance
          Agreement,  multiplied by the aggregate  principal balance,  as of the
          related  Cut-off  Date,  of such  Mortgage  Loan listed on the related
          Mortgage Loan Schedule.  The initial  principal  amount of the related
          Mortgage  Loans  shall  be  the  aggregate  principal  balance  of the
          Mortgage Loans, so computed as of the related Cut-off Date.

               In  addition  to the  Purchase  Price  as  described  above,  the
          Purchaser  shall  pay to the  Seller,  at  closing,  up to 60  days of
          accrued  interest  on the  current  principal  amount of each  related
          Mortgage Loan (other than Liquidated Mortgage Loans) as of the related
          Cut-off  Date  only  if  such  Mortgage  Loan  is  less  than  60~days
          delinquent  as of the Cut-off  Date.  The Purchase  Price plus accrued
          interest as set forth in the preceding  sentence  shall be paid to the
          Seller by wire transfer of immediately  available  funds to an account
          designated by the Seller in writing.

               The Purchaser shall be entitled to (1)~all principal collected on
          or after the related Cut-off Date, and (2)~all payments of interest on
          the  Mortgage  Loans net of  applicable  Servicing  Fees  (minus  that
          portion of any such payment  which is allocable to the period prior to
          the related  Cut-off  Date).  If, after the related  Closing Date, the
          Seller receives any such amounts payable to the Purchaser,  the Seller
          shall, within 2 Business Days of receipt,  forward such amounts to the
          Purchaser.

SECTION 5. Examination of Mortgage Files.

               At least ten (10)  Business  Days  prior to the  related  Closing
          Date, the Seller shall (a)~deliver to the Purchaser or its designee in
          escrow,  for  examination  with  respect to each  Mortgage  Loan to be
          purchased,  the  related  Mortgage  File,  including  a  copy  of  the
          Assignment of Mortgage,  pertaining to each Mortgage Loan, or (b)~make
          the related  Mortgage File available to the Purchaser for  examination
          at such  other  location  as  shall  otherwise  be  acceptable  to the
          Purchaser.  Such  examination  may be  made  by the  Purchaser  or its
          designee at any  reasonable  time before or after the related  Closing
          Date. If the  Purchaser  makes such  examination  prior to the related
          Closing Date and determines, in its sole discretion, that any Mortgage
          Loans are unacceptable to the Purchaser for any reason,  such Mortgage
          Loans shall be deleted from the related  Mortgage Loan  Schedule.  The
          Purchaser  may,  at its  option  and  without  notice  to the  Seller,
          purchase  some or all of the Mortgage  Loans  without  conducting  any
          partial or complete  examination.  The fact that the  Purchaser or its
          designee  has  conducted  or has  failed to  conduct  any  partial  or
          complete  examination  of the  Mortgage  Files  shall not  affect  the
          Purchaser's  rights to demand  repurchase  or other relief as provided
          herein.
SECTION 6. Conveyance from Seller to Purchaser.

Subsection 6.01   Conveyance of Mortgage Loans.

               The Seller, simultaneously with the delivery of the Mortgage Loan
          Schedule  with  respect to the  related  Mortgage  Loan  Package to be
          purchased  on  each  Closing  Date,   shall  execute  and  deliver  an
          Assignment  and  Conveyance  Agreement in the form attached  hereto as
          Exhibit~D  (the  "Assignment  and Conveyance  Agreement").  The Seller
          shall  cause the  Servicing  File  retained  by the  Interim  Servicer
          pursuant  to this  Agreement  to be  appropriately  identified  in the
          Seller's computer system and/or books and records, as appropriate,  to
          clearly  reflect  the  sale  of  the  related  Mortgage  Loan  to  the
          Purchaser. The Seller shall cause the Interim Servicer to release from
          its custody the contents of any Servicing  File retained by it only in
          accordance  with this  Agreement or the Interim  Servicing  Agreement,
          except when such release is required in  connection  with a repurchase
          of any such Mortgage Loan pursuant to Subsection~9.03.

 Subsection 6.02    Books and Records.

               Record  title to each  Mortgage  as of the related  Closing  Date
          shall be in the name of the Seller,  an Affiliate  of the Seller,  the
          Purchaser or one or more designees of the Purchaser,  as the Purchaser
          shall select. Notwithstanding the foregoing, each Mortgage and related
          Mortgage  Note  shall be  possessed  solely  by the  Purchaser  or the
          appropriate designee of the Purchaser,  as the case may be. All rights
          arising out of the Mortgage Loans  including,  but not limited to, all
          funds received by the Seller or the Interim Servicer after the related
          Cut-off Date on or in connection  with a Mortgage Loan shall be vested
          in the Purchaser or one or more designees of the Purchaser;  provided,
          however,  that all funds received on or in connection  with a Mortgage
          Loan shall be received and held by the Seller or the Interim  Servicer
          in trust for the benefit of the Purchaser or the appropriate  designee
          of the  Purchaser,  as the case may be, as the  owner of the  Mortgage
          Loans pursuant to the terms of this Agreement.

               The Seller  shall be or shall  cause the  Interim  Servicer to be
          responsible for  maintaining,  and shall  maintain,  a complete set of
          books and records for each Mortgage Loan which shall be marked clearly
          to reflect the ownership of each Mortgage Loan by the Purchaser.

               The sale of each Mortgage Loan shall be reflected on the Seller's
          balance  sheet and other  financial  statements as a sale of assets by
          the Seller.

Subsection 6.03   Delivery of Mortgage Loan Documents.

               The Seller  shall  deliver and release to the  Custodian no later
          than two (2)  Business  Days prior to the related  Closing  Date those
          Mortgage Loan  Documents set forth on Exhibit~A  hereto as required by
          the Custodial  Agreement  with respect to each Mortgage Loan set forth
          on the related Mortgage Loan Schedule.

               The Custodian shall certify its receipt of all such Mortgage Loan
          Documents required to be delivered pursuant to the Custodial Agreement
          for  the  related   Closing   Date,   as   evidenced  by  the  Initial
          Certification  of the  Custodian in the form annexed to the  Custodial
          Agreement.  The Seller  shall  comply with the terms of the  Custodial
          Agreement  and the  Purchaser  shall pay all fees and  expenses of the
          Custodian.

               The Seller  shall or shall cause the Interim  Servicer to include
          in the Servicing  File original  documents  evidencing an  assumption,
          modification,  consolidation or extension of any Mortgage Loan entered
          into in  accordance  with  this  Agreement  within  two weeks of their
          execution,  provided,  however,  that the  Seller  shall  provide  the
          Interim Servicer for inclusion in the Servicing File, with a certified
          true copy of any such document  submitted for  recordation  within two
          weeks of its execution, and shall promptly provide the original of any
          document  submitted  for  recordation  or  a  copy  of  such  document
          certified by the appropriate  public recording office to be a true and
          complete copy of the original within ninety days of its submission for
          recordation.

               In  the  event  any  document  required  to be  delivered  to the
          Custodian in the Custodial Agreement, including an original or copy of
          any document  submitted  for  recordation  to the  appropriate  public
          recording  office,  is not so delivered to the  Custodian,  or to such
          other Person as the Purchaser  shall  designate in writing,  within 90
          days  following  the related  Closing Date (other than with respect to
          the  Assignments of Mortgage which shall be delivered to the Custodian
          in blank and recorded  subsequently by the Purchaser or its designee),
          and in the event that the Seller does not cure such failure  within 60
          days of discovery or receipt of written  notification  of such failure
          from the Purchaser,  the related Mortgage Loan shall, upon the request
          of the Purchaser, be repurchased by the Seller at the price and in the
          manner  specified  in   Subsection~9.03.   The  foregoing   repurchase
          obligation shall not apply in the event that the Seller cannot deliver
          an original  document  submitted for  recordation  to the  appropriate
          public  recording  office within the  specified  period due to a delay
          caused  by  the  recording  office  in  the  applicable  jurisdiction;
          provided that the Seller shall instead deliver a recording  receipt of
          such recording office or, if such recording  receipt is not available,
          an  officer"s  certificate  of a  servicing  officer  of  the  Seller,
          confirming  that such  documents  have been  accepted  for  recording;
          provided  that,  upon  request of the  Purchaser  and  delivery by the
          Purchaser to the Seller of a schedule of the related  Mortgage  Loans,
          the Seller shall  reissue and deliver to the Purchaser or its designee
          said officer's certificate.

               The  Seller  shall  pay all  fees or costs  in  transferring  all
          original  documents to the Custodian  or, upon written  request of the
          Purchaser, to the Purchaser or the Purchaser's designee. The Purchaser
          or the  Purchaser's  designee shall be  responsible  for recording the
          Assignments of Mortgage. Subsection 6.04 [Reserved].

SECTION 7.        Servicing of the Mortgage Loans.

               The Mortgage  Loans have been sold by the Seller to the Purchaser
          on a  servicing  released  basis.  Subject  to, and upon the terms and
          conditions of this Agreement and the Interim Servicing Agreement (with
          respect to each Mortgage  Loan,  for an interim  period,  as specified
          therein),  the Seller hereby sells,  transfers,  assigns,  conveys and
          delivers to the Purchaser the Servicing Rights.

               The  Purchaser  shall  retain the  Interim  Servicer  as contract
          servicer of the Mortgage Loans for an interim  period  pursuant to and
          in accordance  with the terms and conditions  contained in the Interim
          Servicing  Agreement  (with  respect  to each  Mortgage  Loan,  for an
          interim  period,  as  specified  therein).  The Seller shall cause the
          Interim  Servicer to execute the Interim  Servicing  Agreement  on the
          initial Closing Date.

               Pursuant to the Interim Servicing Agreement (with respect to each
          Mortgage  Loan,  for an interim  period,  as specified  therein),  the
          Interim Servicer shall begin servicing the Mortgage Loans on behalf of
          the Purchaser and shall be entitled to a Servicing Fee with respect to
          such Mortgage  Loans until the  applicable  Transfer Date. The Interim
          Servicer shall conduct such  servicing in accordance  with the Interim
          Servicing Agreement.

SECTION 8. Transfer of Servicing.

               On the applicable Transfer Date, the Purchaser,  or its designee,
          shall assume all servicing responsibilities related to, and the Seller
          shall   cause   the   Interim   Servicer   to  cease   all   servicing
          responsibilities  related to, the related  Mortgage  Loans  subject to
          such Transfer Date. The Transfer Date shall be the date  determined in
          accordance with Section!~6.02 of the Interim Servicing  Agreement(with
          respect to each Mortgage  Loan,  for an interim  period,  as specified
          therein).
               On or prior to the applicable Transfer Date, the Seller shall, at
          its sole cost and  expense,  take such  steps as may be  necessary  or
          appropriate  to effectuate  and evidence the transfer of the servicing
          of the  related  Mortgage  Loans to the  Purchaser,  or its  designee,
          including but not limited to the following:

               (a) Notice to  Mortgagors.  The Seller  shall  cause the  Interim
          Servicer to mail to the  Mortgagor  of each  related  Mortgage  Loan a
          letter advising such Mortgagor of the transfer of the servicing of the
          related Mortgage Loan to the Purchaser, or its designee, in accordance
          with the Cranston  Gonzales National  Affordable  Housing Act of 1990;
          provided, however, the content and format of the letter shall have the
          prior  approval of the  Purchaser.  The Seller shall cause the Interim
          Servicer to provide  the  Purchaser  with  copies of all such  related
          notices no later than the Transfer Date.

               (b) Notice to Taxing  Authorities  and Insurance  Companies.  The
          Seller shall cause the Interim  Servicer to transmit to the applicable
          taxing authorities and insurance companies and/or agents, notification
          of the transfer of the  servicing to the  Purchaser,  or its designee,
          and  instructions  to deliver  all  notices,  tax bills and  insurance
          statements,  as the case may be, to the  Purchaser  from and after the
          Transfer Date. The Seller shall cause the Interim  Servicer to provide
          the  Purchaser  with  copies  of all such  notices  no later  than the
          Transfer Date.

               (c)  Delivery of  Servicing  Records.  The Seller shall cause the
          Interim  Servicer to forward to the  Purchaser,  or its designee,  all
          servicing  records and the  Servicing  File in the Interim  Servicer's
          possession  relating  to each  related  Mortgage  Loan  including  the
          information  enumerated  in  the  Interim  Servicing  Agreement  (with
          respect  to  each  such  Mortgage  Loan,  for an  interim  period,  as
          specified therein).

               (d) [Reserved.]

               (e) [Reserved.]
..
               (f) Mortgage  Payments  Received Prior to Transfer Date. Prior to
          the Transfer Date all payments received by the Interim Servicer or the
          Seller on each related  Mortgage Loan shall be properly applied by the
          Seller to the account of the particular Mortgagor.

               (g) Mortgage Payments Received after Transfer Date. The amount of
          any related Monthly Payments received by the Seller after the Transfer
          Date shall be properly  endorsed  and  forwarded  to the  Purchaser by
          overnight mail on the date of receipt at the expense of the Purchaser.

               (h) Misapplied  Payments.  Misapplied payments shall be processed
          as follows:

               (i) All parties  shall  cooperate  in  correcting  misapplication
          errors;

               (ii) The party receiving notice of a misapplied payment occurring
          prior  to the  applicable  Transfer  Date  and  discovered  after  the
          Transfer Date shall immediately notify the other party;

               (iii)  If a  misapplied  payment  which  occurred  prior  to  the
          Transfer Date cannot be  identified  and said  misapplied  payment has
          resulted in a shortage in the Collection Account,  the Seller shall be
          liable for the amount of such shortage. The Seller shall reimburse the
          Purchaser  for the amount of such  shortage  within  thirty  (30)~days
          after receipt of written demand therefor from the Purchaser;

               (iv) If a misapplied payment which occurred prior to the Transfer
          Date has  created  an  improper  Purchase  Price as the  result  of an
          inaccurate  outstanding  principal balance, a check shall be issued to
          the party  shorted by the  improper  payment  application  within five
          (5)~Business Days after notice thereof by the other party; and

               (v) Any check issued under the  provisions  of this  Section~8(h)
          shall be  accompanied  by a  statement  indicating  the  corresponding
          Seller and/or the Purchaser Mortgage Loan identification number and an
          explanation of the allocation of any such payments.

               (i) Books and Records.  On the Transfer Date, the books,  records
          and accounts of the Seller with respect to the related  Mortgage Loans
          shall be in accordance with all applicable Purchaser requirements.

               (j)  Reconciliation.  The Seller shall, on or before the Transfer
          Date,  reconcile  principal  balances and make any necessary  monetary
          adjustments. Any such monetary adjustments will be transferred between
          the Seller and the Purchaser as appropriate.

               (k) IRS  Forms.  The  Seller  shall or shall  cause  the  Interim
          Servicer to file all IRS forms 1099, 1099A, 1098 or 1041 and K-1 which
          are required to be filed on or before January 31, 2005 in relation to
          the servicing and ownership of the related  Mortgage Loans. The Seller
          shall  provide,  in electronic  format,  the data used to prepare such
          forms to the Purchaser upon request and shall  reimburse the Purchaser
          for any  costs  or  penalties  incurred  by the  Purchaser  due to the
          Seller's failure to comply with this paragraph.

SECTION 9. Representations, Warranties and Covenants of the Seller; Remedies for
Breach.

Subsection 9.01   Representations and Warranties Regarding the Seller.

               The Seller  represents,  warrants and  covenants to the Purchaser
          that as of the date hereof and as of each Closing Date:
               (a) Due Organization and Authority.  The Seller is a corporation,
          validly  existing,  and  in  good  standing  under  the  laws  of  its
          jurisdiction  of  incorporation  or  formation  and has  all  licenses
          necessary  to carry on its  business  as now  being  conducted  and is
          licensed,  qualified  and in good  standing  in the  states  where the
          Mortgaged  Property  is  located  if the  laws of such  state  require
          licensing or  qualification  in order to conduct  business of the type
          conducted by the Seller.  The Seller has corporate power and authority
          to execute and deliver this  Agreement and to perform its  obligations
          hereunder;  the execution,  delivery and performance of this Agreement
          (including  all  instruments  of transfer to be delivered  pursuant to
          this Agreement) by the Seller and the consummation of the transactions
          contemplated  hereby  have  been  duly and  validly  authorized;  this
          Agreement has been duly executed and  delivered  and  constitutes  the
          valid, legal, binding and enforceable obligation of the Seller, except
          as  enforceability  may  be  limited  by  (i) bankruptcy,  insolvency,
          liquidation, receivership, moratorium, reorganization or other similar
          laws  affecting  the  enforcement  of  the  rights  of  creditors  and
          (ii)~general  principles of equity, whether enforcement is sought in a
          proceeding  in equity or at law. All  requisite  corporate  action has
          been taken by the Seller to make this Agreement valid and binding upon
          the Seller in accordance with its terms;

               (b) No Consent Required. No consent,  approval,  authorization or
          order is required for the transactions  contemplated by this Agreement
          from any  court,  governmental  agency or body,  or  federal  or state
          regulatory  authority having  jurisdiction over the Seller is required
          or, if required,  such consent,  approval,  authorization or order has
          been or will, prior to the related Closing Date, be obtained;

               (c)  Ordinary  Course  of  Business.   The  consummation  of  the
          transactions contemplated by this Agreement are in the ordinary course
          of business of the Seller, and the transfer, assignment and conveyance
          of the Mortgage Notes and the Mortgages by the Seller pursuant to this
          Agreement  are  not  subject  to the  bulk  transfer  or  any  similar
          statutory provisions in effect in any applicable jurisdiction;

               (d) No  Conflicts.  Neither the  execution  and  delivery of this
          Agreement, the acquisition or origination of the Mortgage Loans by the
          Seller,  the  sale  of  the  Mortgage  Loans  to  the  Purchaser,  the
          consummation  of  the  transactions   contemplated   hereby,  nor  the
          fulfillment  of or  compliance  with the terms and  conditions of this
          Agreement,  will  conflict  with or  result  in a breach of any of the
          terms,  conditions or provisions of the Seller's  charter,  by-laws or
          other  organizational  documents  or  any  legal  restriction  or  any
          agreement or instrument to which the Seller is now a party or by which
          it is bound,  or  constitute  a default  or result in an  acceleration
          under any of the  foregoing,  or result in the  violation  of any law,
          rule, regulation, order, judgment or decree to which the Seller or its
          property is subject,  or result in the creation or  imposition  of any
          lien, charge or encumbrance that would have an adverse effect upon any
          of its  properties  pursuant to the terms of any  mortgage,  contract,
          deed of  trust or other  instrument,  or  impair  the  ability  of the
          Purchaser  to realize on the Mortgage  Loans,  impair the value of the
          Mortgage  Loans, or impair the ability of the Purchaser to realize the
          full  amount  of any  insurance  benefits  accruing  pursuant  to this
          Agreement;

               (e) No Litigation Pending.  There is no action, suit,  proceeding
          or investigation  pending or threatened against the Seller, before any
          court,   administrative   agency  or  other  tribunal   asserting  the
          invalidity of this Agreement,  seeking to prevent the  consummation of
          any of the  transactions  contemplated  by this  Agreement  or  which,
          either in any one  instance  or in the  aggregate,  may  result in any
          material  adverse  change  in  the  business,  operations,   financial
          condition,  properties  or assets of the  Seller,  or in any  material
          impairment  of the  right or  ability  of the  Seller  to carry on its
          business substantially as now conducted,  or in any material liability
          on the part of the  Seller,  or which  would  draw into  question  the
          validity  of this  Agreement  or the  Mortgage  Loans or of any action
          taken or to be taken in connection  with the obligations of the Seller
          contemplated herein, or which would be likely to impair materially the
          ability of the Seller to perform under the terms of this Agreement;

               (f) Ability to Perform;  Solvency.  The Seller does not  believe,
          nor  does it have any  reason  or cause  to  believe,  that it  cannot
          perform  each and every  covenant  contained  in this  Agreement.  The
          Seller is solvent  and the sale of the  Mortgage  Loans will not cause
          the Seller to become insolvent.  The sale of the Mortgage Loans is not
          undertaken with the intent to hinder, delay or defraud any of Seller's
          creditors;

               (g) Anti-Money  Laundering Laws. The Seller has complied with all
          applicable  anti-money  laundering  laws  and  regulations,  including
          without  limitation  the USA  Patriot Act of 2001  (collectively,  the
          "Anti-Money   Laundering   Laws");   the  Seller  has  established  an
          anti-money laundering compliance program as required by the Anti-Money
          Laundering   Laws,  has  conducted  the  requisite  due  diligence  in
          connection  with the origination of each Mortgage Loan for purposes of
          the  Anti-Money   Laundering  Laws,  including  with  respect  to  the
          legitimacy  of the  applicable  Mortgagor and the origin of the assets
          used by the said  Mortgagor to purchase the property in question,  and
          maintains,  and will maintain,  sufficient information to identify the
          applicable Mortgagor for purposes of the Anti-Money Laundering Laws;

               (h) Delivery to the  Custodian.  The Mortgage Note, the Mortgage,
          the  Assignment  of Mortgage  and any other  documents  required to be
          delivered with respect to each Mortgage Loan pursuant to the Custodial
          Agreement,  shall be delivered to the Custodian all in compliance with
          the specific requirements of the Custodial Agreement.  With respect to
          each  Mortgage  Loan,  the Seller will be in  possession of a complete
          Mortgage File in compliance  with  Exhibit~A  hereto,  except for such
          documents as will be delivered to the Custodian;

               (i)  No  Untrue  Information.  Neither  this  Agreement  nor  any
          information,   statement,  tape,  diskette,  report,  form,  or  other
          document furnished or to be furnished pursuant to this Agreement or in
          connection with the transactions  contemplated  hereby  (including any
          Securitization  Transfer  or Whole  Loan  Transfer)  contains  or will
          contain any untrue  statement of fact or omits or will omit to state a
          fact necessary to make the statements  contained herein or therein not
          misleading;

               (j) No  Brokers.  The  Seller  has not  dealt  with  any  broker,
          investment  banker,  agent or other person that may be entitled to any
          commission or compensation in connection with the sale of the Mortgage
          Loans;
               (k) Sale  Treatment.  The  Seller  expects  to be  advised by its
          independent certified public accountants that under generally accepted
          accounting  principles  the  transfer  of the  Mortgage  Loans will be
          treated  as a sale on the  books and  records  of the  Seller  and the
          Seller has  determined  that the  disposition  of the  Mortgage  Loans
          pursuant to this Agreement will be afforded sale treatment for tax and
          accounting purposes;

               (l) Owner of  Record.  The  Seller is the owner of record of each
          Mortgage and the indebtedness  evidenced by each Mortgage Note, except
          for the  Assignments  of Mortgage  which have been sent for recording,
          and upon  recordation  the Seller  will be the owner of record of each
          Mortgage and the  indebtedness  evidenced by each Mortgage  Note,  and
          upon the sale of the Mortgage Loans to the Purchaser,  the Seller will
          retain the Mortgage  Files with respect  thereto in trust only for the
          purpose of servicing  and  supervising  the servicing of each Mortgage
          Loan;

               (m) Reasonable Purchase Price. The consideration  received by the
          Seller  upon the  sale of the  Mortgage  Loans  under  this  Agreement
          constitutes fair consideration and reasonably equivalent value for the
          Mortgage Loans; and

               (n) Credit Reporting. The Seller, as Interim Servicer, will fully
          furnish,  in  accordance  with the Fair Credit  Reporting  Act and its
          implementing  regulations,  accurate and complete  information  (e.g.,
          favorable and  unfavorable)  on its borrower  credit files to Equifax,
          Experian  and Trans Union  Credit  Information  Company  (three of the
          credit repositories), on a monthly basis. Additionally, the Seller, as
          Interim  Servicer,  will transmit  full-file credit reporting data for
          each Mortgage Loan pursuant to Fannie Mae Guide Announcement 95-19 and
          that for each Mortgage Loan, the Seller, as Interim  Servicer,  agrees
          it shall report one of the  following  statuses each month as follows:
          new  origination,  current,  delinquent  (30-,  60-,  90-days,  etc.),
          foreclosed, or charged-off.

Subsection 9.02  Representations  and Warranties  Regarding  Individual Mortgage
Loans.
               The Seller hereby  represents and warrants to the Purchaser that,
          as to each  Mortgage  Loan,  as of the related  Closing  Date for such
          Mortgage Loan:

               (a) Mortgage Loans as Described. The information set forth in the
          related Mortgage Loan Schedule is complete, true and correct;

               (b) Original Terms Unmodified. The terms of the Mortgage Note and
          Mortgage have not been  impaired,  waived,  altered or modified in any
          respect,  from the date of origination  except by a written instrument
          which has been  delivered to the  Custodian or to such other Person as
          the Purchaser shall  designate in writing,  and the terms of which are
          reflected in the related Mortgage Loan Schedule.  The substance of any
          such waiver is reflected on the related  Mortgage  Loan  Schedule.  No
          Mortgagor has been released, in whole or in part, except in connection
          with an assumption  agreement,  and which assumption agreement is part
          of the Mortgage Loan File  delivered to the Custodian or to such other
          Person as the  Purchaser  shall  designate in writing and the terms of
          which are reflected in the related Mortgage Loan Schedule;

               (c) Compliance with Applicable  Laws. Any and all requirements of
          any  federal,  state or local law or  regulations  including,  without
          limitation,   usury,   truth-in-lending,    real   estate   settlement
          procedures,  consumer  credit  protection,  equal credit  opportunity,
          disclosure  and all predatory and abusive  lending laws  applicable to
          the Mortgage  Loan,  including,  without  limitation,  any  provisions
          relating  to  prepayment  penalties,  have  been  complied  with,  the
          consummation of the transactions  contemplated hereby will not involve
          the  violation of any such laws or  regulations,  and the Seller shall
          maintain in its possession,  available for the Purchaser's inspection,
          and shall deliver to the Purchaser upon demand, evidence of compliance
          with all such requirements;

               (d) Valid First or Second Lien.  Each  Mortgage with respect to a
          Mortgage  Loan  identified as a First Lien Loan or Second Lien Loan on
          the  related   Mortgage  Loan  Schedule,   is  a  valid,   subsisting,
          enforceable  and  perfected,  first lien (with respect to a First Lien
          Loan) or second  lien  (with  respect  to a Second  Lien  Loan) on the
          Mortgaged  Property,  including all buildings and  improvements on the
          Mortgaged  Property and all installations and mechanical,  electrical,
          plumbing,  heating and air conditioning  systems located in or annexed
          to such buildings,  and all additions,  alterations  and  replacements
          made  at  any  time  with  respect  to  the  foregoing.  Any  security
          agreement,  chattel  mortgage or  equivalent  document  related to and
          delivered in connection with the Mortgage Loan establishes and creates
          a valid,  subsisting,  enforceable  and  perfected  first  lien  (with
          respect to a First Lien Loan) or second lien (with respect to a Second
          Lien Loan) and first  priority  (with respect to a First Lien Loan) or
          second priority (with respect to a Second Lien Loan) security interest
          on the  property  described  therein  and the Seller has full right to
          sell and assign the same to the Purchaser;

               (e) Validity of Mortgage  Documents.  The  Mortgage  Note and the
          Mortgage and any other agreement executed and delivered by a Mortgagor
          in connection with a Mortgage Loan are genuine, and each is the legal,
          valid and  binding  obligation  of the maker  thereof  enforceable  in
          accordance  with  its  terms  (including,   without  limitation,   any
          provisions therein relating to prepayment  penalties).  All parties to
          the Mortgage Note,  the Mortgage and any other such related  agreement
          had legal  capacity to enter into the Mortgage Loan and to execute and
          deliver the Mortgage  Note, the Mortgage and any such  agreement,  and
          the Mortgage Note,  the Mortgage and any other such related  agreement
          have been duly and properly executed by other such related parties. No
          fraud,  error,  omission,  misrepresentation,  negligence  or  similar
          occurrence with respect to a Mortgage Loan has taken place on the part
          of the Seller in connection  with the origination of the Mortgage Loan
          or in the  application  of any  insurance in relation to such Mortgage
          Loan.  No fraud,  error,  omission,  misrepresentation,  negligence or
          similar  occurrence with respect to a Mortgage Loan has taken place on
          the part of any Person,  including without limitation,  the Mortgagor,
          any appraiser,  any builder or developer,  or any other party involved
          in the  origination of the Mortgage Loan or in the application for any
          insurance in relation to such Mortgage  Loan.  The Seller has reviewed
          all of the documents constituting the Servicing File and has made such
          inquiries  as it deems  necessary  to make and confirm the accuracy of
          the representations set forth herein;

               (f) Full  Disbursement  of Proceeds.  The Mortgage  Loan has been
          closed and the proceeds of the Mortgage Loan have been fully disbursed
          and there is no requirement  for future advances  thereunder,  and any
          and all  requirements  as to  completion  of any  on-site or  off-site
          improvement and as to  disbursements of any escrow funds therefor have
          been complied with. All costs, fees and expenses incurred in making or
          closing the Mortgage Loan and the recording of the Mortgage were paid,
          and the Mortgagor is not entitled to any refund of any amounts paid or
          due under the Mortgage Note or Mortgage;

               (g) Ownership.  The Seller is the sole owner of record and holder
          of the Mortgage Loan and the  indebtedness  evidenced by each Mortgage
          Note and upon the sale of the  Mortgage  Loans to the  Purchaser,  the
          Seller will retain the Mortgage Files or any part thereof with respect
          thereto  not  delivered  to  the  Custodian,   the  Purchaser  or  the
          Purchaser's  designee,  in trust only for the purpose of servicing and
          supervising  the servicing of each Mortgage Loan. The Mortgage Loan is
          not  assigned or pledged,  and the Seller has good,  indefeasible  and
          marketable title thereto,  and has full right to transfer and sell the
          Mortgage  Loan to the  Purchaser  free and  clear of any  encumbrance,
          equity,   participation  interest,  lien,  pledge,  charge,  claim  or
          security  interest,  and has full  right 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  and
          following the sale of each Mortgage  Loan, the Purchaser will own such
          Mortgage Loan free and clear of any encumbrance, equity, participation
          interest, lien, pledge, charge, claim or security interest. The Seller
          intends to relinquish  all rights to possess,  control and monitor the
          Mortgage Loan. After the related Closing Date, the Seller will have no
          right to modify or alter  the terms of the sale of the  Mortgage  Loan
          and the Seller  will have no  obligation  or right to  repurchase  the
          Mortgage Loan or substitute  another Mortgage Loan, except as provided
          in this Agreement;

              (h) Ability to Service. The Seller is an approved seller/servicer
          of residential mortgage loans for FHA with the facilities, procedures,
          and  experienced  personnel  necessary  for  the  sound  servicing  of
          mortgage loans of the same type as the Mortgage  Loans.  The Seller is
          in good standing to sell mortgage loans to and service  mortgage loans
          for FHA,  and no event has  occurred,  including  but not limited to a
          change in insurance  coverage,  which would make the Seller  unable to
          comply  with  FHA  eligibility  requirements  or which  would  require
          notification to FHA;

              (i) No  Additional  Collateral.  The Mortgage Note is not and has
          not  been   secured  by  any   collateral   except  the  lien  of  the
          corresponding  Mortgage  and the security  interest of any  applicable
          security  agreement or chattel  mortgage  referred to in paragraph (d)
          above;

              (j)  Delivery of  Mortgage  Documents.  The  Mortgage  Note,  the
          Mortgage,  the Assignment of Mortgage and any other documents required
          to be delivered  under the Custodial  Agreement for each Mortgage Loan
          have been delivered to the Custodian. The Seller is in possession of a
          complete, true and accurate Mortgage File in compliance with Exhibit~A
          hereto,  except for such  documents  the  originals of which have been
          delivered to the Custodian;

               (k)  Collection   Practices.   The  origination,   servicing  and
          collection  practices used by the Seller and the Interim Servicer with
          respect to the Mortgage  Loan have been in all respects in  compliance
          with Accepted  Servicing  Practices,  applicable laws and regulations,
          and have been in all respects legal and proper;

               (l)  FHA  Mortgage   Loans.   Except  for  those  Mortgage  Loans
          identified on the related Mortgage Loan Schedule as FHA Mortgage Loans
          (i.e., Title~I loans), no Mortgage Loan is an FHA Mortgage Loan (i.e.,
          Title~I loan);

               (m)  Recordation.  Each  original  Mortgage  was recorded and all
          subsequent  assignments  of the  original  Mortgage  (other  than  the
          assignment to the  Purchaser)  have been  recorded in the  appropriate
          jurisdictions  wherein  such  recordation  is necessary to perfect the
          lien thereof as against  creditors of the Seller, or is in the process
          of being recorded; and

              (n) Except with respect to normal and  customary  bankruptcy  and
          foreclosure  proceedings,  there is no  action,  suit,  proceeding  or
          investigation pending or threatened with respect to any Mortgage Loan,
          before any court, administrative agency or other tribunal.

Subsection 9.03   Remedies for Breach of Representations and Warranties.

               It  is  understood  and  agreed  that  the   representations  and
          warranties  set forth in  Subsections 9.01  and 9.02 shall survive the
          sale of the  Mortgage  Loans to the  Purchaser  and shall inure to the
          benefit of the Purchaser, notwithstanding any restrictive or qualified
          endorsement  on any  Mortgage  Note or  Assignment  of Mortgage or the
          examination or failure to examine any Mortgage File. Upon discovery by
          either the Seller or the Purchaser of a breach of any of the foregoing
          representations  and  warranties,  the party  discovering  such breach
          shall give prompt written notice to the other.

               Within 60 days of the earlier of either discovery by or notice to
          the Seller of any such breach of a representation  or warranty,  which
          materially  and adversely  affects the value of the Mortgage  Loans or
          the  interest  of the  Purchaser  therein  (or  which  materially  and
          adversely  affects the value of the  applicable  Mortgage  Loan or the
          interest of the Purchaser therein in the case of a representation  and
          warranty relating to a particular Mortgage Loan), the Seller shall use
          its best efforts promptly to cure such breach in all material respects
          and,  if such  breach  cannot  be  cured,  the  Seller  shall,  at the
          Purchaser's  option,  repurchase  such Mortgage Loan at the Repurchase
          Price. In the event that a breach shall involve any  representation or
          warranty set forth in Subsection`9.01, and such breach cannot be cured
          within 60 days of the earlier of either  discovery by or notice to the
          Seller of such  breach,  all of the  Mortgage  Loans  affected by such
          breach shall, at the Purchaser's  option, be repurchased by the Seller
          at the  Repurchase  Price.  Any repurchase of a Mortgage Loan or Loans
          pursuant to the foregoing provisions of this Subsection~9.03  shall be
          accomplished by either (a)~if the Interim Servicing Agreement has been
          entered into and is in effect,  deposit in the  Collection  Account of
          the amount of the Repurchase  Price for  distribution to the Purchaser
          on the next scheduled  Remittance Date, after deducting  therefrom any
          amount received in respect of such repurchased  Mortgage Loan or Loans
          and being held in the Collection  Account for future  distribution  or
          (b)~if the Interim Servicing Agreement has not been entered into or is
          no longer in effect,  by direct  remittance of the Repurchase Price to
          the  Purchaser  or its  designee in  accordance  with the  Purchaser's
          instructions.

               At the time of  repurchase,  the  Purchaser  and the Seller shall
          arrange  for the  reassignment  of the  Deleted  Mortgage  Loan to the
          Seller and the  delivery  to the Seller of any  documents  held by the
          Custodian  relating to the Deleted  Mortgage  Loan.  In the event of a
          repurchase or substitution, the Seller shall, simultaneously with such
          reassignment,   give  written   notice  to  the  Purchaser  that  such
          repurchase  has taken  place,  amend the  Mortgage  Loan  Schedule  to
          reflect  the  withdrawal  of  the  Deleted  Mortgage  Loan  from  this
          Agreement.

               In  addition  to such  repurchase  obligation,  the Seller  shall
          indemnify  the  Purchaser  and  its  present  and  former   directors,
          officers,  employees  and agents and any  successor  Servicer  and its
          present and former directors,  officers, employees and agents and hold
          such parties harmless against any losses, damages,  penalties,  fines,
          forfeitures, legal fees and expenses 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 breach of
          the Seller  representations and warranties contained in this Agreement
          or any Reconstitution  Agreement. It is understood and agreed that the
          obligations of the Seller set forth in this  Subsection~9.03  to cure,
          substitute  for  or  repurchase  a  defective  Mortgage  Loan  and  to
          indemnify the  Purchaser  and  Successor  Servicer as provided in this
          Subsection~9.03 and in  Subsection~14.01  constitute the sole remedies
          of the Purchaser respecting a breach of the foregoing  representations
          and warranties.  For purposes of this paragraph "Purchaser" shall mean
          the Person then acting as the Purchaser  under this  Agreement and any
          and all Persons who previously were "Purchasers"  under this Agreement
          and  "Successor  Servicer"  shall  mean any Person  designated  as the
          Successor  Servicer pursuant to this Agreement and any and all Persons
          who previously were "Successor Servicers" pursuant to this Agreement.

               Any cause of action against the Seller relating to or arising out
          of  the  breach  of  any   representations   and  warranties  made  in
          Subsections~9.01  and 9.02 shall accrue as to any  Mortgage  Loan upon
          (i)~discovery of such breach by the Purchaser or notice thereof by the
          Seller  to the  Purchaser,  (ii)~failure  by the  Seller  to cure such
          breach or  repurchase  such  Mortgage  Loan as  specified  above,  and
          (iii)~demand upon the Seller by the Purchaser for compliance with this
          Agreement.

SECTION 10.       Closing.

               The  closing  for the  purchase  and sale of each  Mortgage  Loan
          Package  shall  take  place  on  the  related  Closing  Date.  At  the
          Purchaser's  option,  each  Closing  shall be  either:  by  telephone,
          confirmed by letter or wire as the parties  shall agree,  or conducted
          in person, at such place as the parties shall agree.

               The  closing  for the  Mortgage  Loans  to be  purchased  on each
          Closing Date shall be subject to each of the following conditions:

               (i) at least two Business Days prior to the related Closing Date,
          the Seller  shall  deliver to the  Purchaser a magnetic  diskette,  or
          transmit by modem,  a listing on a loan-level  basis of the  necessary
          information  to  compute  the  Purchase  Price of the  Mortgage  Loans
          delivered on such  Closing  Date  (including  accrued  interest),  and
          prepare a Mortgage Loan Schedule;

               (ii) all of the  representations  and  warranties  of the  Seller
          under this  Agreement  and of the Interim  Servicer  under the Interim
          Servicing Agreement (with respect to each Mortgage Loan for an interim
          period,  as  specified  therein)  shall be true and  correct as of the
          related  Closing  Date and no event shall have  occurred  which,  with
          notice or the passage of time,  would  constitute a default under this
          Agreement  or  an  Event  of  Default  under  the  Interim   Servicing
          Agreement;

               (iii) the  Purchaser  shall  have  received,  or the  Purchaser's
          attorneys  shall have  received in escrow,  all closing  documents  as
          specified in Section~11 of this Agreement, in such forms as are agreed
          upon and acceptable to the Purchaser, duly executed by all signatories
          other than the Purchaser as required pursuant to the terms hereof;

               (iv)  the  Seller  shall  have  delivered  and  released  to  the
          Custodian all documents required pursuant to the Custodial  Agreement;
          and

               (v) all other terms and conditions of this  Agreement  shall have
          been complied with.

              Subject to the foregoing  conditions,  the Purchaser shall pay to
          the Seller on the related  Closing Date the Purchase  Price,  plus any
          applicable  accrued interest  pursuant to Section~4 of this Agreement,
          by  wire  transfer  of  immediately  available  funds  to the  account
          designated by the Seller.

SECTION 11.       Closing Documents.

The Closing  Documents  for the  Mortgage  Loans to be purchased on each Closing
Date shall consist of fully executed originals of the following documents:
(1)      this Agreement (to be executed and delivered only for the initial
         Closing Date);

(2)      the Interim Servicing  Agreement, dated as of the initial Cut-off Date
        (to be executed and delivered only for the initial Closing Date);

(3)      with respect to the initial Closing Date, the Custodial Agreement,
         dated as of the initial Cut-off Date;

(4)      the  related  Mortgage  Loan  Schedule to be attached to the  related
         Assignment and Conveyance as the Mortgage Loan Schedule thereto);

(5)      with respect to the initial Closing Date, an Officer's Certificate, in
         the form of Exhibit~C hereto with respect to each of the  Seller,
         including all attachments  thereto;  with  respect to subsequent
         Closing Dates, an Officer's Certificate upon request of the Purchaser;

(6)      with respect to the initial  Closing  Date, an Opinion of Counsel of
         the Seller (who may be an employee of the Seller), in the form of
         Exhibit~D  hereto  ("Opinion  of Counsel of the "Seller"); with
         respect to subsequent  Closing  Dates,  an Opinion of Counsel of the
         Seller upon request of the Purchaser;

(7)      a  certificate or other evidence of merger or change of name, signed or
        stamped  by the applicable regulatory authority,  if any of the Mortgage
        Loans  were  acquired by the Seller by merger or acquired or originated
        by the Seller while conducting  business under a name other than its
        present name, if applicable; and.

(8)      Assignment and Conveyance Agreement in the form of Exhibit~D hereto,
         and all exhibits thereto.

The Seller shall bear the risk of loss of the closing  documents until such time
as they are received by the Purchaser or its attorneys.

SECTION 12.       Costs.

The Purchaser  shall pay any commissions due its salesmen and the legal fees and
expenses of its  attorneys  and  custodial  fees.  All other costs and  expenses
incurred in connection  with the transfer and delivery of the Mortgage Loans and
the  Servicing  Rights and the Seller's  attorney's  fees,  shall be paid by the
Seller.

SECTION 13.       Cooperation of Seller with a Reconstitution.

               The Seller and the  Purchaser  agree that with respect to some or
          all of the Mortgage  Loans,  after the related Closing Date, on one or
          more dates (each, a  "Reconstitution  Date") at the  Purchaser's  sole
          option, the Purchaser may effect a sale (each, a "Reconstitution")  of
          some or all of the  Mortgage  Loans then  subject  to this  Agreement,
          without recourse, to:

(i)      one or more third party purchasers in one or more Whole Loan Transfers;
 or

(ii)     one or more trusts or other entities to be formed as part of one or
more Securitization Transfers.

               With respect to each Whole Loan Transfer and each  Securitization
          Transfer entered into by the Purchaser, the Seller agrees to cooperate
          fully with the Purchaser and any prospective purchaser with respect to
          all reasonable requests and due diligence procedures. The Seller shall
          provide to such servicer or issuer,  as the case may be, and any other
          participants  or  purchasers in such  Reconstitution:  (i)~any and all
          information and appropriate  verification of information  which may be
          reasonably available to the Seller or its affiliates,  whether through
          letters of its auditors and counsel or otherwise,  as the Purchaser or
          any such other  participant  shall request;  and (ii)~such  additional
          representations,  warranties,  covenants, opinions of counsel, letters
          from auditors, and certificates of public officials or officers of the
          Seller or the Interim Servicer as are reasonably believed necessary by
          the  Purchaser  or any such other  participant.  For  purposes  of the
          previous  sentence,  "Purchaser"  shall mean the Person then acting as
          the  Purchaser  under  this  Agreement  and any and  all  Persons  who
          previously were "Purchasers" under this Agreement.  Any costs incurred
          by the Seller in  connection  with its  cooperation  pursuant  to this
          Section~13 shall be at the expense of the Purchaser.

               In the event the  Purchaser has elected to have the Seller or the
          Interim  Servicer  hold record  title to the  Mortgages,  prior to the
          Reconstitution  Date,  the  Seller  shall  prepare  an  assignment  of
          mortgage  in blank or to the  prospective  purchaser  or  trustee,  as
          applicable,  from the Seller or the Interim  Servicer,  as applicable,
          acceptable to the prospective purchaser or trustee, as applicable, for
          each  Mortgage Loan that is part of the  Reconstitution  and shall pay
          all  preparation  and  recording  costs   associated   therewith.   In
          connection with the Reconstitution,  the Seller shall execute or shall
          cause the Interim  Servicer to execute  each  assignment  of mortgage,
          track such  Assignments  of Mortgage to ensure they have been recorded
          and deliver them as required by the prospective  purchaser or trustee,
          as applicable,  upon the Seller's receipt thereof.  Additionally,  the
          Seller shall  prepare and execute or shall cause the Interim  Servicer
          to execute, at the direction of the Purchaser, any note endorsement in
          connection with any and all seller/servicer agreements.

               All  Mortgage  Loans  not  sold  or  transferred  pursuant  to  a
          Reconstitution  shall  remain  subject to this  Agreement  and, if the
          Interim Servicing Agreement shall remain in effect with respect to the
          related  Mortgage  Loan  Package,  shall  continue  to be  serviced in
          accordance with the terms of this Agreement and the Interim  Servicing
          Agreement and with respect thereto this Agreement shall remain in full
          force and effect.

SECTION 14.       The Seller.

Subsection 14.01  Additional Indemnification by the Seller; Third Party Claims.
               (a) The Seller shall  indemnify the Purchaser and its present and
          former  directors,  officers,  employees  and agents and any Successor
          Servicer and its present and former directors, officers, employees and
          agents,  and hold such  parties  harmless  against any and all claims,
          losses,  damages,  penalties,  fines,  forfeitures,   legal  fees  and
          expenses  (including  legal fees and expenses  incurred in connection
          with the enforcement of the Seller's indemnification  obligation under
          this  Subsection~14.01)  and related costs,  judgments,  and any other
          costs,  fees and  expenses  that such  parties  may sustain in any way
          related to the  failure  of the  Seller to perform  its duties and the
          Interim  Servicer to service the Mortgage  Loans in strict  compliance
          with the terms of this  Agreement  or any  breach  of any of  Seller's
          representations,  warranties and covenants set forth in this Agreement
          (provided  that such costs shall not include  any lost  profits).  For
          purposes  of this  paragraph  "Purchaser"  shall mean the Person  then
          acting as the Purchaser  under this  Agreement and any and all Persons
          who previously were  "Purchasers"  under this Agreement and "Successor
          Servicer" shall mean any Person  designated as the Successor  Servicer
          pursuant to this Agreement and any and all Persons who previously were
          "Successor Servicers" pursuant to this Agreement.
               (b) Promptly  after  receipt by an  indemnified  party under this
          Subsection~14.01  of notice of the  commencement  of any action,  such
          indemnified  party will,  if a claim in respect  thereof is to be made
          against the indemnifying party under this Subsection~14.01, notify the
          indemnifying  party in writing of the  commencement  thereof;  but the
          omission  so to notify the  indemnifying  party will not  relieve  the
          indemnifying  party  from  any  liability  which  it may  have  to any
          indemnified  party under this  Subsection~14.01,  except to the extent
          that it has  been  prejudiced  in any  material  respect,  or from any
          liability   which   it   may   have,   otherwise   than   under   this
          Subsection~14.01.  In case any such  action  is  brought  against  any
          indemnified  party  and it  notifies  the  indemnifying  party  of the
          commencement  thereof,  the  indemnifying  party will be  entitled  to
          participate  therein,  and to the extent  that it may elect by written
          notice delivered to the indemnified party promptly after receiving the
          aforesaid  notice from such  indemnified  party, to assume the defense
          thereof,  with counsel  reasonably  satisfactory  to such  indemnified
          party; provided that if the defendants in any such action include both
          the indemnified  party and the indemnifying  party and the indemnified
          party or parties  shall have  reasonably  concluded  that there may be
          legal  defenses  available  to it or  them  and/or  other  indemnified
          parties which are different  from or additional to those  available to
          the indemnifying  party,  the indemnified  party or parties shall have
          the right to select separate counsel to assert such legal defenses and
          to  otherwise  participate  in the defense of such action on behalf of
          such  indemnified  party or parties.  Upon  receipt of notice from the
          indemnifying  party to such  indemnified  party of its  election so to
          assume the  defense of such  action and  approval  by the  indemnified
          party of counsel,  the  indemnifying  party will not be liable to such
          indemnified  party for expenses  incurred by the indemnified  party in
          connection with the defense thereof unless (i)~the  indemnified  party
          shall have employed  separate counsel in connection with the assertion
          of legal defenses in accordance with the proviso to the next preceding
          sentence (it being understood,  however,  that the indemnifying  party
          shall not be liable for the expenses of more than one separate counsel
          (together  with  one  local   counsel,   if   applicable)),   (ii)~the
          indemnifying   party  shall  not  have  employed  counsel   reasonably
          satisfactory  to the  indemnified  party to represent the  indemnified
          party within a reasonable  time after  notice of  commencement  of the
          action or (iii)~the  indemnifying  party has authorized in writing the
          employment of counsel for the indemnified  party at the expense of the
          indemnifying  party;  and  except  that,  if  clause  (i) or  (iii) is
          applicable,  such  liability  shall be only in respect of the  counsel
          referred to in such clause (i) or (iii).

Subsection 14.02  Merger or Consolidation of the Seller.

               The Seller  will keep in full  effect its  existence,  rights and
          franchises  as a  corporation  under  the  laws  of the  state  of its
          incorporation except as permitted herein, and will obtain and preserve
          its  qualification  to do  business as a foreign  corporation  in each
          jurisdiction in which such  qualification  is or shall be necessary to
          protect the validity and  enforceability of this Agreement,  or any of
          the Mortgage Loans and to perform its duties under this Agreement.

               Any Person  into which the Seller may be merged or  consolidated,
          or  any   corporation   resulting  from  any  merger,   conversion  or
          consolidation  to which the  Seller  shall be a party,  or any  Person
          succeeding  to the business of the Seller,  shall be the  successor of
          the Seller 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
          creditworthiness  of the  successor or  surviving  Person shall not be
          materially and adversely  different from the  creditworthiness  of the
          Seller at such time.

SECTION 15.       Financial Statements.

               The Seller  understands  that in connection  with the Purchaser's
          marketing of the Mortgage Loans, the Purchaser shall make available to
          prospective  purchasers audited financial statements of the Seller for
          the most recently  completed three fiscal years  respecting which such
          statements  are  available.  The Seller shall also make  available any
          comparable  interim  statements to the extent any such statements have
          been prepared by the Seller (and are available upon request to members
          or stockholders of the Seller or the public at large).  The Seller, if
          it has  not  already  done  so,  agrees  to  furnish  promptly  to the
          Purchaser  copies of the statements  specified above. The Seller shall
          also make  available  information  on its servicing  performance  with
          respect to loans serviced for others, including delinquency ratios.

               The  Seller  also  agrees  to  allow   reasonable   access  to  a
          knowledgeable  financial  or  accounting  officer  for the  purpose of
          answering  questions  asked  by any  prospective  purchaser  regarding
          recent developments  affecting the Seller or the financial  statements
          of the Seller.

                    Notwithstanding anything to the contrary in this Section~15,
               the  Purchaser  shall  not  disclose  any  financial   statements
               received under this Section~15  without the prior written consent
               of the Seller,  except to the extent that it is  appropriate  for
               the Purchaser to do so in working with legal  counsel,  auditors,
               taxing authorities or other governmental agencies.

SECTION 16.       [Reserved].

SECTION 17.       Notices.

All demands,  notices and communications hereunder shall be in writing and shall
be deemed to have been duly given if mailed,  by registered  or certified  mail,
return  receipt  requested,  or, if by other means,  when  received by the other
party at the address as follows:
(i)      if to the Seller:

                           Master Financial, Inc.
                           505 City Parkway West, Suite 800
                           Orange, California  92868
                           Attention:  Michael J. Kim
(ii)     if to the Purchaser:

                           Franklin Credit Management Corporation
                           6 Harrison Street, 6th Floor
                           New York, New York  10013
                           Attention:  Alan Joseph

or such other  address as may  hereafter be furnished to the other party by like
notice.  Any such demand,  notice or communication  hereunder shall be deemed to
have been  received on the date  delivered to or received at the premises of the
addressee (as  evidenced,  in the case of  registered or certified  mail, by the
date noted on the return receipt).

SECTION 18.       Severability Clause.

Any part,  provision  representation  or  warranty  of this  Agreement  which is
prohibited  or  unenforceable  or is held to be  void  or  unenforceable  in any
jurisdiction  shall be ineffective,  as to such  jurisdiction,  to the extent of
such  prohibition  or  unenforceability   without   invalidating  the  remaining
provisions  hereof,  and  any  such  prohibition  or   unenforceability  in  any
jurisdiction   as  to  any  Mortgage   Loan  shall  not   invalidate  or  render
unenforceable such provision in any other jurisdiction.  To the extent permitted
by applicable law, the parties hereto waive any provision of law which prohibits
or renders void or unenforceable  any provision hereof. If the invalidity of any
part, provision,  representation or warranty of this Agreement shall deprive any
party of the economic  benefit  intended to be conferred by this Agreement,  the
parties  shall  negotiate,  in  good-faith,  to develop a structure the economic
effect of which is nearly as possible  the same as the  economic  effect of this
Agreement without regard to such invalidity.

SECTION 19.       Counterparts.

This  Agreement may be executed  simultaneously  in any number of  counterparts.
Each counterpart  shall be deemed to be an original,  and all such  counterparts
shall constitute one and the same instrument.

SECTION 20.       Governing Law.

This  Agreement  shall be  deemed in effect  when a fully  executed  counterpart
thereof  is  received  by the  Purchaser  in the  State of New York and shall be
deemed  to have  been made in the  State of New  York.  The  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 the substantive laws of the State of New York (without regard to
conflicts of laws principles), except to the extent preempted by Federal law.

SECTION 21.       Intention of the Parties.

It is the  intention of the parties that the  Purchaser is  purchasing,  and the
Seller is selling the Mortgage Loans and not a debt  instrument of the Seller or
another  security.  Accordingly,  the  parties  hereto  each intend to treat the
transaction  for Federal  income tax  purposes  as a sale by the  Seller,  and a
purchase by the Purchaser,  of the Mortgage  Loans.  Moreover,  the  arrangement
under which the Mortgage Loans are held shall be consistent with  classification
of such arrangement as a grantor trust in the event it is not found to represent
direct  ownership of the Mortgage  Loans.  The Purchaser shall have the right to
review the Mortgage  Loans and the related  Mortgage Loan Files to determine the
characteristics  of the Mortgage Loans which shall affect the Federal income tax
consequences  of owning the Mortgage  Loans and the Seller shall  cooperate with
all reasonable requests made by the Purchaser in the course of such review.

SECTION 22.       Successors and Assigns; Assignment of Purchase Agreement.

                    This Agreement shall bind and inure to the benefit of and be
               enforceable  by the Seller and the Purchaser  and the  respective
               permitted successors and assigns of the Seller and the successors
               and  assigns  of  the  Purchaser.  This  Agreement  shall  not be
               assigned,  pledged or hypothecated by the Seller to a third party
               without  the  prior  written  consent  of  the  Purchaser.   This
               Agreement  may  be  assigned,  pledged  or  hypothecated  by  the
               Purchaser in whole or in part, and with respect to one or more of
               the  Mortgage  Loans,  without the consent of the Seller.  In the
               event the  Purchaser  assigns  this  Agreement,  and the assignee
               assumes any of the Purchaser's obligations hereunder,  the Seller
               acknowledges and agrees to look solely to such assignee,  and not
               to the Purchaser,  for  performance of the obligations so assumed
               and the  Purchaser  shall be relieved  from any  liability to the
               Seller with respect thereto.

SECTION 23.       Waivers.
                    No term or  provision  of this  Agreement  may be  waived or
               modified  unless  such waiver or  modification  is in writing and
               signed by the party against whom such waiver or  modification  is
               sought to be enforced.

SECTION 24.       Exhibits.

The exhibits to this  Agreement are hereby  incorporated  and made a part hereof
and are an integral part of this Agreement.

SECTION 25.       General Interpretive Principles.

For purposes of this Agreement, except as otherwise expressly provided or unless
the context otherwise requires:
(a) the terms defined in this  Agreement  have the meanings  assigned to them in
this  Agreement and include the plural as well as the  singular,  and the use of
any gender herein shall be deemed to include the other gender;
(b) accounting terms not otherwise  defined herein have the meanings assigned to
them in accordance with generally accepted accounting principles;
(c) references herein to "Articles,"  "Sections,"  "Subsections,"  "Paragraphs,"
and  other  subdivisions  without  reference  to a  document  are to  designated
Articles,  Sections,  Subsections,  Paragraphs  and other  subdivisions  of this
Agreement;
(d)  reference  to a  Subsection  without  further  reference  to a Section is a
reference  to such  Subsection  as  contained  in the same  Section in which the
reference  appears,  and this rule  shall  also  apply to  Paragraphs  and other
subdivisions;
(e) the words "herein," "hereof,"  "hereunder" and other words of similar import
refer to this Agreement as a whole and not to any particular provision; and
(f)      the term "include" or "including" shall mean without limitation by
reason of enumeration.

SECTION 26.       Reproduction of Documents.

                    This   Agreement   and  all  documents   relating   thereto,
               including,   without   limitation,   (a)~consents,   waivers  and
               modifications  which may  hereafter  be  executed,  (b)~documents
               received  by  any  party  at  the  closing,   and   (c)~financial
               statements,  certificates  and other  information  previously  or
               hereafter  furnished,  may be  reproduced  by  any  photographic,
               photostatic,  microfilm,  micro-card,  miniature  photographic or
               other   similar   process.   The  parties  agree  that  any  such
               reproduction  shall be  admissible  in evidence  as the  original
               itself in any judicial or administrative  proceeding,  whether or
               not  the  original  is in  existence  and  whether  or  not  such
               reproduction  was  made  by a  party  in the  regular  course  of
               business,   and  that  any  enlargement,   facsimile  or  further
               reproduction of such reproduction shall likewise be admissible in
               evidence.

SECTION 27.       Further Agreements.

The Seller and the Purchaser each agree to execute and deliver to the other such
reasonable and appropriate  additional  documents,  instruments or agreements as
may be necessary or appropriate to effectuate the purposes of this Agreement.

SECTION 28.       [Reserved].

SECTION 29.       No Solicitation.

From and after the related Closing Date, the Seller agrees that it will not take
any  action or permit  or cause any  action to be taken by any of its  agents or
affiliates,  or by any  independent  contractors  on  the  Seller's  behalf,  to
personally, by telephone or mail (via electronic means or otherwise),  solicit a
Mortgagor  under any  Mortgage  Loan for the purpose of  refinancing  a Mortgage
Loan, in whole or in part,  without the prior written  consent of the Purchaser.
Notwithstanding  the foregoing,  it is understood and agreed that the Seller, or
any of its respective affiliates:
                    (i) may advertise its availability for handling refinancings
               of mortgages in its  portfolio,  including the promotion of terms
               it has  available for such  refinancings,  through the sending of
               letters  or  promotional   material,  so  long  as  it  does  not
               specifically  target  Mortgagors and so long as such  promotional
               material  either  is  sent  to  the  mortgagors  for  all  of the
               mortgages in the servicing portfolio of the Seller and any of its
               affiliates  (those it owns as well as those serviced for others);
               and
                    (ii) may provide pay-off information and otherwise cooperate
               with  individual  mortgagors who contact it about prepaying their
               mortgages by advising them of refinancing  terms and  streamlined
               origination arrangements that are available.

Promotions  undertaken by the Seller or by any affiliate of the Seller which are
directed to the general public at large  (including,  without  limitation,  mass
mailing based on  commercially  acquired  mailing  lists,  newspaper,  radio and
television  advertisements),   shall  not  constitute  solicitation  under  this
Section~29.

SECTION 30.       Waiver of Trial by Jury.

THE SELLER AND THE  PURCHASER  EACH  KNOWINGLY,  VOLUNTARILY  AND  INTENTIONALLY
WAIVES TO THE FULLEST  EXTENT  PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.

SECTION 31.       Governing Law Jurisdiction; Consent to Service of Process.

THIS  AGREEMENT  SHALL BE  DEEMED IN EFFECT  WHEN A FULLY  EXECUTED  COUNTERPART
THEREOF  IS  RECEIVED  BY THE  PURCHASER  IN THE  STATE OF NEW YORK AND SHALL BE
DEEMED  TO HAVE BEEN MADE IN THE  STATE OF NEW  YORK.  THIS  AGREEMENT  SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
ITS CHOICE OF LAW RULES AND  PRINCIPLES.  EACH OF THE  PURCHASER  AND THE SELLER
IRREVOCABLY (I)~SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE
OF NEW YORK AND THE  FEDERAL  COURTS OF THE  UNITED  STATES OF  AMERICA  FOR THE
SOUTHERN  DISTRICT  OF NEW YORK FOR THE  PURPOSE  OF ANY  ACTION  OR  PROCEEDING
RELATING TO THIS AGREEMENT; (II)~WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
THE DEFENSE OF AN  INCONVENIENT  FORUM IN ANY ACTION OR  PROCEEDING  IN ANY SUCH
COURT;  (III)~AGREES  THAT A FINAL  JUDGMENT IN ANY ACTION OR  PROCEEDING IN ANY
SUCH COURT SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER  JURISDICTION BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER  PROVIDED BY LAW; AND  (IV)~CONSENTS
TO SERVICE  OF PROCESS  UPON IT BY  MAILING A COPY  THEREOF  BY  CERTIFIED  MAIL
ADDRESSED TO IT AS PROVIDED FOR NOTICES HEREUNDER.

                                             [Signature Page Follows]

<PAGE>



IN WITNESS  WHEREOF,  the Seller and the Purchaser have caused their names to be
signed hereto by their respective  officers  thereunto duly authorized as of the
date first above written.


                              FRANKLIN CREDIT MANAGEMENT CORPORATION
                                       (Purchaser)


                         By:______________________________________
                         Name:____________________________________
                         Title:___________________________________


                                   MASTER FINANCIAL, INC.
                                         (Seller)


                         By:_______________________________________
                         Name:_____________________________________
                         Title:____________________________________

<PAGE>




                                    EXHIBIT A

                         CONTENTS OF EACH MORTGAGE FILE

With respect to each Mortgage  Loan, the Mortgage File shall include each of the
following  items,  which shall be available for  inspection by the Purchaser and
any prospective Purchaser,  and which shall be delivered to the Custodian, or to
such other  Person as the  Purchaser  shall  designate  in writing,  pursuant to
Section~6 of the Mortgage Loan Purchase and  Warranties  Agreement to which this
Exhibit is attached (the "Agreement"):

(a)      the  original  Mortgage  Note  bearing  all  intervening  endorsements,
         endorsed  "Pay  to the  order of _________,  without  recourse"  and
         signed in the name of the last  endorsee  (the "Last  Endorsee") by an
         authorized  officer.  To the  extent  that  there  is no  room  on the
         face  of the  Mortgage  Notes for endorsements,  the  endorsement
         may be contained on an allonge,  if state law so allows and the
         Custodian is so advised by the Seller  that state law so allows.  If
         the  Mortgage  Loan was  acquired by the Seller in  a  merger,   the
         endorsement  must  be  by  "[Last  Endorsee],   successor  by  merger
         to  [name  of predecessor]."  If the Mortgage Loan was acquired or
         originated by the Last Endorsee  while doing business under another
         name, the endorsement must be by "[Last Endorsee], formerly known as
         [previous name]";

(b)      [the  original of any  guarantee  executed in  connection  with the
          Mortgage  Note;]

(c)      the original Mortgage with evidence of recording  thereon.  If in
         connection with any Mortgage  Loan,  the Seller cannot deliver or
         cause to be delivered the original  Mortgage with evidence of
         recording thereon on or prior to the Closing Date  because  of a delay
         caused by the  public  recording  office  where such Mortgage has been
         delivered for  recordation  or because such Mortgage has been lost or
         because  such public  recording office  retains the  original recorded
         Mortgage,  the Seller shall deliver or cause to be delivered to the
         Custodian, a photocopy of such  Mortgage,  together with (i)~in the
         case of a delay caused by the  public  recording  office, an Officer's
         Certificate  of the  Seller (or certified by the title company,
         escrow agent, or closing attorney) stating that such Mortgage has been
         dispatched to the appropriate public recording office for recordation
         and that the original  recorded  Mortgage or a copy of such Mortgage
         certified by such public  recording office to be a true and complete
         copy of the original  recorded  Mortgage will be promptly  delivered
         to the Custodian upon receipt thereof by the Seller; or (ii)~in the
         case of a Mortgage where a public recording office retains the original
         recorded  Mortgage or in the case where a Mortgage is lost after
         recordation in a public recording office, a copy of such Mortgage
         certified  by such public recording office to be a true and complete
         copy of the original recorded Mortgage;

(d)      the  originals of all  assumption,  modification,  consolidation  or
         extension  agreements,  if any, with evidence of recording thereon;

(e)      the  original Assignment of Mortgage for each  Mortgage  Loan, in form
         and  substance  acceptable for recording.  If the Mortgage Loan was
         acquired by the Seller in a merger,  the  Assignment of Mortgage must
         be made by  "[Seller],  successor by merger to [name of  predecessor]."
         If the Mortgage Loan was acquired or originated by the Seller while
         doing business under another name,  the Assignment of Mortgage must be
         by "[Seller], formerly known as [previous name]";

(f)      the  originals  of all  intervening  assignments  of  mortgage (if any)
         evidencing  a complete  chain of assignment  from the Seller to the
         Last  Endorsee  with  evidence  of  recording  thereon,  or if any such
         intervening  assignment has not been returned from the applicable
         recording office or has been lost or if such public  recording  office
         retains the original  recorded  assignments  of mortgage,  the Seller
         shall deliver or cause to be delivered to the Custodian,  a photocopy
         of such intervening  assignment,  together with (i)~in the case of a
         delay caused by the public  recording  office,  an Officer's
         Certificate of the Seller (or certified by the title  company, escrow
         agent, or closing attorney)  stating  that such intervening assignment
         of mortgage has been dispatched to the  appropriate  public  recording
         office for recordation  and  that  such original recorded intervening
         assignment of mortgage or a copy of such intervening  assignment of
         mortgage certified by the appropriate public recording office to be a
         true and complete copy of the original recorded intervening assignment
         of mortgage will be promptly  delivered to the Custodian upon receipt
         thereof by the Seller; or (ii)~in the case of an intervening assignment
         where a public recording office retains the original recorded
         intervening assignment or in the case where an intervening assignment
         is  lost  after  recordation  in a  public  recording  office,  a
         copy  of  such intervening  assignment  certified by such public
         recording  office to be a true and complete copy of the original
         recorded intervening assignment;

(g)      the original FHA Contract of Insurance, with respect to each FHA
         Mortgage Loan; and

(h)      the  original  or, if  unavailable,  a copy of any security agreement,
         chattel  mortgage or  equivalent document executed in connection with
         the Mortgage.

In the  event  an  Officer's  Certificate  of the  Seller  is  delivered  to the
Purchaser  because of a delay caused by the public recording office in returning
any recorded document, the Seller shall deliver to the Purchaser, within 90 days
of the related Closing Date, an Officer's  Certificate which shall  (i)~identify
the  recorded  document,  (ii)~state  that the  recorded  document  has not been
delivered to the Custodian due solely to a delay caused by the public  recording
office,  (iii)~state  the amount of time  generally  required by the  applicable
recording office to record and return a document submitted for recordation,  and
(iv)~specify the date the applicable  recorded document will be delivered to the
Custodian;  provided,  however,  that any recorded document shall in no event be
delivered  later than one year following the related  Closing Date. An extension
of the date specified in clause  (iv)~above may be requested from the Purchaser,
which consent shall not be unreasonably withheld.


<PAGE>




                                    EXHIBIT B

                         SELLER'S OFFICER'S CERTIFICATE

                    I,  ____________________,  hereby certify that I am the duly
               elected [Vice]~President of Master Financial, Inc., a corporation
               organized  under  the  laws  of  the  state  of  California  (the
               "Company") and further as follows:
                    (i)  Attached  hereto as  Exhibit~1  is a true,  correct and
               complete  copy of the  Articles of  Incorporation  of the Company
               dated  September~8,  1981 along with an  Amendment to Articles of
               Incorporation  dated  December~11,  2002,  which are both in full
               force and effect on the date hereof.
                    (ii)  Attached  hereto as Exhibit~2  is a true,  correct and
               complete copy of the bylaws of the Company which are in effect on
               the date hereof and which have been in effect without  amendment,
               waiver, rescission or modification since ___________.
                    (iii)   Attached   hereto  as   Exhibit`3   is  an  original
               certificate of good standing of the Company issued within fifteen
               days of the date hereof, and no event has occurred since the date
               thereof which would impair such standing.
                    (iv)  Attached  hereto as Exhibit~4  is a true,  correct and
               complete  copy  of the  corporate  resolutions  of the  Board  of
               Directors of the Company  authorizing  the Company to execute and
               deliver (a)the Mortgage Loan Purchase and Warranties  Agreement,
               dated as of September 24, 2004 (the "Purchase Agreement"), by and
               between Franklin Credit Management  Corporation (the "Purchaser")
               and the  Company  and (b)~the  Servicing  Agreement,  dated as of
               September~24,  2004 (the "Servicing  Agreement"),  by and between
               the Purchaser and the Company, and such resolutions are in effect
               on the date  hereof  and have been in effect  without  amendment,
               waiver, rescission or modification since ____________.
                    (v) Either (i)~no consent, approval,  authorization or order
               of any court or  governmental  agency or body is required for the
               execution,   delivery  and  performance  by  the  Company  of  or
               compliance by the Company with the Purchase  Agreement,  the sale
               of the mortgage  loans or the  consummation  of the  transactions
               contemplated by the  agreements;  or (ii)~any  required  consent,
               approval,  authorization  or  order  has  been  obtained  by  the
               Company.
                    (vi)   Neither   the   consummation   of  the   transactions
               contemplated by, nor the fulfillment of the terms of the Purchase
               Agreement  conflicts  or will  conflict  with or  results or will
               result in a breach of or constitutes or will constitute a default
               under the charter or by-laws of the Company or, to the best of my
               knowledge,  the  terms of any  indenture  or other  agreement  or
               instrument  to  which  the  Company  is a party or by which it is
               bound or to which it is subject,  or any statute or order,  rule,
               regulations,   writ,   injunction   or  decree   of  any   court,
               governmental authority or regulatory body to which the Company is
               subject or by which it is bound.
                    (vii) To the best of my knowledge, there is no action, suit,
               proceeding or  investigation  pending or  threatened  against the
               Company which,  in my judgment,  either in any one instance or in
               the aggregate,  may result in any material  adverse change in the
               business, operations,  financial condition,  properties or assets
               of the  Company  or in any  material  impairment  of the right or
               ability of the Company to carry on its business  substantially as
               now  conducted  or in any  material  liability on the part of the
               Company or which  would draw into  question  the  validity of the
               Purchase Agreement,  or the mortgage loans or of any action taken
               or to be taken in connection with the  transactions  contemplated
               hereby, or which would be likely to impair materially the ability
               of the  Company  to  perform  under  the  terms  of the  Purchase
               Agreement.
                    (viii) Each person listed on Exhibit~5  attached hereto who,
               as an officer or  representative  of the Company,  signed (a)~the
               Purchase  Agreement,  and (b)~any other document  delivered or on
               the date hereof in connection with any purchase  described in the
               agreements set forth above was, at the  respective  times of such
               signing and  delivery,  and is now, a duly elected or  appointed,
               qualified and acting  officer or  representative  of the Company,
               who  holds  the  office  set  forth  opposite  his or her name on
               Exhibit~5,  and the signatures of such persons  appearing on such
               documents are their genuine signatures.
                    (ix)  The  Company  is  duly  authorized  to  engage  in the
               transactions   described   and   contemplated   in  the  Purchase
               Agreement.
<PAGE>




IN WITNESS  WHEREOF,  I have hereunto signed my name and affixed the seal of the
Company.


Dated:____________________                  By:___________________________
                                            Name:_________________________
[Seal]                                      Title:   [Vice] President

I,      ________________________,      an      [Assistant]      Secretary     of
______________[COMPANY],  hereby certify that  ____________ is the duly elected,
qualified  and acting  [Vice]  President  of the Company and that the  signature
appearing above is [her] [his] genuine signature.


                  IN WITNESS WHEREOF, I have hereunto signed my name.

Dated:____________________                  By:___________________________
                                            Name:_________________________
                                            Title:   [Assistant] Secretary

<PAGE>



                                                   EXHIBIT 5 to
<PAGE>


                    Company's Officer's Certificate



   NAME                       TITLE                             SIGNATURE








------------------------------------------------------------------------------
<PAGE>




                                    EXHIBIT C

                    FORM OF OPINION OF COUNSEL TO THE SELLER

                                                      (date)

Franklin Credit Management Corporation
6 Harrison Street, 6th Floor
New York, New York 10013

Dear Sirs:

          You have  requested  our opinion,  as counsel to Master  Financial,
 Inc. (the  "Company"),  with respect to certain  matters in  connection  with
 the sale by the  Company of the  Mortgage  Loans  pursuant to that certain
Mortgage Loan Purchase and Warranties  Agreement by and between the Company and
Franklin Credit  Management Corporation (the  "Purchaser"), dated as of
September 24,  2004 (the "Purchase  Agreement"),  which Mortgage Loans will be
serviced  on an interim  basis by the  Company  pursuant  to an Interim
Servicing  Agreement  dated as of September 24,  2004 between the Purchaser and
the Company (the "Servicing  Agreement",  and  collectively  with the
Purchase  Agreement,  the  "Agreements"). Capitalized  terms not otherwise
defined  herein have the meanings set forth in the Purchase Agreement.

We have examined the following documents:
(i)      the Purchase Agreement;
(ii)     the Servicing Agreement;
(iii)    the forms of Assignment of Mortgage and a corresponding  form of
          assignment of deed of trust ("Assignment of Deed of Trust");
(iv)     the form of endorsement of the Mortgage Notes;
(v)      a  Certificate of certain  officers of the Company  which, among other
         things, identifies  contracts to which the  Company is a party or by
         which its assets are bound,  and which are  material to it (the
         "Material Contracts") and
(vi)     such other  documents,  records and papers as we have deemed
         necessary  and  relevant as a basis for this opinion.

To the extent we have  deemed  necessary  and  proper,  we have  relied upon the
representations  and  warranties  of  the  Company  contained  in  the  Purchase
Agreement.  We have assumed the authenticity of all documents submitted to us as
originals,  the  genuineness  of all  signatures,  the legal capacity of natural
persons and the  conformity  to the  originals  of all  documents.  We have also
assumed, with your consent, that for all relevant purposes the laws of the State
of New York are  identical to the laws of the State of  California.  Each of the
statements  set forth  below that is made "to our  knowledge"  is subject to the
discussion set forth below concerning the basis of our knowledge.

 Based upon the foregoing, it is our opinion that:
1. The Company is a corporation  duly organized,  validly existing and in good
   standing under the laws of the State of California and is qualified to
   transact  business in, and is in good standing under, the laws of the State
   of California.
2. The Company has the power to engage in the  transactions contemplated by the
   Agreements and all requisite power, authority and legal right to execute and
   deliver the  Agreements  and to perform and observe the terms and conditions
   of the Agreements.
3. The  Agreements  have been duly  authorized,  executed and  delivered  by
   the Company, and are the legal, valid and binding agreement enforceable in
   accordance with its terms against the Company, subject to the exceptions,
   limitations and qualifications set forth below.
4. The  officers of the Company have been duly authorized to execute any and all
   documents by original signature in order to complete the transactions
   contemplated by the Agreements.
5. The officers of the Company have been duly authorized to execute the
   endorsements to the Mortgage Notes, the Assignments of Mortgages and the
   Assignment of Deed of Trust.
6. Either (i)~no consent,  approval, authorization or order of any California or
   federal governmental agency or body or, to our knowledge, any court is
   required for the execution,  delivery and  performance by the Company of or
   compliance by the Company with the  Agreements and the sale of the Mortgage
   Loans by the Company or the consummation of the  transactions contemplated
   by the Agreements or (ii)~any such required consent, approval, authorization
   or order has been obtained by the Company.
7. Neither  the  consummation  of the  transactions  contemplated  by,  nor the
   fulfillment of the terms of, the Agreements  conflict or will conflict with
   or results or will result in a breach of or constitute or will constitute a
   default under the  charter  or  by-laws  of the  Company  or the  material
   terms of any Material  Contract,  or violates any  California or federal
   statute or rule, or regulation,  or to our  knowledge any order,  writ,
   injunction or decree of any court, governmental authority or regulatory body
   to which the Company is subject or by which it is bound.
8. To our  knowledge,  except  as set forth in  Exhibit  A  hereto,  there is no
   action, suit, proceeding or investigation pending or threatened  against the
   Company which, in our judgment, either in any one instance or in the
   aggregate, may result in any material adverse change in the business,
   operations, financial condition,  properties or assets of the Company or in
   any material impairment of the right or ability of the Company to carry on
   its  business  substantially  as now  conducted or in any material liability
   on the part of the Company or which would draw into question the validity of
   the Agreements or the Mortgage Loans or of any action  taken  or to be taken
   in connection with the transactions contemplated  thereby, or which would be
   likely to impair materially the ability of the Company to perform under the
   terms of the Agreements.
9. The sale of each Mortgage Note and Mortgage as and in the manner contemplated
   by the Agreements is sufficient to fully transfer to the Purchaser all right,
   title and interest of the Company thereto as noteholder and mortgagee.

The opinions  expressed in paragraph 3 above are subject to the following
exceptions,  qualifications and limitations:

(i)  The enforceability of the Agreements is subject to the effect of bankruptcy
,  insolvency,  reorganization,  fraudulent  conveyance,  moratorium,  or  other
similar laws of general  application,  or legal or equitable principles relating
to, limiting, or affecting the enforceability of creditors' rights generally, or
limitations  on the  availability  of  equitable  remedies,  including,  without
limitation,  specific performance or injunctive relief,  whether considered in a
proceeding at law or in equity;

(ii) The  enforceability  of the  Agreements is subject to the effect of general
principles of equity,  including,  without limitation,  concepts of materiality,
reasonableness, and good faith and fair dealing;

(iii) The  enforceability  of the  Agreements  is  subject to the effect of laws
and/or court decisions which may limit or prohibit the effectiveness,  validity,
and/or enforceability of provisions waiving,  releasing, or indemnifying a party
against  liability  for  its  own  wrongful  or  negligent  acts  or  where  the
indemnification is contrary to public policy;

(iv)  We  express  no  opinion  regarding  the   enforceability  of  contractual
provisions   waiving   broadly   or  vaguely   stated   rights,   statutory   or
constitutionally  protected  rights or unknown  future rights where such waivers
are against public policy or prohibited by law or equity,  or of provisions that
rights or remedies are not  exclusive,  that every right or remedy is cumulative
and may be exercised in addition to or together  with any other right or remedy,
or that the  election of some  particular  remedy or remedies  does not preclude
resource to one or more others;

(v) We express no opinion  concerning the  enforceability of: (1) the provisions
of the  Agreements  which choose as the governing law of such documents the laws
of any  particular  state;  (2) any waiver of the right to trial by jury; or (3)
forum selection clauses or consent to jurisdiction clauses.

With respect to our opinions in  paragraphs 6 and 7 relating to the  requirement
of obtaining the consent of a California or federal governmental body or agency,
and the  absence of  conflicts  between  the  transactions  contemplated  by the
Agreements and  California  and federal  statutes,  rules and  regulations,  our
opinions  are  limited  to those  California  and  federal  statutes,  rules and
regulations  that a lawyer  practicing  in the  State of  California  exercising
customary  professional  diligence would reasonably  recognize as being directly
applicable to the Borrowers the transactions  contemplated by the Agreements, or
any or all of them.
With respect to the  statements  in paragraphs 6, 7 and 8 above which are stated
to be "to  our  knowledge,"  we  have,  with  your  consent,  advised  you  only
concerning knowledge obtained by us as a result of the Officers' Certificate and
the  actual  present  knowledge  of those  attorneys  in our firm who have given
substantive  attention  to the  representation  described  in  the  introductory
paragraph  of this  opinion  and does not  include  any  knowledge  of any other
attorneys  within our firm  (regardless of whether they have  represented or are
representing   the  Company  in  connection  with  any  other  matters)  or  any
constructive or imputed knowledge of any matters or items of information. Except
to that limited extent we have, with your consent, made no independent review of
litigation  indices,  public  records  or of any of  the  Company's  operations,
transactions or contractual arrangements,  except for those contracts identified
in the Officers' Certificate.

Except as otherwise  set forth in the  Agreements,  we assume no  obligation  to
revise this opinion or alter its conclusions to update or support this letter to
reflect any facts or circumstances that may hereafter develop.

This  opinion  is given to you for your  sole  benefit,  and no other  person or
entity is entitled to rely hereon  except that the  purchaser or  purchasers  to
which you  initially  and directly  resell the  Mortgage  Loans may rely on this
opinion as if it were addressed to them as of the date of this opinion.

                                                   Respectfully submitted,

<PAGE>




                                    EXHIBIT D

                   FORM OF ASSIGNMENT AND CONVEYANCE AGREEMENT

On this ___ day of ____________,  ________,  _______________  ("Seller"), as the
Seller under that certain Mortgage Loan Purchase and Warranties Agreement, dated
as of September [~~, 2004 (the "Purchase  Agreement",  acknowledges receipt of
the  purchase  price of $ [ ] together  with  accrued  interest of $[ ] and does
hereby sell, transfer, assign, set over and convey to Franklin Credit Management
Corporation  ("Purchaser")  as the Purchaser  under the  Agreements  (as defined
below) without recourse, but subject to the terms of the Agreements,  all right,
title and interest of, in and to the Mortgage  Loans listed on the Mortgage Loan
Schedule attached hereto as Exhibit~A (the "Mortgage Loans"),  together with the
Mortgage Files and the related  Servicing  Rights and all rights and obligations
arising  under the  documents  contained  therein.  Pursuant to Section~6 of the
Purchase Agreement,  the Seller has delivered to the Custodian the documents for
each Mortgage Loan to be purchased as set forth in the Purchase  Agreement.  The
ownership of each Mortgage Note,  Mortgage and the contents of the Mortgage File
and  Servicing  File is vested in the Purchaser and the ownership of all records
and  documents  with respect to the related  Mortgage  Loan prepared by or which
come into the possession of the Seller shall  immediately  vest in the Purchaser
and shall be retained and maintained, in trust, by the Seller at the will of the
Purchaser in a custodial capacity only.

     In accordance with Section~6 of the Purchase  Agreement,  the Purchaser
accepts the Mortgage  Loans listed on Exhibit~A  attached  hereto.
Notwithstanding the foregoing the Purchaser  does not waive any rights or
remedies it may have under the Purchase Agreement.
 Capitalized  terms used herein and not otherwise defined shall have the
meanings set forth in the Purchase Agreement.


<PAGE>

                                             [SIGNATURE PAGE FOLLOWS]

                                  MASTER FINANCIAL, INC.


                          By:  _____________________________
                          Name:  ___________________________
                          Title:  __________________________


Accepted and Agreed:

FRANKLIN CREDIT MANAGEMENT CORPORATION



By:  _____________________________________________________
     Name:
     Title:


<PAGE>



                                                     EXHIBIT A


                                      TO ASSIGNMENT AND CONVEYANCE AGREEMENT





                                                THE MORTGAGE LOANS
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M

==============================================================================

                       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

       Date of Report (Date of earliest event reported): October 13, 2004

                     FRANKLIN CREDIT MANAGEMENT CORPORATION
             (Exact name of registrant as specified in its charter)

                                    Delaware
         (State or other jurisdiction of incorporation or organization)

                                   75-2243266
                      (I.R.S. employer identification no.)

                                     0-17771
                            Commission file number)

                               Six Harrison Street
                               New York, New York
                         (Address of principal executive
                                    offices)

                                      10013
                                   (Zip code)

       Registrant's telephone number, including area code: (212) 925-8745

------------------------------------------------------------------------------
Check  the  appropriate  box  below  if the  Form  8-K  filing  is  intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):

     Written  communications  pursuant to Rule 425 under the  Securities Act
     (17 CFR 230.425)

     Soliciting material pursuant to Rule 14a-12 under the Exchange Act
     (17 CFR 240.14a-12)

     Pre-commencement communications pursuant to Rule 14d-2(b) under the
     Exchange Act (17 CFR 240.14d-2(b))

     Pre-commencement communications pursuant to Rule 13e-4(c) under the
     Exchange Act (17 CFR 240.13e-4(c))
Item 2.01   Completion of Acquisition or Disposition of Assets

On  September  24,  2004  and  October  13,  2004,  Franklin  Credit Management
Corporation (the "Company"),through four wholly owned subsidiaries, consummated
the  acquisition  of a mixed pool of  $99,361,251 in face amount of performing,
sub-performing  and  nonperforming  mortgage  loans secured  by  single  family
residences, from Master Financial Corporation, N.A., a national mortgage banking
company,  as seller (the "Seller"), pursuant to a Mortgage Loan Purchase and
Sale Agreement with Seller for a purchase price of $82,214,418 plus accrued
interest in the amount of $1,123,254. The purchase price was determined through
competitive bidding and arms'-length negotiations between the Company and the
Seller.

The purchase price was funded by the extentsion of the senior debt (the "Senior
Debt") by Sky Financial Bank, an Ohio corporation (the "Bank") pursuant to
Company's Master Credit and Security Agreement with the Bank. The new Senior
Debt bears interest at a rate initially equal to 5.5% adjusted monthly as
provided in the Master Credit Agreement.

The foregoing description is qualified in its entirety by reference to the full
text of the Mortgage Loan Purchase and Sale Agreement, dated as of September 24,
2004 between the Company and the Seller,  which is filed herewith as
Exhibit 10.1.

Item 9.01.  Financial Statements and Exhibits.

Pro forma financial statements required to be filed not later than 71 calender
days after the date of the original report will be filed by amendment.

(a)      Financial Statements of Assets Acquired
         See reference above.

(b)      Pro Forma Financial Information
         See reference above

(c)      Exhibits.

The following exhibits are filed as part of this report:

2.2   Mortgage Loan Purchase and Sale Agreement, dated as of September 24, 2004
      by and between Franklin Credit Management Corporation and Master Financial
      Incorporated.
SIGNATURES

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 hereunto duly authorized.

                                       FRANKLIN CREDIT MANAGEMENT CORPORATION

                                               By: /s/ Thomas J. Axon

                                                       Thomas J. Axon
                                                       Chairman

October 19, 2004
Exhibits Index

10.1   Mortgage Loan Purchase and Sale Agreement, dated as of September 24, 2004
       by and between Franklin Credit Management Corporation and Master
       Financial Inc, Inc.

                                Exhibit 10.1

                 MORTGAGE LOAN PURCHASE AND WARRANTIES AGREEMENT

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

                     FRANKLIN CREDIT MANAGEMENT CORPORATION,

                                    Purchaser

                             MASTER FINANCIAL, INC.,

                                     Seller

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

                         Dated as of September ~ 24, 2004

                      Fixed Rate Residential Mortgage Loans

==============================================================================
TABLE OF CONTENTS

                                                                        Page

SECTION 1.  Definitions..................................................1

SECTION 2.  Agreement to Purchase........................................8

SECTION 3.  Mortgage Schedules...........................................8

SECTION 4.  Purchase Price...............................................8

SECTION 5.  Examination of Mortgage Files................................9

SECTION 6.  Conveyance from Seller to Purchaser..........................9

SECTION 7.  Servicing of the Mortgage Loans..............................11

SECTION 8.  Transfer of Servicing........................................11

SECTION 9.  Representations, Warranties and Covenants of the Seller;
            Remedies for Breach..........................................13

SECTION 10. Closing......................................................20

SECTION 11. Closing Documents............................................21

SECTION 12. Costs........................................................22

SECTION 13. Cooperation of Seller with a Reconstitution..................22

SECTION 14. The Seller...................................................23

SECTION 15. Financial Statements.........................................24

SECTION 16. [Reserved]...................................................25

SECTION 17.  Notices.....................................................25

SECTION 18.  Severability Clause.........................................25

SECTION 19.  Counterparts................................................26

SECTION 20.  Governing Law...............................................26

SECTION 21.  Intention of the Parties....................................26

SECTION 22.  Successors and Assigns; Assignment of
             Purchase Agreement..........................................26

SECTION 23.  Waivers.....................................................27

SECTION 24.  Exhibits....................................................27

SECTION 25.  General Interpretive Principles.............................27

SECTION 26.  Reproduction of Documents...................................27

SECTION 27.  Further Agreements..........................................28

SECTION 28.  [Reserved]..................................................28

SECTION 29.  No Solicitation.............................................28

SECTION 30.  Waiver of Trial by Jury.....................................28

SECTION 31.  Governing Law Jurisdiction; Consent
             to Service of Process.......................................29

                                    EXHIBITS

EXHIBIT A         CONTENTS OF EACH MORTGAGE FILE

EXHIBIT B         FORM OF SELLER'S OFFICER'S CERTIFICATE

EXHIBIT C         FORM OF OPINION OF COUNSEL TO THE SELLER

EXHIBIT D         FORM OF ASSIGNMENT AND CONVEYANCE AGREEMENT
MORTGAGE LOAN PURCHASE AND WARRANTIES AGREEMENT

     This MORTGAGE LOAN PURCHASE AND  WARRANTIES  AGREEMENT  (the  "Agreement"),
dated as of  September~24,  2004,  by and  between  Franklin  Credit  Management
Corporation,  a Delaware  corporation (the  "Purchaser"),  and Master Financial,
Inc., a California corporation (the "Seller").

                              W~I~T~N~E~S~S~E~T~H:

     WHEREAS,  the Seller desires to sell,  from time to time, to the Purchaser,
and the  Purchaser  desires to  purchase,  from time to time,  from the  Seller,
certain  first and second lien or  unsecured,  fixed-rate  residential  mortgage
loans,  certain of which are  insured by FHA (as defined  below) (the  "Mortgage
Loans") on a servicing  released basis as described  herein,  and which shall be
delivered in pools of whole loans (each,  a "Mortgage  Loan Package") on various
dates as provided herein (each, a "Closing Date");

     WHEREAS,  each Mortgage Loan is either  unsecured or secured by a mortgage,
deed of trust or other security  instrument creating a first or second lien on a
residential dwelling located in the jurisdiction  indicated on the Mortgage Loan
Schedule for the related Mortgage Loan Package;

     WHEREAS,  the  Purchaser and the Seller wish to prescribe the manner of the
conveyance, servicing by the Interim Servicer and control of the Mortgage Loans;
and

     NOW, THEREFORE,  in consideration of the premises and mutual agreements set
forth  herein,  and for other good and valuable  consideration,  the receipt and
sufficiency of which are hereby acknowledged, the Purchaser and the Seller agree
as follows:

SECTION 1. Definitions.

     For purposes of this Agreement the following  capitalized  terms shall have
the respective meanings set forth below.

     Accepted  Servicing  Practices:  With respect to any Mortgage  Loan,  those
mortgage  servicing  practices of prudent  mortgage lending  institutions  which
service  mortgage  loans  of  the  same  type  as  such  Mortgage  Loan  in  the
jurisdiction where the related Mortgaged Property is located.

     Act: The National Housing Act, as amended from time to time.

     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.

     Agreement:  This Mortgage Loan  Purchase and  Warranties  Agreement and all
amendments hereof and supplements hereto.

     Assignment and Conveyance Agreement: As defined in Subsection~6.01.

     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 Purchaser.

     Balloon Mortgage Loan: Any Mortgage Loan which by its original terms or any
modifications  thereof provides for amortization  beyond its scheduled  maturity
date.
     Business  Day: Any day other than (i)~a  Saturday or Sunday,  (ii)~a day on
which banking and savings and loan institutions, in the State of New York or the
State in which the  Interim  Servicer's  servicing  operations  are  located  or
(iii)~the state in which the Custodian's  operations are located, are authorized
or obligated by law or executive order to be closed.

     Closing Date:  The date or dates on which the  Purchaser  from time to time
shall purchase,  and the Seller from time to time shall sell, the Mortgage Loans
listed on the  related  Mortgage  Loan  Schedule  with  respect  to the  related
Mortgage Loan Package.

     Code: Internal Revenue Code of 1986, as amended.

     Collection  Account:  The separate  trust  account  created and  maintained
pursuant to the Interim Servicing Agreement (with respect to each Mortgage Loan,
as specified therein).

     Condemnation  Proceeds: All awards or settlements in respect of a Mortgaged
Property, whether permanent or temporary,  partial or entire, by exercise of the
power of  eminent  domain or  condemnation,  to the extent  not  required  to be
released to a Mortgagor  in  accordance  with the terms of the related  Mortgage
Loan Documents.

     Custodial  Agreement:  The  agreement(s)  governing  the  retention  of the
originals of each  Mortgage  Note,  Mortgage,  Assignment  of Mortgage and other
Mortgage Loan  Documents.  If more than one Custodial  Agreement is in effect at
any given time, all of the individual Custodial Agreements shall collectively be
referred to as the "Custodial Agreement".

     Custodian: U.S. Bank, National Association,  and its successors in interest
or any  successor  to the  Custodian  under the  Custodial  Agreement as therein
provided.

     Cut-off Date: The date or dates  designated as such on the related Mortgage
Loan Schedule with respect to the related Mortgage Loan Package.

     Deleted Mortgage Loan: A Mortgage Loan that is repurchased by the Seller in
accordance with the terms of this Agreement.

     Determination  Date: The date specified in the Interim Servicing  Agreement
(with  respect to each  Mortgage  Loan,  for an  interim  period,  as  specified
therein).
     Due Date:  The day of the month on which the  Monthly  Payment  is due on a
Mortgage Loan, exclusive of any days of grace.

     Fannie Mae: The Federal  National  Mortgage  Association,  or any successor
thereto.

     FHA: The Federal Housing Administration, an agency within the United States
Department  of Housing  and Urban  Development,  or any  successor  thereto  and
including  the Federal  Housing  Commissioner  and the  Secretary of Housing and
Urban Development where appropriate under the FHA Regulations.

     FHA Contract of Insurance: The contract of insurance under Title I covering
the related FHA Mortgage Loan.

     FHA  Insurance:  The  insurance  proved by FHA  pursuant  to Title I of the
National Housing Act, as evidenced by the FHA Contract of Insurance.

     FHA Mortgage  Loan:  Each  Mortgage  Loan  eligible for FHA  Insurance,  as
indicated on the related Mortgage Loan Schedule.

     First Lien Loan: A Mortgage  Loan  secured by a first lien  Mortgage on the
related Mortgaged Property.

     Freddie Mac: The Federal Home Loan Mortgage  Corporation,  or any successor
thereto.

     HUD: The Department of Housing and Urban Development, or any federal agency
or official thereof which may from time to time succeed to the functions thereof
with  regard to  mortgage  insurance  issued  by the FHA.  The term  "HUD",  for
purposes of this Agreement,  is also deemed to include subdivisions thereof such
as the FHA and Government  National Mortgage  Association.  Insurance  Proceeds:
With respect to each Mortgage Loan, proceeds of insurance policies  insuring the
Mortgage Loan or the related  Mortgaged  Property, including any applicable FHA
insurance policies.

     Interim Servicer:  The servicer under the Interim Servicing  Agreement,  or
its successor in interest or assigns,  or any successor to the Interim  Servicer
under the  Interim  Servicing  Agreement,  as therein  provided.  Initially  the
Interim Servicer shall be the Seller.

     Interim  Servicing  Agreement:  The  agreement  to be  entered  into by the
Purchaser  and the  Interim  Servicer,  providing  for the  Interim  Servicer to
service the Mortgage Loans as specified by the
Interim Servicing Agreement.

     Liquidated  Mortgage  Loan:  Each Mortgage Loan  identified as a Liquidated
Mortgage Loan on the related Mortgage Loan Schedule.

     Liquidation Proceeds: Cash received in connection with the liquidation of a
defaulted Mortgage Loan, whether through the sale or assignment of such Mortgage
Loan,  trustee's sale,  foreclosure sale or otherwise or the sale of the related
Mortgaged  Property if the Mortgaged Property is acquired in satisfaction of the
Mortgage Loan.
     Manufactured  Home: A single family residential unit that is constructed in
a  factory  in  sections  in  accordance  with  the  Federal  Manufactured  Home
Construction and Safety Standards adopted on July~15, 1976, by the Department of
Housing and Urban  Development  ("HUD Code"), as amended in 2000, which preempts
state and local building codes. Each unit is identified by the presence of a HUD
Plate/Compliance  Certificate  label.  The sections are then  transported to the
site and joined together and affixed to a pre-built permanent  foundation (which
satisfies  the  manufacturer's  requirements  and all state,  county,  and local
building  codes  and   regulations).   The  manufactured  home  is  built  on  a
non-removable, permanent frame chassis that supports the complete unit of walls,
floors, and roof. The underneath part of the home may have running gear (wheels,
axles,  and brakes) that enable it to be transported to the permanent  site. The
wheels  and hitch  are  removed  prior to  anchoring  the unit to the  permanent
foundation.  The  manufactured  home must be classified as real estate and taxed
accordingly.  The permanent  foundation may be on land owned by the mortgager or
may be on leased land.

     Monthly Payment: The scheduled monthly payment of principal and interest on
a Mortgage Loan.

     Mortgage:  The  mortgage,  deed of  trust or other  instrument  securing  a
Mortgage Note,  which creates a first lien, in the case of a First Lien Loan, or
a second lien, in the case of a Second Lien Loan, on the Mortgaged Property.

     Mortgage File: The items pertaining to a particular  Mortgage Loan referred
to in Exhibit~A  annexed  hereto,  and any additional  documents  required to be
added to the Mortgage File pursuant to this Agreement.

     Mortgage  Interest  Rate:  The annual rate of interest  borne on a Mortgage
Note with respect to each Mortgage Loan.

     Mortgage  Loan:  An  individual  Mortgage Loan which is the subject of this
Agreement,  each Mortgage  Loan  originally  sold and subject to this  Agreement
being identified on the applicable  Mortgage Loan Schedule,  which Mortgage Loan
includes without  limitation the Mortgage File, the Monthly Payments,  Principal
Prepayments,  Liquidation Proceeds,  Condemnation Proceeds,  Insurance Proceeds,
Servicing  Rights  and all other  rights,  benefits,  proceeds  and  obligations
arising from or in connection  with such Mortgage  Loan,  excluding  replaced or
repurchased mortgage loans.

     Mortgage  Loan  Documents:  The  documents  required to be delivered to the
Custodian pursuant to Subsection~6.03 hereof with respect to any Mortgage Loan.

     Mortgage  Loan  Package:  Each  pool of  Mortgage  Loans,  which  shall  be
purchased  by the  Purchaser  from the Seller from time to time on each  Closing
Date.

     Mortgage Loan  Schedule:  The schedule of Mortgage  Loans setting forth the
following information with respect to each Mortgage Loan in the related Mortgage
Loan  Package:  (1)~the  Seller's  Mortgage  Loan  identifying  number;  (2)~the
Mortgagor's name; (3)~the street address of the Mortgaged Property including the
city, state and zip code; (4)~a code indicating  whether the Mortgaged  Property
is owner-occupied; (5)~the number and type of residential units constituting the
Mortgaged Property;  (6)~the original months to maturity or the remaining months
to maturity  from the related  Cut-off  Date,  in any case based on the original
amortization  schedule  and, if  different,  the maturity  expressed in the same
manner but based on the actual amortization schedule;  (7)~the amount of monthly
principal  and  interest  collected on such  Mortgage  Loan during each of the 3
months preceding the related Cut-off Date;  (8)~the Mortgage Interest Rate as of
the related  Cut-off Date;  (9)~the date on which the Monthly Payment was due on
the  Mortgage  Loan  and,  if such  date is not  consistent  with  the Due  Date
currently in effect,  such Due Date;  (10)~the  stated  maturity date;  (11)~the
first payment  date;  (12)~the  amount of the Monthly  Payment as of the related
Cut-off Date; (13)~the last payment date on which a payment was actually applied
to the outstanding  principal balance or interest;  (14)~the original  principal
amount of the Mortgage Loan;  (15)~the principal balance of the Mortgage Loan as
of the close of  business  on the  related  Cut-off  Date,  after  deduction  of
payments of principal due and  collected on or before the related  Cut-off Date;
(16)~a code indicating  whether the Mortgage Loan is an FHA Mortgage Loan (i.e.,
Title~I loan); (17)~whether such Mortgage Loan provides for a Prepayment Penalty
and, if applicable,  the Prepayment  Penalty period;  (18)~the credit risk score
(FICO score);  (19)~the date of origination;  (20)~a code indicating whether the
Mortgage  Loan is a  Balloon  Mortgage  Loan;  (21)~the  Due Date for the  first
Monthly  Payment;  (22)~the  original  Monthly  Payment due;  (23)~whether  such
Mortgage  Loan was  modified;  (24)~whether  such  Mortgage Loan is a liquidated
Mortgage  Loan;  (25)~the  property  type,  if any,  securing such Mortgage Loan
(i.e.,  single  family,  Manufactured  Home,  cooperative,  condominium,  etc.);
(26)~whether  such  Mortgage  Loan is a First  Lien  Loan,  Second  Lien Loan or
unsecured;  (27)~whether such Mortgage Loan is subject to bankruptcy and, if so,
the type (i.e.,  Chapter~7 or Chapter~13) and the pre-petition and post-petition
amounts  outstanding  under such Mortgage  Loan;  and  (28)~whether  the related
Mortgagor requested relief under the Servicemember's Relief Act. With respect to
the Mortgage Loans in the aggregate,  the Mortgage Loan Schedule shall set forth
the following  information,  as of the related  Cut-off Date:  (1)~the number of
Mortgage Loans; (2)~the current aggregate  outstanding  principal balance of the
Mortgage Loans;  (3)~the weighted average Mortgage Interest Rate of the Mortgage
Loans;  (4)~the  weighted  average  maturity  of  the  Mortgage  Loans;  (5)~the
applicable Cut-off Date; and (6)~the applicable Closing Date.

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

     Mortgaged  Property:  With respect to each Mortgage Loan,  the  Mortgagor"s
real property  securing  repayment of a related Mortgage Note,  consisting of an
unsubordinated estate in fee simple or, with respect to real property located in
jurisdictions in which the use of leasehold  estates for residential  properties
is a  widely-accepted  practice,  a  leasehold  estate,  in a single  parcel  or
multiple parcels of real property improved by a Residential Dwelling.

    Mortgagor: The obligor on a Mortgage Note.

     Officer's Certificate: A certificate signed by the Chairman of the Board or
the  Vice  Chairman  of the  Board or a  President  or a Vice  President  or the
Secretary or one of the  Assistant  Treasurers or Assistant  Secretaries  of the
Seller, and delivered to the Purchaser as required by this Agreement.

     Opinion of Counsel:  A written  opinion of counsel,  who may be counsel for
the Seller, reasonably acceptable to the Purchaser.

     Person:  Any  individual,   corporation,   partnership,  limited  liability
company, joint venture, association,  joint-stock company, trust, unincorporated
organization,  government  or  any  agency  or  political  subdivision  thereof.
Preliminary Mortgage Schedule: As defined in Section~3.

     Prepayment Penalty:  With respect to each Mortgage Loan, the penalty if the
Mortgagor prepays such Mortgage Loan as provided in the related Mortgage Note or
Mortgage.

     Principal  Prepayment:  Any payment or other recovery of principal on a
Mortgage Loan which is received in advance of its scheduled Due Date, including
any prepayment penalty or premium thereon, and which is not accompanied by an
amount of interest  representing  scheduled interest due on any date or dates
in any month or months subsequent to the month of prepaymen

      Purchase Price: The price paid on the related Closing Date by the
Purchaser to the Seller in exchange for the Mortgage Loans purchased on such
Closing Date as calculated in Section~4 of this Agreement.

       Purchaser: Franklin Credit ManagementCorporation, a Delaware corporation,
and its successors in interest and assigns,  or any successor to the Purchaser
under this Agreement as herein provided.

       Reconstitution:  A Whole Loan Transfer or a Securitization Transfer.

       Reconstitution Date:  As defined in Section~13.

       Relief Act:  The Servicemembers' Civil Relief Act.

       Remittance  Date: The date specified in the Interim Servicing Agreement
(with respect to each Mortgage Loan, as specified therein).

       Repurchase  Price:  With respect to any Mortgage Loan, a price equal to
the Purchase Price with respect to such  Mortgage  Loan (reduced by all amounts
previously  received by the Purchaser  with respect to the Mortgage Loan
representing payments or recoveries of principal made by the Seller prior to the
Cut-off Date) plus accrued  and unpaid interest at the Mortgage  Note rate from
and after the related  Closing Date through the re-purchase date, plus any
advances,  costs,  expenses, and out of pocket costs incurred by Purchaser in
connection with such Mortgage Loan.

        Residential  Dwelling:  Any one of the following: (i)~a  detached
one-family  dwelling,  (ii)~a detached  two- to  four-family  dwelling, (iii)~a
one-family dwelling unit in a condominium project or (iv)~a one-family dwelling
in a planned unit development, none of which is a dwelling unit in a residential
cooperative housing corporation, mobile home or Manufactured Home.

         RESPA:  Real Estate Settlement Procedures Act, as amended from time to
time.
         Second  Lien Loan:  A  Mortgage  Loan  secured  by a second  lien
          Mortgage on the related Mortgaged Property.

         Securitization  Transfer:  The sale or transfer of some or all of the
Mortgage Loans to a trust or other entity as part of a publicly-issued or
privately-placed, rated or unrated mortgage pass-through or other
mortgage-backed securities transaction.

         Seller:  As  defined  in the  initial  paragraph  of the  Agreement,
together with its successors in interest.

         Servicing  Fee:  With respect to each  Mortgage  Loan  subject to the
Interim  Servicing Agreement,  a fee payable  monthly equal to  one-twelfth  of
the product of (a)~the Servicing Fee Rate and (b)~the outstanding  principal
balance of such  Mortgage  Loan.  Such fee shall be payable  monthly and shall
be pro-rated for any portion of a month  during which the Mortgage  Loan is
serviced by the Interim  Servicer  under the Interim Servicing  Agreement.  The
obligation  of the  Purchaser to pay the Servicing Fee is limited to, and the
Servicing Fee is payable solely from, the interest portion (including recoveries
with respect to interest from Liquidation Proceeds,  to the extent permitted by
this Agreement) of such Monthly Payment collected by the Interim Servicer,or as
otherwise provided under this Agreement.

         Servicing  Fee  Rate:  An amount per annum as set forth in the Interim
 Servicing Agreement.

         Servicing  File:  With respect to each Mortgage  Loan, the file
retained by the Interim Servicer  consisting  of originals or copies of all
documents in the Mortgage  File which are not delivered to the Purchaser or the
Custodian.

         Servicing  Rights:  Any and all of the  following:  (a)~any  and all
rights to service the  Mortgage  Loans;  (b)~any  payments to or monies
received by the Seller for  servicing  the  Mortgage  Loans; (c)~any late fees,
penalties  or similar  payments  with respect to the Mortgage  Loans;  (d)~all
agreements or documents  creating,  defining or evidencing any such servicing
rights to the extent they relate to such servicing rights and all rights of the
Seller  thereunder;  (e)~all  accounts and other  rights to payment  related to
any of the  property  described  in this  paragraph;  and (f)~any and all
documents,  files,  records,  servicing  files, servicing  documents, servicing
records, data tapes, computer records,  or other information  pertaining to the
Mortgage Loans or pertaining to the past, present or prospective servicing of
the Mortgage Loans.

          Stated  Principal  Balance:  As to  each  Mortgage  Loan on any  date
 of  determination,(i)~the  principal  balance of such  Mortgage  Loan at the
related  Cut-off Date after giving effect to payments of principal  due on or
before  such  date,  to the  extent  actually  received,  minus  (ii)~all
amounts  previously distributed  to the  Purchaser  with respect to the related
Mortgage Loan representing  payments or recoveries of principal on such
Mortgage Loan.

           Successor  Servicer:  Any servicer of one or more Mortgage Loans
designated by the  Purchaser as being  entitled to the benefits of the
indemnifications set forth in Subsections 9.03 and 14.01.

       Whole Loan Transfer:  The sale or transfer by Purchaser of some or all
of the Mortgage Loans in a whole loan or participation format pursuant to a
Reconstitution Agreement.

SECTION 2.        Agreement to Purchase.

               The Seller  agrees to sell from time to time,  and the  Purchaser
          agrees  to  purchase  from  time to time,  Mortgage  Loans  having  an
          aggregate  principal  balance on the related Cut-off Date in an amount
          agreed to by the  Purchaser  and the Seller as evidenced by the actual
          aggregate  principal  balance of the  Mortgage  Loans  accepted by the
          Purchaser on each Closing Date. The price for each Mortgage Loan shall
          be the related  Purchase  Price as set forth in Section~4.

 SECTION 3.       Mortgage Schedules.

               The Seller  from time to time shall  provide the  Purchaser  with
          certain information constituting a preliminary listing of the Mortgage
          Loans to be  purchased on each  Closing  Date in  accordance  with the
          instructions   of  the  Purchaser   (each,  a "Preliminary   Mortgage
          Schedule").

             The Seller shall  deliver the related  Mortgage Loan Schedule for
          the Mortgage Loans to be purchased on a particular Closing Date to the
          Purchaser at least two (2) Business Days prior to the related  Closing
          Date.
SECTION 4.        Purchase Price.

               The  "Purchase Price"  for  each  Mortgage  Loan  shall  be  the
          percentage of par as stated in the related  Assignment  and Conveyance
          Agreement,  multiplied by the aggregate  principal balance,  as of the
          related  Cut-off  Date,  of such  Mortgage  Loan listed on the related
          Mortgage Loan Schedule.  The initial  principal  amount of the related
          Mortgage  Loans  shall  be  the  aggregate  principal  balance  of the
          Mortgage Loans, so computed as of the related Cut-off Date.

               In  addition  to the  Purchase  Price  as  described  above,  the
          Purchaser  shall  pay to the  Seller,  at  closing,  up to 60  days of
          accrued  interest  on the  current  principal  amount of each  related
          Mortgage Loan (other than Liquidated Mortgage Loans) as of the related
          Cut-off  Date  only  if  such  Mortgage  Loan  is  less  than  60~days
          delinquent  as of the Cut-off  Date.  The Purchase  Price plus accrued
          interest as set forth in the preceding  sentence  shall be paid to the
          Seller by wire transfer of immediately  available  funds to an account
          designated by the Seller in writing.

               The Purchaser shall be entitled to (1)~all principal collected on
          or after the related Cut-off Date, and (2)~all payments of interest on
          the  Mortgage  Loans net of  applicable  Servicing  Fees  (minus  that
          portion of any such payment  which is allocable to the period prior to
          the related  Cut-off  Date).  If, after the related  Closing Date, the
          Seller receives any such amounts payable to the Purchaser,  the Seller
          shall, within 2 Business Days of receipt,  forward such amounts to the
          Purchaser.

SECTION 5. Examination of Mortgage Files.

               At least ten (10)  Business  Days  prior to the  related  Closing
          Date, the Seller shall (a)~deliver to the Purchaser or its designee in
          escrow,  for  examination  with  respect to each  Mortgage  Loan to be
          purchased,  the  related  Mortgage  File,  including  a  copy  of  the
          Assignment of Mortgage,  pertaining to each Mortgage Loan, or (b)~make
          the related  Mortgage File available to the Purchaser for  examination
          at such  other  location  as  shall  otherwise  be  acceptable  to the
          Purchaser.  Such  examination  may be  made  by the  Purchaser  or its
          designee at any  reasonable  time before or after the related  Closing
          Date. If the  Purchaser  makes such  examination  prior to the related
          Closing Date and determines, in its sole discretion, that any Mortgage
          Loans are unacceptable to the Purchaser for any reason,  such Mortgage
          Loans shall be deleted from the related  Mortgage Loan  Schedule.  The
          Purchaser  may,  at its  option  and  without  notice  to the  Seller,
          purchase  some or all of the Mortgage  Loans  without  conducting  any
          partial or complete  examination.  The fact that the  Purchaser or its
          designee  has  conducted  or has  failed to  conduct  any  partial  or
          complete  examination  of the  Mortgage  Files  shall not  affect  the
          Purchaser's  rights to demand  repurchase  or other relief as provided
          herein.
SECTION 6. Conveyance from Seller to Purchaser.

Subsection 6.01   Conveyance of Mortgage Loans.

               The Seller, simultaneously with the delivery of the Mortgage Loan
          Schedule  with  respect to the  related  Mortgage  Loan  Package to be
          purchased  on  each  Closing  Date,   shall  execute  and  deliver  an
          Assignment  and  Conveyance  Agreement in the form attached  hereto as
          Exhibit~D  (the  "Assignment  and Conveyance  Agreement").  The Seller
          shall  cause the  Servicing  File  retained  by the  Interim  Servicer
          pursuant  to this  Agreement  to be  appropriately  identified  in the
          Seller's computer system and/or books and records, as appropriate,  to
          clearly  reflect  the  sale  of  the  related  Mortgage  Loan  to  the
          Purchaser. The Seller shall cause the Interim Servicer to release from
          its custody the contents of any Servicing  File retained by it only in
          accordance  with this  Agreement or the Interim  Servicing  Agreement,
          except when such release is required in  connection  with a repurchase
          of any such Mortgage Loan pursuant to Subsection~9.03.

 Subsection 6.02    Books and Records.

               Record  title to each  Mortgage  as of the related  Closing  Date
          shall be in the name of the Seller,  an Affiliate  of the Seller,  the
          Purchaser or one or more designees of the Purchaser,  as the Purchaser
          shall select. Notwithstanding the foregoing, each Mortgage and related
          Mortgage  Note  shall be  possessed  solely  by the  Purchaser  or the
          appropriate designee of the Purchaser,  as the case may be. All rights
          arising out of the Mortgage Loans  including,  but not limited to, all
          funds received by the Seller or the Interim Servicer after the related
          Cut-off Date on or in connection  with a Mortgage Loan shall be vested
          in the Purchaser or one or more designees of the Purchaser;  provided,
          however,  that all funds received on or in connection  with a Mortgage
          Loan shall be received and held by the Seller or the Interim  Servicer
          in trust for the benefit of the Purchaser or the appropriate  designee
          of the  Purchaser,  as the case may be, as the  owner of the  Mortgage
          Loans pursuant to the terms of this Agreement.

               The Seller  shall be or shall  cause the  Interim  Servicer to be
          responsible for  maintaining,  and shall  maintain,  a complete set of
          books and records for each Mortgage Loan which shall be marked clearly
          to reflect the ownership of each Mortgage Loan by the Purchaser.

               The sale of each Mortgage Loan shall be reflected on the Seller's
          balance  sheet and other  financial  statements as a sale of assets by
          the Seller.

Subsection 6.03   Delivery of Mortgage Loan Documents.

               The Seller  shall  deliver and release to the  Custodian no later
          than two (2)  Business  Days prior to the related  Closing  Date those
          Mortgage Loan  Documents set forth on Exhibit~A  hereto as required by
          the Custodial  Agreement  with respect to each Mortgage Loan set forth
          on the related Mortgage Loan Schedule.

               The Custodian shall certify its receipt of all such Mortgage Loan
          Documents required to be delivered pursuant to the Custodial Agreement
          for  the  related   Closing   Date,   as   evidenced  by  the  Initial
          Certification  of the  Custodian in the form annexed to the  Custodial
          Agreement.  The Seller  shall  comply with the terms of the  Custodial
          Agreement  and the  Purchaser  shall pay all fees and  expenses of the
          Custodian.

               The Seller  shall or shall cause the Interim  Servicer to include
          in the Servicing  File original  documents  evidencing an  assumption,
          modification,  consolidation or extension of any Mortgage Loan entered
          into in  accordance  with  this  Agreement  within  two weeks of their
          execution,  provided,  however,  that the  Seller  shall  provide  the
          Interim Servicer for inclusion in the Servicing File, with a certified
          true copy of any such document  submitted for  recordation  within two
          weeks of its execution, and shall promptly provide the original of any
          document  submitted  for  recordation  or  a  copy  of  such  document
          certified by the appropriate  public recording office to be a true and
          complete copy of the original within ninety days of its submission for
          recordation.

               In  the  event  any  document  required  to be  delivered  to the
          Custodian in the Custodial Agreement, including an original or copy of
          any document  submitted  for  recordation  to the  appropriate  public
          recording  office,  is not so delivered to the  Custodian,  or to such
          other Person as the Purchaser  shall  designate in writing,  within 90
          days  following  the related  Closing Date (other than with respect to
          the  Assignments of Mortgage which shall be delivered to the Custodian
          in blank and recorded  subsequently by the Purchaser or its designee),
          and in the event that the Seller does not cure such failure  within 60
          days of discovery or receipt of written  notification  of such failure
          from the Purchaser,  the related Mortgage Loan shall, upon the request
          of the Purchaser, be repurchased by the Seller at the price and in the
          manner  specified  in   Subsection~9.03.   The  foregoing   repurchase
          obligation shall not apply in the event that the Seller cannot deliver
          an original  document  submitted for  recordation  to the  appropriate
          public  recording  office within the  specified  period due to a delay
          caused  by  the  recording  office  in  the  applicable  jurisdiction;
          provided that the Seller shall instead deliver a recording  receipt of
          such recording office or, if such recording  receipt is not available,
          an  officer"s  certificate  of a  servicing  officer  of  the  Seller,
          confirming  that such  documents  have been  accepted  for  recording;
          provided  that,  upon  request of the  Purchaser  and  delivery by the
          Purchaser to the Seller of a schedule of the related  Mortgage  Loans,
          the Seller shall  reissue and deliver to the Purchaser or its designee
          said officer's certificate.

               The  Seller  shall  pay all  fees or costs  in  transferring  all
          original  documents to the Custodian  or, upon written  request of the
          Purchaser, to the Purchaser or the Purchaser's designee. The Purchaser
          or the  Purchaser's  designee shall be  responsible  for recording the
          Assignments of Mortgage. Subsection 6.04 [Reserved].

SECTION 7.        Servicing of the Mortgage Loans.

               The Mortgage  Loans have been sold by the Seller to the Purchaser
          on a  servicing  released  basis.  Subject  to, and upon the terms and
          conditions of this Agreement and the Interim Servicing Agreement (with
          respect to each Mortgage  Loan,  for an interim  period,  as specified
          therein),  the Seller hereby sells,  transfers,  assigns,  conveys and
          delivers to the Purchaser the Servicing Rights.

               The  Purchaser  shall  retain the  Interim  Servicer  as contract
          servicer of the Mortgage Loans for an interim  period  pursuant to and
          in accordance  with the terms and conditions  contained in the Interim
          Servicing  Agreement  (with  respect  to each  Mortgage  Loan,  for an
          interim  period,  as  specified  therein).  The Seller shall cause the
          Interim  Servicer to execute the Interim  Servicing  Agreement  on the
          initial Closing Date.

               Pursuant to the Interim Servicing Agreement (with respect to each
          Mortgage  Loan,  for an interim  period,  as specified  therein),  the
          Interim Servicer shall begin servicing the Mortgage Loans on behalf of
          the Purchaser and shall be entitled to a Servicing Fee with respect to
          such Mortgage  Loans until the  applicable  Transfer Date. The Interim
          Servicer shall conduct such  servicing in accordance  with the Interim
          Servicing Agreement.

SECTION 8. Transfer of Servicing.

               On the applicable Transfer Date, the Purchaser,  or its designee,
          shall assume all servicing responsibilities related to, and the Seller
          shall   cause   the   Interim   Servicer   to  cease   all   servicing
          responsibilities  related to, the related  Mortgage  Loans  subject to
          such Transfer Date. The Transfer Date shall be the date  determined in
          accordance with Section!~6.02 of the Interim Servicing  Agreement(with
          respect to each Mortgage  Loan,  for an interim  period,  as specified
          therein).
               On or prior to the applicable Transfer Date, the Seller shall, at
          its sole cost and  expense,  take such  steps as may be  necessary  or
          appropriate  to effectuate  and evidence the transfer of the servicing
          of the  related  Mortgage  Loans to the  Purchaser,  or its  designee,
          including but not limited to the following:

               (a) Notice to  Mortgagors.  The Seller  shall  cause the  Interim
          Servicer to mail to the  Mortgagor  of each  related  Mortgage  Loan a
          letter advising such Mortgagor of the transfer of the servicing of the
          related Mortgage Loan to the Purchaser, or its designee, in accordance
          with the Cranston  Gonzales National  Affordable  Housing Act of 1990;
          provided, however, the content and format of the letter shall have the
          prior  approval of the  Purchaser.  The Seller shall cause the Interim
          Servicer to provide  the  Purchaser  with  copies of all such  related
          notices no later than the Transfer Date.

               (b) Notice to Taxing  Authorities  and Insurance  Companies.  The
          Seller shall cause the Interim  Servicer to transmit to the applicable
          taxing authorities and insurance companies and/or agents, notification
          of the transfer of the  servicing to the  Purchaser,  or its designee,
          and  instructions  to deliver  all  notices,  tax bills and  insurance
          statements,  as the case may be, to the  Purchaser  from and after the
          Transfer Date. The Seller shall cause the Interim  Servicer to provide
          the  Purchaser  with  copies  of all such  notices  no later  than the
          Transfer Date.

               (c)  Delivery of  Servicing  Records.  The Seller shall cause the
          Interim  Servicer to forward to the  Purchaser,  or its designee,  all
          servicing  records and the  Servicing  File in the Interim  Servicer's
          possession  relating  to each  related  Mortgage  Loan  including  the
          information  enumerated  in  the  Interim  Servicing  Agreement  (with
          respect  to  each  such  Mortgage  Loan,  for an  interim  period,  as
          specified therein).

               (d) [Reserved.]

               (e) [Reserved.]
..
               (f) Mortgage  Payments  Received Prior to Transfer Date. Prior to
          the Transfer Date all payments received by the Interim Servicer or the
          Seller on each related  Mortgage Loan shall be properly applied by the
          Seller to the account of the particular Mortgagor.

               (g) Mortgage Payments Received after Transfer Date. The amount of
          any related Monthly Payments received by the Seller after the Transfer
          Date shall be properly  endorsed  and  forwarded  to the  Purchaser by
          overnight mail on the date of receipt at the expense of the Purchaser.

               (h) Misapplied  Payments.  Misapplied payments shall be processed
          as follows:

               (i) All parties  shall  cooperate  in  correcting  misapplication
          errors;

               (ii) The party receiving notice of a misapplied payment occurring
          prior  to the  applicable  Transfer  Date  and  discovered  after  the
          Transfer Date shall immediately notify the other party;

               (iii)  If a  misapplied  payment  which  occurred  prior  to  the
          Transfer Date cannot be  identified  and said  misapplied  payment has
          resulted in a shortage in the Collection Account,  the Seller shall be
          liable for the amount of such shortage. The Seller shall reimburse the
          Purchaser  for the amount of such  shortage  within  thirty  (30)~days
          after receipt of written demand therefor from the Purchaser;

               (iv) If a misapplied payment which occurred prior to the Transfer
          Date has  created  an  improper  Purchase  Price as the  result  of an
          inaccurate  outstanding  principal balance, a check shall be issued to
          the party  shorted by the  improper  payment  application  within five
          (5)~Business Days after notice thereof by the other party; and

               (v) Any check issued under the  provisions  of this  Section~8(h)
          shall be  accompanied  by a  statement  indicating  the  corresponding
          Seller and/or the Purchaser Mortgage Loan identification number and an
          explanation of the allocation of any such payments.

               (i) Books and Records.  On the Transfer Date, the books,  records
          and accounts of the Seller with respect to the related  Mortgage Loans
          shall be in accordance with all applicable Purchaser requirements.

               (j)  Reconciliation.  The Seller shall, on or before the Transfer
          Date,  reconcile  principal  balances and make any necessary  monetary
          adjustments. Any such monetary adjustments will be transferred between
          the Seller and the Purchaser as appropriate.

               (k) IRS  Forms.  The  Seller  shall or shall  cause  the  Interim
          Servicer to file all IRS forms 1099, 1099A, 1098 or 1041 and K-1 which
          are required to be filed on or before January 31, 2005 in relation to
          the servicing and ownership of the related  Mortgage Loans. The Seller
          shall  provide,  in electronic  format,  the data used to prepare such
          forms to the Purchaser upon request and shall  reimburse the Purchaser
          for any  costs  or  penalties  incurred  by the  Purchaser  due to the
          Seller's failure to comply with this paragraph.

SECTION 9. Representations, Warranties and Covenants of the Seller; Remedies for
Breach.

Subsection 9.01   Representations and Warranties Regarding the Seller.

               The Seller  represents,  warrants and  covenants to the Purchaser
          that as of the date hereof and as of each Closing Date:
               (a) Due Organization and Authority.  The Seller is a corporation,
          validly  existing,  and  in  good  standing  under  the  laws  of  its
          jurisdiction  of  incorporation  or  formation  and has  all  licenses
          necessary  to carry on its  business  as now  being  conducted  and is
          licensed,  qualified  and in good  standing  in the  states  where the
          Mortgaged  Property  is  located  if the  laws of such  state  require
          licensing or  qualification  in order to conduct  business of the type
          conducted by the Seller.  The Seller has corporate power and authority
          to execute and deliver this  Agreement and to perform its  obligations
          hereunder;  the execution,  delivery and performance of this Agreement
          (including  all  instruments  of transfer to be delivered  pursuant to
          this Agreement) by the Seller and the consummation of the transactions
          contemplated  hereby  have  been  duly and  validly  authorized;  this
          Agreement has been duly executed and  delivered  and  constitutes  the
          valid, legal, binding and enforceable obligation of the Seller, except
          as  enforceability  may  be  limited  by  (i) bankruptcy,  insolvency,
          liquidation, receivership, moratorium, reorganization or other similar
          laws  affecting  the  enforcement  of  the  rights  of  creditors  and
          (ii)~general  principles of equity, whether enforcement is sought in a
          proceeding  in equity or at law. All  requisite  corporate  action has
          been taken by the Seller to make this Agreement valid and binding upon
          the Seller in accordance with its terms;

               (b) No Consent Required. No consent,  approval,  authorization or
          order is required for the transactions  contemplated by this Agreement
          from any  court,  governmental  agency or body,  or  federal  or state
          regulatory  authority having  jurisdiction over the Seller is required
          or, if required,  such consent,  approval,  authorization or order has
          been or will, prior to the related Closing Date, be obtained;

               (c)  Ordinary  Course  of  Business.   The  consummation  of  the
          transactions contemplated by this Agreement are in the ordinary course
          of business of the Seller, and the transfer, assignment and conveyance
          of the Mortgage Notes and the Mortgages by the Seller pursuant to this
          Agreement  are  not  subject  to the  bulk  transfer  or  any  similar
          statutory provisions in effect in any applicable jurisdiction;

               (d) No  Conflicts.  Neither the  execution  and  delivery of this
          Agreement, the acquisition or origination of the Mortgage Loans by the
          Seller,  the  sale  of  the  Mortgage  Loans  to  the  Purchaser,  the
          consummation  of  the  transactions   contemplated   hereby,  nor  the
          fulfillment  of or  compliance  with the terms and  conditions of this
          Agreement,  will  conflict  with or  result  in a breach of any of the
          terms,  conditions or provisions of the Seller's  charter,  by-laws or
          other  organizational  documents  or  any  legal  restriction  or  any
          agreement or instrument to which the Seller is now a party or by which
          it is bound,  or  constitute  a default  or result in an  acceleration
          under any of the  foregoing,  or result in the  violation  of any law,
          rule, regulation, order, judgment or decree to which the Seller or its
          property is subject,  or result in the creation or  imposition  of any
          lien, charge or encumbrance that would have an adverse effect upon any
          of its  properties  pursuant to the terms of any  mortgage,  contract,
          deed of  trust or other  instrument,  or  impair  the  ability  of the
          Purchaser  to realize on the Mortgage  Loans,  impair the value of the
          Mortgage  Loans, or impair the ability of the Purchaser to realize the
          full  amount  of any  insurance  benefits  accruing  pursuant  to this
          Agreement;

               (e) No Litigation Pending.  There is no action, suit,  proceeding
          or investigation  pending or threatened against the Seller, before any
          court,   administrative   agency  or  other  tribunal   asserting  the
          invalidity of this Agreement,  seeking to prevent the  consummation of
          any of the  transactions  contemplated  by this  Agreement  or  which,
          either in any one  instance  or in the  aggregate,  may  result in any
          material  adverse  change  in  the  business,  operations,   financial
          condition,  properties  or assets of the  Seller,  or in any  material
          impairment  of the  right or  ability  of the  Seller  to carry on its
          business substantially as now conducted,  or in any material liability
          on the part of the  Seller,  or which  would  draw into  question  the
          validity  of this  Agreement  or the  Mortgage  Loans or of any action
          taken or to be taken in connection  with the obligations of the Seller
          contemplated herein, or which would be likely to impair materially the
          ability of the Seller to perform under the terms of this Agreement;

               (f) Ability to Perform;  Solvency.  The Seller does not  believe,
          nor  does it have any  reason  or cause  to  believe,  that it  cannot
          perform  each and every  covenant  contained  in this  Agreement.  The
          Seller is solvent  and the sale of the  Mortgage  Loans will not cause
          the Seller to become insolvent.  The sale of the Mortgage Loans is not
          undertaken with the intent to hinder, delay or defraud any of Seller's
          creditors;

               (g) Anti-Money  Laundering Laws. The Seller has complied with all
          applicable  anti-money  laundering  laws  and  regulations,  including
          without  limitation  the USA  Patriot Act of 2001  (collectively,  the
          "Anti-Money   Laundering   Laws");   the  Seller  has  established  an
          anti-money laundering compliance program as required by the Anti-Money
          Laundering   Laws,  has  conducted  the  requisite  due  diligence  in
          connection  with the origination of each Mortgage Loan for purposes of
          the  Anti-Money   Laundering  Laws,  including  with  respect  to  the
          legitimacy  of the  applicable  Mortgagor and the origin of the assets
          used by the said  Mortgagor to purchase the property in question,  and
          maintains,  and will maintain,  sufficient information to identify the
          applicable Mortgagor for purposes of the Anti-Money Laundering Laws;

               (h) Delivery to the  Custodian.  The Mortgage Note, the Mortgage,
          the  Assignment  of Mortgage  and any other  documents  required to be
          delivered with respect to each Mortgage Loan pursuant to the Custodial
          Agreement,  shall be delivered to the Custodian all in compliance with
          the specific requirements of the Custodial Agreement.  With respect to
          each  Mortgage  Loan,  the Seller will be in  possession of a complete
          Mortgage File in compliance  with  Exhibit~A  hereto,  except for such
          documents as will be delivered to the Custodian;

               (i)  No  Untrue  Information.  Neither  this  Agreement  nor  any
          information,   statement,  tape,  diskette,  report,  form,  or  other
          document furnished or to be furnished pursuant to this Agreement or in
          connection with the transactions  contemplated  hereby  (including any
          Securitization  Transfer  or Whole  Loan  Transfer)  contains  or will
          contain any untrue  statement of fact or omits or will omit to state a
          fact necessary to make the statements  contained herein or therein not
          misleading;

               (j) No  Brokers.  The  Seller  has not  dealt  with  any  broker,
          investment  banker,  agent or other person that may be entitled to any
          commission or compensation in connection with the sale of the Mortgage
          Loans;
               (k) Sale  Treatment.  The  Seller  expects  to be  advised by its
          independent certified public accountants that under generally accepted
          accounting  principles  the  transfer  of the  Mortgage  Loans will be
          treated  as a sale on the  books and  records  of the  Seller  and the
          Seller has  determined  that the  disposition  of the  Mortgage  Loans
          pursuant to this Agreement will be afforded sale treatment for tax and
          accounting purposes;

               (l) Owner of  Record.  The  Seller is the owner of record of each
          Mortgage and the indebtedness  evidenced by each Mortgage Note, except
          for the  Assignments  of Mortgage  which have been sent for recording,
          and upon  recordation  the Seller  will be the owner of record of each
          Mortgage and the  indebtedness  evidenced by each Mortgage  Note,  and
          upon the sale of the Mortgage Loans to the Purchaser,  the Seller will
          retain the Mortgage  Files with respect  thereto in trust only for the
          purpose of servicing  and  supervising  the servicing of each Mortgage
          Loan;

               (m) Reasonable Purchase Price. The consideration  received by the
          Seller  upon the  sale of the  Mortgage  Loans  under  this  Agreement
          constitutes fair consideration and reasonably equivalent value for the
          Mortgage Loans; and

               (n) Credit Reporting. The Seller, as Interim Servicer, will fully
          furnish,  in  accordance  with the Fair Credit  Reporting  Act and its
          implementing  regulations,  accurate and complete  information  (e.g.,
          favorable and  unfavorable)  on its borrower  credit files to Equifax,
          Experian  and Trans Union  Credit  Information  Company  (three of the
          credit repositories), on a monthly basis. Additionally, the Seller, as
          Interim  Servicer,  will transmit  full-file credit reporting data for
          each Mortgage Loan pursuant to Fannie Mae Guide Announcement 95-19 and
          that for each Mortgage Loan, the Seller, as Interim  Servicer,  agrees
          it shall report one of the  following  statuses each month as follows:
          new  origination,  current,  delinquent  (30-,  60-,  90-days,  etc.),
          foreclosed, or charged-off.

Subsection 9.02  Representations  and Warranties  Regarding  Individual Mortgage
Loans.
               The Seller hereby  represents and warrants to the Purchaser that,
          as to each  Mortgage  Loan,  as of the related  Closing  Date for such
          Mortgage Loan:

               (a) Mortgage Loans as Described. The information set forth in the
          related Mortgage Loan Schedule is complete, true and correct;

               (b) Original Terms Unmodified. The terms of the Mortgage Note and
          Mortgage have not been  impaired,  waived,  altered or modified in any
          respect,  from the date of origination  except by a written instrument
          which has been  delivered to the  Custodian or to such other Person as
          the Purchaser shall  designate in writing,  and the terms of which are
          reflected in the related Mortgage Loan Schedule.  The substance of any
          such waiver is reflected on the related  Mortgage  Loan  Schedule.  No
          Mortgagor has been released, in whole or in part, except in connection
          with an assumption  agreement,  and which assumption agreement is part
          of the Mortgage Loan File  delivered to the Custodian or to such other
          Person as the  Purchaser  shall  designate in writing and the terms of
          which are reflected in the related Mortgage Loan Schedule;

               (c) Compliance with Applicable  Laws. Any and all requirements of
          any  federal,  state or local law or  regulations  including,  without
          limitation,   usury,   truth-in-lending,    real   estate   settlement
          procedures,  consumer  credit  protection,  equal credit  opportunity,
          disclosure  and all predatory and abusive  lending laws  applicable to
          the Mortgage  Loan,  including,  without  limitation,  any  provisions
          relating  to  prepayment  penalties,  have  been  complied  with,  the
          consummation of the transactions  contemplated hereby will not involve
          the  violation of any such laws or  regulations,  and the Seller shall
          maintain in its possession,  available for the Purchaser's inspection,
          and shall deliver to the Purchaser upon demand, evidence of compliance
          with all such requirements;

               (d) Valid First or Second Lien.  Each  Mortgage with respect to a
          Mortgage  Loan  identified as a First Lien Loan or Second Lien Loan on
          the  related   Mortgage  Loan  Schedule,   is  a  valid,   subsisting,
          enforceable  and  perfected,  first lien (with respect to a First Lien
          Loan) or second  lien  (with  respect  to a Second  Lien  Loan) on the
          Mortgaged  Property,  including all buildings and  improvements on the
          Mortgaged  Property and all installations and mechanical,  electrical,
          plumbing,  heating and air conditioning  systems located in or annexed
          to such buildings,  and all additions,  alterations  and  replacements
          made  at  any  time  with  respect  to  the  foregoing.  Any  security
          agreement,  chattel  mortgage or  equivalent  document  related to and
          delivered in connection with the Mortgage Loan establishes and creates
          a valid,  subsisting,  enforceable  and  perfected  first  lien  (with
          respect to a First Lien Loan) or second lien (with respect to a Second
          Lien Loan) and first  priority  (with respect to a First Lien Loan) or
          second priority (with respect to a Second Lien Loan) security interest
          on the  property  described  therein  and the Seller has full right to
          sell and assign the same to the Purchaser;

               (e) Validity of Mortgage  Documents.  The  Mortgage  Note and the
          Mortgage and any other agreement executed and delivered by a Mortgagor
          in connection with a Mortgage Loan are genuine, and each is the legal,
          valid and  binding  obligation  of the maker  thereof  enforceable  in
          accordance  with  its  terms  (including,   without  limitation,   any
          provisions therein relating to prepayment  penalties).  All parties to
          the Mortgage Note,  the Mortgage and any other such related  agreement
          had legal  capacity to enter into the Mortgage Loan and to execute and
          deliver the Mortgage  Note, the Mortgage and any such  agreement,  and
          the Mortgage Note,  the Mortgage and any other such related  agreement
          have been duly and properly executed by other such related parties. No
          fraud,  error,  omission,  misrepresentation,  negligence  or  similar
          occurrence with respect to a Mortgage Loan has taken place on the part
          of the Seller in connection  with the origination of the Mortgage Loan
          or in the  application  of any  insurance in relation to such Mortgage
          Loan.  No fraud,  error,  omission,  misrepresentation,  negligence or
          similar  occurrence with respect to a Mortgage Loan has taken place on
          the part of any Person,  including without limitation,  the Mortgagor,
          any appraiser,  any builder or developer,  or any other party involved
          in the  origination of the Mortgage Loan or in the application for any
          insurance in relation to such Mortgage  Loan.  The Seller has reviewed
          all of the documents constituting the Servicing File and has made such
          inquiries  as it deems  necessary  to make and confirm the accuracy of
          the representations set forth herein;

               (f) Full  Disbursement  of Proceeds.  The Mortgage  Loan has been
          closed and the proceeds of the Mortgage Loan have been fully disbursed
          and there is no requirement  for future advances  thereunder,  and any
          and all  requirements  as to  completion  of any  on-site or  off-site
          improvement and as to  disbursements of any escrow funds therefor have
          been complied with. All costs, fees and expenses incurred in making or
          closing the Mortgage Loan and the recording of the Mortgage were paid,
          and the Mortgagor is not entitled to any refund of any amounts paid or
          due under the Mortgage Note or Mortgage;

               (g) Ownership.  The Seller is the sole owner of record and holder
          of the Mortgage Loan and the  indebtedness  evidenced by each Mortgage
          Note and upon the sale of the  Mortgage  Loans to the  Purchaser,  the
          Seller will retain the Mortgage Files or any part thereof with respect
          thereto  not  delivered  to  the  Custodian,   the  Purchaser  or  the
          Purchaser's  designee,  in trust only for the purpose of servicing and
          supervising  the servicing of each Mortgage Loan. The Mortgage Loan is
          not  assigned or pledged,  and the Seller has good,  indefeasible  and
          marketable title thereto,  and has full right to transfer and sell the
          Mortgage  Loan to the  Purchaser  free and  clear of any  encumbrance,
          equity,   participation  interest,  lien,  pledge,  charge,  claim  or
          security  interest,  and has full  right 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  and
          following the sale of each Mortgage  Loan, the Purchaser will own such
          Mortgage Loan free and clear of any encumbrance, equity, participation
          interest, lien, pledge, charge, claim or security interest. The Seller
          intends to relinquish  all rights to possess,  control and monitor the
          Mortgage Loan. After the related Closing Date, the Seller will have no
          right to modify or alter  the terms of the sale of the  Mortgage  Loan
          and the Seller  will have no  obligation  or right to  repurchase  the
          Mortgage Loan or substitute  another Mortgage Loan, except as provided
          in this Agreement;

              (h) Ability to Service. The Seller is an approved seller/servicer
          of residential mortgage loans for FHA with the facilities, procedures,
          and  experienced  personnel  necessary  for  the  sound  servicing  of
          mortgage loans of the same type as the Mortgage  Loans.  The Seller is
          in good standing to sell mortgage loans to and service  mortgage loans
          for FHA,  and no event has  occurred,  including  but not limited to a
          change in insurance  coverage,  which would make the Seller  unable to
          comply  with  FHA  eligibility  requirements  or which  would  require
          notification to FHA;

              (i) No  Additional  Collateral.  The Mortgage Note is not and has
          not  been   secured  by  any   collateral   except  the  lien  of  the
          corresponding  Mortgage  and the security  interest of any  applicable
          security  agreement or chattel  mortgage  referred to in paragraph (d)
          above;

              (j)  Delivery of  Mortgage  Documents.  The  Mortgage  Note,  the
          Mortgage,  the Assignment of Mortgage and any other documents required
          to be delivered  under the Custodial  Agreement for each Mortgage Loan
          have been delivered to the Custodian. The Seller is in possession of a
          complete, true and accurate Mortgage File in compliance with Exhibit~A
          hereto,  except for such  documents  the  originals of which have been
          delivered to the Custodian;

               (k)  Collection   Practices.   The  origination,   servicing  and
          collection  practices used by the Seller and the Interim Servicer with
          respect to the Mortgage  Loan have been in all respects in  compliance
          with Accepted  Servicing  Practices,  applicable laws and regulations,
          and have been in all respects legal and proper;

               (l)  FHA  Mortgage   Loans.   Except  for  those  Mortgage  Loans
          identified on the related Mortgage Loan Schedule as FHA Mortgage Loans
          (i.e., Title~I loans), no Mortgage Loan is an FHA Mortgage Loan (i.e.,
          Title~I loan);

               (m)  Recordation.  Each  original  Mortgage  was recorded and all
          subsequent  assignments  of the  original  Mortgage  (other  than  the
          assignment to the  Purchaser)  have been  recorded in the  appropriate
          jurisdictions  wherein  such  recordation  is necessary to perfect the
          lien thereof as against  creditors of the Seller, or is in the process
          of being recorded; and

              (n) Except with respect to normal and  customary  bankruptcy  and
          foreclosure  proceedings,  there is no  action,  suit,  proceeding  or
          investigation pending or threatened with respect to any Mortgage Loan,
          before any court, administrative agency or other tribunal.

Subsection 9.03   Remedies for Breach of Representations and Warranties.

               It  is  understood  and  agreed  that  the   representations  and
          warranties  set forth in  Subsections 9.01  and 9.02 shall survive the
          sale of the  Mortgage  Loans to the  Purchaser  and shall inure to the
          benefit of the Purchaser, notwithstanding any restrictive or qualified
          endorsement  on any  Mortgage  Note or  Assignment  of Mortgage or the
          examination or failure to examine any Mortgage File. Upon discovery by
          either the Seller or the Purchaser of a breach of any of the foregoing
          representations  and  warranties,  the party  discovering  such breach
          shall give prompt written notice to the other.

               Within 60 days of the earlier of either discovery by or notice to
          the Seller of any such breach of a representation  or warranty,  which
          materially  and adversely  affects the value of the Mortgage  Loans or
          the  interest  of the  Purchaser  therein  (or  which  materially  and
          adversely  affects the value of the  applicable  Mortgage  Loan or the
          interest of the Purchaser therein in the case of a representation  and
          warranty relating to a particular Mortgage Loan), the Seller shall use
          its best efforts promptly to cure such breach in all material respects
          and,  if such  breach  cannot  be  cured,  the  Seller  shall,  at the
          Purchaser's  option,  repurchase  such Mortgage Loan at the Repurchase
          Price. In the event that a breach shall involve any  representation or
          warranty set forth in Subsection`9.01, and such breach cannot be cured
          within 60 days of the earlier of either  discovery by or notice to the
          Seller of such  breach,  all of the  Mortgage  Loans  affected by such
          breach shall, at the Purchaser's  option, be repurchased by the Seller
          at the  Repurchase  Price.  Any repurchase of a Mortgage Loan or Loans
          pursuant to the foregoing provisions of this Subsection~9.03  shall be
          accomplished by either (a)~if the Interim Servicing Agreement has been
          entered into and is in effect,  deposit in the  Collection  Account of
          the amount of the Repurchase  Price for  distribution to the Purchaser
          on the next scheduled  Remittance Date, after deducting  therefrom any
          amount received in respect of such repurchased  Mortgage Loan or Loans
          and being held in the Collection  Account for future  distribution  or
          (b)~if the Interim Servicing Agreement has not been entered into or is
          no longer in effect,  by direct  remittance of the Repurchase Price to
          the  Purchaser  or its  designee in  accordance  with the  Purchaser's
          instructions.

               At the time of  repurchase,  the  Purchaser  and the Seller shall
          arrange  for the  reassignment  of the  Deleted  Mortgage  Loan to the
          Seller and the  delivery  to the Seller of any  documents  held by the
          Custodian  relating to the Deleted  Mortgage  Loan.  In the event of a
          repurchase or substitution, the Seller shall, simultaneously with such
          reassignment,   give  written   notice  to  the  Purchaser  that  such
          repurchase  has taken  place,  amend the  Mortgage  Loan  Schedule  to
          reflect  the  withdrawal  of  the  Deleted  Mortgage  Loan  from  this
          Agreement.

               In  addition  to such  repurchase  obligation,  the Seller  shall
          indemnify  the  Purchaser  and  its  present  and  former   directors,
          officers,  employees  and agents and any  successor  Servicer  and its
          present and former directors,  officers, employees and agents and hold
          such parties harmless against any losses, damages,  penalties,  fines,
          forfeitures, legal fees and expenses 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 breach of
          the Seller  representations and warranties contained in this Agreement
          or any Reconstitution  Agreement. It is understood and agreed that the
          obligations of the Seller set forth in this  Subsection~9.03  to cure,
          substitute  for  or  repurchase  a  defective  Mortgage  Loan  and  to
          indemnify the  Purchaser  and  Successor  Servicer as provided in this
          Subsection~9.03 and in  Subsection~14.01  constitute the sole remedies
          of the Purchaser respecting a breach of the foregoing  representations
          and warranties.  For purposes of this paragraph "Purchaser" shall mean
          the Person then acting as the Purchaser  under this  Agreement and any
          and all Persons who previously were "Purchasers"  under this Agreement
          and  "Successor  Servicer"  shall  mean any Person  designated  as the
          Successor  Servicer pursuant to this Agreement and any and all Persons
          who previously were "Successor Servicers" pursuant to this Agreement.

               Any cause of action against the Seller relating to or arising out
          of  the  breach  of  any   representations   and  warranties  made  in
          Subsections~9.01  and 9.02 shall accrue as to any  Mortgage  Loan upon
          (i)~discovery of such breach by the Purchaser or notice thereof by the
          Seller  to the  Purchaser,  (ii)~failure  by the  Seller  to cure such
          breach or  repurchase  such  Mortgage  Loan as  specified  above,  and
          (iii)~demand upon the Seller by the Purchaser for compliance with this
          Agreement.

SECTION 10.       Closing.

               The  closing  for the  purchase  and sale of each  Mortgage  Loan
          Package  shall  take  place  on  the  related  Closing  Date.  At  the
          Purchaser's  option,  each  Closing  shall be  either:  by  telephone,
          confirmed by letter or wire as the parties  shall agree,  or conducted
          in person, at such place as the parties shall agree.

               The  closing  for the  Mortgage  Loans  to be  purchased  on each
          Closing Date shall be subject to each of the following conditions:

               (i) at least two Business Days prior to the related Closing Date,
          the Seller  shall  deliver to the  Purchaser a magnetic  diskette,  or
          transmit by modem,  a listing on a loan-level  basis of the  necessary
          information  to  compute  the  Purchase  Price of the  Mortgage  Loans
          delivered on such  Closing  Date  (including  accrued  interest),  and
          prepare a Mortgage Loan Schedule;

               (ii) all of the  representations  and  warranties  of the  Seller
          under this  Agreement  and of the Interim  Servicer  under the Interim
          Servicing Agreement (with respect to each Mortgage Loan for an interim
          period,  as  specified  therein)  shall be true and  correct as of the
          related  Closing  Date and no event shall have  occurred  which,  with
          notice or the passage of time,  would  constitute a default under this
          Agreement  or  an  Event  of  Default  under  the  Interim   Servicing
          Agreement;

               (iii) the  Purchaser  shall  have  received,  or the  Purchaser's
          attorneys  shall have  received in escrow,  all closing  documents  as
          specified in Section~11 of this Agreement, in such forms as are agreed
          upon and acceptable to the Purchaser, duly executed by all signatories
          other than the Purchaser as required pursuant to the terms hereof;

               (iv)  the  Seller  shall  have  delivered  and  released  to  the
          Custodian all documents required pursuant to the Custodial  Agreement;
          and

               (v) all other terms and conditions of this  Agreement  shall have
          been complied with.

              Subject to the foregoing  conditions,  the Purchaser shall pay to
          the Seller on the related  Closing Date the Purchase  Price,  plus any
          applicable  accrued interest  pursuant to Section~4 of this Agreement,
          by  wire  transfer  of  immediately  available  funds  to the  account
          designated by the Seller.

SECTION 11.       Closing Documents.

The Closing  Documents  for the  Mortgage  Loans to be purchased on each Closing
Date shall consist of fully executed originals of the following documents:
(1)      this Agreement (to be executed and delivered only for the initial
         Closing Date);

(2)      the Interim Servicing  Agreement, dated as of the initial Cut-off Date
        (to be executed and delivered only for the initial Closing Date);

(3)      with respect to the initial Closing Date, the Custodial Agreement,
         dated as of the initial Cut-off Date;

(4)      the  related  Mortgage  Loan  Schedule to be attached to the  related
         Assignment and Conveyance as the Mortgage Loan Schedule thereto);

(5)      with respect to the initial Closing Date, an Officer's Certificate, in
         the form of Exhibit~C hereto with respect to each of the  Seller,
         including all attachments  thereto;  with  respect to subsequent
         Closing Dates, an Officer's Certificate upon request of the Purchaser;

(6)      with respect to the initial  Closing  Date, an Opinion of Counsel of
         the Seller (who may be an employee of the Seller), in the form of
         Exhibit~D  hereto  ("Opinion  of Counsel of the "Seller"); with
         respect to subsequent  Closing  Dates,  an Opinion of Counsel of the
         Seller upon request of the Purchaser;

(7)      a  certificate or other evidence of merger or change of name, signed or
        stamped  by the applicable regulatory authority,  if any of the Mortgage
        Loans  were  acquired by the Seller by merger or acquired or originated
        by the Seller while conducting  business under a name other than its
        present name, if applicable; and.

(8)      Assignment and Conveyance Agreement in the form of Exhibit~D hereto,
         and all exhibits thereto.

The Seller shall bear the risk of loss of the closing  documents until such time
as they are received by the Purchaser or its attorneys.

SECTION 12.       Costs.

The Purchaser  shall pay any commissions due its salesmen and the legal fees and
expenses of its  attorneys  and  custodial  fees.  All other costs and  expenses
incurred in connection  with the transfer and delivery of the Mortgage Loans and
the  Servicing  Rights and the Seller's  attorney's  fees,  shall be paid by the
Seller.

SECTION 13.       Cooperation of Seller with a Reconstitution.

               The Seller and the  Purchaser  agree that with respect to some or
          all of the Mortgage  Loans,  after the related Closing Date, on one or
          more dates (each, a  "Reconstitution  Date") at the  Purchaser's  sole
          option, the Purchaser may effect a sale (each, a "Reconstitution")  of
          some or all of the  Mortgage  Loans then  subject  to this  Agreement,
          without recourse, to:

(i)      one or more third party purchasers in one or more Whole Loan Transfers;
 or

(ii)     one or more trusts or other entities to be formed as part of one or
more Securitization Transfers.

               With respect to each Whole Loan Transfer and each  Securitization
          Transfer entered into by the Purchaser, the Seller agrees to cooperate
          fully with the Purchaser and any prospective purchaser with respect to
          all reasonable requests and due diligence procedures. The Seller shall
          provide to such servicer or issuer,  as the case may be, and any other
          participants  or  purchasers in such  Reconstitution:  (i)~any and all
          information and appropriate  verification of information  which may be
          reasonably available to the Seller or its affiliates,  whether through
          letters of its auditors and counsel or otherwise,  as the Purchaser or
          any such other  participant  shall request;  and (ii)~such  additional
          representations,  warranties,  covenants, opinions of counsel, letters
          from auditors, and certificates of public officials or officers of the
          Seller or the Interim Servicer as are reasonably believed necessary by
          the  Purchaser  or any such other  participant.  For  purposes  of the
          previous  sentence,  "Purchaser"  shall mean the Person then acting as
          the  Purchaser  under  this  Agreement  and any and  all  Persons  who
          previously were "Purchasers" under this Agreement.  Any costs incurred
          by the Seller in  connection  with its  cooperation  pursuant  to this
          Section~13 shall be at the expense of the Purchaser.

               In the event the  Purchaser has elected to have the Seller or the
          Interim  Servicer  hold record  title to the  Mortgages,  prior to the
          Reconstitution  Date,  the  Seller  shall  prepare  an  assignment  of
          mortgage  in blank or to the  prospective  purchaser  or  trustee,  as
          applicable,  from the Seller or the Interim  Servicer,  as applicable,
          acceptable to the prospective purchaser or trustee, as applicable, for
          each  Mortgage Loan that is part of the  Reconstitution  and shall pay
          all  preparation  and  recording  costs   associated   therewith.   In
          connection with the Reconstitution,  the Seller shall execute or shall
          cause the Interim  Servicer to execute  each  assignment  of mortgage,
          track such  Assignments  of Mortgage to ensure they have been recorded
          and deliver them as required by the prospective  purchaser or trustee,
          as applicable,  upon the Seller's receipt thereof.  Additionally,  the
          Seller shall  prepare and execute or shall cause the Interim  Servicer
          to execute, at the direction of the Purchaser, any note endorsement in
          connection with any and all seller/servicer agreements.

               All  Mortgage  Loans  not  sold  or  transferred  pursuant  to  a
          Reconstitution  shall  remain  subject to this  Agreement  and, if the
          Interim Servicing Agreement shall remain in effect with respect to the
          related  Mortgage  Loan  Package,  shall  continue  to be  serviced in
          accordance with the terms of this Agreement and the Interim  Servicing
          Agreement and with respect thereto this Agreement shall remain in full
          force and effect.

SECTION 14.       The Seller.

Subsection 14.01  Additional Indemnification by the Seller; Third Party Claims.
               (a) The Seller shall  indemnify the Purchaser and its present and
          former  directors,  officers,  employees  and agents and any Successor
          Servicer and its present and former directors, officers, employees and
          agents,  and hold such  parties  harmless  against any and all claims,
          losses,  damages,  penalties,  fines,  forfeitures,   legal  fees  and
          expenses  (including  legal fees and expenses  incurred in connection
          with the enforcement of the Seller's indemnification  obligation under
          this  Subsection~14.01)  and related costs,  judgments,  and any other
          costs,  fees and  expenses  that such  parties  may sustain in any way
          related to the  failure  of the  Seller to perform  its duties and the
          Interim  Servicer to service the Mortgage  Loans in strict  compliance
          with the terms of this  Agreement  or any  breach  of any of  Seller's
          representations,  warranties and covenants set forth in this Agreement
          (provided  that such costs shall not include  any lost  profits).  For
          purposes  of this  paragraph  "Purchaser"  shall mean the Person  then
          acting as the Purchaser  under this  Agreement and any and all Persons
          who previously were  "Purchasers"  under this Agreement and "Successor
          Servicer" shall mean any Person  designated as the Successor  Servicer
          pursuant to this Agreement and any and all Persons who previously were
          "Successor Servicers" pursuant to this Agreement.
               (b) Promptly  after  receipt by an  indemnified  party under this
          Subsection~14.01  of notice of the  commencement  of any action,  such
          indemnified  party will,  if a claim in respect  thereof is to be made
          against the indemnifying party under this Subsection~14.01, notify the
          indemnifying  party in writing of the  commencement  thereof;  but the
          omission  so to notify the  indemnifying  party will not  relieve  the
          indemnifying  party  from  any  liability  which  it may  have  to any
          indemnified  party under this  Subsection~14.01,  except to the extent
          that it has  been  prejudiced  in any  material  respect,  or from any
          liability   which   it   may   have,   otherwise   than   under   this
          Subsection~14.01.  In case any such  action  is  brought  against  any
          indemnified  party  and it  notifies  the  indemnifying  party  of the
          commencement  thereof,  the  indemnifying  party will be  entitled  to
          participate  therein,  and to the extent  that it may elect by written
          notice delivered to the indemnified party promptly after receiving the
          aforesaid  notice from such  indemnified  party, to assume the defense
          thereof,  with counsel  reasonably  satisfactory  to such  indemnified
          party; provided that if the defendants in any such action include both
          the indemnified  party and the indemnifying  party and the indemnified
          party or parties  shall have  reasonably  concluded  that there may be
          legal  defenses  available  to it or  them  and/or  other  indemnified
          parties which are different  from or additional to those  available to
          the indemnifying  party,  the indemnified  party or parties shall have
          the right to select separate counsel to assert such legal defenses and
          to  otherwise  participate  in the defense of such action on behalf of
          such  indemnified  party or parties.  Upon  receipt of notice from the
          indemnifying  party to such  indemnified  party of its  election so to
          assume the  defense of such  action and  approval  by the  indemnified
          party of counsel,  the  indemnifying  party will not be liable to such
          indemnified  party for expenses  incurred by the indemnified  party in
          connection with the defense thereof unless (i)~the  indemnified  party
          shall have employed  separate counsel in connection with the assertion
          of legal defenses in accordance with the proviso to the next preceding
          sentence (it being understood,  however,  that the indemnifying  party
          shall not be liable for the expenses of more than one separate counsel
          (together  with  one  local   counsel,   if   applicable)),   (ii)~the
          indemnifying   party  shall  not  have  employed  counsel   reasonably
          satisfactory  to the  indemnified  party to represent the  indemnified
          party within a reasonable  time after  notice of  commencement  of the
          action or (iii)~the  indemnifying  party has authorized in writing the
          employment of counsel for the indemnified  party at the expense of the
          indemnifying  party;  and  except  that,  if  clause  (i) or  (iii) is
          applicable,  such  liability  shall be only in respect of the  counsel
          referred to in such clause (i) or (iii).

Subsection 14.02  Merger or Consolidation of the Seller.

               The Seller  will keep in full  effect its  existence,  rights and
          franchises  as a  corporation  under  the  laws  of the  state  of its
          incorporation except as permitted herein, and will obtain and preserve
          its  qualification  to do  business as a foreign  corporation  in each
          jurisdiction in which such  qualification  is or shall be necessary to
          protect the validity and  enforceability of this Agreement,  or any of
          the Mortgage Loans and to perform its duties under this Agreement.

               Any Person  into which the Seller may be merged or  consolidated,
          or  any   corporation   resulting  from  any  merger,   conversion  or
          consolidation  to which the  Seller  shall be a party,  or any  Person
          succeeding  to the business of the Seller,  shall be the  successor of
          the Seller 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
          creditworthiness  of the  successor or  surviving  Person shall not be
          materially and adversely  different from the  creditworthiness  of the
          Seller at such time.

SECTION 15.       Financial Statements.

               The Seller  understands  that in connection  with the Purchaser's
          marketing of the Mortgage Loans, the Purchaser shall make available to
          prospective  purchasers audited financial statements of the Seller for
          the most recently  completed three fiscal years  respecting which such
          statements  are  available.  The Seller shall also make  available any
          comparable  interim  statements to the extent any such statements have
          been prepared by the Seller (and are available upon request to members
          or stockholders of the Seller or the public at large).  The Seller, if
          it has  not  already  done  so,  agrees  to  furnish  promptly  to the
          Purchaser  copies of the statements  specified above. The Seller shall
          also make  available  information  on its servicing  performance  with
          respect to loans serviced for others, including delinquency ratios.

               The  Seller  also  agrees  to  allow   reasonable   access  to  a
          knowledgeable  financial  or  accounting  officer  for the  purpose of
          answering  questions  asked  by any  prospective  purchaser  regarding
          recent developments  affecting the Seller or the financial  statements
          of the Seller.

                    Notwithstanding anything to the contrary in this Section~15,
               the  Purchaser  shall  not  disclose  any  financial   statements
               received under this Section~15  without the prior written consent
               of the Seller,  except to the extent that it is  appropriate  for
               the Purchaser to do so in working with legal  counsel,  auditors,
               taxing authorities or other governmental agencies.

SECTION 16.       [Reserved].

SECTION 17.       Notices.

All demands,  notices and communications hereunder shall be in writing and shall
be deemed to have been duly given if mailed,  by registered  or certified  mail,
return  receipt  requested,  or, if by other means,  when  received by the other
party at the address as follows:
(i)      if to the Seller:

                           Master Financial, Inc.
                           505 City Parkway West, Suite 800
                           Orange, California  92868
                           Attention:  Michael J. Kim
(ii)     if to the Purchaser:

                           Franklin Credit Management Corporation
                           6 Harrison Street, 6th Floor
                           New York, New York  10013
                           Attention:  Alan Joseph

or such other  address as may  hereafter be furnished to the other party by like
notice.  Any such demand,  notice or communication  hereunder shall be deemed to
have been  received on the date  delivered to or received at the premises of the
addressee (as  evidenced,  in the case of  registered or certified  mail, by the
date noted on the return receipt).

SECTION 18.       Severability Clause.

Any part,  provision  representation  or  warranty  of this  Agreement  which is
prohibited  or  unenforceable  or is held to be  void  or  unenforceable  in any
jurisdiction  shall be ineffective,  as to such  jurisdiction,  to the extent of
such  prohibition  or  unenforceability   without   invalidating  the  remaining
provisions  hereof,  and  any  such  prohibition  or   unenforceability  in  any
jurisdiction   as  to  any  Mortgage   Loan  shall  not   invalidate  or  render
unenforceable such provision in any other jurisdiction.  To the extent permitted
by applicable law, the parties hereto waive any provision of law which prohibits
or renders void or unenforceable  any provision hereof. If the invalidity of any
part, provision,  representation or warranty of this Agreement shall deprive any
party of the economic  benefit  intended to be conferred by this Agreement,  the
parties  shall  negotiate,  in  good-faith,  to develop a structure the economic
effect of which is nearly as possible  the same as the  economic  effect of this
Agreement without regard to such invalidity.

SECTION 19.       Counterparts.

This  Agreement may be executed  simultaneously  in any number of  counterparts.
Each counterpart  shall be deemed to be an original,  and all such  counterparts
shall constitute one and the same instrument.

SECTION 20.       Governing Law.

This  Agreement  shall be  deemed in effect  when a fully  executed  counterpart
thereof  is  received  by the  Purchaser  in the  State of New York and shall be
deemed  to have  been made in the  State of New  York.  The  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 the substantive laws of the State of New York (without regard to
conflicts of laws principles), except to the extent preempted by Federal law.

SECTION 21.       Intention of the Parties.

It is the  intention of the parties that the  Purchaser is  purchasing,  and the
Seller is selling the Mortgage Loans and not a debt  instrument of the Seller or
another  security.  Accordingly,  the  parties  hereto  each intend to treat the
transaction  for Federal  income tax  purposes  as a sale by the  Seller,  and a
purchase by the Purchaser,  of the Mortgage  Loans.  Moreover,  the  arrangement
under which the Mortgage Loans are held shall be consistent with  classification
of such arrangement as a grantor trust in the event it is not found to represent
direct  ownership of the Mortgage  Loans.  The Purchaser shall have the right to
review the Mortgage  Loans and the related  Mortgage Loan Files to determine the
characteristics  of the Mortgage Loans which shall affect the Federal income tax
consequences  of owning the Mortgage  Loans and the Seller shall  cooperate with
all reasonable requests made by the Purchaser in the course of such review.

SECTION 22.       Successors and Assigns; Assignment of Purchase Agreement.

                    This Agreement shall bind and inure to the benefit of and be
               enforceable  by the Seller and the Purchaser  and the  respective
               permitted successors and assigns of the Seller and the successors
               and  assigns  of  the  Purchaser.  This  Agreement  shall  not be
               assigned,  pledged or hypothecated by the Seller to a third party
               without  the  prior  written  consent  of  the  Purchaser.   This
               Agreement  may  be  assigned,  pledged  or  hypothecated  by  the
               Purchaser in whole or in part, and with respect to one or more of
               the  Mortgage  Loans,  without the consent of the Seller.  In the
               event the  Purchaser  assigns  this  Agreement,  and the assignee
               assumes any of the Purchaser's obligations hereunder,  the Seller
               acknowledges and agrees to look solely to such assignee,  and not
               to the Purchaser,  for  performance of the obligations so assumed
               and the  Purchaser  shall be relieved  from any  liability to the
               Seller with respect thereto.

SECTION 23.       Waivers.
                    No term or  provision  of this  Agreement  may be  waived or
               modified  unless  such waiver or  modification  is in writing and
               signed by the party against whom such waiver or  modification  is
               sought to be enforced.

SECTION 24.       Exhibits.

The exhibits to this  Agreement are hereby  incorporated  and made a part hereof
and are an integral part of this Agreement.

SECTION 25.       General Interpretive Principles.

For purposes of this Agreement, except as otherwise expressly provided or unless
the context otherwise requires:
(a) the terms defined in this  Agreement  have the meanings  assigned to them in
this  Agreement and include the plural as well as the  singular,  and the use of
any gender herein shall be deemed to include the other gender;
(b) accounting terms not otherwise  defined herein have the meanings assigned to
them in accordance with generally accepted accounting principles;
(c) references herein to "Articles,"  "Sections,"  "Subsections,"  "Paragraphs,"
and  other  subdivisions  without  reference  to a  document  are to  designated
Articles,  Sections,  Subsections,  Paragraphs  and other  subdivisions  of this
Agreement;
(d)  reference  to a  Subsection  without  further  reference  to a Section is a
reference  to such  Subsection  as  contained  in the same  Section in which the
reference  appears,  and this rule  shall  also  apply to  Paragraphs  and other
subdivisions;
(e) the words "herein," "hereof,"  "hereunder" and other words of similar import
refer to this Agreement as a whole and not to any particular provision; and
(f)      the term "include" or "including" shall mean without limitation by
reason of enumeration.

SECTION 26.       Reproduction of Documents.

                    This   Agreement   and  all  documents   relating   thereto,
               including,   without   limitation,   (a)~consents,   waivers  and
               modifications  which may  hereafter  be  executed,  (b)~documents
               received  by  any  party  at  the  closing,   and   (c)~financial
               statements,  certificates  and other  information  previously  or
               hereafter  furnished,  may be  reproduced  by  any  photographic,
               photostatic,  microfilm,  micro-card,  miniature  photographic or
               other   similar   process.   The  parties  agree  that  any  such
               reproduction  shall be  admissible  in evidence  as the  original
               itself in any judicial or administrative  proceeding,  whether or
               not  the  original  is in  existence  and  whether  or  not  such
               reproduction  was  made  by a  party  in the  regular  course  of
               business,   and  that  any  enlargement,   facsimile  or  further
               reproduction of such reproduction shall likewise be admissible in
               evidence.

SECTION 27.       Further Agreements.

The Seller and the Purchaser each agree to execute and deliver to the other such
reasonable and appropriate  additional  documents,  instruments or agreements as
may be necessary or appropriate to effectuate the purposes of this Agreement.

SECTION 28.       [Reserved].

SECTION 29.       No Solicitation.

From and after the related Closing Date, the Seller agrees that it will not take
any  action or permit  or cause any  action to be taken by any of its  agents or
affiliates,  or by any  independent  contractors  on  the  Seller's  behalf,  to
personally, by telephone or mail (via electronic means or otherwise),  solicit a
Mortgagor  under any  Mortgage  Loan for the purpose of  refinancing  a Mortgage
Loan, in whole or in part,  without the prior written  consent of the Purchaser.
Notwithstanding  the foregoing,  it is understood and agreed that the Seller, or
any of its respective affiliates:
                    (i) may advertise its availability for handling refinancings
               of mortgages in its  portfolio,  including the promotion of terms
               it has  available for such  refinancings,  through the sending of
               letters  or  promotional   material,  so  long  as  it  does  not
               specifically  target  Mortgagors and so long as such  promotional
               material  either  is  sent  to  the  mortgagors  for  all  of the
               mortgages in the servicing portfolio of the Seller and any of its
               affiliates  (those it owns as well as those serviced for others);
               and
                    (ii) may provide pay-off information and otherwise cooperate
               with  individual  mortgagors who contact it about prepaying their
               mortgages by advising them of refinancing  terms and  streamlined
               origination arrangements that are available.

Promotions  undertaken by the Seller or by any affiliate of the Seller which are
directed to the general public at large  (including,  without  limitation,  mass
mailing based on  commercially  acquired  mailing  lists,  newspaper,  radio and
television  advertisements),   shall  not  constitute  solicitation  under  this
Section~29.

SECTION 30.       Waiver of Trial by Jury.

THE SELLER AND THE  PURCHASER  EACH  KNOWINGLY,  VOLUNTARILY  AND  INTENTIONALLY
WAIVES TO THE FULLEST  EXTENT  PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.

SECTION 31.       Governing Law Jurisdiction; Consent to Service of Process.

THIS  AGREEMENT  SHALL BE  DEEMED IN EFFECT  WHEN A FULLY  EXECUTED  COUNTERPART
THEREOF  IS  RECEIVED  BY THE  PURCHASER  IN THE  STATE OF NEW YORK AND SHALL BE
DEEMED  TO HAVE BEEN MADE IN THE  STATE OF NEW  YORK.  THIS  AGREEMENT  SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
ITS CHOICE OF LAW RULES AND  PRINCIPLES.  EACH OF THE  PURCHASER  AND THE SELLER
IRREVOCABLY (I)~SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE
OF NEW YORK AND THE  FEDERAL  COURTS OF THE  UNITED  STATES OF  AMERICA  FOR THE
SOUTHERN  DISTRICT  OF NEW YORK FOR THE  PURPOSE  OF ANY  ACTION  OR  PROCEEDING
RELATING TO THIS AGREEMENT; (II)~WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
THE DEFENSE OF AN  INCONVENIENT  FORUM IN ANY ACTION OR  PROCEEDING  IN ANY SUCH
COURT;  (III)~AGREES  THAT A FINAL  JUDGMENT IN ANY ACTION OR  PROCEEDING IN ANY
SUCH COURT SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER  JURISDICTION BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER  PROVIDED BY LAW; AND  (IV)~CONSENTS
TO SERVICE  OF PROCESS  UPON IT BY  MAILING A COPY  THEREOF  BY  CERTIFIED  MAIL
ADDRESSED TO IT AS PROVIDED FOR NOTICES HEREUNDER.

                                             [Signature Page Follows]
IN WITNESS  WHEREOF,  the Seller and the Purchaser have caused their names to be
signed hereto by their respective  officers  thereunto duly authorized as of the
date first above written.

                              FRANKLIN CREDIT MANAGEMENT CORPORATION
                                       (Purchaser)

                         By:______________________________________
                         Name:____________________________________
                         Title:___________________________________

                                   MASTER FINANCIAL, INC.
                                         (Seller)

                         By:_______________________________________
                         Name:_____________________________________
                         Title:____________________________________
EXHIBIT A

                         CONTENTS OF EACH MORTGAGE FILE

With respect to each Mortgage  Loan, the Mortgage File shall include each of the
following  items,  which shall be available for  inspection by the Purchaser and
any prospective Purchaser,  and which shall be delivered to the Custodian, or to
such other  Person as the  Purchaser  shall  designate  in writing,  pursuant to
Section~6 of the Mortgage Loan Purchase and  Warranties  Agreement to which this
Exhibit is attached (the "Agreement"):

(a)      the  original  Mortgage  Note  bearing  all  intervening  endorsements,
         endorsed  "Pay  to the  order of _________,  without  recourse"  and
         signed in the name of the last  endorsee  (the "Last  Endorsee") by an
         authorized  officer.  To the  extent  that  there  is no  room  on the
         face  of the  Mortgage  Notes for endorsements,  the  endorsement
         may be contained on an allonge,  if state law so allows and the
         Custodian is so advised by the Seller  that state law so allows.  If
         the  Mortgage  Loan was  acquired by the Seller in  a  merger,   the
         endorsement  must  be  by  "[Last  Endorsee],   successor  by  merger
         to  [name  of predecessor]."  If the Mortgage Loan was acquired or
         originated by the Last Endorsee  while doing business under another
         name, the endorsement must be by "[Last Endorsee], formerly known as
         [previous name]";

(b)      [the  original of any  guarantee  executed in  connection  with the
          Mortgage  Note;]

(c)      the original Mortgage with evidence of recording  thereon.  If in
         connection with any Mortgage  Loan,  the Seller cannot deliver or
         cause to be delivered the original  Mortgage with evidence of
         recording thereon on or prior to the Closing Date  because  of a delay
         caused by the  public  recording  office  where such Mortgage has been
         delivered for  recordation  or because such Mortgage has been lost or
         because  such public  recording office  retains the  original recorded
         Mortgage,  the Seller shall deliver or cause to be delivered to the
         Custodian, a photocopy of such  Mortgage,  together with (i)~in the
         case of a delay caused by the  public  recording  office, an Officer's
         Certificate  of the  Seller (or certified by the title company,
         escrow agent, or closing attorney) stating that such Mortgage has been
         dispatched to the appropriate public recording office for recordation
         and that the original  recorded  Mortgage or a copy of such Mortgage
         certified by such public  recording office to be a true and complete
         copy of the original  recorded  Mortgage will be promptly  delivered
         to the Custodian upon receipt thereof by the Seller; or (ii)~in the
         case of a Mortgage where a public recording office retains the original
         recorded  Mortgage or in the case where a Mortgage is lost after
         recordation in a public recording office, a copy of such Mortgage
         certified  by such public recording office to be a true and complete
         copy of the original recorded Mortgage;

(d)      the  originals of all  assumption,  modification,  consolidation  or
         extension  agreements,  if any, with evidence of recording thereon;

(e)      the  original Assignment of Mortgage for each  Mortgage  Loan, in form
         and  substance  acceptable for recording.  If the Mortgage Loan was
         acquired by the Seller in a merger,  the  Assignment of Mortgage must
         be made by  "[Seller],  successor by merger to [name of  predecessor]."
         If the Mortgage Loan was acquired or originated by the Seller while
         doing business under another name,  the Assignment of Mortgage must be
         by "[Seller], formerly known as [previous name]";

(f)      the  originals  of all  intervening  assignments  of  mortgage (if any)
         evidencing  a complete  chain of assignment  from the Seller to the
         Last  Endorsee  with  evidence  of  recording  thereon,  or if any such
         intervening  assignment has not been returned from the applicable
         recording office or has been lost or if such public  recording  office
         retains the original  recorded  assignments  of mortgage,  the Seller
         shall deliver or cause to be delivered to the Custodian,  a photocopy
         of such intervening  assignment,  together with (i)~in the case of a
         delay caused by the public  recording  office,  an Officer's
         Certificate of the Seller (or certified by the title  company, escrow
         agent, or closing attorney)  stating  that such intervening assignment
         of mortgage has been dispatched to the  appropriate  public  recording
         office for recordation  and  that  such original recorded intervening
         assignment of mortgage or a copy of such intervening  assignment of
         mortgage certified by the appropriate public recording office to be a
         true and complete copy of the original recorded intervening assignment
         of mortgage will be promptly  delivered to the Custodian upon receipt
         thereof by the Seller; or (ii)~in the case of an intervening assignment
         where a public recording office retains the original recorded
         intervening assignment or in the case where an intervening assignment
         is  lost  after  recordation  in a  public  recording  office,  a
         copy  of  such intervening  assignment  certified by such public
         recording  office to be a true and complete copy of the original
         recorded intervening assignment;

(g)      the original FHA Contract of Insurance, with respect to each FHA
         Mortgage Loan; and

(h)      the  original  or, if  unavailable,  a copy of any security agreement,
         chattel  mortgage or  equivalent document executed in connection with
         the Mortgage.

In the  event  an  Officer's  Certificate  of the  Seller  is  delivered  to the
Purchaser  because of a delay caused by the public recording office in returning
any recorded document, the Seller shall deliver to the Purchaser, within 90 days
of the related Closing Date, an Officer's  Certificate which shall  (i)~identify
the  recorded  document,  (ii)~state  that the  recorded  document  has not been
delivered to the Custodian due solely to a delay caused by the public  recording
office,  (iii)~state  the amount of time  generally  required by the  applicable
recording office to record and return a document submitted for recordation,  and
(iv)~specify the date the applicable  recorded document will be delivered to the
Custodian;  provided,  however,  that any recorded document shall in no event be
delivered  later than one year following the related  Closing Date. An extension
of the date specified in clause  (iv)~above may be requested from the Purchaser,
which consent shall not be unreasonably withheld.
EXHIBIT B

                         SELLER'S OFFICER'S CERTIFICATE

                    I,  ____________________,  hereby certify that I am the duly
               elected [Vice]~President of Master Financial, Inc., a corporation
               organized  under  the  laws  of  the  state  of  California  (the
               "Company") and further as follows:
                    (i)  Attached  hereto as  Exhibit~1  is a true,  correct and
               complete  copy of the  Articles of  Incorporation  of the Company
               dated  September~8,  1981 along with an  Amendment to Articles of
               Incorporation  dated  December~11,  2002,  which are both in full
               force and effect on the date hereof.
                    (ii)  Attached  hereto as Exhibit~2  is a true,  correct and
               complete copy of the bylaws of the Company which are in effect on
               the date hereof and which have been in effect without  amendment,
               waiver, rescission or modification since ___________.
                    (iii)   Attached   hereto  as   Exhibit`3   is  an  original
               certificate of good standing of the Company issued within fifteen
               days of the date hereof, and no event has occurred since the date
               thereof which would impair such standing.
                    (iv)  Attached  hereto as Exhibit~4  is a true,  correct and
               complete  copy  of the  corporate  resolutions  of the  Board  of
               Directors of the Company  authorizing  the Company to execute and
               deliver (a)the Mortgage Loan Purchase and Warranties  Agreement,
               dated as of September 24, 2004 (the "Purchase Agreement"), by and
               between Franklin Credit Management  Corporation (the "Purchaser")
               and the  Company  and (b)~the  Servicing  Agreement,  dated as of
               September~24,  2004 (the "Servicing  Agreement"),  by and between
               the Purchaser and the Company, and such resolutions are in effect
               on the date  hereof  and have been in effect  without  amendment,
               waiver, rescission or modification since ____________.
                    (v) Either (i)~no consent, approval,  authorization or order
               of any court or  governmental  agency or body is required for the
               execution,   delivery  and  performance  by  the  Company  of  or
               compliance by the Company with the Purchase  Agreement,  the sale
               of the mortgage  loans or the  consummation  of the  transactions
               contemplated by the  agreements;  or (ii)~any  required  consent,
               approval,  authorization  or  order  has  been  obtained  by  the
               Company.
                    (vi)   Neither   the   consummation   of  the   transactions
               contemplated by, nor the fulfillment of the terms of the Purchase
               Agreement  conflicts  or will  conflict  with or  results or will
               result in a breach of or constitutes or will constitute a default
               under the charter or by-laws of the Company or, to the best of my
               knowledge,  the  terms of any  indenture  or other  agreement  or
               instrument  to  which  the  Company  is a party or by which it is
               bound or to which it is subject,  or any statute or order,  rule,
               regulations,   writ,   injunction   or  decree   of  any   court,
               governmental authority or regulatory body to which the Company is
               subject or by which it is bound.
                    (vii) To the best of my knowledge, there is no action, suit,
               proceeding or  investigation  pending or  threatened  against the
               Company which,  in my judgment,  either in any one instance or in
               the aggregate,  may result in any material  adverse change in the
               business, operations,  financial condition,  properties or assets
               of the  Company  or in any  material  impairment  of the right or
               ability of the Company to carry on its business  substantially as
               now  conducted  or in any  material  liability on the part of the
               Company or which  would draw into  question  the  validity of the
               Purchase Agreement,  or the mortgage loans or of any action taken
               or to be taken in connection with the  transactions  contemplated
               hereby, or which would be likely to impair materially the ability
               of the  Company  to  perform  under  the  terms  of the  Purchase
               Agreement.
                    (viii) Each person listed on Exhibit~5  attached hereto who,
               as an officer or  representative  of the Company,  signed (a)~the
               Purchase  Agreement,  and (b)~any other document  delivered or on
               the date hereof in connection with any purchase  described in the
               agreements set forth above was, at the  respective  times of such
               signing and  delivery,  and is now, a duly elected or  appointed,
               qualified and acting  officer or  representative  of the Company,
               who  holds  the  office  set  forth  opposite  his or her name on
               Exhibit~5,  and the signatures of such persons  appearing on such
               documents are their genuine signatures.
                    (ix)  The  Company  is  duly  authorized  to  engage  in the
               transactions   described   and   contemplated   in  the  Purchase
               Agreement.
IN WITNESS  WHEREOF,  I have hereunto signed my name and affixed the seal of the
Company.

Dated:____________________                  By:___________________________
                                            Name:_________________________
[Seal]                                      Title:   [Vice] President

I,      ________________________,      an      [Assistant]      Secretary     of
______________[COMPANY],  hereby certify that  ____________ is the duly elected,
qualified  and acting  [Vice]  President  of the Company and that the  signature
appearing above is [her] [his] genuine signature.

                  IN WITNESS WHEREOF, I have hereunto signed my name.

Dated:____________________                  By:___________________________
                                            Name:_________________________
                                            Title:   [Assistant] Secretary
EXHIBIT 5 to
Company's Officer's Certificate

   NAME                       TITLE                             SIGNATURE

------------------------------------------------------------------------------
EXHIBIT C

                    FORM OF OPINION OF COUNSEL TO THE SELLER

                                                      (date)

Franklin Credit Management Corporation
6 Harrison Street, 6th Floor
New York, New York 10013

Dear Sirs:

          You have  requested  our opinion,  as counsel to Master  Financial,
 Inc. (the  "Company"),  with respect to certain  matters in  connection  with
 the sale by the  Company of the  Mortgage  Loans  pursuant to that certain
Mortgage Loan Purchase and Warranties  Agreement by and between the Company and
Franklin Credit  Management Corporation (the  "Purchaser"), dated as of
September 24,  2004 (the "Purchase  Agreement"),  which Mortgage Loans will be
serviced  on an interim  basis by the  Company  pursuant  to an Interim
Servicing  Agreement  dated as of September 24,  2004 between the Purchaser and
the Company (the "Servicing  Agreement",  and  collectively  with the
Purchase  Agreement,  the  "Agreements"). Capitalized  terms not otherwise
defined  herein have the meanings set forth in the Purchase Agreement.

We have examined the following documents:
(i)      the Purchase Agreement;
(ii)     the Servicing Agreement;
(iii)    the forms of Assignment of Mortgage and a corresponding  form of
          assignment of deed of trust ("Assignment of Deed of Trust");
(iv)     the form of endorsement of the Mortgage Notes;
(v)      a  Certificate of certain  officers of the Company  which, among other
         things, identifies  contracts to which the  Company is a party or by
         which its assets are bound,  and which are  material to it (the
         "Material Contracts") and
(vi)     such other  documents,  records and papers as we have deemed
         necessary  and  relevant as a basis for this opinion.

To the extent we have  deemed  necessary  and  proper,  we have  relied upon the
representations  and  warranties  of  the  Company  contained  in  the  Purchase
Agreement.  We have assumed the authenticity of all documents submitted to us as
originals,  the  genuineness  of all  signatures,  the legal capacity of natural
persons and the  conformity  to the  originals  of all  documents.  We have also
assumed, with your consent, that for all relevant purposes the laws of the State
of New York are  identical to the laws of the State of  California.  Each of the
statements  set forth  below that is made "to our  knowledge"  is subject to the
discussion set forth below concerning the basis of our knowledge.

 Based upon the foregoing, it is our opinion that:
1. The Company is a corporation  duly organized,  validly existing and in good
   standing under the laws of the State of California and is qualified to
   transact  business in, and is in good standing under, the laws of the State
   of California.
2. The Company has the power to engage in the  transactions contemplated by the
   Agreements and all requisite power, authority and legal right to execute and
   deliver the  Agreements  and to perform and observe the terms and conditions
   of the Agreements.
3. The  Agreements  have been duly  authorized,  executed and  delivered  by
   the Company, and are the legal, valid and binding agreement enforceable in
   accordance with its terms against the Company, subject to the exceptions,
   limitations and qualifications set forth below.
4. The  officers of the Company have been duly authorized to execute any and all
   documents by original signature in order to complete the transactions
   contemplated by the Agreements.
5. The officers of the Company have been duly authorized to execute the
   endorsements to the Mortgage Notes, the Assignments of Mortgages and the
   Assignment of Deed of Trust.
6. Either (i)~no consent,  approval, authorization or order of any California or
   federal governmental agency or body or, to our knowledge, any court is
   required for the execution,  delivery and  performance by the Company of or
   compliance by the Company with the  Agreements and the sale of the Mortgage
   Loans by the Company or the consummation of the  transactions contemplated
   by the Agreements or (ii)~any such required consent, approval, authorization
   or order has been obtained by the Company.
7. Neither  the  consummation  of the  transactions  contemplated  by,  nor the
   fulfillment of the terms of, the Agreements  conflict or will conflict with
   or results or will result in a breach of or constitute or will constitute a
   default under the  charter  or  by-laws  of the  Company  or the  material
   terms of any Material  Contract,  or violates any  California or federal
   statute or rule, or regulation,  or to our  knowledge any order,  writ,
   injunction or decree of any court, governmental authority or regulatory body
   to which the Company is subject or by which it is bound.
8. To our  knowledge,  except  as set forth in  Exhibit  A  hereto,  there is no
   action, suit, proceeding or investigation pending or threatened  against the
   Company which, in our judgment, either in any one instance or in the
   aggregate, may result in any material adverse change in the business,
   operations, financial condition,  properties or assets of the Company or in
   any material impairment of the right or ability of the Company to carry on
   its  business  substantially  as now  conducted or in any material liability
   on the part of the Company or which would draw into question the validity of
   the Agreements or the Mortgage Loans or of any action  taken  or to be taken
   in connection with the transactions contemplated  thereby, or which would be
   likely to impair materially the ability of the Company to perform under the
   terms of the Agreements.
9. The sale of each Mortgage Note and Mortgage as and in the manner contemplated
   by the Agreements is sufficient to fully transfer to the Purchaser all right,
   title and interest of the Company thereto as noteholder and mortgagee.

The opinions  expressed in paragraph 3 above are subject to the following
exceptions,  qualifications and limitations:

(i)  The enforceability of the Agreements is subject to the effect of bankruptcy
,  insolvency,  reorganization,  fraudulent  conveyance,  moratorium,  or  other
similar laws of general  application,  or legal or equitable principles relating
to, limiting, or affecting the enforceability of creditors' rights generally, or
limitations  on the  availability  of  equitable  remedies,  including,  without
limitation,  specific performance or injunctive relief,  whether considered in a
proceeding at law or in equity;

(ii) The  enforceability  of the  Agreements is subject to the effect of general
principles of equity,  including,  without limitation,  concepts of materiality,
reasonableness, and good faith and fair dealing;

(iii) The  enforceability  of the  Agreements  is  subject to the effect of laws
and/or court decisions which may limit or prohibit the effectiveness,  validity,
and/or enforceability of provisions waiving,  releasing, or indemnifying a party
against  liability  for  its  own  wrongful  or  negligent  acts  or  where  the
indemnification is contrary to public policy;

(iv)  We  express  no  opinion  regarding  the   enforceability  of  contractual
provisions   waiving   broadly   or  vaguely   stated   rights,   statutory   or
constitutionally  protected  rights or unknown  future rights where such waivers
are against public policy or prohibited by law or equity,  or of provisions that
rights or remedies are not  exclusive,  that every right or remedy is cumulative
and may be exercised in addition to or together  with any other right or remedy,
or that the  election of some  particular  remedy or remedies  does not preclude
resource to one or more others;

(v) We express no opinion  concerning the  enforceability of: (1) the provisions
of the  Agreements  which choose as the governing law of such documents the laws
of any  particular  state;  (2) any waiver of the right to trial by jury; or (3)
forum selection clauses or consent to jurisdiction clauses.

With respect to our opinions in  paragraphs 6 and 7 relating to the  requirement
of obtaining the consent of a California or federal governmental body or agency,
and the  absence of  conflicts  between  the  transactions  contemplated  by the
Agreements and  California  and federal  statutes,  rules and  regulations,  our
opinions  are  limited  to those  California  and  federal  statutes,  rules and
regulations  that a lawyer  practicing  in the  State of  California  exercising
customary  professional  diligence would reasonably  recognize as being directly
applicable to the Borrowers the transactions  contemplated by the Agreements, or
any or all of them.
With respect to the  statements  in paragraphs 6, 7 and 8 above which are stated
to be "to  our  knowledge,"  we  have,  with  your  consent,  advised  you  only
concerning knowledge obtained by us as a result of the Officers' Certificate and
the  actual  present  knowledge  of those  attorneys  in our firm who have given
substantive  attention  to the  representation  described  in  the  introductory
paragraph  of this  opinion  and does not  include  any  knowledge  of any other
attorneys  within our firm  (regardless of whether they have  represented or are
representing   the  Company  in  connection  with  any  other  matters)  or  any
constructive or imputed knowledge of any matters or items of information. Except
to that limited extent we have, with your consent, made no independent review of
litigation  indices,  public  records  or of any of  the  Company's  operations,
transactions or contractual arrangements,  except for those contracts identified
in the Officers' Certificate.

Except as otherwise  set forth in the  Agreements,  we assume no  obligation  to
revise this opinion or alter its conclusions to update or support this letter to
reflect any facts or circumstances that may hereafter develop.

This  opinion  is given to you for your  sole  benefit,  and no other  person or
entity is entitled to rely hereon  except that the  purchaser or  purchasers  to
which you  initially  and directly  resell the  Mortgage  Loans may rely on this
opinion as if it were addressed to them as of the date of this opinion.

                                                   Respectfully submitted,
EXHIBIT D

                   FORM OF ASSIGNMENT AND CONVEYANCE AGREEMENT

On this ___ day of ____________,  ________,  _______________  ("Seller"), as the
Seller under that certain Mortgage Loan Purchase and Warranties Agreement, dated
as of September [~~, 2004 (the "Purchase  Agreement",  acknowledges receipt of
the  purchase  price of $ [ ] together  with  accrued  interest of $[ ] and does
hereby sell, transfer, assign, set over and convey to Franklin Credit Management
Corporation  ("Purchaser")  as the Purchaser  under the  Agreements  (as defined
below) without recourse, but subject to the terms of the Agreements,  all right,
title and interest of, in and to the Mortgage  Loans listed on the Mortgage Loan
Schedule attached hereto as Exhibit~A (the "Mortgage Loans"),  together with the
Mortgage Files and the related  Servicing  Rights and all rights and obligations
arising  under the  documents  contained  therein.  Pursuant to Section~6 of the
Purchase Agreement,  the Seller has delivered to the Custodian the documents for
each Mortgage Loan to be purchased as set forth in the Purchase  Agreement.  The
ownership of each Mortgage Note,  Mortgage and the contents of the Mortgage File
and  Servicing  File is vested in the Purchaser and the ownership of all records
and  documents  with respect to the related  Mortgage  Loan prepared by or which
come into the possession of the Seller shall  immediately  vest in the Purchaser
and shall be retained and maintained, in trust, by the Seller at the will of the
Purchaser in a custodial capacity only.

     In accordance with Section~6 of the Purchase  Agreement,  the Purchaser
accepts the Mortgage  Loans listed on Exhibit~A  attached  hereto.
Notwithstanding the foregoing the Purchaser  does not waive any rights or
remedies it may have under the Purchase Agreement.
 Capitalized  terms used herein and not otherwise defined shall have the
meanings set forth in the Purchase Agreement.
[SIGNATURE PAGE FOLLOWS]

                                  MASTER FINANCIAL, INC.

                          By:  _____________________________
                          Name:  ___________________________
                          Title:  __________________________

Accepted and Agreed:

FRANKLIN CREDIT MANAGEMENT CORPORATION

By:  _____________________________________________________
     Name:
     Title:
EXHIBIT A

                                      TO ASSIGNMENT AND CONVEYANCE AGREEMENT

                                                THE MORTGAGE LOANS