Filed Pursuant to Rule 424(b)(5)
                                             Registration File No. 333-132042-26

PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JUNE 14, 2006)

                                  $304,376,000
                                 (APPROXIMATE)
                               INDYMAC MBS, INC.
                                   DEPOSITOR
                           [INDYMAC BANK, F.S.B. LOGO]

                          SPONSOR, SELLER AND SERVICER
                   INDYMAC INDX MORTGAGE LOAN TRUST 2006-AR12
                                 ISSUING ENTITY
DISTRIBUTIONS ARE PAYABLE MONTHLY ON THE 25TH DAY OF EACH MONTH, BEGINNING
                                AUGUST 25, 2006

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

The issuing entity will issue certificates, including the following classes of
certificates that are offered pursuant to this prospectus supplement and the
accompanying prospectus:



-----------------------------------------------------------------------------------------------------------------------
                       INITIAL CLASS          PASS-THROUGH                        INITIAL CLASS          PASS-THROUGH
   CLASS          CERTIFICATE BALANCE (1)       RATE (2)         CLASS       CERTIFICATE BALANCE (1)       RATE (2)
-----------------------------------------------------------------------------------------------------------------------

  Class A-1             $167,114,400            Floating      Class M-2             $8,310,000             Floating
-----------------------------------------------------------------------------------------------------------------------
  Class A-2             $ 69,631,000            Floating      Class M-3             $3,385,000             Floating
-----------------------------------------------------------------------------------------------------------------------
  Class A-3             $ 41,778,600            Floating      Class M-4             $1,539,000             Floating
-----------------------------------------------------------------------------------------------------------------------
  Class M-1             $ 12,618,000            Floating
-----------------------------------------------------------------------------------------------------------------------


--------------------------------------------------------------------------------
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-17 IN THIS PROSPECTUS
SUPPLEMENT AND ON PAGE 5 IN THE PROSPECTUS.

The certificates represent obligations of the issuing entity only and do not
represent an interest in or obligation of IndyMac MBS, Inc., IndyMac Bank,
F.S.B. or any of their affiliates.

This prospectus supplement may be used to offer and sell the offered
certificates only if accompanied by a prospectus.
--------------------------------------------------------------------------------

(1)  This amount is approximate and is subject to a permitted variance in the
     aggregate of plus or minus 10%.

(2)  The pass-through rate for each class of certificates is calculated as
     described in this prospectus supplement under "Summary" and is based on
     LIBOR.

The classes of certificates offered by this prospectus supplement are listed,
together with their pass-through rates, in the tables under "Summary --
Description of the Certificates" on page S-8 of this prospectus supplement. This
prospectus supplement and the accompanying prospectus relate only to the
offering of the certificates listed above and not to the other classes of
certificates that will be issued by the issuing entity.

Credit Enhancement for the offered certificates will consist of:

o    Excess interest;

o    Overcollateralization as described in this prospectus supplement under
     "Description of the Certificates -- Overcollateralization";

o    Subordination; and

o    Loss allocation features.

The credit enhancement for each class of certificates varies. Not all credit
enhancement is available for every class. The credit enhancement for the
certificates is described in more detail in this prospectus supplement.

The assets of the issuing entity will be comprised primarily of a pool of 30-
and 40-year conventional adjustable-rate negative amortization mortgage loans
secured by first liens on one- to four-family residential properties.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Merrill Lynch, Pierce, Fenner & Smith Incorporated will offer the certificates
listed above to the public at varying prices to be determined at the time of
sale. The proceeds to the depositor from the sale of the offered certificates
are expected to be approximately 103.97625% of the aggregate class certificate
balance of the offered certificates, plus accrued interest, before deducting
expenses. See "Method of Distribution" in this prospectus supplement. The
offered certificates will be available for delivery to investors on or about
July 27, 2006 in book-entry form through the facilities of The Depository Trust
Company, and, upon request, through Clearstream, Luxembourg or the Euroclear
System. The offered certificates are not bank accounts and are not insured by
the FDIC or any other governmental entity.


                              MERRILL LYNCH & CO.

                                 July 27, 2006

                                TABLE OF CONTENTS

PROSPECTUS SUPPLEMENT                                                       PAGE
---------------------                                                       ----
Summary..................................................................    S-5
   Issuing Entity .......................................................    S-5
   Depositor ............................................................    S-5
   Sponsor, Seller and Servicer .........................................    S-5
   Trustee ..............................................................    S-5
   The NIM Insurer ......................................................    S-5
   Pooling and Servicing Agreement ......................................    S-5
   Cut-off Date .........................................................    S-5
   Closing Date .........................................................    S-5
   The Mortgage Loans: ..................................................    S-5
   Description of the Certificates ......................................    S-7
   Designations .........................................................    S-9
   Record Date ..........................................................    S-9
   Denominations ........................................................    S-9
   Registration of Offered Certificates .................................    S-9
   Distribution Dates ...................................................    S-9
   Interest Distributions ...............................................    S-9
   Principal Distributions ..............................................   S-10
   Amounts Available for Distributions on the Certificates ..............   S-10
   Fees and Expenses ....................................................   S-11
   Priority of Interest Distributions ...................................   S-11
   Priority of Principal Distributions ..................................   S-11
   Limited Recourse .....................................................   S-12
   Optional Termination .................................................   S-12
   Advances .............................................................   S-13
   Subordination ........................................................   S-14
   Allocation of Losses .................................................   S-14
   Tax Status ...........................................................   S-14
   ERISA Considerations .................................................   S-15
   Legal Investment .....................................................   S-15
Summary of Transaction Parties ..........................................   S-16
Risk Factors ............................................................   S-17
The Mortgage Pool .......................................................   S-28
   General ..............................................................   S-28
   Assignment of the Mortgage Loans .....................................   S-40
The Seller ..............................................................   S-41
   Origination Process ..................................................   S-41
   Underwriting Process .................................................   S-42
   Representations by Seller; Repurchases, etc. .........................   S-44
Servicing of Mortgage Loans .............................................   S-45
   The Servicer .........................................................   S-45
   Servicing Compensation and Payment of Expenses .......................   S-45
   Adjustment to Servicing Compensation in Connection with Certain
      Prepaid Mortgage Loans ............................................   S-46
   Advances .............................................................   S-46
   Certain Modifications and Refinancings ...............................   S-47
   Default Management Services ..........................................   S-47
The Sponsor .............................................................   S-47
Static Pool Data ........................................................   S-48
The Depositor ...........................................................   S-48
The Issuing Entity ......................................................   S-48
The Trustee .............................................................   S-48
Description of the Certificates .........................................   S-50
   General ..............................................................   S-50
   Calculation of Class Certificate Balance .............................   S-51
   Book-Entry Certificates ..............................................   S-52
   Payments on Mortgage Loans; Accounts .................................   S-56
   Investments of Amounts Held in Accounts ..............................   S-56
   Fees and Expenses ....................................................   S-57
   Distributions ........................................................   S-59
   Interest .............................................................   S-60
   Principal ............................................................   S-63
   Overcollateralization Provisions .....................................   S-67
   Determination of LIBOR ...............................................   S-68
   Carryover Reserve Fund ...............................................   S-69
   Applied Realized Loss Amounts ........................................   S-69
   Structuring Assumptions ..............................................   S-70
   Reports to Certificateholders ........................................   S-72
   Voting Rights ........................................................   S-72
   Termination of the Issuing Entity; Optional Termination ..............   S-72
   Certain Matters Regarding the Servicer, the Depositor, the Seller and
      the NIM Insurer ...................................................   S-73
   Restrictions on Investment, Suitability Requirements .................   S-73
   Rights of the NIM Insurer Under the Pooling and Servicing Agreement ..   S-73
Yield, Prepayment and Maturity Considerations ...........................   S-74
   General ..............................................................   S-74
   Prepayment Considerations and Risks ..................................   S-74
   Weighted Average Lives of the Offered Certificates ...................   S-76
   Decrement Tables .....................................................   S-77
   Final Scheduled Distribution Date ....................................   S-81
   The Subordinated Certificates ........................................   S-81
Legal Proceedings .......................................................   S-81
Material Federal Income Tax Consequences ................................   S-81
   Taxation of the Regular Interest Component of the LIBOR
      Certificates ......................................................   S-82
   Status of the LIBOR Certificates .....................................   S-82
   The Basis Risk Contract Components ...................................   S-83
   Taxation of the Residual Certificates ................................   S-84
ERISA Considerations ....................................................   S-84
Method of Distribution ..................................................   S-85
Use of Proceeds .........................................................   S-86
Legal Matters ...........................................................   S-86
Ratings .................................................................   S-86
Index of Defined Terms ..................................................   S-88


                                       S-2



                                TABLE OF CONTENTS

PROSPECTUS                                                                  PAGE
----------                                                                  ----
Important Notice About Information in This Prospectus and Each
   Accompanying Prospectus Supplement ...................................      4
Risk Factors ............................................................      5
      Limited Source of Payments -- No Recourse to Sellers, Depositor or
         Servicer .......................................................      5
      Credit Enhancement May Not Be Sufficient to Protect You from
         Losses .........................................................      6
      Losses on Balloon Payment Mortgages Are Borne by You ..............      6
      Multifamily Lending ...............................................      6
      Junior Liens ......................................................      7
      Partially Unsecured Loans .........................................      8
      Home Equity Lines of Credit .......................................      8
      Nature of Mortgages ...............................................      9
      Your Risk of Loss May Be Higher Than You Expect If Your Securities
         Are Backed by Partially Unsecured Home Equity Loans ............     13
      Impact of World Events ............................................     13
      You Could Be Adversely Affected by Violations of Environmental
         Laws ...........................................................     14
      Ratings of the Securities Do Not Assure Their Payment .............     14
      Book-Entry Registration ...........................................     15
      Pre-Funding Accounts Will Not Be Used to Cover Losses on the
         Loans ..........................................................     15
      Unused Amounts on Deposit in Any Pre-Funding Account Will Be Paid
         as Principal to Securityholders ................................     16
      Secondary Market for the Securities May Not Exist .................     16
      Bankruptcy or Insolvency May Affect the Timing and Amount of
         Distributions on the Securities ................................     16
      Holders of Original Issue Discount Securities Are Required to
         Include Original Issue Discount in Ordinary Gross Income as
         It Accrues .....................................................     18
      The Principal Amount of Securities May Exceed the Market Value of
         the Issuing Entity Assets ......................................     18
The Issuing Entity ......................................................     19
      The Mortgage Loans--General .......................................     20
      Agency Securities .................................................     26
      Private Mortgage-Backed Securities ................................     30
      Substitution of Issuing Entity Assets .............................     32
      Available Information .............................................     32
      Incorporation of Certain Documents by Reference; Reports Filed with
         the SEC ........................................................     32
      Reports to Securityholders ........................................     33
Use of Proceeds .........................................................     34
The Depositor ...........................................................     34
Mortgage Loan Program ...................................................     35
      Underwriting Standards ............................................     35
      Underwriting Process ..............................................     35
      Qualifications of Sellers .........................................     36
      Representations by Sellers; Repurchases ...........................     36
Static Pool Data ........................................................     37
Description of the Securities ...........................................     38
      General ...........................................................     39
      Distributions on Securities .......................................     41
      Advances ..........................................................     42
      Mandatory Auction .................................................     43
      Categories of Classes of Securities ...............................     43
      Indices Applicable to Floating Rate and Inverse Floating Rate
         Classes ........................................................     45
      Book-Entry Securities .............................................     49
      Global Clearance, Settlement And Tax Documentation Procedures .....     52
Credit Enhancement ......................................................     55
      General ...........................................................     55
      Subordination .....................................................     56
      Letter of Credit ..................................................     57
      Mortgage Pool Insurance Policies ..................................     57
      Special Hazard Insurance Policies .................................     58
      Bankruptcy Bonds ..................................................     59
      Reserve Fund ......................................................     59
      Cross Support .....................................................     60
      Insurance Policies, Surety Bonds and Guaranties ...................     60
      Over-Collateralization ............................................     60
      Financial Instruments .............................................     61
      Deposit Agreements ................................................     61
Yield and Prepayment Considerations .....................................     61
      Prepayment Standards or Models ....................................     64
      Yield .............................................................     64
The Agreements ..........................................................     64
      Assignment of Issuing Entity Assets ...............................     64
      Payments on Issuing Entity Assets; Deposits to Security Account ...     67
      Pre-Funding Account ...............................................     69
      Collection Procedures .............................................     69
      The Surety Provider ...............................................     70
      Hazard Insurance ..................................................     71
      Realization upon Defaulted Mortgage Loans .........................     72
      Servicing and Other Compensation and Payment of Expenses ..........     75
      Evidence as to Compliance .........................................     75
      List of Securityholders ...........................................     76
      Certain Matters Regarding the Servicer and the Depositor ..........     76
      Events of Default .................................................     77
      Amendment .........................................................     79
      Termination; Optional Termination .................................     81
      The Trustee .......................................................     82


                                       S-3



Certain Legal Aspects of the Mortgage Loans .............................     82
      General ...........................................................     82
      Foreclosure and Repossession ......................................     83
      Rights of Redemption ..............................................     85
      Anti-Deficiency Legislation and Other Limitations on Lenders ......     85
      Environmental Risks ...............................................     86
      Due-on-sale Clauses ...............................................     87
      Prepayment Charges ................................................     87
      Applicability of Usury Laws .......................................     88
      Servicemembers Civil Relief Act ...................................     88
Material Federal Income Tax Consequences ................................     88
      General ...........................................................     88
      Taxation of Debt Securities .......................................     89
      REMIC Securities ..................................................     95
      Regular Securities ................................................     97
      Residual Certificates .............................................     97
      Prohibited Transactions and Other Taxes ...........................    100
      Administrative Matters ............................................    101
      Tax-Exempt Investors ..............................................    101
      Tax-Related Restrictions on Transfers of Residual Certificates ....    101
      Tax Status as a Grantor Trust .....................................    103
      Final Trust Reporting Regulations .................................    110
      Tax Characterization of the Issuing Entity as a Partnership .......    111
      Tax Consequences to Holders of the Notes ..........................    111
      Tax Consequences to Holders of the Certificates ...................    113
State Tax Considerations ................................................    117
ERISA Considerations ....................................................    117
Legal Investment ........................................................    121
Method of Distribution ..................................................    121
Legal Matters ...........................................................    123
Financial Information ...................................................    123
Rating ..................................................................    123
Index of Principal Terms ................................................    124


                                       S-4



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

                                     SUMMARY

o    THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND DOES
     NOT CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING YOUR
     INVESTMENT DECISION. TO UNDERSTAND ALL OF THE TERMS OF AN OFFERING OF THE
     CERTIFICATES, READ THIS ENTIRE DOCUMENT AND THE ACCOMPANYING PROSPECTUS
     CAREFULLY.

o    WHILE THIS SUMMARY CONTAINS AN OVERVIEW OF CERTAIN CALCULATIONS, CASH FLOW
     PRIORITIES AND OTHER INFORMATION TO AID YOUR UNDERSTANDING, YOU SHOULD READ
     CAREFULLY THE FULL DESCRIPTION OF THESE CALCULATIONS, CASH FLOW PRIORITIES
     AND OTHER INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
     PROSPECTUS BEFORE MAKING ANY INVESTMENT DECISION.

ISSUING ENTITY

IndyMac INDX Mortgage Loan Trust 2006-AR12, a common law trust formed under the
laws of the State of New York.

DEPOSITOR

IndyMac MBS, Inc., a Delaware corporation and a limited purpose finance
subsidiary of IndyMac Bank, F.S.B. Its address is 155 North Lake Avenue,
Pasadena, California 91101, and its telephone number is (800) 669-2300.

SPONSOR, SELLER AND SERVICER

IndyMac Bank, F.S.B., a federal savings bank. Its principal executive offices
are located at 888 East Walnut Street, Pasadena, California 91101-7211,
Pasadena, California 91101, and its telephone number is (800) 669-2300.

TRUSTEE

Deutsche Bank National Trust Company, a national banking association. The
corporate trust office of the trustee is located (i) for purposes of certificate
transfers, at DB Services Tennessee, 648 Grassmere Park Road., Nashville,
Tennessee 37211-3658, Attention: Transfer Unit and (ii) for all other purposes,
at 1761 East St. Andrew Place, Santa Ana, California 92705, Attention: Trust
Administration IN06AC, and its telephone number is (714) 247-6000.

THE NIM INSURER

After the closing date, a separate trust (or other form of entity) may be
established to issue net interest margin securities secured by all or a portion
of the Class P and Class C Certificates. Those net interest margin securities
may have the benefit of one or more financial guaranty insurance policies that
guaranty payments on those securities. The insurer or insurers issuing these
financial guaranty insurance policies are referred to in this prospectus
supplement as the "NIM Insurer." The references to the NIM Insurer in this
prospectus supplement apply only if the net interest margin securities are so
insured.

Any NIM Insurer will have a number of rights under the pooling and servicing
agreement that will limit and otherwise affect the rights of the holders of the
offered certificates. Any insurance policy issued by a NIM Insurer will not
cover, and will not benefit in any manner, the offered certificates.

See "Risk Factors--Rights of the NIM Insurer" in this prospectus supplement.

POOLING AND SERVICING AGREEMENT

The pooling and servicing agreement dated as of July 1, 2006 among the seller,
the servicer, the depositor and the trustee, under which the issuing entity will
be formed.

CUT-OFF DATE

For any mortgage loan, the later of July 1, 2006 and the origination date of
that mortgage loan.

CLOSING DATE

On or about July 27, 2006.

THE MORTGAGE LOANS:

The mortgage pool will consist primarily of 30- and 40- year conventional
adjustable-rate negative amortization mortgage loans secured by first liens on
one- to four-family residential properties. All of the mortgage loans bear
adjustable interest rates based on the 1-year MTA index, which is a 12-month
moving

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


                                       S-5



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

average of the monthly yields on United States Treasury securities adjusted to a
constant maturity of one year.

The depositor believes that the information set forth in this prospectus
supplement regarding the mortgage loans as of the cut-off date is representative
of the characteristics of the mortgage loans that will be delivered on the
closing date. However, certain mortgage loans may prepay or may be determined
not to meet the eligibility requirements for inclusion in the final mortgage
pool. A limited number of mortgage loans may be added to or substituted for the
mortgage loans that are described in this prospectus supplement. Any addition or
substitution will not result in a material difference in the final mortgage pool
although the cut-off date information regarding the actual mortgage loans may
vary somewhat from the information regarding the mortgage loans presented in
this prospectus supplement.

As of the cut-off date, the depositor expects that all of the mortgage loans in
the issuing entity will have the following characteristics:

Aggregate Stated Principal Balance ................              $307,761,379.16
Geographic Concentrations in excess of 10%:
   California .....................................                       52.06%
Weighted Average Original LTV Ratio ...............                       72.84%
Weighted Average Mortgage Rate ....................                       3.616%
Range of Mortgage Rates ...........................             1.000% to 9.232%
Average Current Principal Balance .................                  $343,100.76
Range of Current Principal Balances ...............  $35,926.94 to $1,690,000.00
Weighted Average Remaining Term to Maturity .......                   386 months
Weighted Average FICO Credit Score ................                          696
Weighted Average Gross Margin .....................                       3.364%
Weighted Average Maximum Mortgage Rate ............                       9.986%
Weighted Average Minimum Mortgage Rate ............                       3.360%
Range of Months to Next Mortgage Rate Adjustment...                   one to two
Range of Months to Next Payment Adjustment ........                      3 to 62
Initial Fixed Payment Period
      12 Months ...................................                       73.41%
      60 Months ...................................                       26.59%
Negative Amortization Limit
      110% ........................................                       89.70%
      115% ........................................                       10.30%

See "The Mortgage Pool" in this prospectus supplement.

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


                                       S-6



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

DESCRIPTION OF THE CERTIFICATES

The issuing entity will issue the following classes of certificates:



                INITIAL
                 CLASS                                                      FINAL SCHEDULED       MODELED FINAL       INITIAL
              CERTIFICATE                                                  DISTRIBUTION DATE    DISTRIBUTION DATE   RATING S&P/
   CLASS      BALANCE (1)          PRINCIPAL TYPE         INTEREST TYPE           (2)                  (3)          MOODY'S (4)
----------   ------------   ---------------------------   -------------   ------------------   ------------------   -----------

OFFERED
CERTIFICATES
A-1.......   $167,114,400       Senior/Super Senior       Variable Rate   September 25, 2046   September 25, 2014     AAA/Aaa
A-2.......   $ 69,631,000   Senior/Super Senior/Support   Variable Rate   September 25, 2046   September 25, 2014     AAA/Aaa
A-3.......   $ 41,778,600         Senior/Support          Variable Rate   September 25, 2046   September 25, 2014     AAA/Aaa
M-1.......   $ 12,618,000           Subordinate           Variable Rate   September 25, 2046   September 25, 2014      AA/Aa1
M-2.......   $  8,310,000           Subordinate           Variable Rate   September 25, 2046   September 25, 2014       A/A2
M-3.......   $  3,385,000           Subordinate           Variable Rate   September 25, 2046   September 25, 2014     BBB/Baa2
M-4.......   $  1,539,000           Subordinate           Variable Rate   September 25, 2046   September 25, 2014    BBB-/Baa3
NON-OFFERED
CERTIFICATES (5)
Class P...            N/A               N/A                                       N/A                  N/A
Class C...            N/A               N/A                                       N/A                  N/A
Class R...            N/A               N/A                                       N/A                  N/A


----------
(1)  This amount is subject to a permitted variance in the aggregate of plus or
     minus 10% depending on the amount of mortgage loans actually delivered on
     the closing date.

(2)  The final scheduled distribution date was determined as described under
     "Yield, Prepayment and Maturity Considerations" in this prospectus
     supplement.

(3)  The modeled final distribution date is based upon (a) an assumed rate of
     prepayments equal to 25% CPR, (b) modeling assumptions used in this
     prospectus supplement, as described under "Yield, Prepayment and Weighted
     Average Life--Weighted Average Life" in this prospectus supplement and (c)
     assuming the optional termination is exercised by the servicer at the
     earliest possible distribution date as described in this prospectus
     supplement under "Description of the Certificates--Termination of the
     Issuing Entity; Optional Termination."

(4)  The offered certificates will not be offered unless they are assigned not
     lower than the indicated ratings by Standard & Poor's, a division of The
     McGraw-Hill Companies, Inc. ("S&P") and Moody's Investors Service Inc.
     ("MOODY'S"). A rating is not a recommendation to buy, sell or hold
     securities. These ratings may be lowered or withdrawn at any time by either
     of the rating agencies. See "Ratings" in this prospectus supplement.

(5)  The Class P, Class C and Class R Certificates are not offered by this
     prospectus supplement. The Class P Certificates will be entitled to any
     prepayment charges collected on the mortgage loans. The Class C
     Certificates will be entitled to receive any excess cashflow from the
     mortgage loans after all required distributions are made on the offered
     certificates. The Class R Certificate is a REMIC tax residual. Any
     information contained in this prospectus supplement with respect to these
     certificates is provided only to permit a better understanding of the
     offered certificates.

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


                                       S-7



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

The certificates also will have the following characteristics:



                                       PASS-THROUGH RATE
                                     BEFORE AND INCLUDING    PASS-THROUGH RATE
                         INITIAL              THE                AFTER THE                                      INTEREST
                      PASS-THROUGH         OPTIONAL               OPTIONAL                                      ACCRUAL
       CLASS            RATE (1)     TERMINATION DATE (2)   TERMINATION DATE (3)   INTEREST ACCRUAL PERIOD     CONVENTION
-------------------   ------------   --------------------   --------------------   -----------------------   -------------

OFFERED
CERTIFICATES
A-1................      5.520%        LIBOR + 0.190%(4)      LIBOR + 0.380%(4)              (5)             Actual/360(6)
A-2................      5.560%        LIBOR + 0.230%(4)      LIBOR + 0.460%(4)              (5)             Actual/360(6)
A-3................      5.600%        LIBOR + 0.270%(4)      LIBOR + 0.540%(4)              (5)             Actual/360(6)
M-1................      5.700%        LIBOR + 0.370%(4)      LIBOR + 0.555%(4)              (5)             Actual/360(6)
M-2................      5.880%        LIBOR + 0.550%(4)      LIBOR + 0.825%(4)              (5)             Actual/360(6)
M-3................      6.780%        LIBOR + 1.450%(4)      LIBOR + 2.175%(4)              (5)             Actual/360(6)
M-4................      7.080%        LIBOR + 1.750%(4)      LIBOR + 2.625%(4)              (5)             Actual/360(6)

NON-OFFERED
CERTIFICATES (7)
P..................        N/A                   N/A                    N/A(7)               (7)                    N/A
C..................        N/A                   N/A                    N/A(7)               (7)                    N/A
R..................        N/A                   N/A                    N/A(7)               (7)                    N/A


----------
(1)  Reflects the expected pass-through rate as of the closing date.

(2)  Reflects the pass-through rate calculation up to and including the earliest
     possible distribution date on which the servicer has the option to purchase
     the mortgage loans as described in this prospectus supplement under
     "Description of the Certificates--Termination of the Issuing Entity;
     Optional Termination."

(3)  Reflects the Pass-Through Rate calculation after the option to purchase the
     mortgage loans is not exercised by the servicer at the earliest possible
     distribution date as described in this prospectus supplement under
     "Description of the Certificates--Termination of the Issuing Entity;
     Optional Termination."

(4)  The pass-through rates on the LIBOR Certificates adjust monthly based on
     the level of one-month LIBOR, subject to the net rate cap. LIBOR for the
     related interest accrual period is calculated as described in this
     prospectus supplement under "Description of the Certificates -
     Determination of LIBOR."

(5)  The interest accrual period for any distribution date will be the period
     beginning on the preceding distribution date (or in the case of the first
     distribution date, on the closing date) and ending on the day immediately
     preceding that distribution date.

(6)  Interest will accrue at the rate described in this table on the basis of a
     360-day year and the actual number of days that elapsed in the interest
     accrual period.

(7)  The Class P, Class C and Class R Certificates will not accrue any interest.

See "Description of the Certificates" in this prospectus supplement.

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


                                       S-8



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

DESIGNATIONS

We sometimes use the following designations to refer to the specified classes of
certificates in order to aid your understanding of the offered certificates.

          DESIGNATION                         CLASS OF CERTIFICATES
------------------------------   -----------------------------------------------
            Senior               Class A-1, Class A-2 and Class A-3 Certificates
         Certificates:

         Super Senior            Class A-1 and Class A-2 Certificates
         Certificates:

        Senior Support           Class A-2 and Class A-3 Certificates
         Certificates:

         Subordinated            Class M-1, Class M-2, Class M-3 and Class M-4
         Certificates:           Certificates

             LIBOR               Senior and Subordinated Certificates
         Certificates:

            Offered              Class A-1, Class A-2, Class A-3, Class M-1,
         Certificates:           Class M-2, Class M-3 and Class M-4 Certificates

          Non-offered            Class P, Class C and Class R Certificates
         Certificates:

The rights of the holders of the subordinated certificates to receive
distributions of principal and interest will be subordinate to the rights of the
holders of the senior certificates.

The Class C Certificates will be entitled to receive any monthly excess cashflow
from the mortgage loans after required distributions are made to the senior and
subordinated certificates.

The Class P Certificates will be entitled to receive prepayment charges paid by
borrowers upon certain full or partial prepayment of the mortgage loans, to the
extent the issuing entity is entitled to those prepayment charges. These amounts
will not be available for distribution to other classes of certificates.

The Class C and Class P Certificates are not offered by this prospectus
supplement.

Effect of negative amortization. If an increase in the mortgage index causes
interest to accrue on a mortgage loan for a given month in excess of the minimum
monthly payment due for that mortgage loan, the amount of that excess will be
added to the outstanding principal balance of that mortgage loan in the form of
deferred interest. For any distribution date, the excess, if any, of (i) the
deferred interest with respect to all mortgage loans for the calendar month
prior to that distribution date, over (ii) the aggregate amount of prepayments
received with respect to all mortgage loans during the related prepayment period
(referred to in this prospectus supplement as the "net deferred interest"), will
be deducted from the interest distributions to the certificates as described in
this prospectus supplement. The amount deducted from the interest distributable
to a class of certificates will be added to the class certificate balance of
that class.

RECORD DATE

The business day immediately preceding a distribution date or, if the offered
certificates are no longer book-entry certificates, the last business day of the
month preceding the month of a distribution date.

DENOMINATIONS

$25,000 and multiples of $1,000 in excess thereof.

REGISTRATION OF OFFERED CERTIFICATES

Persons acquiring beneficial ownership interests in the offered certificates
will hold their beneficial interests through The Depository Trust Company in the
United States and, upon request, through Clearstream Luxembourg or the Euroclear
System in Europe.

See "Description of the Certificates--Book-Entry Certificates" in this
prospectus supplement.

DISTRIBUTION DATES

We will make distributions on the 25th day of each month. If the 25th day of a
month is not a business day, then we will make distributions the next business
day. The first distribution date is scheduled for August 25, 2006.

INTEREST DISTRIBUTIONS

On each distribution date, to the extent funds are available, each class of
certificates will be entitled to receive interest accrued at the applicable
pass-through rate during the related interest accrual period on its class
certificate balance immediately prior to that distribution date, any interest
carryover amount and any net rate carryover due and any accrued interest on this
amount.

Interest will accrue for each interest accrual period related to a distribution
date on each class of offered certificates at the lesser of (1) the applicable
annual rate as described in the table on page S-8 for that class of certificates
and (2) the net rate cap for that distribution date. The net rate cap is a
limitation

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


                                       S-9



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

generally based on the weighted average mortgage rates of the mortgage loans
during the applicable due period, net of certain fees and expenses of the
issuing entity.

The amount of interest distributable on a distribution date with respect to the
certificates will be reduced by the amount of net deferred interest on the
mortgage loans for that distribution date, as described under "Description of
the Certificates - Interest" in this prospectus supplement.

See "Description of the Certificates--Interest" in this prospectus supplement.

When a borrower makes a full or partial prepayment on a mortgage loan, the
amount of interest that the borrower is required to pay may be less than the
amount of interest certificateholders would otherwise be entitled to receive
with respect to the mortgage loan. The servicer is required to reduce its
servicing compensation to offset this shortfall but the reduction for any
distribution date is limited to an amount equal to the product of one-twelfth of
0.125% multiplied by the aggregate stated principal balance of the mortgage
loans as of the first day of the prior month. If the aggregate amount of
interest shortfalls resulting from prepayments on the mortgage loans exceeds the
amount of the reduction in the servicer's servicing compensation, the interest
entitlement for each class of certificates will be reduced proportionately by
the amount of this excess.

See "Servicing of Mortgage Loans--Servicing Compensation and Payment of
Expenses" and "--Adjustment to Servicing Compensation in Connection with Certain
Prepaid Mortgage Loans" in this prospectus supplement.

For each class of certificates, any net rate carryover (which is interest due on
a prior distribution date that was not paid on a prior distribution date due to
the application of the net rate cap) will be payable from excess cashflow as and
to the extent described in this prospectus supplement.

See "Description of the Certificates--Distributions--Distributions of Interest"
in this prospectus supplement.

PRINCIPAL DISTRIBUTIONS

On each distribution date, certificateholders will only receive a distribution
of principal on their certificates if there is cash available on that date for
the distribution of principal. The manner of distributing principal among the
classes of certificates will depend on the priority of distributions, which will
differ, as described in this prospectus supplement, depending on whether the
distribution date is before or on or after the stepdown date and on the loss and
delinquency performance of the mortgage loans.

See "Description of the Certificates--Principal" in this prospectus supplement.

AMOUNTS AVAILABLE FOR DISTRIBUTIONS ON THE CERTIFICATES

Amounts Available with respect to Interest Distributions

The amount available for interest distributions on the certificates on any
distribution date will be based on the "interest remittance amount." The
interest remittance amount for any distribution date will generally consist of
the following amounts, in each case to the extent received, collected or paid as
provided in the pooling and servicing agreement:

o    the interest portion of monthly payments on the mortgage loans less the
     expense fees;

o    interest collected in connection with prepayments of the mortgage loans;

o    interest amounts advanced by the servicer;

o    any compensating interest paid by the servicer related to prepayments of
     the mortgage loans;

o    liquidation proceeds of the mortgage loans (to the extent allocable to
     interest); and

o    the lesser of (1) the aggregate amount of principal prepayments on the
     mortgage loans and (2) the deferred interest on the mortgage loans.

Amounts Available with respect to Principal Distributions

The amount available for principal distributions on the certificates on any
distribution date will generally consist of the following amounts, in each case
to the extent received, collected or paid as provided in the pooling and
servicing agreement:

o    the principal portion of monthly payments on the mortgage loans;

o    principal advances by the servicer;

o    the excess of (1) the principal prepayments on the mortgage loans over (2)
     the deferred interest on the mortgage loans;

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


                                      S-10



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

o    the stated principal balance of any mortgage loans repurchased or purchased
     by the seller or the servicer, as applicable;

o    the difference, if any, between the stated principal balance of a
     substitute mortgage loan and the related deleted mortgage loan; and

o    liquidation proceeds of the mortgage loans (to the extent allocable to
     principal).

FEES AND EXPENSES

The amounts available for distribution on the certificates on any distribution
date generally will not include the following amounts:

o    the servicing fee and additional servicing compensation due to the
     servicer;

o    the trustee fee due to the trustee;

o    amounts reimbursed to the servicer and the trustee in respect of advances
     previously made by them and other amounts for which the servicer and
     trustee are entitled to be reimbursed;

o    all prepayment charges (which are distributable only to the Class P
     Certificates); and

o    all other amounts for which the depositor, the seller or the servicer is
     entitled to be reimbursed.

These amounts will reduce the amount distributed to the certificateholders.

Servicing Fee

The servicer will be paid a monthly fee (referred to as the servicing fee) with
respect to each mortgage loan of 0.375% per annum (referred to as the servicing
fee rate).

Additional Servicing Compensation

The servicer is also entitled to receive additional servicing compensation from
late payment fees, assumption fees and other similar charges (excluding
prepayment charges) and investment income earned on amounts on deposit in
certain of the issuing entity's accounts and excess proceeds with respect to
mortgage loans as described under "Description of the Certificates --Priority of
Distributions Among Certificates."

Source and Priority of Distributions

These amounts will be paid to the servicer from collections on the mortgage
loans prior to any distributions on the certificates.

See "Servicing of the Mortgage Loans--Servicing Compensation and Payment of
Expenses" and "Description of the Certificates--Priority of Distributions Among
Certificates" in this prospectus supplement.

PRIORITY OF INTEREST DISTRIBUTIONS

In general, on any distribution date, the interest remittance amount will be
distributed as follows:

     first, concurrently, to each class of senior certificates, current interest
and interest carry forward amounts, subject to the allocations set forth under
"Description of the Certificates--Distributions--Interest;"

     second, sequentially, in the order of their numerical class designations,
to each class of subordinated certificates, current interest due and any
interest carry forward amount from previous distributions dates for each class
for that distribution date, subject to the allocations set forth under
"Description of the Certificates--Distributions--Interest" in this prospectus
supplement; and

     third, as part of the excess cashflow, as described under
"Overcollateralization--Application of Excess Interest" below.

PRIORITY OF PRINCIPAL DISTRIBUTIONS

General

The manner of allocating principal distributions among the classes of
certificates will differ, as described in this prospectus supplement, depending
upon the occurrence of several different events or triggers:

     o    whether a distribution date occurs before or on or after the "stepdown
          date," which is the later of (1) the distribution date in August 2009
          and (2) the first distribution date on which the ratio of (a) the
          aggregate class certificate balance of the subordinated certificates
          plus any overcollateralized amount to (b) the aggregate stated
          principal balance of the

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


                                      S-11



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

          mortgage loans equals or exceeds the applicable percentage specified
          in this prospectus supplement;

     o    whether cumulative losses on the mortgage loans (in the aggregate) are
          higher than certain levels specified in this prospectus supplement (a
          "CUMULATIVE LOSS TRIGGER EVENT"); and

     o    whether the rate of delinquencies of the mortgage loans (in the
          aggregate) over any three-month period is higher than certain levels
          set forth in this prospectus supplement (a "DELINQUENCY TRIGGER
          EVENT").

A "TRIGGER EVENT" will be in effect if on any distribution date either (i) a
cumulative loss trigger event or (ii) a delinquency trigger event is in effect
for that distribution date.

     Distributions of principal to the classes of offered certificates are based
on the "principal distribution amount," which is, generally, for any
distribution date, the amount of principal collected or advanced by the servicer
on the mortgage loans during the related due period, including any net
prepayments collected during the related prepayment period, plus other amounts
collected or recovered (such as insurance proceeds) which are to be allocated to
principal, but minus any overcollateralization release amount for such
distribution date.

Effect of the Stepdown Date If a Trigger Event is Not in Effect

On any distribution date on or after the stepdown date (and so long as no
trigger event is in effect), instead of allocating all amounts distributable as
principal on the certificates to the classes of senior certificates until those
classes are paid in full, a portion of those amounts distributable as principal
will be allocated to the classes of subordinated certificates.

The amount allocated to each class of certificates on or after the stepdown date
and so long as no trigger event is in effect will be based on the targeted level
of overcollateralization and subordination for each class of certificates. These
amounts are described in more detail under "Description of the Certificates --
Distributions -- Principal--Distributions of Principal" in this prospectus
supplement.

Priority of Principal Distributions

On any distribution date prior to the stepdown date or on which a trigger event
is in effect, the principal distribution amount will be distributed in the
following order, until the aggregate class certificate balance of the
certificates is reduced to the target amount for that distribution date:

     first, concurrently, to the classes of the senior certificates, pro rata,
until their respective class certificate balances are reduced to zero;

     second, sequentially, to the Class M-1, Class M-2, Class M-3 and Class M-4
Certificates, in that order, until their respective class certificate balances
are reduced to zero; and

     third, as part of the excess cashflow.

On any distribution date on or after the stepdown date and so long as a trigger
event is not in effect, the principal distribution amount will be distributed in
the following priority:

     first, concurrently, to the classes of senior certificates, pro rata, until
the senior certificates have been paid to meet certain credit enhancement
targets;

     second, from the remaining principal distribution amount, sequentially, to
the Class M-1, Class M-2, Class M-3 and Class M-4 Certificates, in that order,
until each such class has been paid to meet certain credit enhancement targets;
and

     third, as part of the excess cashflow.

LIMITED RECOURSE

The only source of funds available for interest and principal distributions on
the certificates will be the assets of the issuing entity. The issuing entity
will have no source of funds other than collections and recoveries of the
mortgage loans through insurance or otherwise. No other entity will be required
or expected to make any distributions on the certificates.

OPTIONAL TERMINATION

The servicer may purchase all of the remaining assets of the issuing entity and
retire all outstanding classes of certificates following the distribution date
on which the aggregate stated principal balance of all of the mortgage loans and
real estate owned by the issuing entity declines below 10% of the aggregate

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


                                      S-12



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

stated principal balance of the mortgage loans as of the cut-off date. The NIM
Insurer may also have the right to purchase all of the remaining assets in the
issuing entity.

See "Description of the Certificates--Termination of the Issuing Entity;
Optional Termination" in this prospectus supplement.

ADVANCES

The servicer will make cash advances with respect to delinquent payments of
principal and interest on the mortgage loans to the extent the servicer
reasonably believes that the cash advances can be repaid from future payments on
the mortgage loans. These cash advances are only intended to maintain a regular
flow of scheduled interest and principal distributions on the certificates and
are not intended to guarantee or insure against losses.

See "Servicing of Mortgage Loans--Advances" in this prospectus supplement.

REQUIRED REPURCHASES OR SUBSTITUTIONS OF MORTGAGE LOANS

The seller will make certain representations and warranties relating to the
mortgage loans pursuant to the pooling and servicing agreement. If with respect
to any mortgage loan any of the representations and warranties are breached in
any material respect as of the date made, or an uncured material document defect
exists, the seller will be obligated to repurchase or substitute for the
mortgage loan as further described in this prospectus supplement under
"Description of the Certificates--Representations and Warranties Relating to
Mortgage Loans" and "--Delivery of Mortgage Loan Documents."

The servicer is permitted to modify any mortgage loan at the request of the
related mortgagor, provided that the servicer purchases the mortgage loan from
the issuing entity immediately preceding the modification. See "Servicing of
Mortgage Loans--Certain Modifications and Refinancings" in this prospectus
supplement.

CREDIT ENHANCEMENT

The credit enhancement provided for the benefit of the holders of the
certificates consists solely of excess interest, overcollateralization,
subordination, and the loss allocation features.

OVERCOLLATERALIZATION

On the closing date, the aggregate stated principal balance of the mortgage
loans is expected to exceed the aggregate class certificate balance of the
certificates by approximately $3,385,379, which represents approximately 1.10%
of the aggregate stated principal balance of the mortgage loans as of the
cut-off date. This amount is called "overcollateralization" and is approximately
equal to the initial level of overcollateralization required by the pooling and
servicing agreement.

See "Risk Factors--Excess Interest From the Mortgage Loans May Not Provide
Adequate Credit Enhancement" in this prospectus supplement.

EXCESS CASHFLOW

The mortgage loans are expected to generate more interest than is needed to pay
interest on the certificates because the weighted average interest rate of the
mortgage loans is expected to be higher than the weighted average pass-through
rate on the classes of certificates, plus the weighted average expense fee rate.
The "expense fee rate" is the sum of the servicing fee rate and the trustee fee
rate. Any interest payments received in respect of the mortgage loans in excess
of the amount that is needed to pay interest on the certificates and the trust
expenses, will be used to reduce the aggregate class certificate balance of the
certificates, until the required level of overcollateralization has been
achieved, and to maintain the required levels, once they have been met.

On any distribution date, the amount of overcollateralization (if any) will be
available to absorb the losses from liquidated mortgage loans that would
otherwise be allocated to the certificates, if those losses are not otherwise
covered by excess cashflow (if any) from the mortgage loans. The required levels
of overcollateralization may change over time.

Application of Excess Cashflow

     The amount of any excess interest, together with certain amounts of the
principal distribution amount not paid to the certificates on any distribution
date, will be applied as "excess cashflow" in order to pay principal on the
certificates, to pay unpaid realized loss amounts, to pay net rate carryover
amounts and to make other payments as described in this prospectus supplement.

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


                                      S-13



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

     Any excess cashflow will be distributed on each distribution date in the
following priority:

          first, to the certificates, as principal, generally in accordance with
     the priorities summarized under "Priority of Principal Distributions"
     above;

          second, first, to the classes of senior certificates, pro rata by
     unpaid realized loss amount, and second, to the Class M-1, Class M-2, Class
     M-3 and Class M-4 Certificates, in that order, as unpaid realized loss
     amounts;

          third, (i) to the classes of senior certificates, pro rata based on
     their respective unpaid net rate carryover amount to the extent needed to
     pay any unpaid net rate carryover for each such class; and (ii),
     sequentially, to the Class M-1, Class M-2, Class M-3 and Class M-4
     Certificates, in that order, to pay any unpaid net rate carryover for each
     such class; and

          fourth, to the Class C and Class R Certificates, as specified in the
     pooling and servicing agreement.

See "Description of the Certificates--Overcollateralization Provisions" in this
prospectus supplement.

SUBORDINATION

The issuance of senior certificates and subordinated certificates by the issuing
entity is designed to increase the likelihood that senior certificateholders
will receive regular distributions of interest and principal. The senior
certificates will have a distribution priority over the subordinated
certificates. Among the classes of subordinated certificates offered by this
prospectus supplement, the Class M-1 Certificates will have the highest
distribution priority.

See "Description of the Certificates" and "Credit Enhancement--Subordination in
this prospectus supplement.

ALLOCATION OF LOSSES

Subordination is designed to provide the holders of certificates with a higher
distribution priority with protection against most losses realized when the
remaining unpaid principal balance of a mortgage loan exceeds the amount of
proceeds recovered upon the liquidation of that mortgage loan. In general, this
loss protection is accomplished by allocating the realized losses on the
mortgage loans (to the extent that those losses exceed any monthly excess
cashflow and any overcollateralization) among the subordinated certificates,
beginning with the subordinated certificates with the lowest distribution
priority before realized losses on the mortgage loans are allocated to the
senior certificates. If the applicable subordination is insufficient to absorb
losses, then additional losses on the mortgage loans will reduce the class
certificate balances of senior certificates, sequentially, to the Class A-3,
Class A-2 and Class A-1 Certificates, in that order, until their respective
class certificate balances are reduced to zero.

See "Description of the Certificates--Allocation of Losses" and "Credit
Enhancement--Subordination" in this prospectus supplement.

TAX STATUS

For federal income tax purposes, the issuing entity (exclusive of the carryover
reserve fund) will comprise one or more real estate mortgage investment conduits
in a tiered structure. The highest tier will be referred to as the Master REMIC
and each underlying tier (if any) will be referred to as an underlying REMIC.
Each underlying REMIC (if any) will hold mortgage loans (or uncertificated
regular interests) and will issue several classes of uncertificated regular
interests and a single uncertificated residual interest. The Master REMIC will
hold as assets regular interests issued by underlying REMICs (or the mortgage
loans if there are no underlying REMICs) and will issue the several classes of
certificates, which, other than the Class R Certificate, will represent the
regular interests in the Master REMIC. The rights of the LIBOR certificates to
receive payments of net rate carryover will represent, for federal income tax
purposes, separate contractual rights coupled with REMIC regular interests
within the meaning of Treasury regulation Section 1.860G-2(i). The Class R
Certificate will represent ownership of both the residual interest in the Master
REMIC and the residual interests in any underlying REMIC.

The carryover reserve fund will not constitute any part of any REMIC created
under the pooling and servicing agreement.

See "Material Federal Income Tax Consequences" in this prospectus supplement and
in the prospectus.

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


                                      S-14



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

ERISA CONSIDERATIONS

The offered certificates may be purchased by a pension or other benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended or
Section 4975 of the Internal Revenue Code of 1986, as amended, or by an entity
investing the assets of such a benefit plan, so long as certain conditions are
met.

See "ERISA Considerations" in this prospectus supplement and in the prospectus.

LEGAL INVESTMENT

The senior certificates and the Class M-1 Certificates will be mortgage related
securities for purposes of the Secondary Mortgage Market Enhancement Act of 1984
as long as they are rated in one of the two highest rating categories by at
least one nationally recognized statistical rating organization. The other
classes of certificates will not be rated in one of the two highest rating
categories by a nationally recognized statistical rating organization, and
therefore, will not be mortgage related securities for purposes of that Act.

See "Legal Investment" in the prospectus.

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


                                      S-15



                         SUMMARY OF TRANSACTION PARTIES

                                       --------------------------
                                           SPONSOR AND SELLER
                                          IndyMac Bank, F.S.B.
                                       --------------------------
                                                    |
                                                    |
                                                    |  Mortgage Loans
                                                    |
                                                    |
                                                    V
                                       --------------------------
                                                DEPOSITOR
                                            IndyMac MBS, Inc.
                                       --------------------------
                                                    |
                                                    |
                                                    |  Mortgage Loans
                                                    |
                                                    V
                        Mortgage       --------------------------
                        Loan                 ISSUING ENTITY
--------------------    Servicing      IndyMac INDX Mortgage Loan
      SERVICER        --------------->       Trust 2006-AR12
IndyMac Bank, F.S.B.
--------------------                             TRUSTEE
                                         Deutsche Bank National
                                              Trust Company
                                       --------------------------
                                                    |
                                                    |
                                                    |
                                                    |
                                                    V
                                       --------------------------
                                           CERTIFICATEHOLDERS
                                       --------------------------


                                      S-16



                                  RISK FACTORS

o    The following information, which you should carefully consider, identifies
     significant sources of risk associated with an investment in the
     certificates. You should also carefully consider the information under
     "Risk Factors" beginning on page 5 in the prospectus.

YOUR YIELD WILL BE AFFECTED BY   Borrowers may, at their option, prepay their
HOW BORROWERS REPAY THEIR        mortgage loans in whole or in part at any time.
MORTGAGE LOANS                   We cannot predict the rate at which borrowers
                                 will repay their mortgage loans. A prepayment
                                 of a mortgage loan, however, will usually
                                 result in a prepayment on the certificates. The
                                 issuing entity's prepayment experience may be
                                 affected by many factors, including:

                                 o    general economic conditions,

                                 o    the level of prevailing interest rates,

                                 o    the availability of alternative financing,

                                 o    applicability of prepayment charges, and

                                 o    homeowner mobility.

                                 The rate and timing of prepayment of mortgage
                                 loans will affect the yields to maturity and
                                 weighted average lives of the certificates.

                                 Any reinvestment risks from faster or slower
                                 prepayments of mortgage loans will be borne
                                 entirely by the holders of the certificates.

                                 o    If you purchase your certificates at a
                                      discount and principal is repaid slower
                                      than you anticipate, then your yield may
                                      be lower than you anticipate.

                                 o    If you purchase your certificates at a
                                      premium and principal is repaid faster
                                      than you anticipate, then your yield may
                                      be lower than you anticipate.

                                 o    The rate and timing of principal
                                      prepayments relative to the amount and
                                      timing of the creation of deferred
                                      interest on the mortgage loans will affect
                                      the yields to maturity of the classes of
                                      certificates.

                                 o    Approximately 91.48% of the mortgage loans
                                      by cut-off date pool principal balance
                                      require the mortgagor to pay a charge if
                                      the mortgagor prepays the mortgage loan
                                      during periods ranging from one year to
                                      three years after the mortgage loan was
                                      originated. A prepayment charge may
                                      discourage a mortgagor from prepaying the
                                      mortgage loan during the applicable
                                      period. Prepayment charges will be
                                      distributed to the Class P Certificates
                                      and will not be available to the holders
                                      of other classes of certificates.


                                      S-17



                                 See "Yield, Prepayment and Maturity
                                 Considerations" for a description of factors
                                 that may influence the rate and timing of
                                 prepayments on the mortgage loans.

THE YIELD AND WEIGHTED AVERAGE   All of the mortgage loans are negative
MATURITY OF THE CERTIFICATES     amortization loans. After an introductory
WILL BE SUBJECT TO ANY           period of one month after origination during
NEGATIVE AMORTIZATION ON THE     which the interest rates on the mortgage loans
MORTGAGE LOANS                   are fixed, the interest rates on the mortgage
                                 loans adjust monthly but their monthly payments
                                 and amortization schedules generally adjust
                                 annually (other than approximately 26.59% of
                                 the mortgage loans, which have an initial fixed
                                 payment period of five years) and are subject
                                 to maximum interest rates and payments caps.
                                 The initial interest rates on most of the
                                 mortgage loans are lower than the sum of the
                                 index applicable at origination and the related
                                 gross margin and, in some cases, are only 1.00%
                                 per annum. Since the scheduled monthly payments
                                 on negative amortization loans for the first
                                 year (and, in some cases, for the first five
                                 years) are set at their origination, the
                                 scheduled monthly payments are based upon the
                                 introductory interest rates. As a result, after
                                 the introductory interest rates expire and
                                 until the initial annual adjustment to the
                                 scheduled monthly payment made by the borrower
                                 (unless the fully indexed mortgage rate is a
                                 rate at or below the introductory mortgage
                                 rate), the scheduled monthly payment made by
                                 the borrower will not be sufficient to pay the
                                 amount of interest accruing on the mortgage
                                 loan. Negative amortization loans with initial
                                 fixed periods of five years could result in
                                 significant amounts of deferred interest if
                                 borrowers continue to make only the minimum
                                 scheduled monthly payment. Although negative
                                 amortization loans provide for scheduled
                                 monthly payments, the amount of interest that
                                 accrues and is ultimately due on a negative
                                 amortization loan is based on the monthly
                                 interest rate. If borrowers only make their
                                 scheduled monthly payments, a portion of the
                                 accrued interest on negatively amortizing loans
                                 will become deferred interest. "DEFERRED
                                 INTEREST" is the excess, if any, of (x) the
                                 amount of interest accrued on such Mortgage
                                 Loan from the preceding due date to such due
                                 date over (y) the monthly payment due for such
                                 due date. Deferred interest is added to the
                                 principal balance of the negative amortization
                                 loan and bears interest at the applicable
                                 interest rate for that negative amortization
                                 loan.

                                 Except as described below, negative
                                 amortization loans provide for a limited annual
                                 adjustment to the scheduled payment. As a
                                 result, even after the initial annual
                                 adjustment, the scheduled payment still may not
                                 be sufficient to avoid deferred interest and
                                 also may not be sufficient to amortize fully
                                 the unpaid principal balance of a mortgage loan
                                 over its remaining term to maturity. Deferred
                                 interest is also likely to result if interest
                                 rates rise more quickly than monthly payments
                                 are adjusted and borrowers only make their
                                 scheduled monthly payments, because the
                                 interest accrues at the monthly rate, while the
                                 payments are set annually.

                                 If the interest rates on the mortgage loans
                                 decrease prior to an adjustment in the monthly
                                 payment, a larger portion of the monthly
                                 payment will be applied to the unpaid principal
                                 balance of the mortgage loan, which may cause
                                 the classes of certificates to amortize more
                                 quickly. Conversely, if the interest rates on
                                 the mortgage loans increase prior to an
                                 adjustment in the monthly


                                      S-18



                                 payment, a smaller portion of the monthly
                                 payment will be applied to the unpaid principal
                                 balance of the mortgage loan, which may cause
                                 the classes of certificates to amortize more
                                 slowly. If the unpaid principal balance of a
                                 mortgage loan exceeds the original principal
                                 balance of that mortgage loan by the amount
                                 specified in the related mortgage note, the
                                 monthly payment due on that mortgage loan will
                                 be recast without regard to the related payment
                                 cap in order to provide for the payment in full
                                 of the outstanding balance of the mortgage loan
                                 at its maturity by the payment of equal monthly
                                 installments. In addition, on the fifth payment
                                 adjustment date of a mortgage loan, and every
                                 fifth payment adjustment date thereafter and
                                 the last payment adjustment date prior to the
                                 mortgage loan's maturity, the monthly payment
                                 due on that mortgage loan will be recast
                                 without regard to the related payment cap in
                                 order to provide for the payment in full of the
                                 outstanding balance of the mortgage loan at its
                                 maturity by the payment of equal monthly
                                 installments. These features may affect the
                                 rate at which principal on the mortgage loans
                                 is paid and may create a greater risk of
                                 default if the borrower is unable to pay the
                                 monthly payments on the related increased
                                 principal balance.

HIGH BALANCE MORTGAGE LOANS      As of the cut off date, nine mortgage loans
PRESENT GREATER RISK             constituting approximately 3.86% of the
                                 mortgage loans by cut-off date pool principal
                                 balance had principal balances greater than
                                 $1,000,000, and one mortgage loan constituting
                                 approximately 0.55% of the mortgage loans by
                                 cut-off date pool principal balance had a
                                 principal balance greater than $1,500,000. You
                                 should consider the risk that the loss and
                                 delinquency experience on these high balance
                                 mortgage loans may have a disproportionate
                                 effect on the pool of mortgage loans.

ALLOCATIONS OF NET DEFERRED      On each distribution date, the net deferred
INTEREST MAY AFFECT YOUR YIELD   interest on the mortgage loans will be
                                 allocated to each class of certificates, based
                                 on the class certificate balance of that class
                                 of certificates. Any allocation of net deferred
                                 interest could, as a result, affect the
                                 weighted average life of the affected class of
                                 certificates. The amount of deferred interest,
                                 if any, with respect to mortgage loans for a
                                 given month will reduce the amount of interest
                                 collected on these mortgage loans and available
                                 to be distributed as a distribution of interest
                                 to the classes of certificates. The resulting
                                 reduction in interest collections on the
                                 mortgage loans will be offset, in part or in
                                 whole, by applying voluntary prepayments of
                                 principal received on the mortgage loans to
                                 interest distributions on the classes of
                                 certificates. For any distribution date, the
                                 net deferred interest on the mortgage loans
                                 will be deducted from the interest payable to
                                 the certificates as described in "Description
                                 of the Certificates--Interest" in this
                                 prospectus supplement. The amount of the
                                 reduction of accrued interest distributable to
                                 each class of certificates attributable to net
                                 deferred interest will be added to the class
                                 certificate balance of that class. Only the
                                 amount by which the voluntary prepayments of
                                 principal received on the mortgage loans
                                 exceeds the amount of deferred interest on the
                                 mortgage loans will be distributed as a
                                 principal prepayment on the classes of
                                 certificates. The increase in the class
                                 certificate balance of any class of
                                 certificates may increase the period of time
                                 during which the applicable certificates could
                                 suffer realized losses on the mortgage loans.
                                 We cannot predict the extent to which


                                      S-19



                                 mortgagors will prepay their mortgage loans or
                                 the extent to which deferred interest will
                                 accrue on the mortgage loans, and therefore
                                 cannot predict the extent of the effect of the
                                 allocation of net deferred interest on your
                                 certificates.

YOUR YIELD WILL BE AFFECTED BY   The timing of principal distributions on the
HOW DISTRIBUTIONS ARE            certificates will be affected by a number of
ALLOCATED TO THE CERTIFICATES    factors, including:

                                 o    the extent of prepayments on the mortgage
                                      loans relative to the rate and timing of
                                      the creation of deferred interest on the
                                      mortgage loans,

                                 o    whether the borrower elects to make a
                                      payment greater than the required minimum
                                      monthly payment,

                                 o    how the classes of certificates receive
                                      payments of principal,

                                 o    whether the servicer exercises its right,
                                      in its sole discretion, to terminate the
                                      issuing entity,

                                 o    the rate and timing of payment defaults
                                      and losses on the mortgage loans, and

                                 o    repurchases of mortgage loans for material
                                      breaches of representations and warranties
                                      and due to modifications.

                                 Because distributions on the certificates are
                                 dependent upon the payments on the mortgage
                                 loans, we cannot guarantee the amount of any
                                 particular payment or the amount of time that
                                 will elapse before the issuing entity is
                                 terminated.

                                 See "Description of the
                                 Certificates--Principal," and "--Termination of
                                 the Issuing Entity; Optional Termination" in
                                 this prospectus supplement for a description of
                                 the manner in which principal will be
                                 distributed to the certificates. See "The
                                 Mortgage Pool--Representations by Seller;
                                 Repurchases, etc." and "Servicing of the
                                 Mortgage Loans--Certain Modifications and
                                 Refinancings" in this prospectus supplement for
                                 more information regarding the repurchase of
                                 mortgage loans.

CREDIT ENHANCEMENT MAY NOT BE    The certificates are not insured by any
SUFFICIENT TO PROTECT SENIOR     financial guaranty insurance policy. The
CERTIFICATES FROM LOSSES         subordination features of the issuing entity
                                 are intended to enhance the likelihood that
                                 senior certificateholders will receive regular
                                 payments of interest and principal, as
                                 applicable.

                                 SUBORDINATION. Credit enhancement will be
                                 provided for the certificates, first, by the
                                 right of the holders of senior certificates to
                                 receive distributions of principal before the
                                 classes subordinated to them and, second, to
                                 the extent there is no overcollateralization in
                                 the issuing entity, by the allocation of
                                 realized losses on the mortgage loans to the
                                 subordinated certificates in the inverse order
                                 of their priority of distribution, beginning
                                 with the Class M-4 Certificates. This form of
                                 credit enhancement uses collections on the
                                 mortgage loans otherwise payable to holders of
                                 the subordinated classes to pay


                                      S-20



                                 amounts due on the more senior classes of
                                 certificates. After the credit enhancement
                                 provided by excess cashflow and
                                 overcollateralization (if any) has been
                                 exhausted, collections on the mortgage loans
                                 otherwise payable to the subordinated classes
                                 will comprise the sole source of funds from
                                 which this type of credit enhancement is
                                 provided to the senior certificates.

                                 ALLOCATION OF LOSSES. Realized losses on the
                                 mortgage loans are allocated to the
                                 subordinated certificates, beginning with the
                                 subordinated certificates with the lowest
                                 distribution priority, until the principal
                                 amount of that class has been reduced to zero.
                                 Subsequent realized losses will be allocated to
                                 the next most junior classes of subordinated
                                 certificates sequentially, until the principal
                                 balances of each succeeding class has been
                                 reduced to zero. Accordingly, if the aggregate
                                 principal balance of each class of subordinated
                                 certificates were to be reduced to zero,
                                 delinquencies and defaults on the mortgage
                                 loans would reduce the amount of funds
                                 available for monthly distributions to holders
                                 of the senior certificates.

                                 Any realized losses allocable to the senior
                                 certificates will be allocated as described
                                 "Description of the Certificates--Allocation of
                                 Losses."

                                 See "Credit Enhancement--Subordination" and
                                 "Description of the Certificates--Allocation of
                                 Losses" in this prospectus supplement.

DIFFERENCE BETWEEN MORTGAGE      The pass-through rates on the offered
RATES AND PASS-THROUGH RATES     certificates may adjust monthly and are
MAY REDUCE EXCESS CASHFLOW       generally based on one-month LIBOR (we
                                 sometimes refer to these certificates as the
                                 "LIBOR CERTIFICATES"). The mortgage rates on
                                 the mortgage loans are based on one-year MTA,
                                 which is a 12-month moving average of the
                                 monthly yields on U.S. Treasury securities,
                                 adjusted to a constant maturity of one year.
                                 Because the one-year MTA is an average, its
                                 yield will rise or fall more slowly than
                                 one-month LIBOR, and the indices may move in
                                 opposite directions. We cannot assure you as to
                                 the level, rate or timing of changes in any
                                 index. If the mismatch between one-year MTA and
                                 one-month LIBOR is significant, the application
                                 of the net rate cap may result, all other
                                 things being equal, in a shortfall in the
                                 amount of interest distributable on the classes
                                 of certificates. Additionally because the
                                 mortgage index may respond to various economic
                                 and market factors different than those
                                 affecting one-month LIBOR, there is not
                                 necessarily a correlation in movement between
                                 the interest rates on those mortgage loans and
                                 the pass-through rates of the LIBOR
                                 Certificates. For example, it is possible that
                                 the interest rates on certain of the adjustable
                                 rate mortgage loans may decline while the
                                 pass-through rates on the LIBOR Certificates
                                 are stable or rising.

                                 The pass-through rates on the offered
                                 certificates will be limited by the net rate
                                 cap on the first distribution date, and
                                 possibly on subsequent distribution dates. On
                                 the closing date, the depositor will cause to
                                 be deposited into the carryover reserve fund an
                                 amount that is expected to be sufficient to
                                 cover any net rate carryover amounts on the
                                 LIBOR Certificates with respect to the first
                                 distribution date. Any remaining amount after
                                 the first distribution date will be


                                      S-21



                                 distributed to Merrill Lynch, Pierce, Fenner &
                                 Smith Incorporated and will not be available to
                                 cover any net rate carryover amounts on
                                 subsequent distribution dates.

EXCESS CASHFLOW FROM THE         The amount by which the aggregate stated
MORTGAGE LOANS MAY NOT PROVIDE   principal balance of the mortgage loans exceeds
ADEQUATE CREDIT ENHANCEMENT      the aggregate class certificate balance of the
                                 offered certificates is called
                                 "OVERCOLLATERALIZATION." The initial level of
                                 overcollateralization (that is, the
                                 overcollateralization on the closing date) is
                                 expected to be approximately 1.10% of the
                                 aggregate stated principal balance of the
                                 mortgage loans as of the cut-off date. The
                                 mortgage loans are expected to generate more
                                 interest than is needed to pay interest on the
                                 offered certificates because the weighted
                                 average interest rate on the mortgage loans is
                                 expected to be higher than the weighted average
                                 pass-through rate on the offered certificates
                                 plus the weighted average expense fee rate. In
                                 the event that the level of
                                 overcollateralization is reduced, such "EXCESS
                                 INTEREST" will be used to make additional
                                 principal distributions on the offered
                                 certificates to the extent described in this
                                 prospectus supplement. Overcollateralization is
                                 intended to provide limited protection to the
                                 holders of the offered certificates by
                                 absorbing the certificates' share of losses
                                 from liquidated mortgage loans. However, we
                                 cannot assure you that enough excess interest
                                 will be generated on the mortgage loans to
                                 maintain or restore the required level of
                                 overcollateralization.

                                 The excess interest available on any
                                 distribution date will be affected by the
                                 actual amount of interest received, collected
                                 or advanced in respect of the mortgage loans
                                 for that distribution date. That amount will be
                                 influenced by changes in the weighted average
                                 of the mortgage rates resulting from
                                 prepayments and liquidations of the mortgage
                                 loans as well as from adjustments of the
                                 mortgage rates on the mortgage loans. The
                                 mortgage rates on the mortgage loans adjust
                                 monthly based on one-year MTA following their
                                 respective one-month introductory fixed rate.
                                 The pass-through rate of each class of LIBOR
                                 Certificates is subject to a net rate cap which
                                 generally is based on the weighted average
                                 adjusted net mortgage rates of the mortgage
                                 loans, net of certain fees and expenses of the
                                 issuing entity. If the pass-through rate on one
                                 or more classes is limited by the net rate cap,
                                 it may be necessary to apply all or a portion
                                 of the interest funds available to distribute
                                 interest at the pass-through rates for such
                                 classes of certificates. As a result, interest
                                 may be unavailable for any other purpose.

                                 If the protection afforded by
                                 overcollateralization is insufficient, then the
                                 holders of the offered certificates could
                                 experience a loss on their investment.

EXCESS INTEREST WILL ALSO BE     When a borrower makes a full or partial
REDUCED BY PREPAYMENTS ON THE    prepayment on a mortgage loan, the amount of
MORTGAGE LOANS                   interest that the borrower is required to pay
                                 may be less than the amount of interest
                                 certificateholders would otherwise be entitled
                                 to receive with respect to the mortgage loan.
                                 The servicer is required to reduce its
                                 servicing fee to offset this shortfall, but the
                                 reduction for any distribution date is limited
                                 to the servicing fee for the related month. If
                                 the aggregate amount of interest shortfalls
                                 resulting from prepayments exceeds the amount
                                 of the reduction in the servicing fee, the
                                 amount of interest available to make


                                      S-22



                                 distributions of interest to the certificates
                                 and to maintain or restore
                                 overcollateralization will be reduced.

CERTAIN INTEREST SHORTFALLS      Your certificates may be subject to certain
WILL BE ALLOCATED TO THE         shortfalls in interest collections arising from
CERTIFICATES                     the application of the Servicemembers Civil
                                 Relief Act and similar state and local laws
                                 (referred to in this prospectus supplement as
                                 the Relief Act). The Relief Act provides relief
                                 to borrowers who enter active military service
                                 and to borrowers in reserve status who are
                                 called to active duty after the origination of
                                 their mortgage loan. The Relief Act provides
                                 generally that these borrowers may not be
                                 charged interest on a mortgage loan in excess
                                 of 6% per annum during the period of the
                                 borrower's active duty. These shortfalls are
                                 not required to be paid by the borrower at any
                                 future time, will not be advanced by the
                                 servicer, and will reduce accrued interest on
                                 each class of certificates on a pro rata basis.
                                 Additionally, the Relief Act imposes certain
                                 limitations that would impair the servicer's
                                 ability to foreclose on an affected mortgage
                                 loan during the borrower's period of active
                                 service and, under some circumstances, during
                                 an additional period thereafter. In addition,
                                 pursuant to the laws of various states, under
                                 certain circumstances, payments on the mortgage
                                 loans by residents in such states who are
                                 called into active duty with the National Guard
                                 or the reserves will be deferred. These state
                                 laws may also limit the ability of the servicer
                                 to foreclose on the related mortgaged property
                                 This could result in delays or reductions in
                                 payment and increased losses on the mortgage
                                 loans, which would be borne by the
                                 certificateholders.

                                 Your certificates also may be subject to other
                                 shortfalls in collections of interest as
                                 described in this prospectus supplement under
                                 "Description of the Certificates--Interest."

CERTIFICATES MAY NOT BE          The offered certificates may not be an
APPROPRIATE FOR SOME INVESTORS   appropriate investment for investors who do not
                                 have sufficient resources or expertise to
                                 evaluate the particular characteristics of the
                                 applicable class of offered certificates. This
                                 may be the case because, among other things:

                                 o    The yield to maturity of offered
                                      certificates purchased at a price other
                                      than par will be sensitive to the
                                      uncertain rate and timing of principal
                                      prepayments on the mortgage loans;

                                 o    The rate of principal distributions on and
                                      the weighted average lives of the offered
                                      certificates will be sensitive to the
                                      uncertain rate and timing of principal
                                      prepayments on the mortgage loans and the
                                      priority of principal distributions among
                                      the classes of certificates. Accordingly,
                                      the offered certificates may be an
                                      inappropriate investment if you require a
                                      distribution of a particular amount of
                                      principal on a specific date or an
                                      otherwise predictable stream of
                                      distributions;

                                 o    You may not be able to reinvest
                                      distributions on an offered certificate
                                      (which, in general, are expected to be
                                      greater during periods of relatively low
                                      interest rates) at a rate at least as high
                                      as the pass-through rate applicable to
                                      your certificate; or


                                      S-23



                                 o    A secondary market for the offered
                                      certificates may not develop or provide
                                      certificateholders with liquidity of
                                      investment.

GEOGRAPHIC CONCENTRATIONS        Approximately 52.06% of the mortgage loans by
INCREASE RISK THAT CERTIFICATE   pool principal balance as of the cut-off date
YIELDS COULD BE IMPAIRED         are secured by property in California. Property
                                 in California may be more susceptible than
                                 homes located in other parts of the country to
                                 some types of uninsurable hazards, such as
                                 earthquakes, floods, mudslides and other
                                 natural disasters. In addition,

                                 o    economic conditions in California (which
                                      may or may not affect real property
                                      values) may affect the ability of
                                      borrowers to repay their loans on time;

                                 o    declines in the California residential
                                      real estate market may reduce the values
                                      of properties located in California, which
                                      would result in an increase in the
                                      loan-to-value ratios. Mortgage loans with
                                      higher loan-to-value ratios may present a
                                      greater risk of default and, in the case
                                      of defaults, an increase in the severity
                                      of losses; and

                                 o    any increase in the market value of
                                      properties located in California would
                                      reduce the loan-to-value ratios and could,
                                      therefore, make alternative sources of
                                      financing available to the borrowers at
                                      lower interest rates, which could result
                                      in an increased rate of prepayment of the
                                      mortgage loans.

YOUR YIELD WILL BE AFFECTED BY   The table titled "Original Term to Maturity"
THE INCLUSION OF 40-YEAR         under the caption "The Mortgage Pool" in this
MORTGAGE LOANS                   prospectus supplement specifies the percentage
                                 of the mortgage loans, by aggregate stated
                                 principal balance as of the cut-off date, that
                                 have original terms to maturity of 40 years.
                                 Loans with original terms to maturity of 40
                                 years have only begun to be originated
                                 recently. As a result, there is no basis on
                                 which to predict the performance
                                 characteristics of these mortgage loans.

                                 The longer term to maturity of 40-year mortgage
                                 loans results in a lower monthly payment than
                                 would be required by a traditional 30-year
                                 mortgage loan. The lower monthly payment may
                                 allow the borrower to borrow a larger amount
                                 than would have been the case for a mortgage
                                 loan with a 30-year term to maturity.

                                 The 40-year mortgage loans may have risks and
                                 payment characteristics that are not present
                                 with traditional 30-year mortgage loans,
                                 including the following:

                                 o    less principal will be distributed to
                                      certificateholders on a monthly basis
                                      (except in the case of a prepayment) which
                                      may extend the weighted average lives of
                                      the certificates,

                                 o    due to the smaller monthly payment,
                                      40-year mortgage loans may be less likely
                                      to be prepaid since the perceived benefits
                                      of refinancing may be less than with a
                                      30-year fully amortizing mortgage loan,
                                      and


                                      S-24



                                 o    if a 40-year mortgage loan defaults, the
                                      severity of loss is likely to be greater
                                      due to the larger unpaid principal
                                      balance.

                                 The 40-year mortgage loans also are negative
                                 amortization mortgage loans. The combination of
                                 a longer term to maturity with the possibility
                                 of accruing interest on an increasing principal
                                 balance may produce unanticipated payment
                                 performance.

INABILITY TO REPLACE SERVICER    The structure of the servicing fee might affect
COULD AFFECT COLLECTIONS AND     the ability to find a replacement servicer.
RECOVERIES ON THE MORTGAGE       Although the trustee is required to replace the
LOANS                            servicer if the servicer is terminated or
                                 resigns, if the trustee is unwilling (including
                                 for example because the servicing fee is
                                 insufficient) or unable (including for example,
                                 because the trustee does not have the systems
                                 to service mortgage loans), it may be necessary
                                 to appoint a replacement servicer. Because the
                                 servicing fee is structured as a percentage of
                                 the stated principal balance of each mortgage
                                 loan, it may be difficult to replace the
                                 servicer at a time when the balance of the
                                 mortgage loans has been significantly reduced
                                 because the fee may be insufficient to cover
                                 the costs associated with servicing the
                                 mortgage loans and related REO properties
                                 remaining in the pool. The performance of the
                                 mortgage loans may be negatively impacted,
                                 beyond the expected transition period during a
                                 servicing transfer, if a replacement servicer
                                 is not retained within a reasonable amount of
                                 time.


RIGHTS OF THE NIM INSURER        If there is a NIM Insurer, pursuant to the
                                 pooling and servicing agreement, unless the NIM
                                 Insurer fails to make a required payment under
                                 the certificate guaranty insurance policy
                                 insuring the net interest margin securities and
                                 the failure is continuing or the NIM Insurer is
                                 the subject of a bankruptcy proceeding (each
                                 such event, a "NIM Insurer Default"), the NIM
                                 Insurer will be entitled to exercise, among
                                 others, the following rights without the
                                 consent of holders of the offered certificates,
                                 and the holders of the offered certificates may
                                 exercise such rights only with the prior
                                 written consent of the NIM Insurer:

                                      o    the right to provide notices of
                                           servicer defaults and the right to
                                           direct the trustee to terminate the
                                           rights and obligations of the
                                           servicer under the pooling and
                                           servicing agreement upon a default by
                                           the servicer,

                                      o    the right to remove the trustee or
                                           any custodian pursuant to the pooling
                                           and servicing agreement, and

                                      o    the right to direct the trustee to
                                           make investigations and take actions
                                           pursuant to the pooling and servicing
                                           agreement.

                                 In addition, unless a NIM Insurer Default
                                 exists, such NIM Insurer's consent will be
                                 required before, among other things,

                                      o    any removal of the servicer, any
                                           successor servicer or the trustee,
                                           any appointment of any co-trustee,


                                      S-25



                                      o    any otherwise permissible waivers of
                                           prepayment charges or extensions of
                                           due dates for payment granted by the
                                           servicer with respect to more than 5%
                                           of the mortgage loans, or

                                      o    any amendment to the pooling and
                                           servicing agreement.

                                 Investors in the offered certificates should
                                 note that:

                                      o    any insurance policy issued by the
                                           NIM Insurer will not cover, and will
                                           not benefit in any manner whatsoever,
                                           the offered certificates,

                                      o    the rights granted to the NIM Insurer
                                           are extensive,

                                      o    the interests of the NIM Insurer may
                                           be inconsistent with, and adverse to,
                                           the interests of the holders of the
                                           offered certificates, and the NIM
                                           Insurer has no obligation or duty to
                                           consider the interests of the offered
                                           certificates in connection with the
                                           exercise or nonexercise of the NIM
                                           Insurer's rights, and

                                      o    the NIM Insurer's exercise of its
                                           rights and consents may negatively
                                           affect the offered certificates and
                                           the existence of the NIM Insurer's
                                           rights, whether or not exercised, may
                                           adversely affect the liquidity of the
                                           offered certificates, relative to
                                           other asset-backed certificates
                                           backed by comparable mortgage loans
                                           and with comparable payment
                                           priorities and ratings.

                                 See "Rights of the NIM Insurer under Pooling
                                 and Servicing Agreement" in this prospectus
                                 supplement.

INCREASED DELINQUENCIES AND      The servicer intends to relocate its default
DEFAULTS WHICH MAY ADVERSELY     management, collections, and loss mitigation
AFFECT THE YIELD ON THE          functions from Pasadena, California to the
CERTIFICATES                     Dallas area of Texas in the fourth quarter of
                                 2006. Fewer than 70 of the servicer's employees
                                 will be affected by this relocation. Although
                                 certain of these employees will be offered the
                                 opportunity to relocate, the servicer expects
                                 that a substantial number of these employees
                                 may elect not to do so.

                                 If a substantial number of employees in default
                                 management services resign prior to the
                                 relocation or elect not to relocate, the
                                 servicer's collection and default management
                                 processes may be disrupted which may result in
                                 an increase in delinquencies and defaults.
                                 Although any increase in delinquencies and
                                 defaults is expected to be temporary, there can
                                 be no assurance as to the duration or severity
                                 of any disruption in the collection and default
                                 management processes or as to the resulting
                                 effects on the yield of the certificates. In an
                                 attempt to mitigate any disruptions in these
                                 processes, the servicer will continue to
                                 provide default management services from
                                 Pasadena until the relocation of those services
                                 to the Dallas area has been


                                      S-26



                                 completed and the default management,
                                 collections, and loss mitigation functions in
                                 the Dallas area are fully operational.

SOME OF THE STATEMENTS CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS CONSIST OF FORWARD-LOOKING
STATEMENTS RELATING TO FUTURE ECONOMIC PERFORMANCE OR PROJECTIONS AND OTHER
FINANCIAL ITEMS. THESE STATEMENTS CAN BE IDENTIFIED BY THE USE OF
FORWARD-LOOKING WORDS SUCH AS "MAY," "WILL," "SHOULD," "EXPECTS," "BELIEVES,"
"ANTICIPATES," "ESTIMATES," OR OTHER COMPARABLE WORDS. FORWARD-LOOKING
STATEMENTS ARE SUBJECT TO A VARIETY OF RISKS AND UNCERTAINTIES THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER FROM THE PROJECTED RESULTS. THOSE RISKS AND
UNCERTAINTIES INCLUDE, AMONG OTHERS, GENERAL ECONOMIC AND BUSINESS CONDITIONS,
REGULATORY INITIATIVES AND COMPLIANCE WITH GOVERNMENTAL REGULATIONS, CUSTOMER
PREFERENCES AND VARIOUS OTHER MATTERS, MANY OF WHICH ARE BEYOND OUR CONTROL.
BECAUSE WE CANNOT PREDICT THE FUTURE, WHAT ACTUALLY HAPPENS MAY BE VERY
DIFFERENT FROM WHAT WE PREDICT IN OUR FORWARD-LOOKING STATEMENTS.


                                      S-27



                                THE MORTGAGE POOL

GENERAL

     The depositor, IndyMac MBS, Inc. will purchase the mortgage loans in the
mortgage pool from the sponsor, IndyMac Bank, F.S.B. ("INDYMAC BANK"), pursuant
to a pooling and servicing agreement dated as of July 1, 2006 among IndyMac
Bank, as seller and servicer, the depositor and Deutsche Bank National Trust
Company, as trustee, and will cause the mortgage loans to be assigned to the
trustee for the benefit of holders of the certificates (such mortgage loans, the
"MORTGAGE LOANS").

     All of the Mortgage Loans to be included in the issuing entity will be
evidenced by promissory notes (the "MORTGAGE Notes"). The Mortgage Notes will be
secured by first lien deeds of trust, security deeds or mortgages on one- to
four-family residential properties (the "MORTGAGED PROPERTIES"). The Mortgaged
Properties in the mortgage pool are located in 37 states and the District of
Columbia.

     Under the pooling and servicing agreement, the seller will make certain
representations, warranties and covenants to the depositor relating to, among
other things, the due execution and enforceability of the pooling and servicing
agreement and certain characteristics of the Mortgage Loans and, subject to the
limitations described below in this prospectus supplement under "--Assignment of
Mortgage Loans" and "--Representations by Seller; Repurchases, etc." the seller
will be obligated to repurchase or substitute a similar mortgage loan for any
Mortgage Loan as to which there exists deficient documentation that materially
and adversely affects the interests of the certificateholders in the Mortgage
Loan or as to which there has been an uncured breach of any representation or
warranty relating to the characteristics of the Mortgage Loans that materially
and adversely affects the interests of the certificateholders in that Mortgage
Loan. The seller will represent and warrant to the depositor in the pooling and
servicing agreement that the Mortgage Loans were selected from among the
outstanding one- to four-family mortgage loans in the seller's portfolio as to
which the representations and warranties set forth in the pooling and servicing
agreement can be made and that the selection was not made in a manner intended
to affect the interests of the certificateholders adversely. See "Mortgage Loan
Program--Representations by Seller; Repurchases, etc." in the prospectus. Under
the pooling and servicing agreement, the depositor will assign all its right,
title and interest in and to those representations, warranties and covenants
(including the seller's repurchase obligation) to the trustee for the benefit of
the certificateholders. The depositor will make no representations or warranties
with respect to the Mortgage Loans and will have no obligation to repurchase or
substitute Mortgage Loans with deficient documentation or that are otherwise
defective. IndyMac Bank is selling the Mortgage Loans without recourse and will
have no obligation with respect to the certificates in its capacity as seller
other than the repurchase or substitution obligations described above. The
obligations of IndyMac Bank, as servicer, with respect to the certificates are
limited to the servicer's contractual servicing obligations under the pooling
and servicing agreement.

     The depositor believes that the cut-off date information set forth in this
prospectus supplement regarding the Mortgage Loans is representative of the
characteristics of the Mortgage Loans to be delivered on the closing date.
Certain Mortgage Loans, however, may prepay or may be determined not to meet the
eligibility requirements for inclusion in the final pool. A limited number of
Mortgage Loans may be added to or substituted for the Mortgage Loans described
in this prospectus supplement, although any addition or substitution will not
result in a material difference in the pool of Mortgage Loans. As a result, the
cut-off date information regarding the Mortgage Loans actually delivered on the
closing date may vary from the cut-off date information regarding the Mortgage
Loans presented in this prospectus supplement.

     As of the Cut-off Date, the aggregate Stated Principal Balance of the
Mortgage Loans is expected to be approximately $307,761,379, which is referred
to as the "CUT-OFF DATE POOL PRINCIPAL BALANCE."

     The principal balance of each Mortgage Loan as of the Cut-off Date reflects
the application of scheduled payments of principal due on the Mortgage Loan on
or prior to the Cut-off Date, whether or not received, and any amounts of
Deferred Interest added to the Stated Principal Balance of such Mortgage Loan as
a result of negative amortization (as described below). Whenever reference is
made in this prospectus supplement to a percentage of some or all of the
Mortgage Loans, that percentage is determined on the basis of the Stated
Principal Balances of


                                      S-28



those Mortgage Loans as of the Cut-off Date, unless otherwise specified. The
Cut-off Date Pool Principal Balance of the Mortgage Loans set forth above is
subject to a variance of plus or minus ten percent.

     All of the Mortgage Loans provide for payments due on the first day of each
month (the "DUE DATE"). At origination, all of the Mortgage Loans had stated
terms to maturity of 30 or 40 years. Scheduled monthly payments made by the
mortgagors on the Mortgage Loans (referred to as scheduled payments) either
earlier or later than their scheduled Due Dates will not affect the amortization
schedule or the relative application of the payments to principal and interest.
With respect to approximately 8.52% of the Mortgage Loans by Cut-off Date Pool
Principal Balance, the mortgagors may prepay their Mortgage Loans at any time
without a prepayment charge. The remainder of the Mortgage Loans require the
payment of a prepayment charge on either certain types of prepayments or on all
prepayments generally within one to three years after origination. The holder of
the Class P Certificates will be entitled to all prepayment charges received on
the Mortgage Loans, and those amounts will not be available for distribution on
the other classes of certificates. Under certain circumstances, as described in
this prospectus supplement under "Servicing of the Mortgage Loans--Prepayment
Charges," the servicer may waive the payment of any otherwise applicable
prepayment charge. Investors should conduct their own analysis of the effect, if
any, that the prepayment charges, and decisions by the servicer with respect to
the waiver thereof, may have on the prepayment performance of the Mortgage
Loans. The depositor makes no representations as to the effect that the
prepayment charges, and decisions by the servicer with respect to the waiver
thereof, may have on the prepayment performance of the Mortgage Loans.

     The index applicable to the determination of the mortgage rates for the
Mortgage Loans is a per annum rate equal to the twelve-month moving average of
the monthly yields on United States Treasury securities adjusted to a constant
maturity of one year, as published by the Federal Reserve Board in Statistical
Release H.15(519) (the "MTA INDEX" or the "INDEX").

     The index will be calculated as of the date specified in the related
mortgage note. In the event that the index described above becomes unavailable
or is otherwise unpublished, the servicer will select a comparable alternative
index over which it has no direct control and which is readily verifiable, and
which is permissible under the terms of the related mortgage and mortgage note.

     Mortgage Rate Adjustments. The mortgage rates for the Mortgage Loans will
adjust monthly, following the expiration of a one-month introductory fixed-rate
period. The mortgage rate for each Mortgage Loan will be adjusted to equal the
sum of the index applicable to that Mortgage Loan and a fixed percentage amount
known as the "GROSS MARGIN" for that Mortgage Loan. The Mortgage Loans adjust
according to the MTA index.

     No Mortgage Loan will have a mortgage rate that exceeds the maximum
mortgage rate specified in the related mortgage note (the "MAXIMUM MORTGAGE
RATE"). Due to the application of the Maximum Mortgage Rates, the mortgage rate
on each Mortgage Loan, as adjusted on any mortgage rate adjustment date, may be
less than the sum of the index and gross margin.

     Monthly Payment Adjustments. With respect to approximately 73.41% of the
Mortgage Loans (by Cut-off Date Pool Principal Balance), beginning one month
following their first payment date, the Mortgage Rate on the Mortgage Loans
adjust monthly but their monthly payments and amortization schedules adjust
annually (each such date of adjustment, a "PAYMENT ADJUSTMENT DATE") and are
subject to the Maximum Mortgage Rate and a 7.50% payment cap (the "PAYMENT
CAP"), with the exception of each fifth Payment Adjustment Date on which the
monthly payment will be recast without regard to the Payment Cap (such date, the
"RECAST DATE"). Any monthly payment, as so capped under the provisions described
above, is referred to as a "CAPPED PAYMENT." With respect to the remaining
26.59% of the Mortgage Loans, the first Payment Adjustment Date does not occur
until five years after the first payment date of the Mortgage Loan. If the
unpaid principal balance of a Mortgage Loan exceeds the negative amortization
limit of the original principal balance due to Deferred Interest, the monthly
payment will be recast without regard to the Payment Cap to amortize fully the
then unpaid principal balance of the Mortgage Loan over its remaining term to
maturity. The negative amortization limit for approximately 89.70% and 10.30% of
the Mortgage Loans (by Cut-off Date Pool Principal Balance) was 110% and 115%,
respectively.

     Because the mortgage rates on the Mortgage Loans adjust at a different time
than the monthly payments thereon and the Payment Caps may limit the amount by
which the monthly payments may adjust, the amount of a


                                      S-29



monthly payment may be more or less than the amount necessary to fully amortize
the principal balance of the Mortgage Loans over its then remaining term at the
applicable mortgage rate. Accordingly, the Mortgage Loans may be subject to
reduced amortization (if the monthly payment due on a Due Date is sufficient to
pay interest accrued during the related interest accrual period at the
applicable mortgage rate but is not sufficient to reduce principal in accordance
with a fully amortizing schedule); negative amortization (if interest accrued
during the related interest accrual period at the applicable mortgage rate is
greater the entire monthly payment due on the related Due Date); or accelerated
amortization (if the monthly payment due on a Due Date is greater than the
amount necessary to pay interest accrued during the related interest accrual
period at the applicable mortgage rate and to reduce principal in accordance
with a fully amortizing schedule). In the event of negative amortization,
Deferred Interest is added to the principal balance of such Mortgage Loan and,
if such Deferred Interest is not offset by subsequent accelerated amortization
at the final payment adjustment date, it may result in a payment greater than,
and potentially substantially greater than, the monthly payment due on the
immediately preceding Due Date.

     Payment Options. When the amount of interest accrued on each Mortgage Loan
is greater than the Capped Payment, the Seller's monthly statement to borrowers
will show, in addition to the Capped Payment, the payment equal to accrued
interest that is the minimum payment necessary to avoid negative amortization,
and the payment that would fully amortize the loan by the stated maturity.
Although the statements under these circumstances show the borrower three
optional payments, all borrowers are permitted to make payments in any amount in
excess of the Capped Payment at any time.

     The month of the earliest first payment date, earliest stated maturity date
and latest stated maturity date of any Mortgage Loan are October 2005, September
2035 and August 2046, respectively.

     As of the Cut-off Date, none of the Mortgage Loans were delinquent 30 days.
Since the later of their origination date and date of acquisition by the seller,
no more than 0.58% of the Mortgage Loans (by Cut-off Date Pool Principal
Balance) have been more than one payment delinquent in the last 12 months and
0.58% of the Mortgage Loans (by Cut-off Date Pool Principal Balance) have been
delinquent more than once. No Mortgage Loan was subject to a buydown agreement.

     At origination, all of the Mortgage Loans had a Loan-to-Value Ratio of 95%
or less. All of the Mortgage Loans with a Loan-to-Value Ratio at origination of
greater than 80% will be covered by a primary mortgage guaranty insurance policy
issued by a mortgage insurance company acceptable to Fannie Mae or Freddie Mac.
After the date on which the Loan-to-Value Ratio of a Mortgage Loan is 80% or
less, either because of principal payments on the Mortgage Loan or because of a
new appraisal of the mortgaged property, no primary mortgage guaranty insurance
policy will be required on that Mortgage Loan. See " --Underwriting Standards"
in this prospectus supplement.

     The "LOAN-TO-VALUE RATIO" of a Mortgage Loan at any given time is a
fraction, expressed as a percentage, the numerator of which is the principal
balance of that Mortgage Loan at the date of determination and the denominator
of which is

     o    in the case of a purchase, the lesser of the selling price of the
          mortgaged property or its appraised value at the time of sale, or

     o    in the case of a refinance, the appraised value of the mortgaged
          property at the time of the refinance.

     No assurance can be given that the value of any mortgaged property has
remained or will remain at the level that existed on the appraisal or sales
date. If residential real estate values generally or in a particular geographic
area decline, the Loan-to-Value Ratios might not be a reliable indicator of the
rates of delinquencies, foreclosures and losses that could occur with respect to
the Mortgage Loans.

     "FICO CREDIT SCORES" are obtained by many mortgage lenders in connection
with mortgage loan applications to help assess a borrower's creditworthiness.
FICO Credit Scores are generated by models developed by a third party that
analyze data on consumers in order to establish patterns that are believed to be
indicative of the borrower's probability of default. The FICO Credit Score is
based on a borrower's historical credit data, including, among other things,
payment history, delinquencies on accounts, levels of outstanding indebtedness,
length of credit


                                      S-30



history, types of credit, and bankruptcy experience. FICO Credit Scores range
from approximately 300 to approximately 850, with higher scores indicating an
individual with a more favorable credit history compared to an individual with a
lower score. A FICO Credit Score, however, purports only to be a measurement of
the relative degree of risk a borrower represents to a lender, i.e., that a
borrower with a higher score is statistically expected to be less likely to
default in payment than a borrower with a lower score. In addition, it should be
noted that FICO Credit Scores were developed to indicate a level of default
probability over a two-year period that does not correspond to the life of a
mortgage loan. Furthermore, FICO Credit Scores were not developed specifically
for use in connection with mortgage loans, but for consumer loans in general.
Therefore, a FICO Credit Score does not take into consideration the effect of
mortgage loan characteristics (which may differ from consumer loan
characteristics) on the probability of repayment by the borrower. There can be
no assurance that a FICO Credit Score will be an accurate predictor of the
likely risk or quality of a mortgage loan.

     The following information sets forth in tabular format information about
the Mortgage Loans as of the Cut-off Date. Other than with respect to rates of
interest, percentages (approximate) are stated by Stated Principal Balance of
the Mortgage Loans as of the Cut-off Date and have been rounded in order to
total 100%.


                                      S-31



                                 MORTGAGE LOANS

                    MORTGAGE RATES FOR THE MORTGAGE LOANS(1)



                                                                PERCENT OF                            WEIGHTED      WEIGHTED
                                                AGGREGATE       AGGREGATE      AVERAGE     WEIGHTED    AVERAGE      AVERAGE
                                 NUMBER OF      PRINCIPAL       PRINCIPAL      CURRENT      AVERAGE     FICO        CURRENT
                                  MORTGAGE       BALANCE         BALANCE      PRINCIPAL    MORTGAGE    CREDIT    LOAN-TO-VALUE
RANGE OF MORTGAGE RATES (%)        LOANS       OUTSTANDING     OUTSTANDING     BALANCE       RATE       SCORE        RATIO
------------------------------   ---------   ---------------   -----------   -----------   --------   --------   -------------

0.501 - 1.000.................        4      $    894,250.00       0.29%     $223,562.50    1.000%       676         75.25%
1.001 - 1.500.................      155        52,951,314.06      17.21       341,621.38    1.419        719         64.83
1.501 - 2.000.................      178        63,372,774.10      20.59       356,026.82    1.798        688         77.77
2.001 - 2.500.................      182        56,195,911.35      18.26       308,768.74    2.311        702         68.69
2.501 - 3.000.................      122        39,684,922.00      12.89       325,286.25    2.734        699         76.13
3.001 - 3.500.................       36        10,179,441.23       3.31       282,762.26    3.267        674         74.73
3.501 - 4.000.................        9         2,900,500.00       0.94       322,277.78    3.673        700         72.27
4.001 - 4.500.................        3           853,000.00       0.28       284,333.33    4.163        665         87.97
4.501 - 5.000.................        1           396,000.00       0.13       396,000.00    4.700        691         80.00
6.001 - 6.500.................        1           598,679.28       0.19       598,679.28    6.482        724         60.00
6.501 - 7.000.................       15         6,824,740.77       2.22       454,982.72    6.773        737         70.71
7.001 - 7.500.................       33        13,508,298.61       4.39       409,342.38    7.249        707         72.20
7.501 - 8.000.................       73        26,223,578.01       8.52       359,227.10    7.770        704         73.94
8.001 - 8.500.................       29        10,944,291.39       3.56       377,389.36    8.278        656         76.31
8.501 - 9.000.................       55        22,102,187.97       7.18       401,857.96    8.665        651         79.33
9.001 - 9.500.................        1           131,490.39       0.04       131,490.39    9.232        639         80.00
                                    ---      ---------------     ------      -----------    -----        ---         -----
   Total......................      897      $307,761,379.16     100.00%     $343,100.76    3.616%       696         72.84%
                                    ===      ===============     ======      ===========    =====        ===         =====


----------
(1)  As of the Cut-off Date, the weighted average Mortgage Rate of the Mortgage
     Loans was approximately 3.616% per annum.

              CURRENT PRINCIPAL BALANCES FOR THE MORTGAGE LOANS(1)




                                                                PERCENT OF                              WEIGHTED      WEIGHTED
                                                AGGREGATE       AGGREGATE       AVERAGE      WEIGHTED    AVERAGE      AVERAGE
                                 NUMBER OF      PRINCIPAL       PRINCIPAL       CURRENT       AVERAGE     FICO        CURRENT
RANGE OF CURRENT MORTGAGE         MORTGAGE       BALANCE         BALANCE       PRINCIPAL     MORTGAGE    CREDIT    LOAN-TO-VALUE
LOAN PRINCIPAL BALANCES ($)        LOANS       OUTSTANDING     OUTSTANDING      BALANCE        RATE       SCORE        RATIO
------------------------------   ---------   ---------------   -----------   -------------   --------   --------   -------------

0.01 - 50,000.00..............        1            35,926.94       0.01%         35,926.94    7.982%       653         90.00%
50,000.01 - 100,000.00........       16         1,323,287.50       0.43          82,705.47    2.594        703         64.44
100,000.01 - 150,000.00 ......       52         6,647,984.74       2.16         127,845.86    3.534        705         66.88
150,000.01 - 200,000.00.......      128        22,598,928.35       7.34         176,554.13    2.995        702         67.08
200,000.01 - 250,000.00.......      126        28,579,677.88       9.29         226,822.84    2.966        698         72.04
250,000.01 - 300,000.00.......      110        30,482,058.57       9.90         277,109.62    3.063        698         72.65
300,000.01 - 350,000.00.......      110        35,845,056.20      11.65         325,864.15    3.523        691         74.44
350,000.01 - 400,000.00.......      101        37,997,360.14      12.35         376,211.49    3.812        691         74.17
400,000.01 - 450,000.00.......       64        27,419,467.97       8.91         428,429.19    4.474        688         73.48
450,000.01 - 500,000.00.......       56        26,604,841.97       8.64         475,086.46    3.821        682         76.50
500,000.01 - 550,000.00.......       32        16,833,731.07       5.47         526,054.10    3.396        694         78.21
550,000.01 - 600,000.00.......       29        16,580,606.38       5.39         571,745.05    4.136        704         74.47
600,000.01 - 650,000.00.......       25        15,807,230.54       5.14         632,289.22    2.920        702         73.97
650,000.01 - 700,000.00.......       16        10,778,138.69       3.50         673,633.67    3.796        705         70.84
700,000.01 - 750,000.00.......        6         4,341,439.59       1.41         723,573.27    2.732        725         73.89
750,000.01 - 800,000.00.......        4         3,093,431.62       1.01         773,357.91    7.317        696         68.63
800,000.01 - 850,000.00.......        3         2,476,392.53       0.80         825,464.18    5.580        685         72.87
850,000.01 - 900,000.00.......        1           852,476.60       0.28         852,476.60    8.682        659         78.50
900,000.01 - 950,000.00.......        4         3,693,756.92       1.20         923,439.23    6.498        682         74.32
950,000.01 - 1,000,000.00.....        4         3,900,630.27       1.27         975,157.57    5.022        683         65.42
1,000,000.01 - 1,250,000.00...        5         5,678,954.69       1.85       1,135,790.94    3.746        747         70.09
1,250,000.01 - 1,500,000.00...        3         4,500,000.00       1.46       1,500,000.00    1.417        722         52.75
1,500,000.01 - 2,000,000.00...        1         1,690,000.00       0.55       1,690,000.00    2.650        739         76.82
                                    ---      ---------------     ------      -------------    -----        ---         -----
   Total .....................      897      $307,761,379.16     100.00%     $  343,100.76    3.616%       696         72.84%
                                    ===      ===============     ======      =============    =====        ===         =====


----------
(1)  As of the Cut-off Date, the average principal balance of the Mortgage Loans
     was approximately $343,100.76


                                      S-32



             ORIGINAL LOAN-TO-VALUE RATIOS FOR THE MORTGAGE LOANS(1)




                                                                PERCENT OF                            WEIGHTED      WEIGHTED
                                                AGGREGATE       AGGREGATE      AVERAGE     WEIGHTED    AVERAGE      AVERAGE
                                 NUMBER OF      PRINCIPAL       PRINCIPAL      CURRENT      AVERAGE     FICO        CURRENT
RANGE OF ORIGINAL                 MORTGAGE       BALANCE         BALANCE      PRINCIPAL    MORTGAGE    CREDIT    LOAN-TO-VALUE
LOAN-TO-VALUE RATIOS (%)           LOANS       OUTSTANDING     OUTSTANDING     BALANCE       RATE       SCORE        RATIO
------------------------------   ---------   ---------------   -----------   -----------   --------   --------   -------------

0.000 - 50.000................       55      $ 14,427,845.63       4.69%     $262,324.47    2.486%       736         41.01%
50.001 - 60.000...............       81        27,689,235.55       9.00       341,842.41    2.946        701         56.07
60.001 - 70.000...............      147        48,647,559.41      15.81       330,935.78    3.141        699         66.85
70.001 - 75.000...............      159        54,968,298.76      17.86       345,712.57    3.704        692         74.10
75.001 - 80.000...............      435       156,755,087.82      50.93       360,356.52    3.869        693         79.58
80.001 - 90.000...............       14         3,849,850.06       1.25       274,989.29    6.449        673         88.00
90.001 - 95.000...............        6         1,423,501.93       0.46       237,250.32    5.359        709         94.99
                                    ---      ---------------     ------      -----------    -----        ---         -----
   Total......................      897      $307,761,379.16     100.00%     $343,100.76    3.616%       696         72.84%
                                    ===      ===============     ======      ===========    =====        ===         =====


----------
(1)  As of the Cut-off Date, the weighted average original Loan-to-Value Ration
     of the Mortgage Loans was approximately 72.84%.

             ORIGINAL TERM TO STATED MATURITY FOR THE MORTGAGE LOANS




                                                                PERCENT OF                            WEIGHTED      WEIGHTED
                                                AGGREGATE       AGGREGATE      AVERAGE     WEIGHTED    AVERAGE      AVERAGE
                                 NUMBER OF      PRINCIPAL       PRINCIPAL      CURRENT      AVERAGE     FICO        CURRENT
ORIGINAL TERM TO STATED           MORTGAGE       BALANCE         BALANCE      PRINCIPAL    MORTGAGE    CREDIT    LOAN-TO-VALUE
MATURITY (MONTHS)                  LOANS       OUTSTANDING     OUTSTANDING     BALANCE       RATE       SCORE        RATIO
------------------------------   ---------   ---------------   -----------   -----------   --------   --------   -------------

360...........................      693      $237,919,236.57      77.31%     $343,317.80    3.943%       694         72.82%
480...........................      204        69,842,142.59      22.69       342,363.44    2.501        703         72.93
                                    ---      ---------------     ------      -----------    -----        ---         -----
   Total......................      897      $307,761,379.16     100.00%     $343,100.76    3.616%       696         72.84%
                                    ===      ===============     ======      ===========    =====        ===         =====


          REMAINING TERMS TO STATED MATURITY FOR THE MORTGAGE LOANS(1)




                                                                PERCENT OF                            WEIGHTED      WEIGHTED
                                                AGGREGATE       AGGREGATE      AVERAGE     WEIGHTED    AVERAGE      AVERAGE
                                 NUMBER OF      PRINCIPAL       PRINCIPAL      CURRENT      AVERAGE     FICO        CURRENT
REMAINING TERMS TO STATED         MORTGAGE       BALANCE         BALANCE      PRINCIPAL    MORTGAGE    CREDIT    LOAN-TO-VALUE
MATURITY (MONTHS)                  LOANS       OUTSTANDING     OUTSTANDING     BALANCE       RATE       SCORE        RATIO
------------------------------   ---------   ---------------   -----------   -----------   --------   --------   -------------

350...........................        1      $    453,259.66       0.15%     $453,259.66    7.682%       631         90.00%
351...........................        2         1,015,533.22       0.33       507,766.61    7.737        664         56.54
352...........................        2           835,283.25       0.27       417,641.63    8.104        631         80.00
353...........................       17         7,399,370.97       2.40       435,257.12    8.231        656         78.61
354...........................       25        10,652,911.89       3.46       426,116.48    8.266        665         76.57
355...........................       25        10,284,695.90       3.34       411,387.84    8.544        662         78.71
356...........................       17         6,378,215.11       2.07       375,189.12    8.512        653          79.4
357...........................       15         4,870,178.38       1.58       324,678.56    7.981        670         72.95
358...........................       19         7,709,994.33       2.51       405,789.18    7.508        713         76.17
359...........................       73        27,461,523.18       8.92       376,185.25    7.416        715         71.62
360...........................      497       160,858,270.68      52.27       323,658.49    2.042        699         71.72
477...........................        1           299,061.80       0.10       299,061.80    7.532        674         66.67
478...........................        1           124,414.22       0.04       124,414.22    7.482        700         69.22
479...........................        9         2,848,824.51       0.93       316,536.06    7.824        710         75.75
480...........................      193        66,569,842.06      21.63       344,921.46    2.241        703         72.84
                                    ---      ---------------     ------      -----------    -----        ---         -----
   Total......................      897      $307,761,379.16     100.00%     $343,100.76    3.616%       696         72.84%
                                    ===      ===============     ======      ===========    =====        ===         =====


----------
(1)  As of the Cut-off Date, the weighted average remaining term to stated
     maturity of the Mortgage Loans was approximately 386 months.


                                      S-33



   GEOGRAPHIC DISTRIBUTION OF THE MORTGAGED PROPERTIES FOR THE MORTGAGE LOANS



                                                                PERCENT OF                            WEIGHTED     WEIGHTED
                                                AGGREGATE       AGGREGATE      AVERAGE     WEIGHTED    AVERAGE      AVERAGE
                                 NUMBER OF      PRINCIPAL       PRINCIPAL      CURRENT      AVERAGE     FICO        CURRENT
                                  MORTGAGE       BALANCE         BALANCE      PRINCIPAL    MORTGAGE    CREDIT    LOAN-TO-VALUE
GEOGRAPHIC AREA                    LOANS       OUTSTANDING     OUTSTANDING     BALANCE       RATE       SCORE        RATIO
------------------------------   ---------   ---------------   -----------   -----------   --------   --------   -------------

Alaska........................        4      $  1,211,400.00       0.39%     $302,850.00     1.894%      725         75.54%
Arizona.......................       24         7,107,856.49       2.31       296,160.69     3.073       718         65.00
California....................      397       160,212,788.51      52.06       403,558.66     3.967       695         72.82
Colorado......................       11         4,506,919.84       1.46       409,719.99     4.704       707         73.32
Connecticut...................        8         2,986,253.07       0.97       373,281.63     6.305       704         66.44
Delaware......................        6         1,482,920.00       0.48       247,153.33     2.168       737         72.99
District of Columbia..........        4         1,346,230.19       0.44       336,557.55     3.959       684         67.47
Florida.......................      112        27,329,837.98       8.88       244,016.41     3.450       696         74.63
Georgia.......................        9         2,304,354.88       0.75       256,039.43     2.875       700         78.00
Hawaii........................       18         8,756,231.79       2.85       486,457.32     3.266       703         69.21
Idaho.........................        3           490,120.00       0.16       163,373.33     2.425       742         71.32
Illinois......................       12         3,943,948.45       1.28       328,662.37     3.088       683         66.46
Indiana.......................        1           562,000.00       0.18       562,000.00     1.500       679         64.60
Iowa..........................        1           174,000.00       0.06       174,000.00     1.500       713         69.60
Louisiana.....................        1           176,000.00       0.06       176,000.00     1.700       793         80.00
Maine.........................        2           448,650.00       0.15       224,325.00     2.053       715         77.84
Maryland......................       29         7,296,361.55       2.37       251,598.67     3.159       693         72.91
Massachusetts.................        7         2,518,559.12       0.82       359,794.16     3.363       720         70.10
Michigan......................        7         1,616,037.80       0.53       230,862.54     4.267       691         79.05
Minnesota.....................       10         2,245,720.00       0.73       224,572.00     2.107       711         78.53
Missouri......................        3           775,976.44       0.25       258,658.81     5.293       706         70.34
Nevada........................       20         6,966,024.43       2.26       348,301.22     3.616       702         74.51
New Hampshire.................        1           295,000.00       0.10       295,000.00     2.200       690         66.59
New Jersey....................       52        17,235,228.91       5.60       331,446.71     2.650       687         74.28
New Mexico....................        4           808,589.68       0.26       202,147.42     3.323       723         72.36
New York......................       45        15,702,792.49       5.10       348,950.94     2.861       687         68.78
Ohio..........................        5         1,310,600.00       0.43       262,120.00     2.455       729         76.33
Oregon........................        8         1,754,548.70       0.57       219,318.59     3.123       690         75.13
Pennsylvania..................        9         1,540,902.47       0.50       171,211.39     2.934       677         76.89
Rhode Island..................        3           827,200.00       0.27       275,733.33     1.632       744         77.57
South Carolina................        3         1,676,250.00       0.54       558,750.00     2.228       672         75.17
Tennessee.....................        1            35,926.94       0.01        35,926.94     7.982       653         90.00
Texas.........................        5         1,414,640.00       0.46       282,928.00     1.911       721         76.81
Utah..........................        6         1,137,053.35       0.37       189,508.89     2.244       698         73.98
Virginia......................       45        14,040,298.83       4.56       312,006.64     3.792       696         75.82
Washington....................       18         5,012,543.03       1.63       278,474.61     2.820       697         76.87
Wisconsin.....................        2           387,200.00       0.13       193,600.00     2.056       713         80.00
Wyoming.......................        1           124,414.22       0.04       124,414.22     7.482       700         69.22
                                    ---      ---------------     ------      -----------     -----       ---         -----
   Total......................      897      $307,761,379.16     100.00%     $343,100.76     3.616%      696         72.84%
                                    ===      ===============     ======      ===========     =====       ===         =====



                                      S-34



                MORTGAGORS' FICO SCORES FOR THE MORTGAGE LOANS(1)



                                                                PERCENT OF                            WEIGHTED      WEIGHTED
                                                AGGREGATE       AGGREGATE      AVERAGE     WEIGHTED    AVERAGE      AVERAGE
                                 NUMBER OF      PRINCIPAL       PRINCIPAL      CURRENT      AVERAGE     FICO        CURRENT
RANGE OF FICO                     MORTGAGE       BALANCE         BALANCE      PRINCIPAL    MORTGAGE    CREDIT    LOAN-TO-VALUE
CREDIT SCORES                      LOANS       OUTSTANDING     OUTSTANDING     BALANCE       RATE       SCORE        RATIO
------------------------------   ---------   ---------------   -----------   -----------   --------   --------   -------------

620 - 639.....................       73      $ 22,838,479.60       7.42%     $312,855.88     5.277%      629          77.04%
640 - 659.....................      134        46,724,280.76      15.18       348,688.66     4.880       650          74.61
660 - 679.....................      174        61,031,212.21      19.83       350,754.09     3.482       670          74.37
680 - 699.....................      140        48,569,485.32      15.78       346,924.90     3.130       688          72.50
700 - 719.....................      110        36,951,502.07      12.01       335,922.75     3.220       709          72.06
720 - 739.....................       81        29,653,196.09       9.64       366,088.84     2.662       728          71.05
740 - 759.....................       80        26,513,116.78       8.61       331,413.96     3.268       750          69.51
760 - 779.....................       65        21,790,152.35       7.08       335,233.11     2.942       769          71.77
780 - 799.....................       26        10,183,491.85       3.31       391,672.76     3.779       788          69.91
800 - 819.....................       14         3,506,462.13       1.14       250,461.58     3.584       805          63.87
                                    ---      ---------------     ------      -----------     -----       ---          -----
   Total......................      897      $307,761,379.16     100.00%     $343,100.76     3.616%      696          72.84%
                                    ===      ===============     ======      ===========     =====       ===          =====


----------
(1)  As of the Cut-off Date, the weighted average FICO Credit Score of the
     Mortgage Loans was approximately 696.

              TYPES OF MORTGAGED PROPERTIES FOR THE MORTGAGE LOANS



                                                                 PERCENT OF                           WEIGHTED     WEIGHTED
                                                AGGREGATE        AGGREGATE      AVERAGE     WEIGHTED   AVERAGE      AVERAGE
                                 NUMBER OF      PRINCIPAL        PRINCIPAL      CURRENT      AVERAGE    FICO        CURRENT
                                  MORTGAGE       BALANCE          BALANCE      PRINCIPAL    MORTGAGE   CREDIT    LOAN-TO-VALUE
PROPERTY TYPE                      LOANS       OUTSTANDING      OUTSTANDING     BALANCE        RATE     SCORE        RATIO
------------------------------   ---------   ---------------    -----------   -----------   --------  --------   -------------

Single Family Residence.......      641      $212,387,245.29       69.01%     $331,337.36     3.697%     694         72.32%
Low-Rise Condominium..........       58        17,123,227.16        5.56       295,228.05     3.574      703         74.82
Two-Family Residence..........       30        11,546,034.96        3.75       384,867.83     3.262      695         69.34
Planned Unit Development
   (PUD)......................      156        62,669,283.46       20.36       401,726.18     3.370      703         74.63
Three-Family Residence........        1           290,500.00        0.09       290,500.00     3.450      667         70.00
Four-Family Residence.........        3         1,258,019.74        0.41       419,339.91     4.235      725         66.24
High-Rise Condominium.........        8         2,487,068.55        0.81       310,883.57     4.467      704         78.70
                                    ---      ---------------      ------      -----------     -----      ---         -----
   Total......................      897      $307,761,379.16      100.00%     $343,100.76     3.616%     696         72.84%
                                    ===      ===============      ======      ===========     =====      ===         =====


                         PURPOSES OF THE MORTGAGE LOANS



                                                                PERCENT OF                            WEIGHTED      WEIGHTED
                                                AGGREGATE       AGGREGATE      AVERAGE     WEIGHTED    AVERAGE      AVERAGE
                                 NUMBER OF      PRINCIPAL       PRINCIPAL      CURRENT      AVERAGE     FICO        CURRENT
                                  MORTGAGE       BALANCE         BALANCE      PRINCIPAL    MORTGAGE    CREDIT    LOAN-TO-VALUE
LOAN PURPOSE                       LOANS       OUTSTANDING     OUTSTANDING     BALANCE       RATE       SCORE        RATIO
------------------------------   ---------   ---------------   -----------   -----------   --------   --------   -------------

Refinance (Cash Out) .........      595      $195,540,007.37      63.54%     $328,638.67    3.851%       692         71.06%
Refinance (Rate/Term) ........      155        54,248,191.89      17.63       349,988.33    3.323        696         73.41
Purchase .....................      147        57,973,179.90      18.84       394,375.37    3.095        711         78.35
                                    ---      ---------------     ------      -----------    -----        ---         -----
   Total .....................      897      $307,761,379.16     100.00%     $343,100.76    3.616%       696         72.84%
                                    ===      ===============     ======      ===========    =====        ===         =====



                                      S-35



                    OCCUPANCY TYPES FOR THE MORTGAGE LOANS(1)



                                                                                                                 WEIGHTED
                                                                PERCENT OF                            WEIGHTED    AVERAGE
                                                AGGREGATE       AGGREGATE      AVERAGE     WEIGHTED    AVERAGE    CURRENT
                                 NUMBER OF      PRINCIPAL       PRINCIPAL      CURRENT      AVERAGE     FICO     LOAN-TO-
                                  MORTGAGE       BALANCE         BALANCE      PRINCIPAL    MORTGAGE    CREDIT      VALUE
OCCUPANCY TYPE                     LOANS       OUTSTANDING     OUTSTANDING     BALANCE       RATE       SCORE      RATIO
------------------------------   ---------   ---------------   -----------   -----------   --------   --------   --------

Investment....................       33      $  8,113,532.61       2.64%     $245,864.62     5.840%      715      67.77%
Primary Home..................      846       294,446,232.25      95.67       348,045.19     3.518       695      72.99
Second Home...................       18         5,201,614.30       1.69       288,978.57     5.694       719      72.32
                                    ---      ---------------     ------      -----------     -----       ---      -----
   Total......................      897      $307,761,379.16     100.00%     $343,100.76     3.616%      696      72.84%
                                    ===      ===============     ======      ===========     =====       ===      =====


----------
(1)  Based  upon  representations  of the  related  mortgagors  at the  time  of
     origination.

                 LOAN DOCUMENTATION TYPE FOR THE MORTGAGE LOANS



                                                                                                                 WEIGHTED
                                                                PERCENT OF                            WEIGHTED    AVERAGE
                                                AGGREGATE       AGGREGATE      AVERAGE     WEIGHTED    AVERAGE    CURRENT
                                 NUMBER OF      PRINCIPAL       PRINCIPAL      CURRENT      AVERAGE     FICO     LOAN-TO-
                                  MORTGAGE       BALANCE         BALANCE      PRINCIPAL    MORTGAGE    CREDIT      VALUE
TYPE OF PROGRAM                    LOANS       OUTSTANDING     OUTSTANDING     BALANCE       RATE       SCORE      RATIO
------------------------------   ---------   ---------------   -----------   -----------   --------   --------   --------

Full/Alt......................       79      $ 23,141,648.25       7.52%     $292,932.26     3.023%      702      76.12%
No Income/No Asset............      274        89,464,354.94      29.07       326,512.24     3.702       702      67.86
No ratio......................       10         4,561,952.28       1.48       456,195.23      8.32       648      74.65
Stated Income.................      526       188,785,198.95      61.34       358,907.22     3.527       694      74.89
FastForward...................        7         1,371,629.46       0.45       195,947.07     3.068       740      52.89
No Doc........................        1           436,595.28       0.14       436,595.28     8.382       678      79.45
                                    ---      ---------------     ------      -----------     -----       ---      -----
   Total......................      897      $307,761,379.16     100.00%     $343,100.76     3.616%      696      72.84%
                                    ===      ===============     ======      ===========     =====       ===      =====


                       LOAN AGE FOR THE MORTGAGE LOANS(1)



                                                                                                                 WEIGHTED
                                                                PERCENT OF                            WEIGHTED    AVERAGE
                                                AGGREGATE       AGGREGATE      AVERAGE     WEIGHTED    AVERAGE    CURRENT
                                 NUMBER OF      PRINCIPAL       PRINCIPAL      CURRENT      AVERAGE     FICO     LOAN-TO-
                                  MORTGAGE       BALANCE         BALANCE      PRINCIPAL    MORTGAGE    CREDIT      VALUE
LOAN AGE (MONTHS)                  LOANS       OUTSTANDING     OUTSTANDING     BALANCE       RATE       SCORE      RATIO
------------------------------   ---------   ---------------   -----------   -----------   --------   --------   --------

0.............................      690      $227,428,112.74      73.90%     $329,605.96     2.100%      700      72.05%
1.............................       82        30,310,347.69       9.85       369,638.39     7.454       714      72.00
2.............................       20         7,834,408.55       2.55       391,720.43     7.507       713      76.06
3.............................       16         5,169,240.18       1.68       323,077.51     7.955       670      72.58
4.............................       17         6,378,215.11       2.07       375,189.12     8.512       653      79.40
5.............................       25        10,284,695.90       3.34       411,387.84     8.544       662      78.71
6.............................       25        10,652,911.89       3.46       426,116.48     8.266       665      76.57
7.............................       17         7,399,370.97       2.40       435,257.12     8.231       656      78.61
8.............................        2           835,283.25       0.27       417,641.63     8.104       631      80.00
9.............................        2         1,015,533.22       0.33       507,766.61     7.737       664      56.54
10............................        1           453,259.66       0.15       453,259.66     7.682       631      90.00
                                    ---      ---------------     ------      -----------     -----       ---      -----
   Total......................      897      $307,761,379.16     100.00%     $343,100.76     3.616%      696      72.84%
                                    ===      ===============     ======      ===========     =====       ===      =====


----------
(1)  As of the Cut-off Date, the weighted average loan age of the Mortgage Loans
     was approximately one month.


                                      S-36



                  PREPAYMENT CHARGE TERMS OF THE MORTGAGE LOANS



                                                                                                                 WEIGHTED
                                                                PERCENT OF                            WEIGHTED    AVERAGE
                                                AGGREGATE       AGGREGATE      AVERAGE     WEIGHTED    AVERAGE    CURRENT
                                 NUMBER OF      PRINCIPAL       PRINCIPAL      CURRENT      AVERAGE     FICO     LOAN-TO-
PREPAYMENT CHARGE                 MORTGAGE       BALANCE         BALANCE      PRINCIPAL    MORTGAGE    CREDIT      VALUE
TERM (MONTHS)                      LOANS       OUTSTANDING     OUTSTANDING     BALANCE       RATE       SCORE      RATIO
------------------------------   ---------   ---------------   -----------   -----------   --------   --------   --------

None..........................       71      $ 26,217,526.21       8.52%     $369,260.93     4.275%      709      67.83%
12 Months-Hard................       86        33,622,157.20      10.92       390,955.32     4.162       701      73.21
12 Months-Soft................       26        12,745,807.15       4.14       490,223.35     2.316       716      72.21
36 Months-Hard................      711       233,836,997.49      75.98       328,884.67     3.512       693      73.43
36 Months-Soft................        3         1,338,891.11       0.44       446,297.04     7.527       676      65.16
                                    ---      ---------------     ------      -----------     -----       ---      -----
   Total......................      897      $307,761,379.16     100.00%     $343,100.76     3.616%      696      72.84%
                                    ===      ===============     ======      ===========     =====       ===      =====


                     GROSS MARGINS FOR THE MORTGAGE LOANS(1)



                                                                                                                   WEIGHTED
                                                                PERCENT OF                              WEIGHTED    AVERAGE
                                                AGGREGATE       AGGREGATE       AVERAGE      WEIGHTED    AVERAGE    CURRENT
                                 NUMBER OF      PRINCIPAL       PRINCIPAL       CURRENT       AVERAGE     FICO     LOAN-TO-
RANGE OF GROSS                    MORTGAGE       BALANCE         BALANCE       PRINCIPAL     MORTGAGE    CREDIT      VALUE
MARGINS (%)                        LOANS       OUTSTANDING     OUTSTANDING      BALANCE        RATE       SCORE      RATIO
------------------------------   ---------   ---------------   -----------   -------------   --------   --------   --------

1.501 - 2.000.................        1      $  1,221,000.00        0.40%    $1,221,000.00     1.500%      780      65.65%
2.001 - 2.500.................       25        13,407,965.03        4.36        536,318.60     3.462       730      66.87
2.501 - 3.000.................      121        49,676,579.70       16.14        410,550.25     3.022       715      70.43
3.001 - 3.500.................      454       145,722,607.20       47.35        320,974.91     2.801       704      72.51
3.501 - 4.000.................      221        68,880,096.13       22.38        311,674.64     3.960       676      73.93
4.001 - 4.500.................       73        28,325,640.71        9.20        388,022.48     8.130       653      79.13
4.501 - 5.000.................        2           527,490.39        0.17        263,745.20     5.830       678      80.00
                                    ---      ---------------      ------     -------------     -----       ---      -----
   Total......................      897      $307,761,379.16      100.00%    $  343,100.76     3.616%      696      72.84%
                                    ===      ===============      ======     =============     =====       ===      =====


----------
(1)  As of the Cut-off Date,  the weighted  average Gross Margin of the Mortgage
     Loans was approximately 3.364%.

                MAXIMUM MORTGAGE RATES FOR THE MORTGAGE LOANS(1)



                                                                                                                 WEIGHTED
                                                                PERCENT OF                            WEIGHTED    AVERAGE
                                                AGGREGATE       AGGREGATE      AVERAGE     WEIGHTED    AVERAGE    CURRENT
                                 NUMBER OF      PRINCIPAL       PRINCIPAL      CURRENT      AVERAGE     FICO     LOAN-TO-
                                  MORTGAGE       BALANCE         BALANCE      PRINCIPAL    MORTGAGE    CREDIT      VALUE
MAXIMUM MORTGAGE RATE (%)          LOANS       OUTSTANDING     OUTSTANDING     BALANCE       RATE       SCORE      RATIO
------------------------------   ---------   ---------------   -----------   -----------   --------   --------   --------

7.250.........................        1      $    151,000.00       0.05%     $151,000.00     2.700%      646      36.12%
9.500.........................        1           174,582.96       0.06       174,582.96     7.982       649      68.63
9.900.........................        1           192,340.55       0.06       192,340.55     6.732       779      80.00
9.950.........................      786       265,867,853.94      86.39       338,254.27     2.977       702      72.01
9.990.........................       36        14,615,014.80       4.75       405,972.63     8.538       658      79.20
9.999.........................       55        19,921,408.69       6.47       362,207.43     8.078       652      79.29
10.200........................        1           185,500.00       0.06       185,500.00     2.750       620      88.33
10.250........................        1           181,500.00       0.06       181,500.00     2.500       652      68.49
10.400........................        1           431,500.00       0.14       431,500.00     1.700       667      69.94
10.450........................        2           449,371.65       0.15       224,685.83     7.537       720      77.29
10.500........................        1           640,000.00       0.21       640,000.00     1.800       649      80.00
11.450........................        2           893,360.18       0.29       446,680.09     2.527       748      80.00
11.650........................        1           524,000.00       0.17       524,000.00     1.700       673      80.00
11.700........................        1           705,000.00       0.23       705,000.00     1.750       740      75.00
11.950........................        6         2,622,446.39       0.85       437,074.40     8.125       646      67.85
12.000........................        1           206,500.00       0.07       206,500.00     2.050       650      70.00
                                    ---      ---------------     ------      -----------     -----       ---      -----
   Total......................      897      $307,761,379.16     100.00%     $343,100.76     3.616%      696      72.84%
                                    ===      ===============     ======      ===========     =====       ===      =====


----------
(1)  As of the Cut-off Date, the weighted  average Maximum  Mortgage Rate of the
     Mortgage Loans was approximately 9.986%.


                                      S-37



               NEGATIVE AMORTIZATION LIMIT FOR THE MORTGAGE LOANS



                                                                PERCENT OF                            WEIGHTED      WEIGHTED
                                                AGGREGATE       AGGREGATE      AVERAGE     WEIGHTED    AVERAGE      AVERAGE
                                 NUMBER OF      PRINCIPAL       PRINCIPAL      CURRENT      AVERAGE     FICO        CURRENT
NEGATIVE AMORTIZATION             MORTGAGE       BALANCE         BALANCE      PRINCIPAL    MORTGAGE    CREDIT    LOAN-TO-VALUE
LIMIT (%)                          LOANS       OUTSTANDING     OUTSTANDING     BALANCE       RATE       SCORE        RATIO
------------------------------   ---------   ---------------   -----------   -----------   --------   --------   -------------

110...........................      821      $276,064,450.93       89.70%    $336,253.90     3.127%      697         72.74%
115...........................       76        31,696,928.23       10.30      417,064.85     7.869       693         73.77
                                    ---      ---------------      ------     -----------     -----       ---         -----
   Total......................      897      $307,761,379.16      100.00%    $343,100.76     3.616%      696         72.84%
                                    ===      ===============      ======     ===========     =====       ===         =====


                NEXT RATE ADJUSTMENT DATE FOR THE MORTGAGE LOANS



                                                                PERCENT OF                            WEIGHTED      WEIGHTED
                                                AGGREGATE       AGGREGATE      AVERAGE     WEIGHTED    AVERAGE      AVERAGE
                                 NUMBER OF      PRINCIPAL       PRINCIPAL      CURRENT      AVERAGE     FICO        CURRENT
                                  MORTGAGE       BALANCE         BALANCE      PRINCIPAL    MORTGAGE    CREDIT    LOAN-TO-VALUE
NEXT RATE ADJUSTMENT DATE          LOANS       OUTSTANDING     OUTSTANDING     BALANCE       RATE       SCORE        RATIO
------------------------------   ---------   ---------------   -----------   -----------   --------   --------   -------------

July 2006 ....................      108      $ 44,084,634.11      14.32%     $408,191.06     7.960%      683         74.03%
August 2006 ..................      713       242,237,433.63      78.71       339,743.95     2.917       699         72.60
September 2006 ...............       76        21,439,311.42       6.97       282,096.20     2.576       699         73.09
                                    ---      ---------------      ------     -----------     -----       ---         -----
   Total .....................      897      $307,761,379.16     100.00%     $343,100.76     3.616%      696         72.84%
                                    ===      ===============     ======      ===========     =====       ===         =====


             NEXT PAYMENT ADJUSTMENT DATE FOR THE MORTGAGE LOANS(1)



                                                                PERCENT OF                            WEIGHTED      WEIGHTED
                                                AGGREGATE       AGGREGATE      AVERAGE     WEIGHTED    AVERAGE      AVERAGE
                                 NUMBER OF      PRINCIPAL       PRINCIPAL      CURRENT     AVERAGE      FICO        CURRENT
                                  MORTGAGE       BALANCE         BALANCE      PRINCIPAL    MORTGAGE    CREDIT    LOAN-TO-VALUE
NEXT PAYMENT ADJUSTMENT DATE       LOANS       OUTSTANDING     OUTSTANDING     BALANCE        RATE      SCORE         RATIO
------------------------------   ---------   ---------------   -----------   -----------   --------   --------   -------------

October 2006 .................        1      $    453,259.66        0.15%    $453,259.66     7.682%      631         90.00%
November 2006 ................        2         1,015,533.22        0.33      507,766.61     7.737       664         56.54
December 2006 ................        2           835,283.25        0.27      417,641.63     8.104       631         80.00
January 2007 .................       17         7,399,370.97        2.40      435,257.12     8.231       656         78.61
February 2007 ................       25        10,652,911.89        3.46      426,116.48     8.266       665         76.57
March 2007 ...................       25        10,284,695.90        3.34      411,387.84     8.544       662         78.71
April 2007 ...................       17         6,378,215.11        2.07      375,189.12     8.512       653         79.40
May 2007 .....................       14         4,493,168.76        1.46      320,940.63     8.010       672         72.44
June 2007 ....................       17         7,121,943.43        2.31      418,937.85     7.506       712         75.96
July 2007 ....................       74        27,140,216.52        8.82      366,759.68     7.454       716         71.72
August 2007 ..................      387       137,318,607.22       44.62      354,828.44     1.785       699         72.70
September 2007 ...............       47        12,824,967.00        4.17      272,871.64     1.865       693         73.57
May 2011 .....................        2           676,071.42        0.22      338,035.71     7.588       662         73.52
June 2011 ....................        3           712,465.12        0.23      237,488.37     7.523       722         77.03
July 2011 ....................        8         3,170,131.17        1.03      396,266.40     7.452       697         74.44
August 2011 ..................      232        70,048,738.52       22.76      301,934.22     2.691       703         70.62
September 2011 ...............       24         7,235,800.00        2.35      301,491.67     2.774       709         70.93
                                    ---      ---------------      ------     -----------     -----       ---         -----
   Total .....................      897      $307,761,379.16      100.00%    $343,100.76     3.616%      696         72.84%
                                    ===      ===============      ======     ===========     =====       ===         =====


----------
(1)  As of the Cut-off Date, the weighted average next payment adjustment date
     of the Mortgage Loans would be in approximately 25 months.


                                      S-38



                INITIAL FIXED PAYMENT TERM FOR THE MORTGAGE LOANS



                                                                PERCENT OF                            WEIGHTED      WEIGHTED
                                                AGGREGATE       AGGREGATE      AVERAGE     WEIGHTED    AVERAGE      AVERAGE
                                 NUMBER OF      PRINCIPAL       PRINCIPAL      CURRENT      AVERAGE     FICO        CURRENT
INITIAL FIXED PAYMENT TERM        MORTGAGE       BALANCE         BALANCE      PRINCIPAL    MORTGAGE    CREDIT    LOAN-TO-VALUE
(MONTHS)                           LOANS       OUTSTANDING     OUTSTANDING     BALANCE       RATE       SCORE         RATIO
------------------------------   ---------   ---------------   -----------   -----------   --------   --------   -------------

12 ...........................      628      $225,918,172.93       73.41%    $359,742.31     3.851%      694        73.56%
60 ...........................      269        81,843,206.23       26.59      304,249.84     2.966       703        70.87
                                    ---      ---------------      ------     -----------     -----       ---        -----
   Total .....................      897      $307,761,379.16      100.00%    $343,100.76     3.616%      696        72.84%
                                    ===      ===============      ======     ===========     =====       ===        =====


                   ORIGINATION CHANNEL FOR THE MORTGAGE LOANS



                                                                PERCENT OF                            WEIGHTED      WEIGHTED
                                                AGGREGATE       AGGREGATE      AVERAGE     WEIGHTED    AVERAGE      AVERAGE
                                 NUMBER OF      PRINCIPAL       PRINCIPAL      CURRENT      AVERAGE     FICO        CURRENT
                                  MORTGAGE       BALANCE         BALANCE      PRINCIPAL    MORTGAGE    CREDIT    LOAN-TO-VALUE
ORIGINATION CHANNEL                LOANS       OUTSTANDING     OUTSTANDING     BALANCE       RATE       SCORE        RATIO
------------------------------   ---------   ---------------   -----------   -----------   --------   --------   -------------

Conduit ......................      160      $ 61,436,127.72       19.96%    $383,975.80     7.942%      677         75.56%
Correspondent ................      296        95,422,802.12       31.01      322,374.33     2.856       703         71.73
Consumer Direct ..............       19         7,186,308.30        2.34      378,226.75     2.724       718         75.32
Mortgage Professional ........      422       143,716,141.02       46.70      340,559.58     2.315       699         72.30
                                    ---      ---------------      ------     -----------     -----       ---         -----
   Total .....................      897      $307,761,379.16      100.00%    $343,100.76     3.616%      696         72.84%
                                    ===      ===============      ======     ===========     =====       ===         =====



                                      S-39



ASSIGNMENT OF THE MORTGAGE LOANS

     Pursuant to the pooling and servicing agreement, on the closing date the
depositor will assign without recourse to the trustee in trust for the benefit
of the certificateholders all interest of the depositor in each Mortgage Loan
and all interest in all other assets included in IndyMac INDX Mortgage Loan
Trust 2006-AR12. This assignment will include all scheduled payments received on
or with respect to the Mortgage Loans that were due after the Cut-off Date but
will not include any scheduled payments due on or before the Cut-off Date.

     In connection with the assignment of the Mortgage Loans, the depositor will
deliver or cause to be delivered to the trustee the mortgage file, which
contains among other things, the original mortgage note (and any modification or
amendment to it) endorsed in blank without recourse, except that the depositor
may deliver or cause to be delivered a lost note affidavit in lieu of any
original mortgage note that has been lost, the original mortgage creating a
first lien on the related mortgaged property with evidence of recording
indicated thereon, an assignment in recordable form of the mortgage, the title
policy with respect to the related mortgaged property and, if applicable, all
recorded intervening assignments of the mortgage and any riders or modifications
to the mortgage note and mortgage (except for any documents not returned from
the public recording office, which will be delivered to the trustee as soon as
they are available to the depositor). With respect to up to 30% of the Mortgage
Loans, the depositor may deliver all or a portion of each related mortgage file
to the trustee not later than five business days after the closing date.
Assignments of the Mortgage Loans to the trustee (or its nominee) generally will
not be recorded in a public office for real property records in California and
other states where, in the opinion of counsel, recording is not required to
protect the trustee's interest in the Mortgage Loan against the claim of any
subsequent transferee or any successor to or creditor of the depositor or the
seller. Under certain circumstances specified in the pooling and servicing
agreement, the assignments will be recorded (at the Servicer's expense).

     The trustee will review each mortgage file within 90 days of the closing
date (or promptly after the trustee's receipt of any document permitted to be
delivered after the closing date) and if any document in a mortgage file is
found to be missing or defective in a material respect adverse to the interests
of the certificateholders in the related Mortgage Loan and the seller does not
cure the defect within 90 days of notice of the defect from the trustee (or
within such longer period not to exceed 720 days after the closing date as
provided in the pooling and servicing agreement in the case of missing documents
not returned from the public recording office), the seller will be obligated to
repurchase the related Mortgage Loan from the issuing entity. The trustee will
hold the Mortgage Loan documents in trust for the benefit of the
certificateholders in accordance with its customary procedures, including
storing the documents in fire-resistant facilities. Rather than repurchase the
Mortgage Loan as provided above, the seller may remove the Mortgage Loan
(referred to as a deleted Mortgage Loan) from the issuing entity and substitute
in its place another Mortgage Loan (referred to as a replacement Mortgage Loan);
however, substitution is permitted only within two years of the closing date and
may not be made unless an opinion of counsel is provided to the trustee to the
effect that the substitution will not disqualify any REMIC or result in a
prohibited transaction tax under the Code. Any replacement Mortgage Loan
generally will, on the date of substitution, among other characteristics set
forth in the pooling and servicing agreement,

     o    have a principal balance, after deduction of all scheduled payments
          due in the month of substitution, not in excess of, and not more than
          10% less than, the Stated Principal Balance of the deleted Mortgage
          Loan (the amount of any shortfall to be deposited by the seller in the
          Certificate Account and held for distribution to the
          certificateholders on the related Distribution Date (a "SUBSTITUTION
          ADJUSTMENT AMOUNT")),

     o    have a Mortgage Rate not lower than, and not more than 1% per annum
          higher than, that of the deleted Mortgage Loan,

     o    have a Maximum Mortgage Rate not more than 1% per annum higher than
          and not lower than the Maximum Mortgage Rate of the deleted Mortgage
          Loan,

     o    have the same negative amortization limit, payment adjustment
          intervals and recast intervals as that of the deleted Mortgage Loan,


                                      S-40



     o    have the same index and Payment Cap as the deleted Mortgage Loan and a
          gross margin not more than 1% per annum higher than, and not lower
          than that of the deleted Mortgage Loan,

     o    have a Loan-to-Value Ratio not higher than that of the deleted
          Mortgage Loan,

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

     o    comply with all of the representations and warranties set forth in the
          pooling and servicing agreement as of the date of substitution.

     This cure, repurchase or substitution obligation constitutes the sole
remedy available to certificateholders or the trustee for a material omission
of, or a material defect in, a mortgage loan document.

     Notwithstanding the foregoing, in lieu of providing the duly executed
assignment of the mortgage to the trustee and the original recorded assignment
or assignments of the mortgage together with all interim recorded assignments of
such mortgage, above, the depositor may at its discretion provide evidence that
the related mortgage is held through the MERS(R) System. In addition, the
mortgages for some or all of the Mortgage Loans in the issuing entity that are
not already held through the MERS(R) System may, at the discretion of the
Servicer, in the future be held through the MERS(R) System. For any mortgage
held through the MERS(R) System, the mortgage is recorded in the name of
Mortgage Electronic Registration Systems, Inc., or MERS, as nominee for the
owner of the Mortgage Loan, and subsequent assignments of the mortgage were, or
in the future may be, at the discretion of the Servicer, registered
electronically through the MERS(R) System. For each of the Mortgage Loans, MERS
serves as mortgagee of record on the mortgage solely as a nominee in an
administrative capacity on behalf of the trustee, and does not have any interest
in the Mortgage Loan.

                                   THE SELLER

     IndyMac Bank will be the seller of the Mortgage Loans. The principal
executive offices of the Seller are located at 888 East Walnut Street, Pasadena,
California 91101-7211. IndyMac Bank is a wholly-owned subsidiary of IndyMac
Intermediate Holdings, Inc., which is a wholly-owned subsidiary of IndyMac
Bancorp, Inc. The business now operated by IndyMac Bank began in 1993. On July
1, 2000, this business was transferred by a predecessor company to IndyMac Bank
and began operation as a federal savings bank.

ORIGINATION PROCESS

     IndyMac Bank acquires mortgage loans principally through four channels:
mortgage professionals, consumer direct, correspondent and conduit. IndyMac Bank
also acquires a relatively small number of mortgage loans through other
channels.

     Mortgage professionals: Mortgage brokers, mortgage bankers, financial
institutions and homebuilders who have taken applications from prospective
borrowers and submitted those applications to IndyMac Bank.

     Consumer direct: Mortgage loans initiated through direct contact with the
borrower. This contact may arise from internet advertising and IndyMac Bank
website traffic, affinity relationships, company referral programs, realtors and
through its Southern California retail banking branches.

     Correspondent: Mortgage brokers, mortgage bankers, financial institutions
and homebuilders who sell previously funded mortgage loans to IndyMac Bank.

     Conduit: IndyMac Bank acquires pools of mortgage loans in negotiated
transactions either with the original mortgagee or an intermediate owner of the
mortgage loans.

     IndyMac Bank approves each mortgage loan seller prior to the initial
transaction on the basis of the seller's financial and management strength,
reputation and prior experience. Sellers are periodically reviewed and if their


                                      S-41



performance, as measured by compliance with the applicable loan sale agreement,
is unsatisfactory, IndyMac Bank will cease doing business with them.

UNDERWRITING PROCESS

     Mortgage loans that are acquired by IndyMac Bank are underwritten by
IndyMac Bank according to IndyMac Bank's underwriting guidelines, which also
accept mortgage loans meeting Fannie Mae or Freddie Mac guidelines regardless of
whether such mortgage loans would otherwise meet IndyMac Bank's guidelines, or
pursuant to an exception to those guidelines based on IndyMac Bank's procedures
for approving such exceptions. Conventional mortgage loans are loans that are
not insured by the FHA or partially guaranteed by the VA. Conforming mortgage
loans are loans that qualify for sale to Fannie Mae and Freddie Mac, whereas
non-conforming mortgage loans are loans that do not so qualify. Non-conforming
mortgage loans originated or purchased by IndyMac Bank pursuant to its
underwriting programs typically differ from conforming loans primarily with
respect to loan-to-value ratios, borrower income, required documentation,
interest rates, borrower occupancy of the mortgaged property and/or property
types. To the extent that these programs reflect underwriting standards
different from those of Fannie Mae and Freddie Mac, the performance of loans
made pursuant to these different underwriting standards may reflect higher
delinquency rates and/or credit losses.

     IndyMac Bank has two principal underwriting methods designed to be
responsive to the needs of its mortgage loan customers: traditional underwriting
and e-MITS (Electronic Mortgage Information and Transaction System)
underwriting. E-MITS is an automated, internet-based underwriting and risk-based
pricing system. IndyMac Bank believes that e-MITS generally enables it to
estimate expected credit loss, interest rate risk and prepayment risk more
objectively than traditional underwriting and also provides consistent
underwriting decisions. IndyMac Bank has procedures to override an e-MITS
decision to allow for compensating factors.

     IndyMac Bank's underwriting criteria for traditionally underwritten
mortgage loans includes an analysis of the borrower's credit history, ability to
repay the mortgage loan and the adequacy of the mortgaged property as
collateral. Traditional underwriting decisions are made by individuals
authorized to consider compensating factors that would allow mortgage loans not
otherwise meeting IndyMac Bank's guidelines.

     In determining a borrower's FICO Credit Score, IndyMac Bank generally
selects the middle credit score of the scores provided by each of the three
major U.S. credit repositories (Equifax, TransUnion and Experian) for each
borrower, and then selects the lowest of these scores. In some instances,
IndyMac Bank selects the middle score of the borrower with the largest amount of
qualifying income among all of the borrowers on the mortgage loan. A FICO Credit
Score might not be available for a borrower due to insufficient credit
information on file with the credit repositories. In these situations, IndyMac
Bank will establish a borrower's credit history through documentation of
alternative sources of credit such as utility payments, auto insurance payments
and rent payments. In addition to the FICO Credit Score, other information
regarding a borrower's credit quality is considered in the loan approval
process, such as the number and degree of any late mortgage or rent payments
within the preceding 12-month period, the age of any foreclosure action against
any property owned by the borrower, the age of any bankruptcy action, the number
of seasoned tradelines reflected on the credit report and any outstanding
judgments, liens, charge-offs or collections.

     For each mortgage loan with a Loan-to-Value Ratio at origination exceeding
80%, IndyMac Bank will usually require a primary mortgage guarantee insurance
policy that conforms to the guidelines of Fannie Mae and Freddie Mac. After the
date on which the Loan-to-Value Ratio of a mortgage loan is 80% or less, either
because of principal payments on the mortgage loan or because of a new appraisal
of the mortgaged property, no primary mortgage guaranty insurance policy will be
required on that mortgage loan.

     All of the insurers that have issued primary mortgage guaranty insurance
policies with respect to the mortgage loans meet Fannie Mae's or Freddie Mac's
standards or are acceptable to the Rating Agencies. In some circumstances,
however, IndyMac Bank does not require primary mortgage guaranty insurance on
mortgage loans with Loan-to-Value Ratios greater than 80%.

     IndyMac Bank purchases loans that have been originated under one of seven
documentation programs: Full/Alternate, FastForward, Limited, Stated Income, No
Ratio, No Income/No Asset and No Doc. In general,


                                      S-42



documentation types that provide for less than full documentation of employment,
income and liquid assets require higher credit quality and have lower
loan-to-value ratios and loan amount limits.

     Under the Full/Alternate Documentation Program, the prospective borrower's
employment, income and assets are verified through written documentation such as
tax returns, pay stubs or W-2 forms. Generally, a two-year history of employment
or continuous source of income is required to demonstrate adequacy and
continuance of income. Borrowers applying under the Full/Alternate Documentation
Program may, based on certain loan characteristics and higher credit quality,
qualify for IndyMac Bank's FastForward program and be entitled to income and
asset documentation relief. Borrowers who qualify for FastForward must state
their income, provide a signed Internal Revenue Service Form 4506 (authorizing
IndyMac Bank to obtain copies of their tax returns), and state their assets.
IndyMac Bank does not require any verification of income or assets under this
program.

     The Limited Documentation Program is similar to the Full/Alternate
Documentation Program except that borrowers generally must document income and
employment for one year (rather than two, as required by the Full/Alternate
Documentation Program). Borrowers under the Limited Documentation Program may
use bank statements to verify their income and employment. If applicable,
written verification of a borrower's assets is required under this program.

     The Stated Income Documentation Program requires prospective borrowers to
provide information regarding their assets and income. Information regarding a
borrower's assets, if applicable, is verified through written communications.
Information regarding income is not verified and employment verification may not
be written.

     The No Ratio Program requires prospective borrowers to provide information
regarding their assets, which is then verified through written communications.
The No Ratio Program does not require prospective borrowers to provide
information regarding their income, but verification of employment may not be
written.

     Under the No Income/No Asset Documentation Program and the No Doc
Documentation Program, emphasis is placed on the credit score of the prospective
borrower and on the value and adequacy of the mortgaged property as collateral,
rather than on the income and the assets of the prospective borrower.
Prospective borrowers are not required to provide information regarding their
assets or income under either program, although under the No Income/No Asset
Documentation Program, employment is orally verified.

     IndyMac Bank generally will re-verify income, assets, and employment for
mortgage loans it acquires through the wholesale channel, but not for mortgage
loans acquired through other channels.

     Maximum loan-to-value and combined loan-to-value ratios and loan amounts
are established according to the occupancy type, loan purpose, property type,
FICO Credit Score, number of previous late mortgage payments, and the age of any
bankruptcy or foreclosure actions. Additionally, maximum total monthly debt
payments-to-income ratios and cash-out limits may be applied. Other factors may
be considered in determining loan eligibility such as a borrower's residency and
immigration status, whether a non-occupying borrower will be included for
qualification purposes, sales or financing concessions included in any purchase
contract, the acquisition cost of the property in the case of a refinance
transaction, the number of properties owned by the borrower, the type and amount
of any subordinate mortgage, the amount of any increase in the borrower's
monthly mortgage payment compared to previous mortgage or rent payments and the
amount of disposable monthly income after payment of all monthly expenses.

     To determine the adequacy of the property to be used as collateral, an
appraisal is generally made of the subject property in accordance with the
Uniform Standards of Profession Appraisal Practice. The appraiser generally
inspects the property, analyzes data including the sales prices of comparable
properties and issues an opinion of value using a Fannie Mae/Freddie Mac
appraisal report form, or other acceptable form. In some cases, an automated
valuation model (AVM) may be used in lieu of an appraisal. AVMs are computer
programs that use real estate information, such as demographics, property
characteristics, sales prices, and price trends to calculate a value for the
specific property. The value of the property, as indicated by the appraisal or
AVM, must support the loan amount.


                                      S-43



     Underwriting procedures vary by channel of origination. Generally, mortgage
loans originated through the mortgage professional channel will be submitted to
e-MITS for assessment and subjected to a full credit review and analysis.
Mortgage loans that do not meet IndyMac Bank's guidelines may be manually
re-underwritten and approved under an exception to those underwriting
guidelines. Mortgage loans originated through the consumer direct channel are
subjected to essentially the same procedures, modified as necessary to reflect
the fact that no third-party contributes to the preparation of the credit file.

     IndyMac Bank currently operates two mortgage loan purchase programs as part
of its correspondent channel:

     1. Prior Approval Program. Under this program, IndyMac Bank performs a full
credit review and analysis of each mortgage loan generally with the same
procedures used for mortgage loans originated through the mortgage professionals
channel. Only after IndyMac Bank issues an approval notice to a loan originator
is a mortgage loan eligible for purchase pursuant to this program.

     2. Preferred Delegated Underwriting Program. Under this program, loan
originators that meet certain eligibility requirements are allowed to tender
mortgage loans for purchase without the need for IndyMac Bank to verify
mortgagor information. The eligibility requirements for participation in the
Preferred Delegated Underwriting Program vary based on the net worth of the loan
originators with more stringent requirements imposed on loan originators with a
lower net worth. Loan originators are required to submit a variety of
information to IndyMac Bank for review, including their current audited
financial statements, their quality control policies and procedures, their
current errors and omissions/fidelity insurance coverage evidencing blanket
coverage in a minimum amount of $300,000, at least three underwriters' resumes
showing at least three years experience or a direct endorsement designation, and
at least two references from mortgage insurance companies. Loan originators are
required to have an active, traditional warehouse line of credit, which is
verified together with the bailee letter and wire instructions. IndyMac Bank
requires each loan originator to be recertified on an annual basis to ensure
that it continues to meet the minimum eligibility guidelines for the Preferred
Delegated Underwriting Program.

     Under the Preferred Delegated Underwriting Program, each eligible loan
originator is required to underwrite mortgage loans in compliance with IndyMac
Bank's underwriting guidelines usually by use of e-MITS or, infrequently, by
submission of the mortgage loan to IndyMac Bank for traditional underwriting. A
greater percentage of mortgage loans purchased pursuant to this program are
selected for post-purchase quality control review than for the other program.

     Mortgage loans originated through the conduit channel were generally
initially underwritten by the seller to the seller's underwriting guidelines.
IndyMac Bank reviews each seller's guidelines for acceptability, and these
guidelines generally meet industry standards and incorporate many of the same
factors used by Fannie Mae, Freddie Mac and IndyMac Bank. Each mortgage loan is
re-underwritten by IndyMac Bank for compliance with its guidelines based only on
the objective characteristics of the mortgage loan, such as FICO, documentation
type, loan-to-value ratio, etc., but without reassessing the underwriting
procedures originally used. In addition, a portion of the mortgage loans
acquired from a seller are subjected to a full re-underwriting.

     Exceptions to underwriting standards are permitted in situations in which
compensating factors exist. Examples of these factors are significant financial
reserves, a low loan-to-value ratio, significant decrease in the borrower's
monthly payment and long-term employment with the same employer.

REPRESENTATIONS BY SELLER; REPURCHASES, ETC.

     The seller represents that immediately before the assignment of the
Mortgage Loans to the depositor, it will have good title to, and will be the
sole owner of, each Mortgage Loan free and clear of any pledge, lien,
encumbrance or security interest and will have full right and authority, subject
to no interest or participation of, or agreement with, any other party, to sell
and assign the Mortgage Loans pursuant to the pooling and servicing agreement.


                                      S-44



     In the event of a breach of any representation or warranty in respect of a
Mortgage Loan that materially and adversely affects the interests of the
certificateholders, the seller will be obligated, in accordance with the pooling
and servicing agreement, to cure that breach, to repurchase the Mortgage Loan at
the purchase price or to substitute a qualified mortgage loan for the Mortgage
Loan. See "Mortgage Loan Program--Representations by Seller; Repurchases" in the
prospectus.

                           SERVICING OF MORTGAGE LOANS

THE SERVICER

     IndyMac Bank will act as servicer under the pooling and servicing agreement
(in such capacity, the "SERVICER"). The principal executive offices of the
Servicer are located at 888 East Walnut Street, Pasadena, California 91101-7211.
IndyMac Bank has been servicing mortgage loans since 1993 and servicing mortgage
loans directly (servicing without the use of a subservicer) since 1998. It is
expected that on the closing date the Servicer will be the only entity servicing
the Mortgage Loans. As of the date of this prospectus supplement, IndyMac Bank
is rated (x) by Fitch, "RPS2+" as a servicer of alt/A, prime and subprime
mortgage loans, (y) by Moody's, "SQ2" as a primary servicer of prime and
subprime first lien mortgage loans and "SQ3" as a special servicer and (z) by
S&P, "above average/stable" as a primary servicer and "average/stable" as a
master servicer and special servicer.

     The Servicer will be responsible for servicing the Mortgage Loans in
accordance with the terms set forth in the pooling and servicing agreement
employing the same degree of skill and care that it employs in servicing other
mortgage loans comparable to the Mortgage Loans serviced by the Servicer for
itself or others. The Servicer has agreed to represent and protect the interest
of the trustee in the Mortgage Loans in the same manner as it currently protects
its own interest in mortgage loans in its own portfolio in any claim, proceeding
or litigation regarding a Mortgage Loan.

     If the servicing of any Mortgage Loan were to be transferred, there may be
an increase in delinquencies and defaults due to misapplied or lost payments,
data input errors, system incompatibilities or otherwise. Although any increase
in delinquencies is expected to be temporary, there can be no assurance as to
the duration or severity of any disruption in servicing the applicable Mortgage
Loans as a result of any servicing transfer. See also "Risk Factors--Bankruptcy
or Insolvency May Affect the Timing and Amount of Distributions on the
Certificates" in the prospectus.

SERVICING COMPENSATION AND PAYMENT OF EXPENSES

     The expense fees are payable out of the interest payments on each Mortgage
Loan. As of the Cut-off Date, the weighted average rate at which the expense
fees accrue (referred to as the "EXPENSE FEE RATE") is equal to approximately
0.3835% per annum. The expense fees consist of (a) the servicing fee and (b)
fees payable to the trustee in respect of its activities as trustee under the
pooling and servicing agreement in an amount of 0.0085% per annum of the Stated
Principal Balance of each Mortgage Loan. The servicing fee rate will be 0.3750%
per annum. The Servicer is obligated to pay certain ongoing expenses associated
with the issuing entity and incurred by the Servicer in connection with its
responsibilities under the pooling and servicing agreement and those amounts
will be paid by the Servicer out of its fee. The amount of the Servicer's
servicing compensation is subject to adjustment with respect to prepaid mortgage
loans, as described in this prospectus supplement under "--Adjustment to
Servicing Compensation in Connection with Certain Prepaid Mortgage Loans." The
Servicer will also be entitled to receive late payment fees, assumption fees and
other similar charges. The Servicer will be entitled to receive all reinvestment
income earned on amounts on deposit in the collection account, the Certificate
Account and the Distribution Account and Excess Proceeds with respect to the
Mortgage Loans as described in this prospectus supplement under "Description of
the Certificates--Fees and Expenses."

     The "ADJUSTED NET MORTGAGE RATE" of a Mortgage Loan is the Mortgage Loan's
Mortgage Rate minus the expense fee rate.


                                      S-45



ADJUSTMENT TO SERVICING COMPENSATION IN CONNECTION WITH CERTAIN PREPAID MORTGAGE
LOANS

     When a borrower prepays a Mortgage Loan between Due Dates, the borrower is
required to pay interest on the amount prepaid only to the date of prepayment
and not thereafter. Similarly, if the Servicer purchases a Mortgage Loan as
described in this prospectus supplement under "--Certain Modifications and
Refinancings," the issuing entity is entitled to the interest paid by the
borrower only to the date of purchase. Except with respect to the month of the
Cut-off Date, principal prepayments by borrowers received by the Servicer from
the first day through the fifteenth day of a calendar month will be distributed
to certificateholders on the Distribution Date in the same month in which the
prepayments on such Mortgage Loans are received and, accordingly, no shortfall
in the amount of interest to be distributed to certificateholders with respect
to the prepaid Mortgage Loans will result. Conversely, principal prepayments on
such Mortgage Loans received by the Servicer from the sixteenth day (or, in the
case of the first Distribution Date, from the Cut-off Date) through the last day
of a calendar month will be distributed to certificateholders on the
Distribution Date in the month following the month of receipt and, accordingly,
a shortfall in the amount of interest to be distributed to certificateholders
with respect to such prepaid Mortgage Loans would result. To offset any interest
shortfall to certificateholders as a result of any prepayments, the Servicer
will be required to reduce its servicing compensation, but the reduction for any
Distribution Date will be limited to an amount (the "COMPENSATING INTEREST")
equal to the product of

     o    0.1250% multiplied by

     o    one-twelfth multiplied by

     o    the aggregate Stated Principal Balance of the Mortgage Loans as of the
          first day of the prior month.

If shortfalls in interest as a result of prepayments in any month exceed the
Compensating Interest for such month, the amount of interest to be distributed
to certificateholders will be reduced by the amount of the excess and no amounts
will be due or paid with respect to such reduction on future Distribution Dates.
See "Description of the Certificates--Interest" in this prospectus supplement.

ADVANCES

     Except as described below, the Servicer will be required to advance prior
to each Distribution Date from its own funds or funds in the Certificate Account
that are not required to be distributed on that Distribution Date, an amount
(referred to as an "ADVANCE") equal to

     o    all of the payments of principal and interest on the Mortgage Loans
          due but delinquent as of the "DETERMINATION DATE" (which will be the
          18th of the month or, if the 18th is not a business day, the next
          business day after the 18th day of the month)

     minus

     o    the servicing fee for those Mortgage Loans for the period

     plus

     o    an amount equivalent to interest (net of the servicing fee) on each
          Mortgage Loan as to which the mortgaged property has been acquired by
          the issuing entity (through foreclosure or deed-in-lieu of
          foreclosure).

     Advances are intended to maintain a regular flow of scheduled interest and
principal distributions on the certificates rather than to guarantee or insure
against losses. The Servicer is obligated to make advances with respect to
delinquent payments of principal of or interest on each Mortgage Loan only to
the extent that advances made on that Mortgage Loan are, in its reasonable
judgment, recoverable from future payments and collections or insurance payments
or proceeds of liquidation of the related Mortgage Loan. If the Servicer
determines on any Determination Date to make an advance, that advance will be
included with the distribution to certificateholders on the related


                                      S-46



Distribution Date. Any failure by the Servicer to make a deposit in the
Certificate Account as required under the pooling and servicing agreement,
including any failure to make an advance, will constitute an event of default
under the pooling and servicing agreement if such failure remains unremedied for
five days after written notice of such failure. If the Servicer is terminated as
a result of the occurrence of an event of default, the trustee or the successor
servicer will be obligated to make any required advance, in accordance with the
terms of the pooling and servicing agreement. An advance will be reimbursed from
the payments on the Mortgage Loan with respect to which the advance was made.
However, if an advance is determined to be nonrecoverable and the Servicer
delivers an officer's certificate to the trustee indicating that the advance is
nonrecoverable, the Servicer will be entitled to withdraw from the Certificate
Account an amount equal to the nonrecoverable advance. Reimbursement for
advances and nonrecoverable advances will be made prior to distributions on the
certificates.

CERTAIN MODIFICATIONS AND REFINANCINGS

     The Servicer may modify any Mortgage Loan at the request of the related
mortgagor, provided that the Servicer purchases the Mortgage Loan from the
issuing entity immediately preceding the modification. Any modification of a
Mortgage Loan may not be made unless the modification includes a change in the
interest rate on the related Mortgage Loan to approximately a prevailing market
rate. The Servicer attempts to identify mortgagors who are likely to refinance
their Mortgage Loans (and therefore cause a prepayment in full) and inform them
of the availability of the option of modification in lieu of refinancing.
Mortgagors who are informed of this option are more likely to request a
modification than mortgagors who are not so informed. Any purchase of a Mortgage
Loan subject to a modification will be for a price equal to 100% of the Stated
Principal Balance of that Mortgage Loan, plus accrued and unpaid interest on the
Mortgage Loan up to the first day of the month in which the proceeds are to be
distributed at the applicable adjusted net mortgage rate, net of any
unreimbursed advances of principal and interest on the Mortgage Loan made by the
Servicer. The Servicer will deposit the purchase price in the Certificate
Account within one business day of the purchase of that Mortgage Loan and the
purchase price will be treated by the Servicer as a prepayment in full of the
related Mortgage Loan, and will be distributed by the trustee in accordance with
the pooling and servicing agreement. Purchases of Mortgage Loans may occur when
prevailing interest rates are below the interest rates on the Mortgage Loans and
mortgagors request modifications as an alternative to refinancings. The Servicer
will indemnify the issuing entity against liability for any prohibited
transactions taxes and any interest, additions or penalties imposed on any REMIC
as a result of any modification or purchase.

DEFAULT MANAGEMENT SERVICES

     In connection with the servicing of defaulted Mortgage Loans, the Servicer
may perform certain default management and other similar services (including,
but not limited to, appraisal services) and may act as a broker in the sale of
mortgaged properties related to those Mortgage Loans. The Servicer will be
entitled to reasonable compensation for providing those services, in addition to
the servicing compensation described in this prospectus supplement.

                                   THE SPONSOR

     The sponsor is IndyMac Bank. The sponsor is the same entity as the seller
and the Servicer of the Mortgage Loans, and is the parent company of the
depositor. The sponsor has been the sponsor of securitizations backed by
residential mortgage loans since 1993. The following table describes the
approximate volume of mortgage loan securitizations sponsored by IndyMac Bank
since 2002.

YEAR   APPROXIMATE VOLUME
----   ------------------
2002     $ 6.25 billion
2003     $ 5.78 billion
2004     $16.03 billion
2005     $31.37 billion

     As the sponsor, IndyMac Bank originates and acquires mortgage loans and
initiates their securitization by transferring the mortgage loans to the
depositor. The mortgage loans are then transferred to the issuing entity for the


                                      S-47



related securitization. The sponsor works with underwriters and rating agencies
in structuring its securitization transactions.

                                STATIC POOL DATA

     Certain static pool data with respect to the delinquency, cumulative loss
and prepayment data for IndyMac Bank is available on the internet at
http://regab.indymacbank.com/. Each of these securitizations is unique, and the
characteristics of each securitized mortgage pool varies from each other as well
as from the Mortgage Loans to be included in the issuing entity that will issue
the certificates offered by this prospectus supplement. In addition, the
performance information relating to the prior securitizations described above
may have been influenced by factors beyond the sponsor's control, such as
housing prices and market interest rates. Therefore, the performance of these
prior securitizations is likely to not be indicative of the future performance
of the Mortgage Loans.

     This static pool data is not deemed part of the prospectus or the
registration statement of which the prospectus is a part to the extent that the
static pool data relates to:

     o    prior securitized pools of IndyMac Bank, F.S.B. that do not include
          the Mortgage Loans and that were established before January 1, 2006;
          or

     o    in the case of information regarding the Mortgage Loans, information
          about the Mortgage Loans for periods before January 1, 2006.

                                  THE DEPOSITOR

     The depositor is IndyMac MBS, Inc., a Delaware corporation that is a
limited purpose finance subsidiary of IndyMac Bank, F.S.B. Its address is 155
North Lake Avenue, Pasadena, California 91101, and its telephone number is (800)
669-2300. The depositor will not have any business operations other than
securitizing mortgage assets and related activities.

                               THE ISSUING ENTITY

     In connection with the issuance of the certificates, the depositor will
form the IndyMac INDX Mortgage Loan Trust 2006-AR12, a common law trust created
under the laws of the State of New York pursuant to the pooling and servicing
agreement. The trustee serves as trustee of the issuing entity and acts on
behalf of the issuing entity as the issuing entity does not have any directors,
officers or employees. The fiscal year end of the issuing entity is December 31.

     The issuing entity's activities are limited to the transactions and
activities entered into in connection with the securitization described in this
prospectus supplement, and except for those activities, the issuing entity is
not authorized and has no power to borrow money or issue debt, merge with
another entity, reorganize, liquidate or sell assets or engage in any business
or activities. Consequently, the issuing entity is not permitted to hold any
assets, or incur any liabilities, other than those described in this prospectus
supplement. Because the issuing entity is created pursuant to the pooling and
servicing agreement, the issuing entity and its permissible activities can only
be amended or modified by amending the pooling and servicing agreement.

     Because the issuing entity is a common law trust, it may not be eligible
for relief under the federal bankruptcy laws, unless it can be characterized as
a "business trust" for purposes of the federal bankruptcy laws. Bankruptcy
courts look at various considerations in making this determination, so it is not
possible to predict with any certainty whether the issuing entity would be
characterized as a "business trust."

                                   THE TRUSTEE

     Deutsche Bank National Trust Company ("DBNTC" or the "TRUSTEE") will act as
trustee, calculation agent and custodian. DBNTC is a national banking
association which has an office in Santa Ana, California. DBNTC has previously
been appointed to the role of trustee for numerous mortgage-backed transactions
since 1991. As


                                      S-48



custodian, DBNTC will maintain the mortgage files in secure, fire-resistant
facilities. DBNTC will not physically segregate the mortgage files in DBNTC's
custody and the mortgage files will be kept in shared facilities. DBNTC's
proprietary document tracking system will show the location within DBNTC's
facilities of each mortgage file held by the trustee on behalf of the trust.
DBNTC has no legal proceeding that would materially affect its ability to
perform its duties as trustee, calculation agent or custodian. DBNTC may perform
certain of its obligations through one or more third party vendors. However,
DBNTC will remain liable for the duties and obligations required of it under the
pooling and servicing agreement. The depositor and the servicer may maintain
other banking relationships in the ordinary course of business with DBNTC.

     Offered certificates may be surrendered at the offices designated by the
trustee from time to time for such purposes, which as of the closing date is of
the trustee located at DB Services Tennessee, 648 Grassmere Park Rd., Nashville,
TN 37211-3658, Attention: Transfer Unit, or at any other address the trustee
designates from time to time. Correspondence may be directed to the trustee at
its corporate trust office located at 1761 East St. Andrew Place, Santa Ana,
California 92705, Attention: Trust Administration IN06AC. Certificateholders may
access monthly statements from the trustee's website
(https://www.tss.db.com/invr). Certificateholders may obtain assistance in
operating the trustee's website by calling the trustee's investor relations desk
at (800) 735-7777.

     In addition to the duties described elsewhere in this prospectus supplement
and the prospectus, the trustee will perform many services on behalf of the
issuing entity pursuant to the pooling and servicing agreement. The trustee will
be responsible for (x) calculating and paying principal and interest
distributions to each certificateholder, (y) preparing and filing all income tax
returns and (z) the preparation of monthly statements to certificateholders.

     The trustee will be liable for its own negligent action, its own negligent
failure to act or its own willful misconduct. However, the trustee will not be
liable, individually or as trustee,

     o    for an error of judgment made in good faith by a responsible officer
          of the trustee, unless it is finally proven that the trustee was
          negligent in ascertaining the pertinent facts,

     o    with respect to any action taken, suffered or omitted to be taken by
          it in good faith in accordance with the direction of holders of
          certificates evidencing not less than 25% of the Voting Rights of the
          certificates relating to the time, method and place of conducting any
          proceeding for any remedy available to the trustee, or exercising any
          trust or power conferred upon the trustee under the pooling and
          servicing agreement,

     o    for any action taken, suffered or omitted by it in good faith and
          believed by it to be authorized or within the discretion or rights or
          powers conferred upon it by the pooling and servicing agreement, or

     o    for any loss on any investment of funds pursuant to the pooling and
          servicing agreement (other than as issuer of the investment security).

     The trustee may request and rely upon and shall be protected in acting or
refraining from acting upon any resolution, officer's certificate, certificate
of auditors or any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond or other paper or document
believed by it in good faith to be genuine and to have been signed or presented
by the proper party or parties.

     The trustee and any successor trustee will, at all times, be a corporation
or association organized and doing business under the laws of a state or the
United States of America, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $50,000,000, subject
to supervision or examination by federal or state authority and with a credit
rating that would not cause any of the Rating Agencies to reduce their
respective ratings of any class of certificates below the ratings issued on the
closing date (or having provided security from time to time as is sufficient to
avoid the reduction). If the trustee no longer meets the foregoing requirements,
the trustee has agreed to resign immediately.

     The trustee may at any time resign by giving written notice of resignation
to the depositor, the Servicer and each Rating Agency not less than 60 days
before the specified resignation date. The resignation will not be effective


                                      S-49



until a successor trustee has been appointed. If a successor trustee has not
been appointed within 30 days after the trustee gives notice of resignation, the
resigning trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee.

     The depositor or the Servicer may remove the trustee and appoint a
successor trustee if:

     o    the trustee ceases to meet the eligibility requirements described
          above and fails to resign after written request to do so is delivered
          to the trustee by the depositor,

     o    the trustee becomes incapable of acting, or is adjudged as bankrupt or
          insolvent, or a receiver of the trustee or of its property is
          appointed, or any public officer takes charge or control of the
          trustee or of its property or affairs for the purpose of
          rehabilitation, conservation or liquidation,

     o    a tax is imposed with respect to the issuing entity by any state in
          which the trustee or the issuing entity is located and the imposition
          of the tax would be avoided by the appointment of a different trustee,
          or

     o    during the period in which the depositor is required to file reports
          under the Securities Exchange Act of 1934, as amended, the trustee
          fails to comply with its related obligations, as described in the
          pooling and servicing agreement.

     In addition, the holders of certificates evidencing at least 51% of the
Voting Rights may at any time remove the trustee and appoint a successor
trustee. Notice of any removal of the trustee shall be given to each Rating
Agency by the successor trustee. The party initiating the removal of a trustee
will bear any expense associated with the removal of the appointment of a new
trustee.

     Any resignation or removal of the trustee and appointment of a successor
trustee pursuant to any of the provisions described above will become effective
upon acceptance of appointment by the successor trustee.

     A successor trustee will not be appointed unless the successor trustee
meets the eligibility requirements described above and its appointment does not
adversely affect the then-current ratings of the certificates.

                         DESCRIPTION OF THE CERTIFICATES

GENERAL

     The certificates will be issued pursuant to the pooling and servicing
agreement. The following sections of this prospectus supplement are summaries of
the material terms of the certificates and the pooling and servicing agreement
pursuant to which the certificates will be issued. They do not purport to be
complete, however, and are subject to, and are qualified in their entirety by
reference to, the provisions of the pooling and servicing agreement. When
particular provisions or terms used in the pooling and servicing agreement are
referred to, the actual provisions (including definitions of terms) are
incorporated by reference. We will file a final copy of the pooling and
servicing agreement after the issuing entity issues the certificates. The
certificates represent obligations of the issuing entity only and do not
represent an interest in or obligation of IndyMac MBS, Inc., IndyMac Bank,
F.S.B. or any of their affiliates.

     The Mortgage Pass-Through Certificates, Series 2006-AR12 will consist of
the Class A-1, Class A-2, Class A-3, Class M-1, Class M-2, Class M-3, Class M-4,
Class P, Class C and Class R Certificates. Only the classes of certificates
listed on the cover page are offered by this prospectus supplement. The Class P,
Class C and Class R Certificates (all of which are together referred to as the
"PRIVATE CERTIFICATES") are not offered by this prospectus supplement.


                                      S-50



     When describing the offered certificates in this prospectus supplement, we
use the following terms:

       DESIGNATION                      CLASSES OF CERTIFICATES
-------------------------   -----------------------------------------------
   Senior Certificates      Class A-1, Class A-2 and Class A-3 Certificates

Subordinated Certificates      Class M-1, Class M-2, Class M-3 and Class
                                           M-4 Certificates

   LIBOR Certificates          Senior Certificates and the Subordinated
                                             Certificates

  Offered Certificates                    LIBOR Certificates

The certificates are generally referred to as the following types:

           CLASS                                   TYPE
--------------------------   -----------------------------------------------
Class A-1 Certificates:      Senior/ Floating Pass-Through Rate/Super Senior
Class A-2 Certificates:         Senior/ Floating Pass-Through Rate/Super
                                             Senior/Support
Class A-3 Certificates:        Senior/ Floating Pass-Through Rate/Support
Subordinated Certificates:       Subordinate/ Floating Pass-Through Rate
Class P Certificates:                      Prepayment Charges
Class C Certificates:                           Residual
Class R Certificates:                        REMIC Residual

     The Class C, Class P and Class R Certificates are not offered by this
prospectus supplement. The private certificates will not bear interest. The
Class P Certificates will be entitled to all prepayment charges received in
respect of the Mortgage Loans and such amounts will not be available for
distribution to the holders of the offered certificates and the other private
certificates. Any information presented in this prospectus supplement with
respect to the private certificates is provided only to permit a better
understanding of the offered certificates. The initial Class Certificate
Balances are set forth in the first table under "Summary--Description of the
Certificates" in this prospectus supplement.

CALCULATION OF CLASS CERTIFICATE BALANCE

     The "CLASS CERTIFICATE BALANCE" of any class of certificates as of any
Distribution Date is the initial Class Certificate Balance of that class reduced
by the sum of

     o    all amounts previously distributed to holders of certificates of that
          class as distributions of principal,

     o    the amount of Applied Realized Loss Amounts allocated to that class,
          and

and, increased by

     o    the amount of Net Deferred Interest allocated to that class of
          certificates;

provided, however, to the extent Applied Realized Loss Amounts have been
allocated to the Class Certificate Balance of any class of offered certificates,
its Class Certificate Balance will be increased on each Distribution Date
sequentially by class in the order of distribution priority by the amount of
Subsequent Recoveries (if any) on the Mortgage Loans collected during the period
beginning on the second day of the calendar month preceding the calendar month
in which that Distribution Date occurs and ending on the Due Date in the month
in which that Distribution Date occurs (but not by more than the amount of the
Unpaid Realized Loss Amount for that class).


                                      S-51



After such allocation, a corresponding decrease will be made on that
Distribution Date to the Unpaid Realized Loss Amount for any class that had its
Class Certificate Balance increased by such allocation of Subsequent Recoveries.

     Although Subsequent Recoveries, if any, will be allocated to increase the
Class Certificate Balance of a class of offered certificates, as described
above, such Subsequent Recoveries will be included in the Principal Remittance
Amount and will be distributed in the priority set forth below under
"Distributions--Distributions of Principal," and therefore such Subsequent
Recoveries may not to be used to make any principal distributions on the class
or classes of certificates for which the Class Certificate Balances have been
increased by allocation of Subsequent Recoveries as described above.
Additionally, holders of those certificates will not be entitled to any payment
in respect of interest that would have accrued on the amount of the increase in
Class Certificate Balance for any Interest Accrual Period preceding the
Distribution Date on which such increase occurs.

     If the Overcollateralized Amount is zero and there is a Realized Loss on a
Mortgage Loan, the Class Certificate Balance of the class of subordinated
certificates then outstanding with the lowest priority of distribution will be
reduced if and to the extent that the aggregate of the Class Certificate
Balances of the offered certificates, following all distributions on any
Distribution Date, exceeds the aggregate Stated Principal Balance of the
Mortgage Loans as of the Due Date occurring in the month of the Distribution
Date (after giving effect to principal prepayments received in the Prepayment
Period related to that Due Date).

BOOK-ENTRY CERTIFICATES

     The offered certificates will be book-entry certificates (the "BOOK-ENTRY
CERTIFICATES"). Persons acquiring beneficial ownership interests in the
Book-Entry Certificates ("CERTIFICATE OWNERS") may elect to hold their
Book-Entry Certificates through The Depository Trust Company ("DTC") in the
United States, or, upon request, through Clearstream, Luxembourg (as defined in
this prospectus supplement) or the Euroclear System ("EUROCLEAR") in Europe, if
they are participants of such systems, or indirectly through organizations that
are participants in such systems. The Book-Entry Certificates will be issued in
one or more certificates that equal the aggregate Class Certificate Balance of
the offered certificates and will initially be registered in the name of Cede &
Co., the nominee of DTC. Clearstream, Luxembourg and Euroclear will hold omnibus
positions on behalf of their participants through customers' securities accounts
in Clearstream Banking's and Euroclear's names on the books of their respective
depositaries which in turn will hold such positions in customers' securities
accounts in the depositaries' names on the books of DTC. Citibank, N.A. will act
as depositary for Clearstream, Luxembourg and JPMorgan Chase Bank will act as
depositary for Euroclear (in such capacities, individually the "RELEVANT
DEPOSITARY" and collectively the "EUROPEAN DEPOSITARIES"). Investors may hold
such beneficial interests in the Book-Entry Certificates in minimum
denominations representing Class Certificate Balances of $25,000 and integral
multiples of $1,000 in excess thereof. Except as described below, no person
acquiring a Book-Entry Certificate will be entitled to receive a physical
certificate representing such offered certificate (a "DEFINITIVE CERTIFICATE").
Unless and until Definitive Certificates are issued, it is anticipated that the
only Certificateholder of the offered certificates will be Cede & Co., as
nominee of DTC. Certificate Owners will not be Certificateholders as that term
is used in the pooling and servicing agreement. Certificate Owners are only
permitted to exercise their rights indirectly through the participating
organizations that utilize the services of DTC, including securities brokers and
dealers, banks and trust companies and clearing corporations and certain other
organizations ("PARTICIPANTS") and DTC.

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

     Certificate Owners will receive all distributions of principal of, and
interest on, the offered certificates from the trustee through DTC and
Participants. While the offered certificates are outstanding (except under the
circumstances described below), under the rules, regulations and procedures
creating and affecting DTC and its operations (the "DTC RULES"), DTC is required
to make book-entry transfers among Participants on whose behalf it acts with
respect to the offered certificates and is required to receive and transmit
distributions of principal of, and


                                      S-52



interest on, the offered certificates. Participants and organizations which have
indirect access to the DTC system, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("INDIRECT PARTICIPANTS"), with whom
Certificate Owners have accounts with respect to offered certificates are
similarly required to make book-entry transfers and receive and transmit such
distributions on behalf of their respective Certificate Owners. Accordingly,
although Certificate Owners will not possess certificates, the DTC Rules provide
a mechanism by which Certificate Owners will receive distributions and will be
able to transfer their interest.

     Certificate Owners will not receive or be entitled to receive certificates
representing their respective interests in the offered certificates, except
under the limited circumstances described below. Unless and until Definitive
Certificates are issued, Certificate Owners who are not Participants may
transfer ownership of offered certificates only through Participants and
Indirect Participants by instructing such Participants and Indirect Participants
to transfer Book-Entry Certificates, by book-entry transfer, through DTC for the
account of the purchasers of such Book-Entry Certificates, which account is
maintained with their respective Participants. Under the DTC Rules and in
accordance with DTC's normal procedures, transfers of ownership of Book-Entry
Certificates will be executed through DTC and the accounts of the respective
Participants at DTC will be debited and credited. Similarly, the Participants
and Indirect Participants will make debits or credits, as the case may be, on
their records on behalf of the selling and purchasing Certificate Owners.

     Because of time zone differences, credits of securities received in
Clearstream, Luxembourg or Euroclear as a result of a transaction with a
Participant will be made during, subsequent securities settlement processing and
dated the business day following, the DTC settlement date. Such credits or any
transactions in such securities, settled during such processing will be reported
to the relevant Euroclear or Clearstream, Luxembourg Participants on such
business day. Cash received in Clearstream, Luxembourg or Euroclear, as a result
of sales of securities by or through a Clearstream, Luxembourg Participant or
Euroclear Participant to a Participant, will be received with value on the DTC
settlement date but will be available in the relevant Clearstream, Luxembourg or
Euroclear cash account only as of the business day following settlement in DTC.
For information with respect to tax documentation procedures, relating to the
offered certificates, see "Material Federal Income Tax Consequences -- Taxation
of Debt Securities--Non-U.S. Investors" and "Description of the
Securities--Global, Clearance, Settlement And Tax Documentation Procedures --
Material U.S. Federal Income Tax Documentation Requirements" in the prospectus.

     Transfers between Participants will occur in accordance with DTC Rules.
Transfers between Clearstream, Luxembourg Participants and Euroclear
Participants will occur in accordance with their respective rules and operating
procedures.

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

     DTC, which is a New York-chartered limited purpose trust company, performs
services for its participants, some of which (and/or their representatives) own
DTC. In accordance with its normal procedures, DTC is expected to record the
positions held by each participant in the Book-Entry Certificates, whether held
for its own account or as a nominee for another person. In general, beneficial
ownership of Book-Entry Certificates will be subject to the DTC Rules.

     Clearstream Banking, societe anonyme, 67 Bd Grande-Duchesse Charlotte,
L-2967 Luxembourg ("CLEARSTREAM, LUXEMBOURG"), was incorporated in 1970 as
"Clearstream, Luxembourg S.A." a company with limited liability under Luxembourg
law (a societe anonyme). Clearstream, Luxembourg S.A. subsequently changed


                                      S-53



its name to Cedelbank. On January 10, 2000, Cedelbank's parent company,
Clearstream, Luxembourg International, societe anonyme ("CI") merged its
clearing, settlement and custody business with that of Deutsche Borse Clearing
AG ("DBC"). The merger involved the transfer by CI of substantially all of its
assets and liabilities (including its shares in CB) to a new Luxembourg company,
New Clearstream, Luxembourg International, societe anonyme ("NEW CI"), which is
50% owned by CI and 50% owned by DBC's parent company Deutsche Borse AG. The
shareholders of these two entities are banks, securities dealers and financial
institutions. Clearstream, Luxembourg International currently has 92
shareholders, including U.S. financial institutions or their subsidiaries. No
single entity may own more than 5 percent of Clearstream, Luxembourg
International's stock.

     Further to the merger, the Board of Directors of New Clearstream,
Luxembourg International decided to re-name the companies in the group in order
to give them a cohesive brand name. The new brand name that was chosen is
"Clearstream" With effect from January 14, 2000 New CI has been renamed
"Clearstream International, societe anonyme." On January 18, 2000, Cedelbank was
renamed "Clearstream Banking, societe anonyme" and Clearstream, Luxembourg
Global Services was renamed "Clearstream Services, societe anonyme."

     On January 17, 2000 DBC was renamed "Clearstream Banking AG." This means
that there are now two entities in the corporate group headed by Clearstream
International which share the name "Clearstream Banking," the entity previously
named "Cedelbank" and the entity previously named "Deutsche Borse Clearing AG."

     Clearstream, Luxembourg holds securities for its customers and facilitates
the clearance and settlement of securities transactions between Clearstream,
Luxembourg customers through electronic book-entry changes in accounts of
Clearstream, Luxembourg customers, thereby eliminating the need for physical
movement of certificates. Transactions may be settled by Clearstream, Luxembourg
in any of 36 currencies, including United States Dollars. Clearstream,
Luxembourg provides to its customers, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Clearstream, Luxembourg also
deals with domestic securities markets in over 30 countries through established
depository and custodial relationships. Clearstream, Luxembourg is registered as
a bank in Luxembourg, and as such is subject to regulation by the Commission de
Surveillance du Secteur Financier, "CSSF," which supervises Luxembourg banks.
Clearstream, Luxembourg's customers are world-wide financial institutions
including underwriters, securities brokers and dealers, banks, trust companies
and clearing corporations. Clearstream, Luxembourg's U.S. customers are limited
to securities brokers and dealers, and banks. Currently, Clearstream, Luxembourg
has approximately 2,000 customers located in over 80 countries, including all
major European countries, Canada, and the United States. Indirect access to
Clearstream, Luxembourg is available to other institutions that clear through or
maintain a custodial relationship with an account holder of Clearstream,
Luxembourg. Clearstream, Luxembourg has established an electronic bridge with
Euroclear Bank S.A./N.V. as the Operator of the Euroclear System (the "EUROCLEAR
OPERATOR") in Brussels to facilitate settlement of trades between Clearstream,
Luxembourg and the Euroclear Operator.

     Euroclear was created in 1968 to hold securities for participants of
Euroclear ("EUROCLEAR PARTICIPANTS") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in any of 32 currencies, including United
States dollars. Euroclear includes various other services, including securities
lending and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. Euroclear is operated by the Brussels, Belgium office of the
Euroclear Operator, under contract with Euroclear Clearance Systems S.C., a
Belgian cooperative corporation (the "COOPERATIVE"). All operations are
conducted by the Euroclear Operator, and all Euroclear securities clearance
accounts and Euroclear cash accounts are accounts with the Euroclear Operator,
not the Cooperative. The Cooperative establishes policy for Euroclear on behalf
of Euroclear Participants. Euroclear Participants include banks (including
central banks), securities brokers and dealers and other professional financial
intermediaries. Indirect access to Euroclear is also available to other firms
that clear through or maintain a custodial relationship with a Euroclear
Participant, either directly or indirectly.

     The Euroclear Operator has a banking license from the Belgian Banking and
Finance Commission. This license authorizes the Euroclear Operator to carry out
banking activities on a global basis.


                                      S-54



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

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

     Under a book-entry format, Certificate Owners may experience some delay in
their receipt of payments, since such payments will be forwarded by the trustee
to Cede & Co. Distributions with respect to offered certificates held through
Clearstream, Luxembourg or Euroclear will be credited to the cash accounts of
Clearstream, Luxembourg Participants or Euroclear Participants in accordance
with the relevant system's rules and procedures, to the extent received by the
Relevant Depositary. Such distributions will be subject to tax reporting in
accordance with relevant United States tax laws and regulations. See "Material
Federal Income Tax Consequences -- Taxation of Debt Securities--Non-U.S.
Investors" and "-- Backup Withholding" in the prospectus. Because DTC can only
act on behalf of Financial Intermediaries, the ability of a Certificate Owner to
pledge Book-Entry Certificates to persons or entities that do not participate in
the depository system, or otherwise take actions in respect of such Book-Entry
Certificates, may be limited due to the lack of physical certificates for such
Book-Entry Certificates. In addition, issuance of the Book-Entry Certificates in
book-entry form may reduce the liquidity of such certificates in the secondary
market since certain potential investors may be unwilling to purchase
certificates for which they cannot obtain physical certificates.

     Monthly and annual reports on the issuing entity provided by the trustee to
Cede & Co., as nominee of DTC, may be made available to Certificate Owners upon
request, in accordance with the DTC Rules and the rules, regulations and
procedures creating and affecting the Relevant Depositary, and to the Financial
Intermediaries to whose DTC accounts the Book-Entry Certificates of such
Certificate Owners are credited.

     DTC has advised the depositor and the trustee that, unless and until
Definitive Certificates are issued, DTC will take any action permitted to be
taken by the holders of the Book-Entry Certificates under the pooling and
servicing agreement only at the direction of one or more Financial
Intermediaries to whose DTC accounts the Book-Entry Certificates are credited,
to the extent that such actions are taken on behalf of Financial Intermediaries
whose holdings include such Book-Entry Certificates. Clearstream, Luxembourg or
the Euroclear Operator, as the case may be, will take any other action permitted
to be taken by a holder of a Book-Entry Certificate under the pooling and
servicing agreement on behalf of a Clearstream, Luxembourg Participant or
Euroclear Participant only in accordance with its relevant rules and procedures
and subject to the ability of the Relevant Depositary to effect such actions on
its behalf through DTC. DTC may take actions, at the direction of the related
Participants, with respect to some Book-Entry Certificates which conflict with
actions taken with respect to other Book-Entry Certificates.

     Definitive Certificates will be issued to Certificate Owners, or their
nominees, rather than to DTC, only if (a) DTC or the depositor advises the
trustee in writing that DTC is no longer willing, qualified or able to discharge
properly its responsibilities as nominee and depositary with respect to the
Book-Entry Certificates and the depositor or the trustee is unable to locate a
qualified successor, or (b) after the occurrence of an event of default under
the pooling and servicing agreement), beneficial owners having not less than 51%
of the Voting Rights evidenced by the offered certificates advise the trustee
and DTC through the Financial Intermediaries and the Participants in writing
that the continuation of a book-entry system through DTC (or a successor
thereto) is no longer in the best interests of beneficial owners of such class.

     Upon the occurrence of any of the events described in the immediately
preceding paragraph, the trustee will be required to notify all beneficial
owners of the occurrence of such event and the availability through DTC of


                                      S-55



Definitive Certificates. Upon surrender by DTC of the global certificate or
certificates representing the Book-Entry Certificates and instructions for
re-registration, the trustee will issue Definitive Certificates, and thereafter
the trustee will recognize the holders of such Definitive Certificates as
holders of the related offered certificates under the pooling and servicing
agreement.

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

PAYMENTS ON MORTGAGE LOANS; ACCOUNTS

     On or before the closing date, the Servicer will establish an account (the
"CERTIFICATE ACCOUNT"), which will be maintained in trust for the benefit of the
certificateholders. The Servicer will deposit or cause to be deposited in the
Certificate Account all amounts required to be deposited in it under the pooling
and servicing agreement. The Servicer may withdraw funds from the Certificate
Account for purposes set forth in the pooling and servicing agreement. See "The
Agreements--Payments on Issuing Entity Assets--Deposits to Security Account" in
the prospectus. On or before the closing date, the trustee will establish an
account (the "DISTRIBUTION ACCOUNT"), which will be maintained with the trustee
in trust for the benefit of the certificateholders. On or prior to the business
day immediately preceding each Distribution Date, the Servicer will withdraw
from the Certificate Account the amount of the Interest Remittance Amount and
the Principal Remittance Amount for that Distribution Date and the prepayment
charges and will deposit such amounts in the Distribution Account. The holders
of the Class P Certificates will be entitled to all prepayment charges received
on the Mortgage Loans and such amounts will not be available for distribution to
the holders of the other certificates. There is no independent verification of
the transaction accounts or the transaction activity with respect to the
Distribution Account.

     Prior to each Determination Date, the Servicer is required to provide the
trustee a report containing the data and information concerning the Mortgage
Loans that is required by the trustee to prepare the monthly statement to
certificateholders for the related Distribution Date. See "--Reports to
Certificateholders" in this prospectus supplement. The trustee is not
responsible for recomputing, recalculating or verifying the information provided
to it by the Servicer in that report and will be permitted to conclusively rely
on any information provided to it by the Servicer.

INVESTMENTS OF AMOUNTS HELD IN ACCOUNTS

     The Certificate Account. All funds in the Certificate Account may be
invested in permitted investments at the direction of the Servicer. All income
and gain net of any losses realized from investment of funds in the Certificate
Account will be for the benefit of the Servicer as additional servicing
compensation and will be remitted to it monthly as described herein.

     The amount of any losses incurred in the Certificate Account in respect of
the investments will be deposited by the Servicer in the Certificate Account.
The trustee will not be liable for the amount of any loss incurred in respect of
any investment or lack of investment of funds held in the Certificate Account
and made in accordance with the pooling and servicing agreement.

     The Distribution Account and Carryover Reserve Fund. Funds in the
Distribution Account and Carryover Reserve Fund will not be invested.


                                      S-56



FEES AND EXPENSES

     The following summarizes the related fees and expenses to be paid from the
assets of the issuing entity and the source of payments for the fees and
expenses:



     TYPE / RECIPIENT (1)                     AMOUNT                 GENERAL PURPOSE             SOURCE (2)              FREQUENCY
-----------------------------   ----------------------------------   ---------------   -----------------------------   ------------

FEES
Servicing Fee / Servicer        0.375% per annum of the Stated       Compensation      Interest collected with              Monthly
                                Principal Balance of each Mortgage                     respect to each Mortgage Loan
                                Loan (3)                                               and any Liquidation Proceeds
                                                                                       or Subsequent Recoveries that
                                                                                       are allocable to accrued and
                                                                                       unpaid interest (4)

Additional Servicing            o    All late payment fees,          Compensation      Payments made by obligors       Time to time
Compensation / Servicer              assumption fees and other                         with respect to the Mortgage
                                     similar charges (excluding                        Loans
                                     prepayment charges)

                                o    All investment income earned    Compensation      Investment income related to         Monthly
                                     on amounts on deposit in the                      the Certificate ccount
                                     Certificate Account.

                                                                                       Liquidation Proceeds and
                                o    Excess Proceeds (5)             Compensation      Subsequent Recoveries           Time to time

Trustee Fee / Trustee           0.0085% per annum of the Stated      Compensation      Interest Remittance Amount           Monthly
                                Principal Balance of each Mortgage
                                Loan

EXPENSES
Insurance expenses / Servicer   Expenses incurred by the Servicer    Reimbursement     To the extent the expenses      Time to time
                                                                     of Expenses       are covered by an insurance
                                                                                       policy with respect to the
                                                                                       Mortgage Loan

Advances / Servicer             To the extent of funds available,    Reimbursement     With respect to each Mortgage   Time to time
                                the amount of any advances.          of Expenses       Loan, late recoveries of the
                                                                                       payments of the costs and
                                                                                       expenses, Liquidation
                                                                                       Proceeds, Subsequent
                                                                                       Recoveries, purchase proceeds
                                                                                       or repurchase proceeds for
                                                                                       that Mortgage Loan (6)



                                      S-57





     TYPE / RECIPIENT (1)                     AMOUNT                 GENERAL PURPOSE             SOURCE (2)              FREQUENCY
-----------------------------   ----------------------------------   ---------------   -----------------------------   ------------

Indemnification expenses /      Amounts for which the seller, the    Indemnification   Amounts on deposit on the       Time to time
the Seller, the Servicer,       Servicer, the NIM Insurer and the                      Certificate Account on any
the Depositor and the NIM       depositor are entitled to                              Distribution Account Deposit
Insurer                         indemnification(7)                                     Date, following the transfer
                                                                                       to the Distribution Account


(1)  If the trustee succeeds to the position of Servicer, it will be entitled to
     receive the same fees and expenses of the Servicer described in this
     prospectus supplement. Any change to the fees and expenses described in
     this prospectus supplement would require an amendment to the pooling and
     servicing agreement. See "The Agreements--Amendment" in the prospectus.

(2)  Unless otherwise specified, the fees and expenses shown in this table are
     paid (or retained by the Servicer in the case of amounts owed to the
     Servicer) prior to distributions on the certificates.

(3)  The amount of the monthly Servicing Fee is subject to adjustment with
     respect to Mortgage Loans that are prepaid in full, as described in this
     prospectus supplement under "Servicing of the Mortgage Loans -- Adjustment
     to Servicing Fee in Connection with Certain Prepaid Mortgage Loans."

(4)  The Servicing Fee is payable from interest collections on the Mortgage
     Loans, but may be paid from any other amounts on deposit in the Certificate
     Account, if interest collections are insufficient to pay the Servicing Fee.

(5)  "EXCESS PROCEEDS" with respect to a liquidated Mortgage Loan means the
     amount, if any, by which the sum of any net liquidation proceeds and
     Subsequent Recoveries exceeds the sum of (i) the unpaid principal balance
     of the Mortgage Loan plus (ii) accrued interest on the Mortgage Loan at the
     Mortgage Rate during each Due Period as to which interest was not paid or
     advanced on the Mortgage Loan.

(6)  Reimbursement of advances for a Mortgage Loan is limited to the late
     recoveries of the payments of the costs and expenses, Liquidation Proceeds,
     Subsequent Recoveries, purchase proceeds or repurchase proceeds for that
     Mortgage Loan.

(7)  Each of the seller, the Servicer and the depositor are entitled to
     indemnification of certain expenses as described in this prospectus
     supplement under "-- Certain Matters Related to the Servicer, the
     Depositor, the Seller and the NIM Insurer."


                                      S-58



DISTRIBUTIONS

     Distributions on the certificates will be made by the trustee on the 25th
day of each month or, if such day is not a business day, on the first business
day thereafter, commencing in August 2006 (each, a "DISTRIBUTION DATE"), to the
persons in whose names such certificates are registered at the close of business
on the Record Date. The "RECORD DATE" for (a) the LIBOR Certificates, as long as
these certificates are Book-Entry Certificates, is the business day immediately
prior to that Distribution Date and (b) any Definitive Certificates is the last
business day of the month immediately preceding the month of that Distribution
Date.

     Distributions on each Distribution Date will be made by check mailed to the
address of the person entitled thereto as it appears on the certificate register
or in the case of a certificateholder who has so notified the trustee in writing
in accordance with the pooling and servicing agreement, by wire transfer in
immediately available funds to the account of such certificateholder at a bank
or other depository institution having appropriate wire transfer facilities;
provided, however, that the final distribution in retirement of the certificates
will be made only upon presentment and surrender of such certificates at the
corporate trust office of the trustee.

     On each Distribution Date, the Trustee will withdraw all prepayment charges
in the Distribution Account and distribute them to the Class P Certificates.

     The "INTEREST REMITTANCE AMOUNT" for any Distribution Date is equal to:

          (a) the sum, without duplication, of:

               (1) all interest on the Mortgage Loans due on the related Due
          Date and received on or prior to the related Determination Date, less
          the expense fees,

               (2) all interest on prepayments on the Mortgage Loans, other than
          Prepayment Interest Excess,

               (3) all advances relating to interest in respect of the Mortgage
          Loans,

               (4) amounts paid by the Servicer in respect of Compensating
          Interest, and

               (5) liquidation proceeds on the Mortgage Loans received during
          the related Prepayment Period (to the extent such liquidation proceeds
          relate to interest),

          minus

          (b) all advances in respect of the Mortgage Loans relating to interest
     and certain expenses reimbursed since the prior Due Date,

          plus

          (c) the lesser of (i) the Principal Prepayment Amount for that
     Distribution Date and (ii) the Deferred Interest for that Distribution
     Date.

     The "PRINCIPAL REMITTANCE AMOUNT" for any Distribution Date is equal to:

          (a) the sum, without duplication, of:

               (1) the principal collected or advanced on the Mortgage Loans
          with respect to the related Due Date,

               (2) the Net Prepayments for that Distribution Date;


                                      S-59



               (3) the Stated Principal Balance of each Mortgage Loan that was
          repurchased by the seller or purchased by the Servicer with respect to
          that Distribution Date (other than Mortgage Loans repurchased due to a
          rate modification);

               (4) any Substitution Adjustment Amounts in respect of Mortgage
          Loans, and

               (5) all liquidation proceeds in respect of Mortgage Loans (to the
          extent such liquidation proceeds related to principal) and all
          Subsequent Recoveries in respect of Mortgage Loans received during the
          related Prepayment Period

          minus

          (b) all non-recoverable advances relating to principal on the Mortgage
     Loans and certain expenses reimbursed since the prior Due Date.

     "PREPAYMENT INTEREST EXCESS" means with respect to any Mortgage Loan and
principal prepayment received by the Servicer from the first day through the
fifteenth day of any calendar month (other than the calendar month in which the
Cut-off Date occurs), all amounts paid by the related mortgagor in respect of
interest on such principal prepayment.

INTEREST

     General. On each Distribution Date, the interest distributable with respect
to the offered certificates is the interest which has accrued on their Class
Certificate Balances immediately prior to that Distribution Date at the then
applicable Pass-Through Rate during the applicable Interest Accrual Period and
any Interest Carry Forward Amount.

     The Pass-Through Rates for the LIBOR Certificates are variable rates that
may change from Distribution Date to Distribution Date. Additionally, the
Pass-Through Rates for the LIBOR Certificates are subject to increase after the
Optional Termination Date. On each Distribution Date, the Pass-Through Rate for
each class of LIBOR Certificates will be subject to the Net Rate Cap. If on any
Distribution Date, the Pass-Through Rate for a class of LIBOR Certificates is
based on the Net Rate Cap, each holder of the applicable certificates will be
entitled to receive the resulting shortfall only from remaining excess cashflow
(if any) to the extent described in this prospectus supplement under "--
Overcollateralization Provisions."

     Distributions of Interest Remittance Amount. On each Distribution Date, the
Interest Remittance Amount for that Distribution Date are required to be
distributed in the following priority, until such Interest Remittance Amount
have been fully distributed:

     first, concurrently, to the classes of senior certificates, the Current
Interest and Interest Carry Forward Amount for each of those classes and that
Distribution Date, pro rata, based on the amount of interest each class is
entitled to receive on that Distribution Date; provided, however, that if funds
available are insufficient to pay such amount, any resulting shortfalls will be
allocated pro rata on the basis of Current Interest and Interest Carry Forward
Amounts due such classes on that Distribution Date; and

     second, sequentially, to the Class M-1, Class M-2, Class M-3 and Class M-4
Certificates, in that order, the Current Interest and Interest Carry Forward
Amount for each such class and that Distribution Date; and

     third, for application as part of the Excess Cashflow for that Distribution
Date, as described under "Overcollateralization" below, any such Interest
Remittance Amount remaining undistributed for that Distribution Date.


                                      S-60



     Pass-Through Rates. The classes of certificates will have the respective
pass through rates described below (each, a "PASS-THROUGH RATE").

     LIBOR Certificates.

     The Pass-Through Rate with respect to each Interest Accrual Period and each
class of LIBOR Certificates will be a per annum rate equal to the lesser of:

     (1) One-month LIBOR for that Interest Accrual Period (calculated as
described below under "-- Calculation of One-Month LIBOR") plus the Pass-Through
Margin for that class and Interest Accrual Period, and

     (2) the Net Rate Cap for that class for that Distribution Date.

     The "PASS-THROUGH MARGIN" for each class of LIBOR Certificates is as
follows:

                 PASS-THROUGH MARGIN
CLASS OF LIBOR   -------------------
 CERTIFICATES        (1)     (2)
--------------      -----   -----
Class A-1           0.190%  0.380%
Class A-2           0.230%  0.460%
Class A-3           0.270%  0.540%
Class M-1           0.370%  0.555%
Class M-2           0.550%  0.825%
Class M-3           1.450%  2.175%
Class M-4           1.750%  2.625%

----------
(1)  For the Interest Accrual Period related to any Distribution Date occurring
     on or prior to the first possible Optional Termination Date.

(2)  For the Interest Accrual Period related to any Distribution Date occurring
     after the first possible Optional Termination Date.

     Definitions Related to Interest Calculations. The "INTEREST ACCRUAL PERIOD"
for each class of offered certificates and for any Distribution Date, will be
the period commencing on the Distribution Date in the month prior to the month
in which that Distribution Date occurs (or the closing date, in the case of the
first Distribution Date) and ending on the day immediately prior to that
Distribution Date. Interest on the offered certificates will be calculated on
the basis of a 360-day year and the actual number of days that elapsed in that
Interest Accrual Period.

     "CURRENT INTEREST," with respect to each class of LIBOR Certificates and
each Distribution Date, is (x) the interest accrued at the applicable
Pass-Through Rate for the applicable Interest Accrual Period on the Class
Certificate Balance of that class immediately prior to that Distribution Date
minus (y) the Net Deferred Interest, if any, allocated to that class for that
Distribution Date.

     "INTEREST CARRY FORWARD AMOUNT," with respect to each class of LIBOR
Certificates and each Distribution Date, is the sum of

     (i) the excess of:

          (a)  Current Interest for that class with respect to prior
               Distribution Dates, over

          (b)  the amount actually distributed to that class with respect to
               interest on prior Distribution Dates; and

     (ii) interest for the applicable Interest Accrual Period on the amount
described above based on the Pass-Through Rate for the applicable class of LIBOR
Certificates.

     "ADJUSTED NET MORTGAGE RATE," with respect to each Mortgage Loan and any
Distribution Date is equal to the Mortgage Rate on that Mortgage Loan as of the
Due Date in the prior month minus the expense fee rate.


                                      S-61



     The "NET RATE CAP" for each Distribution Date is the product of (A) the
weighted average Adjusted Net Mortgage Rate of the Mortgage Loans as of the Due
Date in the prior calendar month (after giving effect to principal prepayments
received in the Prepayment Period related to that prior Due Date) and (B) a
fraction, the numerator of which is 30, and the denominator of which is the
actual number of days in the related Interest Accrual Period.

     The "NET RATE CARRYOVER" for a class of offered certificates on any
Distribution Date is the excess of:

          (1) the amount of interest that class would have accrued for that
     Distribution Date had the Pass-Through Rate for that class and the related
     Interest Accrual Period not been calculated based on the Net Rate Cap, over

          (2) the amount of interest that class accrued on that Distribution
     Date based on the Net Rate Cap,

     plus the unpaid portion of any excess from prior Distribution Dates (and
interest accrued thereon at the then applicable Pass-Through Rate, without
giving effect to the Net Rate Cap).

     Allocation of Net Deferred Interest

     With respect to each Mortgage Loan and each related Due Date, "DEFERRED
INTEREST" will be the excess, if any, of the amount of interest accrued on such
Mortgage Loan from the preceding Due Date to such Due Date over the monthly
payment due for such Due Date. This excess may occur because the Mortgage Rates
of the Mortgage Loans adjust monthly, while the monthly payment generally
adjusts annually (and in some cases only after expiration of a five-year
fixed-payment period), or as a result of the application of the Payment Caps, in
either case, resulting in negative amortization. See "The Mortgage Loans -
General - Mortgage Rate Adjustments" and "--Monthly Payment Adjustments" in this
prospectus supplement.

     With respect to each Distribution Date, the "NET DEFERRED INTEREST" is
equal to the excess, if any, of the Deferred Interest that accrued on the
Mortgage Loans as described above, over the Principal Prepayment Amount for
those Mortgage Loans for that Distribution Date. For each Distribution Date, the
"PRINCIPAL PREPAYMENT AMOUNT" is equal to the sum of all voluntary principal
prepayments received on the Mortgage Loans during the related Prepayment Period,
including the purchase price of any Mortgage Loans repurchased due to
modifications of the Mortgage Rates. For any Distribution Date, the "NET
PREPAYMENTS" are equal to the excess, if any, of the (i) Principal Prepayment
Amount over (ii) the aggregate amount of Deferred Interest accrued on the
Mortgage Loans from the preceding Due Date to the Due Date related to that
Distribution Date.

     To the extent that there is Net Deferred Interest on a Distribution Date,
the Net Deferred Interest on the Mortgage Loans will be allocated among the
offered certificates, pro rata, according to the Class Certificate Balance of
each such class in reduction of the amount of interest otherwise distributable
to that class; provided, however, the amount of Net Deferred Interest allocated
to any class of certificates on a Distribution Date will not exceed the amount
of Current Interest (prior to reduction for Net Deferred Interest) for such
class for that Distribution Date. To the extent that any Net Deferred Interest
allocated to a class of certificates would exceed the amount of Current Interest
(prior to reduction for Net Deferred Interest) for that class for that
Distribution Date, the amount of that excess will be allocated to the Class C
Certificates to the extent distributions would otherwise be made to the Class C
Certificates. Thereafter, that excess amount will be allocated among the classes
of certificates, in proportion to, and up to, the amount of any remaining
interest otherwise distributable on the certificates.

     Any Net Deferred Interest allocated to a class of certificates will be
added to the Class Certificate Balance of the applicable class of certificates.


                                      S-62



PRINCIPAL

     Distributions of Principal. On each Distribution Date, the Principal
Distribution Amount for that Distribution Date is required to be distributed as
follows until such Principal Distribution Amount has been fully distributed:

     (1) For each Distribution Date prior to the Stepdown Date or on which a
Trigger Event is in effect, until the aggregate Class Certificate Balance of the
certificates equals the Target Amount for that Distribution Date in the
following priority:

          (i) concurrently, to the classes of senior certificates, pro rata,
          until their respective Class Certificate Balances are reduced to zero;

          (ii) sequentially, to the Class M-1, Class M-2, Class M-3 and Class
          M-4 Certificates, in that order, until their respective Class
          Certificate Balances are reduced to zero; and

          (iii) any remainder as part of the Excess Cashflow to be allocated as
          described under "--Overcollateralization Provisions" below.

     (2) For each Distribution Date on or after the Stepdown Date and so long as
a Trigger Event is not in effect, from the Principal Distribution Amount, in the
following priority:

          (i) (a) for so long as any class of subordinated certificates is
          outstanding, concurrently, to the classes of senior certificates, pro
          rata, in an amount equal to the lesser of (x) the Principal
          Distribution Amount for that Distribution Date and (y) the Senior
          Principal Distribution Amount for that Distribution Date, until the
          Class Certificate Balance of each such class has been reduced to zero;
          or (b) otherwise to each class of senior certificates, pro rata, the
          Principal Distribution Amount for that Distribution Date;

          (ii) to the Class M-1 Certificates, an amount equal to the lesser of
          (x) the excess of (a) the Principal Distribution Amount for that
          Distribution Date over (b) the amount distributed to the senior
          certificates on that Distribution Date pursuant to clause (2)(i) above
          and (y) the Class M-1 Principal Distribution Amount for that
          Distribution Date, until its Class Certificate Balance has been
          reduced to zero;

          (iii) to the Class M-2 Certificates, an amount equal to the lesser of
          (x) the excess of (a) the Principal Distribution Amount for that
          Distribution Date over (b) the amount distributed to the senior
          certificates and the Class M-1 Certificates on that Distribution Date
          pursuant to clauses (2)(i) and (2)(ii) above and (y) the Class M-2
          Principal Distribution Amount for that Distribution Date, until its
          Class Certificate Balance has been reduced to zero;

          (iv) to the Class M-3 Certificates, an amount equal to the lesser of
          (x) the excess of (a) the Principal Distribution Amount for that
          Distribution Date over (b) the amount distributed to the senior
          certificates and the Class M-1 and Class M-2 Certificates on that
          Distribution Date pursuant to clauses (2)(i) through (2)(iii) above
          and (y) the Class M-3 Principal Distribution Amount for that
          Distribution Date, until its Class Certificate Balance has been
          reduced to zero;

          (v) to the Class M-4 Certificates, an amount equal to the lesser of
          (x) the excess of (a) the Principal Distribution Amount for that
          Distribution Date over (b) the amount distributed to the senior
          certificates and the Class M-1, Class M-2 and Class M-3 Certificates
          on that Distribution Date pursuant to clauses (2)(i) through (2)(iv)
          above and (y) the Class M-4 Principal Distribution Amount for that
          Distribution Date, until its Class Certificate Balance has been
          reduced to zero; and

          (vi) any remainder as part of the Excess Cashflow to be allocated as
          described under "--Overcollateralization Provisions" below.


                                      S-63



     Definitions Related to Principal Distributions.

     "STATED PRINCIPAL BALANCE" means for any Mortgage Loan and Due Date, the
unpaid principal balance of the Mortgage Loan as of that Due Date, as specified
in its amortization schedule at that time (before any adjustment to the
amortization schedule for any moratorium or similar waiver or grace period),
after giving effect to (i) the payment of principal due on that Due Date,
irrespective of any delinquency in payment by the related mortgagor and (ii)
prepayments of principal and the principal portion of liquidation proceeds
received with respect to that Mortgage Loan through the last day of the
Prepayment Period in which the Due Date occurs and increased by any Deferred
Interest added to the principal balance on or prior to that Due Date. The Stated
Principal Balance of a Liquidated Mortgage Loan is zero. The "POOL PRINCIPAL
BALANCE" equals the aggregate Stated Principal Balances of the Mortgage Loans.

     "PREPAYMENT PERIOD" means, with respect to any Distribution Date and
related Due Date, the period from the sixteenth day of the calendar month
immediately preceding the month in which the Distribution Date occurs (or in the
case of the first Distribution Date, from July 1, 2006) through the fifteenth
day of the calendar month in which the Distribution Date occurs.

     "PRINCIPAL DISTRIBUTION AMOUNT" with respect to each Distribution Date is
the (a) Principal Remittance Amount for that Distribution Date, minus (b) the
Overcollateralization Release Amount for that Distribution Date.

     "SENIOR PRINCIPAL DISTRIBUTION AMOUNT" for any Distribution Date an amount
equal to (a) prior to the Stepdown Date or if a Trigger Event is in effect with
respect to that Distribution Date, 100% of the Principal Distribution Amount for
that Distribution Date and (b) on or after the Stepdown Date and as long as a
Trigger Event is not in effect with respect to that Distribution Date, the
amount, if any, by which (x) the aggregate Class Certificate Balance of the
classes of senior certificates after allocation of any Net Deferred Interest for
that Distribution Date but prior to any distributions on that Distribution Date
exceeds (y) the Senior Target Amount.

     "SENIOR TARGET AMOUNT" for any Distribution Date, an amount equal to the
lesser of (a) the product of (1) (i) for each Distribution Date prior to the
Distribution Date in July 2012, approximately 76.25%; and (ii) thereafter,
approximately 81.00% and (2) the Pool Principal Balance for that Distribution
Date determined as of the last day of the related Due Period and (b) the amount,
if any, by which (1) the Pool Principal Balance for that Distribution Date
determined as of the last day of the related Due Period exceeds (2) the OC
Floor.

     "CLASS M-1 PRINCIPAL DISTRIBUTION AMOUNT" for any Distribution Date, an
amount equal, on or after the Stepdown Date and as long as a Trigger Event is
not in effect with respect to that Distribution Date, to the amount, if any, by
which (x) the sum of (i) the aggregate Class Certificate Balance of the senior
certificates, in each case after giving effect to distributions on that
Distribution Date and after allocation of any Net Deferred Interest for that
Distribution Date, and (ii) the Class Certificate Balance of the Class M-1
Certificates after allocation of any Net Deferred Interest for that Distribution
Date but prior to any distributions on that Distribution Date exceeds (y) the
Class M-1 Target Amount for that Distribution Date.

     "CLASS M-1 TARGET AMOUNT" for any Distribution Date, an amount equal to the
lesser of (a) the product of (1) (i) for each Distribution Date prior to the
Distribution Date in July 2012, approximately 86.50%; and (ii) thereafter,
approximately 89.20% and (2) the Pool Principal Balance for that Distribution
Date determined as of the last day of the related Due Period and (b) the amount,
if any, by which (1) the Pool Principal Balance for that Distribution Date
determined as of the last day of the related Due Period exceeds (2) the OC
Floor.

     "CLASS M-2 PRINCIPAL DISTRIBUTION AMOUNT" for any Distribution Date, an
amount equal, on or after the Stepdown Date and as long as a Trigger Event is
not in effect with respect to that Distribution Date, to the amount, if any, by
which (x) the sum of (i) the aggregate Class Certificate Balance of the senior
certificates and Class M-1 Certificates, in each case after giving effect to
distributions on that Distribution Date and after allocation of any Net Deferred
Interest for that Distribution Date, and (ii) the Class Certificate Balance of
the Class M-2 Certificates after allocation of any Net Deferred Interest for
that Distribution Date but prior to any distributions on that Distribution Date
exceeds (y) the Class M-2 Target Amount for that Distribution Date.


                                      S-64



     "CLASS M-2 TARGET AMOUNT" for any Distribution Date, an amount equal to the
lesser of (a) the product of (1) (i) for each Distribution Date prior to the
Distribution Date in July 2012, approximately 93.25%; and (ii) thereafter,
approximately 94.60% and (2) the Pool Principal Balance for that Distribution
Date determined as of the last day of the related Due Period and (b) the amount,
if any, by which (1) the Pool Principal Balance for that Distribution Date
determined as of the last day of the related Due Period exceeds (2) the OC
Floor.

     "CLASS M-3 PRINCIPAL DISTRIBUTION AMOUNT" for any Distribution Date, an
amount equal, on or after the Stepdown Date and as long as a Trigger Event is
not in effect with respect to that Distribution Date, to the amount, if any, by
which (x) the sum of (i) the aggregate Class Certificate Balance of the senior
certificates, Class M-1 Certificates and Class M-2 Certificates, in each case
after giving effect to distributions on that Distribution Date and after
allocation of any Net Deferred Interest for that Distribution Date, and (ii) the
Class Certificate Balance of the Class M-3 Certificates after allocation of any
Net Deferred Interest for that Distribution Date but prior to any distributions
on that Distribution Date exceeds (y) the Class M-3 Target Amount for that
Distribution Date.

     "CLASS M-3 TARGET AMOUNT" for any Distribution Date, an amount equal to the
lesser of (a) the product of (1) (i) for each Distribution Date prior to the
Distribution Date in July 2012, approximately 96.00%; and (ii) thereafter,
approximately 96.80% and (2) the Pool Principal Balance for that Distribution
Date determined as of the last day of the related Due Period and (b) the amount,
if any, by which (1) the Pool Principal Balance for that Distribution Date
determined as of the last day of the related Due Period exceeds (2) the OC
Floor.

     "CLASS M-4 PRINCIPAL DISTRIBUTION AMOUNT" for any Distribution Date, an
amount equal, on or after the Stepdown Date and as long as a Trigger Event is
not in effect with respect to that Distribution Date, to the amount, if any, by
which (x) the sum of (i) the aggregate Class Certificate Balance of the senior
certificates, Class M-1 Certificates, Class M-2 Certificates and Class M-3
Certificates, in each case after giving effect to distributions on that
Distribution Date and after allocation of any Net Deferred Interest for that
Distribution Date, and (ii) the Class Certificate Balance of the Class M-4
Certificates after allocation of any Net Deferred Interest for that Distribution
Date but prior to any distributions on that Distribution Date exceeds (y) the
Class M-4 Target Amount for that Distribution Date.

     "CLASS M-4 TARGET AMOUNT" for any Distribution Date, an amount equal to the
lesser of (a) the product of (1) (i) for each Distribution Date prior to the
Distribution Date in July 2012, approximately 97.25%; and (ii) thereafter,
approximately 97.80% and (2) the Pool Principal Balance for that Distribution
Date determined as of the last day of the related Due Period and (b) the amount,
if any, by which (1) the Pool Principal Balance for that Distribution Date
determined as of the last day of the related Due Period exceeds (2) the OC
Floor.

     The "TARGET AMOUNT" means for any Distribution Date, an amount equal to the
Pool Principal Balance for that Distribution Date minus the
Overcollateralization Target Amount for that Distribution Date.

     "OC FLOOR" means an amount equal to 0.50% of the Cut-off Date Pool
Principal Balance of the Mortgage Loans.

     "OVERCOLLATERALIZATION DEFICIENCY AMOUNT," with respect to any Distribution
Date equals the amount, if any, by which the Overcollateralization Target Amount
exceeds the Overcollateralized Amount on that Distribution Date (after giving
effect to distributions of the Principal Remittance Amount on that Distribution
Date).

     "OVERCOLLATERALIZATION TARGET AMOUNT" means with respect to any
Distribution Date (a) prior to the Stepdown Date, an amount equal to
approximately 1.10% of the Cut-off Date Pool Principal Balance and (b) on or
after the Stepdown Date, the greater of (1) the product of (i) for any
Distribution Date on or after the Stepdown Date but prior to the Distribution
Date in July 2012, 2.75% and thereafter, 2.20% and (ii) of the Pool Principal
Balance as of the Due Date in the month of that Distribution Date (after giving
effect to principal prepayments received in the related Prepayment Period) and
(2) the OC Floor; provided, however, that if a Trigger Event is in effect on any
Distribution Date, the Overcollateralization Target Amount will be the
Overcollateralization Target Amount as in effect for the prior Distribution
Date.

     "OVERCOLLATERALIZED AMOUNT" for any Distribution Date is the amount, if
any, by which (x) the Pool Principal Balance in the Mortgage Pool as of the Due
Date in the month of that Distribution Date (after giving effect to principal
prepayments received in the related Prepayment Period) exceeds (y) the aggregate
Class Certificate Balance of the offered certificates (after giving effect to
distributions on that Distribution Date).


                                      S-65



     "OVERCOLLATERALIZATION RELEASE AMOUNT" means with respect to any
Distribution Date, an amount equal to the lesser of (x) the Principal Remittance
Amount for that Distribution Date and (y) the amount, if any, by which the
Overcollateralized Amount for that date (calculated for this purpose on the
basis of the assumption that 100% of the Principal Remittance Amount for that
date is applied in reduction of the Class Certificate Balances of the offered
certificates) exceeds the Overcollateralization Target Amount for that date.

     "STEPDOWN DATE" is the earlier to occur of (A) the Distribution Date on
which the aggregate Class Certificate Balance of the senior certificates has
been reduced to zero and (B) the later to occur of (x) the Distribution Date in
August 2009 and (y) the first Distribution Date on which the Senior Enhancement
Percentage (calculated for this purpose after giving effect to payments or other
recoveries in respect of the Mortgage Loans during the related Due Period, but
before giving effect to distributions on any certificates on that Distribution
Date) is greater than or equal to (a) on any Distribution Date prior to the
Distribution Date in July 2012, 23.75% and (b) on any Distribution Date on or
after that Distribution Date, 19.00%.

     A "TRIGGER EVENT" is in effect with respect to a Distribution Date on or
after the Stepdown Date if either a Delinquency Trigger Event is in effect with
respect to that Distribution Date or a Cumulative Loss Trigger Event is in
effect with respect to that Distribution Date.

     A "DELINQUENCY TRIGGER EVENT" is in effect with respect to any Distribution
Date on or after the Stepdown Date if the Rolling Three Month Delinquency Rate
as of the last day of the immediately preceding month equals or exceeds, for
Distribution Dates prior to August 2012, 29.17%, and, for Distribution Dates on
or after August 2012, 36.84% of the Senior Enhancement Percentage for such
Distribution Date.

     The "SENIOR ENHANCEMENT PERCENTAGE" with respect to a Distribution Date on
or after the Stepdown Date is equal to a fraction (expressed as a percentage)
of:

          (1) the numerator of which is sum of the aggregate Class Certificate
     Balance of the subordinated certificates and the Overcollateralized Amount
     (which, for purposes of this definition only, shall not be less than zero)
     and

          (2) the denominator of which is the Pool Principal Balance for the
     preceding Distribution Date, in each case after giving effect to
     distributions on that Distribution Date.

     A "CUMULATIVE LOSS TRIGGER EVENT" is in effect with respect to a
Distribution Date on or after the Stepdown Date if the aggregate amount of
Realized Losses on the Mortgage Loans from (and including) the Cut-off Date for
each such Mortgage Loan to (and including) the related Due Date (reduced by the
aggregate amount of Subsequent Recoveries received from the Cut-off Date through
the Prepayment Period related to that Due Date) exceeds the applicable
percentage, for that Distribution Date, of the Cut-off Date Pool Principal
Balance, as set forth below:

DISTRIBUTION DATE                                  PERCENTAGE
--------------------------------   ------------------------------------------
August 2009 - July 2010.........   0.45% with respect to August 2009, plus an
                                   additional 1/12th of 0.35% for each month
                                   thereafter through July 2010

August 2010 - July 2011.........   0.80% with respect to August 2010, plus an
                                   additional 1/12th of 0.35% for each month
                                   thereafter through July 2011

August 2011 - July 2012.........   1.15% with respect to August 2011, plus an
                                   additional 1/12th of 0.40% for each month
                                   thereafter through July 2012

August 2012 - July 2013.........   1.55% with respect to August 2012, plus an
                                   additional 1/12th of 0.15% for each month
                                   thereafter through July 2013

August 2013 and thereafter......   1.70%


                                      S-66



     "UNPAID REALIZED LOSS AMOUNT" means for any class of LIBOR Certificates,
(x) the portion of the aggregate Applied Realized Loss Amount previously
allocated to that class remaining unpaid from prior Distribution Dates minus (y)
any increase in the Class Certificate Balance of that class due to the
allocation of Subsequent Recoveries to the Class Certificate Balance of that
class, and in the case of the senior certificates, together with interest
thereon at the applicable Pass-Through Rate.

     A "REALIZED LOSS" with respect to a Distribution Date and any defaulted
Mortgage Loan, is the excess of the Stated Principal Balance of such defaulted
Mortgage Loan over the liquidation proceeds allocated to principal that have
been received with respect to such Mortgage Loan on or at any time prior to the
Due Date after such Mortgage Loan has been liquidated.

     The "ROLLING THREE MONTH DELINQUENCY RATE" with respect to any Distribution
Date, is an amount equal to the average of the Delinquency Rates for each of the
three (or one and two, in the case of the first and second Distribution Dates,
respectively) immediately preceding months.

     The "DELINQUENCY RATE" for any month is the fraction, expressed as a
percentage, the numerator of which is the aggregate Stated Principal Balance of
all Mortgage Loans that are 60 or more days delinquent (including all
foreclosures, bankruptcies and REO properties) as of the close of business on
the last day of that month, and the denominator of which is the Pool Principal
Balance as of the last day of that month.

     "SUBSEQUENT RECOVERIES" are unexpected recoveries received after the
determination by the Servicer that it has received all proceeds it expects to
receive, with respect to the liquidation of a Mortgage Loan that resulted in a
Realized Loss (other than the amount of such net recoveries representing any
profit realized by the Servicer in connection with the liquidation of any
Mortgage Loan and net of reimbursable expenses) in a month prior to the month of
the receipt of such recoveries.

OVERCOLLATERALIZATION PROVISIONS

     The weighted average Adjusted Net Mortgage Rate for the Mortgage Loans is
generally expected to be higher than the weighted average of the Pass-Through
Rates on the offered certificates. As a result, interest collections on the
Mortgage Loans are expected to be generated in excess of the amount of interest
payable to the holders of the offered certificates and the fees and expenses
payable by the issuing entity. The Excess Cashflow, if any, will be applied on
each Distribution Date as a payment of principal on the class or classes of
certificates then entitled to receive distributions in respect of principal, but
only to the limited extent hereafter described.

     The "EXCESS CASHFLOW" with respect to any Distribution Date is the sum of
(i) the Interest Remittance Amount remaining after the distribution of interest
to the holders of the certificates for that Distribution Date, (ii) the
Overcollateralization Release Amount and (iii) any remaining Principal
Distribution Amount for that date.

     With respect to any Distribution Date, any Excess Cashflow will be paid to
the classes of certificates in the following priority, in each case to the
extent of the remaining Excess Cashflow:

          (1) for each Distribution Date occurring (a) before the Stepdown Date
     or (b) on or after the Stepdown Date but for which a Trigger Event is in
     effect, then until the aggregate Class Certificate Balance of the
     certificates equals the Target Amount for that Distribution Date, in the
     following priority:

               (i) after giving effect to principal distributions on that
     Distribution Date (as described under "--Principal" above), concurrently,
     to the classes of senior certificates, pro rata, in reduction of their
     respective Class Certificate Balances, until their respective Class
     Certificate Balances have been reduced to zero; and

               (ii) sequentially, to the Class M-1, Class M-2, Class M-3 and
     Class M-4 Certificates, in that order, until their respective Class
     Certificate Balance have been reduced to zero;


                                      S-67



          (2) for each Distribution Date occurring on or after the Stepdown Date
     and for which a Trigger Event is not in effect, in the following priority:

               (i) after giving effect to principal distributions on that
     Distribution Date (as described under "--Principal" above), concurrently,
     to the classes of senior certificates, pro rata, in reduction of their
     respective Class Certificate Balances, until the aggregate Class
     Certificate Balance of the senior certificates, after giving effect to
     distributions on that Distribution Date, equals the Senior Target Amount
     for that Distribution Date;

               (ii) to the Class M-1 Certificates, in reduction of their Class
     Certificate Balances, until the aggregate Class Certificate Balance of the
     senior certificates and the Class M-1 Certificates, after giving effect to
     distributions made on that Distribution Date, equals the Class M-1 Target
     Amount for that Distribution Date;

               (iii) to the Class M-2 Certificates, in reduction of their Class
     Certificate Balances, until the aggregate Class Certificate Balance of the
     senior certificates and the Class M-1 and Class M-2 Certificates, after
     giving effect to distributions made on that Distribution Date, equals the
     Class M-2 Target Amount for that Distribution Date;

               (iv) to the Class M-3 Certificates, in reduction of their Class
     Certificate Balances, until the aggregate Class Certificate Balance of the
     senior certificates and the Class M-1, Class M-2 and Class M-3
     Certificates, after giving effect to distributions made on that
     Distribution Date, equals the Class M-3 Target Amount for that Distribution
     Date; and

               (v) to the Class M-4 Certificates, in reduction of their Class
     Certificate Balances, until the aggregate Class Certificate Balance of the
     senior certificates and the Class M-1, Class M-2, Class M-3 and Class M-4
     Certificates, after giving effect to distributions made on that
     Distribution Date, equals the Class M-4 Target Amount for that Distribution
     Date;

          (3) in proportion to their respective Unpaid Realized Loss Amounts, to
     the classes of senior certificates the Unpaid Realized Loss Amount for each
     such class;

          (4) sequentially, to the Class M-1, Class M-2, Class M-3 and Class M-4
     Certificates, in that order, any Unpaid Realized Loss Amounts on for that
     class and that Distribution Date;

          (5) to the Carryover Reserve Fund, the amount of any Net Rate
     Carryover and then from the Carryover Reserve Fund, in the following
     priority:

               (a) to the classes of senior certificates, the amount of any Net
     Rate Carryover Amounts and unpaid Net Rate Carryover Amounts for each such
     class and that Distribution Date, to be paid from amounts on deposit in the
     Carryover Reserve Fund, pro rata, in proportion to the amount of such
     shortfalls;

               (b) sequentially, to the Class M-1, Class M-2, Class M-3 and
     Class M-4 Certificates, in that order, any applicable Net Rate Carryover
     Amounts and unpaid Net Rate Carryover Amounts for each such class and that
     Distribution Date; and

               (c) to the Class C Certificates, as provided in the pooling and
     servicing agreement, any amounts remaining in the Carryover Reserve Fund in
     excess of amounts required to be on deposit therein after satisfying
     priorities (5)(a) through (5)(b) above for that Distribution Date; and

          (6) to the Class R Certificate, any remaining amount.

DETERMINATION OF LIBOR

     The certificates for a particular series may include classes for which the
pass-through rate is based on LIBOR (such certificates, "LIBOR CERTIFICATES").

     LIBOR applicable to an Interest Accrual Period for a class of LIBOR
Certificates will be determined on the second London Business Day prior to the
commencement of such Interest Accrual Period (a "LIBOR DETERMINATION


                                      S-68



DATE"). On each LIBOR Determination Date the Trustee, as calculation agent (in
such capacity, the "CALCULATION AGENT"), will establish LIBOR for the Interest
Accrual Period on the basis of the British Bankers' Association ("BBA")
"INTEREST SETTLEMENT RATE" for one-month deposits in U.S. dollars as found on
Moneyline Telerate Page 3750 as of 11:00 a.m. London time on each LIBOR
Determination Date ("LIBOR"). Interest Settlement Rates currently are based on
rates quoted by sixteen BBA designated banks as being, in the view of such
banks, the offered rate at which deposits are being quoted to prime banks in the
London interbank market. Such Interest Settlement Rates are calculated by
eliminating the four highest rates and the four lowest rates, averaging the
eight remaining rates, carrying the result (expressed as a percentage) out to
six decimal places, and rounding to five decimal places. "MONEYLINE TELERATE
PAGE 3750" means the display page currently so designated on the Moneyline
Telerate Service (or such other page as may replace that page on that service
for the purpose of displaying comparable rates or prices). "LONDON BUSINESS DAY"
means any day on which dealings in deposits of United States dollars are
transacted in the London interbank market.

     If on any LIBOR Determination Date, the Calculation Agent is unable to
calculate LIBOR in accordance with the method set forth in the immediately
preceding paragraph, LIBOR for the next Interest Accrual Period for the
applicable classes of LIBOR Certificates will be calculated in accordance with
the method described in the attached free writing prospectus supplement base
under "Description of the Certificates--Index Applicable to Floating Rate and
Inverse Floating Rate Classes--LIBOR."

     If on the initial LIBOR Determination Date, the Calculation Agent is
required but unable to determine LIBOR in the manner provided in the prospectus,
LIBOR for the initial LIBOR Determination Date will be 5.33%.

CARRYOVER RESERVE FUND

     The Pooling and Servicing Agreement establishes an account (the "CARRYOVER
RESERVE FUND"), which is held in trust by the trustee on behalf of the holders
of the certificates. On the closing date, the depositor will deposit or cause to
be deposited $1,000 in the Carryover Reserve Fund. The Carryover Reserve Fund
will not be an asset of any REMIC.

     In addition to the $1,000 deposit described in the preceding paragraph, on
the closing date the depositor will cause to be deposited in the Carryover
Reserve Fund an amount that is expected to be sufficient to cover any Net Rate
Carryover on the interest-bearing certificates with respect to the first
Distribution Date. On the applicable Distribution Date, such amount will be
distributed first, concurrently, to the classes of the senior certificates, pro
rata, based upon the amount of any Net Rate Carryover with respect to each such
class of certificates, and then, sequentially, to Class M-1, Class M-2, Class
M-3 and Class M-4 Certificates, in that order. Any such amount that remains from
the initial deposit caused by the depositor after payment of any Net Rate
Carryover to the certificates on the first Distribution Date will be distributed
to Merrill Lynch, Pierce, Fenner & Smith Incorporated and will not be available
to cover any Net Rate Carryover on subsequent Distribution Dates.

APPLIED REALIZED LOSS AMOUNTS

     If on any Distribution Date, after giving effect to the distributions
described above, the aggregate Class Certificate Balance of the LIBOR
Certificates exceeds the Pool Principal Balance, the amount of such excess will
be applied to reduce the Class Certificate Balances of the Class M-4, Class M-3,
Class M-2 and Class M-1 Certificates, in that order, in each case until the
Class Certificate Balance of such class has been reduced to zero. After the
Class Certificate Balance of each class of subordinated certificates has been
reduced to zero, if the aggregate Class Certificate Balance of the senior
certificates exceeds the aggregate Stated Principal Balance of the Mortgage
Loans, the amount of that excess will be allocated to reduce the Class
Certificate Balances, sequentially, of the Class A-3, Class A-2 and Class A-1
Certificates, in that order, until their respective Class Certificate Balances
are reduced to zero. Any such reduction described in this paragraph is an
"APPLIED REALIZED LOSS AMOUNT."

     Interest on any class of certificates, the Class Certificate Balance of
which has been reduced through the application of Applied Realized Loss Amounts
as described above will accrue for the related class of certificates on the
Class Certificate Balance as so reduced unless the Class Certificate Balance is
subsequently increased due to the allocation of Subsequent Recoveries to the
Class Certificate Balance of such class as described in the definition of Class
Certificate Balance above.


                                      S-69



STRUCTURING ASSUMPTIONS

     Unless otherwise specified, the information in the tables under "Yield,
Prepayment and Maturity Considerations--Decrement Tables" in this prospectus
supplement has been prepared on the basis of the following assumed
characteristics of the Mortgage Loans and the following additional assumptions,
which combined are the structuring assumptions:

     o    the issuing entity consists of 23 Mortgage Loans with the following
          characteristics:



    CURRENT      MORTGAGE   CURRENT ADJUSTED                                   GROSS     MAXIMUM
   PRINCIPAL       RATE       NET MORTGAGE     REMAINING TERM TO   LOAN AGE    MARGIN   MORTGAGE
  BALANCE ($)       (%)         RATE (%)       MATURITY (MONTHS)   (MONTHS)     (%)     RATE (%)
--------------   --------   ----------------   -----------------   --------   -------   --------

  4,554,255.91    3.00031        2.61681              360              0      3.08017    9.95000
  4,195,907.60    3.24986        2.86636              360              0      2.97014    9.96298
  2,466,000.00    2.58642        2.20292              360              0      2.50943    9.95000
 48,735,769.05    2.90132        2.51782              360              0      3.27614    9.95000
 11,010,632.08    3.20081        2.81731              360              0      2.97793    9.95000
  7,007,924.00    7.86404        7.48054              356              4      3.58204   10.22360
 10,574,342.27    3.03368        2.65018              360              0      3.08400   10.05586
 10,055,328.87    7.43578        7.05228              358              2      3.15378    9.95000
  7,228,215.15    2.37257        1.98907              359              1      2.97236    9.95294
117,389,085.92    3.65167        3.26817              359              1      3.42038    9.97676
 13,661,946.41    8.20915        7.82565              356              4      3.99140   10.08010
    199,590.75    8.23200        7.84850              359              1      3.95000   11.95000
    840,238.56    7.35700        6.97350              358              2      3.07500    9.95000
    734,000.00    2.84714        2.46364              480              0      3.26035    9.95000
  1,252,000.00    2.63403        2.25053              480              0      3.18834    9.95000
    848,500.00    2.45000        2.06650              480              0      3.25000    9.95000
 18,757,711.87    3.08800        2.70450              480              0      3.57439    9.92826
    299,061.80    7.53200        7.14850              477              3      3.25000    9.95000
  2,910,714.22    2.04935        1.66585              480              0      3.37981   10.37387
  7,544,578.46    2.14022        1.75672              480              0      3.25811    9.95000
  2,203,092.00    1.77762        1.39412              480              0      3.22740    9.95000
 35,160,993.85    2.26885        1.88535              480              0      3.42711    9.99409
    131,490.39    9.23200        8.84850              479              1      4.95000   11.95000


  MONTHS TO     MONTHS TO                                    ORIGINAL
  NEXT RATE   NEXT PAYMENT     NEGATIVE                      PRINCIPAL     ORIGINAL
 ADJUSTMENT    ADJUSTMENT    AMORTIZATION    MONTHS TO        BALANCE      MORTGAGE
    DATE          DATE         LIMIT (%)    RECAST DATE         ($)        RATE (%)
 ----------   ------------   ------------   -----------   --------------   --------

      1            61             110            60         4,554,000.00    2.59617
      1            61             110            60         4,197,400.00    2.38540
      1            61             110            60         2,466,000.00    2.58642
      1            61             110            60        48,740,279.00    2.63846
      1            13             110            60        11,016,294.00    1.62838
      1             9             115            60         6,987,700.00    1.28500
      1            13             110            60        10,584,972.00    1.78897
      1            11             115            60        10,056,750.00    1.16569
      1            12             110            60         7,224,450.00    1.53860
      1            12             110            60       117,175,923.06    1.58773
      1             9             115            60        13,572,050.00    1.23342
      1            12             110            60           200,000.00    1.95000
      1            11             115            60           840,000.00    1.00000
      1            61             110            60           734,000.00    2.84714
      1            61             110            60         1,252,000.00    2.63403
      1            61             110            60           848,500.00    2.45000
      1            61             110            60        18,758,292.00    2.95253
      1            58             110            60           300,000.00    1.90000
      1            13             110            60         2,910,900.00    1.84709
      1            13             110            60         7,544,949.00    1.94906
      1            13             110            60         2,203,092.00    1.77762
      1            13             110            60        35,167,194.00    1.94120
      1            12             115            60           131,760.00    1.95000



                                      S-70



     o    the Mortgage Loans prepay at the specified percentage of CPR,

     o    no defaults in the payment by mortgagors of principal of and interest
          on the Mortgage Loans are experienced,

     o    scheduled payments on the Mortgage Loans are received on the first day
          of each month commencing in the calendar month following the closing
          date and are computed before giving effect to prepayments received on
          the last day of the prior month,

     o    Net Prepayments are allocated as described in this prospectus
          supplement without giving effect to loss and delinquency tests,

     o    there are no net interest shortfalls and prepayments represent
          prepayments in full of individual Mortgage Loans and are received on
          the last day of each month, commencing in the calendar month of the
          closing date,

     o    the scheduled monthly payment for each Mortgage Loan has been
          calculated initially and on each Payment Adjustment Date such that
          each Mortgage Loan will amortize in amounts sufficient to repay the
          current balance of the Mortgage Loan by its respective remaining term
          to maturity, subject to the Payment Caps,

     o    the initial Class Certificate Balance of each class of certificates is
          as set forth on the cover page of this prospectus supplement or as
          described in this prospectus supplement under "Description of the
          Certificates,"

     o    interest accrues on each interest bearing class of certificates at the
          applicable interest rate set forth or described on the cover page of
          this prospectus supplement or as described in this prospectus
          supplement,

     o    LIBOR and MTA indices are 5.330% and 4.432%, respectively,

     o    the interest rates on the Mortgage Loans adjust according to the MTA
          index;

     o    distributions in respect of the certificates are received in cash on
          the 25th day of each month commencing in the calendar month following
          the closing date,

     o    the closing date of the sale of the certificates is July 31, 2006, and
          the LIBOR Certificates settle with six days of accrued interest,

     o    the seller is not required to repurchase or substitute for any
          Mortgage Loan,

     o    the Servicer does not exercise the option to repurchase the Mortgage
          Loans described in this prospectus supplement under "--Termination of
          the Issuing Entity; Optional Termination" other than as specified in
          the rows entitled "Weighted Average Life (in years) to Call" in the
          decrement tables in this prospectus supplement or as otherwise
          specified,

     o    no class of certificates becomes a Restricted Class,

     o    the minimum Monthly Payment is received on each Mortgage Loan;

     o    the minimum mortgage rate for a Mortgage Loan is equal to its Gross
          Margin; and

     o    the negative amortization limit for each Mortgage Loan is based on the
          current balance of that Mortgage Loan.


                                      S-71



     The prepayment model used in this prospectus supplement represents an
assumed rate of prepayment each month relative to the then outstanding principal
balance of a pool of mortgage loans for the life of those mortgage loans. The
Prepayment Assumption ("PREPAYMENT ASSUMPTION") does not purport to be a
historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of mortgage loans, including the
mortgage loans. The Prepayment Assumption assumes a constant prepayment rate
("CPR") of 25% per annum of the then outstanding principal balance of the
Mortgage Loans in each month during the life of the Mortgage Loans.

     Although it is assumed that each of the Mortgage Loans prepays at the
specified percentage of CPR, this is not likely to be the case. Moreover,
discrepancies may exist between the characteristics of the actual Mortgage Loans
that will be delivered to the trustee and characteristics of the Mortgage Loans
used in preparing the tables.

REPORTS TO CERTIFICATEHOLDERS

     The monthly statement is prepared by the trustee based on information
provided by the Servicer. The trustee is not responsible for recomputing,
recalculating or verifying the information provided to it by the Servicer and
will be permitted to conclusively rely on any information provided to it by the
Servicer. The report to certificateholders may include additional or other
information of a similar nature to that specified above.

VOTING RIGHTS

     As of any date of determination, holders of the classes of Certificates
will be allocated voting rights in respect of the certificates (collectively,
the "VOTING RIGHTS") as follows: (x) 1% of all Voting Rights will be allocated
to the Holder of the Class R Certificates and (y) the remaining Voting Rights
will be allocated to the classes of offered certificates in proportion to the
certificate balances of the respective certificates on that date.

TERMINATION OF THE ISSUING ENTITY; OPTIONAL TERMINATION

     The Servicer will have the right to repurchase all remaining Mortgage Loans
and foreclosed or otherwise repossessed properties and thereby effect early
retirement of the certificates following the Distribution Date on which the
aggregate Stated Principal Balance of all of the Mortgage Loans and real estate
owned by the issuing entity declines below 10% of the Cut-off Date Pool
Principal Balance. In the event the Servicer exercises such option, the purchase
price distributed with respect to each affected certificate will be 100% of its
then outstanding certificate balance, plus any unpaid accrued interest on such
certificate balance at the applicable pass-through rate, in each case subject to
reduction as provided in the pooling and servicing agreement if the purchase
price is based in part on the appraised value of any foreclosed or otherwise
repossessed properties or delinquent Mortgage Loans and the appraised value is
less than the aggregate Stated Principal Balance of the related Mortgage Loans.
Distributions in respect of any such optional termination will first be paid to
the senior certificates and then, except as set forth in the pooling and
servicing agreement, to the subordinated certificates. The proceeds from any
optional termination may not be sufficient to distribute the full amount to
which each class of certificates is entitled if the purchase price is based in
part on the appraised value of any foreclosed or otherwise repossessed
properties or delinquent Mortgage Loans and such appraised value is less than
the Stated Principal Balance of the Mortgage Loan.

     The issuing entity also is required to terminate upon notice to the trustee
of either the later of: (i) the distribution to certificateholders of the final
payment or collection with respect to the last Mortgage Loan and (ii) the
disposition of all funds with respect to the last Mortgage Loan and the
remittance of all funds due under the pooling and servicing agreement; provided,
however, that in no event will the trust established by the pooling and
servicing agreement terminate later than twenty-one years after the death of the
last surviving lineal descendant of the person named in the pooling and
servicing agreement.

     The pooling and servicing agreement requires the Servicer to direct the
trustee to send a notice of final distribution to each certificateholder in the
event that there are no outstanding Mortgage Loans and no other funds or assets
in the issuing entity other than the funds in the Certificate Account. The
trustee will be required to promptly send the notice of final distribution by
letter to certificateholders mailed not later than the 15th day of the month of
such final distribution. Any such notice of final distribution will be required
to specify (a) the Distribution Date


                                      S-72



upon which final distribution on the certificates will be made upon presentation
and surrender of certificates at the office designated in the notice, (b) the
amount of such final distribution, (c) the location of the office or agency at
which such presentation and surrender must be made, and (d) that the Record Date
otherwise applicable to that Distribution Date is not applicable, distributions
being made only upon presentation and surrender of the certificates at the
office specified in the notice.

     In the event a notice of final distribution is given, the Servicer will be
required to remit all funds in the Certificate Account to the trustee for
deposit in the Distribution Account on the business day prior to the applicable
Distribution Date in an amount equal to the final distribution in respect of the
certificates. Upon final deposit with respect to the issuing entity and the
receipt by the trustee of a request for release of the mortgage loan files, the
trustee will be required to promptly release to the Servicer or its designee the
mortgage loan files.

     Upon presentation and surrender of the certificates, the trustee will be
required to cause to be distributed to the certificateholders of each class
(after reimbursement of all amounts due to the Servicer, the depositor and the
trustee pursuant to the pooling and servicing agreement) (i) its Class
Certificate Balance plus accrued interest in the case of an interest bearing
certificate and all other amounts to which such classes are entitled and (ii) as
to the Class R certificateholders, the amount, if any, which remains on deposit
in the Distribution Account (other than the amounts retained to meet claims)
after application pursuant to clause (i) above.

     In the event that any affected certificateholder does not surrender
certificates for cancellation within six months after the date specified in the
notice of final distribution, the trustee will be required to give a second
written notice to the remaining certificateholders to surrender their
certificates for cancellation and receive the final distribution. If within six
months after the second notice all the applicable certificates have been
surrendered for cancellation, the trustee may take appropriate steps, or may
appoint an agent to take appropriate steps, to contact the remaining
certificateholders concerning surrender of their certificates, and the related
costs will be paid out of the funds and other assets which remain a part of the
issuing entity. If within one year after the second notice all certificates have
not been surrendered for cancellation, the Class R certificateholders will be
entitled to all unclaimed funds and other assets of the issuing entity.

CERTAIN MATTERS REGARDING THE SERVICER, THE DEPOSITOR, THE SELLER AND THE NIM
INSURER

     The prospectus describes the indemnification to which the Servicer and the
depositor (and their respective directors, officers, employees and agents) are
entitled and also describes the limitations on any liability of the Servicer and
the depositor (and their respective directors, officers, employees and agents)
to the issuing entity. See "The Agreements--Certain Matters Regarding the
Servicer and the Depositor" in the prospectus." in the prospectus. The pooling
and servicing agreement provides that these same provisions regarding
indemnification and exculpation apply to the Seller and any NIM Insurer.

RESTRICTIONS ON INVESTMENT, SUITABILITY REQUIREMENTS

     An investment in the certificates may not be appropriate for all investors
due to tax, ERISA or other legal requirements. Investors should review the
disclosure included in this prospectus supplement and the prospectus under
"Material Federal Income Tax Consequences," "ERISA Considerations" and "Legal
Matters" prior to any acquisition and are encouraged to consult with their
advisors prior to purchasing the certificates.

RIGHTS OF THE NIM INSURER UNDER THE POOLING AND SERVICING AGREEMENT

     After the closing date, a separate trust or trusts (or other form of
entity) may be established to issue net interest margin securities secured by
all or a portion of the Class P and Class C Certificates. Those net interest
margin securities may or may not have the benefit of a financial guaranty
insurance policy. The insurer or insurers (the "NIM INSURER") that would issue a
policy will be a third party beneficiary of the Pooling and Servicing Agreement
and will have a number of rights under the Pooling and Servicing Agreement,
which will include the following:


                                      S-73



     o    the right to consent to the Servicer's exercise of its discretion to
          waive assumption fees, late payment or other charges in connection
          with a Mortgage Loan or to arrange for the extension of due dates for
          payments due on a mortgage note for no more than 270 days, if the
          waivers or extensions relate to more than 5% of the Mortgage Loans;

     o    the right to direct the Trustee to terminate all of the rights and
          obligations of the Servicer under the Pooling and Servicing Agreement
          relating to the issuing entity and the assets of the issuing entity
          following the occurrence of an event of default under the Pooling and
          Servicing Agreement;

     o    the right to approve or reject the appointment of any successor
          servicer other than the Trustee, if the Servicer is required to be
          replaced and the Trustee is unwilling or unable to act as successor
          servicer;

     o    the right to consent to any amendment to the Pooling and Servicing
          Agreement; and

     o    each of the rights under "Risk Factors--Rights of the NIM Insurer" in
          this prospectus supplement.

     You should note the rights that the NIM Insurer would have and carefully
evaluate its potential impact on your investment.

                  YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS

GENERAL

     Delinquencies on the Mortgage Loans that are not advanced by or on behalf
of the Servicer (because amounts, if advanced, would be nonrecoverable), will
adversely affect the yield on the certificates. Because of the priority of
distributions, shortfalls resulting from delinquencies on the Mortgage Loans not
so advanced will be borne first by the subordinated certificates, in the reverse
order of their numerical class designations, and then by the senior
certificates, pro rata. If, as a result of shortfalls on the Mortgage Loans, the
sum of the aggregate of the Class Certificate Balances of all classes of
certificates exceeds the Pool Principal Balance, the Class Certificate Balance
of the class of subordinated certificates then outstanding with the highest
numerical class designation will be reduced by the amount of the excess.

PREPAYMENT CONSIDERATIONS AND RISKS

     The rate of principal distributions on the offered certificates, the
aggregate amount of distributions on the offered certificates and the yield to
maturity of the offered certificates will be related to the rate and timing of
payments of principal on the Mortgage Loans. The rate of principal payments on
the Mortgage Loans will in turn be affected by the amortization schedules of the
Mortgage Loans, the rate and timing of the creation of Deferred Interest and by
the rate of principal prepayments, including for this purpose prepayments
resulting from refinancing, liquidations of the Mortgage Loans due to defaults,
casualties, condemnations and repurchases by the seller or Servicer. A
substantial majority of the Mortgage Loans have a prepayment charge if the
related mortgagor prepays such Mortgage Loan during a period ranging from one
year to three years after origination. Because a substantial majority of the
Mortgage Loans contain prepayment charges, the rate of principal prepayments may
be less than the rate of principal payments for Mortgage Loans that did not have
prepayment charges. The holders of the Class P Certificates will be entitled to
all prepayment charges received on the Mortgage Loans, and those amounts will
not be available for distribution on the other classes of certificates. Under
certain circumstances, as described in the pooling and servicing agreement, the
Servicer may waive the payment of any otherwise applicable prepayment charge.
Investors should conduct their own analysis of the effect, if any, that the
prepayment charges, and decisions by the Servicer with respect to the waiver
thereof, may have on the prepayment performance of the Mortgage Loans. The
depositor makes no representations as to the effect that the prepayment charges,
and decisions by the Servicer with respect to the waiver thereof, may have on
the prepayment performance of the Mortgage Loans. The Mortgage Loans are subject
to the "due-on-sale" provisions included therein. However, the Servicer may
choose not to accelerate a Mortgage Loan upon the conveyance of the related
mortgaged property if the Servicer would make a similar decision with respect to
a comparable Mortgage Loan held for its own account. See "The Mortgage Pool" in
this prospectus supplement.


                                      S-74



     The negative amortization of the Mortgage Loans may affect the yields on
the classes of certificates. As a result of the negative amortization of the
Mortgage Loans, the pass-through rate on the offered classes of certificates may
be limited by the Net Rate Cap as described in this prospectus supplement under
"Description of the Certificates--Interest." During periods in which the
outstanding principal balance of a Mortgage Loan is increasing due to the
addition of Deferred Interest to it, such increasing principal balance of that
Mortgage Loan may approach or exceed the value of the related mortgaged
property, thus increasing the likelihood of defaults as well as the amount of
any loss experienced with respect to any such Mortgage Loan that is required to
be liquidated. Furthermore, each Mortgage Loan provides for the payment of any
remaining unamortized principal balance of such Mortgage Loan (due to the
addition of Deferred Interest, if any, to the principal balance of such Mortgage
Loan) in a single payment at the maturity of the Mortgage Loan. Because the
mortgagors may be required to make a larger single payment upon maturity, it is
possible that the default risk associated with the Mortgage Loans is greater
than that associated with fully amortizing mortgage loans.

     In addition, because the Mortgage Rates on the Mortgage Loans adjust at a
different time than the monthly payments thereon and the Payment Caps may limit
the amount by which the monthly payments may adjust, the amount of a monthly
payment may be more or less than the amount necessary to fully amortize the
principal balance of the Mortgage Loans over its then remaining term at the
applicable Mortgage Rate. Accordingly, the Mortgage Loans may be subject to
negative amortization or reduced amortization (if the monthly payment due on a
Due Date is sufficient to pay interest accrued during the related Interest
Accrual Period at the applicable Mortgage Rate but is not sufficient to reduced
principal in accordance with a fully amortizing schedule); or accelerated
amortization (if the monthly payment due on a Due Date is greater than the
amount necessary to pay interest accrued during the related Interest Accrual
Period at the applicable Mortgage Rate and to reduce principal in accordance
with a fully amortizing schedule). In the event of negative amortization,
Deferred Interest is added to the principal balance of such Mortgage Loan and,
if such Deferred Interest is not offset by subsequent accelerated amortization,
at the final payment adjustment date, it may result in payments during the
period prior to the maturity date of the loan greater than, and potentially
substantially greater than, the monthly payment due for the immediately
preceding year.

     Prepayments, liquidations and purchases of the Mortgage Loans will result
in distributions on the certificates of principal amounts that would otherwise
be distributed over the remaining terms of these Mortgage Loans. This includes
any optional repurchase of the remaining Mortgage Loans in connection with the
termination of the issuing entity, as described in this prospectus supplement.
Because the rate of payment of principal of the Mortgage Loans will depend on
future events and a variety of factors, no assurance can be given as to the rate
of payment of principal of the Mortgage Loans or the rate of principal
prepayments. The extent to which the yield to maturity of a class of offered
certificates may vary from the anticipated yield will depend upon the degree to
which the offered certificate is purchased at a discount or premium, and the
degree to which the timing of payments thereon is sensitive to prepayments,
liquidations and purchases of the Mortgage Loans. Further, an investor should
consider the risk that, in the case of any certificate purchased at a discount,
a slower than anticipated rate of principal payments (including prepayments) on
the Mortgage Loans could result in an actual yield to the investor that is lower
than the anticipated yield and, in the case of any other offered certificate
purchased at a premium, a faster than anticipated rate of principal payments
could result in an actual yield to the investor that is lower than the
anticipated yield.

     The rate of principal payments (including prepayments) on pools of mortgage
loans may vary significantly over time and may be influenced by a variety of
economic, geographic, social and other factors, including changes in mortgagors'
housing needs, job transfers, unemployment, mortgagors' net equity in the
mortgaged properties, servicing decisions, as well as the characteristics of the
Mortgage Loans included in the mortgage pool as described in this prospectus
supplement under "The Mortgage Pool--General" and "--Underwriting Process." In
general, if prevailing interest rates were to fall significantly below the
Mortgage Rates on the Mortgage Loans, the Mortgage Loans could be subject to
higher prepayment rates than if prevailing interest rates were to remain at or
above the Mortgage Rates on the Mortgage Loans. Conversely, if prevailing
interest rates were to rise significantly, the rate of prepayments on the
Mortgage Loans would generally be expected to decrease. No assurances can be
given as to the rate of prepayments on the Mortgage Loans in stable or changing
interest rate environments. Furthermore, with respect to up to 30% of the
Mortgage Loans, the depositor may deliver all or a portion of each related
Mortgage File to the trustee not later than five business days after the closing
date. Should the seller fail to deliver all or a portion of any mortgage files
to the depositor or other designee of the depositor or, at the depositor's
direction, to the trustee within that period, the seller will be required to use
its best efforts to deliver a substitute mortgage loan for the


                                      S-75



related delayed delivery Mortgage Loan or repurchase the related delayed
delivery Mortgage Loan. Any repurchases pursuant to this provision would also
have the effect of accelerating the rate of prepayments on the Mortgage Loans.

     The rate and timing of principal prepayments relative to the rate and
timing of the creation of Deferred Interest on the Mortgage Loans will also
affect the yields to maturity on the classes of certificates. To the extent that
Net Deferred Interest exists, it will be allocated in the priority described in
this prospectus supplement. Any allocation of Net Deferred Interest to a class
of certificates will reduce the amount of interest distributable on that class.
Although interest will thereafter accrue on the Net Deferred Interest so
allocated, the increase in the related Class Certificate Balance may increase
the weighted average life of the applicable class of certificates. Any increase
in the weighted average life of the applicable class of certificates may
increase the risk that Realized Losses will be allocated to those classes of
certificates. In addition, because the allocation of the amount of principal
received in connection with voluntary prepayments and repurchases of modified
Mortgage Loans between the senior certificates and the subordinated certificates
may be determined based on the relationship between the aggregate Class
Certificate Balance of the senior certificates and the aggregate Class
Certificate Balance of the subordinated certificates, this method of allocating
Net Deferred Interest may affect the rate and timing of distributions of
principal prepayments among the classes of certificates. We cannot assure you as
to the rate, timing or amount of the allocation of Net Deferred Interest to any
class of certificates or as to the resulting effect on the yield to maturity or
the weighted average life of any class of certificates. The amount of the
Deferred Interest on the Mortgage Loans is offset by using a portion of the
Principal Prepayment Amount to make distributions of Current Interest on the
certificates. On any Distribution Date, to the extent that the aggregate
Deferred Interest on the Mortgage Loans as of the related Due Date exceeds the
Principal Prepayment Amount as of the end of the related Prepayment Period, such
excess amounts will be deducted from the interest payable on the certificates
and thereby cause a delay in the payment of accrued interest on the classes of
certificates to which the Net Deferred Interest is allocated.

     The timing of changes in the rate of prepayments on the Mortgage Loans may
significantly affect an investor's actual yield to maturity, even if the average
rate of principal payments on the Mortgage Loans is consistent with an
investor's expectation. In general, the earlier a prepayment of principal on the
Mortgage Loans, the greater the effect on an investor's yield to maturity. The
effect on an investor's yield as a result of principal distributions occurring
at a rate higher (or lower) than the rate anticipated by the investor during the
period immediately following the issuance of the offered certificates may not be
offset by a subsequent like decrease (or increase) in the rate of principal
distributions.

WEIGHTED AVERAGE LIVES OF THE OFFERED CERTIFICATES

     The weighted average life of an offered certificate is determined by (a)
multiplying the amount of the net reduction, if any, of the Class Certificate
Balance of the Certificate on each Distribution Date by the number of years from
the date of issuance to the Distribution Date, (b) summing the results and (c)
dividing the sum by the aggregate amount of the net reductions in the Class
Certificate Balance of the Certificate referred to in clause (a).

     For a discussion of the factors that may influence the rate of payments
(including prepayments) of the Mortgage Loans, see "--Prepayment Considerations
and Risks" in this prospectus supplement and "Yield and Prepayment
Considerations" in the prospectus.

     In general, the weighted average lives of the offered certificates will be
shortened if the level of prepayments of principal of the Mortgage Loans
increases. The weighted average lives of the offered certificates, however, will
depend upon a variety of other factors, including the timing of changes in the
rate of principal distributions, and the priority sequence of distributions of
principal of the classes of certificates. See "Description of the
Certificates--Principal" in this prospectus supplement.

     The interaction of the foregoing factors may have different effects on
various classes of offered certificates and the effects on any class may vary at
different times during the life of the class. Accordingly, no assurance can be
given as to the weighted average life of any class of offered certificates.
Further, to the extent the prices of the offered certificates represent
discounts or premiums to their respective original Class Certificate Balances,
variability in the weighted average lives of the classes of offered certificates
will result in variability in the related yields to maturity. For an example of
how the weighted average lives of the classes of offered certificates may be


                                      S-76



affected at various constant percentages of the Prepayment Assumption, see the
Decrement Tables under the next heading.

DECREMENT TABLES

     The following tables indicate the percentages of the initial Class
Certificate Balances of the classes of offered certificates that would be
outstanding after each of the Distribution Dates shown at various percentages of
the Prepayment Assumption and the corresponding weighted average lives of the
classes. The tables have been prepared on the basis of the structuring
assumptions. It is not likely that the Mortgage Loans will have the precise
characteristics described in this prospectus supplement or all of the Mortgage
Loans will prepay at the percentages of the Prepayment Assumption specified in
the tables or at any other constant rate. Moreover, the diverse remaining terms
to maturity of the Mortgage Loans could produce slower or faster principal
distributions than indicated in the tables, which have been prepared using the
specified constant percentages of the Prepayment Assumption, even if the
remaining term to maturity of the Mortgage Loans is consistent with the
remaining terms to maturity of the Mortgage Loans specified in the structuring
assumptions.


                                      S-77



            PERCENT OF INITIAL CLASS CERTIFICATE BALANCES OUTSTANDING



                                 CLASS A-1, CLASS A-2 AND CLASS A-3               CLASS M-1
                                          PERCENTAGE OF CPR                   PERCENTAGE OF CPR
                                 ----------------------------------   ---------------------------------
DISTRIBUTION DATE                  15%    20%    25%    30%    40%     15%     20%    25%    30%    40%
------------------------------    ----   ----   ----   ----   ----    -----   ----   ----   ----   ----

Initial Percentage ...........     100    100    100    100    100      100    100    100    100    100
July 2007 ....................      87     81     75     69     58      100    100    100    100    100
July 2008 ....................      75     65     56     47     32      100    100    100    100    100
July 2009 ....................      64     51     41     31     16      100    100    100    100    100
July 2010 ....................      52     39     29     22     12      100    100     86     65     35
July 2011 ....................      42     30     22     15      7      100     88     64     45     21
July 2012 ....................      35     24     16     11      4      100     71     49     32     12
July 2013 ....................      30     20     13      8      3       67     44     28     17      1
July 2014 ....................      25     16      9      5      1       57     35     21     12      0
July 2015 ....................      21     12      7      4      1       47     27     15      7      0
July 2016 ....................      18     10      5      3      *       40     22     11      1      0
July 2017 ....................      15      8      4      2      0       33     17      7      0      0
July 2018 ....................      12      6      3      1      0       27     13      2      0      0
July 2019 ....................      10      5      2      *      0       23     10      0      0      0
July 2020 ....................       8      4      1      *      0       19      7      0      0      0
July 2021 ....................       7      3      1      0      0       16      2      0      0      0
July 2022 ....................       6      2      *      0      0       13      0      0      0      0
July 2023 ....................       5      2      *      0      0       11      0      0      0      0
July 2024 ....................       4      1      0      0      0        8      0      0      0      0
July 2025 ....................       3      1      0      0      0        4      0      0      0      0
July 2026 ....................       3      *      0      0      0        1      0      0      0      0
July 2027 ....................       2      *      0      0      0        0      0      0      0      0
July 2028 ....................       1      0      0      0      0        0      0      0      0      0
July 2029 ....................       1      0      0      0      0        0      0      0      0      0
July 2030 ....................       1      0      0      0      0        0      0      0      0      0
July 2031 ....................       *      0      0      0      0        0      0      0      0      0
July 2032 ....................       *      0      0      0      0        0      0      0      0      0
July 2033 ....................       0      0      0      0      0        0      0      0      0      0
July 2034 ....................       0      0      0      0      0        0      0      0      0      0
July 2035 ....................       0      0      0      0      0        0      0      0      0      0
July 2036 and thereafter .....       0      0      0      0      0        0      0      0      0      0
Weighted Average Life (in
   years) to Maturity** ......    5.79   4.29   3.34   2.69   1.83    10.10   7.84   6.32   5.24   4.14
Weighted Average Life (in
   years) to Call*** .........    5.40   3.96   3.08   2.47   1.68     9.43   7.31   5.90   4.89   3.84


----------
*    Indicates a value greater than 0% and less than 0.5%

**   Determined as specified under "Weighted Average Lives of the Offered
     Certificates" in this prospectus supplement.

***  Determined as specified under "Weighted Average Lives of the Offered
     Certificates" in this prospectus supplement and assumes that the Servicer
     exercises the option to repurchase the Mortgage Loans on the earliest
     possible Distribution Date.


                                      S-78



            PERCENT OF INITIAL CLASS CERTIFICATE BALANCES OUTSTANDING



                                             CLASS M-2                          CLASS M-3
                                         PERCENTAGE OF CPR                  PERCENTAGE OF CPR
                                 --------------------------------   --------------------------------
DISTRIBUTION DATE                 15%    20%    25%    30%    40%    15%    20%    25%    30%    40%
------------------------------   ----   ----   ----   ----   ----   ----   ----   ----   ----   ----

Initial Percentage ...........    100    100    100    100    100    100    100    100    100    100
July 2007 ....................    100    100    100    100    100    100    100    100    100    100
July 2008 ....................    100    100    100    100    100    100    100    100    100    100
July 2009 ....................    100    100    100    100    100    100    100    100    100    100
July 2010 ....................    100    100     86     65     35    100    100     86     65     35
July 2011 ....................    100     88     64     45     21    100     88     64     45      6
July 2012 ....................     98     66     42     25      1     80     56     38     16      0
July 2013 ....................     67     44     28     16      0     67     44     23      0      0
July 2014 ....................     57     35     21      5      0     57     35      6      0      0
July 2015 ....................     47     27     12      0      0     47     22      0      0      0
July 2016 ....................     40     22      4      0      0     40      7      0      0      0
July 2017 ....................     33     15      0      0      0     33      0      0      0      0
July 2018 ....................     27      8      0      0      0     22      0      0      0      0
July 2019 ....................     23      2      0      0      0     10      0      0      0      0
July 2020 ....................     19      0      0      0      0      1      0      0      0      0
July 2021 ....................     13      0      0      0      0      0      0      0      0      0
July 2022 ....................      7      0      0      0      0      0      0      0      0      0
July 2023 ....................      3      0      0      0      0      0      0      0      0      0
July 2024 ....................      0      0      0      0      0      0      0      0      0      0
July 2025 ....................      0      0      0      0      0      0      0      0      0      0
July 2026 ....................      0      0      0      0      0      0      0      0      0      0
July 2027 ....................      0      0      0      0      0      0      0      0      0      0
July 2028 ....................      0      0      0      0      0      0      0      0      0      0
July 2029 ....................      0      0      0      0      0      0      0      0      0      0
July 2030 ....................      0      0      0      0      0      0      0      0      0      0
July 2031 ....................      0      0      0      0      0      0      0      0      0      0
July 2032 ....................      0      0      0      0      0      0      0      0      0      0
July 2033 ....................      0      0      0      0      0      0      0      0      0      0
July 2034 ....................      0      0      0      0      0      0      0      0      0      0
July 2035 ....................      0      0      0      0      0      0      0      0      0      0
July 2036 and thereafter .....      0      0      0      0      0      0      0      0      0      0
Weighted Average Life (in
   years) to Maturity* .......   9.78   7.59   6.12   5.07   3.97   9.19   7.13   5.76   4.80   3.74
Weighted Average Life (in
   years) to Call** ..........   9.41   7.29   5.89   4.88   3.75   9.18   7.12   5.75   4.80   3.69


----------
*    Determined as specified under "Weighted Average Lives of the Offered
     Certificates" in this prospectus supplement.

**   Determined as specified under "Weighted Average Lives of the Offered
     Certificates" in this prospectus supplement and assumes that the Servicer
     exercises the option to repurchase the Mortgage Loans on the earliest
     possible Distribution Date.


                                      S-79



            PERCENT OF INITIAL CLASS CERTIFICATE BALANCES OUTSTANDING

                                             CLASS M-4
                                         PERCENTAGE OF CPR
                                 --------------------------------
DISTRIBUTION DATE                 15%    20%    25%    30%    40%
------------------------------   ----   ----   ----   ----   ----
Initial Percentage ...........    100    100    100    100    100
July 2007 ....................    100    100    100    100    100
July 2008 ....................    100    100    100    100    100
July 2009 ....................    100    100    100    100    100
July 2010 ....................    100    100     86     65     13
July 2011 ....................    100     88     64     45      0
July 2012 ....................     80     56     21      0      0
July 2013 ....................     67     41      0      0      0
July 2014 ....................     57     11      0      0      0
July 2015 ....................     47      0      0      0      0
July 2016 ....................     26      0      0      0      0
July 2017 ....................      5      0      0      0      0
July 2018 ....................      0      0      0      0      0
July 2019 ....................      0      0      0      0      0
July 2020 ....................      0      0      0      0      0
July 2021 ....................      0      0      0      0      0
July 2022 ....................      0      0      0      0      0
July 2023 ....................      0      0      0      0      0
July 2024 ....................      0      0      0      0      0
July 2025 ....................      0      0      0      0      0
July 2026 ....................      0      0      0      0      0
July 2027 ....................      0      0      0      0      0
July 2028 ....................      0      0      0      0      0
July 2029 ....................      0      0      0      0      0
July 2030 ....................      0      0      0      0      0
July 2031 ....................      0      0      0      0      0
July 2032 ....................      0      0      0      0      0
July 2033 ....................      0      0      0      0      0
July 2034 ....................      0      0      0      0      0
July 2035 ....................      0      0      0      0      0
July 2036 and thereafter .....      0      0      0      0      0
Weighted Average Life (in
   years) to Maturity* .......   8.44   6.56   5.35   4.58   3.47
Weighted Average Life (in
   years) to Call** ..........   8.44   6.56   5.35   4.58   3.47

----------
*    Determined as specified under "Weighted Average Lives of the Offered
     Certificates" in this prospectus supplement.

**   Determined as specified under "Weighted Average Lives of the Offered
     Certificates" in this prospectus supplement and assumes that the Servicer
     exercises the option to repurchase the Mortgage Loans on the earliest
     possible Distribution Date.


                                      S-80



FINAL SCHEDULED DISTRIBUTION DATE

     The "FINAL SCHEDULED DISTRIBUTION DATE" for the certificates is the
Distribution Date in September 2046. Because the rate of distributions in
reduction of the Class Certificate Balance of each class of offered certificates
will depend on the rate of payment (including prepayments) of the Mortgage
Loans, the Class Certificate Balance of any class could be reduced to zero
significantly earlier or later than the Final Scheduled Distribution Date. The
rate of payments on the Mortgage Loans will depend on their particular
characteristics, as well as on prevailing interest rates from time to time and
other economic factors, and no assurance can be given as to the actual payment
experience of the Mortgage Loans. See "Yield, Prepayment and Maturity
Considerations--Prepayment Considerations and Risks" and "--Weighted Average
Lives of the Offered Certificates" in this prospectus supplement and "Yield and
Prepayment Considerations" in the prospectus.

THE SUBORDINATED CERTIFICATES

     General. The weighted average life of, and the yield to maturity on, the
subordinated certificates, in increasing order of their numerical class
designation, will be progressively more sensitive to the rate and timing of
mortgagor defaults and the severity of ensuing losses on the Mortgage Loans. In
particular, the rate and timing of mortgagor defaults and the severity of
ensuing losses on the Mortgage Loans may be affected by the characteristics of
the Mortgage Loans as described under "The Mortgage Pool--General" and
"--Underwriting Process." If the actual rate and severity of losses on the
Mortgage Loans is higher than those assumed by a holder of a subordinated
certificate, the actual yield to maturity of the Certificate may be lower than
the yield expected by the holder based on the holder's assumptions. The timing
of losses on Mortgage Loans will also affect an investor's actual yield to
maturity, even if the rate of defaults and severity of losses over the life of
the mortgage pool are consistent with an investor's expectations. In addition,
shortfalls in cash available for distributions on the subordinated certificates
will result in a reduction in the Class Certificate Balance of the class of
subordinated certificates then outstanding with the highest numerical class
designation if and to the extent that the aggregate of the Class Certificate
Balances of the certificates (other than the Class P Certificates), following
all distributions and the allocation of Realized Losses on the Mortgage Loans on
a Distribution Date, exceeds the Pool Principal Balance as of the Due Date
occurring in the month of the Distribution Date. As a result of the reductions,
less interest will accrue on the class of subordinated certificates than
otherwise would be the case. See "Description of the Certificates--Allocation of
Losses" in this prospectus supplement.

                                LEGAL PROCEEDINGS

     There are no legal proceedings against IndyMac Bank, F.S.B., the depositor,
the trustee, the issuing entity or the Servicer, or to which any of their
respective properties are subject, that is material to the certificateholders,
nor is the depositor aware of any proceedings of this type contemplated by
governmental authorities.

                    MATERIAL FEDERAL INCOME TAX CONSEQUENCES

     The following discussion and the discussion in the prospectus under the
caption "Material Federal Income Tax Consequences" is the opinion of Sidley
Austin LLP ("TAX COUNSEL") on the anticipated material federal income tax
consequences of the purchase, ownership, and disposition of the offered
certificates. It is based on the current provisions and interpretations of the
Code and the accompanying Treasury regulations and on current judicial and
administrative rulings. All of these authorities are subject to change and any
change can apply retroactively.

     For federal income tax purposes, the issuing entity (exclusive of the
Carryover Reserve Fund) will consist of one or more REMICs in a tiered
structure. The highest REMIC will be referred to as the "MASTER REMIC", and each
REMIC below the Master REMIC will be referred to as an "UNDERLYING REMIC." Each
underlying REMIC will issue multiple classes of uncertificated interests (the
"UNDERLYING REMIC REGULAR INTERESTS"), which will be designated as the regular
interests in such underlying REMIC and will be held by the REMIC directly above
such underlying REMIC in a tiered structure. The assets of the lowest REMIC in
this tiered structure will consist of the Mortgage Loans and any other assets
designated in the pooling and servicing agreement. The Master REMIC will issue
the senior certificates and the subordinated certificates (together, excluding
the Class R Certificate, the "REGULAR CERTIFICATES"). The Regular Certificates
will be designated as the regular interests in the Master REMIC. In addition,
each class of LIBOR Certificates will represent a beneficial interest in the
right to receive certain


                                      S-81



payments of Net Rate Carryover as described below. The rights of the LIBOR
Certificates to receive payments of such Net Rate Carryover will represent, for
federal income tax purposes, separate contractual rights coupled with REMIC
regular interests within the meaning of Treasury regulation Section 1.860G-2(i).
Elections will be made to treat each of the REMICs as a REMIC for federal tax
purposes. The Class R Certificates will represent the beneficial ownership of
the residual interest in each underlying REMIC (if any) and the residual
interest in the Master REMIC. The assets of the Master REMIC will consist of the
underlying REMIC Regular Certificates (or, if there are no underlying REMICs,
the Mortgage Loans and any other assets designated in the pooling and servicing
agreement). If there are one or more underlying REMICs, the aggregate
distributions on the underlying REMIC Regular Interests held by the Master REMIC
will equal the aggregate distributions on the Regular Certificates issued by the
Master REMIC. The Carryover Reserve Fund will not constitute any part of any
REMIC created under the pooling and servicing agreement.

TAXATION OF THE REGULAR INTEREST COMPONENT OF THE LIBOR CERTIFICATES

     A holder of a class of LIBOR Certificates will be treated for federal
income tax purposes as owning an interest in the corresponding class of regular
interests in the Master REMIC (this interest is referred herein as the "regular
interest component" of the LIBOR Certificate). In addition, the Pooling and
Servicing Agreement provides that each holder of a LIBOR Certificate will be
treated as owning an interest in a limited recourse interest rate cap contract
representing the right to receive Net Rate Carryover (this interest is referred
herein as the "basis risk contract component" of the LIBOR Certificate). The
regular interest component of a LIBOR Certificate will be entitled to receive
interest and principal distributions at the times and in the amounts equal to
those made on the LIBOR Certificate to which it corresponds, excluding any Net
Rate Carryover.

     A holder of a LIBOR Certificate must allocate its purchase price for the
LIBOR Certificate between its components--the regular interest component and the
basis risk contract component. To the extent the basis risk contract component
has significant value, the regular interest component will, in the case of the
LIBOR Certificates, be viewed as having been issued with lesser premium or an
additional amount of original issue discount ("OID") (which could cause the
total amount of OID to exceed a statutorily defined de minimis amount).

     Upon the sale, exchange, or other disposition of a LIBOR Certificate, the
holder must allocate the amount realized between the components of the LIBOR
Certificate based on the relative fair market values of those components at the
time of sale. Assuming that a LIBOR Certificate is held as a "capital asset"
within the meaning of Section 1221 of the Code, gain or loss on the disposition
of an interest in the basis risk contract component should be capital gain or
loss and gain or loss on the regular interest component will be treated as
described in the prospectus under "Federal Income Tax Consequences--Gain or Loss
on Disposition".

     Interest on the regular interest component of a LIBOR Certificate must be
included in income by a holder under the accrual method of accounting,
regardless of the holder's regular method of accounting. In addition, the
regular interest components of the LIBOR Certificates could be considered to
have been issued with OID. For purposes of determining the amount and rate of
accrual of OID and market discount, the issuing entity intends to assume that
there will be prepayments on the Mortgage Loans at a rate equal to 100% of the
Prepayment Assumption. No representation is made as to whether the Mortgage
Loans will prepay at the foregoing rate or any other rate. See "Yield,
Prepayment and Maturity Considerations" and "Material Federal Income Tax
Consequences" in the prospectus.

     If the holders of any Regular Certificates are treated as acquiring their
certificates at a premium, the holders are encouraged to consult their tax
advisors regarding the election to amortize bond premium and the method to be
employed. See "Material Federal Income Tax Consequences--REMIC Certificates--a.
Regular Certificates" in the prospectus.

STATUS OF THE LIBOR CERTIFICATES

     The regular interest components of the LIBOR Certificates will be treated
as assets described in Section 7701(a)(19)(C) of the Code for a "domestic
building and loan association," and as "real estate assets" under Section
856(c)(5)(B) of the Code for a "real estate investment trust" ("REIT"),
generally, in the same proportion that the assets of the issuing entity,
exclusive of Carryover Reserve Fund, would be so treated. In addition, to the
extent the


                                      S-82



regular interest component of a LIBOR Certificate represents real estate assets
under Section 856(c)(5)(B) of the Code, the interest derived from that component
would be interest on obligations secured by interests in real property for
purposes of Section 856(c)(3)(B) of the Code for a REIT. In addition, the
regular interest components of the LIBOR Certificates will be treated as assets
described in Section 860G(a)(3) of the Code. The basis risk contract components
of the LIBOR Certificates will not, however, qualify as assets described in
Section 7701(a)(19)(C) of the Code, as real estate assets under Section
856(c)(5)(B) of the Code or as assets described in Section 860G(a)(3) of the
Code.

THE BASIS RISK CONTRACT COMPONENTS

     The following discussion assumes that the rights of the holders of the
LIBOR Certificates under the basis risk contract will be treated as rights under
a notional principal contract rather than as a partnership for federal income
tax purposes. If these rights were treated as representing the beneficial
interests in an entity taxable as a partnership for federal income tax purposes,
then there could be different tax timing consequences to all such
certificateholders and different withholding tax consequences on payments of Net
Rate Carryover to holders of the LIBOR Certificates who are non-U.S. Persons.
Prospective investors in the LIBOR Certificates should consult their tax
advisors regarding their appropriate tax treatment.

     As indicated above, a portion of the purchase price paid by a holder to
acquire a LIBOR Certificate will be attributable to the basis risk contract
component of such certificate. As of the closing date, the basis risk contract
components are expected to have an insubstantial value relative to the regular
interest components. The portion of the overall purchase price attributable to
the basis risk contract component must be amortized over the life of such
certificate, taking into account the declining balance of the related regular
interest component. Treasury regulations concerning notional principal contracts
provide alternative methods for amortizing the purchase price of an interest
rate cap contract. Under the level yield method, the price paid for an interest
rate cap is amortized over the life of the cap as though it were the principal
amount of a loan bearing interest at a reasonable rate. Holders are urged to
consult their tax advisors concerning the methods that can be employed to
amortize the portion of the purchase price paid for the basis risk contract
component of a LIBOR Certificate.

     Any Net Rate Carryover paid to a holder from the Carryover Reserve Fund
will be treated as periodic payments on an interest rate cap contract. To the
extent the sum of such periodic payments for any year exceeds that year's
amortized cost of the related basis risk contract component, such excess is
ordinary income. Conversely, to the extent that the amount of that year's
amortized cost exceeds the sum of the periodic payments, such excess shall
represent a net deduction for that year. Although not clear, net income or a net
deduction with respect to the basis risk contract should be treated as ordinary
income or as an ordinary deduction.

     A beneficial owner's ability to recognize a net deduction with respect to
the basis risk contract component of a LIBOR Certificate or any such guarantee
payment may be limited under Sections 67 and/or 68 of the Code in the case of
(1) estates and trusts and (2) individuals owning an interest in such component
directly or through a "pass-through entity" (other than in connection with such
individual's trade or business). Pass-through entities include partnerships, S
corporations, grantor trusts and non-publicly offered regulated investment
companies, but do not include estates, nongrantor trusts, cooperatives, real
estate investment trusts and publicly offered regulated investment companies.
Further, a beneficial owner will not be able to recognize a net deduction with
respect to the basis risk contract component or any such guarantee payment in
computing the beneficial owner's alternative minimum tax liability. Because a
beneficial owner of a LIBOR Certificate will be required to include in income
the amount deemed to have been paid by such owner pursuant to the basis risk
contract or such guarantee but may not be able to deduct that amount from
income, a beneficial owner of a LIBOR Certificate may have income that exceeds
cash distributions on the LIBOR Certificate, in any period over the term of the
LIBOR Certificate. As a result, the LIBOR Certificates may not be a suitable
investment for any taxpayer whose net deduction with respect to the basis risk
contract or guarantee would be subject to the limitations described above.
Subject to the foregoing, if for any year the amount of that year's amortized
cost exceeds the sum of the periodic payments, such excess is allowable as an
ordinary deduction.


                                      S-83



TAXATION OF THE RESIDUAL CERTIFICATES

     The holders of the Residual Certificates must include the taxable income of
each underlying REMIC and the Master REMIC in their federal taxable income. The
resulting tax liability of the holders may exceed cash distributions to them
during certain periods. All or a portion of the taxable income from a Residual
Certificate recognized by a holder may be treated as "excess inclusion" income,
which with limited exceptions, cannot be reduced by deductions (including net
operating losses) and in all cases is subject to U.S. federal income tax.

     In computing alternative minimum taxable income, the special rule providing
that taxable income cannot be less than the sum of the taxpayer's excess
inclusions for the year does not apply. However, a taxpayer's alternative
minimum taxable income cannot be less than the sum of the taxpayer's excess
inclusions for the year. In addition, the amount of any alternative minimum tax
net operating loss is determined without regard to any excess inclusions.

     Purchasers of a Residual Certificate are encouraged to consider carefully
the tax consequences of an investment in Residual Certificates discussed in the
prospectus and consult their tax advisors with respect to those consequences.
See "Material Federal Income Tax Consequences - REMIC Certificates - b. Residual
Certificates" in the prospectus. In particular, prospective holders of Residual
Certificates are encouraged to consult their tax advisors regarding whether a
Residual Certificate will be treated as a "noneconomic" residual interest, as a
"tax avoidance potential" residual interest or both. Among other things, holders
of Residual Certificates that are treated as noneconomic residual interests
should be aware of REMIC regulations that govern the treatment of "inducement
fees" and that may affect their ability to transfer the Residual Certificates.
See "Material Federal Income Tax Consequences - Tax-Related Restrictions on
Transfer of Residual Certificates - Noneconomic Residual Certificates" and
"Material Federal Income Tax Consequences - b. Residual Certificates - Excess
Inclusions" in the prospectus.

                              ERISA CONSIDERATIONS

     Any fiduciary of an employee benefit or other plan or arrangement (such as
an individual retirement account or Keogh plan) that is subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or to Section 4975
of the Code (a "Plan") that proposes to cause the Plan to acquire any of the
offered certificates (directly or indirectly through investment by an entity or
account holding assets of the Plan) is encouraged to consult with its counsel
with respect to the potential consequences of the Plan's acquisition and
ownership of the certificates under ERISA and Section 4975 of the Code. See
"ERISA Considerations" in the prospectus. Section 406 of ERISA prohibits
"parties in interest" with respect to an employee benefit plan subject to ERISA
from engaging in various different types of transactions involving the Plan and
its assets unless a statutory, regulatory or administrative exemption applies to
the transaction. Section 4975 of the Code imposes excise taxes on prohibited
transactions involving "disqualified persons" and Plans described under that
Section. ERISA authorizes the imposition of civil penalties for prohibited
transactions involving Plans not subject to the requirements of Section 4975 of
the Code.

     Some employee benefit plans, including governmental plans and some church
plans, are not subject to ERISA's requirements. Accordingly, assets of those
plans may be invested in the offered certificates without regard to the ERISA
considerations described in this prospectus supplement and in the prospectus,
subject to the provisions of other applicable federal and state law. Any of
those plans that is qualified and exempt from taxation under Sections 401(a) and
501(a) of the Code may be subject to the prohibited transaction rules set forth
in Section 503 of the Code.

     Investments by Plans or with assets of Plans that are subject to ERISA must
satisfy ERISA's general fiduciary requirements, including the requirement of
investment prudence and diversification and the requirement that a Plan's
investments be made in accordance with the documents governing the Plan. A
fiduciary that decides to invest the assets of a Plan in the offered
certificates should consider, among other factors, the extreme sensitivity of
the investment to the rate of principal payments (including prepayments) on the
Mortgage Loans. It is anticipated that the certificates will constitute "equity
interests" for the purpose of the Plan Assets Regulation.

     The U.S. Department of Labor has granted to the underwriter an
administrative exemption (the "EXEMPTION") from some of the prohibited
transaction rules of ERISA and the related excise tax provisions of


                                      S-84



Section 4975 of the Code with respect to the initial purchase, the holding and
the subsequent resale by Plans of securities, including certificates, in
pass-through trusts that consist of specified receivables, loans and other
obligations that meet the conditions and requirements of the Exemption. The
Exemption applies to mortgage loans such as the Mortgage Loans. The Exemption
extends exemptive relief to certificates, including subordinated certificates,
rated in the four highest generic rating categories in certain designated
transactions when the conditions of the Exemption, including the requirement
that an investing plan be an "accredited investor" as defined in Rule 501(a)(1)
of Regulation D under the Securities Act of 1933, as amended, are met.

     For a general description of the Exemption and the conditions that must be
satisfied for the Exemption to apply, see "ERISA Considerations" in the
prospectus.

     It is expected that the Exemption will apply to the acquisition and holding
by Plans of the offered certificates and that all conditions of the Exemption
other than those within the control of the investors will be met. In addition,
as of the date hereof, there is no single mortgagor that is the obligor on five
percent (5%) of the Mortgage Loans included in the issuing entity by aggregate
unamortized principal balance of the assets of the issuing entity.

     The rating of a certificate may change. If a class of certificates no
longer has a rating of at least BBB- (or its equivalent) from at least one of
S&P, Fitch or Moody's, certificates of that class will no longer be eligible for
relief under the Exemption (although a Plan that had purchased the certificate
when it had an investment-grade rating would not be required by the Exemption to
dispose of it). A certificate that satisfies the requirements of the Exemption
other than the ratings requirement may be eligible for purchase by an insurance
company investing assets of its general account that include plan assets when
the requirements of Sections I and III of Prohibited Transaction Class Exemption
95-60 are met.

     Prospective Plan investors are encouraged to consult with their legal
advisors concerning the impact of ERISA and the Code, the effect of the Plan
Assets Regulation and the applicability of the Exemption described in the
prospectus, and the potential consequences in their specific circumstances,
before making an investment in any of the offered certificates. Moreover, each
Plan fiduciary is encouraged to determine whether, under the general fiduciary
standards of investment prudence and diversification, an investment in the
issuing entity, represented by an interest in the offered certificates is
appropriate for the Plan, taking into account the overall investment policy of
the Plan and the composition of the Plan's investment portfolio.

     The sale of offered certificates to a Plan is no respect a representation
by the issuer or any underwriter of the certificates that this investment meets
all relevant legal requirements with respect to investments by Plans generally
or any particular Plan, or that this investment is appropriate for Plans
generally or any particular Plan.

                             METHOD OF DISTRIBUTION

     Subject to the terms and conditions set forth in the underwriting agreement
between the depositor and Merrill Lynch, Pierce, Fenner & Smith Incorporated
("MERRILL" or the "UNDERWRITER"), the depositor has agreed to sell the offered
certificates to the underwriter and the underwriter has agreed to purchase from
the depositor the offered certificates.

     Distribution of the offered certificates will be made by the underwriter
from time to time in negotiated transactions or otherwise at varying prices to
be determined at the time of sale. The underwriter may effect such transactions
by selling the offered certificates to or through dealers and such dealers may
receive from the underwriter, for which they act as agent, compensation in the
form of underwriting discounts, concessions or commissions. The underwriter and
any dealers that participate with the underwriter in the distribution of the
offered certificates may be deemed to be underwriters, and any discounts,
commissions or concessions received by them, and any profits or resale of the
offered certificates purchased by them, may be deemed to be underwriting
discounts and commissions under the Securities Act of 1933, as amended.

     The depositor has been advised by the underwriter that it intends to make a
market in the offered certificates purchased by it but it does not have any
obligation to do so. We cannot give any assurance that a secondary market for
the offered certificates will develop or, if it does develop, that it will
continue or that it will provide certificateholders with a sufficient level of
liquidity of investment.


                                      S-85



     The depositor has agreed to indemnify the Underwriter against, or make
contributions to the underwriter with respect to, liabilities, customarily
indemnified against, including liabilities under the Securities Act of 1933, as
amended.

                                 USE OF PROCEEDS

     It is expected that the proceeds to the depositor from the sale of the
offered certificates will be approximately 103.97625% of the aggregate Class
Certificate Balance of the offered certificates, before deducting issuance
expenses payable by the depositor. The depositor will apply the net proceeds of
the sale of the offered certificates against the purchase price of the Mortgage
Loans on the closing date.

                                  LEGAL MATTERS

     The validity of the certificates, including their material federal income
tax consequences, will be passed upon for the depositor by Sidley Austin LLP,
New York, New York. Certain legal matters will be passed upon for the
Underwriter by McKee Nelson LLP.

                                     RATINGS

     It is a condition to the issuance of the offered certificates that they be
assigned ratings not lower than the following by S&P and Moody's.

           CLASS           S&P/MOODY'S
------------------------   -----------
A-1.....................     AAA/Aaa
A-2.....................     AAA/Aaa
A-3.....................     AAA/Aaa
M-1.....................     AA/Aa1
M-2.....................      A/A2
M-3.....................    BBB/Baa2
M-4.....................    BBB-/Baa3

     The ratings assigned by S&P to mortgage pass-through certificates address
the likelihood of the receipt of all distributions on the Mortgage Loans by the
certificateholders under the agreements pursuant to which the certificates are
issued. S&P ratings take into consideration the credit quality of the related
mortgage pool, including any credit support providers, structural and legal
aspects associated with the certificates, and the extent to which the payment
stream on the mortgage pool is adequate to make the payments required by the
certificates.

     The ratings assigned by Moody's to mortgage pass-through certificates
address the likelihood of the receipt by certificateholders of all distributions
to which such certificateholders are entitled under the transaction structure.
Moody's ratings reflect its analysis of the riskiness of the Mortgage Loans and
its analysis of the structure of the transaction as set forth in the operative
documents. Moody's ratings do not address the effect on the certificates' yield
attributable to prepayments or recoveries on the underlying Mortgage Loans. The
ratings of the rating agencies do not address the possibility that, as a result
of principal prepayments, certificateholders may receive a lower than
anticipated yield.

     The rating agencies have stated that their standard policy is to monitor
ratings on public offered securities for which a rating as been provided, unless
the depositor has requested a rating without ongoing surveillance. A rating
agency will monitor the rating it issues on an ongoing basis and may update the
rating after conducting its regular review of the depositor's or issuing
entity's creditworthiness or after conducting a review of the status of the
rating upon becoming aware of any information that might reasonably be expected
to result in a change of rating. The depositor has not requested that any rating
agency not monitor their ratings of the offered certificates, and the depositor
has not requested that any rating agency use any monitoring procedures other
than their standard procedures.


                                      S-86



     The ratings assigned to the offered certificates should be evaluated
independently from similar ratings on other types of securities. A security
rating is not a recommendation to buy, sell or hold securities and may be
subject to revision or withdrawal at any time by the rating agencies.

     The depositor has not requested a rating of the offered certificates by any
rating agency other than the rating agencies; there can be no assurance,
however, as to whether any other rating agency will rate the offered
certificates or, if it does, what rating would be assigned by the other rating
agency. The rating assigned by the other rating agency to the offered
certificates could be lower than the respective ratings assigned by the rating
agencies.


                                      S-87



                             INDEX OF DEFINED TERMS

Adjusted Net Mortgage Rate.........................................   S-45, S-61
Applied Realized Loss Amount.......................................         S-69
BBA................................................................         S-69
Book-Entry Certificates............................................         S-52
Calculation Agent..................................................         S-69
Capped Payment.....................................................         S-29
Carryover Reserve Fund.............................................         S-69
Certificate Owners.................................................         S-52
CI ................................................................         S-54
Class M-1 Principal Distribution Amount............................         S-64
Class M-1 Target Amount............................................         S-64
Class M-2 Principal Distribution Amount............................         S-64
Class M-2 Target Amount............................................         S-65
Class M-3 Principal Distribution Amount............................         S-65
Class M-3 Target Amount............................................         S-65
Class M-4 Principal Distribution Amount............................         S-65
Class M-4 Target Amount............................................         S-65
Clearstream, Luxembourg............................................         S-53
Cooperative........................................................         S-54
CPR................................................................         S-72
Cumulative Loss Trigger Event......................................         S-66
Current Interest...................................................         S-61
Cut-off Date Pool Principal Balance................................         S-28
DBC................................................................         S-54
DBNTC..............................................................         S-48
Deferred Interest..................................................   S-18, S-62
Definitive Certificate.............................................         S-52
Delinquency Rate...................................................         S-67
Delinquency Trigger Event..........................................         S-66
Determination Date.................................................         S-46
Distribution Date..................................................         S-59
DTC................................................................         S-52
DTC Rules..........................................................         S-52
Due Date...........................................................         S-29
ERISA..............................................................         S-84
Euroclear..........................................................         S-52
Euroclear Operator.................................................         S-54
Euroclear Participants.............................................         S-54
European Depositaries..............................................         S-52
Excess Cashflow....................................................         S-67
Excess Interest....................................................         S-22
Excess Proceeds....................................................         S-58
FICO Credit Scores.................................................         S-30
Final Scheduled Distribution Date..................................         S-81
Financial Intermediary.............................................         S-52
Gross Margin.......................................................         S-29
Index..............................................................         S-29
Indirect Participants..............................................         S-53
IndyMac Bank.......................................................         S-28
Interest Accrual Period............................................         S-61
Interest Carry Forward Amount......................................         S-61
Interest Remittance Amount.........................................         S-59
Interest Settlement Rate...........................................         S-69
LIBOR..............................................................         S-69
LIBOR Certificates.................................................         S-68
LIBOR Determination Date...........................................         S-69
Loan-to-Value Ratio................................................         S-30
London Business Day................................................         S-69
Master REMIC.......................................................         S-81
Maximum Mortgage Rate..............................................         S-29
Merrill............................................................         S-85
Moneyline Telerate Page 3750.......................................         S-69
Mortgage Loans.....................................................         S-28
Mortgage Notes.....................................................         S-28
Mortgaged Properties...............................................         S-28
MTA index..........................................................         S-29
Net Deferred Interest..............................................         S-62
Net Prepayments....................................................         S-62
Net Rate Cap.......................................................         S-62
Net Rate Carryover.................................................         S-62
New CI.............................................................         S-54
NIM Insurer........................................................         S-73
OC Floor...........................................................         S-65
OID................................................................         S-82
Overcollateralization Deficiency Amount............................         S-65
Overcollateralization Release Amount...............................         S-66
Overcollateralization Target Amount................................         S-65
Overcollateralized Amount..........................................         S-65
Participants.......................................................         S-52
Pass-Through Margin................................................         S-61
Pass-Through Rate..................................................         S-61
Payment Adjustment Date............................................         S-29
Payment Cap........................................................         S-29
Plan...............................................................         S-84
Pool Principal Balance.............................................         S-64
Prepayment Assumption..............................................         S-72
Prepayment Interest Excess.........................................         S-60
Prepayment Period..................................................         S-64
Principal Distribution Amount......................................         S-64
Principal Prepayment Amount........................................         S-62
Principal Remittance Amount........................................         S-59
Private Certificates...............................................         S-50
Realized Loss......................................................         S-67
Recast Date........................................................         S-29
Record Date........................................................         S-59
Regular Certificates...............................................         S-81
REIT...............................................................         S-82
Relevant Depositary................................................         S-52
Rolling Three Month Delinquency Rate...............................         S-67
senior certificates................................................         S-51
Senior Enhancement Percentage......................................         S-66
Senior Principal Distribution Amount...............................         S-64
Senior Target Amount...............................................         S-64
Stated Principal Balance...........................................         S-64
Stepdown Date......................................................         S-66
Subsequent Recoveries..............................................         S-67
Substitution Adjustment Amount.....................................         S-40
Target Amount......................................................         S-65
Terms and Conditions...............................................         S-55
Trigger Event......................................................         S-66
Trustee............................................................         S-48
underlying REMIC...................................................         S-81


                                      S-88



underlying REMIC Regular Interests.................................         S-81
underwriter........................................................         S-85
Unpaid Realized Loss Amount........................................         S-67


                                      S-89

PROSPECTUS

                                INDYMAC MBS, INC.
                                    DEPOSITOR

                       MORTGAGE PASS-THROUGH CERTIFICATES
                           MORTGAGE PASS-THROUGH NOTES
                              (ISSUABLE IN SERIES)

PLEASE CAREFULLY CONSIDER OUR DISCUSSION OF SOME OF THE RISKS OF INVESTING IN
THE SECURITIES UNDER "RISK FACTORS" BEGINNING ON PAGE 5.

The securities will represent obligations of the related issuing entity only and
will not represent an interest in or obligation of IndyMac MBS, Inc., any
originator, servicer, or any of their affiliates.

THE TRUSTS

Each issuing entity will be established to hold assets transferred to it by
IndyMac MBS, Inc. The assets in each issuing entity will be specified in the
prospectus supplement for the particular trust and will generally consist of:

o     first and/or subordinate lien mortgage loans secured by one- to
      four-family residential properties, including manufactured housing that is
      permanently affixed and treated as real property under local law, or
      security interests issued by cooperative housing corporations or
      participations in that type of loan,

o     loans secured by first and/or subordinate liens on small multifamily
      residential properties, such as rental apartment buildings or projects
      containing five to fifty residential units,

o     closed-end second lien loans, secured in whole or in part by subordinate
      liens on one- to four-family residential properties,

o     loans secured by first and/or subordinate liens on mixed residential and
      commercial properties (mixed use loans),

o     home equity line of credit loans or specified balances thereof, secured in
      whole or in part by first and/or subordinate liens on one- to four-family
      residential properties,

o     loans secured in whole or in part by first and/or subordinate liens on
      improved land that is generally suitable for one- to four-family
      residential dwellings (lot loans), including loans to finance the
      construction of a dwelling (construction loans) and construction loans
      which by their terms convert into a permanent loan upon the completion of
      construction (construction-to-permanent loans),

o     home improvement installment sale contracts and installment loan
      agreements that are secured by first or subordinate liens on one- to
      four-family residential properties,

o     mortgage pass-through securities issued or guaranteed by Ginnie Mae,
      Fannie Mae, or Freddie Mac,

o     private mortgage-backed securities backed by first lien mortgage loans
      secured by one- to four-family residential properties or participations in
      that type of loan, or

o     mortgage-backed securities or collateralized mortgage obligations backed
      by loans secured by first and/or subordinate liens on one- to four-family
      residential properties, by lot loans or by participations in these types
      of loans.

THE SECURITIES

IndyMac MBS, Inc. will offer either certificates or notes pursuant to a
prospectus supplement. The securities will be grouped into one or more series,
each having its own distinct designation. Each series will be issued in one or
more classes and each class will evidence beneficial ownership of (in the case
of certificates) or a right to receive payments supported by (in the case of
notes) a specified portion of future payments on the assets in the issuing
entity to which the series relates. A prospectus supplement for a series will
specify all of the terms of the series and of each of the classes in the series.

OFFERS OF SECURITIES

The securities may be offered through several different methods, including
offerings through underwriters.

CREDIT ENHANCEMENT

If the securities have any type of credit enhancement, the prospectus supplement
for the related series will describe the credit enhancement. The types of credit
enhancement are generally described in this prospectus supplement.

                              _____________________

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

June 14, 2006




                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----
Important Notice About Information in this Prospectus and Each Accompanying
         Prospectus Supplement.................................................4
Risk Factors...................................................................5
     Limited Source of Payments -- No Recourse to Sellers, Depositor or
         Servicer..............................................................5
     Credit Enhancement May Not Be Sufficient to Protect You from Losses.......6
     Losses on Balloon Payment Mortgages Are Borne by You......................6
     Multifamily Lending.......................................................6
     Junior Liens..............................................................7
     Partially Unsecured Loans.................................................8
     Home Equity Lines of Credit...............................................8
     Nature of Mortgages.......................................................9
     Your Risk of Loss May Be Higher Than You Expect If Your Securities Are
         Backed by Partially Unsecured Home Equity Loans......................13
     Impact of World Events...................................................13
     You Could Be Adversely Affected by Violations of Environmental Laws......14
     Ratings of the Securities Do Not Assure Their Payment....................14
     Book-Entry Registration..................................................15
     Pre-Funding Accounts Will Not Be Used to Cover Losses on the Loans.......15
     Unused Amounts on Deposit in Any Pre-Funding Account Will Be Paid as
         Principal to Securityholders.........................................16
     Secondary Market for the Securities May Not Exist........................16
     Bankruptcy or Insolvency May Affect the Timing and Amount of
         Distributions on the Securities......................................16
     Holders of Original Issue Discount Securities Are Required to Include
         Original Issue Discount in Ordinary Gross Income as It Accrues.......18
     The Principal Amount of Securities May Exceed the Market Value of the
         Issuing Entity Assets................................................18
The Issuing Entity............................................................19
     The Mortgage Loans--General..............................................20
     Agency Securities........................................................26
     Private Mortgage-Backed Securities.......................................30
     Substitution of Issuing Entity Assets....................................32
     Available Information....................................................32
     Incorporation of Certain Documents by Reference; Reports Filed with the
         SEC..................................................................32
     Reports to Securityholders...............................................33
Use of Proceeds...............................................................34
The Depositor.................................................................34
Mortgage Loan Program.........................................................35
     Underwriting Standards...................................................35
     Underwriting Process.....................................................35
     Qualifications of Sellers................................................36
     Representations by Sellers; Repurchases..................................36
Static Pool Data..............................................................37
Description of the Securities.................................................38
     General..................................................................39
     Distributions on Securities..............................................41
     Advances.................................................................42
     Mandatory Auction........................................................43
     Categories of Classes of Securities......................................43
     Indices Applicable to Floating Rate and Inverse Floating Rate Classes....45
     Book-Entry Securities....................................................49
     Global Clearance, Settlement And Tax Documentation Procedures............52
Credit Enhancement............................................................55
     General..................................................................55
     Subordination............................................................56
     Letter of Credit.........................................................57
     Mortgage Pool Insurance Policies.........................................57
     Special Hazard Insurance Policies........................................58
     Bankruptcy Bonds.........................................................59
     Reserve Fund.............................................................59
     Cross Support............................................................60
     Insurance Policies, Surety Bonds and Guaranties..........................60
     Over-Collateralization...................................................60
     Financial Instruments....................................................61
     Deposit Agreements.......................................................61
Yield and Prepayment Considerations...........................................61
     Prepayment Standards or Models...........................................64
     Yield....................................................................64
The Agreements................................................................64
     Assignment of Issuing Entity Assets......................................64
     Payments on Issuing Entity Assets; Deposits to Security Account..........67
     Pre-Funding Account......................................................69
     Collection Procedures....................................................69
     The Surety Provider......................................................70
     Hazard Insurance.........................................................71
     Realization upon Defaulted Mortgage Loans ...............................72
     Servicing and Other Compensation and Payment of Expenses.................75
     Evidence as to Compliance................................................75
     List of Securityholders..................................................76
     Certain Matters Regarding the Servicer and the Depositor.................76
     Events of Default........................................................77
     Amendment................................................................79
     Termination; Optional Termination........................................81


                                        2



     The Trustee..............................................................82
Certain Legal Aspects of the Mortgage Loans...................................82
     General..................................................................82
     Foreclosure and Repossession.............................................83
     Rights of Redemption.....................................................85
     Anti-Deficiency Legislation and Other Limitations on Lenders.............85
     Environmental Risks......................................................86
     Due-on-sale Clauses......................................................87
     Prepayment Charges.......................................................87
     Applicability of Usury Laws..............................................88
     Servicemembers Civil Relief Act..........................................88
Material Federal Income Tax Consequences......................................88
     General..................................................................88
     Taxation of Debt Securities..............................................89
     REMIC Securities.........................................................95
     Tax Status as a Grantor Trust...........................................103
     Final Trust Reporting Regulations.......................................110
     Tax Characterization of the Issuing Entity as a Partnership.............111
     Tax Consequences to Holders of the Notes............................... 111
     Tax Consequences to Holders of the Certificates.........................113
State Tax Considerations.....................................................117
ERISA Considerations.........................................................117
     Exemptions Available to Debt Instruments................................117
     Underwriter Exemption...................................................118
Legal Investment.............................................................121
Method of Distribution.......................................................121
Legal Matters................................................................123
Financial Information........................................................123
Rating.......................................................................123
INDEX OF PRINCIPAL TERMS.....................................................124


                                        3



         IMPORTANT NOTICE ABOUT INFORMATION IN THIS PROSPECTUS AND EACH
                       ACCOMPANYING PROSPECTUS SUPPLEMENT

      Information about each series of securities is contained in two separate
      documents:

      o     this prospectus, which provides general information, some of which
            may not apply to a particular series; and

      o     the accompanying prospectus supplement for a particular series,
            which describes the specific terms of the securities of that series.

      The prospectus supplement will contain information about a particular
series that supplements the information contained in this prospectus, and you
should rely on that supplementary information in the prospectus supplement.

      You should rely only on the information in this prospectus and the
accompanying prospectus supplement. We have not authorized anyone to provide you
with information that is different from that contained in this prospectus and
the accompanying prospectus supplement.

                               ___________________

      If you require additional information, the mailing address of our
principal executive offices is IndyMac MBS, Inc., 155 North Lake Avenue,
Pasadena, California 91101 and the telephone number is (800) 669-2300. For other
means of acquiring additional information about us or a series of securities,
see "The Issuing Entity-- Available Information" and "--Incorporation of Certain
Documents by Reference; Reports Filed with the SEC" on page 33.


                                        4



                                  RISK FACTORS

      You should carefully consider the following information because it
identifies significant risks associated with an investment in the securities.



      LIMITED SOURCE OF           The applicable prospectus supplement may provide that securities
      PAYMENTS -- NO RECOURSE     will be payable from other issuing entities in addition to their
      TO SELLERS, DEPOSITOR OR    associated issuing entity, but if it does not, they will be
      SERVICER                    payable solely from their associated issuing entity. If the
                                  issuing entity does not have sufficient assets to distribute the
                                  full amount due to you as a securityholder, your yield will be
                                  impaired. The return of your principal may be impaired, and you
                                  will not have recourse to any other entity. Furthermore, at the
                                  times specified in the applicable prospectus supplement, certain
                                  assets of the issuing entity may be released and paid out to other
                                  people, such as the depositor, a servicer, a credit enhancement
                                  provider, or any other person entitled to payments from the
                                  issuing entity. Those assets will no longer be available to make
                                  payments to you. Those payments are generally made after other
                                  specified payments that may be set forth in the applicable
                                  prospectus supplement have been made.

                                  You will not have any recourse against the depositor or any
                                  servicer if you do not receive a required distribution on the
                                  securities. Unless otherwise specified in the applicable
                                  prospectus supplement, you also will not have recourse against the
                                  assets of the issuing entity of any other series of securities.

                                  The securities will not represent an interest in the depositor,
                                  any servicer, any seller to the depositor, or anyone else except
                                  the issuing entity. The only obligation of the depositor to an
                                  issuing entity comes from certain representations and warranties
                                  made by it about assets transferred to the issuing entity. If
                                  these representations and warranties turn out to be untrue, the
                                  depositor may be required to repurchase or substitute for some of
                                  the transferred assets. IndyMac MBS, Inc., which is the depositor,
                                  does not have significant assets and is unlikely to have
                                  significant assets in the future. If the depositor were required
                                  to repurchase a loan because of a breach of a representation, its
                                  only sources of funds for the repurchase would be:

                                  o   funds obtained from enforcing a corresponding obligation of a
                                      seller or originator of the loan, or

                                  o   funds from a reserve fund or similar credit enhancement
                                      established to pay for loan repurchases.

                                  The only obligations of the servicer to an issuing entity (other
                                  than its servicing obligations) comes from certain representations
                                  and warranties made by it in connection with its loan servicing
                                  activities. If these representations and warranties turn out to be
                                  untrue, the servicer may be required to repurchase some of the
                                  loans. However, the servicer may not have the financial ability to
                                  make the required repurchase.



                                        5





                                  The only obligations to an issuing entity of a seller of loans to
                                  the depositor comes from certain representations and warranties
                                  made by it in connection with its sale of the loans and certain
                                  document delivery requirements. If these representations and
                                  warranties turn out to be untrue, or the seller fails to deliver
                                  required documents, it may be required to repurchase some of the
                                  loans. However, the seller may not have the financial ability to
                                  make the required repurchase.

      CREDIT ENHANCEMENT MAY      Credit enhancement is intended to reduce the effect of loan
      NOT BE SUFFICIENT TO        losses. Credit enhancements, however, may benefit only some
      PROTECT YOU FROM LOSSES     classes of a series of securities and the amount of any credit
                                  enhancement will be limited as described in the applicable
                                  prospectus supplement. Furthermore, the amount of a credit
                                  enhancement may decline over time pursuant to a schedule or
                                  formula or otherwise, and could be depleted from payments or for
                                  other reasons before the securities covered by the credit
                                  enhancement are paid in full. In addition, a credit enhancement
                                  may not cover all potential sources of loss. For example, a credit
                                  enhancement may or may not cover fraud or negligence by a loan
                                  originator or other parties. Also, all or a portion of a credit
                                  enhancement may be reduced, substituted for, or even eliminated,
                                  so long as the rating agencies rating the securities indicate that
                                  the change in credit enhancement would not cause them to adversely
                                  change their rating of the securities. Consequently,
                                  securityholders may suffer losses even though a credit enhancement
                                  exists and its provider does not default.

      LOSSES ON BALLOON PAYMENT   Some of the underlying loans may not be fully amortizing over
      MORTGAGES ARE BORNE BY YOU  their terms to maturity and, thus, will require substantial
                                  principal payments (that is, balloon payments) at their stated
                                  maturity. Loans with balloon payments involve a greater degree of
                                  risk than fully amortizing loans because typically the borrower
                                  must be able to refinance the loan or sell the property to make
                                  the balloon payment at maturity. The ability of a borrower to do
                                  this will depend on factors such as mortgage rates at the time of
                                  sale or refinancing, the borrower's equity in the property, the
                                  relative strength of the local housing market, the financial
                                  condition of the borrower, and tax laws. Losses on these loans
                                  that are not otherwise covered by a credit enhancement will be
                                  borne by the holders of one or more classes of securities.

      MULTIFAMILY LENDING         Multifamily lending may expose the lender to a greater risk of
                                  loss than single family residential lending. Owners of multifamily
                                  residential properties rely on monthly rent payments from tenants
                                  to:

                                  o   pay for maintenance and other operating expenses of those
                                      properties,

                                  o   fund capital improvements, and

                                  o   service any loan or other debt that may be secured by those
                                      properties.



                                        6





                                  Various factors, many of which are beyond the control of the owner
                                  or operator of a multifamily property, may affect the economic
                                  viability of that property.

                                  Changes in payment patterns by tenants may result from a variety
                                  of social, legal and economic factors. Economic factors include
                                  the rate of inflation, unemployment levels and relative rates
                                  offered for various types of housing. Shifts in economic factors
                                  may trigger changes in payment patterns including increased risks
                                  of defaults by tenants and higher vacancy rates. Adverse economic
                                  conditions, either local or national, may limit the amount of rent
                                  that can be charged and may result in a reduction in timely lease
                                  payments or a reduction in occupancy levels. Occupancy and rent
                                  levels may also be affected by construction of additional housing
                                  units, competition and local politics, including rent
                                  stabilization or rent control laws and policies. In addition, the
                                  level of mortgage interest rates may encourage tenants to purchase
                                  single family housing. We cannot determine and have no basis to
                                  predict whether, or to what extent, economic, legal or social
                                  factors will affect future rental or payment patterns.

                                  The location and construction quality of a particular property may
                                  affect the occupancy level as well as the rents that may be
                                  charged for individual units. The characteristics of a
                                  neighborhood may change over time or in relation to newer
                                  developments. The effects of poor construction quality will
                                  increase over time in the form of increased maintenance and
                                  capital improvements. Even good construction will deteriorate over
                                  time if adequate maintenance is not performed in a timely fashion.

      JUNIOR LIENS                The mortgages and deeds of trust securing the closed-end second-
                                  lien loans will be, the home equity line of credit loans and home
                                  improvement contracts will primarily be, and other loans may be
                                  junior liens subordinate to the rights of the related senior
                                  mortgage(s) or deed(s) of trust. Accordingly, the proceeds from
                                  any liquidation, insurance policy or condemnation proceeding will
                                  be available to satisfy the outstanding balance of the junior lien
                                  only to the extent that the claims of the related senior
                                  mortgagees have been satisfied in full, including any related
                                  foreclosure costs. In addition, if a junior mortgagee forecloses
                                  on the property securing a junior mortgage, the junior mortgagee
                                  will have to foreclose subject to any senior mortgage and must
                                  take one of the following steps to protect its interest in the
                                  property:

                                  o   pay the senior mortgage in full at or prior to the foreclosure
                                      sale, or

                                  o   assume the payments on the senior mortgage if the mortgagor is
                                      in default under that mortgage.

                                  Unless the servicer is obligated under the applicable agreement to
                                  advance such funds, the issuing entity may effectively be
                                  prevented from foreclosing on the related property because it will
                                  not have sufficient funds to satisfy any senior mortgages or make



                                        7





                                  payments due to any senior mortgagees.

                                  Some states have imposed legal limits on the remedies of a secured
                                  lender in the event that the proceeds of any sale under a deed of
                                  trust or other foreclosure proceedings are insufficient to pay
                                  amounts owed to that secured lender. In some states, including
                                  California, if a lender simultaneously originates a loan secured
                                  by a senior lien on a particular property and a loan secured by a
                                  junior lien on the same property, that lender as the holder of the
                                  junior lien may be precluded from obtaining a deficiency judgment
                                  with respect to the excess of:

                                  o   the aggregate amount owed under both the senior and junior
                                      loans, over

                                  o   the proceeds of any sale under a deed of trust or other
                                      foreclosure proceedings.

                                  See "Certain Legal Aspects of the Loans Anti-Deficiency
                                  Legislation; Bankruptcy Laws; Tax Liens."

      PARTIALLY UNSECURED LOANS   The issuing entity for any series may include closed-end
                                  second-lien loans, home equity line of credit loans and home
                                  improvement contracts that were originated with loan-to-value
                                  ratios or combined loan-to-value ratios in excess of the value of
                                  the related property.

                                  Under these circumstances, the issuing entity for the related
                                  series could be treated as a general unsecured creditor as to any
                                  unsecured portion of any related loan. If a borrower defaults
                                  under a loan that is unsecured in part, the related issuing entity
                                  generally will have recourse only against the borrower's assets
                                  for the unsecured portion of the loan, along with all other
                                  general unsecured creditors of the borrower. In a bankruptcy or
                                  insolvency proceeding relating to a borrower on a partially
                                  unsecured loan, the borrower's unsecured obligation on that loan
                                  will be treated as an unsecured loan and may be discharged by the
                                  bankruptcy court. Losses on any partially unsecured loans that are
                                  not otherwise covered by a credit enhancement will be borne by the
                                  holders of one or more classes of securities of the related
                                  series.

      HOME EQUITY LINES OF        Generally, a home equity line of credit has a draw period that
      CREDIT                      lasts for the first ten years (during which no principal or
                                  minimal amount of principal is due) and, unless otherwise
                                  specified in the related prospectus supplement, a repayment term
                                  following the draw period of zero, ten, fifteen or twenty years.
                                  As a result, there may be limited collections available to make
                                  payments to related securityholders or payments of principal may
                                  be received more slowly than anticipated, which will affect the
                                  yield on one or more classes of securities of the related series.

                                  Home equity lines of credit that do not have a repayment term



                                        8





                                  following the draw period are effectively balloon loans that pose
                                  an additional risk because a borrower must make a large lump sum
                                  payment of principal at the end of the draw period. If the
                                  borrower is unable to pay the lump sum or refinance such amount,
                                  holders of one or more classes of securities of the related series
                                  may suffer a loss if the related credit enhancement is not
                                  sufficient to cover such shortfall.

    NATURE OF MORTGAGES           The value of the properties underlying the loans held in the
Declines In Property Values       issuing entity may decline over time. Among the factors that could
May Adversely Affect You          adversely affect the value of the properties are:

                                  o   an overall decline in the residential real estate market in
                                      the areas in which they are located,

                                  o   a decline in their general condition from the failure of
                                      borrowers to maintain their property adequately, and

                                  o   natural disasters that are not covered by insurance, such as
                                      earthquakes and floods.

                                  If property values decline, the actual rates of delinquencies,
                                  foreclosures, and losses on all underlying loans could be higher
                                  than those currently experienced in the mortgage lending industry
                                  in general. These losses, to the extent not otherwise covered by a
                                  credit enhancement, will be borne by the holder of one or more
                                  classes of securities.

Cooperative Loans May             Cooperative loans are evidenced by promissory notes secured by
Experience Relatively Higher      security interests in shares issued by private corporations that
Losses                            are entitled to be treated as housing cooperatives under the
                                  Internal Revenue Code and in the related proprietary leases or
                                  occupancy agreements granting exclusive rights to occupy specific
                                  dwelling units in the corporations' buildings.

                                  If a blanket mortgage (or mortgages) exists on the cooperative
                                  apartment building and/or underlying land, as is generally the
                                  case, the cooperative, as property borrower, is responsible for
                                  meeting these mortgage or rental obligations. If the cooperative
                                  is unable to meet the payment obligations arising under a blanket
                                  mortgage, the mortgagee holding a blanket mortgage could foreclose
                                  on that mortgage and terminate all subordinate proprietary leases
                                  and occupancy agreements. A foreclosure by the holder of a blanket
                                  mortgage could eliminate or significantly diminish the value of
                                  any collateral held by the lender who financed an individual
                                  tenant-stockholder of cooperative shares or, in the case of the
                                  mortgage loans, the collateral securing the cooperative loans.

                                  If an underlying lease of the land exists, as is the case in some
                                  instances, the cooperative is responsible for meeting the related
                                  rental obligations. If the cooperative is unable to meet its
                                  obligations arising under its land lease, the holder of the land
                                  lease could terminate the land lease and all subordinate
                                  proprietary leases and occupancy agreements. The termination of
                                  the land lease by its holder could eliminate or significantly
                                  diminish the



                                        9





                                  value of any collateral held by the lender who financed an
                                  individual tenant-stockholder of the cooperative shares or, in the
                                  case of the mortgage loans, the collateral securing the
                                  cooperative loans. A land lease also has an expiration date and
                                  the inability of the cooperative to extend its term or, in the
                                  alternative, to purchase the land could lead to termination of the
                                  cooperative's interest in the property and termination of all
                                  proprietary leases and occupancy agreements which could eliminate
                                  or significantly diminish the value of the related collateral.

                                  In addition, if the corporation issuing the shares related to the
                                  cooperative loans fails to qualify as a cooperative housing
                                  corporation under the Internal Revenue Code, the value of the
                                  collateral securing the cooperative loan could be significantly
                                  impaired because the tenant-stockholders would not be permitted to
                                  deduct its proportionate share of certain interest expenses and
                                  real estate taxes of the corporation.

                                  The cooperative shares and proprietary lease or occupancy
                                  agreement pledged to the lender are, in almost all cases, subject
                                  to restrictions on transfer, including obtaining the consent of
                                  the cooperative housing corporation prior to the transfer, which
                                  may impair the value of the collateral after a default by the
                                  borrower due to an inability to find a transferee acceptable to
                                  the related housing corporation.

Delays in Liquidation May         Even if the properties underlying the loans held in the issuing
Adversely Affect You              entity provide adequate security for the loans, substantial delays
                                  could occur before defaulted loans are liquidated and their
                                  proceeds are forwarded to investors. Property foreclosure actions
                                  are regulated by state statutes and rules and are subject to many
                                  of the delays and expenses of other lawsuits if defenses or
                                  counterclaims are made, sometimes requiring several years to
                                  complete. Furthermore, an action to obtain a deficiency judgment
                                  is regulated by statutes and rules, and the amount or availability
                                  of a deficiency judgment may be limited by law. In the event of a
                                  default by a borrower, these restrictions may impede the ability
                                  of the servicer to foreclose on or to sell the mortgaged property
                                  or to obtain a deficiency judgment to obtain sufficient proceeds
                                  to repay the loan in full. In addition, the servicer will be
                                  entitled to deduct from liquidation proceeds all expenses
                                  reasonably incurred in attempting to recover on the defaulted
                                  loan, including legal and appraisal fees and costs, real estate
                                  taxes, and property maintenance and preservation expenses.

                                  In the event that:

                                        o   the mortgaged properties fail to provide adequate
                                            security for the related loans,

                                        o   if applicable to a series as specified in the related
                                            prospectus supplement, excess cashflow (if any) and
                                            overcollateralization (if any) is insufficient to cover



                                       10





                                            these shortfalls,

                                        o   if applicable to a series as specified in the related
                                            prospectus supplement, the subordination of certain
                                            classes are insufficient to cover these shortfalls, and

                                        o   with respect to the securities with the benefit of an
                                            insurance policy as specified in the related prospectus
                                            supplement, the credit enhancement provider fails to
                                            make the required payments under the related insurance
                                            policies,

                                  you could lose all or a portion of the money you paid for the
                                  securities and could also have a lower yield than anticipated at
                                  the time you purchased the securities.

Disproportionate Effect of        Liquidation expenses of defaulted loans generally do not vary
Liquidation Expenses May          directly with the outstanding principal balance of the loan at the
Adversely Affect You              time of default. Therefore, if a servicer takes the same steps for
                                  a defaulted loan having a small remaining principal balance as it
                                  does for a defaulted loan having a large remaining principal
                                  balance, the amount realized after expenses is smaller as a
                                  percentage of the outstanding principal balance of the small loan
                                  than it is for the defaulted loan having a large remaining
                                  principal balance.

Consumer Protection Laws          Federal, state and local laws extensively regulate various aspects
May Adversely Affect You          of brokering, originating, servicing and collecting mortgage loans
                                  secured by consumers' dwellings. Among other things, these laws
                                  may regulate interest rates and other charges, require
                                  disclosures, impose financial privacy requirements, mandate
                                  specific business practices, and prohibit unfair and deceptive
                                  trade practices. In addition, licensing requirements may be
                                  imposed on persons that broker, originate, service or collect
                                  mortgage loans secured by consumers' dwellings.

                                  Additional requirements may be imposed under federal, state or
                                  local laws on so-called "high cost" mortgage loans, which
                                  typically are defined as loans secured by a consumer's dwelling
                                  that have interest rates or origination costs in excess of
                                  prescribed levels. These laws may limit certain loan terms, such
                                  as prepayment charges, or the ability of a creditor to refinance a
                                  loan unless it is in the borrower's interest. In addition, certain
                                  of these laws may allow claims against loan brokers or mortgage
                                  originators, including claims based on fraud or
                                  misrepresentations, to be asserted against persons acquiring the
                                  mortgage loans, such as the trust.

                                  The federal laws that may apply to loans held in the trust include
                                  the following:

                                  o   the Truth in Lending Act and its regulations, which (among
                                      other things) require disclosures to borrowers regarding the
                                      terms of mortgage loans and provide consumers who pledged



                                       11





                                      their principal dwelling as collateral in a non-purchase money
                                      transaction with a right of rescission that generally extends
                                      for three days after proper disclosures are given (but in no
                                      event more than three years);

                                  o   the Home Ownership and Equity Protection Act and its
                                      regulations, which (among other things) imposes additional
                                      disclosure requirements and limitations on loan terms with
                                      respect to non-purchase money, installment loans secured by
                                      the consumer's principal dwelling that have interest rates or
                                      origination costs in excess of prescribed levels;

                                  o   the Home Equity Loan Consumer Protection Act and its
                                      regulations, which (among other things) limit changes that may
                                      be made to open-end loans secured by the consumer's dwelling,
                                      and restricts the ability to accelerate balances or suspend
                                      credit privileges on this type of loans;

                                  o   the Real Estate Settlement Procedures Act and its regulations,
                                      which (among other things) prohibit the payment of referral
                                      fees for real estate settlement services (including mortgage
                                      lending and brokerage services) and regulate escrow accounts
                                      for taxes and insurance and billing inquiries made by
                                      borrowers;

                                  o   the Equal Credit Opportunity Act and its regulations, which
                                      (among other things) generally prohibits discrimination in any
                                      aspect of a credit transaction on certain enumerated basis,
                                      such as age, race, color, sex, religion, marital status,
                                      national origin or receipt of public assistance;

                                  o   the Federal Trade Commission's Rule on Preservation of
                                      Consumer Claims and Defenses, which generally provides that
                                      the rights of an assignee of a conditional sales contract (or
                                      of certain lenders making purchase money loans) to enforce a
                                      consumer credit obligation are subject to the claims and
                                      defenses that the consumer could assert against the seller of
                                      goods or services financed in the credit transaction; and

                                  o   the Fair Credit Reporting Act, which (among other things)
                                      regulates the use of consumer reports obtained from consumer
                                      reporting agencies and the reporting of payment histories to
                                      consumer reporting agencies.

                                  The penalties for violating these federal, state, or local laws
                                  vary depending on the applicable law and the particular facts of
                                  the situation. However, private plaintiffs typically may assert
                                  claims for actual damages and, in some cases, also may recover
                                  civil money penalties or exercise a right to rescind the mortgage
                                  loan. Violations of certain laws may limit the ability to collect
                                  all or part of the principal or interest on a mortgage loan and,
                                  in some cases, borrowers even may be entitled to a refund of
                                  amounts previously paid. Federal, state and local administrative
                                  or law enforcement



                                       12





                                  agencies also may be entitled to bring legal actions, including
                                  actions for civil money penalties or restitution, for violations
                                  of certain of these laws.

                                  Depending on the particular alleged misconduct, it is possible
                                  that claims may be asserted against various participants in the
                                  secondary mortgage market, including assignees that hold the
                                  mortgage loan, such as the trust. Losses on loans from the
                                  application of these federal, state and local laws that are not
                                  otherwise covered by one or more forms of credit enhancement will
                                  be borne by holders of one or more classes of securities.
                                  Additionally, the trust may experience losses arising from
                                  lawsuits related to alleged violations of these laws, which, if
                                  not covered by one or more forms of credit enhancement or the
                                  seller, will be borne by the holders of one or more classes of
                                  securities.

YOUR RISK OF LOSS MAY BE          The issuing entity may also include home equity loans that were
HIGHER THAN YOU EXPECT IF YOUR    originated with loan-to-value ratios or combined loan-to-value
SECURITIES ARE BACKED BY          ratios in excess of the value of the related mortgaged property.
PARTIALLY UNSECURED HOME          Under these circumstances, the issuing entity could be treated as
EQUITY LOANS                      a general unsecured creditor as to any unsecured portion of any
                                  related loan. In the event of a default under a loan that is
                                  unsecured in part, the issuing entity will have recourse only
                                  against the borrower's assets generally for the unsecured portion
                                  of the loan, along with all other general unsecured creditors of
                                  the borrower.

IMPACT OF WORLD EVENTS            The economic impact of the United States' military operations in
                                  Iraq and other parts of the world, as well as the possibility of
                                  any terrorist attacks domestically or abroad, is uncertain, but
                                  could have a material effect on general economic conditions,
                                  consumer confidence, and market liquidity. We can give no
                                  assurance as to the effect of these events on consumer confidence
                                  and the performance of the loans held by issuing entity. Any
                                  adverse impact resulting from these events would be borne by the
                                  holders of one or more classes of the securities.

                                  United States military operations also increase the likelihood of
                                  shortfalls under the Servicemembers Civil Relief Act or similar
                                  state laws (referred to as the "Relief Act" ). The Relief Act
                                  provides relief to borrowers who enter active military service and
                                  to borrowers in reserve status who are called to active duty after
                                  the origination of their loan. The Relief Act provides generally
                                  that these borrowers may not be charged interest on a loan in
                                  excess of 6% per annum during the period of the borrower's active
                                  duty. These shortfalls are not required to be paid by the borrower
                                  at any future time and will not be advanced by the servicer,
                                  unless otherwise specified in the related prospectus supplement.
                                  To the extent these shortfalls reduce the amount of interest paid
                                  to the holders of securities with the benefit of an insurance
                                  policy, unless otherwise specified in the related prospectus
                                  supplement, they will not be covered by the related insurance
                                  policy. In addition, the Relief Act imposes limitations that would
                                  impair the ability of the servicer to foreclose on an affected
                                  loan during the borrower's



                                       13





                                  period of active duty status, and, under some circumstances,
                                  during an additional period thereafter.

YOU COULD BE ADVERSELY AFFECTED   Federal, state, and local laws and regulations impose a wide range
BY VIOLATIONS OF ENVIRONMENTAL    of requirements on activities that may affect the environment,
LAWS                              health, and safety. In certain circumstances, these laws and
                                  regulations impose obligations on "owners" or "operators" of
                                  residential properties such as those that secure the loans held in
                                  the issuing entity. Failure to comply with these laws and
                                  regulations can result in fines and penalties that could be
                                  assessed against the trust if it were to be considered an "owner"
                                  or "operator" of the related property. A property "owner" or
                                  "operator" can also be held liable for the cost of investigating
                                  and remediating contamination, regardless of fault, and for
                                  personal injury or property damage arising from exposure to
                                  contaminants.

                                  In some states, a lien on the property due to contamination has
                                  priority over the lien of an existing mortgage. Also, under
                                  certain circumstances, a mortgage lender may be held liable as an
                                  "owner" or "operator" for costs associated with the release of
                                  hazardous substances from a site, or petroleum from an underground
                                  storage tank under certain circumstances. If the issuing entity
                                  were to be considered the "owner" or "operator" of a property, it
                                  will suffer losses as a result of any liability imposed for
                                  environmental hazards on the property.

      RATINGS OF THE SECURITIES   Any class of securities offered under this prospectus and the
      DO NOT ASSURE THEIR         accompanying prospectus supplement will be rated in one of the
      PAYMENT                     four highest rating categories of at least one nationally
                                  recognized rating agency. A rating is based on the adequacy of the
                                  value of the trust assets and any credit enhancement for that
                                  class, and, in the case of surety bonds, insurance policies,
                                  letters of credit or guarantees, primarily on the claims paying
                                  ability of any related surety provider, insurer, letter of credit
                                  provider or guarantor, and reflects the rating agency's assessment
                                  of how likely it is that holders of the class of securities will
                                  receive the payments to which they are entitled. A rating does not
                                  constitute an assessment of how likely it is that principal
                                  prepayments on the underlying loans will be made, the degree to
                                  which the rate of prepayments might differ from that originally
                                  anticipated, or the likelihood that the securities will be
                                  redeemed early. A rating is not a recommendation to purchase,
                                  hold, or sell securities because it does not address the market
                                  price of the securities or the suitability of the securities for
                                  any particular investor.

                                  A rating may not remain in effect for any given period of time and
                                  the rating agency could lower or withdraw the rating in the
                                  future. For example, the rating agency could lower or withdraw its
                                  rating due to:

                                  o   a decrease in the adequacy of the value of the trust assets or
                                      any related credit enhancement,



                                       14





                                  o   an adverse change in the financial or other condition of a
                                      credit enhancement provider, or

                                  o   a change in the rating of the credit enhancement provider's
                                      long-term debt.

                                  The amount, type, and nature of credit enhancement established for
                                  a class of securities will be determined on the basis of criteria
                                  established by each rating agency rating classes of the
                                  securities. These criteria are sometimes based upon an actuarial
                                  analysis of the behavior of similar loans in a larger group. That
                                  analysis is often the basis upon which each rating agency
                                  determines the amount of credit enhancement required for a class.
                                  The historical data supporting any actuarial analysis may not
                                  accurately reflect future experience, and the data derived from a
                                  large pool of similar loans may not accurately predict the
                                  delinquency, foreclosure, or loss experience of any particular
                                  pool of mortgage loans. Mortgaged properties may not retain their
                                  values. If residential real estate markets experience an overall
                                  decline in property values such that the outstanding principal
                                  balances of the loans held in a particular issuing entity and any
                                  secondary financing on the related mortgaged properties become
                                  equal to or greater than the value of the mortgaged properties,
                                  the rates of delinquencies, foreclosures, and losses could be
                                  higher than those now generally experienced in the mortgage
                                  lending industry. In addition, adverse economic conditions may
                                  affect timely payment by mortgagors on their loans regardless of
                                  whether the conditions affect real property values and,
                                  accordingly, the rates of delinquencies, foreclosures, and losses
                                  in any issuing entity. Losses from this that are not covered by a
                                  credit enhancement will be borne, at least in part, by the holders
                                  of one or more classes of securities.

      BOOK-ENTRY REGISTRATION     Securities issued in book-entry form may have only limited
  Limit on Liquidity              liquidity in the resale market, since investors may be unwilling
                                  to purchase securities for which they cannot obtain physical
                                  instruments.

  Limit on Ability to Transfer    Transactions in book-entry securities can be effected only through
  or Pledge                       The Depository Trust Company, its participating organizations, its
                                  indirect participants, and certain banks. Therefore, your ability
                                  to transfer or pledge securities issued in book-entry form may be
                                  limited.

  Delays in Distributions         You may experience some delay in the receipt of distributions on
                                  book-entry securities since the distributions will be forwarded by
                                  the trustee to The Depository Trust Company for it to credit the
                                  accounts of its participants. In turn, these participants will
                                  then credit the distributions to your account either directly or
                                  indirectly through indirect participants.

PRE-FUNDING ACCOUNTS WILL NOT     The prospectus supplement for a series of securities may provide
BE USED TO COVER LOSSES ON THE    that on the closing date for that series, the depositor will
LOANS                             deposit cash into a pre-funding account. The amount deposited into
                                  the pre-funding account will never exceed 50% of the initial
                                  aggregate principal amount of the certificates and/or notes of the
                                  related



                                       15





                                  series. The pre-funding account will only be used to purchase
                                  additional loans from the depositor during the period beginning
                                  with the related closing date and ending not more than one year
                                  after the closing date. The depositor will acquire these
                                  additional loans from the seller or sellers specified in the
                                  related prospectus supplement. The trustee for the related series
                                  will maintain the pre- funding account. Amounts on deposit in the
                                  pre-funding account will not be used to cover losses on or in
                                  respect of the related loans.

UNUSED AMOUNTS ON DEPOSIT IN      Any amounts remaining in a pre-funding account at the end of the
ANY PRE-FUNDING ACCOUNT WILL BE   period specified in the applicable prospectus supplement will be
PAID AS PRINCIPAL TO              distributed as a prepayment of principal to the related
SECURITYHOLDERS                   securityholders on the first distribution date after the end of
                                  that period. Any such distribution will be made in the amounts and
                                  according to the priorities specified in the related prospectus
                                  supplement. The holders of one or more classes of the related
                                  series of securities will bear the entire reinvestment risk
                                  resulting from that prepayment.

SECONDARY MARKET FOR THE          The related prospectus supplement for each series will specify the
SECURITIES MAY NOT EXIST          classes in which the underwriter intends to make a secondary
                                  market, but no underwriter will have any obligation to do so. We
                                  can give no assurance that a secondary market for the securities
                                  will develop or, if it develops, that it will continue.
                                  Consequently, you may not be able to sell your securities readily
                                  or at prices that will enable you to realize your desired yield.
                                  If only a portion of a class of offered certificates has been sold
                                  to the public, the market for the offered certificates could be
                                  illiquid because of the small amount of these certificates held by
                                  the public. In addition, the market overhang created by the
                                  existence of offered certificates that the market is aware may be
                                  sold to the public in the near future could adversely affect your
                                  ability to sell your certificates. The market values of the
                                  securities are likely to fluctuate. Fluctuations may be
                                  significant and could result in significant losses to you.

                                  The secondary markets for asset backed securities have experienced
                                  periods of illiquidity and can be expected to do so in the future.
                                  Illiquidity can have a severely adverse effect on the prices of
                                  securities that are especially sensitive to prepayment, credit or
                                  interest rate risk, or that have been structured to meet the
                                  investment requirements of limited categories of investors.

BANKRUPTCY OR INSOLVENCY MAY      The seller and the depositor will take steps to structure the
AFFECT THE TIMING AND AMOUNT OF   transfer of the loans held in the issuing entity by the seller to
DISTRIBUTIONS ON THE SECURITIES   the depositor as a sale. The depositor and the issuing entity will
                                  take steps to structure the transfer of the loans from the
                                  depositor to the issuing entity as a sale. If these
                                  characterizations are correct, then if the seller were to become
                                  bankrupt, the loans would not be part of the seller's bankruptcy
                                  estate and would not be available to the seller's creditors. On
                                  the other hand, if the seller becomes bankrupt, its



                                       16





                                  bankruptcy trustee or one of its creditors may attempt to
                                  recharacterize the sale of the loans as a borrowing by the seller,
                                  secured by a pledge of the loans. Presenting this position to a
                                  bankruptcy court could prevent timely payments on the securities
                                  and even reduce the payments on the securities. Additionally, if
                                  that argument is successful, the bankruptcy trustee could elect to
                                  sell the loans and pay down the securities early. Thus, you could
                                  lose the right to future payments of interest, and might suffer
                                  reinvestment losses in a lower interest rate environment.
                                  Similarly, if the characterizations of the transfers as sales are
                                  correct, then if the depositor were to become bankrupt, the loans
                                  would not be part of the depositor's bankruptcy estate and would
                                  not be available to the depositor's creditors. On the other hand,
                                  if the depositor becomes bankrupt, its bankruptcy trustee or one
                                  of its creditors may attempt to recharacterize the sale of the
                                  loans as a borrowing by the depositor, secured by a pledge of the
                                  loans. Presenting this position to a bankruptcy court could
                                  prevent timely payments on the securities and even reduce the
                                  payments on the securities.

                                  If the servicer becomes bankrupt, the bankruptcy trustee may have
                                  the power to prevent the appointment of a successor servicer. Any
                                  related delays in servicing could result in increased
                                  delinquencies or losses on the loans. The period during which cash
                                  collections may be commingled with the servicer's own funds before
                                  each distribution date for securities will be specified in the
                                  applicable prospectus supplement. If the servicer becomes bankrupt
                                  and cash collections have been commingled with the servicer's own
                                  funds, the issuing entity will likely not have a perfected
                                  interest in those collections. In this case the trust might be an
                                  unsecured creditor of the servicer as to the commingled funds and
                                  could recover only its share as a general creditor, which might be
                                  nothing. Collections commingled but still in an account of the
                                  servicer might also be included in the bankruptcy estate of the
                                  servicer even though the trust may have a perfected security
                                  interest in them. Their inclusion in the bankruptcy estate of the
                                  servicer may result in delays in payment and failure to pay
                                  amounts due on the securities. Federal and state statutory
                                  provisions affording protection or relief to distressed borrowers
                                  may affect the ability of the secured mortgage lender to realize
                                  upon its security in other situations as well. For example, in a
                                  proceeding under the federal Bankruptcy Code, a lender may not
                                  foreclose on a mortgaged property without the permission of the
                                  bankruptcy court. In certain instances a bankruptcy court may
                                  allow a borrower to reduce the monthly payments, change the rate
                                  of interest, and alter the mortgage loan repayment schedule for
                                  under collateralized mortgage loans. The effect of these types of
                                  proceedings can be to cause delays in receiving payments on the
                                  loans underlying securities and even to reduce the aggregate
                                  amount of payments on the loans underlying securities.



                                       17





HOLDERS OF ORIGINAL ISSUE         Debt securities that are compound interest securities will be, and
DISCOUNT SECURITIES ARE           certain other debt may be, securities issued with original issue
REQUIRED TO INCLUDE ORIGINAL      income discount for federal tax purposes. A holder of debt
ISSUE DISCOUNT IN ORDINARY        securities issued with original issue discount is required to
GROSS INCOME AS IT ACCRUES        include original issue discount in ordinary gross income for
                                  federal income tax purposes as it accrues, before receiving the
                                  cash attributable to that income. Accrued but unpaid interest on
                                  the debt securities that are compound interest securities
                                  generally will be treated as original issue discount for this
                                  purpose.

                                  See "Federal Income Tax Consequences-Taxation of Debt Securities
                                  Interest and Acquisition Discount" and " Market Discount."

THE PRINCIPAL AMOUNT OF           The market value of the assets relating to a series of securities
SECURITIES MAY EXCEED THE         at any time may be less than the principal amount of the
MARKET VALUE OF THE ISSUING       securities of that series then outstanding, plus accrued interest.
ENTITY ASSETS                     In the case of a series of notes, after an event of default and a
                                  sale of the assets relating to a series of securities, the
                                  trustee, the servicer, the credit enhancer, if any, and any other
                                  service provider specified in the related prospectus supplement
                                  generally will be entitled to receive the proceeds of that sale to
                                  the extent of unpaid fees and other amounts owing to them under
                                  the related transaction document prior to distributions to
                                  securityholders. Upon any sale of the assets in connection with an
                                  event of default, the proceeds may be insufficient to pay in full
                                  the principal of and interest on the securities of the related
                                  series.

                                  Certain capitalized terms are used in this prospectus to assist
                                  you in understanding the terms of the securities. The capitalized
                                  terms used in this prospectus are defined on the pages indicated
                                  under the caption "Index of Principal Terms" on page 124.



                                       18



                              THE ISSUING ENTITY(1)

      This prospectus relates to either Mortgage Pass-Through Certificates or
Mortgage Pass-Through Notes, or a combination of those, which may be sold from
time to time in one or more series by the depositor, IndyMac MBS, Inc., on terms
determined at the time of sale and described in this prospectus and the related
prospectus supplement. Each series will be issued under a separate agreement to
be entered into with respect to each series. The securities of each series will
represent interests in the assets of the related issuing entity, and the notes
of each series will be secured by the pledge of the assets of the related
issuing entity. The issuing entity for each series will be held by the trustee
for the benefit of the related security holders. Each issuing entity will
consist of the issuing entity assets (the "ISSUING ENTITY ASSETS") consisting
of:

      o   a pool of mortgage loans of the type or types specified in the related
          prospectus supplement, together with payments relating to those loans,

      o   mortgage pass-through securities (the "AGENCY SECURITIES") issued or
          guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac or

      o   other mortgage pass-through certificates or collateralized mortgage
          obligations (the "PRIVATE MORTGAGE-BACKED SECURITIES") evidencing an
          interest in, or secured by, mortgage loans of the type that would
          otherwise be eligible to be mortgage loans.

      The depositor will cause the Issuing Entity Assets to be assigned to the
trustee named in the related prospectus supplement for the benefit of the
holders of the securities of the related series. The servicer named in the
related prospectus supplement will service the Issuing Entity Assets pursuant
to:

      o   a pooling and servicing agreement among the depositor, the servicer
          and the trustee, in the case of a series consisting of certificates

      o   a servicing agreement between the trustee and the servicer, in the
          case of a series consisting of certificates and notes, or

      o   a sale and servicing agreement among the depositor, the servicer and
          the trustee, in the case of a series consisting of notes.

      The servicer will receive a fee for its services. See "Loan Program" and
"The Agreements" in this prospectus. With respect to loans serviced by the
servicer through a sub-servicer, the servicer will remain liable for its
servicing obligations under the related agreement as if the servicer alone were
servicing those loans.

      In the case of a series consisting of certificates, the term "AGREEMENT"
 means the related pooling and servicing agreement. In the case of a series
 consisting of certificates and notes, the term "AGREEMENT" means the related
 trust agreement, indenture and servicing agreement, as the context requires. In
 the case of a series consisting of notes, the term "AGREEMENT" means the
 related trust agreement, sale and servicing agreement or indenture, as the
 context requires.

      If specified in the related prospectus supplement, an issuing entity for a
series may be a business trust or common law trust formed under the laws of the
state specified in the related prospectus supplement pursuant to a trust
agreement between the depositor and the related trustee.

      Before the initial offering of a series of securities, the issuing entity
for that series will have no assets or liabilities. The issuing entity for a
series is not expected to engage in any activities other than:

______________________
(1)   Whenever the terms mortgage pool and certificates are used in this
      prospectus, those terms will be considered to apply, unless the context
      indicates otherwise, to one specific mortgage pool and the certificates
      representing certain undivided interests in a single issuing entity
      consisting primarily of the Issuing Entity Assets in the mortgage pool.
      Similarly, the term pass-through rate will refer to the pass-through rate
      borne by the certificates of one specific series and the term issuing
      entity will refer to one specific issuing entity.


                                       19



      o     acquiring, holding and managing the related Issuing Entity Assets
            and any other assets specified in this prospectus and the related
            prospectus supplement (including any proceeds of those assets),

      o     issuing securities and making distributions on them, and

      o     certain other related activities.

      The issuing entity for a series is not expected to have any source of
capital other than its assets and any related credit enhancement.

      The related prospectus supplement may provide for additional obligations
of the depositor, but if it does not, the depositor's only obligations with
respect to a series of securities will be to obtain certain representations and
warranties from the seller and to assign to the related trustee the depositor's
rights with respect to those representations and warranties. See "The
Agreements- Assignment of the Issuing Entity Assets." The servicer's obligations
with respect to the loans will consist mainly of its contractual servicing
obligations under the related agreement (including its obligation to enforce the
obligations of the sellers, as described in this prospectus under "Loan
Program-Representations by Seller; Repurchases" and "-Assignment of the Issuing
Entity Assets"), and any obligation to make cash advances in the event of
delinquent payments on the loans, as described under "Description of the
Securities-Advances" in this prospectus. The servicer's obligation to make
advances may be limited, as described in this prospectus and the related
prospectus supplement.

      The securities will be entitled to payment from the assets of the related
issuing entity or other assets pledged for the benefit of the holders of the
securities as specified in the related prospectus supplement and will not be
entitled to payments in respect of the assets of any other issuing entity
established by the depositor. The applicable prospectus supplement may specify
the Issuing Entity Assets that an issuing entity will consist of, but if it does
not, the Issuing Entity Assets of any issuing entity will consist of mortgage
loans, Agency Securities or Private Mortgage-Backed Securities but not a
combination of them. Mortgage loans acquired by the depositor will have been
originated in accordance with the underwriting criteria specified below under
"Mortgage Loan Program--Underwriting Standards" or as otherwise described in a
related prospectus supplement.

      The following is a brief description of the Issuing Entity Assets expected
to be included in the issuing entities. If specific information about the
Issuing Entity Assets is not known at the time the related series of securities
initially is offered, the related prospectus supplement will contain more
general information of the nature described below, and specific information will
be set forth in a report on Form 8-K to be filed with the Securities and
Exchange Commission (the "SEC") after the initial issuance of the related series
of securities. A maximum of 5% of the Issuing Entity Assets (relative to the
related pool principal balance) as they will be constituted at the time that the
applicable detailed description of Issuing Entity Assets is filed will deviate
in any material respect from the Mortgage Asset pool characteristics described
in the related prospectus supplement. A schedule of the Issuing Entity Assets
relating to the series will be attached to the pooling and servicing agreement
delivered to the trustee upon delivery of the securities.

THE MORTGAGE LOANS--GENERAL

      The mortgage loans will be secured by first and, if so specified in the
related prospectus supplement, subordinate mortgage liens on one- to four-family
residential properties and, if so specified in the related prospectus
supplement, may include cooperative apartment loans secured by security
interests in shares issued by private, nonprofit, cooperative housing
corporations and in the related proprietary leases or occupancy agreements
granting exclusive rights to occupy specific dwelling units in the cooperatives'
buildings. In addition, the Issuing Entity Assets of the related issuing entity
may include mortgage participation certificates evidencing interests in mortgage
loans. The mortgage loans may be conventional loans (i.e., loans that are not
insured or guaranteed by any governmental agency), insured by the FHA or
partially guaranteed by the VA as specified in the related prospectus
supplement. All or a portion of the mortgage loans in a mortgage pool may be
insured by FHA insurance and may be partially guaranteed by the VA.

      The mortgage loans will consist of single family loans, multifamily loans,
mixed-use loans, closed-end second-lien loans, home equity line of credit loans,
lot loans or home improvement contracts. If specified in the


                                       20



related prospectus supplement, the loans may include cooperative apartment loans
("COOPERATIVE LOANS") secured by security interests in shares issued by private,
non-profit, cooperative housing corporations ("COOPERATIVES") and in the related
proprietary leases or occupancy agreements granting exclusive rights to occupy
specific dwelling units in the cooperatives' buildings. As more fully described
in the related prospectus supplement, the loans may be "conventional" loans or
loans that are insured or guaranteed by a governmental agency such as the
Federal Housing Administration (the "FHA") or the Department of Veterans'
Affairs (the "VA").

      The real property that secures repayment of the mortgage loans is referred
to collectively as "MORTGAGED PROPERTIES." The mortgaged properties will be
located in any one of the fifty states, the District of Columbia, Guam, Puerto
Rico or any other territory of the United States. Mortgage loans with certain
Loan-to-Value Ratios or certain principal balances or both may be covered wholly
or partially by primary mortgage guaranty insurance policies. The existence,
extent and duration of coverage will be described in the applicable prospectus
supplement. The mortgaged properties will be secured by mortgages or deeds of
trust or other similar security instruments creating a lien on a property. In
the case of closed-end second-lien loans, liens will be, in the case of home
equity line of credit loans and home improvement contracts, liens generally will
be, and in the case of all other loans, liens may be subordinated to one or more
senior liens on the related properties, as described in the related prospectus
supplement. In addition to being secured by mortgages on real estate, the home
improvement contracts may also be secured by purchase money security interests
in the home improvements financed thereby. If so specified in the related
prospectus supplement, the closed-end second-lien loans, home equity line of
credit loans and home improvement contracts may include loans (primarily for
home improvement or debt consolidation purposes) in amounts exceeding the value
of the related properties at the time of origination.

      The applicable prospectus supplement may specify the day or days on which
bi-weekly or monthly payments on the mortgage loans in a mortgage pool will be
due, but if it does not, all of the mortgage loans in a mortgage pool will have
monthly payments due on the first day of each month. The payment terms of the
mortgage loans to be included in an issuing entity will be described in the
related prospectus supplement and may include any of the following features or
combination thereof or other features described in the related prospectus
supplement:

      o   Interest may be payable at a fixed rate, a rate adjustable from time
          to time in relation to an index (which will be specified in the
          related prospectus supplement), a rate that is fixed for a period of
          time or under certain circumstances and is followed by an adjustable
          rate, a rate that otherwise varies from time to time, or a rate that
          is convertible from an adjustable rate to a fixed rate. Changes to an
          adjustable rate may be subject to periodic limitations, maximum rates,
          minimum rates or a combination of the limitations. Accrued interest
          may be deferred and added to the principal of a loan for the periods
          and under the circumstances as may be specified in the related
          prospectus supplement. Mortgage loans may provide for the payment of
          interest at a rate lower than the specified interest rate borne by
          that loan (the "LOAN RATE") for a period of time or for the life of
          the loan; the amount of the difference may be contributed by the
          seller of the property or another source.

      o   Principal may be payable on a level debt service basis to fully
          amortize the mortgage loan over its term, may be calculated on the
          basis of an assumed amortization schedule that is significantly longer
          than the original term to maturity or on an interest rate that is
          different from the Loan Rate or may not be amortized during all or a
          portion of the original term. Payment (referred to as a "BALLOON
          PAYMENT") of all or a substantial portion of the principal may be due
          on maturity, called balloon payments. Principal may include interest
          that has been deferred and added to the principal balance of the
          mortgage loan.

      o   Monthly payments of principal and interest may be fixed for the life
          of the mortgage loan, may increase over a specified period of time or
          may change from period to period, including periods in which payments
          are interest only. The terms of a mortgage loan may include limits on
          periodic increases or decreases in the amount of monthly payments and
          may include maximum or minimum amounts of monthly payments.

      o   The mortgage loans generally may be prepaid at any time without the
          payment of any prepayment charge. If so specified in the related
          prospectus supplement, some prepayments of principal may be subject to
          a prepayment charge, which may be fixed for the life of the mortgage
          loan or may decline


                                       21



          over time, and may be prohibited for the life of the mortgage loan or
          for certain periods, which are called lockout periods. Certain
          mortgage loans may permit prepayments after expiration of the
          applicable lockout period and may require the payment of a prepayment
          charge in connection with any subsequent prepayment. Other mortgage
          loans may permit prepayments without payment of a fee unless the
          prepayment occurs during specified time periods. The loans may include
          "due-on-sale" clauses that permit the mortgagee to demand payment of
          the entire mortgage loan in connection with the sale or certain
          transfers of the related mortgaged property. Other mortgage loans may
          be assumable by persons meeting the then applicable underwriting
          standards of the seller.

      An issuing entity may contain buydown loans that include provisions
whereby a third party partially subsidizes the monthly payments of the obligors
on the mortgage loans during the early years of the mortgage loans, the
difference to be made up from a buydown fund contributed by the third party at
the time of origination of the mortgage loan. A buydown fund will be in an
amount equal either to the discounted value or full aggregate amount of future
payment subsidies. Thereafter, buydown funds are applied to the applicable
mortgage loan upon receipt by the servicer of the mortgagor's portion of the
monthly payment on the mortgage loan. The servicer administers the buydown fund
to ensure that the monthly allocation from the buydown fund combined with the
monthly payment received from the mortgagor equals the scheduled monthly payment
on the applicable mortgage loan. The underlying assumption of buydown plans is
that the income of the mortgagor will increase during the buydown period as a
result of normal increases in compensation and inflation, so that the mortgagor
will be able to meet the full mortgage payments at the end of the buydown
period. To the extent that this assumption as to increased income is not
fulfilled, the possibility of defaults on buydown loans is increased. The
related prospectus supplement will contain information with respect to any
buydown loan concerning limitations on the interest rate initially paid by the
mortgagor, on annual increases in the interest rate and on the length of the
buydown period.

      The real properties securing repayment of the loans are referred to as the
properties. The loans will be secured by mortgages or deeds of trust or other
similar security instruments creating a lien on a property. In the case of
closed-end second-lien loans, liens will be, in the case of home equity line of
credit loans and home improvement contracts, liens generally will be, and in the
case of all other loans, liens may be subordinated to one or more senior liens
on the related properties, as described in the related prospectus supplement. In
addition to being secured by mortgages on real estate, the home improvement
contracts may also be secured by purchase money security interests in the home
improvements financed thereby. If so specified in the related prospectus
supplement, the closed-end second-lien loans, home equity line of credit loans
and home improvement contracts may include loans (primarily for home improvement
or debt consolidation purposes) in amounts exceeding the value of the related
properties at the time of origination. The properties and the home improvements
are collectively referred to in this prospectus as the "PROPERTIES" and are
individually referred to as a "PROPERTY." The Properties may be located in any
one of the fifty states, the District of Columbia, Guam, Puerto Rico or any
other territory of the United States.

      Loans with certain Loan-to-Value Ratios (defined below) and/or certain
principal balances may be covered wholly or partially by primary mortgage
guaranty insurance policies. The existence, extent and duration of any such
coverage will be described in the applicable prospectus supplement.

      The related prospectus supplement will disclose the aggregate principal
balance of loans secured by owner-occupied properties. The related prospectus
supplement also may state the basis for representations relating to Single
Family Properties (defined below), but if it does not, the sole basis for a
representation that a given percentage of the loans is secured by owner-occupied
Single Family Properties will be the borrower's representation at origination
that the borrower intends to use the Property as a primary residence.

      Single Family Loans. The mortgaged properties relating to single family
loans will consist of detached or semi-detached one- to four-family dwelling
units, townhouses, rowhouses, individual condominium units, individual units in
planned unit developments, manufactured housing that is permanently affixed and
treated as real property under local law, security interests in shares issued by
cooperative housing corporations, and certain other dwelling units ("SINGLE
FAMILY PROPERTIES"). Single Family Properties may include vacation and second
homes, investment properties and leasehold interests. In the case of leasehold
interests the related prospectus supplement may specify the leasehold term, but
if it does not, the stated term of the leasehold will exceed the scheduled
maturity of the loan by at least five years.


                                       22



      Multifamily Loans. Properties securing multifamily loans may include small
multifamily residential properties such as rental apartment buildings or
projects containing five to fifty residential units, including mid-rise and
garden apartments. Certain of the multifamily loans may be secured by apartment
buildings owned by cooperatives. The cooperative owns all the apartment units in
the building and all common areas. The cooperative is owned by
tenant-stockholders who, through ownership of stock, shares or membership
certificates in the corporation, receive proprietary leases or occupancy
agreements conferring exclusive rights to occupy specific apartments or units.
Generally, a tenant-stockholder of a cooperative makes a monthly payment to the
cooperative representing that tenant-stockholder's pro rata share of the
cooperative's payments for its loan, real property taxes, maintenance expenses
and other capital or ordinary expenses. That monthly payment is in addition to
any payments of principal and interest the tenant-stockholder makes on any loans
to the tenant-stockholder secured by its shares in the cooperative. The
cooperative will be directly responsible for building management and, in most
cases, payment of real estate taxes and hazard and liability insurance. A
cooperative's ability to meet debt service obligations on a multifamily loan, as
well as all other operating expenses, will depend in large part on its receipt
of maintenance payments from the tenant-stockholders, as well as any rental
income from units the cooperative controls. Unanticipated expenditures may in
some cases have to be paid by special assessments on the tenant-stockholders. No
more than 10% of the aggregate Issuing Entity Assets for any series, as
constituted at the time of the applicable cut-off date (measured by principal
balance), will be comprised of multifamily loans.

      Mixed-Use Loans. The properties securing mixed-use loans will be improved
by structures that have both residential and commercial units. No more than 10%
of the aggregate Issuing Entity Assets for any series, as constituted at the
applicable cut-off date (measured by principal balance), will be comprised of
mixed-use loans.

      Closed-End Second-Lien Loans. The mortgaged properties relating to
closed-end second-lien loans will be Single Family Properties. The full amount
of a closed-end second-lien loan is advanced at the inception of the loan and
generally is repayable in equal (or substantially equal) installments designed
to fully amortize the loan at its stated maturity. Except as provided in the
related prospectus supplement, the original terms to stated maturity of
closed-end second-lien loans will not exceed 360 months. With respect to certain
circumstances, a borrower may choose an interest only payment option whereby the
borrower pays only the amount of interest accrued on the loan during the billing
cycle. An interest only payment option may be available for a specified period
before the borrower must begin paying at least the minimum monthly payment of a
specified percentage of the average outstanding balance of the loan.

      Home Equity Line of Credit Loans. The mortgaged properties relating to
home equity line of credit loans will be Single Family Properties. As more fully
described in the related prospectus supplement, interest on each home equity
line of credit loan (excluding introductory rates offered from time to time
during promotional periods) is computed and payable monthly on the average daily
outstanding principal balance of the loan. Principal amounts on a home equity
line of credit loan may be drawn down (up to a maximum amount specified in the
related prospectus supplement) or repaid under each home equity line of credit
loan from time to time, but may be subject to a minimum periodic payment. Except
as provided in the related prospectus supplement, the Issuing Entity Assets will
not include any amounts borrowed under a home equity line of credit loan after
the cut-off date. With respect to certain circumstances, a borrower may choose
an interest only payment option whereby the borrower pays only the amount of
interest accrued on the loan during the billing cycle. An interest only payment
option may be available for a specified period before the borrower must begin
paying at least the minimum monthly payment of a specified percentage of the
average outstanding balance of the loan.

      Lot Loans. These loans provide short-term financing for borrowers buying a
parcel of land that has been improved for residential use with the intention of
building a home thereon. Each lot loan is secured by a parcel of land that has
been improved for residential use, which generally means that it is legally
accessible by street and utilities such as sewer, electricity and water have
been brought to the parcel or are available in the street, but a dwelling has
not yet been built thereon. Lot loans may include loans to finance the
construction of a dwelling on such a parcel and construction loans which convert
into permanent loans upon the completion of construction.

      Home Improvement Contracts. The Issuing Entity Assets for a series of
securities may consist, in whole or in part, of home improvement contracts
originated by a home improvement contractor, a thrift or a commercial mortgage
banker in the ordinary course of business. The home improvements securing the
home improvement contracts may include, but are not limited to, replacement
windows, house siding, new roofs, swimming pools, spas, kitchen and bathroom
remodeling goods, solar heating panels and other exterior and interior
renovations and general


                                       23



remodeling projects. The home improvement contracts will be secured by mortgages
on Single Family Properties that are generally subordinate to other mortgages on
the same Property. In general, the home improvement contracts will be fully
amortizing and may have fixed interest rates or adjustable interest rates and
may provide for other payment characteristics as described below and in the
related prospectus supplement. The initial Loan-to-Value Ratio of a home
improvement contract is computed in the manner described in the related
prospectus supplement.

      Additional Information. Each prospectus supplement will contain
information, as of the date of the prospectus supplement and to the extent then
specifically known to the depositor, with respect to the mortgage loans
contained in the related mortgage pool, including

      o   the aggregate outstanding principal balance and the average
          outstanding principal balance of the mortgage loans as of the first
          day of the month of issuance of the related series of securities or
          another date referred to in the related prospectus supplement as a
          cut-off date,

      o   the type of property securing the mortgage loans (e.g., single family
          residences, individual units in condominium apartment buildings or in
          buildings owned by cooperatives, vacation and second homes, small
          multi-family properties or other real property or home improvements),

      o   the original terms to maturity of the mortgage loans,

      o   the ranges of the principal balances of the mortgage loans,

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

      o   the ranges of the Loan-to-Value Ratios or Combined Loan-to-Value
          Ratios (each as defined below), as applicable, of the loans at
          origination,

      o   the Loan Rates or annual percentage rates ("APR") or range of Loan
          Rates or APRs borne by the loans,

      o   the maximum and minimum per annum mortgage rates and

      o   the geographical distribution of the mortgage loans.

      If the depositor does not know specific information about the mortgage
loans at the time the related securities are initially offered, the related
prospectus supplement will contain more general information of the type
described above.

      Unless otherwise specified in the related prospectus supplement, the
"LOAN-TO-VALUE RATIO" of a loan at any given time is a fraction, expressed as a
percentage, the numerator of which is the original principal balance of the
related loan and the denominator of which is the collateral value of the related
Property.

      Unless otherwise specified in the related prospectus supplement, the
"COMBINED LOAN-TO-VALUE RATIO" of a loan at any given time is the ratio,
expressed as a percentage, of

      (x) the sum of

      o   the original principal balance of the loan (or, in the case of a home
          equity line of credit loan, the maximum amount available at
          origination), and

      o   the outstanding principal balance at the date of origination of the
          loan of any senior loan(s) (or, in the case of any open-ended senior
          loan, the maximum available line of credit with respect to that loan
          at origination, regardless of any lesser amount actually outstanding
          at the date of origination of the loan,

      to

      (y) the collateral value of the related Property.


                                       24



      The applicable prospectus supplement may specify how the collateral value
of a Property will be calculated, but if it does not, the collateral value of a
Property (other than with respect to certain loans the proceeds of which were
used to refinance an existing loan), is the lesser of:

      o   the sales price for the property, and

      o   the appraised value determined in an appraisal obtained by the
          originator at origination of the loan.

In the case of refinance loans, the collateral value of the related Property is
generally the appraised value determined in an appraisal obtained at the time of
refinancing.

      We can give no assurance that values of the mortgaged properties have
remained or will remain at their levels on the dates of origination of the
related mortgage loans. If the residential real estate market were to experience
an overall decline in property values so that the outstanding principal balances
of the mortgage loans, and any primary or secondary financing on the Properties,
in a particular mortgage pool become equal to or greater than the value of the
mortgaged properties, the actual rates of delinquencies, foreclosures and losses
could be higher than those now generally experienced in the mortgage lending
industry. In addition, adverse economic conditions and other factors (which may
or may not affect real property values) may affect the timely payment by
mortgagors of scheduled payments of principal and interest on the mortgage loans
and, accordingly, the actual rates of delinquencies, foreclosures and losses
with respect to any mortgage pool. To the extent that the losses are not covered
by subordination provisions or alternative arrangements, the losses will be
borne, at least in part, by the holders of the securities of the related series.

      The depositor will cause the mortgage loans comprising each mortgage pool
to be assigned to the trustee named in the related prospectus supplement for the
benefit of the securityholders of the related series. The servicer named in the
related prospectus supplement will service the mortgage loans pursuant to the
pooling and servicing agreement, sale and servicing agreement or servicing
agreement, as applicable, and will receive a fee for its services. See "Mortgage
Loan Program" and "The Agreements."

      The applicable prospectus supplement may provide for additional
obligations of the depositor, but if it does not, the only obligations of the
depositor with respect to a series of securities will be to obtain certain
representations and warranties from the sellers and to assign to the trustee for
the series of securities the depositor's rights with respect to the
representations and warranties. See "The Agreements--Assignment of Issuing
Entity Assets." The obligations of the servicer with respect to the mortgage
loans will consist principally of its contractual servicing obligations under
the related pooling and servicing agreement, sale and servicing agreement or
servicing agreement, as applicable (including its obligation to enforce the
obligations of the sellers, as more fully described under "Mortgage Loan
Program--Representations by Sellers; Repurchases") and its obligation to make
cash advances upon delinquencies in payments on or with respect to the mortgage
loans in the amounts described under "Description of the Securities--Advances."
The obligations of the servicer to make advances may be subject to limitations,
to the extent provided in this prospectus and in the related prospectus
supplement. The servicer may also be a seller in which case a breach of its
obligations in one capacity will not constitute a breach of its obligations in
the other capacity.

      The mortgage loans will consist of mortgage loans, deeds of trust or
participations or other beneficial interests therein, secured by first and, if
so specified in the related prospectus supplement, subordinate, liens on one-to
four-family residential properties and, if so specified in the related
prospectus supplement, may include cooperative apartment loans secured by
security interests in shares issued by private, non-profit, cooperative housing
corporations and in the related proprietary leases or occupancy agreements
granting exclusive rights to occupy specific dwelling units in the cooperatives'
buildings. In addition, Issuing Entity Assets of the related issuing entity may
include mortgage participation certificates evidencing interests in mortgage
loans. These loans may be conventional loans (i.e., loans that are not insured
or guaranteed by any governmental agency) or loans insured by the FHA or
partially guaranteed by the VA, as specified in the related prospectus
supplement. The mortgaged properties relating to mortgage loans will consist of
detached or semi-detached one-family dwelling units, two- to four-family
dwelling units, townhouses, rowhouses, individual condominium units, individual
units in planned unit developments and certain other dwelling units. The
mortgaged properties may include vacation and second homes, investment
properties and leasehold interests. In the case of leasehold interests, the
applicable prospectus


                                       25



supplement may specify that the term of the leasehold may be less than five
years beyond the scheduled maturity of the mortgage loan, but if it does not,
the term of the leasehold will exceed the scheduled maturity of the mortgage
loan by at least five years.

AGENCY SECURITIES

      Government National Mortgage Association. Ginnie Mae is a wholly-owned
corporate instrumentality of the United States with the United States Department
of Housing and Urban Development. Section 306(g) of Title II of the National
Housing Act of 1934, as amended, authorizes Ginnie Mae to guarantee the timely
payment of the principal of and interest on certificates that represent an
interest in a pool of mortgage loans insured by the FHA under the National
Housing Act of 1934 or Title V of the Housing Act of 1949, or partially
guaranteed by the VA under the Servicemen's Readjustment Act of 1944, as
amended, or Chapter 37 of Title 38, United States Code.

      Section 306(g) of the National Housing Act of 1934 provides that "the full
faith and credit of the United States is pledged to the payment of all amounts
which may be required to be paid under any guaranty under this subsection." In
order to meet its obligations under that guaranty, Ginnie Mae may, under Section
306(d) of the National Housing Act of 1934, borrow from the United States
Treasury in an unlimited amount which is at any time sufficient to enable Ginnie
Mae to perform its obligations under its guarantee.

      Ginnie Mae Certificates. Each Ginnie Mae certificate held in an issuing
entity will be a "fully modified pass-through" mortgage backed certificate
issued and serviced by a Ginnie Mae issuer approved by Ginnie Mae or by Fannie
Mae as a seller-servicer of FHA loans or VA loans. The Ginnie Mae certificates
may be issued under either the Ginnie Mae I program or the Ginnie Mae II
program. The mortgage loans underlying the Ginnie Mae certificates will consist
of FHA loans or VA loans. Each mortgage loan is secured by a one- to four-family
or multifamily residential property. Ginnie Mae will approve the issuance of
each Ginnie Mae certificate in accordance with a guaranty agreement between
Ginnie Mae and the Ginnie Mae issuer. Pursuant to its guaranty agreement, a
Ginnie Mae issuer will be required to advance its own funds in order to make
timely payments of all amounts due on each Ginnie Mae certificate if the
payments received by the Ginnie Mae issuer on the FHA loans or VA loans
underlying each Ginnie Mae certificate are less than the amounts due on each
Ginnie Mae certificate.

      The full and timely payment of principal of and interest on each Ginnie
Mae certificate will be guaranteed by Ginnie Mae, which obligation is backed by
the full faith and credit of the United States. Each Ginnie Mae certificate will
have an original maturity of not more than 30 years (but may have original
maturities of substantially less than 30 years). Each Ginnie Mae certificate
will be based on and backed by a pool of FHA loans or VA loans secured by one to
four-family residential properties and will provide for the payment by or on
behalf of the Ginnie Mae issuer to the registered holder of the Ginnie Mae
certificate of scheduled monthly payments of principal and interest equal to the
registered holder's proportionate interest in the aggregate amount of the
monthly principal and interest payment on each FHA loan or VA loan underlying
the Ginnie Mae certificate, less the applicable servicing and guaranty fee,
which together equal the difference between the interest on the FHA loan or VA
loan and the pass-through rate on the Ginnie Mae certificate. In addition, each
payment will include proportionate pass-through payments of any prepayments of
principal on the FHA loans or VA loans underlying the Ginnie Mae certificate and
liquidation proceeds upon a foreclosure or other disposition of the FHA loans or
VA loans.

      If a Ginnie Mae issuer is unable to make the payments on a Ginnie Mae
certificate as it becomes due, it must promptly notify Ginnie Mae and request
Ginnie Mae to make the payment. Upon notification and request, Ginnie Mae will
make the payments directly to the registered holder of the Ginnie Mae
certificate. If no payment is made by a Ginnie Mae issuer and the Ginnie Mae
issuer fails to notify and request Ginnie Mae to make the payment, the holder of
the Ginnie Mae certificate will have recourse only against Ginnie Mae to obtain
the payment. The trustee or its nominee, as registered holder of the Ginnie Mae
certificates held in an issuing entity, will have the right to proceed directly
against Ginnie Mae under the terms of the guaranty agreements relating to the
Ginnie Mae certificates for any amounts that are not paid when due.

      All mortgage loans underlying a particular Ginnie Mae I certificate must
have the same interest rate over the term of the loan, except in pools of
mortgage loans secured by manufactured homes. The interest rate on the Ginnie
Mae I certificate will equal the interest rate on the mortgage loans included in
the pool of mortgage loans underlying the Ginnie Mae I certificate, less
one-half percentage point per annum of the unpaid principal balance of the
mortgage loans.


                                       26



      Mortgage loans underlying a particular Ginnie Mae II certificate may have
per annum interest rates that vary from each other by up to one percentage
point. The interest rate on each Ginnie Mae II certificate will be between one
half percentage point and one and one-half percentage points lower than the
highest interest rate on the mortgage loans included in the pool of mortgage
loans underlying the Ginnie Mae II certificate, except for pools of mortgage
loans secured by manufactured homes.

      Regular monthly installment payments on each Ginnie Mae certificate held
in an issuing entity will be comprised of interest due as specified on the
Ginnie Mae certificate plus the scheduled principal payments on the FHA loans or
VA loans underlying the Ginnie Mae certificate due on the first day of the month
in which the scheduled monthly installments on the Ginnie Mae certificate are
due. The regular monthly installments on each Ginnie Mae certificate are
required to be paid to the trustee as registered holder by the 15th day of each
month in the case of a Ginnie Mae I certificate and are required to be mailed to
the trustee by the 20th day of each month in the case of a Ginnie Mae II
certificate. Any principal prepayments on any FHA loans or VA loans underlying a
Ginnie Mae certificate held in an issuing entity or any other early recovery of
principal on the loans will be passed through to the trustee as the registered
holder of the Ginnie Mae certificate.

      Ginnie Mae certificates may be backed by graduated payment mortgage loans
or by buy down loans for which funds will have been provided (and deposited into
escrow accounts) for application to the payment of a portion of the borrowers'
monthly payments during the early years of the mortgage loan. Payments due the
registered holders of Ginnie Mae certificates backed by pools containing buydown
loans will be computed in the same manner as payments derived from other Ginnie
Mae certificates and will include amounts to be collected from both the borrower
and the related escrow account. The graduated payment mortgage loans will
provide for graduated interest payments that, during the early years of the
mortgage loans, will be less than the amount of stated interest on the mortgage
loans. The interest not so paid will be added to the principal of the graduated
payment mortgage loans and, together with interest on them, will be paid in
subsequent years. The obligations of Ginnie Mae and of a Ginnie Mae issuer will
be the same irrespective of whether the Ginnie Mae certificates are backed by
graduated payment mortgage loans or buydown loans. No statistics comparable to
the FHA's prepayment experience on level payment, non-buydown mortgage loans are
available for graduated payment or buydown loans. Ginnie Mae certificates
related to a series of securities may be held in book-entry form.

      The Ginnie Mae certificates included in an issuing entity, and the related
underlying mortgage loans, may have characteristics and terms different from
those described above. Any different characteristics and terms will be described
in the related prospectus supplement.

      Federal Home Loan Mortgage Corporation. Freddie Mac is a corporate
instrumentality of the United States created pursuant to Title III of the
Emergency Home Finance Act of 1970, as amended. The common stock of Freddie Mac
is owned by the Federal Home Loan Banks and its preferred stock is owned by
stockholders of the Federal Home Loan Banks. Freddie Mac was established
primarily to increase the availability of mortgage credit to finance urgently
needed housing. It seeks to provide an enhanced degree of liquidity for
residential mortgage investments primarily by assisting in the development of
secondary markets for conventional mortgages. The principal activity of Freddie
Mac currently consists of the purchase of first lien conventional mortgage loans
or participation interests in mortgage loans and the sale of the mortgage loans
or participations so purchased in the form of mortgage securities, primarily
mortgage participation certificates issued and either guaranteed as to timely
payment of interest or guaranteed as to timely payment of interest and ultimate
payment of principal by Freddie Mac. Freddie Mac is confined to purchasing, so
far as practicable, mortgage loans that it deems to be of the quality, type and
class as to meet generally the purchase standards imposed by private
institutional mortgage investors.

      Freddie Mac Certificates. Each Freddie Mac certificate represents an
undivided interest in a pool of mortgage loans that may consist of first lien
conventional loans, FHA loans or VA loans. Freddie Mac certificates are sold
under the terms of a Mortgage Participation Certificate Agreement. A Freddie Mac
certificate may be issued under either Freddie Mac's Cash Program or Guarantor
Program.

      Mortgage loans underlying the Freddie Mac certificates held by an issuing
entity will consist of mortgage loans with original terms to maturity of between
10 and 40 years. Each mortgage loan must meet the applicable standards set forth
in the Emergency Home Finance Act of 1970. A Freddie Mac certificate group may
include whole loans, participation interests in whole loans and undivided
interests in whole loans and participations


                                       27



comprising another Freddie Mac certificate group. Under the Guarantor Program, a
Freddie Mac certificate group may include only whole loans or participation
interests in whole loans.

      Freddie Mac guarantees to each registered holder of a Freddie Mac
certificate the timely payment of interest on the underlying mortgage loans to
the extent of the applicable certificate interest rate on the registered
holder's pro rata share of the unpaid principal balance outstanding on the
underlying mortgage loans in the Freddie Mac certificate group represented by
the Freddie Mac certificate, regardless of whether received. Freddie Mac also
guarantees to each registered holder of a Freddie Mac certificate collection by
the holder of all principal on the underlying mortgage loans, without any offset
or deduction, to the extent of the holder's pro rata share of it, but does not,
except if and to the extent specified in the related prospectus supplement for a
series of securities, guarantee the timely payment of scheduled principal. Under
Freddie Mac's Gold PC Program, Freddie Mac guarantees the timely payment of
principal based on the difference between the pool factor published in the month
preceding the month of distribution and the pool factor published in the month
of distribution. Pursuant to its guaranties, Freddie Mac indemnifies holders of
Freddie Mac certificates against any diminution in principal from charges for
property repairs, maintenance and foreclosure. Freddie Mac may remit the amount
due on account of its guaranty of collection of principal at any time after
default on an underlying mortgage loan, but not later than 30 days following
foreclosure sale, 30 days following payment of the claim by any mortgage insurer
or 30 days following the expiration of any right of redemption, whichever occurs
later, but in any event no later than one year after demand has been made upon
the mortgagor for accelerated payment of principal. In taking actions regarding
the collection of principal after default on the mortgage loans underlying
Freddie Mac certificates, including the timing of demand for acceleration,
Freddie Mac reserves the right to exercise its judgment with respect to the
mortgage loans in the same manner as for mortgage loans that it has purchased
but not sold. The length of time necessary for Freddie Mac to determine that a
mortgage loan should be accelerated varies with the particular circumstances of
each mortgagor, and Freddie Mac has not adopted standards which require that the
demand be made within any specified period.

      Freddie Mac certificates are not guaranteed by the United States or by any
Federal Home Loan Bank and do not constitute debts or obligations of the United
States or any Federal Home Loan Bank. The obligations of Freddie Mac under its
guaranty are obligations solely of Freddie Mac and are not backed by, or
entitled to, the full faith and credit of the United States. If Freddie Mac were
unable to satisfy its obligations, distributions to holders of Freddie Mac
certificates would consist solely of payments and other recoveries on the
underlying mortgage loans and, accordingly, monthly distributions to holders of
Freddie Mac certificates would be affected by delinquent payments and defaults
on the mortgage loans.

      Registered holders of Freddie Mac certificates are entitled to receive
their monthly pro rata share of all principal payments on the underlying
mortgage loans received by Freddie Mac, including any scheduled principal
payments, full and partial prepayments of principal and principal received by
Freddie Mac by virtue of condemnation, insurance, liquidation or foreclosure,
and repurchases of the mortgage loans by Freddie Mac or their seller. Freddie
Mac is required to remit each registered Freddie Mac security holder's pro rata
share of principal payments on the underlying mortgage loans, interest at the
Freddie Mac pass-through rate and any other sums such as prepayment charges,
within 60 days of the date on which the payments are deemed to have been
received by Freddie Mac.

      Under Freddie Mac's Cash Program, there is no limitation on the amount by
which interest rates on the mortgage loans underlying a Freddie Mac certificate
may exceed the pass-through rate on the Freddie Mac certificate. Under that
program, Freddie Mac purchases groups of whole mortgage loans from sellers at
specified percentages of their unpaid principal balances, adjusted for accrued
or prepaid interest, which when applied to the interest rate of the mortgage
loans and participations purchased results in the yield required by Freddie Mac.
The required yield, which includes a minimum servicing fee retained by the
servicer, is calculated using the outstanding principal balance. The range of
interest rates on the mortgage loans and participations in a Freddie Mac
certificate group under the Cash Program will vary since mortgage loans and
participations are purchased and assigned to a Freddie Mac certificate group
based upon their yield to Freddie Mac rather than on the interest rate on the
underlying mortgage loans. Under Freddie Mac's Guarantor Program, the
pass-through rate on a Freddie Mac certificate is established based upon the
lowest interest rate on the underlying mortgage loans, minus a minimum servicing
fee and the amount of Freddie Mac's management and guaranty income as agreed
upon between the seller and Freddie Mac.


                                       28



      Freddie Mac certificates duly presented for registration of ownership on
or before the last business day of a month are registered effective as of the
first day of the month. The first remittance to a registered holder of a Freddie
Mac certificate will be distributed so as to be received normally by the 15th
day of the second month following the month in which the purchaser became a
registered holder of the Freddie Mac certificate. Thereafter, the remittance
will be distributed monthly to the registered holder so as to be received
normally by the 15th day of each month. The Federal Reserve Bank of New York
maintains book-entry accounts for Freddie Mac certificates sold by Freddie Mac
on or after January 2, 1985, and makes payments of principal and interest each
month to their registered holders in accordance with the holders' instructions.

      Federal National Mortgage Association. Fannie Mae is a federally chartered
and privately owned corporation organized and existing under the Federal
National Mortgage Association Charter Act, as amended. Fannie Mae was originally
established in 1938 as a United States government agency to provide supplemental
liquidity to the mortgage market and was transformed into a stockholder owned
and privately-managed corporation by legislation enacted in 1968.

      Fannie Mae provides funds to the mortgage market primarily by purchasing
mortgage loans from lenders, thereby replenishing their funds for additional
lending. Fannie Mae acquires funds to purchase mortgage loans from many capital
market investors that may not ordinarily invest in mortgages, thereby expanding
the total amount of funds available for housing. Operating nationwide, Fannie
Mae helps to redistribute mortgage funds from capital-surplus to capital-short
areas.

      Fannie Mae Certificates. These are guaranteed mortgage pass-through
certificates issued and guaranteed as to timely payment of principal and
interest by Fannie Mae representing fractional undivided interests in a pool of
mortgage loans formed by Fannie Mae. Each mortgage loan must meet the applicable
standards of the Fannie Mae purchase program. Mortgage loans comprising a pool
are either provided by Fannie Mae from its own portfolio or purchased pursuant
to the criteria of the Fannie Mae purchase program.

      Mortgage loans underlying Fannie Mae certificates held by an issuing
entity will consist of conventional mortgage loans, FHA loans or VA loans.
Original maturities of substantially all of the conventional, level payment
mortgage loans underlying a Fannie Mae certificate are expected to be between
either 8 to 15 years or 20 to 40 years. The original maturities of substantially
all of the fixed rate, level payment FHA loans or VA loans are expected to be 30
years. Mortgage loans underlying a Fannie Mae certificate may have annual
interest rates that vary by as much as two percentage points from each other.
The rate of interest payable on a Fannie Mae certificate is equal to the lowest
interest rate of any mortgage loan in the related pool, less a specified minimum
annual percentage representing servicing compensation and Fannie Mae's guaranty
fee. Under a regular servicing option, the annual interest rates on the mortgage
loans underlying a Fannie Mae certificate will be between 50 basis points and
250 basis points greater than is its annual pass through rate. Under this option
the mortgagee or each other servicer assumes the entire risk of foreclosure
losses. Under a special servicing option, the annual interest rates on the
mortgage loans underlying a Fannie Mae certificate will generally be between 55
basis points and 255 basis points greater than the annual Fannie Mae certificate
pass-through rate. Under this option Fannie Mae assumes the entire risk for
foreclosure losses. If specified in the related prospectus supplement, Fannie
Mae certificates may be backed by adjustable rate mortgages.

      Fannie Mae guarantees to each registered holder of a Fannie Mae
certificate that it will distribute amounts representing the holder's
proportionate share of scheduled principal and interest payments at the
applicable pass through rate provided for by the Fannie Mae certificate on the
underlying mortgage loans, regardless of whether received, and the holder's
proportionate share of the full principal amount of any foreclosed or other
finally liquidated mortgage loan, regardless of whether the principal amount is
actually recovered. The obligations of Fannie Mae under its guaranties are
obligations solely of Fannie Mae and are not backed by, or entitled to, the full
faith and credit of the United States. Although the Secretary of the Treasury of
the United States has discretionary authority to lend Fannie Mae up to $2.25
billion outstanding at any time, neither the United States nor any of its
agencies is obligated to finance Fannie Mae's operations or to assist Fannie Mae
in any other manner. If Fannie Mae were unable to satisfy its obligations,
distributions to holders of Fannie Mae certificates would consist solely of
payments and other recoveries on the underlying mortgage loans and, accordingly,
monthly distributions to holders of Fannie Mae certificates would be affected by
delinquent payments and defaults on the mortgage loans.


                                       29



      Except for Fannie Mae certificates backed by pools containing graduated
payment mortgage loans or mortgage loans secured by multifamily projects, Fannie
Mae certificates evidencing interests in pools of mortgage loans formed on or
after May 1, 1985 are available in book-entry form only. Distributions of
principal and interest on each Fannie Mae certificate will be made by Fannie Mae
on the 25th day of each month to the persons in whose name the Fannie Mae
certificate is entered in the books of the Federal Reserve Banks or registered
on the Fannie Mae certificate register as of the close of business on the last
day of the preceding month. Distributions on Fannie Mae certificates issued in
book-entry form will be made by wire. Distributions on fully registered Fannie
Mae certificates will be made by check.

      The Fannie Mae certificates included in an issuing entity, and the related
underlying mortgage loans, may have characteristics and terms different from
those described above. Any different characteristics and terms will be described
in the related prospectus supplement.

      Stripped Mortgage-Backed Securities. Agency Securities may consist of one
or more stripped mortgage-backed securities, each as described in this
prospectus and in the related prospectus supplement. Each Agency Security will
represent an undivided interest in all or part of either the principal
distributions (but not the interest distributions) or the interest distributions
(but not the principal distributions), or in some specified portion of the
principal and interest distributions (but not all the distributions) on certain
Freddie Mac, Fannie Mae or Ginnie Mae certificates. The underlying securities
will be held under a trust agreement by Freddie Mac, Fannie Mae or Ginnie Mae,
each as trustee, or by another trustee named in the related prospectus
supplement. The applicable prospectus supplement may specify that Freddie Mac,
Fannie Mae or Ginnie Mae will not guarantee each stripped Agency Security to the
same extent it guarantees the underlying securities backing the stripped Agency
Security, but if it does not, then Freddie Mac, Fannie Mae or Ginnie Mae will
guarantee each stripped Agency Security to the same extent it guarantees the
underlying securities backing the stripped Agency Security.

      Other Agency Securities. If specified in the related prospectus
supplement, an issuing entity may include other mortgage pass-through
certificates issued or guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac. The
characteristics of those mortgage pass-through certificates will be described in
the prospectus supplement. If so specified, a combination of different types of
Agency Securities may be held in an issuing entity.

PRIVATE MORTGAGE-BACKED SECURITIES

      Private Mortgage-Backed Securities may consist of mortgage pass-through
certificates or participation certificates evidencing an undivided interest in a
pool of mortgage loans or collateralized mortgage obligations secured by
mortgage loans. Private Mortgage-Backed Securities may include stripped
mortgage-backed securities representing an undivided interest in all or a part
of either the principal distributions (but not the interest distributions) or
the interest distributions (but not the principal distributions) or in some
specified portion of the principal and interest distributions (but not all the
distributions) on certain mortgage loans. Private Mortgage-Backed Securities
will have been issued pursuant to a pooling and servicing agreement, an
indenture or similar agreement. The applicable prospectus supplement may provide
that the seller/servicer of the underlying mortgage loans will not have entered
into a pooling and servicing agreement with a private trustee, but if it does
not, the seller/servicer of the underlying mortgage loans will have entered into
the pooling and servicing agreement with a private trustee. The private trustee
or its agent, or a custodian, will possess the mortgage loans underlying the
Private Mortgage-Backed Security. Mortgage loans underlying a Private
Mortgage-Backed Security will be serviced by a private servicer directly or by
one or more subservicers who may be subject to the supervision of the private
servicer.

      The issuer of the Private Mortgage-Backed Securities will be a financial
institution or other entity engaged generally in the business of mortgage
lending, a public agency or instrumentality of a state, local or federal
government, or a limited purpose corporation organized for the purpose of, among
other things, establishing trusts and acquiring and selling residential mortgage
loans to the trusts and selling beneficial interests in the trusts. If so
specified in the related prospectus supplement, the issuer of Private
Mortgage-Backed Securities may be an affiliate of the depositor. The obligations
of the issuer of Private Mortgage-Backed Securities will generally be limited to
certain representations and warranties with respect to the assets conveyed by it
to the related issuing entity. The issuer of Private Mortgage-Backed Securities
will not have guaranteed any of the assets conveyed to the related issuing
entity or any of the Private Mortgage-Backed Securities issued under the pooling
and servicing agreement. Additionally, although the mortgage loans underlying
the Private Mortgage-Backed Securities may be guaranteed by


                                       30



an agency or instrumentality of the United States, the Private Mortgage-Backed
Securities themselves will not be so guaranteed.

      Distributions of principal and interest will be made on the Private
Mortgage-Backed Securities on the dates specified in the related prospectus
supplement. The Private Mortgage-Backed Securities may be entitled to receive
nominal or no principal distributions or nominal or no interest distributions.
Principal and interest distributions will be made on the Private Mortgage-Backed
Securities by the private trustee or the private servicer. The issuer of Private
Mortgage-Backed Securities or the private servicer may have the right to
repurchase assets underlying the Private Mortgage-Backed Securities after a
certain date or under other circumstances specified in the related prospectus
supplement.

      The mortgage loans underlying the Private Mortgage-Backed Securities may
consist of fixed rate, level payment, fully amortizing loans or graduated
payment mortgage loans, buydown loans, adjustable rate mortgage loans or loans
having balloon or other special payment features. The mortgage loans may be
secured by first and/or subordinate liens on single family property or
residential lot or by an assignment of the proprietary lease or occupancy
agreement relating to a specific dwelling within a cooperative and the related
shares issued by the cooperative or small multifamily residential properties,
such as rental apartment buildings or projects containing five to fifty
residential units, or by closed-end and/or revolving home equity loans, secured
in whole or in part by first and/or subordinate liens on one- to four-family
residential properties.

      The prospectus supplement for a series for which the issuing entity
includes Private Mortgage-Backed Securities will specify

      o   the aggregate approximate principal amount and type of the Private
          Mortgage-Backed Securities to be included in the issuing entity;

      o   certain characteristics of the mortgage loans that comprise the
          underlying assets for the Private Mortgage-Backed Securities including

          o   the payment features of the mortgage loans,

          o   the approximate aggregate principal balance, if known, of
              underlying mortgage loans insured or guaranteed by a governmental
              entity,

          o   the servicing fee or range of servicing fees with respect to the
              mortgage loans and

          o   the minimum and maximum stated maturities of the underlying
              mortgage loans at origination;

      o   the maximum original term-to-stated maturity of the Private
          Mortgage-Backed Securities;

      o   the weighted average term-to stated maturity of the Private
          Mortgage-Backed Securities;

      o   the pass-through or certificate rate of the Private Mortgage-Backed
          Securities;

      o   the weighted average pass-through or certificate rate of the Private
          Mortgage-Backed Securities;

      o   the issuer of Private Mortgage-Backed Securities, the private servicer
          (if other than the issuer of Private Mortgage-Backed Securities) and
          the private trustee for the Private Mortgage-Backed Securities;

      o   certain characteristics of credit support, if any, the as reserve
          funds, insurance policies, surety bonds, letters of credit or
          guaranties relating to the mortgage loans underlying the Private
          Mortgage-Backed Securities or to the Private Mortgage-Backed
          Securities themselves;

      o   the terms on which the underlying mortgage loans for the Private
          Mortgage-Backed Securities may, or are required to, be purchased
          before their stated maturity or the stated maturity of the Private
          Mortgage-Backed Securities;


                                       31



      o   the terms on which mortgage loans may be substituted for those
          originally underlying the Private Mortgage-Backed Securities; and

      o   as appropriate, shall indicate whether the information required to be
          presented with respect to the Private Mortgage-Backed Securities as a
          "significant obligor" is either incorporated by referenced, provided
          directly by the issuer or provided by reference to the Exchange Act
          filing of another entity.

      Private Mortgage-Backed Securities included in the issuing entity for a
series of certificates that were issued by an issuer of Private Mortgage-Backed
Securities that is not affiliated with the depositor must be acquired in bona
fide secondary market transactions or either have been previously registered
under the Securities Act of 1933, as amended (the "SECURITIES ACT") or have been
held for at least the holding period required to be eligible for sale under Rule
144(k) under the Securities Act.

SUBSTITUTION OF ISSUING ENTITY ASSETS

      Substitution of Issuing Entity Assets will be permitted upon breaches of
representations and warranties with respect to any original Mortgage Asset or if
the trustee determines that the documentation with respect to any Mortgage Asset
is incomplete. See "Loan Program--Representations by Sellers; Repurchases." The
period during which the substitution will be permitted generally will be
indicated in the related prospectus supplement. The related prospectus
supplement will describe any other conditions upon which Issuing Entity Assets
may be substituted for Issuing Entity Assets initially included in the issuing
entity.

AVAILABLE INFORMATION

      The depositor has filed with the SEC a Registration Statement under the
Securities Act covering the securities. This prospectus, which forms a part of
the Registration Statement, and the prospectus supplement relating to each
series of securities contain summaries of the material terms of the documents
referred to in this prospectus and in the prospectus supplement, but do not
contain all of the information in the Registration Statement pursuant to the
rules and regulations of the SEC. For further information, reference is made to
the Registration Statement and its exhibits. The Registration Statement and
exhibits can be inspected and copied at prescribed rates at the public reference
facilities maintained by the SEC at its Public Reference Room at 100 F Street,
N.E., Washington, DC 20549. You may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an
Internet Web site that contains reports and information statements, and other
information regarding the registrants that file electronically with the SEC,
including the depositor. The address of that Internet Web site is
http://www.sec.gov. The depositor's SEC Securities Act file number is
333-132042.

      This prospectus and any applicable prospectus supplement do not constitute
an offer to sell or a solicitation of an offer to buy any securities other than
the securities offered by this prospectus and the prospectus supplement nor an
offer of the securities to any person in any state or other jurisdiction in
which the offer would be unlawful.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE; REPORTS FILED WITH THE SEC

      All documents filed for the issuing entity referred to in the accompanying
prospectus supplement after the date of this prospectus and before the end of
the related offering with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") are
incorporated by reference in this prospectus and are a part of this prospectus
from the date of their filing. Any statement contained in a document
incorporated by reference in this prospectus is modified or superseded for all
purposes of this prospectus to the extent that a statement contained in this
prospectus (or in the accompanying prospectus supplement) or in any other
subsequently filed document that also is incorporated by reference differs from
that statement. Any statement so modified or superseded shall not, except as so
modified or superseded, constitute a part of this prospectus.

      The depositor or servicer on behalf of the issuing entity of the related
series will file the reports required under the Securities Act and under Section
13(a), 13(c) 14 or 15(d) of the Exchange Act. These reports include (but are not
limited to):


                                       32



o     Reports on Form 8-K (Current Report), following the issuance of the series
      of securities of the related issuing entity, including as Exhibits to the
      Form 8-K (1) the agreements or other documents specified in the related
      prospectus supplement, if applicable, (2) the Detailed Description, if
      applicable, regarding the related Issuing Entity Assets and (3) the
      opinions related to the tax consequences and the legality of the series
      being issued required to be filed under applicable securities laws;

o     Reports on Form 8-K (Current Report), following the occurrence of events
      specified in Form 8-K requiring disclosure, which are required to be filed
      within the time-frame specified in Form 8-K related to the type of event;

o     Reports on Form 10-D (Asset-Backed Issuer Distribution Report), containing
      the distribution and pool performance information required on Form 10-D,
      which are required to be filed 15 days following the distribution date
      specified in the related prospectus supplement; and

o     Report on Form 10-K (Annual Report), containing the items specified in
      Form 10-K with respect to a fiscal year and filing or furnishing, as
      appropriate, the required exhibits.

      Neither the depositor nor the servicer intends to file with the SEC any
reports required under Section 13 (a), 13(c), 14 or 15(d) of the Exchange Act
with respect to an issuing entity following completion of the reporting period
required by Rule 15d-1 or Regulation 15D under the Securities Exchange Act of
1934. Unless specifically stated in the report, the reports and any information
included in the report will neither be examined nor reported on by an
independent public accountant. Each issuing entity formed by the depositor will
have a separate file number assigned by the SEC. Reports filed with respect to
an issuing entity with the SEC after the final prospectus supplement is filed
will be available under issuing entity's specific number, which will be a series
number assigned to the file number of the depositor shown above.

      The trustee on behalf of any issuing entity will provide without charge to
each person to whom this prospectus is delivered, on the person's written or
oral request, a copy of any or all of the documents referred to above that have
been or may be incorporated by reference in this prospectus (not including
exhibits to the information that is incorporated by reference unless the
exhibits are specifically incorporated by reference into the information that
this prospectus incorporates) and any reports filed with the SEC. Requests
should be directed to the corporate trust office of the trustee specified in the
accompanying prospectus supplement.

REPORTS TO SECURITYHOLDERS

      The distribution and pool performance reports filed on Form 10-D will be
forwarded to each securityholder as specified in the related prospectus
supplement. All other reports filed with the SEC concerning the issuing entity
will be forwarded to securityholders free of charge upon written request to the
trustee on behalf of any issuing entity, but will not be made available through
a website of the depositor, the servicer or any other party as these reports and
exhibits can be inspected and copied at prescribed rates at the public reference
facilities maintained by the SEC and can also viewed electronically at the
internet Web site of the SEC shown above under "--Available Information."

      The applicable prospectus supplement may specify different items to be
 reported, but if it does not, before or concurrently with each distribution on
 a distribution date the servicer or the trustee will furnish to each
 securityholder of record of the related series a statement setting forth, to
 the extent applicable to the series of securities, among other things:

      o   the amount of the distribution allocable to principal, separately
          identifying the aggregate amount of any principal prepayments and, if
          so specified in the related prospectus supplement, prepayment charges;

      o   the amount of the distribution allocable to interest;

      o   the amount of any advance;


                                       33



      o   the aggregate amount otherwise allocable to the subordinated
          securityholders on the distribution date and the aggregate amount
          withdrawn from the reserve fund, if any, that is included in the
          amounts distributed to the securityholders;

      o   the Class Security Balance or notional amount of each class of the
          related series after giving effect to the distribution of principal on
          the distribution date;

      o   the percentage of principal payments on the Issuing Entity Assets
          (excluding prepayments), if any, which each class will be entitled to
          receive on the following distribution date;

      o   the percentage of principal prepayments with respect to the Issuing
          Entity Assets, if any, which each class will be entitled to receive on
          the following distribution date;

      o   the related amount of the servicing compensation retained or withdrawn
          from the Security Account by the servicer, and the amount of
          additional servicing compensation received by the servicer
          attributable to penalties, fees, excess liquidation proceeds and other
          similar charges and items;

      o   the number and aggregate principal balances of mortgage loans (A)
          delinquent (exclusive of mortgage loans in foreclosure) 1 to 30 days,
          31 to 60 days, 61 to 90 days and 91 or more days and (B) in
          foreclosure and delinquent 1 to 30 days, 31 to 60 days, 61 to 90 days
          and 91 or more days, as of the close of business on the last day of
          the calendar month preceding the distribution date;

      o   the book value of any real estate acquired through foreclosure or
          grant of a deed in lieu of foreclosure;

      o   the pass-through rate, if adjusted from the date of the last
          statement, of a class expected to be applicable to the next
          distribution to the class;

      o   if applicable, the amount remaining in the reserve fund at the close
          of business on the distribution date;

      o   the pass-through rate as of the day before the preceding distribution
          date; and

      o   any amounts remaining under letters of credit, pool policies or other
          forms of credit enhancement.

      Where applicable, any amount set forth above may be expressed as a dollar
amount per single certificate of the relevant class having the percentage
interest specified in the related prospectus supplement. The report to
securityholders for any series of securities may include additional or other
information of a similar nature to that specified above.

      In addition, within a reasonable period of time after the end of each
calendar year, the servicer or the trustee will mail to each security holder of
record at any time during the calendar year a report as to the aggregate of
amounts reported pursuant to the first two items for the calendar year or, if
the person was a securityholder of record during a portion of the calendar year,
for the applicable portion of the year and other customary information deemed
appropriate for securityholders to prepare their tax returns.

                                 USE OF PROCEEDS

      The depositor will apply the net proceeds from the sale of the securities
to the purchase of Issuing Entity Assets or will be used by the depositor for
general corporate purposes. The depositor expects to sell securities in series
from time to time, but the timing and amount of securities offerings will depend
on a number of factors, including the volume of Issuing Entity Assets acquired
by the depositor, prevailing interest rates, availability of funds and general
market conditions.

                                  THE DEPOSITOR

      IndyMac MBS, Inc., a Delaware corporation, was organized on July 9, 1999
for the limited purpose of acquiring, owning and transferring Issuing Entity
Assets and selling interests in them or bonds secured by them. The depositor is
a limited purpose finance subsidiary of IndyMac Bank, F.S.B., a federal savings
bank organized under


                                       34



the laws of the United States. The depositor maintains its principal office at
155 North Lake Avenue, Pasadena, California 91101. Its telephone number is
(800) 669-2300.

      The depositor's obligations after issuance of the securities include
delivery of the Issuing Entity Assets and certain related documents and
instruments, repurchasing Issuing Entity Assets in the event of certain breaches
of representations and warranties made by the depositor, providing tax-related
information to the trustee and maintaining the trustee's first and/or
subordinate priority perfected security interest in the Issuing Entity Assets.

      Neither the depositor nor any of the depositor's affiliates will insure or
guarantee distributions on the securities of any series.

                              MORTGAGE LOAN PROGRAM

      The mortgage loans will have been purchased by the depositor, either
directly or through affiliates, from sellers. The discussion below under
"Underwriting Process" contains a general description of underwriting standards
that are applicable to most sellers. A description of the underwriting
guidelines that are applied by the seller or sellers in a particular transaction
will be set forth in the related prospectus supplement.

UNDERWRITING STANDARDS

      The applicable prospectus supplement may provide for the seller's
representations and warranties relating to the mortgage loans, but if it does
not, each seller will represent and warrant that all loans originated and/or
sold by it to the depositor will have been underwritten in accordance with
standards consistent with those utilized by mortgage lenders generally during
the period of origination for similar types of loans. As to any loan insured by
the FHA or partially guaranteed by the VA, the seller will represent that it has
complied with the underwriting police of the FHA or the VA, as the case may be.

UNDERWRITING PROCESS

      Underwriting standards are applied by or on behalf of a lender to evaluate
the borrower's credit standing and repayment ability, and the value and adequacy
of the Property as collateral. Most lenders offer a number of different
underwriting programs. Some programs place more emphasis on a borrower's credit
standing and repayment ability while others emphasize the value and adequacy of
the Property as collateral. The most comprehensive of the programs emphasize
both.

      In general, where a loan is subject to full underwriting review, a
prospective borrower applying for a mortgage loan is required to fill out a
detailed application designed to provide to the underwriting officer pertinent
credit information. As part of the description of the borrower's financial
condition, the borrower generally is required to provide a current list of
assets and liabilities and a statement of income and expenses, as well as an
authorization to apply for a credit report which summarizes the borrower's
credit history with local merchants and lenders and any record of bankruptcy. In
most cases, an employment verification is obtained from an independent source,
typically the borrower's employer. The verification reports the length of
employment with that organization, the borrower's current salary and whether it
is expected that the borrower will continue employment in the future. If a
prospective borrower is self-employed, the borrower may be required to submit
copies of signed tax returns. The borrower may also be required to authorize
verification of deposits at financial institutions where the borrower has demand
or savings accounts.

      In determining the adequacy of the Property as collateral, an appraisal is
made of each property considered for financing. Except as described in the
applicable prospectus supplement, an appraiser is required to inspect the
property and verify that it is in good repair and that construction, if new, has
been completed. The appraisal is based on the market value of comparable homes,
the estimated rental income (if considered applicable by the appraiser) and the
cost of replacing the home.

      Once all applicable employment, credit and property information is
received, a determination generally is made as to whether the prospective
borrower has sufficient monthly income available to meet monthly housing
expenses and other financial obligations and monthly living expenses and to meet
the borrower's monthly obligations on the proposed mortgage loan (generally
determined on the basis of the monthly payments due in the


                                       35



year of origination) and other expenses related to the Property such as property
taxes and hazard insurance). The underwriting standards applied by sellers,
particularly with respect to the level of loan documentation and the mortgagor's
income and credit history, may be varied in appropriate cases where factors as
low Loan-to-Value Ratios or other favorable credit factors exist.

      In the event a lender underwrites mortgage loans under programs less
restrictive than the one described above, a description of those programs will
be set forth in the related prospectus supplement.

      Certain of the types of mortgage loans that may be included in an issuing
entity may be recently developed and may involve additional uncertainties not
present in traditional types of loans. For example, certain of the mortgage
loans may provide for escalating or variable payments by the mortgagor. These
types of mortgage loans are underwritten on the basis of a judgment that the
mortgagors have the ability to make the monthly payments required initially. In
some instances, however, a mortgagor's income may not be sufficient to permit
continued loan payments as the payments increase. These types of mortgage loans
may also be underwritten primarily on the basis of Loan-to-Value Ratios or other
favorable credit factors.

QUALIFICATIONS OF SELLERS

      Each seller must be an institution experienced in originating mortgage
loans of the type contained in the related mortgage pool and must maintain
satisfactory facilities to originate those mortgage loans.

REPRESENTATIONS BY SELLERS; REPURCHASES

      Each seller will have made representations and warranties in respect of
the mortgage loans sold by it and evidenced by a series of securities. The
applicable prospectus supplement may specify the different representations and
warranties, but if it does not, the representations and warranties will
generally include, among other things:

      o   that a lender's policy of title insurance (or in the case of mortgaged
          properties located in areas where title insurance policies are
          generally not available, an attorney's certificate of title) or a
          commitment to issue the policy was effective on the date of
          origination of each loan, other than cooperative loans, and that each
          policy (or certificate of title as applicable) remained in effect on
          the date of purchase of the mortgage loan from the seller by or on
          behalf of the depositor;

      o   that the seller had good title to each mortgage loan and the mortgage
          loan was subject to no valid offsets, defenses, counterclaims or
          rights of rescission except to the extent that any buydown agreement
          described in this prospectus may forgive certain indebtedness of a
          mortgagor;

      o   that each mortgage loan is secured by a valid first lien on, or a
          first perfected security interest with respect to, the Property
          (subject only to permissible title insurance exceptions, if
          applicable, and certain other exceptions described in the pooling and
          servicing agreement or sale and servicing agreement, as applicable)
          and that the Property was free of material damage;

      o   that there were no delinquent tax or assessment liens against the
          Property; and

      o   that each loan at the time it was originated and on the date of
          transfer by the seller to the depositor complied in all material
          respects with all applicable local, state and federal laws.

      As to any mortgage loan insured by the FHA or partially guaranteed by the
VA, the seller will represent that it has complied with underwriting policies of
the FHA or the VA, as the case may be.

      As indicated in the related pooling and servicing agreement, the
representations and warranties of a seller in respect of a mortgage loan will be
made as of the date of initial issuance of the series of securities, the related
cut-off date, the date on which the seller sold the mortgage loan to the
depositor or one of its affiliates, or the date of origination of the related
mortgage loan, as the case may be. If representations and warranties are made as
of a date other than the closing date or cut-off date, a substantial period of
time may have elapsed between the other date and the date of initial issuance of
the series of securities evidencing an interest in the mortgage loan. Because
the representations and warranties of a seller do not address events that may
occur following the sale of a mortgage loan


                                       36



by the seller or following the origination of the mortgage loan, as the case may
be, its repurchase obligation will not arise if the relevant event that would
otherwise have given rise to a repurchase obligation with respect to a mortgage
loan occurs after the date of sale of the mortgage loan by the seller to the
depositor or its affiliates or after the origination of the mortgage loan, as
the case may be. In addition, the representations concerning fraud in the
origination of the mortgage loan will be limited to the extent the seller has
knowledge and the seller will be under no obligation to investigate the
substance of the representation. However, the depositor will not include any
mortgage loan in the issuing entity for any series of securities if anything has
come to the depositor's attention that would cause it to believe that the
representations and warranties of a seller will not be accurate and complete in
all material respects in respect of the mortgage loan as of the date of initial
issuance of the related series of securities. If the servicer is also a seller
of mortgage loans with respect to a particular series, the representations will
be in addition to the representations and warranties made by the servicer in its
capacity as the servicer.

      The trustee, if the servicer is the seller, or the servicer will promptly
notify the relevant seller of any breach of any representation or warranty made
by it in respect of a mortgage loan that materially and adversely affects the
interests of the security holders in the mortgage loan. The applicable
prospectus supplement may specify that the seller has a different repurchase
obligation, but if it does not, then if the seller cannot cure the breach within
90 days after notice from the servicer or the trustee, as the case may be, then
the seller will be obligated to either

          o   repurchase the mortgage loan from the issuing entity at a price
              equal to 100% of the outstanding principal balance of the mortgage
              as of the date of the repurchase plus accrued interest on it to
              the first day of the month in which the purchase price is to be
              distributed at the mortgage rate, less any unreimbursed advances
              or amount payable as related servicing compensation if the seller
              is the servicer with respect to the mortgage loan or

          o   substitute for the loan a replacement loan that satisfies the
              criteria specified in the related prospectus supplement.

      If an election is to be made to treat an issuing entity or designated
portions of it as a "real estate mortgage investment conduit" as defined in the
Internal Revenue Code of 1986, as amended (the "CODE"), the servicer or a holder
of the related residual certificate will be obligated to pay any prohibited
transaction tax that may arise in connection with any repurchase or substitution
and the trustee must have received a satisfactory opinion of counsel that the
repurchase or substitution will not cause the issuing entity to lose its status
as a REMIC or otherwise subject the issuing entity to a prohibited transaction
tax. The applicable prospectus supplement may contain different reimbursement
options, but if it does not, the servicer will be entitled to reimbursement for
that payment from the assets of the related issuing entity or from any holder of
the related residual certificate. See "Description of the Securities-- General"
and in the related prospectus supplement. Except in those cases in which the
servicer is the seller, the servicer will be required under the applicable
pooling and servicing agreement to enforce this obligation for the benefit of
the trustee and the security holders, following the practices it would employ in
its good faith business judgment were it the owner of the mortgage loan. This
repurchase obligation will constitute the sole remedy available to security
holders or the trustee for a breach of representation by a seller.

      Neither the depositor nor the servicer (unless the servicer is the seller)
will be obligated to purchase or substitute a mortgage loan if a seller defaults
on its obligation to do so, and we can give no assurance that sellers will carry
out their respective repurchase or substitution obligations with respect to
mortgage loans. However, to the extent that a breach of a representation and
warranty of a seller may also constitute a breach of a representation made by
the servicer, the servicer may have a repurchase or substitution obligation as
described under "The Agreements--Assignment of Issuing Entity Assets."

                                STATIC POOL DATA

      If specified in the related prospectus supplement, static pool data with
respect to the delinquency, cumulative loss and prepayment data for IndyMac
Bank, F.S.B. or any other person specified in the related prospectus supplement
will be made available through a website. The prospectus supplement related to
each series for which the static pool data is provided through a website will
contain the website address to obtain this information. Except as stated below,
the static pool data provided through any Web site will be deemed part of this


                                       37



prospectus and the registration statement of which this prospectus is a part
from the date of the related prospectus supplement.

      Notwithstanding the foregoing, the following information shall not be
deemed part of the prospectus or the registration statement of which this
prospectus is a part:

      o   with respect to information regarding prior securitized pools of
          IndyMac Bank, F.S.B. (or the applicable person specified in the
          related prospectus supplement) that do not include the currently
          offered pool, information regarding prior securitized pools that were
          established before January 1, 2006; and

      o   with respect to information regarding the pool described in the
          related prospectus supplement, information about the pool for periods
          before January 1, 2006.

      Static pool data may also be provided in the related prospectus supplement
or may be provided in the form of a CD-ROM accompanying the related prospectus
supplement. The related prospectus supplement will specify how the static pool
data will be presented.

                          DESCRIPTION OF THE SECURITIES

      The prospectus supplement relating to the securities of each series to be
offered under this prospectus will, among other things, set forth for the
securities, as appropriate:

      o   a description of the class or classes of securities and the rate at
          which interest will be passed through to holders of each class of
          securities entitled to interest or the method of determining the
          amount of interest, if any, to be passed through to each class;

      o   the initial aggregate principal balance of each class of securities
          included in the series, the dates on which distributions on the
          securities will be made and, if applicable, the initial and final
          scheduled distribution dates for each class;

      o   information as to the assets comprising the issuing entity, including
          the general characteristics of the Issuing Entity Assets included in
          the issuing entity and, if applicable, the insurance, surety bonds,
          guaranties, letters of credit or other instruments or agreements
          included in the issuing entity, and the amount and source of any
          reserve fund;

      o   the circumstances, if any, under which the issuing entity may be
          subject to early termination;

      o   the method used to calculate the amount of principal to be distributed
          with respect to each class of securities;

      o   the order of application of distributions to each of the classes
          within the series, whether sequential, pro rata, or otherwise;

      o   the distribution dates with respect to the series;

      o   additional information with respect to the plan of distribution of the
          securities;

      o   whether one or more REMIC elections will be made and designation of
          the regular interests and residual interests;

      o   the aggregate original percentage ownership interest in the issuing
          entity to be evidenced by each class of securities;

      o   information as to the nature and extent of subordination with respect
          to any class of securities that is subordinate in right of payment to
          any other class; and


                                       38



      o   information as to the seller, the servicer and the trustee.

      Each series of certificates will be issued pursuant to a separate Pooling
and Servicing Agreement. A form of Pooling and Servicing Agreement has been
filed as an exhibit to the Registration Statement of which this prospectus forms
a part. Each Pooling and Servicing Agreement will be dated as of the related
cut-off date, will be among the depositor, the servicer and the trustee for the
benefit of the holders of the securities of the related series. Each series of
notes will be issued pursuant to an indenture (the "INDENTURE") between the
related issuing entity and the entity named in the related prospectus supplement
as trustee with respect to the related series, and the related loans will be
serviced by the servicer pursuant to a Sale and Servicing Agreement. Each
Indenture will be dated as of the cut-off date and the Issuing Entity Assets
will be pledged to the related trustee for the benefit of the holders of the
securities of the related series.

      A form of Indenture and Sale and Servicing Agreement has been filed as an
exhibit to the Registration Statement of which this prospectus forms a part. A
series of securities may consist of both notes and certificates. The provisions
of each agreement will vary depending upon the nature of the securities to be
issued thereunder and the nature of the related issuing entity. The following
are descriptions of the material provisions which may appear in each agreement.
The descriptions are subject to, and are qualified in their entirety by
reference to, all of the provisions of the agreement for each series of
securities and the applicable prospectus supplement. The depositor will provide
a copy of the agreements (without exhibits) relating to any series without
charge upon written request of a holder of record of a security of the series
addressed to IndyMac MBS, Inc., 155 North Lake Avenue, Pasadena, California
91101, Attention: Transaction Management. The following summaries describe
material provisions that may appear in each agreement.

GENERAL

      The securities of each series will be issued in either fully registered or
book-entry form in the authorized denominations specified in the related
prospectus supplement. In the case of certificates, the securities will evidence
specified beneficial ownership interests in the related issuing entity. In the
case of notes, the securities will be secured by the assets of the related
issuing entity. In both cases, the securities will not be entitled to payments
in respect of the assets included in any other issuing entity established by the
depositor. The applicable prospectus supplement may provide for guarantees by a
governmental entity or other person, but if it does not, the Issuing Entity
Assets will not be insured or guaranteed by any governmental entity or other
person. Each issuing entity will consist of, to the extent provided in the
related agreement,

      o   the Issuing Entity Assets that from time to time are subject to the
          related agreement (exclusive of any amounts specified in the related
          prospectus supplement as a retained interest);

      o   the assets required to be deposited in the related Security Account
          from time to time;

      o   property that secured a mortgage loan and that is acquired on behalf
          of the security holders by foreclosure or deed in lieu of foreclosure;
          and

      o   any primary mortgage insurance policies, FHA insurance and VA
          guaranties, and any other insurance policies or other forms of credit
          enhancement required to be maintained pursuant to the related
          agreement.

      If specified in the related prospectus supplement, an issuing entity may
also include one or more of the following: reinvestment income on payments
received on the Issuing Entity Assets, a reserve fund, a mortgage pool insurance
policy, a special hazard insurance policy, a bankruptcy bond, one or more
letters of credit, a surety bond, guaranties or similar instruments or other
agreements.

      Each series of securities will be issued in one or more classes. Each
class of securities of a series will evidence beneficial ownership of a
specified percentage or portion of future interest payments and a specified
percentage or portion of future principal payments on the Issuing Entity Assets
in the related issuing entity. These specified percentages may be 0%. Each class
of notes of a series will be secured by the related Issuing Entity Assets. A
series of securities may include one or more classes that are senior in right to
payment to one or more other classes of securities of the series. Certain series
or classes of securities may be covered by insurance policies,


                                       39



surety bonds or other forms of credit enhancement, in each case as described
under"--Credit Enhancement" in this prospectus and in the related prospectus
supplement. One or more classes of securities of a series may be entitled to
receive distributions of principal, interest or any combination of principal and
interest. Distributions on one or more classes of a series of securities may be
made before one or more other classes, after the occurrence of specified events,
in accordance with a schedule or formula, on the basis of collections from
designated portions of the Issuing Entity Assets in the related issuing entity,
or on a different basis, in each case as specified in the related prospectus
supplement. The timing and amounts of the distributions may vary among classes
or over time as specified in the related prospectus supplement.

      The trustee will make distributions of either or both of principal and
interest on the related securities on each distribution date (i.e., monthly,
quarterly, semi-annually or at other intervals and on the dates specified in the
prospectus supplement) in proportion to the percentages specified in the related
prospectus supplement. Distributions will be made to the persons in whose names
the securities are registered at the close of business on the dates specified in
the related prospectus supplement. Distributions will be made in the manner
specified in the related prospectus supplement to the persons entitled to them
at the addresses appearing in the security register maintained for
securityholders; provided, however, that the final distribution in retirement of
the securities will be made only upon presentation and surrender of the
securities at the office or agency of the trustee or other person specified in
the notice to securityholders of the final distribution.

      The securities will be freely transferable and exchangeable at the
corporate trust office of the trustee specified in the related prospectus
supplement. No service charge will be made for any registration of exchange or
transfer of securities of any series, but the trustee may require payment of a
sum sufficient to cover any related tax or other governmental charge.

      Under current law the purchase and holding by or on behalf of any employee
benefit plan or other retirement arrangement subject to provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the
Code of certain classes of securities may result in "prohibited transactions"
within the meaning of ERISA and the Code. See "ERISA Considerations." Retirement
arrangements subject to these provisions include individual retirement accounts
and annuities, Keogh plans and collective investment funds in which the plans,
accounts or arrangements are invested. The applicable prospectus supplement may
specify other conditions under which transfers of this type would be permitted,
but if it does not, transfer of the securities will not be registered unless the
transferee represents that it is not, and is not purchasing on behalf of, a
plan, account or other retirement arrangement or provides an opinion of counsel
satisfactory to the trustee and the depositor that the purchase of the
securities by or on behalf of a plan, account or other retirement arrangement is
permissible under applicable law and will not subject the trustee, the servicer
or the depositor to any obligation or liability in addition to those undertaken
in the applicable agreement.

      As to each series, an election may be made to treat the related issuing
entity or designated portions of it as a real estate mortgage investment conduit
or REMIC as defined in the Code. The related prospectus supplement will specify
whether a REMIC election is to be made. Alternatively, the agreement for a
series may provide that a REMIC election may be made at the discretion of the
depositor or the servicer and may be made only if certain conditions are
satisfied. The terms applicable to the making of a REMIC election, as well as
any material federal income tax consequences to securityholders not described in
this prospectus, will be set forth in the related prospectus supplement. If a
REMIC election is made with respect to a series, one of the classes will be
designated as evidencing the sole class of residual interests in the related
REMIC, as defined in the Code. All other classes of securities in the series
will constitute regular interests in the related REMIC, as defined in the Code.
As to each series for which a REMIC election is to be made, the servicer or a
holder of the related residual interest or ownership will be obligated to comply
with applicable laws and regulations and will be obligated to pay any prohibited
transaction taxes. The applicable prospectus supplement may restrict the
servicer's reimbursement rights, but if it does not, the servicer will be
entitled to reimbursement for that payment from the assets of the issuing entity
or from any holder of the related residual certificate or ownership interest.
Unless otherwise specified in the related prospectus supplement, if the amounts
distributable to the related residual securities are insufficient to cover the
amount of any prohibited transaction taxes, the amount necessary to reimburse
the servicer may be deducted from the amounts otherwise distributable to the
other classers of securities of the series.


                                       40



DISTRIBUTIONS ON SECURITIES

      General. In general, the method of determining the amount of distributions
on a particular series of securities will depend on the type of credit support,
if any, for that series. See "Credit Enhancement" in this prospectus and in the
related prospectus supplement. Various methods that may be used to determine the
amount of distributions on the securities of a particular series. The prospectus
supplement for each series of securities will describe the method to be used in
determining the amount of distributions on the securities of that series.

      The trustee will make distributions allocable to principal of and interest
on the securities out of, and only to the extent of, funds in the related
Security Account, including any funds transferred from any reserve fund. As
between securities of different classes and as between distributions of
principal (and, if applicable, between distributions of principal prepayments
and scheduled payments of principal) and interest, distributions made on any
distribution date will be applied as specified in the related prospectus
supplement. The applicable prospectus supplement may provide for payment
distinctions within classes, but if it does not, distributions to any class of
securities will be made pro rata to all security holders of that class.

      Available Funds. All distributions on the securities of each series on
each distribution date will be made from the Available Funds, in accordance with
the terms described in the related prospectus supplement and specified in the
related agreement. The applicable prospectus supplement may define Available
Funds with reference to different accounts or different amounts, but if it does
not, "Available Funds" for each distribution date will generally equal the
amount on deposit in the related Security Account on that distribution date (net
of related fees and expenses payable by the related issuing entity) other than
amounts to be held in the Security Account for distribution on future
distribution dates.

      Distributions of Interest. Interest will accrue on the aggregate original
balance of the securities (or, in the case of securities entitled only to
distributions allocable to interest, the aggregate notional amount) of each
class of securities (the "CLASS SECURITY BALANCE") entitled to interest at the
pass-through rate or interest rate, as applicable (which in either case may be a
fixed rate or a rate adjustable as specified in the prospectus supplement) from
the date and for the periods specified in the related prospectus supplement. To
the extent funds are available therefor, interest accrued during each specified
period on each class of securities entitled to interest (other than a class of
securities that provides for interest that accrues, but is not currently
payable) will be distributable on the distribution dates specified in the
related prospectus supplement until the Class Security Balance of the class has
been distributed in full. In the case of securities entitled only to
distributions allocable to interest, interest will be distributable until the
aggregate notional amount of the securities is reduced to zero or for the period
of time designated in the related prospectus supplement. The original principal
balance of each security will equal the aggregate distributions allocable to
principal to which the security is entitled. The applicable prospectus
supplement may specify some other basis for these distributions, but if it does
not, distributions allocable to interest on each security that is not entitled
to distributions allocable to principal will be calculated based on the notional
amount of the certificate. The notional amount of a security will not evidence
an interest in or entitlement to distributions allocable to principal but will
be used solely for convenience in expressing the calculation of interest and for
certain other purposes.

      Interest payable on the securities of a series on a distribution date will
include all interest accrued during the period specified in the related
prospectus supplement. If the interest accrual period for a security ends two or
more days before a distribution date, the effective yield will be lower than the
yield obtained if interest on the security were to accrue through the day
immediately preceding that distribution date. In addition, the effective yield
(at par) to securityholders will be less than the indicated coupon rate.

      With respect to any class of accrual securities, any interest that has
accrued but is not paid on a given distribution date will be added to the Class
Security Balance of the class of securities on that distribution date. The
applicable prospectus supplement may specify some other basis for these
distributions, but if it does not, distributions of interest on each class of
accrual securities will commence only after the occurrence of the events
specified in the prospectus supplement and, before that time, the beneficial
ownership interest of the class of accrual securities in the issuing entity, as
reflected in the Class Security Balance of the class of accrual securities, will
increase on each distribution date by the amount of interest that accrued on the
class of accrual securities during the preceding interest accrual period but
that was not required to be distributed to the class on the distribution date. A
class of accrual securities will thereafter accrue interest on its outstanding
Class Security Balance as so adjusted.


                                       41



      Distributions of Principal. The related prospectus supplement will specify
the method by which the amount of principal to be distributed on the securities
on each distribution date will be calculated and the manner in which that amount
will be allocated among the classes of securities entitled to distributions of
principal. The Class Security Balance of any class of securities entitled to
distributions of principal will be the original Class Security Balance of the
class of securities specified in the prospectus supplement,

          o   reduced by all distributions reported to the holders of the
              securities as allocable to principal

          o   in the case of accrual securities, unless otherwise specified in
              the related prospectus supplement, increased by all interest
              accrued but not then distributable on the accrual securities,

          o   in the case of adjustable rate securities, unless otherwise
              specified in the related prospectus supplement, subject to the
              effect of negative amortization, and

          o   if specified in the related prospectus supplement, reduced by the
              amount of any losses allocated to the Class Security Balance of
              the class of securities.

      A series of securities may include one or more classes of senior
securities and one or more classes of subordinate securities. If so provided in
the related prospectus supplement, one or more classes of senior securities will
be entitled to receive all or a disproportionate percentage of the payments of
principal that are received from borrowers in advance of their scheduled due
dates and are not accompanied by amounts representing scheduled interest due
after the month of the payments in the percentages and under the circumstances
or for the periods specified in the prospectus supplement. Any disproportionate
allocation of these principal prepayments to senior securities will have the
effect of accelerating the amortization of the senior securities while
increasing the interests evidenced by the subordinated securities in the issuing
entity. Increasing the interests of the subordinated securities relative to that
of the senior securities is intended to preserve the availability of the
subordination provided by the subordinated securities. See "Credit
Enhancement--Subordination" and "Credit Enhancement--Subordination of the
Subordinated Securities" in the related prospectus supplement.

      Unscheduled Distributions. If specified in the related prospectus
supplement, the securities will be subject to receipt of distributions before
the next scheduled distribution date. If applicable, the trustee will be
required to make unscheduled distributions on the day and in the amount
specified in the related prospectus supplement if, due to substantial payments
of principal (including principal prepayments) on the Issuing Entity Assets, the
trustee or the servicer determines that the funds available or anticipated to be
available from the Security Account and, if applicable, any reserve fund, may be
insufficient to make required distributions on the securities on the
distribution date. The applicable prospectus supplement may specify some other
basis for these distributions, but if it does not, the amount of the unscheduled
distribution that is allocable to principal will not exceed the amount that
would otherwise have been required to be distributed as principal on the
securities on the next distribution date. The applicable prospectus supplement
may provide that unscheduled distributions will not include interest or that
interest will be computed on a different basis, but if it does not, all
unscheduled distributions will include interest at the applicable pass-through
rate on the amount of the unscheduled distribution allocable to principal for
the period and to the date specified in the prospectus supplement.

ADVANCES

      To the extent provided in the related prospectus supplement, the servicer
will be required to advance on or before each distribution date (from its own
funds or funds held in the Security Account for future distributions to security
holders), an amount equal to the aggregate of payments of principal and interest
that were delinquent on the related Determination Date, subject to the
servicer's determination that the advances will be recoverable out of late
payments by obligors on the Issuing Entity Assets, liquidation proceeds,
insurance proceeds not used to restore the property or otherwise. In the case of
cooperative loans, the servicer also will be required to advance any unpaid
maintenance fees and other charges under the related proprietary leases as
specified in the related prospectus supplement.

      In making advances, the servicer will endeavor to maintain a regular flow
of scheduled interest and principal payments to securityholders, rather than to
guarantee or insure against losses.


                                       42



      If the servicer makes advances from funds being held for future
distribution to securityholders, the servicer will replace the funds on or
before any future distribution date to the extent that funds in the applicable
Security Account on the distribution date would be less than the amount required
to be available for distributions to securityholders on the distribution date.
Any advances will be reimbursable to the servicer out of recoveries on the
specific Issuing Entity Assets with respect to which the advances were made
(e.g., late payments made by the related obligors, any related insurance
proceeds, liquidation proceeds or proceeds of any mortgage loan repurchased by
the depositor or a seller pursuant to the related pooling and servicing
agreement or sale and servicing agreement, as applicable). In addition, advances
by the servicer also will be reimbursable to the servicer from cash otherwise
distributable to securityholders (including the holders of senior securities) to
the extent that the servicer determines that the advances previously made are
not ultimately recoverable as described in the preceding sentence. The servicer
also will be obligated to make advances, to the extent recoverable out of
insurance proceeds not used to restore the property, liquidation proceeds or
otherwise, for certain taxes and insurance premiums not paid by mortgagors on a
timely basis. Funds so advanced are reimbursable to the servicer to the extent
permitted by the pooling and servicing agreement, sale and servicing agreement
or servicing agreement, as applicable. If specified in the related prospectus
supplement, the obligations of the servicer to make advances may be supported by
a cash advance reserve fund, a surety bond or other arrangement, in each case as
described in the prospectus supplement.

      In the event that the servicer fails to make a required advance, the
applicable prospectus supplement may specify whether another party will have
advancing obligations, but if it does not, the trustee will be obligated to make
such advance in its capacity as successor servicer. If the trustee makes such an
advance, it will be entitled to be reimbursed for such advance to the same
extent and degree as the servicer is entitled to be reimbursed for advances. See
"Description of the Securities-Distributions on Securities."

MANDATORY AUCTION

      The applicable prospectus supplement for a series of notes may provide for
a Dutch auction of such notes to be held on a specified date, provided that
certain conditions are met. The prospectus supplement may further provide for
adjustments to the terms of the notes, including but not limited to,
acceleration of principal repayments, reset of interest rate and/or payment by a
credit enhancement provider, and such adjustments may be determined by the
results of the Dutch auction.

CATEGORIES OF CLASSES OF SECURITIES

      In general, classes of pass-through securities fall into different
categories. The following chart identifies and generally defines the more
typical categories. The prospectus supplement for a series of securities may
identify the classes which comprise the series by reference to the following
categories.



CATEGORIES OF CLASSES                                                     DEFINITION PRINCIPAL TYPES

Accretion Directed Class................    A class that receives principal payments from the accreted interest from specified
                                            accrual classes. An accretion directed class also may receive principal payments from
                                            principal paid on the underlying Issuing Entity Assets or other assets of the issuing
                                            entity for the related series.

Companion Class.........................    A class that receives principal payments on any distribution date only if scheduled
                                            payments have been made on specified planned principal classes, targeted principal
                                            classes or scheduled principal classes.

Component Class.........................    A class consisting of "components." The components of a class of component
                                            securities may have different principal and interest payment characteristics but
                                            together constitute a single class. Each component of a class of component securities
                                            may be identified as falling into one or more of the categories in this chart.



                                       43





CATEGORIES OF CLASSES                                                     DEFINITION PRINCIPAL TYPES

Non-Accelerated Senior or NAS ..........    A class that, for the period of time specified in the related prospectus supplement,
                                            generally will not receive (in other words, is locked out) (1) principal prepayments
                                            on the underlying Issuing Entity Assets that are allocated disproportionately to the
                                            senior securities because of the shifting interest structure of the securities in the
                                            issuing entity and/or (2) scheduled principal payments on the underlying Issuing
                                            Entity Assets, as specified in the related prospectus supplement. During the lock-out
                                            period, the portion of the principal distributions on the underlying Issuing Entity
                                            Assets of which the NAS Class is locked out will be distributed to the other classes
                                            of senior securities.

Notional Amount Class ..................    A class having no principal balance and bearing interest on the related notional
                                            amount. The notional amount is used for purposes of the determination of interest
                                            distributions.

Planned Principal Class or PACs ........    A class that is designed to receive principal payments using a predetermined
                                            principal balance schedule derived by assuming two constant prepayment rates for the
                                            underlying Issuing Entity Assets. These two rates are the endpoints for the
                                            "structuring range" for the planned principal class. The planned principal classes in
                                            any series of securities may be subdivided into different categories (e.g., primary
                                            planned principal classes, secondary planned principal classes and so forth) having
                                            different effective structuring ranges and different principal payment priorities.
                                            The structuring range for the secondary planned principal class of a series of
                                            securities will be narrower than that for the primary planned principal class of the
                                            series.

Scheduled Principal Class ..............    A class that is designed to receive principal payments using a predetermined
                                            principal balance schedule but is not designated as a planned principal class or
                                            targeted principal class. In many cases, the schedule is derived by assuming two
                                            constant prepayment rates for the underlying Issuing Entity Assets. These two rates
                                            are the endpoints for the "structuring range" for the scheduled principal class.

Sequential Pay Class ...................    Classes that receive principal payments in a prescribed sequence, that do not have
                                            predetermined principal balance schedules and that under all circumstances receive
                                            payments of principal continuously from the first distribution date on which they
                                            receive principal until they are retired. A single class that receives principal
                                            payments before or after all other classes in the same series of securities may be
                                            identified as a sequential pay class.

Strip Class ............................    A class that receives a constant proportion, or "strip," of the principal payments on
                                            the underlying Issuing Entity Assets or other assets of the issuing entity.

Super Senior Class .....................    A class that will not bear its proportionate share of realized losses (other than
                                            excess losses) as its share is directed to another class (the "Support Class") until
                                            the Class Security Balance of the Support Class is reduced to zero.

Support Class ..........................    A class that absorbs realized losses other than excess losses that would otherwise be
                                            allocated to a Super Senior class after the related classes of subordinated
                                            securities are no longer outstanding.



                                       44





CATEGORIES OF CLASSES                                                     DEFINITION PRINCIPAL TYPES

Targeted Principal Class or TACs .......    A class that is designed to receive principal payments using a predetermined
                                            principal balance schedule derived by assuming a single constant prepayment rate for
                                            the underlying Issuing Entity Assets.

                                                                                INTEREST TYPES

Fixed Rate..............................    A class with an interest rate that is fixed throughout the life of the class.

Floating Rate...........................    A class with an interest rate that resets periodically based upon a designated index
                                            and that varies directly with changes in the index.

Inverse Floating Rate...................    A class with an interest rate that resets periodically based upon a designated index
                                            and that varies inversely with changes in the index.

Variable Rate...........................    A class with an interest rate that resets periodically and is calculated by reference
                                            to the rate or rates of interest applicable to specified assets or instruments (e.g.,
                                            the mortgage rates borne by the underlying mortgage loans).

Interest Only...........................    A class that receives some or all of the interest payments made on the underlying
                                            Issuing Entity Assets or other assets of the issuing entity and little or no
                                            principal. Interest only classes have either a nominal principal balance or a
                                            notional amount. A nominal principal balance represents actual principal that will be
                                            paid on the class. It is referred to as nominal since it is extremely small compared
                                            to other classes. A notional amount is the amount used as a reference to calculate
                                            the amount of interest due on an interest only class that is not entitled to any
                                            distributions of principal.

Principal Only..........................    A class that does not bear interest and is entitled to receive only distributions of
                                            principal.

Partial Accrual.........................    A class that accretes a portion of the amount of accrued interest on it, which amount
                                            will be added to the principal balance of the class on each applicable distribution
                                            date, with the remainder of the accrued interest to be distributed currently as
                                            interest on the class. The accretion may continue until a specified event has
                                            occurred or until the partial accrual class is retired.

Accrual.................................    A class that accretes the amount of accrued interest otherwise distributable on the
                                            class, which amount will be added as principal to the principal balance of the class
                                            on each applicable distribution date. The accretion may continue until some specified
                                            event has occurred or until the accrual class is retired.


      INDICES APPLICABLE TO FLOATING RATE AND INVERSE FLOATING RATE CLASSES

LIBOR

      The applicable prospectus supplement may specify some other basis for
determining LIBOR, but if it does not, on the LIBOR determination date (as
defined in the related prospectus supplement) for each class of securities of a
series for which the applicable interest rate is determined by reference to an
index denominated as LIBOR, the person designated in the related pooling and
servicing agreement, sale and servicing agreement or servicing agreement, as
applicable as the calculation agent will determine LIBOR in accordance with one
of the two methods described below (which method will be specified in the
related prospectus supplement):


                                       45



LIBO Method

      If using this method to calculate LIBOR, the calculation agent will
determine LIBOR by reference to the quotations, as set forth on the Moneyline
Telerate Page 3750, offered by the principal London office of each of the
designated reference banks meeting the criteria set forth in this prospectus for
making one-month United States dollar deposits in leading banks in the London
Interbank market, as of 11:00 a.m. (London time) on the LIBOR determination
date. In lieu of relying on the quotations for those reference banks that appear
at the time on the Moneyline Telerate Page 3750, the calculation agent will
request each of the reference banks to provide the offered quotations at that
time.

      Under this method the calculation agent will establish LIBOR on each LIBOR
determination date as follows:

            (a) If on any LIBOR determination date two or more reference banks
      provide offered quotations, LIBOR for the next interest accrual period
      shall be the arithmetic mean of the offered quotations (rounded upwards if
      necessary to the nearest whole multiple of 1/32%).

            (b) If on any LIBOR determination date only one or none of the
      reference banks provides offered quotations, LIBOR for the next interest
      accrual period shall be whichever is the higher of

            o   LIBOR as determined on the previous LIBOR determination date or

            o   the reserve interest rate.

      The reserve interest rate shall be the rate per annum which the
      calculation agent determines to be either

            o   the arithmetic mean (rounded upwards if necessary to the nearest
                whole multiple of 1/32%) of the one-month United States dollar
                lending rates that New York City banks selected by the
                calculation agent are quoting, on the relevant LIBOR
                determination date, to the principal London offices of at least
                two of the reference banks to which the quotations are, in the
                opinion of the calculation agent being so made, or

            o   if the calculation agent cannot determine the arithmetic mean,
                the lowest one-month United States dollar lending rate which New
                York City banks selected by the calculation agent are quoting on
                the LIBOR determination date to leading European banks.

            (c) If on any LIBOR determination date for a class specified in the
      related prospectus supplement, the calculation agent is required but is
      unable to determine the reserve interest rate in the manner provided in
      paragraph (b) above, LIBOR for the next interest accrual period shall be
      LIBOR as determined on the preceding LIBOR determination date, or, in the
      case of the first LIBOR determination date, LIBOR shall be considered to
      be the per annum rate specified as such in the related prospectus
      supplement.

      Each reference bank will be a leading bank engaged in transactions in
Eurodollar deposits in the international Eurocurrency market; will not control,
be controlled by, or be under common control with the calculation agent; and
will have an established place of business in London. If reference bank should
be unwilling or unable to act as such or if appointment of a reference bank is
terminated, another leading bank meeting the criteria specified above will be
appointed.

BBA Method

      If using this method of determining LIBOR, the calculation agent will
determine LIBOR on the basis of the British Bankers' Association "Interest
Settlement Rate" for one-month deposits in United States dollars as found on
Moneyline Telerate Page 3750 as of 11:00 a.m. London time on each LIBOR
determination date. Interest Settlement Rates currently are based on rates
quoted by eight British Bankers' Association designated banks as being, in the
view of the banks, the offered rate at which deposits are being quoted to prime
banks in the London interbank market. The Interest Settlement Rates are
calculated by eliminating the two highest rates and the two lowest rates,


                                       46



averaging the four remaining rates, carrying the result (expressed as a
percentage) out to six decimal places, and rounding to five decimal places.

      If on any LIBOR determination date, the calculation agent is unable to
calculate LIBOR in accordance with the method set forth in the immediately
preceding paragraph, LIBOR for the next interest accrual period will be
calculated in accordance with the LIBOR method described under "LIBO Method."

      The calculation agent's determination of LIBOR on each LIBOR determination
date and its calculation of the rate of interest for the applicable classes for
the related interest accrual period will (in the absence of manifest error) be
final and binding.

COFI

      The Eleventh District Cost of Funds Index is designed to represent the
monthly weighted average cost of funds for savings institutions in Arizona,
California and Nevada that are member institutions of the Eleventh Federal Home
Loan Bank District (the "ELEVENTH DISTRICT"). The Eleventh District Cost of
Funds Index for a particular month reflects the interest costs paid on all types
of funds held by Eleventh District member institutions and is calculated by
dividing the cost of funds by the average of the total amount of those funds
outstanding at the end of that month and of the prior month and annualizing and
adjusting the result to reflect the actual number of days in the particular
month. If necessary, before these calculations are made, the component figures
are adjusted by the Federal Home Loan Bank of San Francisco ("FHLBSF") to
neutralize the effect of events such as member institutions leaving the Eleventh
District or acquiring institutions outside the Eleventh District. The Eleventh
District Cost of Funds Index is weighted to reflect the relative amount of each
type of funds held at the end of the relevant month. The major components of
funds of Eleventh District member institutions are: savings deposits, time
deposits, FHLBSF advances, repurchase agreements and all other borrowings.
Because the component funds represent a variety of maturities whose costs may
react in different ways to changing conditions, the Eleventh District Cost of
Funds Index does not necessarily reflect current market rates.

      A number of factors affect the performance of the Eleventh District Cost
of Funds Index, which may cause it to move in a manner different from indices
tied to specific interest rates, such as United States Treasury Bills or LIBOR.
Because the liabilities upon which the Eleventh District Cost of Funds Index is
based were issued at various times under various market conditions and with
various maturities, the Eleventh District Cost of Funds Index may not
necessarily reflect the prevailing market interest rates on new liabilities of
similar maturities. Moreover, as stated above, the Eleventh District Cost of
Funds Index is designed to represent the average cost of funds for Eleventh
District savings institutions for the month before the month in which it is due
to be published. Additionally, the Eleventh District Cost of Funds Index may not
necessarily move in the same direction as market interest rates at all times,
because as longer term deposits or borrowings mature and are renewed at
prevailing market interest rates, the Eleventh District Cost of Funds Index is
influenced by the differential between the prior and the new rates on those
deposits or borrowings. In addition, movements of the Eleventh District Cost of
Funds Index, as compared to other indices tied to specific interest rates, may
be affected by changes instituted by the FHLBSF in the method used to calculate
the Eleventh District Cost of Funds Index.

      The FHLBSF publishes the Eleventh District Cost of Funds Index in its
monthly Information Bulletin. Any individual may request regular receipt by mail
of Information Bulletins by writing the Federal Home Loan Bank of San Francisco,
P.O. Box 7948, 600 California Street, San Francisco, California 94120, or by
calling (415) 616-1000. The Eleventh District Cost of Funds Index may also be
obtained by calling the FHLBSF at (415) 616-2600.

      The FHLBSF has stated in its Information Bulletin that the Eleventh
District Cost of Funds Index for a month "will be announced on or near the last
working day" of the following month and also has stated that it "cannot
guarantee the announcement" of the index on an exact date. So long as the index
for a month is announced on or before the tenth day of the second following
month, the interest rate for each class of securities of a series for which the
applicable interest rate is determined by reference to an index denominated as
COFI for the interest accrual period commencing in the second following month
will be based on the Eleventh District Cost of Funds Index for the second
preceding month. If publication is delayed beyond the tenth day, the interest
rate will be based on the Eleventh District Cost of Funds Index for the third
preceding month.


                                       47



      The applicable prospectus supplement may specify some other basis for
determining COFI, but if it does not, then if on the tenth day of the month in
which any interest accrual period commences for a class of COFI securities the
most recently published Eleventh District Cost of Funds Index relates to a month
before the third preceding month, the index for the current interest accrual
period and for each succeeding interest accrual period will, except as described
in the next to last sentence of this paragraph, be based on the National Monthly
Median Cost of Funds Ratio to SAIF-Insured Institutions (the "NATIONAL COST OF
FUNDS INDEX") published by the Office of Thrift Supervision (the "OTS") for the
third preceding month (or the fourth preceding month if the National Cost of
Funds Index for the third preceding month has not been published on the tenth
day of an interest accrual period). Information on the National Cost of Funds
Index may be obtained by writing the OTS at 1700 G Street, N. W., Washington,
D.C. 20552 or calling (202) 906-6677, and the current National Cost of Funds
Index may be obtained by calling (202) 906-6988. If on the tenth day of the
month in which an interest accrual period commences the most recently published
National Cost of Funds Index relates to a month before the fourth preceding
month, the applicable index for the interest accrual period and each succeeding
interest accrual period will be based on LIBOR, as determined by the calculation
agent in accordance with the pooling and servicing agreement, sale and servicing
agreement or servicing agreement, as applicable, relating to the series of
securities. A change of index from the Eleventh District Cost of Funds Index to
an alternative index will result in a change in the index level and could
increase its volatility, particularly if LIBOR is the alternative index.

      The calculations agent's determination of COFI and its calculation of the
rates of interest for the applicable classes for the related interest accrual
period shall (in the absence of manifest error) be final and binding.

Treasury Index

      The applicable prospectus supplement may specify some other basis for
determining and defining the Treasury index, but if it does not, on the Treasury
index determination date for each class of securities of a series for which the
applicable interest rate is determined by reference to an index denominated as a
Treasury index, the calculation agent will ascertain the Treasury index for
Treasury securities of the maturity and for the period (or, if applicable, date)
specified in the related prospectus supplement. The Treasury index for any
period means the average of the yield for each business day during the specified
period (and for any date means the yield for the date), expressed as a per annum
percentage rate, on U.S. Treasury securities adjusted to the "constant maturity"
specified in the prospectus supplement or if no "constant maturity" is so
specified, U.S. Treasury securities trading on the secondary market having the
maturity specified in the prospectus supplement, in each case as published by
the Federal Reserve Board in its Statistical Release No. H. 15 (519).
Statistical Release No. H. 15 (519) is published on Monday or Tuesday of each
week and may be obtained by writing or calling the Publications Department at
the Board of Governors of the Federal Reserve System, 21st and C Streets,
Washington, D.C. 20551 (202) 452-3244. If the calculation agent has not yet
received Statistical Release No. H. 15 (519) for a week, then it will use the
Statistical Release from the preceding week.

      Yields on U.S. Treasury securities at "constant maturity" are derived from
the U.S. Treasury's daily yield curve. This curve, which relates the yield on a
security to its time to maturity, is based on the closing market bid yields on
actively traded Treasury securities in the over-the-counter market. These market
yields are calculated from composites of quotations reported by five leading
U.S. Government securities dealers to the Federal Reserve Bank of New York. This
method provides a yield for a given maturity even if no security with that exact
maturity is outstanding. If the Treasury index is no longer published, a new
index based upon comparable data and methodology will be designated in
accordance with the pooling and servicing agreement, sale and servicing
agreement or servicing agreement, as applicable, relating to the particular
series of securities. The calculation agent's determination of the Treasury
index, and its calculation of the rates of interest for the applicable classes
for the related interest accrual period shall (in the absence of manifest error)
be final and binding.

Prime Rate

      The applicable prospectus supplement may specify some other basis for
determining and defining the prime rate, but if it does not, on the prime rate
determination date for each class of securities of a series for which the
applicable interest rate is determined by reference to an index denominated as
the prime rate, the calculation agent will ascertain the prime rate for the
related interest accrual period. The prime rate for an interest accrual period
will be the "prime rate" as published in the "Money Rates" section of The Wall
Street Journal on the related prime rate determination date, or if not so
published, the "prime rate" as published in a newspaper of general circulation


                                       48



selected by the calculation agent in its sole discretion. If a prime rate range
is given, then the average of the range will be used. If the prime rate is no
longer published, a new index based upon comparable data and methodology will be
designated in accordance with the applicable agreement relating to the
particular series of securities. The calculation agent's determination of the
prime rate and its calculation of the rates of interest for the related interest
accrual period shall (in the absence of manifest error) be final and binding.

BOOK-ENTRY SECURITIES

      If so specified in the related prospectus supplement, one or more classes
of securities of any series may be issued as book-entry securities. Persons
acquiring beneficial ownership interests in book-entry securities will hold
their securities either:

      o   directly through The Depository Trust Company ("DTC") in the United
          States, or Clearstream, Luxembourg or Euroclear in Europe, if they are
          participants of these systems, or

      o   indirectly through organizations that are participants in these
          systems.

      Each class of book-entry securities will be issued in one or more
securities that equal the aggregate principal balance of the class and will
initially be registered in the name of Cede & Co. as the nominee of DTC.
Clearstream, Luxembourg and Euroclear will hold omnibus positions on behalf of
their participants through customers' securities accounts in Clearstream,
Luxembourg's or Euroclear's name, on the books of their respective depositaries.
These depositaries will in turn hold the positions in customers' securities
accounts in the depositaries' names on the books of DTC. Citibank, N.A. will act
as depositary for Clearstream, Luxembourg and The Chase Manhattan Bank will act
as depositary for Euroclear. Except as described below, no person acquiring a
beneficial interest in a book-entry security will be entitled to receive a
physical certificate representing the security.

      The beneficial owner's ownership of a book-entry security will be recorded
on the records of the brokerage firm, bank, thrift institution or other
financial intermediary that maintains the beneficial owner's account for that
purpose. In turn, the financial intermediary's ownership of a book-entry
security will be recorded on the records of DTC (or of a participating firm that
acts as agent for the financial intermediary, whose interest will in turn be
recorded on the records of DTC, if the beneficial owner's financial intermediary
is not a DTC participant, and on the records of Clearstream, Luxembourg or
Euroclear, as appropriate). Therefore, the beneficial owner must rely on the
foregoing procedures to evidence its beneficial ownership of a book-entry
security. Beneficial ownership of a book-entry security may only be transferred
by compliance with the procedures of the financial intermediaries and depository
participants.

      Beneficial owners will receive all distributions of principal of and
interest on the securities from the trustee through DTC and its participants.
While the securities are outstanding (except under the circumstances described
below), DTC is required to make book-entry transfers of the securities among
participants on whose behalf it acts and is required to receive and transmit
distributions on the securities in accordance with rules, regulations and
procedures creating and affecting DTC and its operations. Participants and
indirect participants with whom beneficial owners have accounts are likewise
required to make book-entry transfers and receive and transmit distributions on
behalf of their respective beneficial owners. Although beneficial owners will
not possess physical certificates, the DTC rules, regulations and procedures
provide a mechanism by which beneficial owners may receive distributions on the
securities and transfer their interests in the securities.

      Beneficial owners will not receive or be entitled to receive certificates
representing their interests in the securities except under the limited
circumstances described below. Until definitive securities are issued,
beneficial owners who are not participants may transfer ownership of their
securities only through participants and indirect participants by instructing
them to transfer securities through DTC for the accounts of the purchasers of
those securities. In accordance with DTC's rules, regulations and procedures,
transfers of ownership will be executed through DTC, and the accounts of the
respective participants at DTC will be debited and credited. Similarly, the
participants and indirect participants will make the appropriate debits and
credits on their records on behalf of the selling and purchasing beneficial
owners.


                                       49



      Because of time zone differences, credits of securities received in
Clearstream, Luxembourg or Euroclear resulting from transactions with
participants will be made during subsequent securities settlement processing and
dated the business day after the DTC settlement date. These credits, and any
transactions in the securities settled during processing, will be reported to
the applicable Euroclear or Clearstream, Luxembourg participants on that
business day. Cash received in Clearstream, Luxembourg or Euroclear resulting
from sales of securities by or through a Clearstream, Luxembourg participant
(described below) or Euroclear Participant (described below) to a DTC
participant will be received with value on the DTC settlement date but will not
be available in the applicable Clearstream, Luxembourg or Euroclear cash account
until the business day after settlement in DTC.

      Transfers between DTC participants will be governed by DTC rules.
Transfers between Clearstream, Luxembourg participants and Euroclear
participants will be governed by their respective rules and operating
procedures.

      Cross-market transfers between persons holding directly or indirectly
through DTC and persons holding directly or indirectly through Clearstream,
Luxembourg participants or Euroclear participants will be effected in DTC in
accordance with DTC rules on behalf of the applicable European international
clearing system by the applicable depositary. These cross-market transactions,
however, will require delivery of instructions to the applicable European
international clearing system by the counterparty in that system according to
its rules and procedures and within its established deadlines (European time).
If the transaction meets its settlement requirements, the applicable European
international clearing system will deliver instructions to the applicable
depositary to effect final settlement on its behalf by delivering or receiving
securities in DTC, and making or receiving payment in accordance with the
procedures for same day funds settlement applicable to DTC. Clearstream,
Luxembourg Participants and Euroclear Participants may not deliver instructions
directly to the European depositaries.

      DTC, which is a New York-chartered limited purpose trust company, performs
services for its participants, some of which (and/or their representatives) own
DTC. In accordance with its normal procedures, DTC is expected to record the
positions held by each DTC participant in the book-entry securities, whether
held for its own account or as a nominee for another person. In general,
beneficial ownership of book-entry securities will be subject to the DTC Rules.

      Clearstream Banking, societe anonyme, 67 Bd Grande-Duchesse Charlotte,
L-2967 Luxembourg ("CLEARSTREAM, LUXEMBOURG"), was incorporated in 1970 as
"Clearstream, Luxembourg S.A." a company with limited liability under Luxembourg
law (a societe anonyme). Clearstream, Luxembourg S.A. subsequently changed its
name to Cedelbank. On 10 January 2000, Cedelbank's parent company, Clearstream,
Luxembourg International, societe anonyme ("CI") merged its clearing, settlement
and custody business with that of Deutsche Borse Clearing AG ("DBC"). The merger
involved the transfer by CI of substantially all of its assets and liabilities
(including its shares in CB) to a new Luxembourg company, New Clearstream,
Luxembourg International, societe anonyme ("NEW CI"), which is 50% owned by CI
and 50% owned by DBC's parent company Deutsche Borse AG. The shareholders of
these two entities are banks, securities dealers and financial institutions.
Clearstream, Luxembourg International currently has 92 shareholders, including
U.S. financial institutions or their subsidiaries. No single entity may own more
than 5 percent of Clearstream, Luxembourg International's stock.

      Further to the merger, the Board of Directors of New Clearstream,
Luxembourg International decided to rename the companies in the group in order
to give them a cohesive brand name. The new brand name that was chosen is
"Clearstream" With effect from January 14, 2000 New CI has been renamed
"Clearstream International, societe anonyme." On January 18, 2000, Cedelbank was
renamed "Clearstream Banking, societe anonyme" and Clearstream, Luxembourg
Global Services was renamed "Clearstream Services, societe anonyme."

      On January 17, 2000 DBC was renamed "Clearstream Banking AG." This means
that there are now two entities in the corporate group headed by Clearstream
International which share the name "Clearstream Banking," the entity previously
named "Cedelbank" and the entity previously named "Deutsche Borse Clearing AG."

      Clearstream, Luxembourg holds securities for its customers and facilitates
the clearance and settlement of securities transactions between Clearstream,
Luxembourg customers through electronic book-entry changes in accounts of
Clearstream, Luxembourg customers, thereby eliminating the need for physical
transfer of certificates. Transactions may be settled by Clearstream, Luxembourg
in any of 30 currencies, including United States dollars.


                                       50



Clearstream, Luxembourg provides its customers, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Clearstream, Luxembourg
interfaces with domestic markets in several countries. As a professional
depository, Clearstream, Luxembourg is registered as a bank in Luxembourg, and
as such is subject to regulation by the Commission de Surveillance du Secteur
Financier, "CSSF," which supervises Luxembourg banks. Clearstream, Luxembourg's
customers are world-wide financial institutions, including underwriters,
securities brokers and dealers, banks, trust companies and clearing
corporations. Clearstream, Luxembourg's U.S. customers are limited to securities
brokers and dealers, and banks. Currently, Clearstream, Luxembourg has
approximately 2,000 customers located in over 80 countries, including all major
European countries, Canada, and the United States. Indirect access to
Clearstream, Luxembourg is also available to other institutions that clear
through or maintain a custodial relationship with an account holder of
Clearstream, Luxembourg. Clearstream, Luxembourg has established an electronic
bridge with Euroclear Bank S.A./N.V. as the Operator of the Euroclear System
(the "EUROCLEAR OPERATOR") in Brussels to facilitate settlement of trades
between Clearstream, Luxembourg and the Euroclear Operator.

      Euroclear was created in 1968 to hold securities for its participants and
to clear and settle transactions between Euroclear participants through
simultaneous electronic book-entry delivery against payment, thereby eliminating
the need for physical transfer of certificates, as well as any risk from the
lack of simultaneous transfers of securities and cash. Transactions may be
settled in any of 32 currencies, including United States dollars. Euroclear
provides various other services, including securities lending and borrowing. It
also interfaces with domestic markets in several countries in a manner similar
to the arrangements for cross-market transfers with DTC described above.
Euroclear is operated by the Brussels, Belgium office of the Euroclear Operator,
under contract with Euroclear Clearance Systems S.C., a Belgian cooperative
corporation (the "COOPERATIVE"). All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative establishes policy for Euroclear on behalf of Euroclear
participants. Euroclear participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries.
Indirect access to Euroclear is also available to other firms that clear through
or maintain a custodial relationship with a Euroclear participant, either
directly or indirectly.

      The Euroclear Operator has a banking license from the Belgian Banking and
Finance Commission. This license authorizes the Euroclear Operator to carry out
banking activities on a global basis.

      Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "TERMS AND CONDITIONS"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear participants, and has no record of or relationship with persons
holding through Euroclear participants.

      Under a book-entry format, beneficial owners of the book-entry securities
may experience some delay in their receipt of payments, because the trustee will
send payments to Cede & Co., as nominee of DTC. Distributions on securities held
through Clearstream, Luxembourg or Euroclear and received by the applicable
depositary will be credited to the cash accounts of Clearstream, Luxembourg
Participants or Euroclear Participants in accordance with each system's rules
and procedures. These distributions will be subject to tax reporting under the
applicable United States laws and regulations. See "Federal Income Tax
Consequences-Tax Treatment of Foreign Investors" and "-Tax Consequences to
Holders of the Notes-Backup Withholding" in this prospectus. Because DTC can
only act on behalf of financial intermediaries, the a beneficial owner's ability
to pledge book-entry securities to persons or entities that do not participate
in the DTC system, or otherwise take actions in respect of the book-entry
securities, may be limited by the lack of physical certificates for the
book-entry securities. In addition, issuance of the book-entry securities in
book-entry form may reduce the liquidity of those securities in the secondary
market because some potential investors may not want to purchase securities for
which they cannot obtain physical certificates.

      Until definitive securities are issued, it is anticipated that the only
"securityholder" of the book-entry securities will be Cede & Co., as nominee of
DTC. Beneficial owners are only permitted to exercise the rights of security
holders indirectly through financial intermediaries and DTC. Monthly and annual
reports for the related


                                       51



issuing entity will be provided to Cede & Co., as nominee of DTC. Cede & Co. may
make them available to beneficial owners upon request, in accordance with the
rules, regulations and procedures creating and affecting DTC. It may also make
them available to the financial intermediaries to whose DTC accounts the
book-entry securities of those beneficial owners are credited.

      Until definitive securities are issued, DTC will take any action permitted
to be taken by the holders of the book-entry securities of a series under the
related agreement only at the direction of one or more financial intermediaries
to whose DTC accounts the book-entry securities are credited, to the extent that
the actions are taken on behalf of financial intermediaries whose holdings
include the book-entry securities. Clearstream, Luxembourg or the Euroclear
Operator, as the case may be, will take any other action permitted to be taken
by a securityholder on behalf of a Clearstream, Luxembourg participant or
Euroclear participant, respectively, only in accordance with its applicable
rules and procedures and subject to the applicable depositary's ability to
effect actions on its behalf through DTC. At the direction of the related
participants, DTC may take actions with respect to some securities that conflict
with actions taken with respect to other securities.

      The applicable prospectus supplement may specify when and for what reasons
definitive securities may be issued, but if it does not, definitive securities
will be issued to beneficial owners of book-entry securities, or their
nominees, rather than to DTC, only if:

      o     DTC or the depositor advises the trustee in writing that DTC is no
            longer willing, qualified or able to discharge properly its
            responsibilities as nominee and depository with respect to the
            book-entry securities, and DTC or the trustee is unable to locate a
            qualified successor;

      o     the depositor, at its sole option, elects to terminate the
            book-entry system through DTC;

      o     or after the occurrence of an event of default, beneficial owners of
            securities representing not less than 51% of the aggregate
            percentage interests evidenced by each class of securities of the
            related series issued as book-entry securities advise the trustee
            and DTC through the financial intermediaries in writing that the
            continuation of a book-entry system through DTC (or a successor to
            it) is no longer in the best interests of the beneficial owners.

      Upon the occurrence of any of the events described in the preceding
paragraph, the trustee will be required to notify all beneficial owners of the
occurrence of the event and the availability of definitive securities through
DTC. Upon surrender by DTC of the global certificate or certificates
representing the book-entry securities and instructions for re-registration, the
trustee will issue the definitive securities, and thereafter the trustee will
recognize the holders of the definitive securities as security holders under the
applicable agreement.

      Although DTC, Clearstream, Luxembourg and Euroclear have agreed to the
foregoing procedures in order to facilitate transfers of securities among
participants of DTC, Clearstream, Luxembourg and Euroclear, they are not
obligated to perform or continue to perform these procedures and these
procedures may be discontinued at any time.

      The servicer, the depositor and the trustee will not be responsible for
any aspect of the records relating to or payments made on account of beneficial
ownership interests of the book-entry securities held by Cede & Co., as nominee
of DTC, or for maintaining, supervising or reviewing any records relating to the
beneficial ownership interests.

GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES

      Except in certain limited circumstances, the securities offered by a
prospectus supplement, other than any residual securities, will be offered
globally (the "GLOBAL SECURITIES") and will be available only in book-entry
form. Investors in the Global Securities may hold such Global Securities through
DTC and, upon request, through Clearstream or Euroclear. The Global Securities
will be tradable as home market instruments in both the European and U.S.
domestic markets. Initial settlement and all secondary trades will settle in
same-day funds.


                                       52



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

      Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.

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

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

      Initial Settlement

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

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

      Secondary Market Trading

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

      Trading between Participants. Secondary market trading between
Participants will be settled using the procedures applicable to prior mortgage
loan asset-backed certificates issues in same-day funds.

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

      Trading between DTC Seller and Clearstream or Euroclear purchaser. When
Global Securities are to be transferred from the account of a Participant to the
account of a Clearstream participant or a Euroclear Participant, the purchaser
will send instructions to Clearstream or Euroclear through a Clearstream
participant or Euroclear Participant at least one business day prior to
settlement. Clearstream or Euroclear will instruct the respective Depositary, as
the case may be, to receive the Global Securities against payment. Payment will
include interest accrued on each class of Global Securities according to the
interest accrual method specified in the related prospectus supplement. For
transactions settling on the 31st of the month, payment will include interest
accrued to and excluding the first day of the following month. Payment will then
be made by the respective Depositary of the Participant's account against
delivery of the Global Securities. After settlement has been completed, the
Global Securities will be credited to the respective clearing system and by the
clearing system, in accordance with its usual procedures, to the Clearstream
participant's or Euroclear Participant's account. The Global Securities credit
will appear the next day (European time) and the cash debt will be back-valued
to, and the interest on the Global Securities will accrue from, the value date
(which would be the preceding day when settlement occurred in New York). If
settlement is not completed on the intended value date (i.e., the trade fails),
the Clearstream or Euroclear cash debt will be valued instead as of the actual
settlement date.


                                       53



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

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

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

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

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

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

            2.    borrowing the Global Securities in the United States from a
      Participant no later than one day prior to settlement, which would give
      the Global Securities sufficient time to be reflected in their Clearstream
      or Euroclear account in order to settle the sale side of the trade; or

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


                                       54



      Certain U.S. Federal Income Tax Documentation Requirements

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

o   Exemption for non-U.S. Persons (Form W-8BEN). Beneficial owners of Global
    Securities that are non-U.S. Persons can obtain a complete exemption from
    the withholding tax by filing a signed Form W-8BEN (Certificate of Foreign
    Status of Beneficial Owner for United States Tax Withholding). Non-U.S.
    Persons that are Certificate Owners residing in a country that has a tax
    treaty with the United States can obtain an exemption or reduced tax rate
    (depending on the treaty terms) by filing Form W-8BEN (Certificate of
    Foreign Status of Beneficial Owner for United States Tax Withholding). If
    the information shown on Form W-8BEN changes, a new Form W-8BEN must be
    filed within 30 days of such change. More complex rules apply to nominees
    and entities treated as partnerships that are not U.S. Persons.

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

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

      In each case, the Certificate Owner of a Global Security files by
submitting the appropriate form to the person through whom it holds (the
clearing agency, in the case of persons holding directly on the books of the
clearing agency). Form W-8BEN and Form W-8ECI are generally effective until the
end of the third succeeding calendar year after the date such form is signed
unless the information provided in the form changes. If information in the form
changes, a new form must be provided within 30 days of such change.

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

                               CREDIT ENHANCEMENT

GENERAL

      Credit enhancement may be provided for one or more classes of a series of
securities or with respect to the Issuing Entity Assets in the related issuing
entity. Credit enhancement may be in the form of a limited financial guaranty
policy issued by an entity named in the related prospectus supplement, the
subordination of one or more


                                       55



classes of the securities of the series, the establishment of one or more
reserve funds, the use of a cross support feature, use of a mortgage pool
insurance policy, FHA insurance, VA guarantee, bankruptcy bond, special hazard
insurance policy, surety bond, letter of credit, guaranteed investment contract,
overcollateralization or other method of credit enhancement described in the
related prospectus supplement, or any combination of them. Credit enhancement
may not provide protection against all risks of loss or guarantee repayment of
the entire principal balance of the securities and interest on them. If losses
occur which exceed the amount covered by credit enhancement or which are not
covered by the credit enhancement, securityholders will bear their allocable
share of any deficiencies.

SUBORDINATION

      If so specified in the related prospectus supplement, the rights of
holders of one or more classes of subordinated securities will be subordinate to
the rights of holders of one or more other classes of senior securities of the
series to distributions of scheduled principal, principal prepayments, interest
or any combination of them that otherwise would have been payable to holders of
subordinated securities under the circumstances and to the extent specified in
the related prospectus supplement. If specified in the related prospectus
supplement, holders of senior securities also may be protected by a reduction in
the ownership interest, if any, of the related subordinated securities or by any
other method described in the related prospectus supplement. If specified in the
related prospectus supplement, delays in receipt of scheduled payments on the
Issuing Entity Assets and losses with respect to the Issuing Entity Assets will
be borne first by the various classes of subordinated securities and thereafter
by the various classes of senior securities, in each case under the
circumstances and subject to the limitations specified in the related prospectus
supplement. The aggregate distributions of delinquent payments on the Issuing
Entity Assets over the lives of the securities or at any time, the aggregate
losses on Issuing Entity Assets which must be borne by the subordinated
securities by virtue of subordination and the amount of the distributions
otherwise distributable to the subordinated securityholders that will be
distributable to senior securityholders on any distribution date may be limited
as specified in the related prospectus supplement. If aggregate distributions of
delinquent payments on the Issuing Entity Assets or aggregate losses on the
Issuing Entity Assets were to exceed the amount specified in the related
prospectus supplement, senior securityholders would experience losses on the
securities.

      In addition to or instead of the subordination methods listed above, the
prospectus supplement for a series may provide that all or a portion of the
distributions otherwise payable to holders of subordinated securities on any
distribution date will instead either be deposited into one or more reserve
accounts established with the trustee, or distributed to the holders of senior
securities. As specified in the related prospectus supplement, deposits into a
reserve account may be made on each distribution date, or for specified time
periods, or until the balance in the reserve account has reached a specified
amount and thereafter, to the extent necessary to maintain the balance in the
reserve account at any required level. Amounts on deposit in the reserve account
for a series may be released to the holders of certain classes of securities at
the times and under the circumstances specified in the related prospectus
supplement.

      If specified in the related prospectus supplement, various classes of
senior securities and subordinated securities may themselves be subordinate in
their right to receive certain distributions to other classes of senior and
subordinated securities, respectively, through a cross support mechanism or
otherwise.

      As between classes of senior securities and as between classes of
subordinated securities, distributions may be allocated among the classes in the
order of their scheduled final distribution dates, in accordance with a schedule
or formula, in relation to the occurrence of events, or otherwise, in each case
as specified in the related prospectus supplement. As between classes of
subordinated securities, payments to senior securityholders on account of
delinquencies or losses and payments to the reserve fund will be allocated as
specified in the related prospectus supplement.

      With respect to any series with classes of senior and subordinated
securities, the terms and priorities of the subordination may vary from those
described in the preceding paragraphs. Any such variation will be described in
the related prospectus supplement.


                                       56



LETTER OF CREDIT

      Any letter of credit for a series of securities will be issued by the bank
or financial institution specified in the related prospectus supplement. The
specified bank will be obligated to honor drawings under the letter of credit in
an aggregate fixed dollar amount, net of unreimbursed payments under the letter
of credit, equal to a specified percentage of the aggregate principal balance
of:

      o     the mortgage loans on the related cut-off date, or

      o     one or more classes of securities.

      If specified in the related prospectus supplement, the letter of credit
may permit drawings in the event of losses not covered by insurance policies or
other credit support, such as losses arising from damage not covered by standard
hazard insurance policies, losses resulting from the bankruptcy of a borrower
and the application of certain provisions of the Bankruptcy Code, or losses
resulting from denial of insurance coverage due to misrepresentations in
connection with the origination of a mortgage loan. The amount available under
the letter of credit will be reduced by the amount of unreimbursed payments
under the letter of credit. The obligations of the bank issuing a letter of
credit for any series of securities will expire at the earlier of the date
specified in the related prospectus supplement or the termination of the issuing
entity. See "The Agreements-Termination: Optional Termination." A copy of any
letter of credit for a series will be filed with the SEC as an exhibit to a
Current Report on Form 8-K after the issuance of the securities of the related
series.

 MORTGAGE POOL INSURANCE POLICIES

      If specified in the related prospectus supplement relating to a mortgage
pool, a separate mortgage pool insurance policy will be obtained for the
mortgage pool and issued by the insurer named in the prospectus supplement. Each
mortgage pool insurance policy will, subject to policy limitations, cover loss
from default in payment on mortgage loans in the mortgage pool in an amount
equal to a percentage specified in the prospectus supplement of the aggregate
principal balance of the mortgage loans on the cut-off date that are not covered
as to their entire outstanding principal balances by primary mortgage insurance
policies. As more fully described below, the servicer will present claims under
the insurance to the pool insurer on behalf of itself, the trustee and the
securityholders. The mortgage pool insurance policies, however, are not blanket
policies against loss, since claims under them may be made only for particular
defaulted mortgage loans and only upon satisfaction of conditions precedent in
the policy. The applicable prospectus supplement may specify that mortgage pool
insurance will cover the failure to pay or the denial of a claim under a primary
mortgage insurance policy, but if it does not, the mortgage pool insurance
policies will not cover losses due to a failure to pay or denial of a claim
under a primary mortgage insurance policy.

      In general, each mortgage pool insurance policy will provide that no
claims may be validly presented unless

      o   any required primary mortgage insurance policy is in effect for the
          defaulted mortgage loan and a claim under it has been submitted and
          settled;

      o   hazard insurance on the related Property has been kept in force and
          real estate taxes and other protection and preservation expenses have
          been paid;

      o   if there has been physical loss or damage to the Property, it has been
          restored to its physical condition (reasonable wear and tear excepted)
          at the time of issuance of the policy; and

      o   the insured has acquired good and merchantable title to the Property
          free and clear of liens except certain permitted encumbrances.

      Upon satisfaction of these conditions, the pool insurer will have the
option either to purchase the Property at a price equal to the principal balance
of the related mortgage loan plus accrued and unpaid interest at the mortgage
rate to the date of the purchase and certain expenses incurred by the servicer
on behalf of the trustee and


                                       57



security holders or to pay the amount by which the sum of the principal balance
of the defaulted mortgage loan plus accrued and unpaid interest at the mortgage
rate to the date of payment of the claim and the aforementioned expenses exceeds
the proceeds received from an approved sale of the Property, in either case net
of certain amounts paid or assumed to have been paid under the related primary
mortgage insurance policy. If any Property is damaged, and proceeds, if any,
from the related hazard insurance policy or a special hazard insurance policy or
policies maintained for a series are insufficient to restore the damaged
property to a condition sufficient to permit recovery under the mortgage pool
insurance policy, the servicer will not be required to expend its own funds to
restore the damaged property unless it determines that the restoration will
increase the proceeds to securityholders on liquidation of the mortgage loan
after reimbursement of the servicer for its expenses and the expenses will be
recoverable by it through proceeds of the sale of the Property or proceeds of
the related mortgage pool insurance policy or any related primary mortgage
insurance policy.

      The applicable prospectus supplement may specify that mortgage pool
insurance will cover various origination and servicing defaults, but if it does
not, then no mortgage pool insurance policy will insure (and many primary
mortgage insurance policies do not insure) against loss sustained from a default
arising from, among other things, fraud or negligence in the origination or
servicing of a mortgage loan, including misrepresentation by the mortgagor, the
originator or persons involved in its origination, or failure to construct a
Property in accordance with plans and specifications. A failure of coverage for
one of these reasons will not ordinarily result in a breach of the related
seller's representations and, in that case, will not result in an obligation on
the part of the seller to cure or repurchase the defaulted mortgage loan. No
mortgage pool insurance policy will cover (and many primary mortgage insurance
policies do not cover) a claim with respect to a defaulted mortgage loan
occurring when the servicer of the mortgage loan, at the time of default or
thereafter, was not approved by the applicable insurer.

      The original amount of coverage under each mortgage pool insurance policy
will be maintained to the extent provided in the related prospectus supplement
and may be reduced over the life of the related securities by the aggregate
dollar amount of claims paid less the aggregate of the net amounts realized by
the pool insurer upon disposition of all foreclosed properties. The applicable
prospectus supplement may provide that the claims paid will be net of servicer
expenses and accrued interest, but if it does not, then the amount of claims
paid will include certain expenses incurred by the servicer as well as accrued
interest on delinquent mortgage loans to the date of payment of the claim.
Accordingly, if aggregate net claims paid under any mortgage pool insurance
policy reach the original policy limit, coverage under that mortgage pool
insurance policy will be exhausted and any further losses will be borne by the
securityholders.

SPECIAL HAZARD INSURANCE POLICIES

      If specified in the related prospectus supplement, a separate special
hazard insurance policy will be obtained for the mortgage pool and will be
issued by the insurer named in the prospectus supplement. Each special hazard
insurance policy will, subject to policy limitations, protect holders of the
related securities from loss caused by the application of the coinsurance clause
contained in hazard insurance policies and loss from damage to mortgaged
properties caused by certain hazards not insured against under the standard form
of hazard insurance policy in the states where the mortgaged properties are
located or under a flood insurance policy if the Property is located in a
federally designated flood area. Some of the losses covered include earthquakes
and, to a limited extent, tidal waves and related water damage or as otherwise
specified in the related prospectus supplement. See "The Agreements--Hazard
Insurance." No special hazard insurance policy will cover losses from fraud or
conversion by the trustee or servicer, war, insurrection, civil war, certain
governmental action, errors in design, faulty workmanship or materials (except
under certain circumstances), nuclear or chemical reaction, flood (if the
Property is located in a federally designated flood area), nuclear or chemical
contamination and certain other risks. The amount of coverage under any special
hazard insurance policy will be specified in the related prospectus supplement.
Each special hazard insurance policy will provide that no claim may be paid
unless hazard and, if applicable, flood insurance on the property securing the
mortgage loan have been kept in force and other protection and preservation
expenses have been paid.

      The applicable prospectus supplement may provide for other payment
coverage, but if it does not, then, subject to these limitations, each special
hazard insurance policy will provide that where there has been damage to
property securing a foreclosed mortgage loan (title to which has been acquired
by the insured) and to the extent the damage is not covered by the hazard
insurance policy or flood insurance policy, if any, maintained by the mortgagor


                                       58



or the servicer, the special hazard insurer will pay the lesser of the cost of
repair or replacement of the property or, upon transfer of the property to the
special hazard insurer, the unpaid principal balance of the mortgage loan at the
time of acquisition of the property by foreclosure or deed in lieu of
foreclosure, plus accrued interest to the date of claim settlement and certain
expenses incurred by the servicer with respect to the property. If the unpaid
principal balance of a mortgage loan plus accrued interest and certain expenses
is paid by the special hazard insurer, the amount of further coverage under the
related special hazard insurance policy will be reduced by that amount less any
net proceeds from the sale of the property. Any amount paid to repair the
property will further reduce coverage by that amount. So long as a mortgage pool
insurance policy remains in effect, the payment by the special hazard insurer of
the cost of repair or of the unpaid principal balance of the related mortgage
loan plus accrued interest and certain expenses will not affect the total
insurance proceeds paid to securityholders, but will affect the relative amounts
of coverage remaining under the related special hazard insurance policy and
mortgage pool insurance policy.

      To the extent specified in the prospectus supplement, the servicer may
deposit cash, an irrevocable letter of credit, or any other instrument
acceptable to each nationally recognized rating agency rating the securities of
the related series at the request of the depositor in a special trust account to
provide protection in lieu of or in addition to that provided by a special
hazard insurance policy. The amount of any special hazard insurance policy or of
the deposit to the special trust account relating to the securities may be
reduced so long as the reduction will not result in a downgrading of the rating
of the securities by a rating agency rating securities at the request of the
depositor.

BANKRUPTCY BONDS

      If specified in the related prospectus supplement, a bankruptcy bond to
cover losses resulting from proceedings under the federal Bankruptcy Code with
respect to a mortgage loan will be issued by an insurer named in the prospectus
supplement. Each bankruptcy bond will cover, to the extent specified in the
related prospectus supplement, certain losses resulting from a reduction by a
bankruptcy court of scheduled payments of principal and interest on a mortgage
loan or a reduction by the court of the principal amount of a mortgage loan and
will cover certain unpaid interest on the amount of a principal reduction from
the date of the filing of a bankruptcy petition. The required amount of coverage
under each bankruptcy bond will be set forth in the related prospectus
supplement. Coverage under a bankruptcy bond may be cancelled or reduced by the
servicer if the cancellation or reduction would not adversely affect the then
current rating or ratings of the related securities. See "Certain Legal Aspects
of the Mortgage Loans--Anti-Deficiency Legislation and Other Limitations on
Lenders."

      To the extent specified in the prospectus supplement, the servicer may
deposit cash, an irrevocable letter of credit or any other instrument acceptable
to each nationally recognized rating agency rating the securities of the related
series at the request of the depositor in a special trust account to provide
protection in lieu of or in addition to that provided by a bankruptcy bond. The
amount of any bankruptcy bond or of the deposit to the special trust account
relating to the securities may be reduced so long as the reduction will not
result in a downgrading of the rating of the securities by a rating agency
rating securities at the request of the depositor.

RESERVE FUND

      If so specified in the related prospectus supplement, credit support with
respect to a series of securities may be provided by one or more reserve funds
held by the trustee, in trust, for the series of securities. The related
prospectus supplement will specify whether a reserve fund will be included in
the issuing entity for a series.

      The reserve fund for a series will be funded by a deposit of cash, U.S.
Treasury securities or instruments evidencing ownership of principal or interest
payments on U. S. Treasury securities, letters of credit, demand notes,
certificates of deposit, or a combination of them in an aggregate amount
specified in the related prospectus supplement; by the deposit from time to time
of amounts specified in the related prospectus supplement to which the
subordinated securityholders, if any, would otherwise be entitled; or in any
other manner specified in the related prospectus supplement.

      Any amounts on deposit in the reserve fund and the proceeds of any other
instrument deposited in it upon maturity will be held in cash or will be
invested in permitted investments. The applicable prospectus supplement may
specify a different definition of permitted investments, but if it does not,
then permitted investments will include obligations of the United States and
specified agencies of the United States, certificates of deposit, specified


                                       59



commercial paper, time deposits and bankers acceptances sold by eligible
commercial banks, and specified repurchase agreements for United States
government securities with eligible commercial banks. If a letter of credit is
deposited with the trustee, the letter of credit will be irrevocable. Generally,
any deposited instrument will name the trustee, in its capacity as trustee for
the securityholders, as beneficiary and will be issued by an entity acceptable
to each rating agency that rates the securities at the request of the depositor.
Additional information about the instruments deposited in the reserve funds will
be set forth in the related prospectus supplement.

      Any amounts so deposited and payments on instruments so deposited will be
available for withdrawal from the reserve fund for distribution to the
securityholders for the purposes, in the manner and at the times specified in
the related prospectus supplement.

CROSS SUPPORT

      If specified in the related prospectus supplement, the beneficial
ownership of separate groups of assets included in an issuing entity may be
evidenced by separate classes of the related series of securities. In that case,
credit support may be provided by a cross support feature that requires that
distributions be made on securities evidencing a beneficial ownership interest
in other asset groups within the same issuing entity. The related prospectus
supplement for a series that includes a cross support feature will describe the
manner and conditions for applying the cross support feature.

      If specified in the related prospectus supplement, the coverage provided
by one or more forms of credit support may apply concurrently to two or more
related issuing entities. If applicable, the related prospectus supplement will
identify the issuing entities to which the credit support relates and the manner
of determining the amount of the coverage provided by it and of the application
of the coverage to the identified issuing entities.

INSURANCE POLICIES, SURETY BONDS AND GUARANTIES

      If so provided in the prospectus supplement for a series of securities,
deficiencies in amounts otherwise payable on the securities or certain of their
classes will be covered by insurance policies or surety bonds provided by one or
more insurance companies or sureties. These instruments may cover timely
distributions of interest or full distributions of principal or both on the
basis of a schedule of principal distributions set forth in or determined in the
manner specified in the related prospectus supplement. In addition, if specified
in the related prospectus supplement, an issuing entity may also include
bankruptcy bonds, special hazard insurance policies, other insurance or
guaranties for the purpose of maintaining timely payments or providing
additional protection against losses on the assets included in the issuing
entity, paying administrative expenses, or establishing a minimum reinvestment
rate on the payments made on the assets or principal payment rate on the assets.
If specified in the related prospectus supplement, the issuing entity may
include a guaranteed investment contract pursuant to which the issuing entity is
entitled to receive specified payments for a period of time. These arrangements
may include agreements under which securityholders are entitled to receive
amounts deposited in various accounts held by the trustee on the terms specified
in the prospectus supplement.

OVER-COLLATERALIZATION

      If provided in the prospectus supplement for a series, a portion of the
interest payment on each mortgage loan may be applied as an additional
distribution in respect of principal to reduce the principal balance of a
particular class or classes of securities and, thus, accelerate the rate of
principal payments on the specified class or classes. Reducing the principal
balance of the securities without a corresponding reduction in the principal
balance of the underlying mortgage loans will result in over-collateralization
and additional protection to the securityholders as specified in the related
prospectus supplement. If so specified in the related prospectus supplement,
overcollateralization may also be provided for on the date of issuance of
securities by the issuance of all classes of securities in an initial aggregate
principal amount that is less than the aggregate principal amount of the Issuing
Entity Assets in the related issuing entity. Additionally, some of the excess
cash flow may be applied to make distributions to holders of securities to which
losses have been allocated up to the amount of the losses that were allocated.

      If provided in the prospectus supplement for a series, during a revolving
period designated therein, the portion of interest payments collected on home
equity line of credit loans may be applied to purchase additional


                                       60



home equity line of credit loans so that the level of overcollateralization
represented by the amount by which the outstanding principal balances of the
home equity line of credit loans exceed the outstanding principal balances of
the securities will be maintained at a level specified in the prospectus
supplement.

FINANCIAL INSTRUMENTS

      If specified in the related prospectus supplement, the issuing entity may
include one or more interest rate or currency swap arrangements or similar
financial instruments that are used to alter the payment characteristics of the
mortgage loans or the securities issued by the issuing entity and whose primary
purpose is not to provide credit enhancement related to the assets in the
issuing entity or the securities issued by the issuing entity. The primary
purpose of a currency swap arrangement will be to convert payments to be made on
the mortgage loans or the securities issued by the issuing entity from one
currency into another currency, and the primary purpose of an interest rate swap
arrangement or other financial instrument will be one or more of the following:

o     convert the payments on some or all of the mortgage loans from fixed to
      floating payments, or from floating to fixed, or from floating based on a
      particular interest rate index to floating based on another interest rate
      index;

o     provide payments in the event that any interest rate index related to the
      loans or the securities issued by the trust rises above or falls below
      specified levels; or

o     provide protection against interest rate changes, certain types of losses,
      including reduced market values, or the payment shortfalls to one or more
      classes of the related series.

      If an issuing entity includes financial instruments of this type, the
instruments may be structured to be exempt from the registration requirements of
the Securities Act. If applicable, a copy of any instrument for a series will be
filed with the SEC as an exhibit to a Current Report on Form 8-K to be filed
with the SEC after the issuance of the securities of the related series.

DEPOSIT AGREEMENTS

      If specified in a prospectus supplement, the depositor or the seller and
the trustee for a series of securities will enter into a deposit agreement with
the entity specified in such prospectus supplement on or before the sale of that
series of securities. Pursuant to the deposit agreement, all or a portion of the
amounts held in the collection account, the distribution account or in any
reserve fund would be invested with the entity specified in the prospectus
supplement. The purpose of a deposit agreement would be to accumulate available
cash for investment so that the cash, together with income thereon, can be
applied to future distributions on one or more classes of securities. The
trustee would be entitled to withdraw amounts invested pursuant to a deposit
agreement, plus interest at a rate equal to the assumed reinvestment rate, in
the manner specified in the prospectus supplement. The prospectus supplement for
a series of securities pursuant to which a deposit agreement is used will
contain a description of the terms of such deposit agreement.

                       YIELD AND PREPAYMENT CONSIDERATIONS

      The yields to maturity and weighted average lives of the securities will
be affected primarily by the amount and timing of principal payments received on
or in respect of the Issuing Entity Assets included in the related issuing
entity. The original terms to maturity of the underlying mortgage loans of the
Issuing Entity Assets in a given mortgage pool will vary depending upon the type
of mortgage loans included in it, and each prospectus supplement will contain
information about the type and maturities of the loans in the related pool or
securing Mortgage-Backed Securities. The applicable prospectus supplement may
indicate that some mortgage loans provide for prepayment charges or limit
prepayments thereof, but if it does not, then the mortgage loans may be prepaid
without penalty in full or in part at any time. The prepayment experience on the
underlying mortgage loans of the Issuing Entity Assets will affect the weighted
average lives of the related securities.

      The rate of prepayment on the mortgage loans cannot be predicted.
Closed-end second-lien loans, home equity line of credit loans and home
improvement contracts have been originated in significant volume only during


                                       61



the past few years and, with respect to any such loans originated by an
affiliate thereof, the depositor is not aware of any publicly available studies
or statistics on the respective prepayment rates of such loans. Generally,
borrowers do not view closed-end second-lien loans, home equity line of credit
loans and home improvement contracts as permanent financing. Accordingly, those
loans may experience a higher prepayment rate than traditional first-lien
mortgage loans. On the other hand, because home equity line of credit loans
generally are not fully amortizing, the absence of voluntary borrower
prepayments could cause principal payment rates to be similar to, or lower than,
the rates associated with traditional fully-amortizing first-lien mortgage
loans.

      A number of factors may affect the prepayment experience of the mortgage
loans, including general economic conditions, prevailing interest rates, the
availability of alternative financing, homeowner mobility and the frequency and
amount of future draws on any home equity lines of credit. Other factors that
might affect the prepayment rate of closed-end second-lien loans, home equity
line of credit loans or home improvement contracts include the amount of, and
interest rates on, the related senior loans, and the fact that subordinate loans
are generally used for shorter-term financing for a variety of purposes,
including home improvement, education expenses and purchases of consumer goods
such as automobiles. In addition, any future limitations on borrowers' right to
deduct interest payments on closed-end second-lien loans, home equity line of
credit loans or any other type of mortgage loan for federal income tax purposes
may further increase the rate of prepayments of the mortgage loans. The
enforcement of a due-on-sale provision (described below) will have the same
effect as a prepayment of the related loan. See "Certain Legal Aspects of the
Loans-Due-on-Sale Clauses." If you buy securities in the secondary market at a
price other than par, your yield may vary from the yield you anticipated if the
prepayment rate on the loans is different from the rate you anticipated when you
bought the securities.

      Collections on home equity line of credit loans may vary because, among
other things, borrowers may:

      o     make payments as low as the minimum monthly payment for any month,

      o     make payments consisting only of the interest, fees and charges for
            a given month during the interest-only period for certain home
            equity line of credit loans (and, in more limited circumstances, in
            the case of closed-end second-lien loans for which an interest-only
            payment option has been selected), or

      o     make payments as high as the entire outstanding principal balance
            plus accrued interest, fees and charges on that mortgage loan.

      In addition, borrowers may fail to make the required periodic payments.
Collections on the mortgage loans also may vary due to seasonal purchasing and
borrowers' payment habits.

      The applicable prospectus supplement may indicate that some conventional
mortgage loans do not have due-on-sale provisions, but if it does not, then all
conventional mortgage loans will contain due-on-sale provisions permitting the
mortgagee to accelerate the maturity of the loan upon sale or specified
transfers by the mortgagor of the underlying Property. Mortgage loans insured by
the FHA and mortgage loans partially guaranteed by the VA are assumable with the
consent of the FHA and the VA, respectively. Thus, the rate of prepayments on
those mortgage loans may be lower than that on conventional mortgage loans
bearing comparable interest rates. The servicer generally will enforce any
due-on-sale or due-on-encumbrance clause, to the extent it has knowledge of the
conveyance or further encumbrance or the proposed conveyance or proposed further
encumbrance of the Property and reasonably believes that it is entitled to do so
under applicable law. However, the servicer will not take any enforcement action
that would impair or threaten to impair any recovery under any related insurance
policy. See "The Agreements--Collection Procedures" and "Certain Legal Aspects
of the Mortgage Loans" for a description of certain provisions of each agreement
and certain legal developments that may affect the prepayment experience on the
mortgage loans.

      The rate of prepayments of conventional mortgage loans has fluctuated
significantly in recent years. In general, if prevailing rates fall
significantly below the mortgage rates borne by the mortgage loans, the mortgage
loans are likely to be subject to higher prepayment rates than if prevailing
interest rates remain at or above those mortgage rates. Conversely, if
prevailing interest rates rise appreciably above the mortgage rates borne by the


                                       62



mortgage loans, the mortgage loans are likely to experience a lower prepayment
rate than if prevailing rates remain at or below those mortgage rates. However,
there can be no assurance that this will be the case.

      When a full prepayment is made on a mortgage loan, the mortgagor is
charged interest on the principal amount of the mortgage loan prepaid only for
the number of days in the month actually elapsed up to the date of the
prepayment rather than for a full month. Thus, in most instances, the effect of
prepayments in full will be to reduce the amount of interest passed through in
the following month to securityholders. Partial prepayments in a given month may
be applied to the outstanding principal balances of the mortgage loans so
prepaid in the month of receipt or the month following receipt. In the latter
case, partial prepayments will not reduce the amount of interest passed through
in the month. In the latter case, partial prepayments will not reduce the amount
of interest passed through or paid in that month. Unless the related prospectus
supplement provides otherwise, neither full nor partial prepayments will be
passed through or paid until the month following receipt.

      Even if the Properties underlying the mortgage loans held in the issuing
entity or securing Mortgage-Backed Securities provide adequate security for the
mortgage loans, substantial delays could occur before defaulted loans are
liquidated and their proceeds are forwarded to investors. Property foreclosure
actions are regulated by state statutes and rules and are subject to many of the
delays and expenses of other lawsuits if defenses or counterclaims are made,
sometimes requiring several years to complete. In addition, in some states, if
the proceeds of the foreclosure are insufficient to repay the loan, the borrower
is not liable for the deficit. If a borrower defaults, these restrictions may
impede the servicer's ability to dispose of the property and obtain sufficient
proceeds to repay the loan in full. In addition, the servicer will be entitled
to deduct from liquidation proceeds all expenses reasonably incurred in
attempting to recover on the defaulted loan, including payments to senior
lienholders, legal fees and costs, real estate taxes, and property maintenance
and preservation expenses.

      Liquidation expenses of defaulted loans generally do not vary directly
with the outstanding principal balance of the loan at the time of default.
Therefore, if a servicer takes the same steps for a defaulted loan having a
small remaining principal balance as it does for a defaulted loan having a large
remaining principal balance, the amount realized after expenses is a smaller
percentage of the outstanding principal balance of the small loan than it is for
the defaulted loan with a large remaining principal balance.

      State laws generally regulate interest rates and other charges, require
certain disclosures, and require licensing of loan originators and servicers. In
addition, most states have other laws and public policies for the protection of
consumers that prohibit unfair and deceptive practices in the origination,
servicing and collection of loans. Depending on the particular law and the
specific facts involved, violations may limit the ability of the servicer to
collect all or part of the principal or interest on the underlying loans held in
the issuing entity or securing Mortgage-Backed Securities. In some cases, the
borrower may even be entitled to a refund of amounts previously paid. In
addition, damages and administrative sanctions could be imposed on the servicer.

      If the rate at which interest is passed through or paid to securityholders
is calculated on a loan-by-loan basis, disproportionate principal prepayments
among loans with different Loan Rates will affect the yields on those
securities. In most cases, the effective yield to securityholders will be lower
than the yield otherwise produced by the applicable pass-through rate or
interest rate and purchase price, because although interest will accrue on each
loan from the first day of the month (unless the related prospectus supplement
provides otherwise), the interest will not be distributed until the month
following the month of accrual. In the case of securities backed by
Mortgage-Backed Securities, the interest accrued on loans securing such
Mortgage-Backed Securities will generally not be distributed until several
months following the month of accrual on such underlying mortgage loans.

      Under specified circumstances, the servicer or the holders of the residual
interests in a REMIC or any person specified in the related prospectus
supplement may have the option to purchase the assets of an issuing entity
thereby effecting earlier retirement of the related series of securities. See
"The Agreements--Termination; Optional Termination."

      Factors other than those identified in this prospectus and in the related
prospectus supplement could significantly affect principal prepayments at any
time and over the lives of the securities. The relative contribution of the
various factors affecting prepayment may also vary from time to time. There can
be no assurance as to the rate of payment of principal of the Issuing Entity
Assets at any time or over the lives of the securities.


                                       63



      The prospectus supplement relating to a series of securities will discuss
in greater detail the effect of the rate and timing of principal payments
(including principal prepayments), delinquencies and losses on the yield,
weighted average lives and maturities of the securities.

PREPAYMENT STANDARDS OR MODELS

      Prepayments on loans can be measured relative to a prepayment standard or
model. The prospectus supplement for a series of securities will describe the
prepayment standard or model, if any, used and may contain tables setting forth
the projected weighted average life of each class of securities of that series
and the percentage of the original principal amount of each class of securities
of that series that would be outstanding on specified distribution dates for
that series based on the assumptions stated in the prospectus supplement,
including assumptions that prepayments on the loans or underlying loans, as
applicable, included in the related issuing entity are made at rates
corresponding to various percentages of the prepayment standard or model
specified in the prospectus supplement.

      We can give no assurance that prepayment of the loans or underlying loans,
as applicable, included in the related issuing entity will conform to any level
of any prepayment standard or model specified in the related prospectus
supplement. The rate of principal prepayments on pools of loans is influenced by
a variety of economic, demographic, geographic, legal, tax, social and other
factors.

YIELD

      The yield to an investor who purchases securities in the secondary market
at a price other than par will vary from the anticipated yield if the rate of
prepayment on the loans is actually different than the rate anticipated by the
investor at the time the securities were purchased.

      The prospectus supplement relating to a series of securities will discuss
in greater detail the effect of the rate and timing of principal payments
(including prepayments), delinquencies and losses on the yield, weighted average
lives and maturities of the securities.

                                 THE AGREEMENTS

      The following is a discussion of the material provisions of each agreement
that are not described elsewhere in this prospectus. Where particular provisions
or terms used in the agreements are referred to, the provisions or terms are as
specified in the related agreement.

ASSIGNMENT OF ISSUING ENTITY ASSETS

      Assignment of the Mortgage Loans. At the time of issuance of the
securities of a series, the depositor will cause the mortgage loans comprising
the related issuing entity to be assigned to the trustee, together with all
principal and interest received by or on behalf of the depositor on or with
respect to the mortgage loans after the cutoff date, other than principal and
interest due on or before the cut-off date and other than any retained interest
specified in the related prospectus supplement. The trustee will, concurrently
with the assignment, deliver the securities to the depositor in exchange for the
mortgage loans. Each mortgage loan will be identified in a schedule appearing as
an exhibit to the related agreement. The schedule will include information as to
the outstanding principal balance of each mortgage loan after application of
payments due on the cut-off date, as well as information regarding the mortgage
rate, the current scheduled monthly payment of principal and interest, the
maturity of the loan, the Loan-to-Value Ratios or Combined Loan-to-Value Ratios,
as applicable, at origination and other specified information.

      In addition, the depositor will deliver or cause to be delivered to the
 trustee (or to the custodian) for each mortgage loan

      o   the mortgage note endorsed without recourse in blank or to the order
          of the trustee, except that the depositor may deliver or cause to be
          delivered a lost note affidavit in lieu of any original mortgage note
          that has been lost,


                                       64



      o   the mortgage, deed of trust or similar instrument with evidence of
          recording indicated on it (except for any mortgage not returned from
          the public recording office, in which case the depositor will deliver
          or cause to be delivered a copy of the mortgage together with a
          certificate that the original of the mortgage was delivered to the
          recording office or some other arrangement will be provided for),

      o   an assignment of the mortgage to the trustee in recordable form and

      o   any other security documents specified in the related prospectus
          supplement or the related agreement, including security documents
          relating to any senior interests in the property.

The applicable prospectus supplement may provide other arrangements for assuring
the priority of the assignments, but if it does not, then the depositor will
promptly cause the assignments of the related loans to be recorded in the
appropriate public office for real property records, except in states in which
in the opinion of counsel recording is not required to protect the trustee's
interest in the loans against the claim of any subsequent transferee or any
successor to or creditor of the depositor or the originator of the loans.

      With respect to any mortgage loans that are cooperative loans, the
depositor will cause to be delivered to the trustee

      o   the related original cooperative note endorsed without recourse in
          blank or to the order of the trustee (or, to the extent the related
          pooling and servicing agreement, sale and servicing agreement or
          servicing agreement, as applicable, so provides, a lost note
          affidavit),

      o   the original security agreement,

      o   the proprietary lease or occupancy agreement,

      o   the recognition agreement,

      o   an executed financing agreement and

      o   the relevant stock certificate, related blank stock powers and any
          other document specified in the related prospectus supplement.

      The depositor will cause to be filed in the appropriate office an
assignment and a financing statement evidencing the trustee's security interest
in each cooperative loan.

      For any loans that are closed-end second-lien loans or home equity line of
credit loans, the applicable prospectus supplement will specify whether the
documents relating to those loans will have to be delivered to the trustee (or a
custodian) and whether assignments of the related mortgage to the trustee will
be recorded. If documents need not be delivered, the servicer will retain them.

      For any home improvement contracts, the applicable prospectus supplement
will specify whether the documents relating to those contracts will have to be
delivered to the trustee (or a custodian). However, unless specified in the
related prospectus supplement, the depositor will not deliver to the trustee the
original mortgage securing a home improvement contract. In order to give notice
of the right, title and interest of securityholders to the home improvement
contracts, the depositor will cause a UCC-1 financing statement to be executed
by the depositor or the seller, identifying the trustee as the secured party and
identifying all home improvement contracts as collateral. Unless otherwise
specified in the related prospectus supplement, the home improvement contracts
will not be stamped or otherwise marked to reflect their assignment to the
trustee. Therefore, if, through negligence, fraud or otherwise, a subsequent
purchaser takes physical possession of the home improvement contracts without
notice of the assignment, the securityholders' interest in the home improvement
contracts could be defeated. See "Certain Legal Aspects of the Loans-The Home
Improvement Contracts."

      The trustee (or the custodian) will review the loan documents after
receiving them, within the time period specified in the related prospectus
supplement, and will hold the documents in trust for the benefit of the
securityholders. Generally, if a document is found to be missing or defective in
any material respect, the trustee (or


                                       65



custodian) will notify the servicer and the depositor, and the servicer will
notify the related seller. If, after receiving notice, the seller cannot cure
the omission or defect within the time period specified in the related
prospectus supplement, and such omission or defect materially and adversely
affects the interests of the security holders in the related mortgage loan, it
will be obligated to:

      o   purchase the related mortgage loan from the issuing entity at the
          Purchase Price or,

      o   if specified in the related prospectus supplement, replace the
          mortgage loan with another mortgage loan that meets specified
          requirements.

      There can be no assurance that a seller will fulfill this purchase or
substitution obligation. Although the servicer may be obligated to enforce the
seller's obligation, the servicer will not be obligated to purchase or replace
the loan if the seller defaults on its obligation (nor will the servicer
otherwise be obligated to purchase or replace any loan for any other reason).
See "Loan Program-Representations by Sellers; Repurchases" in this prospectus.
The applicable prospectus supplement may provide other remedies, but if it does
not, then this obligation of the seller constitutes the sole remedy available to
the securityholders or the trustee for omission of, or a material defect in, a
constituent document.

      Notwithstanding the repurchase obligations described above, no purchase or
substitution of a loan will be made with respect to an issuing entity for which
a REMIC election is to be made if the purchase or substitution would result in a
prohibited transaction tax under the Code (unless the servicer or a holder of
the related residual certificate otherwise pays that tax from its own funds).
See "Loan Program-Representations by Sellers; Repurchases."

      The trustee will be authorized to appoint a custodian pursuant to a
custodial agreement to maintain possession of and, if applicable, to review the
documents relating to the mortgage loans as agent of the trustee.

      Notwithstanding these provisions, unless the related prospectus supplement
otherwise provides, no mortgage loan will be purchased from an issuing entity
for which a REMIC election is to be made if the purchase would result in a
prohibited transaction tax under the Code.

      Although the depositor has expressed in the agreement its intent to treat
the conveyance of the loans as a sale, the depositor will also grant to the
trustee (or trust, in the case of a series with both notes and certificates) a
security interest in the loans. This security interest is intended to protect
the interests of the securityholders if a bankruptcy court were to characterize
the depositor's transfer of the loans as a borrowing by the depositor secured by
a pledge of the loans as described under "Risk Factors - Bankruptcy or
Insolvency May Affect the Timing and Amount of Distributions on the Securities."
In the event that a bankruptcy court were to characterize the transaction as a
borrowing by the depositor, that borrowing would be secured by the loans in
which the depositor granted a security interest to the trustee. The depositor
has agreed to take those actions that are necessary to maintain the security
interest granted to the trustee as a first priority, perfected security interest
in the loans, including the filing of Uniform Commercial Code financing
statements, if necessary.

      Assignment of Agency Securities. The depositor will cause the Agency
Securities to be registered in the name of the trustee or its nominee, and the
trustee concurrently will execute, countersign and deliver the securities. Each
Agency Security will be identified in a schedule appearing as an exhibit to the
related agreement, which will specify as to each Agency Security the original
principal amount and outstanding principal balance as of the cut-off date, the
annual pass-through rate and the maturity date.

      Assignment of Private Mortgage-Backed Securities. The depositor will cause
the Private Mortgage-Backed Securities to be registered in the name of the
trustee. The trustee (or the custodian) will have possession of any certificated
Private Mortgage-Backed Securities. Generally, the trustee will not be in
possession of or be assignee of record of any underlying assets for a Private
Mortgage-Backed Security. See "The Issuing Entity--Private Mortgage-Backed
Securities." Each Private Mortgage-Backed Security will be identified in a
schedule appearing as an exhibit to the related pooling and servicing agreement
which will specify the original principal amount, outstanding principal balance
as of the cut-off date, annual pass-through rate or interest rate and maturity
date and other specified pertinent information for each Private Mortgage-Backed
Security conveyed to the trustee.


                                       66



PAYMENTS ON ISSUING ENTITY ASSETS; DEPOSITS TO SECURITY ACCOUNT

      The servicer will establish and maintain or cause to be established and
maintained for the related issuing entity a separate account or accounts for the
collection of payments on the related Issuing Entity Assets in the issuing
entity (the "SECURITY ACCOUNT"). The applicable prospectus supplement may
provide for other requirements for the Security Account, but if it does not,
then the Security Account must be one of the following:

      o   maintained with a depository institution the short-term unsecured debt
          obligations of which are rated in the highest short-term rating
          category by the nationally recognized statistical rating organizations
          that rated one or more classes of the related series of securities at
          the request of the depositor, or in the case of a depository
          institution that is the principal subsidiary of a holding company, the
          short-term debt obligations of the holding company are so rated,

      o   an account or accounts the deposits in which are insured by the FDIC
          or SAIF to the limits established by the FDIC or the SAIF, and the
          uninsured deposits in which are otherwise secured such that, as
          evidenced by an opinion of counsel, the security holders have a claim
          with respect to the funds in the Security Account or a perfected first
          priority security interest against any collateral securing the funds
          that is superior to the claims of any other depositors or general
          creditors of the depository institution with which the Security
          Account is maintained,

      o   a trust account or accounts maintained with the trust department of a
          federal or a state chartered depository institution or trust company,
          acting in a fiduciary capacity or

      o   an account or accounts otherwise acceptable to each rating agency that
          rated one or more classes of the related series of securities at the
          request of the depositor.

      The collateral eligible to secure amounts in the Security Account is
limited to defined permitted investments. A Security Account may be maintained
as an interest bearing account or the funds held in it may be invested pending
each succeeding distribution date in defined permitted investments. To the
extent provided in the related prospectus supplement, the servicer or its
designee will be entitled to receive the interest or other income earned on
funds in the Security Account as additional compensation and will be obligated
to deposit in the Security Account the amount of any loss immediately as
realized. The Security Account may be maintained with the servicer or with a
depository institution that is an affiliate of the servicer, provided it meets
the standards set forth above.

      Unless otherwise indicated in the applicable prospectus supplement, the
servicer will deposit or cause to be deposited in the Security Account for each
issuing entity on a daily basis, to the extent applicable and unless the related
prospectus supplement provides for a different deposit arrangement, the
following payments and collections received or advances made by or on behalf of
it after the cut-off date (other than payments due on or before the cutoff date
and exclusive of any amounts representing any retained interest specified in the
related prospectus supplement):

      o   all payments on account of principal, including principal prepayments
          and, if specified in the related prospectus supplement, prepayment
          charges, on the mortgage loans;

      o   all payments on account of interest on the mortgage loans, net of
          applicable servicing compensation;

      o   all proceeds (net of unreimbursed payments of property taxes,
          insurance premiums and similar items ("INSURED EXPENSES") incurred,
          and unreimbursed advances made, by the servicer) of the hazard
          insurance policies and any primary mortgage insurance policies, to the
          extent the proceeds are not applied to the restoration of the property
          or released to the mortgagor in accordance with the servicer's normal
          servicing procedures and all other cash amounts (net of unreimbursed
          expenses incurred in connection with liquidation or foreclosure and
          unreimbursed advances, if any) received and retained in connection
          with the liquidation of defaulted mortgage loans, by foreclosure or
          otherwise, together with any net proceeds received on a monthly basis
          with respect to any properties acquired on behalf of the security
          holders by foreclosure or deed in lieu of foreclosure;


                                       67



      o   all proceeds of any mortgage loan or property in respect thereof
          purchased by the servicer, the depositor or any seller as described
          under "Mortgage Loan Program--Representations by Sellers; Repurchases"
          or "The Agreements--Assignment of Issuing Entity Assets" above and all
          proceeds of any mortgage loan repurchased as described under "The
          Agreements--Termination; Optional Termination";

      o   all payments required to be deposited in the Security Account with
          respect to any deductible clause in any blanket insurance policy
          described under "--Hazard Insurance";

      o   any amount required to be deposited by the servicer in connection with
          losses realized on investments for the benefit of the servicer of
          funds held in the Security Account and, to the extent specified in the
          related prospectus supplement, any payments required to be made by the
          servicer in connection with prepayment interest shortfalls; and

      o   all other amounts required to be deposited in the Security Account
          pursuant to the pooling and servicing agreement.

      Unless otherwise specified in the related prospectus supplement, the
servicer (or the depositor, as applicable) may from time to time direct the
institution that maintains the Security Account to withdraw funds from the
Security Account for the following purposes:

      o   to pay to the servicer the servicing fees described in the related
          prospectus supplement, the servicing fees (subject to reduction) and,
          as additional servicing compensation, earnings on or investment income
          with respect to funds in the amounts in the Security Account credited
          thereto;

      o   to reimburse the servicer for advances, the right of reimbursement
          with respect to any mortgage loan being limited to amounts received
          that represent late recoveries of payments of principal and interest
          on the mortgage loan (or insurance proceeds or liquidation proceeds
          from the mortgage loan) with respect to which the advance was made;

      o   to reimburse the servicer for any advances previously made that the
          servicer has determined to be nonrecoverable;

      o   to reimburse the servicer from insurance proceeds not used to restore
          the property for expenses incurred by the servicer and covered by the
          related insurance policies;

      o   to reimburse the servicer for (a) unpaid servicing fees and
          unreimbursed out-of-pocket costs and expenses incurred by the servicer
          in the performance of its servicing obligations, the right of
          reimbursement being limited to amounts received representing late
          recoveries of the payments for which the advances were made and (b)
          unreimbursed out-of-costs and expenses incurred for which such
          advances are not recoverable from the borrower under applicable law;

      o   to pay to the servicer, with respect to each mortgage loan or property
          acquired in respect thereof that has been purchased by the servicer
          pursuant to the pooling and servicing agreement, all amounts received
          on them and not taken into account in determining the principal
          balance of the repurchased mortgage loan;

      o   to reimburse the servicer, the depositor or other party specified in
          the related prospectus supplement for expenses incurred and
          reimbursable pursuant to the related agreement;

      o   to pay any lender-paid primary mortgage insurance premium;

      o   to withdraw any amount deposited in the Security Account that was not
          required to be deposited in it; and

      o   to clear and terminate the Security Account upon termination of the
          related agreement.


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      In addition, the related prospectus supplement will generally provide that
on or before the business day preceding each distribution date, the servicer
shall withdraw from the Security Account the amount of Available Funds and the
trustee fee for the distribution date, to the extent on deposit, for deposit in
an account maintained by the trustee for the related series of securities.

      Unless otherwise specified in the related prospectus supplement, aside
from the annual compliance review and servicing criteria assessment and
accompanying accountants' attestation, there is no independent verification of
the transaction accounts or the transaction activity. The servicer is required
to provide an annual certification to the effect that the servicer has fulfilled
its obligations under the related agreement throughout the preceding year, as
well as an annual assessment and an accompanying accountants' attestation as to
its compliance with applicable servicing criteria. See " - Evidence as to
Compliance."

PRE-FUNDING ACCOUNT

      If specified in the related prospectus supplement, the servicer will
establish and maintain a pre-funding account, in the name of the related trustee
on behalf of the related security holders, into which the depositor will deposit
the pre-funded amount in cash on the related closing date. The pre-funding
account will be maintained with the trustee for the related series of securities
and is designed solely to hold funds that the trustee will use during the
funding period to pay the purchase price for subsequent loans to the depositor.
Monies on deposit in the pre-funding account will not be available to cover
losses on or in respect of the related loans. The pre-funded amount will not
exceed 50% of the offering proceeds of the certificates and notes of the related
series. The applicable trustee will use the pre-funded amount to purchase
subsequent loans from the depositor from time to time during the funding period.
Each funding period will begin on the related closing date and will end on the
date specified in the related prospectus supplement (or at the latest, one year
after the related closing date). Monies on deposit in the pre-funding account
may be invested in permitted investments under the circumstances and in the
manner described in the related agreement. Investment earnings on funds in a
pre-funding account will be deposited into the related Security Account or other
trust account specified in the related prospectus supplement. Any investment
losses will be charged against the funds on deposit in the pre-funding account.
Any amounts remaining in the pre-funding account at the end of the funding
period will be distributed to the related security holders in the manner and
priority specified in the related prospectus supplement, as a prepayment of
principal of the related securities.

      In addition, if provided in the related prospectus supplement, on the
closing date for the related series, the depositor will deposit in an account
(the "CAPITALIZED INTEREST ACCOUNT") cash in an amount needed to cover
shortfalls in interest on the related series of securities that may arise by
using the pre-funding account as described above. The Capitalized Interest
Account will be maintained with the trustee for the related series of securities
and is designed solely to cover those interest shortfalls. Monies on deposit in
the Capitalized Interest Account will not be available to cover losses on or in
respect of the related loans. If the entire amount on deposit in a Capitalized
Interest Account has not been used to cover shortfalls in interest on the
related series of securities by the end of the related funding period, any
amounts remaining in that Capitalized Interest Account will be paid to the
depositor.

COLLECTION PROCEDURES

      The servicer will make reasonable efforts to collect all payments called
for under the mortgage loans and will, consistent with each pooling and
servicing agreement, sale and servicing agreement or servicing agreement, as
applicable, and any mortgage pool insurance policy, primary mortgage insurance
policy, FHA insurance, VA guaranty and bankruptcy bond or alternative
arrangements, follow the collection procedures it customarily follows for
mortgage loans that are comparable to the mortgage loans.

      Consistent with the above and pursuant to the authority granted to the
servicer in the related agreement, the servicer may, in its discretion, waive
any assumption fee, late payment or other charge in connection with a mortgage
loan and arrange with a mortgagor a schedule for the liquidation of
delinquencies to the extent not inconsistent with the coverage of the mortgage
loan by a mortgage pool insurance policy, primary mortgage insurance policy, FHA
insurance, VA guaranty or bankruptcy bond or alternative arrangements, if
applicable. To the extent the servicer is obligated to make or to cause to be
made advances, the obligation will remain during any period of such an
arrangement. Notwithstanding the foregoing, in connection with a defaulted
mortgage loan, the servicer, consistent with the standards set forth in the
pooling and servicing agreement, sale and servicing agreement


                                       69



or servicing agreement, as applicable, may waive, modify or vary any term of
that mortgage loan (including modifications that change the mortgage rate,
forgive the payment of principal or interest or extend the final maturity date
of that mortgage loan), accept payment from the related mortgagor of an amount
less than the stated principal balance in final satisfaction of that mortgage
loan, or consent to the postponement of strict compliance with any such term or
otherwise grant indulgence to any mortgagor if in the servicer's determination
such waiver, modification, postponement or indulgence is not materially adverse
to the interests of the security holders (taking into account any estimated loss
that might result absent such action).

      The applicable prospectus supplement may provide for other alternatives
regarding due-on-sale clauses, but if it does not, then in any case in which
property securing a conventional mortgage loan has been, or is about to be,
conveyed by the mortgagor, the servicer will, to the extent it has knowledge of
the conveyance or proposed conveyance, exercise or cause to be exercised its
rights to accelerate the maturity of the mortgage loan under any due-on-sale
clause applicable to it, but only if permitted by applicable law and the
exercise will not impair or threaten to impair any recovery under any related
primary mortgage insurance policy. If these conditions are not met or if the
servicer reasonably believes it is unable under applicable law to enforce the
due-on-sale clause or if the mortgage loan is insured by the FHA or partially
guaranteed by the VA, the servicer will enter into or cause to be entered into
an assumption and modification agreement with the person to whom the property
has been or is about to be conveyed, pursuant to which that person becomes
liable for repayment of the mortgage loan and, to the extent permitted by
applicable law, the mortgagor also remains liable on it. Any fee collected by or
on behalf of the servicer for entering into an assumption agreement will be
retained by or on behalf of the servicer as additional servicing compensation.
See "Certain Legal Aspects of the Mortgage Loans--Due-on-Sale Clauses." The
terms of the related mortgage loan may not be changed in connection with an
assumption.

      Any prospective purchaser of a cooperative apartment will generally have
to obtain the approval of the board of directors of the relevant cooperative
before purchasing the shares and acquiring rights under the related proprietary
lease or occupancy agreement. See "Certain Legal Aspects of the Mortgage Loans."
This approval is usually based on the purchaser's income and net worth and
numerous other factors. Although the cooperative's approval is unlikely to be
unreasonably withheld or delayed, the necessity of acquiring the approval could
limit the number of potential purchasers for those shares and otherwise limit
the issuing entity's ability to sell and realize the value of shares securing a
cooperative loan.

      In general, a "tenant-stockholder" (as defined in Code Section 216(b)(2))
of a corporation that qualifies as a "cooperative housing corporation" within
the meaning of Code Section 216(b)(1) is allowed a deduction for amounts paid or
accrued within his taxable year to the corporation representing his
proportionate share of certain interest expenses and certain real estate taxes
allowable as a deduction under Code Section 216(a) to the corporation under Code
Sections 163 and 164. In order for a corporation to qualify under Code Section
216(b)(1) for its taxable year in which the items are allowable as a deduction
to the corporation, the Section requires, among other things, that at least 80%
of the gross income of the corporation be derived from its tenant-stockholders
(as defined in Code Section 216(b)(2)). By virtue of this requirement, the
status of a corporation for purposes of Code Section 216(b)(1) must be
determined on a year-to-year basis. Consequently, we can give no assurance that
cooperatives relating to the cooperative loans will qualify under Section
216(b)(1) for any particular year. If a cooperative fails to qualify for one or
more years, the value of the collateral securing any related cooperative loans
could be significantly impaired because no deduction would be allowable to
tenant-stockholders under Code Section 216(a) with respect to those years. In
view of the significance of the tax benefits accorded tenant-stockholders of a
corporation that qualifies under Code Section 216(b)(1), the likelihood that a
failure to qualify would be permitted to continue over a period of years appears
remote.

THE SURETY PROVIDER

      The related prospectus supplement may provide that a surety provider will
irrevocably and unconditionally guarantee payment to, or at the direction of,
the related trustee for the benefit of the related investor of that portion of
any guaranteed interest or principal payments or any other covered amounts due
and payable pursuant to the terms of the related pooling and servicing
agreement, sale and servicing agreement, servicing agreement or sale agreement,
as applicable, and unpaid by reason of nonpayment (as defined in the applicable
policies).


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HAZARD INSURANCE

      The related prospectus supplement may provide otherwise, but the servicer
will generally require the mortgagor on each mortgage loan to maintain a hazard
insurance policy providing for no less than the coverage of the standard form of
fire insurance policy with extended coverage customary for the type of Property
in the state in which the Property is located. The coverage will be in an amount
that is at least equal to the lesser of

      o   the maximum insurable value of the improvements securing the mortgage
          loan or

      o   the greater of

          o   the outstanding principal balance of the mortgage loan and

          o   an amount such that the proceeds of the policy shall be sufficient
              to prevent the mortgagor or the mortgagee from becoming a
              co-insurer.

All amounts collected by the servicer under any hazard policy (except for
amounts to be applied to the restoration or repair of the Property or released
to the mortgagor in accordance with the servicer's normal servicing procedures)
will be deposited in the related Security Account. If the servicer maintains a
blanket policy insuring against hazard losses on all the mortgage loans
comprising part of an issuing entity, it will have satisfied its obligation
relating to the maintenance of hazard insurance. The blanket policy may contain
a deductible clause, in which case the servicer will be required to deposit from
its own funds into the related Security Account the amounts that would have been
deposited therein but for the clause.

      In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements securing a mortgage loan
by fire, lightning, explosion, smoke, windstorm and hail, riot, strike and civil
commotion, subject to the conditions and exclusions particularized in each
policy. Although the policies relating to the mortgage loans may have been
underwritten by different insurers under different state laws in accordance with
different applicable forms and therefore may not contain identical terms, their
basic terms are dictated by the respective state laws, and most policies
typically do not cover any physical damage resulting from war, revolution,
governmental actions, floods and other water-related causes, earth movement
(including earthquakes, landslides and mud flows), nuclear reactions, wet or dry
rot, vermin, rodents, insects or domestic animals, theft and, in certain cases,
vandalism. This list is merely indicative of certain kinds of uninsured risks
and is not all inclusive. If the Property securing a mortgage loan is located in
a federally designated special flood area at the time of origination, the
servicer will require the mortgagor to obtain and maintain flood insurance.

      The hazard insurance policies covering properties securing the mortgage
loans typically contain a clause that in effect requires the insured at all
times to carry insurance of a specified percentage (generally 80% to 90%) of the
full replacement value of the insured property in order to recover the full
amount of any partial loss. If the insured's coverage falls below this specified
percentage, then the insurer's liability upon partial loss will not exceed the
larger of the actual cash value (generally defined as replacement cost at the
time and place of loss, less physical depreciation) of the improvements damaged
or destroyed and the proportion of the loss that the amount of insurance carried
bears to the specified percentage of the full replacement cost of the
improvements. Since the amount of hazard insurance the servicer may cause to be
maintained on the improvements securing the mortgage loans declines as the
principal balances owing on them decrease, and since improved real estate
generally has appreciated in value over time in the past, the effect of this
requirement upon partial loss may be that hazard insurance proceeds will be
insufficient to fully restore the damaged property. If specified in the related
prospectus supplement, a special hazard insurance policy will be obtained to
insure against certain of the uninsured risks described above. See "Credit
Enhancement--Special Hazard Insurance Policies" and "Credit
Enhancements--Insurance--Special Hazard Insurance Policy" in the related
prospectus supplement.

      The servicer will not require that a standard hazard or flood insurance
policy be maintained on the cooperative dwelling relating to any cooperative
loan. Generally, the cooperative itself is responsible for maintenance of hazard
insurance for the property owned by the cooperative and the tenant-stockholders
of that cooperative do not maintain individual hazard insurance policies. To the
extent, however, that a cooperative and the related borrower on a cooperative
loan do not maintain insurance or do not maintain adequate coverage or any
insurance proceeds are not applied to the restoration of damaged property, any
damage to the borrower's cooperative


                                       71



dwelling or the cooperative's building could significantly reduce the value of
the collateral securing the cooperative loan to the extent not covered by other
credit support.

REALIZATION UPON DEFAULTED MORTGAGE LOANS

      Primary Mortgage Insurance Policies. The servicer will maintain or cause
to be maintained, as the case may be, in effect, to the extent specified in the
related prospectus supplement, a primary mortgage insurance policy with regard
to each mortgage loan for which coverage is required. The servicer will not
cancel or refuse to renew any primary mortgage insurance policy in effect at the
time of the initial issuance of a series of securities that is required to be
kept in force under the applicable agreement unless the replacement primary
mortgage insurance policy for the cancelled or nonrenewed policy is maintained
with an insurer whose claims-paying ability is sufficient to maintain the
current rating of the classes of securities of the series that have been rated.

      Although the terms of primary mortgage insurance vary, the amount of a
claim for benefits under a primary mortgage insurance policy covering a mortgage
loan will consist of the insured percentage of the unpaid principal amount of
the covered mortgage loan and accrued and unpaid interest on it and
reimbursement of certain expenses, less all rents or other payments collected or
received by the insured (other than the proceeds of hazard insurance) that are
derived from or in any way related to the Property, hazard insurance proceeds in
excess of the amount required to restore the Property and which have not been
applied to the payment of the mortgage loan, amounts expended but not approved
by the issuer of the related primary mortgage insurance policy, claim payments
previously made by the primary insurer and unpaid premiums.

      Primary mortgage insurance policies reimburse certain losses sustained
from defaults in payments by borrowers. Primary mortgage insurance policies will
not insure against, and exclude from coverage, a loss sustained from a default
arising from or involving certain matters, including fraud or negligence in
origination or servicing of the mortgage loans, including misrepresentation by
the originator, mortgagor or other persons involved in the origination of the
mortgage loan; failure to construct the Property subject to the mortgage loan in
accordance with specified plans; and physical damage to the Property.

      Recoveries Under A Primary Mortgage Insurance Policy. As conditions
precedent to the filing of or payment of a claim under a primary mortgage
insurance policy covering a mortgage loan, the insured will be required to

      o   advance or discharge

          o   all hazard insurance policy premiums and

          o   as necessary and approved in advance by the primary insurer, real
              estate property taxes, all expenses required to maintain the
              related Property in at least as good a condition as existed at the
              effective date of the primary mortgage insurance policy, ordinary
              wear and tear excepted, Property sales expenses, any specified
              outstanding liens on the mortgaged property and foreclosure costs,
              including court costs and reasonable attorneys' fees;

      o   upon any physical loss or damage to the Property, have the Property
          restored and repaired to at least as good a condition as existed at
          the effective date of the primary mortgage insurance policy, ordinary
          wear and tear excepted; and

      o   tender to the primary insurer good and merchantable title to and
          possession of the Property.

      The servicer, on behalf of itself, the trustee and the security holders,
will present claims to the insurer under each primary mortgage insurance policy,
and will take any reasonable steps consistent with its practices regarding
comparable mortgage loans and necessary to receive payment or to permit recovery
under the policy with respect to defaulted mortgage loans. As set forth above,
all collections by or on behalf of the servicer under any primary mortgage
insurance policy and, when the Property has not been restored, the hazard
insurance policy, are to be deposited in the Security Account, subject to
withdrawal as heretofore described.


                                       72



      If the Property securing a defaulted mortgage loan is damaged and
proceeds, if any, from the related hazard insurance policy are insufficient to
restore the damaged Property to a condition sufficient to permit recovery under
the related primary mortgage insurance policy, if any, the servicer is not
required to expend its own funds to restore the damaged Property unless it
determines that the restoration will increase the proceeds to securityholders on
liquidation of the mortgage loan after reimbursement of the servicer for its
expenses and that the expenses will be recoverable by it from related insurance
proceeds or liquidation proceeds.

      If recovery on a defaulted mortgage loan under any related primary
mortgage insurance policy is not available for the reasons set forth in the
preceding paragraph, or if the defaulted mortgage loan is not covered by a
primary mortgage insurance policy, the servicer will be obligated to follow or
cause to be followed the normal practices and procedures that it deems
appropriate to realize upon the defaulted mortgage loan. If the proceeds of any
liquidation of the Property securing the defaulted mortgage loan are less than
the principal balance of the mortgage loan plus interest accrued on it that is
payable to securityholders, the issuing entity will realize a loss in the amount
of the difference plus the aggregate of expenses incurred by the servicer in
connection with the proceedings that are reimbursable under the pooling and
servicing agreement, sale and servicing agreement or servicing agreement, as
applicable. In the unlikely event that the proceedings result in a total
recovery which is, after reimbursement to the servicer of its expenses, in
excess of the principal balance of the mortgage loan plus interest accrued on it
that is payable to securityholders, the servicer will be entitled to withdraw or
retain from the Security Account amounts representing its normal servicing
compensation with respect to the mortgage loan and, unless otherwise specified
in the related prospectus supplement, amounts representing the balance of the
excess, exclusive of any amount required by law to be forwarded to the related
mortgagor, as additional servicing compensation.

      If the servicer or its designee recovers insurance proceeds not used to
restore the property which, when added to any related liquidation proceeds and
after deduction of certain expenses reimbursable to the servicer, exceed the
principal balance of a mortgage loan plus interest accrued thereon that is
payable to securityholders, the servicer will be entitled to withdraw or retain
from the Security Account amounts representing its normal servicing compensation
with respect to the mortgage loan. If the servicer has expended its own funds to
restore the damaged Property and the funds have not been reimbursed under the
related hazard insurance policy, it will be entitled to withdraw from the
Security Account out of related liquidation proceeds or insurance proceeds an
amount equal to the expenses incurred by it, in which event the issuing entity
may realize a loss up to the amount so charged. Since insurance proceeds cannot
exceed deficiency claims and certain expenses incurred by the servicer, no
insurance payment or recovery will result in a recovery to the issuing entity
that exceeds the principal balance of the defaulted mortgage loan together with
accrued interest on it. See "Credit Enhancement" in this prospectus and in the
related prospectus supplement.

      FHA Insurance; VA Guaranties. Mortgage loans designated in the related
prospectus supplement as insured by the FHA will be insured by the FHA as
authorized under the United States National Housing Act of 1934 of 1937, as
amended. Those mortgage loans will be insured under various FHA programs
including the standard FHA 203(b) program to finance the acquisition of one-to
four-family housing units and the FHA 245 graduated payment mortgage program.
These programs generally limit the principal amount and interest rates of the
mortgage loans insured. Mortgage loans insured by the FHA generally require a
minimum down payment of approximately 5% of the original principal amount of the
loan. No FHA-insured mortgage loans relating to a series may have an interest
rate or original principal amount exceeding the applicable FHA limits at the
time of origination of the loan.

      The insurance premiums for mortgage loans insured by the FHA are collected
by lenders approved by the HUD or by the servicer and are paid to the FHA. The
regulations governing FHA single-family mortgage insurance programs provide that
insurance benefits are payable either upon foreclosure (or other acquisition of
possession) and conveyance of the mortgaged premises to HUD or upon assignment
of the defaulted mortgage loan to HUD. With respect to a defaulted FHA-insured
mortgage loan, the servicer is limited in its ability to initiate foreclosure
proceedings. When it is determined, either by the servicer or HUD, that default
was caused by circumstances beyond the mortgagor's control, the servicer is
expected to make an effort to avoid foreclosure by entering, if feasible, into
one of a number of available forms of forbearance plans with the mortgagor.
These plans may involve the reduction or suspension of regular mortgage payments
for a specified period, with the payments to be made up on or before the
maturity date of the mortgage, or the recasting of payments due under the
mortgage up to or beyond the maturity date. In addition, when a default caused
by circumstances beyond the mortgagor's control is accompanied by certain other
criteria, HUD may provide relief by making payments to the servicer in partial
or full satisfaction of amounts


                                       73



due under the mortgage loan (which payments are to be repaid by the mortgagor to
HUD) or by accepting assignment of the loan from the servicer. With certain
exceptions, at least three full monthly installments must be due and unpaid
under the mortgage loan and HUD must have rejected any request for relief from
the mortgagor before the servicer may initiate foreclosure proceedings.

      HUD has the option, in most cases, to pay insurance claims in cash or in
debentures issued by HUD. Currently, claims are being paid in cash, and claims
have not been paid in debentures since 1965. HUD debentures issued in
satisfaction of FHA insurance claims bear interest at the applicable HUD
debentures interest rate. The servicer of each FHA-insured mortgage loan will be
obligated to purchase the debenture issued in satisfaction of the mortgage loan
upon default for an amount equal to the principal amount of the debenture.

      The amount of insurance benefits generally paid by the FHA is equal to the
entire unpaid principal amount of the defaulted mortgage loan adjusted to
reimburse the servicer for certain costs and expenses and to deduct certain
amounts received or retained by the servicer after default. When entitlement to
insurance benefits results from foreclosure (or other acquisition of possession)
and conveyance to HUD, the servicer is compensated for no more than two-thirds
of its foreclosure costs, and is compensated for accrued and unpaid interest but
in general only to the extent it was allowed pursuant to a forbearance plan
approved by HUD. When entitlement to insurance benefits results from assignment
of the mortgage loan to HUD, the insurance payment includes full compensation
for interest accrued and unpaid to the assignment date. The insurance payment
itself, upon foreclosure of an FHA-insured mortgage loan, bears interest from a
date 30 days after the mortgagor's first uncorrected failure to perform any
obligation to make any payment due under the mortgage loan and, upon assignment,
from the date of assignment to the date of payment of the claim, in each case at
the same interest rate as the applicable HUD debenture interest rate as
described above.

      Mortgage loans designated in the related prospectus supplement as
guaranteed by the VA will be partially guaranteed by the VA under the
Serviceman's Readjustment Act of 1944, as amended. The Serviceman's Readjustment
Act of 1944, as amended, permits a veteran (or in certain instances the spouse
of a veteran) to obtain a mortgage loan guaranty by the VA covering mortgage
financing of the purchase of a one- to four-family dwelling unit at interest
rates permitted by the VA. The program has no mortgage loan limits, requires no
down payment from the purchaser and permits the guarantee of mortgage loans of
up to 30 years' duration. However, no mortgage loan guaranteed by the VA will
have an original principal amount greater than five times the partial VA
guaranty for the mortgage loan.

      The liability on the guaranty may be reduced or increased pro rata with
any reduction or increase in the amount of indebtedness, but in no event will
the amount payable on the guaranty exceed the amount of the original guaranty.
The VA, at its option and without regard to the guaranty, may make full payment
to a mortgage holder of unsatisfied indebtedness on a mortgage upon its
assignment to the VA.

      With respect to a defaulted VA guaranteed mortgage loan, the servicer is,
absent exceptional circumstances, authorized to announce its intention to
foreclose only when the default has continued for three months. Generally, a
claim for the guaranty is submitted after liquidation of the Property.

      The amount payable under the guaranty will be the percentage of the
VA-insured mortgage loan originally guaranteed applied to indebtedness
outstanding as of the applicable date of computation specified in the VA
regulations. Payments under the guaranty will be equal to the unpaid principal
amount of the loan, interest accrued on the unpaid balance of the loan to the
appropriate date of computation and limited expenses of the mortgagee, but in
each case only to the extent that the amounts have not been recovered through
liquidation of the Property. The amount payable under the guaranty may in no
event exceed the amount of the original guaranty.

      Application of Liquidation Proceeds. Unless the related pooling and
servicing agreement, sale and servicing agreement or servicing agreement, as
applicable, provides for a different application of liquidation proceeds, the
proceeds from any liquidation of a mortgage loan will be applied in the
following order of priority:

            first, to reimburse the servicer for any unreimbursed expenses
      incurred by it to restore the related Property and any unreimbursed
      servicing compensation payable to the servicer with respect to the
      mortgage loan;


                                       74



            second, to reimburse the servicer for any unreimbursed advances with
      respect to the mortgage loan;

            third, to accrued and unpaid interest (to the extent no advance has
      been made for the amount) on the mortgage loan; and

            fourth, as a recovery of principal of the mortgage loan.

Unless otherwise specified in the related prospectus supplement, excess proceeds
from the liquidation of a mortgage loan will be retained by the servicer as
additional servicing compensation.

      If specified in the related prospectus supplement, if a final liquidation
of a mortgage loan resulted in a realized loss and thereafter the servicer
receives a recovery specifically related to that mortgage loan, such recovery
(net of any reimbursable expenses) shall be distributed to the security holders
in the same manner as prepayments received in the prior calendar month, to the
extent that the related realized loss was allocated to any class of securities.
In addition, the Class Security Balance of each class of securities to which
realized losses have been allocated, will be increased, sequentially in the
order of payment priority, to the extent that such subsequent recoveries are
distributed as principal to any class of securities. However, the Class Security
Balance of each such class of securities will not be increased by more than the
amount of realized losses previously applied to reduce the Class Security
Balance of each such class of securities. Holders of securities whose Class
Security Balance is increased in this manner will not be entitled to interest on
the increased balance for any interest accrual period preceding the distribution
date on which the increase occurs. The foregoing provisions will apply even if
the Class Security Balance of a class of securities was previously reduced to
zero. Accordingly, each class of securities will be considered to remain
outstanding until the termination of the related trust.

SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES

      The principal servicing compensation to be paid to the servicer in respect
of its servicing activities for each series of securities will be equal to the
percentage per annum described in the related prospectus supplement (which may
vary under certain circumstances) of the outstanding principal balance of each
mortgage loan, and the compensation will be retained by it from collections of
interest on the mortgage loan in the related issuing entity. As compensation for
its servicing duties, the servicer will be entitled to a monthly servicing fee
as described in the related prospectus supplement. In addition, generally the
servicer will retain all prepayment charges, assumption fees and late payment
charges, to the extent collected from mortgagors, and any benefit that may
accrue as a result of the investment of funds in the applicable Security Account
(unless otherwise specified in the related prospectus supplement).

      The servicer will, to the extent provided in the related pooling and
servicing agreement, sale and servicing agreement or servicing agreement, as
applicable, pay or cause to be paid certain ongoing expenses associated with
each issuing entity and incurred by it in connection with its responsibilities
under the related agreement, including, without limitation, payment of the fees
and disbursements of the trustee, any custodian appointed by the trustee, the
security registrar and any paying agent, and payment of expenses incurred in
enforcing the obligations of the servicer and the seller. In addition, as
indicated in the preceding section, the servicer will be entitled to
reimbursement for certain expenses incurred by it in connection with any
defaulted mortgage loan as to which it has determined that all recoverable
liquidation proceeds and insurance proceeds have been received (a "LIQUIDATED
MORTGAGE"), and in connection with the restoration of mortgaged properties, the
right of reimbursement being before the rights of security holders to receive
any related liquidation proceeds (including insurance proceeds).

EVIDENCE AS TO COMPLIANCE

      Each agreement will provide for delivery to the trustee, on or before a
specified date in each year, of an annual statement signed by two officers of
the servicer to the effect that the servicer has fulfilled its obligations under
the pooling and servicing agreement, sale and servicing agreement or servicing
agreement, as applicable, throughout the preceding year.

      Each pooling and servicing agreement, sale and servicing agreement or
servicing agreement, as applicable, will also provide for delivery to the
depositor, the servicer and the trustee, on or before a specified date in each
year,


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of an annual servicing assessment report from each party performing servicing
functions with respect to the related series, including any servicer that
services 5% or more of the Issuing Entity Assets. In each assessment report, the
party providing the report must include an assessment of its compliance with the
servicing criteria during the previous fiscal year, and disclose any material
noncompliance with the applicable servicing criteria. The servicing criteria are
divided generally into four categories:

            o   general servicing considerations;

            o   cash collection and administration;

            o   investor remittances and reporting; and

            o   pool asset administration.

      Each servicing assessment report is required to be accompanied by
attestation report provided by a public registered accounting firm. The
attestation report must contain an opinion of the registered public accounting
firm as to whether the related servicing criteria assessment was fairly stated
in all material respects, or a statement that the firm cannot express that
opinion. The attestation examination the must be made in accordance with the
attestation engagement standards issued or adopted by the Public Company
Accounting Oversight Board.

      Copies of the annual servicing compliance statement, the servicing
criteria assessment report and related accountants attestations and the annual
accountants' statement (if any) may be obtained by security holders of the
related series without charge upon written request to the servicer at the
address set forth in the related prospectus supplement.

LIST OF SECURITYHOLDERS

      Each agreement will provide that three or more holders of securities of
any series may, by written request to the trustee, obtain access to the list of
all securityholders maintained by the trustee for the purpose of communicating
with other securityholders with respect to their rights under the applicable
agreement and the securities.

CERTAIN MATTERS REGARDING THE SERVICER AND THE DEPOSITOR

      The servicer under each pooling and servicing agreement, sale and
servicing agreement or servicing agreement, as applicable, will be named in the
related prospectus supplement. The entity serving as servicer may be an
affiliate of the depositor and may have other business relationships with the
depositor or the depositor's affiliates.

      Each agreement will provide that the servicer may not resign from its
 obligations and duties under the agreement except

      o   upon appointment of a successor servicer and receipt by the trustee of
          a letter from each rating agency rating the related transaction that
          such a resignation and appointment will not result in a downgrading of
          the rating of any of the securities of the related series, or

      o   upon a determination that the performance by it of its duties under
          the agreement is no longer permissible under applicable law.

No resignation will become effective until the trustee or a successor servicer
has assumed the servicer's obligations and duties under the related agreement.

      Each agreement will further provide that neither the servicer, the
depositor nor any director, officer, employee, or agent of the servicer or the
depositor will be under any liability to the related issuing entity or
securityholders for any action taken or for refraining from the taking of any
action in good faith pursuant to the applicable agreement, or for errors in
judgment. However, neither the servicer, the depositor nor any director,
officer, employee, or agent of the servicer or the depositor will be protected
against any liability that would


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otherwise be imposed for willful misfeasance, bad faith or negligence in the
performance of duties under the pooling and servicing agreement, sale and
servicing agreement or servicing agreement, as applicable, or for reckless
disregard of obligations and duties under the applicable agreement. Each
agreement will further provide that the servicer, the depositor and any
director, officer, employee or agent of the servicer or the depositor will be
entitled to indemnification by the related issuing entity and will be held
harmless against any loss, liability or expense incurred in connection with any
legal action relating to the agreement or the securities, other than any loss,
liability or expense related to any specific Mortgage Asset or Issuing Entity
Assets (except any loss, liability or expense otherwise reimbursable pursuant to
the related agreement) and any loss, liability or expense incurred for willful
misfeasance, bad faith or negligence in the performance of duties under the
related agreement or for reckless disregard of obligations and duties under the
related agreement. In addition, each agreement will provide that neither the
servicer nor the depositor will be under any obligation to appear in, prosecute
or defend any legal action that is not incidental to its respective
responsibilities under that agreement and that in its opinion may involve it in
any expense or liability. The servicer or the depositor may, however, in its
discretion undertake any action that it deems appropriate with respect to that
agreement and the rights and duties of the parties to the pooling and servicing
agreement, sale and servicing agreement or servicing agreement, as applicable,
and the interests of the securityholders under that agreement. In that event,
the legal expenses and costs of the action and any liability resulting from it
will be expenses, costs and liabilities of the issuing entity, and the servicer
or the depositor, as the case may be, will be entitled to be reimbursed for them
out of funds otherwise distributable to securityholders.

      Any person into which the servicer may be merged or consolidated, or any
person resulting from any merger or consolidation to which the servicer is a
party, or any person succeeding to the business of the servicer, will be the
successor of the servicer under each agreement, provided that the person is
qualified to sell mortgage loans to, and service mortgage loans on behalf of,
Fannie Mae or Freddie Mac and further provided that the merger, consolidation or
succession does not adversely affect the then current rating or ratings of the
class or classes of securities of any series that have been rated.

EVENTS OF DEFAULT

      Pooling and Servicing Agreement; Sale and Servicing Agreement; Servicing
Agreement. The applicable prospectus supplement may provide for other events of
default, but if it does not, then events of default under each agreement will
consist of

      o   any failure by the servicer to deposit in the Security Account or
          remit to the trustee any payment which continues unremedied for five
          days after the giving of written notice of the failure to the servicer
          by the trustee or the depositor, or to the servicer and the trustee by
          the holders of securities having not less than 25% of the voting
          rights evidenced by the securities;

      o   any failure by the servicer to make an advance as required under the
          agreement, unless cured as specified therein;

      o   any failure by the servicer to observe or perform in any material
          respect any of its other covenants or agreements in the pooling and
          servicing agreement, sale and servicing agreement or servicing
          agreement, as applicable, which failure materially affects the rights
          of securityholders that continues unremedied for sixty days after the
          giving of written notice of the failure to the servicer by the trustee
          or the depositor, or to the servicer and the trustee by the holders of
          securities of any class evidencing not less than 25% of the voting
          rights evidenced by the securities; and

      o   certain events of insolvency, readjustment of debt, marshalling of
          assets and liabilities or similar proceeding and certain actions by or
          on behalf of the servicer indicating its insolvency, reorganization or
          inability to pay its obligations.

      Unless otherwise provided in the related prospectus supplement, so long as
an event of default under an agreement remains unremedied, the depositor or the
trustee may, and at the direction of holders of securities of any class
evidencing not less than 66 2/3% of the aggregate percentage interests
constituting such class and under other circumstances specified in the
agreement, the trustee will terminate all of the rights and obligations of the
servicer under the agreement relating to the issuing entity and in and to the
related Issuing Entity Assets, upon which the


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trustee will succeed to all of the responsibilities, duties and liabilities of
the servicer under the agreement, including, if specified in the related
prospectus supplement, the obligation to make advances, and will be entitled to
similar compensation arrangements. After the servicer has received notice of
termination, the trustee may execute and deliver, on behalf of the servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments, and
do or accomplish all other acts or things necessary or appropriate to effect the
termination of the servicer, including the transfer and endorsement or
assignment of the loans and related documents. The servicer has agreed to
cooperate with the trustee in effecting the termination of the servicer,
including the transfer to the trustee of all cash amounts which shall at the
time be credited to the Security Account, or thereafter be received with respect
to the loans. No additional funds have been reserved to pay for any expenses not
paid by the servicer in connection with a servicing transfer.

      If the trustee is unwilling or unable to so act, it may appoint, or
petition a court of competent jurisdiction for the appointment of, a loan
servicing institution with a net worth of a least $ 15,000,000 to act as
successor to the servicer under the agreement. Pending any appointment, the
trustee is obligated to act as servicer. The trustee and any successor to the
servicer may agree upon the servicing compensation to be paid, which in no event
may be greater than the compensation payable to the servicer under the
agreement.

      Unless otherwise provided in the related prospectus supplement, no
securityholder, solely by virtue of its status as a securityholder, will have
any right under any agreement to institute any proceeding with respect to the
agreement, unless the holder previously has given to the trustee written notice
of default and unless the holders of securities of any class evidencing not less
than 66 2/3% of the aggregate percentage interest constituting such class have
made a written request upon the trustee to institute a proceeding in its own
name as trustee and have offered to the trustee reasonable indemnity, and the
trustee for 60 days has neglected or refused to institute the proceeding.

      If specified in the related prospectus supplement, the agreement will
permit the trustee to sell the Issuing Entity Assets and the other assets of the
issuing entity described under "Credit Enhancement" if payments on them are
insufficient to make payments required in the agreement. The assets of the
issuing entity will be sold only under the circumstances and in the manner
specified in the related prospectus supplement.

      Indenture. The applicable prospectus supplement may provide for other
events of default, but if it does not, then the events of default under each
indenture will consist of:

      o   a default in the payment of any principal of or interest on any note
          of any series which continues unremedied for a specified number of
          days after the written notice of the default is given as specified in
          the related prospectus supplement;

      o   failure to perform in any material respect any other covenant of the
          depositor or the issuing entity in the indenture which continues for a
          specified number of days after notice is given in accordance with the
          procedures described in the related prospectus supplement;

      o   certain events of bankruptcy, insolvency, receivership or liquidation
          of the depositor or the issuing entity; or

      o   any other event of default provided with respect to notes of that
          series including but not limited to certain defaults on the part of
          the issuer, if any, of a credit enhancement instrument supporting the
          notes.

      If an event of default with respect to the notes of any series at the time
outstanding occurs and is continuing, either the trustee or the holders of a
majority of the then aggregate outstanding amount of the notes of such series
may declare the principal amount (or, if the notes of that series have an
interest rate of 0%, such portion of the principal amount as may be specified in
the terms of that series, as provided in the related prospectus supplement) of
all the notes of such series to be due and payable immediately. Such declaration
may, under certain circumstances, be rescinded and annulled by the holders of
more than 50% of the Percentage Interests of the notes of such series.


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      If, following an event of default with respect to any series of notes, the
notes of such series have been declared to be due and payable, the trustee may,
in its discretion, notwithstanding such acceleration, elect to maintain
possession of the collateral securing the notes of such series and to continue
to apply distributions on such collateral as if there had been no declaration of
acceleration if such collateral continues to provide sufficient funds for the
payment of principal of and interest on the notes of such series as they would
have become due if there had not been such a declaration. In addition, the
trustee may not sell or otherwise liquidate the collateral securing the notes of
a series following an event of default, other than a default in the payment of
any principal or interest on any note of such series for a specified number of
days, unless

      o   the holders of 100% of the percentage interests of the notes of such
          series consent to the sale,

      o   the proceeds of such sale or liquidation are sufficient to pay in full
          the principal of and accrued interest, due and unpaid, on the
          outstanding notes of such series at the date of such sale or

      o   the trustee determines that such collateral would not be sufficient on
          an ongoing basis to make all payments on such notes as such payments
          would have become due if such notes had not been declared due and
          payable, and the trustee obtains the consent of the holders of 66 2/3%
          of the percentage interests of the notes of such series.

      If specified in the related prospectus supplement, other parties, such as
a credit enhancement provider, may have certain rights with respect to remedies
upon an Event of Default that may limit the rights of the related security
holders.

      If the trustee liquidates the collateral in connection with an event of
default involving a default for five days or more in the payment of principal of
or interest on the notes of a series, the indenture provides that the trustee
will have a prior lien on the proceeds of any such liquidation for unpaid fees
and expenses. As a result, upon the occurrence of such an event of default, the
amount available for distribution to the noteholders would be less than would
otherwise be the case. However, the trustee may not institute a proceeding for
the enforcement of its lien except in connection with a proceeding for the
enforcement of the lien of the indenture for the benefit of the noteholders
after the occurrence of such an event of default.

      Except as otherwise specified in the related prospectus supplement, if the
principal of the notes of a series is declared due and payable, as described
above, the holders of any such notes issued at a discount from par may be
entitled to receive no more than an amount equal to the unpaid principal amount
of the notes less the amount of such discount which is unamortized.

      Subject to the provisions of the indenture relating to the duties of the
trustee, in case an event of default shall occur and be continuing with respect
to a series of notes, the trustee shall be under no obligation to exercise any
of the rights or powers under the indenture at the request or direction of any
of the holders of notes of such series, unless such holders offered to the
trustee security or indemnity satisfactory to it against the costs, expenses and
liabilities which might be incurred by it in complying with such request or
direction. Subject to such provisions for indemnification and certain
limitations contained in the indenture, the holders of a majority of the then
aggregate outstanding amount of the notes of such series shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the trustee or exercising any trust or power conferred on the
trustee with respect to the notes of such series, and the holders of a majority
of the then aggregate outstanding amount of the notes of such series may, in
certain cases, waive any default with respect to them, except a default in the
payment of principal or interest or a default in respect of a covenant or
provision of the indenture that cannot be modified without the waiver or consent
of all the holders of the outstanding notes of such series affected by that
default. If provided in the related prospectus supplement, the priority of
payments payable on the notes may change following and event of default.

AMENDMENT

      The applicable prospectus supplement may specify other amendment
provisions, but if it does not, then each agreement may be amended by the
depositor, the servicer and the trustee, without the consent of any of the
security holders,


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            (a) to cure any ambiguity or mistake;

            (b) to correct any defective provision in the agreement or to
      supplement any provision in the agreement that may be inconsistent with
      any other provision in it;

            (c) to conform the pooling and servicing agreement, sale and
      servicing agreement or servicing agreement, as applicable, to the final
      prospectus supplement provided to investors in accordance with the initial
      offering of the securities;

            (d) to add to the duties of the depositor, the seller or the
      servicer;

            (e) to modify, alter, amend, add to or rescind any of the terms or
      provisions contained in the pooling and servicing agreement, sale and
      servicing agreement or servicing agreement, as applicable, to comply with
      any rules or regulations promulgated by the SEC from time to time;

            (f) to add any other provisions with respect to matters or questions
      arising under the pooling and servicing agreement, sale and servicing
      agreement or servicing agreement, as applicable; or

            (g) to modify, alter, amend, add to or rescind any of the terms or
      provisions contained in the pooling and servicing agreement, sale and
      servicing agreement or servicing agreement, as applicable.

However, no action pursuant to clauses (e), (f) or (g) may, as evidenced by an
opinion of counsel, adversely affect in any material respect the interests of
any securityholder. But no opinion of counsel will be required if the person
requesting the amendment obtains a letter from each rating agency requested to
rate the class or classes of securities of the series stating that the amendment
will not result in the downgrading or withdrawal of the respective ratings then
assigned to the securities.

      In addition, the related agreement may be amended to modify, eliminate or
add to any of its provisions to the extent necessary to maintain the
qualification of the related issuing entity as a REMIC or to avoid or minimize
the risk of imposition of any tax on the REMIC, if a REMIC election is made with
respect to the issuing entity, or to comply with any other requirements of the
Code, if the trustee has received an opinion of counsel to the effect that the
action is necessary or helpful ensure the proper operation of the master REMIC,
to maintain the qualification, avoid or minimize that risk or comply with those
requirements, as applicable.

      The applicable prospectus supplement may specify other amendment
provisions, but if it does not, then each pooling and servicing agreement may
also be amended by the depositor, the servicer and the trustee with the consent
of holders of securities of the series evidencing a majority in interest of each
class adversely affected thereby for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the agreement or
of modifying in any manner the rights of the holders of the related securities.
However, no amendment may

            (a) reduce in any manner the amount of, or delay the timing of,
      payments received on Issuing Entity Assets that are required to be
      distributed on any security without the consent of the holder of the
      security,

            (b) amend, modify, add to, rescind or alter in any respect the
      provisions of the agreement restricting the issuing entity from engaging
      in any activity that would disqualify the issuing entity from being a
      qualifying special purpose entity under generally accepted accounting
      principles without the consent of the holders of securities evidencing
      percentage interests aggregating 66%% (provided however that no securities
      held by the seller, the depositor or any affiliate shall be given effect
      for the purpose of such calculation), or

            (c) reduce the aforesaid percentage of securities of any class of
      holders that is required to consent to the amendment without the consent
      of the holders of all securities of the class covered by the agreement
      then outstanding.

If a REMIC election is made with respect to an issuing entity, the trustee will
not be entitled to consent to an amendment to the related agreement without
having first received an opinion of counsel to the effect that the


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amendment will not cause the issuing entity to fail to qualify as a REMIC. If so
described in the related prospectus supplement, an amendment of an agreement may
require the consent of persons that are not party to the agreement, such as a
credit enhancement provider.

TERMINATION; OPTIONAL TERMINATION

      Pooling and Servicing Agreement, Sale and Servicing Agreement or Servicing
Agreement. Generally, the obligations created by each agreement for each series
of securities will terminate upon the payment to the related security holders of
all amounts held in the Security Account or by the servicer and required to be
paid to them pursuant to the agreement following the later of

      o     the final payment or other liquidation of the last of the Issuing
            Entity Assets subject to it or the disposition of all property
            acquired upon foreclosure of the Issuing Entity Assets remaining in
            the issuing entity and

      o     the purchase by the servicer or, if REMIC treatment has been elected
            and if specified in the related prospectus supplement, by the holder
            of the residual interest in the REMIC (see "Material Federal Income
            Tax Consequences" in this prospectus and in the related prospectus
            supplement), from the related issuing entity of all of the remaining
            Issuing Entity Assets and all property acquired in respect of the
            Issuing Entity Assets.

      Any purchase of Issuing Entity Assets and property acquired in respect of
Issuing Entity Assets evidenced by a series of securities will be made at the
option of the servicer or the party specified in the related prospectus
supplement, including the holder of the REMIC residual interest, at a price, and
in accordance with the procedures, specified in the related prospectus
supplement. The exercise of that right will effect early retirement of the
securities of that series, but the right of the servicer or the other party or,
if applicable, the holder of the REMIC residual interest, to so purchase is
subject to the principal balance of the related Issuing Entity Assets being less
than the percentage specified in the related prospectus supplement of the
aggregate principal balance of the Issuing Entity Assets at the cut-off date for
the series. The foregoing is subject to the provision that if a REMIC election
is made with respect to an issuing entity, any repurchase pursuant to the second
bulleted item above will be made only in connection with a "qualified
liquidation" of the REMIC within the meaning of Code Section 860F(a)(4).

      Indenture. The indenture will be discharged with respect to a series of
notes (except with respect to certain continuing rights specified in the
indenture) upon the delivery to the trustee for cancellation of all the notes of
such series or, with certain limitations, upon deposit with the trustee of funds
sufficient for the payment in full of all of the notes of such series.

      In addition to such discharge with certain limitations, the indenture will
provide that, if so specified with respect to the notes of any series, the
related issuing entity will be discharged from any and all obligations in
respect of the notes of such series (except for certain obligations relating to
temporary notes and exchange of notes, to register the transfer of or exchange
notes of such series, to replace stolen, lost or mutilated notes of such series,
to maintain paying agencies and to hold monies for payment in trust) upon the
deposit with the trustee, in trust, of money and/or direct obligations of or
obligations guaranteed by the United States of America which through the payment
of interest and principal in respect of them in accordance with their terms will
provide money in an amount sufficient to pay the principal of and each
installment of interest on the notes of such series on the last scheduled
distribution date for such notes and any installment of interest on such notes
in accordance with the terms of the indenture and the notes of such series. In
the event of any defeasance and discharge of notes of such series, holders of
notes of such series would be able to look only to such money and/or direct
obligations for payment of principal and interest, if any, on their notes until
maturity.

      The applicable prospectus supplement for a series of notes may also
provide that when the principal balance of such notes is reduced to a specified
percentage of the original principal balance as of the cut-off date, the
depositor, the indenture trustee or the holder of a call right may, at its
option, redeem one or more classes of notes at a price equal to 100% of the
outstanding principal balance of the notes plus accrued interest thereon plus
the amount due and owing to the surety provider, if any. Such redemption will
have the same effect as a prepayment on the notes.


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THE TRUSTEE

      The trustee under each agreement will be named in the applicable
prospectus supplement. The commercial bank or trust company serving as trustee
may have normal banking relationships with the depositor, the servicer and any
of their respective affiliates.

                   CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS

      The following discussion contains summaries, which are general in nature,
of certain legal matters relating to the mortgage loans. Because the legal
aspects are governed primarily by applicable state law (which laws may differ
substantially), the summaries do not purport to be complete or to reflect the
laws of any particular state or to encompass the laws of all states in which the
security for the mortgage loans is situated. If more than ten percent (by
principal balance) of the mortgage loans in the issuing entity for any series
are located in a single state, the prospectus, as supplemented by the related
prospectus supplement, will disclose all material legal matters relating to the
mortgage loans in that state.

GENERAL

      The mortgage loans will be secured by deeds of trust, mortgages, security
deeds or deeds to secure debt, depending upon the prevailing practice in the
state in which the property subject to the loan is located. Deeds of trust are
used almost exclusively in California instead of mortgages. Mortgages are used
in New York instead of deeds of trust. A mortgage creates a lien upon the real
property encumbered by the mortgage, which lien is generally not before the lien
for real estate taxes and assessments. Priority between mortgages depends on
their terms and generally on the order of recording with a state or county
office. There are two parties to a mortgage, the mortgagor, who is the borrower
and owner of the Property, and the mortgagee, who is the lender. Under the
mortgage instrument, the mortgagor delivers to the mortgagee a note or bond and
the mortgage. Although a deed of trust is similar to a mortgage, a deed of trust
formally has three parties, the borrower-property owner called the trustor
(similar to a mortgagor), a lender (similar to a mortgagee) called the
beneficiary, and a third-party grantee called the trustee. Under a deed of
trust, the borrower grants the property, irrevocably until the debt is paid, in
trust, generally with a power of sale, to the trustee to secure payment of the
obligation. A security deed and a deed to secure debt are special types of deeds
which indicate on their face that they are granted to secure an underlying debt.
By executing a security deed or deed to secure debt, the grantor conveys title
to, as opposed to merely creating a lien upon, the subject property to the
grantee until the underlying debt is repaid. The trustee's authority under a
deed of trust, the mortgagee's authority under a mortgage and the grantee's
authority under a security deed or deed to secure debt are governed by law and,
with respect to some deeds of trust, the directions of the beneficiary.

      Cooperatives. Certain of the mortgage loans may be cooperative loans. The
cooperative owns all the real property that comprises the project, including the
land, separate dwelling units and all common areas. The cooperative is directly
responsible for project management and, in most cases, payment of real estate
taxes and hazard and liability insurance. If there is a blanket mortgage on the
cooperative or underlying land or both, as is generally the case, the
cooperative, as project mortgagor, is also responsible for meeting these
mortgage obligations. A blanket mortgage is ordinarily incurred by the
cooperative in connection with the construction or purchase of the cooperative's
apartment building. The interest of the occupant under proprietary leases or
occupancy agreements to which that cooperative is a party are generally
subordinate to the interest of the holder of the blanket mortgage in that
building. If the cooperative is unable to meet the payment obligations arising
under its blanket mortgage, the mortgagee holding the blanket mortgage could
foreclose on that mortgage and terminate all subordinate proprietary leases and
occupancy agreements. In addition, the blanket mortgage on a cooperative may
provide financing in the form of a mortgage that does not fully amortize with a
significant portion of principal being due in one lump sum at final maturity.
The inability of the cooperative to refinance this mortgage and its consequent
inability to make the final payment could lead to foreclosure by the mortgagee
providing the financing. A foreclosure in either event by the holder of the
blanket mortgage could eliminate or significantly diminish the value of any
collateral held by the lender who financed the purchase by an individual
tenant-stockholder of cooperative shares or, in the case of an issuing entity
including cooperative loans, the collateral securing the cooperative loans.


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      The cooperative is owned by tenant-stockholders who, through ownership of
stock, shares or membership certificates in the corporation, receive proprietary
leases or occupancy agreements which confer exclusive rights to occupy specific
units. Generally, a tenant-stockholder of a cooperative must make a monthly
payment to the cooperative representing the tenant-stockholder's pro rata share
of the cooperative's payments for its blanket mortgage, real property taxes,
maintenance expenses and other capital or ordinary expenses. An ownership
interest in a cooperative and accompanying rights is financed through a
cooperative share loan evidenced by a promissory note and secured by a security
interest in the occupancy agreement or proprietary lease and in the related
cooperative shares. The lender takes possession of the share certificate and a
counterpart of the proprietary lease or occupancy agreement, and a financing
statement covering the proprietary lease or occupancy agreement and the
cooperative shares is filed in the appropriate state and local offices to
perfect the lender's interest in its collateral. Subject to the limitations
discussed below, upon default of the tenant-stockholder, the lender may sue for
judgment on the promissory note, dispose of the collateral at a public or
private sale or otherwise proceed against the collateral or tenant-stockholder
as an individual as provided in the security agreement covering the assignment
of the proprietary lease or occupancy agreement and the pledge of cooperative
shares.

FORECLOSURE AND REPOSSESSION

      Deed of Trust. Foreclosure of a deed of trust is generally accomplished by
a non-judicial sale under a specific provision in the deed of trust which
authorizes the trustee to sell the property at public auction upon any default
by the borrower under the terms of the note or deed of trust. In certain states,
foreclosure also may be accomplished by judicial action in the manner provided
for foreclosure of mortgages. In some states, such as California, the trustee
must record a notice of default and send a copy to the borrower-trustor and to
any person who has recorded a request for a copy of any notice of default and
notice of sale. In addition, the trustee must provide notice in some states to
any other individual having an interest of record in the real property,
including any junior lien holders. If the deed of trust is not reinstated within
any applicable cure period, a notice of sale must be posted in a public place
and, in most states, including California, published for a specified period of
time in one or more newspapers. In addition, these notice provisions require
that a copy of the notice of sale be posted on the property and sent to all
parties having an interest of record in the property. In California, the entire
process from recording a notice of default to a non-judicial sale usually takes
four to five months, but can take longer if the borrower seeks bankruptcy
protection or other events intervene.

      In some states, including California, the borrower-trustor has the right
to reinstate the loan at any time following default until shortly before the
trustee's sale. In general, the borrower, or any other person having a junior
encumbrance on the real estate, may, during a reinstatement period, cure the
default by paying the entire amount in arrears plus the costs and expenses
incurred in enforcing the obligation. Certain state laws control the amount of
foreclosure expenses and costs, including attorney's fees, that a lender can
recover.

      Mortgages. Foreclosure of a mortgage is generally accomplished by judicial
action. The action is initiated by the service of legal pleadings upon all
parties having an interest in the real property. Delays in completion of the
foreclosure may occasionally result from difficulties in locating necessary
parties. Judicial foreclosure proceedings are sometimes not contested by any of
the parties. When the mortgagee's right to foreclosure is contested, the legal
proceedings necessary to resolve the issue can be time consuming. After the
completion of a judicial foreclosure proceeding, the court generally issues a
judgment of foreclosure and appoints a referee or other court officer to conduct
the sale of the property. In general, the borrower, or any other person having a
junior encumbrance on the real estate, may, during a statutorily prescribed
reinstatement period, cure a monetary default by paying the entire amount in
arrears plus other designated costs and expenses incurred in enforcing the
obligation. Generally, state law controls the amount of foreclosure expenses and
costs, including attorney's fees, which may be recovered by a lender. After the
reinstatement period has expired without the default having been cured, the
borrower or junior lienholder no longer has the right to reinstate the loan and
must pay the loan in full to prevent the scheduled foreclosure sale. If the deed
of trust is not reinstated, a notice of sale must be posted in a public place
and, in most states, published for a specific period of time in one or more
newspapers. In addition, some state laws require that a copy of the notice of
sale be posted on the property and sent to all parties having an interest in the
real property.

      Although foreclosure sales are typically public sales, frequently no third
party purchaser bids in excess of the lender's lien because of the difficulty of
determining the exact status of title to the property, the possible
deterioration of the property during the foreclosure proceedings and a
requirement that the purchaser pay for the


                                       83



property in cash or by cashier's check. Thus the foreclosing lender often
purchases the property from the trustee or referee for an amount equal to the
principal amount outstanding under the loan, accrued and unpaid interest and the
expenses of foreclosure. Thereafter, the lender will assume the burden of
ownership, including obtaining hazard insurance and making repairs at its own
expense necessary to render the property suitable for sale. The lender will
commonly obtain the services of a real estate broker and pay the broker's
commission in connection with the sale of the property. Depending upon market
conditions, the ultimate proceeds of the sale of the property may not equal the
lender's investment in the property.

      Courts have imposed general equitable principles upon foreclosure, which
are generally designed to mitigate the legal consequences to the borrower of the
borrower's defaults under the loan documents. Some courts have been faced with
the issue of whether federal or state constitutional provisions reflecting due
process concerns for fair notice require that borrowers under deeds of trust
receive notice longer than that prescribed by statute. For the most part, these
cases have upheld the notice provisions as being reasonable or have found that
the sale by a trustee under a deed of trust does not involve sufficient state
action to afford constitutional protection to the borrower. When the beneficiary
under a junior mortgage or deed of trust cures the default and reinstates or
redeems by paying the full amount of the senior mortgage or deed of trust, the
amount paid by the beneficiary becomes a part of the indebtedness secured by the
junior mortgage or deed of trust. See "--Junior Mortgages; Rights of Senior
Mortgagees" below.

      Cooperative Loans. The cooperative shares owned by the tenant-stockholder
and pledged to the lender are, in almost all cases, subject to restrictions on
transfer as set forth in the cooperative's certificate of incorporation and
bylaws, as well as the proprietary lease or occupancy agreement, and may be
cancelled by the cooperative for failure by the tenant-stockholder to pay rent
or other obligations or charges owed by the tenant-stockholder, including
mechanics' liens against the cooperative apartment building incurred by the
tenant-stockholder. The proprietary lease or occupancy agreement generally
permits the cooperative to terminate the lease or agreement if an obligor fails
to make payments or defaults in the performance of covenants required under it.
Typically, the lender and the cooperative enter into a recognition agreement,
which establishes the rights and obligations of both parties upon a default by
the tenant-stockholder on its obligations under the proprietary lease or
occupancy agreement. A default by the tenant-stockholder under the proprietary
lease or occupancy agreement will usually constitute a default under the
security agreement between the lender and the tenant-stockholder.

      The recognition agreement generally provides that, if the
tenant-stockholder has defaulted under the proprietary lease or occupancy
agreement, the cooperative will take no action to terminate the lease or
agreement until the lender has been provided with an opportunity to cure the
default. The recognition agreement typically provides that if the proprietary
lease or occupancy agreement is terminated, the cooperative will recognize the
lender's lien against proceeds from the sale of the cooperative apartment,
subject, however, to the cooperative's right to sums due under the proprietary
lease or occupancy agreement. The total amount owed to the cooperative by the
tenant-stockholder, which the lender generally cannot restrict and does not
monitor, could reduce the value of the collateral below the outstanding
principal balance of the cooperative loan and accrued and unpaid interest on it.

      Recognition agreements also provide that upon foreclosure of a cooperative
loan, the lender must obtain the approval or consent of the cooperative as
required by the proprietary lease before transferring the cooperative shares or
assigning the proprietary lease. Generally, the lender is not limited in any
rights it may have to dispossess the tenant-stockholders.

      In some states, such as New York, foreclosure on the cooperative shares is
accomplished by a sale in accordance with the provisions of Article 9 of the UCC
and the security agreement relating to those shares. Article 9 of the UCC
requires that a sale be conducted in a "commercially reasonable" manner. Whether
a foreclosure sale has been conducted in a "commercially reasonable" manner will
depend on the facts in each case. In determining commercial reasonableness, a
court will look to the notice given the debtor and the method, manner, time,
place and terms of the foreclosure. Generally, a sale conducted according to the
usual practice of banks selling similar collateral will be considered reasonably
conducted.

      Article 9 of the UCC provides that the proceeds of the sale will be
applied first to pay the costs and expenses of the sale and then to satisfy the
indebtedness secured by the lender's security interest. The recognition
agreement, however, generally provides that the lender's right to reimbursement
is subject to the right of the cooperative to receive sums due under the
proprietary lease or occupancy agreement. If there are proceeds


                                       84



remaining, the lender must account to the tenant-stockholder for the surplus.
Conversely, if a portion of the indebtedness remains unpaid, the
tenant-stockholder is generally responsible for the deficiency. See
"Anti-Deficiency Legislation and Other Limitations on Lenders."

      In the case of foreclosure on a building converted from a rental building
to a building owned by a cooperative under a non-eviction plan, some states
require that a purchaser at a foreclosure sale take the property subject to rent
control and rent stabilization laws that apply to certain tenants who elected to
remain in the building but who did not purchase shares in the cooperative when
the building was so converted.

RIGHTS OF REDEMPTION

      In some states after a sale pursuant to a deed of trust or foreclosure of
a mortgage, the borrower and certain foreclosed junior lienors are given a
statutory period in which to redeem the property from the foreclosure sale. In
certain other states, including California, this right of redemption applies
only to sales following judicial foreclosure, and not to sales pursuant to a
non-judicial power of sale. In New York, the borrower may not redeem the
property after a foreclosure sale. In most states where the right of redemption
is available, statutory redemption may occur upon payment of the foreclosure
purchase price, accrued interest and taxes. In some states, the right to redeem
is an equitable right. The effect of a right of redemption is to diminish the
ability of the lender to sell the foreclosed property. The exercise of a right
of redemption would defeat the title of any purchaser at a foreclosure sale, or
of any purchaser from the lender after judicial foreclosure or sale under a deed
of trust. Consequently, the practical effect of the redemption right is to force
the lender to retain the property and pay the expenses of ownership until the
redemption period has run.

ANTI-DEFICIENCY LEGISLATION AND OTHER LIMITATIONS ON LENDERS

      Certain states have imposed statutory restrictions that limit the remedies
of a beneficiary under a deed of trust or a mortgagee under a mortgage. In some
states, including California and New York, statutes limit the right of the
beneficiary or mortgagee to obtain a deficiency judgment against the borrower
following foreclosure or a sale under a deed of trust. A deficiency judgment is
a personal judgment against the borrower equal in most cases to the difference
between the amount due to the lender and the current fair market value of the
property at the time of the foreclosure sale. As a result of these prohibitions,
it is anticipated that in most instances the servicer will utilize the
non-judicial foreclosure remedy and will not seek deficiency judgments against
defaulting mortgagors.

      Some state statutes may require the beneficiary or mortgagee to exhaust
the security afforded under a deed of trust or mortgage by foreclosure in an
attempt to satisfy the full debt before bringing a personal action against the
borrower. In certain other states, such as New York, the lender has the option
of bringing a personal action against the borrower on the debt without first
exhausting that security. However, in some of these states, following judgment
on a personal action, the lender may be considered to have elected a remedy and
may be precluded from exercising other remedies with respect to the security.
Consequently, the practical effect of the election requirement, when applicable,
is that lenders will usually proceed first against the security rather than
bringing a personal action against the borrower.

      In some states, exceptions to the anti-deficiency statutes are provided
for in certain instances where the value of the lender's security has been
impaired by acts or omissions of the borrower, for example, upon waste of the
property.

      In addition to anti-deficiency and related legislation, numerous other
federal and state statutory provisions, including the federal bankruptcy laws,
the federal Servicemembers Civil Relief Act and state laws affording relief to
debtors, may interfere with or affect the ability of the secured mortgage lender
to realize on its security. For example, in a proceeding under the federal
Bankruptcy Code, a lender may not foreclose on a Property without the permission
of the bankruptcy court. And in certain instances a bankruptcy court may allow a
borrower to reduce the monthly payments, change the rate of interest, and alter
the mortgage loan repayment schedule for under collateralized mortgage loans.
The effect of these types of proceedings can be to cause delays in receiving
payments on the loans underlying certificates and even to reduce the aggregate
amount of payments on the loans underlying certificates.


                                       85



      The federal tax laws provide priority to certain tax liens over the lien
of a mortgage or secured party. Numerous federal and state consumer protection
laws impose substantive requirements upon mortgage lenders in connection with
the origination, servicing and enforcement of mortgage loans. These laws include
the federal Truth-in-Lending Act, Real Estate Settlement Procedures Act, Equal
Credit Opportunity Act, Fair Credit Billing Act, Fair Credit Reporting Act and
related statutes and regulations. These federal and state laws impose specific
statutory liabilities on lenders who fail to comply with the provisions of the
law. In some cases, this liability may affect assignees of the loans or
contracts.

      Generally, Article 9 of the UCC governs foreclosure on cooperative shares
and the related proprietary lease or occupancy agreement. Some courts have
interpreted section 9-504 of the UCC to prohibit a deficiency award unless the
creditor establishes that the sale of the collateral (which, in the case of a
cooperative loan, would be the shares of the cooperative and the related
proprietary lease or occupancy agreement) was conducted in a commercially
reasonable manner.

ENVIRONMENTAL RISKS

      Real property pledged as security to a lender may be subject to unforeseen
environmental risks. Environmental remedial costs can be substantial and can
potentially exceed the value of the property. Under the laws of certain states,
contamination of a property may give rise to a lien against the property to
assure the payment of the costs of clean-up. In several states that lien has
priority over the lien of an existing mortgage on the property. In addition,
under the federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), the EPA may impose a lien on property where
the EPA has incurred clean-up costs. However, a CERCLA lien is subordinate to
pre-existing, perfected security interests.

      Under the laws of some states, and under CERCLA, it is conceivable that a
secured lender may be held liable as an "owner" or "operator" for the costs of
addressing releases or threatened releases of hazardous substances at a
Property, even though the environmental damage or threat was caused by a prior
or current owner or operator. CERCLA imposes liability for those costs on any
and all "potentially responsible parties," including "owners" or "operators."
However, CERCLA excludes from the definition of "owner or operator" a secured
creditor who holds indicia of ownership primarily to protect its security
interest (the "SECURED CREDITOR EXEMPTION") but without "participating in the
management" of the property. Thus, if a lender's activities encroach on the
actual management of a contaminated facility or property, the lender may incur
liability as an "owner or operator" under CERCLA. Similarly, if a lender
forecloses and takes title to a contaminated facility or property, the lender
may incur CERCLA liability in various circumstances, including, but not limited
to, when it fails to market the property in a timely fashion.

      Whether actions taken by a lender would constitute participation in the
management of a mortgaged property so as to render the secured creditor
exemption unavailable to a lender, was historically a matter of judicial
interpretation of the statutory language. Court decisions were inconsistent and,
in fact, in 1990, the Court of Appeals for the Eleventh Circuit suggested that
the mere capacity of the lender to influence a borrower's decisions regarding
disposal of hazardous substances was sufficient participation in the management
of a borrower's business to deny the protection of the secured creditor
exemption to the lender. In 1996, Congress enacted the Asset Conservation,
Lender Liability and Deposit Insurance Protection Act ("ASSET CONSERVATION
ACT"), which provides that, in order to be deemed to have participated in the
management of a mortgaged property, a lender must actually participate in the
operational affairs of the property. The Asset Conservation Act also provides
that participation in the management of the property does not include merely
having the capacity to influence, or unexercised right to control operations.
Rather, a lender will lose the protection of the secured creditor exemption only
if it (a) exercises decision-making control over the borrower's environmental
compliance and hazardous substance handling and disposal practices at the
property, or (b) exercises control comparable to the manager of the property, so
that the lender has assumed responsibility for (i) "the overall management of
the facility encompassing day-to-day decision-making with respect to
environmental compliance" or (ii) "over all or substantially all of the
operational functions" of the property other than environmental compliance.

      If a lender is or becomes liable, it may be able to bring an action for
contribution under CERCLA or other statutory or common laws against any other
"potentially responsible parties," including a previous owner or operator, who
created the environmental hazard and who has not settled its liability with the
government, but those


                                       86



persons or entities may be bankrupt or otherwise judgment proof. The costs
associated with environmental cleanup may be substantial. It is conceivable that
the costs arising from the circumstances set forth above would result in a loss
to securityholders.

      CERCLA does not apply to petroleum products, and the secured creditor
exemption does not govern liability for cleanup costs under state laws or under
federal laws other than CERCLA, including Subtitle I of the federal Resource
Conservation and Recovery Act ("RCRA"), which regulates underground petroleum
storage tanks (except heating oil tanks). The EPA has adopted a lender liability
rule for underground storage tanks under Subtitle I of RCRA. Under that rule, a
holder of a security interest in an underground storage tank or real property
containing an underground storage tank is not considered an operator of the
underground storage tank as long as petroleum is not added to, stored in or
dispensed from the tank. Moreover, under the Asset Conservation Act, the
protections accorded to lenders under CERCLA are also accorded to holders of
security interests in underground petroleum storage tanks or the properties on
which they are located. A lender will lose the protections accorded to secured
creditors under federal law for petroleum underground storage tanks by
"participating in the management" of the tank or tank system if the lender
either: (a) "exercises decisionmaking control over the operational" aspects of
the tank or tank system; or (b) exercises control comparable to a manager of the
property, so that the lender has assumed responsibility for overall management
of the property including day-to-day decision making with regard to all, or
substantially all, operational aspects. It should be noted, however, that
liability for cleanup of petroleum contamination may be governed by state law,
which may not provide for any specific protection for secured creditors.

      While the "owner" or "operator" of contaminated property may face
liability for investigating and cleaning up the property, regardless of fault,
it may also be required to comply with environmental regulatory requirements,
such as those governing asbestos. In addition, the presence of asbestos, mold,
lead-based paint, lead in drinking water, and/or radon at a real property may
lead to the incurrence of costs for remediation, mitigation or the
implementation of an operations and maintenance plan. Furthermore, the presence
of asbestos, mold, lead-based paint, lead in drinking water, radon and/or
contamination at a property may present a risk that third parties will seek
recovery from "owners" or "operators" of that property for personal injury or
property damage. Environmental regulatory requirements for property "owners" or
"operators," or law that is the basis for claims of personal injury or property
damage, may not have exemptions for secured creditors.

      In general, at the time the loans were originated no environmental
assessment, or a very limited environmental assessment, of the mortgaged
properties was conducted.

DUE-ON-SALE CLAUSES

      Generally, each conventional mortgage loan will contain a due-on-sale
clause which will generally provide that if the mortgagor or obligor sells,
transfers or conveys the Property, the loan may be accelerated by the mortgagee.
In recent years, court decisions and legislative actions have placed substantial
restriction on the right of lenders to enforce these clauses in many states. For
instance, the California Supreme Court in August 1978 held that due-on-sale
clauses were generally unenforceable. However, the Garn-St Germain Depository
Institutions Act of 1982 (the "GARN-ST GERMAIN ACT"), subject to specified
exceptions, preempts state constitutional, statutory and case law prohibiting
the enforcement of due-on-sale clauses. As to loans secured by an owner-occupied
residence, the Garn-St Germain Act sets forth nine specific instances in which a
mortgagee covered by the Garn-St Germain Act may not exercise its rights under a
due-on-sale clause, notwithstanding the fact that a transfer of the property may
have occurred. The inability to enforce a due-on-sale clause may result in
transfer of the related Property to an uncreditworthy person, which could
increase the likelihood of default or may result in a mortgage bearing an
interest rate below the current market rate being assumed by a new home buyer,
which may affect the average life of the mortgage loans and the number of
mortgage loans which may extend to maturity.

PREPAYMENT CHARGES

      Under certain state laws, prepayment charges may not be imposed after a
certain period of time following the origination of mortgage loans with respect
to prepayments on loans secured by liens encumbering owner-occupied residential
properties. Since many of the mortgaged properties will be owner-occupied, it is
anticipated that prepayment charges may not be imposed on many of the mortgage
loans. The absence of this restraint on


                                       87



prepayment, particularly with respect to fixed rate mortgage loans having higher
mortgage rates, may increase the likelihood of refinancing or other early
retirement of the loans or contracts.

APPLICABILITY OF USURY LAWS

      Title V of the depository Institutions Deregulation and Monetary Control
Act of 1980, enacted in March 1980 ("TITLE V"), provides that state usury
limitations shall not apply to certain types of residential first mortgage loans
originated by certain lenders after March 31, 1980. The Office of Thrift
Supervision, as successor to the Federal Home Loan Bank Board, is authorized to
issue rules and regulations and to publish interpretations governing
implementation of Title V. The statute authorized the states to reimpose
interest rate limits by adopting, before April 1, 1983, a law or constitutional
provision that expressly rejects an application of the federal law. In addition,
even where Title V is not so rejected, any state is authorized by the law to
adopt a provision limiting discount points or other charges on mortgage loans
covered by Title V. Certain states have taken action to reimpose interest rate
limits or to limit discount points or other charges, or both.

SERVICEMEMBERS CIVIL RELIEF ACT

      Generally, under the terms of the Servicemembers Civil Relief Act or
similar state and local laws (the "RELIEF ACT"), a borrower who enters military
service after the origination of the borrower's mortgage loan (including a
borrower who is a member of the National Guard or is in reserve status at the
time of the origination of the mortgage loan and is later called to active duty)
may not be charged interest above an annual rate of 6% during the period of the
borrower's active duty status, unless a court orders otherwise upon application
of the lender. It is possible that this interest rate limitation could have an
effect, for an indeterminate period of time, on the ability of the servicer to
collect full amounts of interest on some of the mortgage loans. Unless the
applicable prospectus supplement provides a special feature for a particular
issuing entity, any shortfall in interest collections resulting from the
application of the Relief Act could result in losses to the holders of the
securities. In addition, the Relief Act imposes limitations which would impair
the ability of the servicer to foreclose on an affected mortgage loan during the
borrower's period of active duty status. Thus, if an affected mortgage loan goes
into default, there may be delays and losses occasioned by the inability to
realize upon the Property in a timely fashion.

                    MATERIAL FEDERAL INCOME TAX CONSEQUENCES

      The following discussion is the opinion of Sidley Austin LLP, Heller
Ehrman LLP, Mayer, Brown, Rowe & Maw LLP or Thacher Proffitt & Wood LLP, counsel
to the depositor, as to the material federal income tax consequences of the
purchase, ownership, and disposition of securities. The opinion of the
applicable law firm is based on laws, regulations, administrative rulings, and
judicial decisions now in effect, all of which are subject to change either
prospectively or retroactively. The following discussion does not describe
aspects of federal tax law that are unique to insurance companies, securities
dealers and investors who hold securities as part of a straddle within the
meaning of Section 1092 of the Code. Prospective investors are encouraged to
consult their tax advisors regarding the federal, state, local, and any other
tax consequences to them of the purchase, ownership, and disposition of
securities.

GENERAL

      The federal income tax consequences to Holders will vary depending on
whether

o     the securities of a series are classified as indebtedness;

o     an election is made to treat the issuing entity relating to a particular
      series of securities as a real estate mortgage investment conduit
      ("REMIC") under the Code;

o     the securities represent an ownership interest in some or all of the
      assets included in the issuing entity for a series; or

o     an election is made to treat the issuing entity relating to a particular
      series of certificates as a partnership.


                                       88



      The prospectus supplement for each series of securities will specify how
the securities will be treated for federal income tax purposes and will discuss
whether a REMIC election, if any, will be made with respect to the series. The
depositor will file with the SEC a Form 8-K on behalf of the related issuing
entity containing an opinion of Tax Counsel with respect to the validity of the
information set forth under "Material Federal Income Tax Consequences" herein
and in the related prospectus supplement.

      Debt Securities. For purposes of the discussion that follows, securities
characterized as debt for federal income tax purposes and securities
representing REMIC regular interests ("REGULAR INTEREST SECURITIES") will be
referred to hereinafter collectively as "DEBT SECURITIES."

TAXATION OF DEBT SECURITIES

      Original Issue Discount and Premium. The Debt Securities may be issued
with OID. Generally, OID, if any, will equal the difference between the "stated
redemption price at maturity" of a Debt Security and its "issue price." Holders
of any class of securities issued with OID will be required to include OID in
gross income for federal income tax purposes as it accrues, in accordance with a
constant interest method based on the compounding of interest as it accrues
rather than in accordance with receipt of the interest payments. Holders of Debt
Securities (the "DEBT SECURITYHOLDERS") should be aware, however, that the OID
Regulations do not adequately address certain issues relevant to prepayable
securities, such as the Debt Securities.

      Rules governing OID are set forth in Code Sections 1271 through 1273 and
1275. These rules require that the amount and rate of accrual of OID be
calculated based on the Prepayment Assumption and the anticipated reinvestment
rate, if any, relating to the Debt Securities and prescribe a method for
adjusting the amount and rate of accrual of the discount where the actual
prepayment rate differs from the Prepayment Assumption. Under the Code, the
Prepayment Assumption must be determined in the manner prescribed by
regulations, which regulations have not yet been issued. The Legislative History
provides, however, that Congress intended the regulations to require that the
Prepayment Assumption be the prepayment assumption that is used in determining
the initial offering price of the Debt Securities. The prospectus supplement for
each series of Debt Securities will specify the Prepayment Assumption to be used
for the purpose of determining the amount and rate of accrual of OID. No
representation is made that the Debt Securities will prepay at the Prepayment
Assumption or at any other rate.

      Regulations governing the calculation of OID on instruments having
contingent interest payments (the "CONTINGENT REGULATIONS") specifically do not
apply for purposes of calculating OID on debt instruments subject to Code
Section 1272(a)(6), such as the Debt Securities. Additionally, the OID
Regulations do not contain provisions specifically interpreting Code Section
1272(a)(6). The trustee intends to base its computations on Code Section
1272(a)(6) and the OID Regulations as described in this prospectus. However,
because no regulatory guidance currently exists under Code Section 1272(a)(6),
we can give no assurance that this methodology represents the correct manner of
calculating OID.

      In general, each Debt Security will be treated as a single installment
obligation issued with an amount of OID equal to the excess of its "stated
redemption price at maturity" over its issue price. The issue price of a Debt
Security is the first price at which a substantial amount of Debt Securities of
that class are first sold to the public (excluding bond houses, brokers,
underwriters or wholesalers). The issue price of a Debt Security also includes
the amount paid by an initial securityholder for accrued interest that relates
to a period before the issue date of the Debt Security. The stated redemption
price at maturity of a Debt Security includes the original principal amount of
the Debt Security, but generally will not include distributions of interest that
constitute "qualified stated interest." Qualified stated interest generally
means interest unconditionally payable at intervals of one year or less at a
single fixed rate or qualified variable rate (as described below) during the
entire term of the Debt Security. Interest is payable at a single fixed rate
only if the rate appropriately takes into account the length of the interval
between payments. Distributions of interest on Debt Securities with respect to
which Deferred Interest will accrue will not constitute qualified stated
interest payments, and the stated redemption price at maturity of the Debt
Securities includes all distributions of interest as well as principal thereon.

      Where the interval between the issue date and the first distribution date
on a Debt Security is longer than the interval between subsequent distribution
dates, the greater of any original issue discount disregarding the rate in the
first period and any interest foregone during the first period is treated as the
amount by which the stated redemption price of the security exceeds its issue
price for purposes of the de minimis rule described below. The


                                       89



OID Regulations suggest that all or a portion of the interest on a long first
period Debt Security that is issued with non-de minimis OID will be treated as
OID. Where the interval between the issue date and the first distribution date
on a Debt Security is shorter than the interval between subsequent distribution
dates, interest due on the first distribution date in excess of the amount that
accrued during the first period would be added to the securities' stated
redemption price at maturity. Holders of Debt Securities should consult their
own tax advisors to determine the issue price and stated redemption price at
maturity of a Debt Security. Additionally, it is possible that the IRS could
assert that the stated pass-through rate of interest on the Debt Securities is
not unconditionally payable because late payments or nonpayments on the mortgage
loans are not penalized nor are there reasonable remedies in place to compel
payment on the mortgage loans. That position, if successful, would require all
holders of Debt Securities to accrue income on the securities under the OID
Regulations.

      Under the de minimis rule, OID on a Debt Security will be considered to be
zero if it is less than 0.25% of the stated redemption price at maturity of the
Debt Security multiplied by the weighted average maturity of the Debt Security.
For this purpose, the weighted average maturity of the Debt Security is computed
as the sum of the amounts determined by multiplying the number of full years
(i.e., rounding down partial years) from the issue date until each distribution
in reduction of stated redemption price at maturity is scheduled to be made by a
fraction, the numerator of which is the amount of each distribution included in
the stated redemption price at maturity of the Debt Security and the denominator
of which is the stated redemption price at maturity of the Debt Security.
Although currently unclear, it appears that the schedule of these distributions
should be determined in accordance with the Prepayment Assumption. The
Prepayment Assumption with respect to a series of Debt Security will be set
forth in the related prospectus supplement. Holders generally must report de
minimis OID pro rata as principal payments are received, and income will be
capital gain if the Debt Security is held as a capital asset. However, accrual
method holders may elect to accrue all de minimis OID as well as market discount
under a constant interest method.

      The prospectus supplement with respect to an issuing entity may provide
for certain Debt Securities to be issued at prices significantly exceeding their
principal amounts or based on notional principal balances (the "SUPER-PREMIUM
SECURITIES"). The income tax treatment of Super-Premium Securities is not
entirely certain. For information reporting purposes, the issuing entity intends
to take the position that the stated redemption price at maturity of
Super-Premium Securities is the sum of all payments to be made on these Debt
Securities determined under the Prepayment Assumption, with the result that
these Debt Securities would be issued with OID. The calculation of income in
this manner could result in negative original issue discount (which delays
future accruals of OID rather than being immediately deductible) when
prepayments on the mortgage loans exceed those estimated under the Prepayment
Assumption. As discussed above, the Contingent Regulations specifically do not
apply to prepayable debt instruments subject to Code Section 1272(a)(6), such as
the Debt Securities. However, if the Super-Premium Securities were treated as
contingent payment obligations, it is unclear how holders of those securities
would report income or recover their basis. In the alternative, the IRS could
assert that the stated redemption price at maturity of Super-Premium Securities
should be limited to their principal amount (subject to the discussion under
"--Accrued Interest Securities"), so that the Debt Securities would be
considered for federal income tax purposes to be issued at a premium. If this
position were to prevail, the rules described under "--Debt Securities
--Premium" would apply. It is unclear when a loss may be claimed for any
unrecovered basis for a Super-Premium Security. It is possible that a holder of
a Super-Premium Security may only claim a loss when its remaining basis exceeds
the maximum amount of future payments, assuming no further prepayments or when
the final payment is received with respect to the Super-Premium Security. Absent
further guidance, the trustee intends to treat the Super-Premium Securities as
described in this prospectus.

      Under the REMIC Regulations, if the issue price of a Regular Interest
Security (other than those based on a notional amount) does not exceed 125% of
its actual principal amount, the interest rate is not considered
disproportionately high. Accordingly, such a Debt Security generally should not
be treated as a Super-Premium Security and the rules described under "--Debt
Securities--Premium" should apply. However, it is possible that Regular Interest
Securities issued at a premium, even if the premium is less than 25% of the
security's actual principal balance, will be required to amortize the premium
under an original issue discount method or contingent interest method even
though no election under section 171 of the Code is made to amortize the
premium.

      Generally, a Debt Securityholder must include in gross income the "daily
portions," as determined below, of the OID that accrues on a Debt Security for
each day a securityholder holds the Debt Security, including the purchase date
but excluding the disposition date. The daily portions of OID are determined by
allocating to each day


                                       90



in an accrual period the ratable portion of OID allocable to the accrual period.
Accrual periods may be of any length and may vary in length over the term of the
Debt Securities, provided that each accrual period is not longer than one year,
begins or ends on a distribution date (except for the first accrual period which
begins on the issue date) and begins on the day after the preceding accrual
period ends. This will be done, in the case of each full accrual period, by

      o           adding

          o   The present value at the end of the accrual period (determined by
              using as a discount factor the original yield to maturity of the
              Debt Securities as calculated under the Prepayment Assumption) of
              all remaining payments to be received on the Debt Securities under
              the Prepayment Assumption and

          o   any payments included in the stated redemption price at maturity
              received during the same accrual period, and

      o           subtracting from that total the adjusted issue price of the
          Debt Securities at the beginning of the same accrual period.

The adjusted issue price of a Debt Security at the beginning of the first
accrual period is its issue price; the adjusted issue price of a Debt Security
at the beginning of a subsequent accrual period is the adjusted issue price at
the beginning of the immediately preceding accrual period plus the amount of OID
allocable to that accrual period and reduced by the amount of any payment other
than a payment of qualified stated interest made at the end of or during that
accrual period. The OID accrued during an accrual period will then be divided by
the number of days in the period to determine the daily portion of OID for each
day in the accrual period. The calculation of OID under the method described
above will cause the accrual of OID to either increase or decrease (but never
below zero) in a given accrual period to reflect the fact that prepayments are
occurring faster or slower than under the Prepayment Assumption. With respect to
an initial accrual period shorter than a full accrual period, the daily portions
of OID may be determined according to an appropriate allocation under any
reasonable method.

      A subsequent purchaser of a Debt Security issued with OID who purchases
the Debt Security at a cost less than the remaining stated redemption price at
maturity will also be required to include in gross income the sum of the daily
portions of OID on that Debt Security. In computing the daily portions of OID
for a subsequent purchaser of a Debt Security (as well as an initial purchaser
that purchases at a price higher than the adjusted issue price but less than the
stated redemption price at maturity), however, the daily portion is reduced by
the amount that would be the daily portion for the day (computed in accordance
with the rules set forth above) multiplied by a fraction, the numerator of which
is the amount, if any, by which the price paid by the holder for that Debt
Security exceeds the following amount:

      o           the sum of the issue price plus the aggregate amount of OID
          that would have been includible in the gross income of an original
          Debt Securityholder (who purchased the Debt Security at its issue
          price), less

      o           any prior payments included in the stated redemption price at
          maturity, and the denominator of which is the sum of the daily
          portions for that Debt Security for all days beginning on the date
          after the purchase date and ending on the maturity date computed under
          the Prepayment Assumption.

A holder who pays an acquisition premium instead may elect to accrue OID by
treating the purchase as a purchase at original issue.

      Variable Rate Debt Securities. Debt Securities may provide for interest
based on a variable rate. Interest is treated as payable at a variable rate and
not as contingent interest if, generally, the issue price does not exceed the
original principal balance by more than a specified amount and the interest
compounds or is payable at least annually at current values of certain objective
rates matured by or based on lending rates for newly borrowed funds. An
objective rate is a rate (other than a qualified floating rate) that is
determined using a single fixed formula and that is based on objective financial
or economic information. The variable interest generally will be qualified
stated


                                       91



interest to the extent it is unconditionally payable at least annually and, to
the extent successive variable rates are used, interest is not significantly
accelerated or deferred.

      The amount of OID with respect to a Debt Security bearing a variable rate
of interest will accrue in the manner described under "--Original Issue Discount
and Premium" by assuming generally that the index used for the variable rate
will remain fixed throughout the term of the security. Appropriate adjustments
are made for the actual variable rate.

      Although unclear at present, the depositor intends to treat Debt
Securities bearing an interest rate that is a weighted average of the net
interest rates on mortgage loans as variable rate securities. In such case, the
weighted average rate used to compute the initial pass-through rate on the Debt
Securities will be deemed to be the index in effect through the life of the Debt
Securities. It is possible, however, that the IRS may treat some or all of the
interest on Debt Securities with a weighted average rate as taxable under the
rules relating to obligations providing for contingent payments. This treatment
may effect the timing of income accruals on the Debt Securities. Additionally,
if some or all of the mortgage loans are subject to "teaser rates" (i.e., the
initial rates on the mortgage loans are less than subsequent rates on the
mortgage loans) the interest paid on some or all of the Debt Securities may be
subject to accrual using a constant yield method notwithstanding the fact that
these securities may not have been issued with "true" non-de minimis original
issue discount.

      Election to Treat All Interest as OID. The OID Regulations permit a
securityholder to elect to accrue all interest, discount (including de minimis
market or original issue discount) and premium in income as interest, based on a
constant yield method for securities. If such an election were to be made with
respect to a Debt Security with market discount, a securityholder would be
deemed to have made an election to include in income currently market discount
with respect to all other debt instruments having market discount that the
securityholder acquires during the year of the election or thereafter.
Similarly, a securityholder that makes this election for a security that is
acquired at a premium will be deemed to have made an election to amortize bond
premium with respect to all debt instruments having amortizable bond premium
that the securityholder owns or acquires. See "--Debt Securities --Premium." The
election to accrue interest, discount and premium on a constant yield method
with respect to a security cannot be revoked without the consent of the IRS.

      Market Discount. A purchaser of a Debt Security may also be subject to the
market discount provisions of sections 1276 through 1278 of the Code. Under
these provisions and the OID Regulations, "MARKET DISCOUNT" equals the excess,
if any, of a Debt Security's stated principal amount or, in the case of a Debt
Security with OID, the adjusted issue price (determined for this purpose as if
the purchaser had purchased the Debt Security from an original holder) over the
price for the Debt Security paid by the purchaser. A securityholder that
purchases a Debt Security at a market discount will recognize income upon
receipt of each distribution representing stated redemption price. In
particular, under section 1276 of the Code a holder generally will be required
to allocate each principal distribution first to accrued market discount not
previously included in income, and to recognize ordinary income to that extent.
A securityholder may elect to include market discount in income currently as it
accrues rather than including it on a deferred basis in accordance with the
foregoing. If made, the election will apply to all market discount bonds
acquired by the electing securityholder on or after the first day of the first
taxable year to which the election applies.

      Market discount with respect to a Debt Security will be considered to be
zero if the amount allocable to the Debt Security is less than 0.25% of the Debt
Security's stated redemption price at maturity multiplied by the Debt Security's
weighted average maturity remaining after the date of purchase. If market
discount on a Debt Security is considered to be zero under this rule, the actual
amount of market discount must be allocated to the remaining principal payments
on the Debt Security, and gain equal to the allocated amount will be recognized
when the corresponding principal payment is made. Treasury regulations
implementing the market discount rules have not yet been issued; therefore,
investors should consult their own tax advisors regarding the application of
these rules and the advisability of making any of the elections allowed under
sections 1276 through 1278 of the Code.

      The Code provides that any principal payment (whether a scheduled payment
or a prepayment) or any gain on disposition of a market discount bond acquired
by the taxpayer after October 22, 1986, shall be treated as ordinary income to
the extent that it does not exceed the accrued market discount at the time of
the payment. The amount of accrued market discount for purposes of determining
the tax treatment of subsequent principal payments or dispositions of the market
discount bond is to be reduced by the amount so treated as ordinary income.


                                       92



      The Code also grants authority to the Treasury Department to issue
regulations providing for the computation of accrued market discount on debt
instruments, the principal of which is payable in more than one installment.
Until regulations are issued by the Treasury, rules described in the Legislative
History will apply. Under those rules, the holder of a market discount bond may
elect to accrue market discount either on the basis of a constant interest rate
or according to one of the following methods. For Debt Securities issued with
OID, the amount of market discount that accrues during a period is equal to the
product of the total remaining market discount and a fraction, the numerator of
which is the OID accruing during the period and the denominator of which is the
total remaining OID at the beginning of the period. For Debt Securities issued
without OID, the amount of market discount that accrues during a period is equal
to the product of the total remaining market discount and a fraction, the
numerator of which is the amount of stated interest paid during the accrual
period and the denominator of which is the total amount of stated interest
remaining to be paid at the beginning of the period. For purposes of calculating
market discount under any of the above methods in the case of instruments (such
as the Debt Securities) that provide for payments that may be accelerated due to
prepayments of other obligations securing the instruments, the same Prepayment
Assumption applicable to calculating the accrual of OID will apply.

      A holder of a Debt Security that acquires the Debt Security at a market
discount also may be required to defer, until the maturity date of the Debt
Security or its earlier disposition in a taxable transaction, the deduction of a
portion of the amount of interest that the holder paid or accrued during the
taxable year on indebtedness incurred or maintained to purchase or carry the
Debt Security in excess of the aggregate amount of interest (including OID)
includible in the holder's gross income for the taxable year with respect to the
Debt Security. The amount of the net interest expense deferred in a taxable year
may not exceed the amount of market discount accrued on the Debt Security for
the days during the taxable year on which the holder held the Debt Security and,
in general, would be deductible when the market discount is includible in
income. The amount of any remaining deferred deduction is to be taken into
account in the taxable year in which the Regular Security matures or is disposed
of in a taxable transaction. In the case of a disposition in which gain or loss
is not recognized in whole or in part, any remaining deferred deduction will be
allowed to the extent of gain recognized on the disposition. This deferral rule
does not apply if the Debt Security holder elects to include the market discount
in income currently as it accrues on all market discount obligations acquired by
the Debt Security holder in that taxable year or thereafter.

      Premium. A purchaser of a Debt Security that purchases the Debt Security
at a cost (not including accrued qualified stated interest) greater than its
remaining stated redemption price at maturity will be considered to have
purchased the Debt Security at a premium and may elect to amortize the premium
under a constant yield method. It is not clear whether the Prepayment Assumption
would be taken into account in determining the life of the Debt Security for
this purpose. The trustee intends to account for amortizable bond premium in the
manner described in this prospectus. However, the Legislative History states
that the same rules that apply to accrual of market discount (which rules
require use of a Prepayment Assumption in accruing market discount with respect
to Debt Securities without regard to whether the securities have OID) will also
apply in amortizing bond premium. The Code provides that amortizable bond
premium will be allocated among the interest payments on the Debt Securities and
will be applied as an offset against the interest payment. Prospective
purchasers of the Debt Securities should consult their tax advisors regarding
the possible application of the Amortizable Bond Premium Regulations.

      Deferred Interest. Certain classes of Debt Securities will provide for the
accrual of Deferred Interest with respect to one or more ARM Loans. Any Deferred
Interest that accrues with respect to a class of Debt Securities will constitute
income to the holders of the securities before the time distributions of cash
with respect to the Deferred Interest are made. It is unclear, under the OID
Regulations, whether any of the interest on the securities will constitute
qualified stated interest or whether all or a portion of the interest payable on
the securities must be included in the stated redemption price at maturity of
the securities and accounted for as OID (which could accelerate the inclusion).
Interest on Debt Securities must in any event be accounted for under an accrual
method by the holders of the securities and, therefore, applying the latter
analysis may result only in a slight difference in the timing of the inclusion
in income of interest on the Debt Securities.

      Effects of Defaults and Delinquencies. Certain series of securities may
contain one or more classes of subordinated securities, and in the event there
are defaults or delinquencies on the mortgage loans, amounts that would
otherwise be distributed on the subordinated securities may instead be
distributed on the senior securities. Subordinated securityholders nevertheless
will be required to report income with respect to their securities under an
accrual method without giving effect to delays and reductions in distributions
on the subordinated securities


                                       93



attributable to defaults and delinquencies on the mortgage loans, except to the
extent that it can be established that the amounts are uncollectible. As a
result, the amount of income reported by a subordinated securityholder in any
period could significantly exceed the amount of cash distributed to the holder
in that period. The holder will eventually be allowed a loss (or will be allowed
to report a lesser amount of income) to the extent that the aggregate amount of
distributions on the subordinated security is reduced as a result of defaults
and delinquencies on the mortgage loans. However, the timing and
characterization of any losses or reductions in income are uncertain, and,
accordingly, subordinated securityholders are urged to consult their own tax
advisors on this point.

      Sale, Exchange or Redemption. If a Debt Security is sold, exchanged,
redeemed or retired, the seller will recognize gain or loss equal to the
difference between the amount realized on the sale, exchange, redemption, or
retirement and the seller's adjusted basis in the Debt Security. The adjusted
basis generally will equal the cost of the Debt Security to the seller,
increased by any OID and market discount included in the seller's gross income
with respect to the Debt Security, and reduced (but not below zero) by payments
included in the stated redemption price at maturity previously received by the
seller and by any amortized premium. Similarly, a holder who receives a payment
that is part of the stated redemption price at maturity of a Debt Security will
recognize gain equal to the excess, if any, of the amount of the payment over
the holder's adjusted basis in the Debt Security. A Debt Securityholder who
receives a final payment that is less than the holder's adjusted basis in the
Debt Security will generally recognize a loss. Any gain or loss will be capital
gain or loss, provided that the Debt Security is held as a "capital asset"
(generally, property held for investment) within the meaning of section 1221 of
the Code. Gain from the sale or other disposition of a Debt Security that might
otherwise be capital gain will be treated as ordinary income (a) to the extent
the gain constitutes market discount and (b) in the case of Regular Interest
Securities, to the extent that the gain does not exceed the excess, if any, of
the amount that would have been includible in the holder s income with respect
to the Debt Security had income accrued on it at a rate equal to 110% of the AFR
as defined in section 1274(d) of the Code determined as of the date of purchase
of the Regular Interest Security, over the amount actually includible in the
holder's income. In addition, the Debt Securities will be "evidences of
indebtedness" within the meaning of section 582(c)(1) of the Code, so that gain
or loss recognized from the sale of a Debt Security by a bank or a thrift
institution to which this section applies will be ordinary income or loss.

      The Debt Security information reports will include a statement of the
adjusted issue price of the Debt Security at the beginning of each accrual
period. In addition, the reports will include information necessary to compute
the accrual of any market discount that may arise upon secondary trading of Debt
Securities. Because exact computation of the accrual of market discount on a
constant yield method would require information relating to the holder's
purchase price which the REMIC may not have, it appears that the information
reports will only require information pertaining to the appropriate
proportionate method of accruing market discount.

      Accrued Interest Securities. Certain of the Debt Securities ("PAYMENT LAG
SECURITIES") may provide for payments of interest based on a period that
corresponds to the interval between distribution dates but that ends before each
distribution date. The period between the Closing Date for Payment Lag
Securities and their first distribution date may or may not exceed that
interval. Purchasers of Payment Lag Securities for which the period between the
Closing Date and the first distribution date does not exceed that interval could
pay upon purchase of the Debt Securities accrued interest in excess of the
accrued interest that would be paid if the interest paid on the distribution
date were interest accrued from distribution date to distribution date. If a
portion of the initial purchase price of a Debt Security is allocable to
interest that has accrued before the issue date ("PRE-ISSUANCE ACCRUED
INTEREST") and the Debt Security provides for a payment of stated interest on
the first payment date (and the first payment date is within one year of the
issue date) that equals or exceeds the amount of the pre-issuance accrued
interest, then the Regular v issue price may be computed by subtracting from the
issue price the amount of pre-issuance accrued interest, rather than as an
amount payable on the Debt Security. However, it is unclear under this method
how the OID Regulations treat interest on Payment Lag Securities. Therefore, in
the case of a Payment Lag Security, the issuing entity intends to include
accrued interest in the issue price and report interest payments made on the
first distribution date as interest to the extent the payments represent
interest for the number of days that the securityholder has held the Payment Lag
Security during the first accrual period.

      Investors are encouraged to consult their own tax advisors concerning the
treatment for federal income tax purposes of Payment Lag Securities.

      Treatment of Realized Losses. Although not entirely clear, it appears that
holders of Regular Securities that are corporations should in general be allowed
to deduct as an ordinary loss any loss sustained during the taxable year


                                       94



on account of the securities becoming wholly or partially worthless, and that,
in general, holders of securities that are not corporations should be allowed to
deduct as a short-term capital loss any loss sustained during the taxable year
on account of the securities becoming wholly worthless. Although the matter is
unclear, non-corporate holders of securities may be allowed a bad debt deduction
at the time that the principal balance of a certificate is reduced to reflect
realized losses resulting from any liquidated mortgage loans. The Internal
Revenue Service, however, could take the position that non-corporate holders
will be allowed a bad debt deduction to reflect realized losses only after all
mortgage loans remaining in the related issuing entity have been liquidated or
the securities of the related series have been otherwise retired. Potential
investors and Holders of the securities are urged to consult their own tax
advisors regarding the appropriate timing, amount and character of any loss
sustained with respect to their securities, including any loss resulting from
the failure to recover previously accrued interest or discount income.

      Subsequent Recoveries. The Class Security Balance of securities that have
been reduced because of allocations of Realized Losses may also be increased as
a result of Subsequent Recoveries. See the discussion under the caption "The
Agreements--Realization Upon Defaulted Mortgage Loans--Application of
Liquidation Proceeds." An increase in a principal balance caused by a Subsequent
Recovery should be treated by the securityholder as ordinary (or capital) income
to the extent that the securityholder claimed an ordinary (or capital) deduction
for any decrease in the principal balance caused by Realized Losses. Potential
investors and Holders of the securities are urged to consult their own tax
advisors regarding the appropriate timing, amount and character of any income
realized with respect to their securities as a result of Subsequent Recoveries.
"SUBSEQUENT RECOVERIES" are unexpected recoveries, net of reimbursable expenses,
with respect to a Liquidated Mortgage Loan that resulted in a Realized Loss
prior to the receipt of such recoveries.

      Non-U.S. Persons. A non-U.S. Person who is an individual or corporation
(or an entity treated as a corporation for federal income tax purposes) holding
the securities on its own behalf other than in connection with a United States
trade or business carried on by such non-U.S. Person will not be subject to
United States federal income taxes on payments of principal, premium, interest
or original issue discount on a debt security, unless such non-U.S. Person is a
direct or indirect 10% or greater shareholder of the issuing entity in a
particular transaction, a controlled foreign corporation related to the issuing
entity in a particular transaction or a bank receiving interest described in
section 881(c)(3)(A) of the Code. To qualify for the exemption from taxation,
the non-U.S. Person must follow the certification requirements set forth in the
section identified as "Material Federal Income Tax Consequences--Status as a
Grantor Trust--d. Non-U.S. Persons. "

      Backup Withholding. Backup withholding of United States federal income tax
may apply to payments made in respect of the securities to registered owners who
are not "exempt recipients" and who fail to provide certain identifying
information (such as the registered owner's taxpayer identification number) in
the required manner. To qualify for the exemption from taxation, the non-U.S.
Person must follow the certification requirements set forth in the section
identified as "Material Federal Income Tax Consequences--Status as a Grantor
Trust--d. Non-U.S. Persons."

      In addition, upon the sale of a security to (or through) a broker, the
broker must report the sale and withhold on the entire purchase price, unless
either (a) the broker determines that the seller is a corporation or other
exempt recipient or (b) the seller certifies that such seller is a non-U.S.
Person (and certain other conditions are met).

      Certification of the registered owner's non-U.S. status would be made
normally on an IRS Form W-8BEN under penalties of perjury, although in certain
cases it may be possible to submit other documentary evidence.

      Any amounts withheld under the backup withholding rules from a payment to
a beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States federal income tax provided the required
information is furnished to the IRS.

      Prospective investors are strongly urged to consult their own tax advisors
with respect to the Withholding Regulations.

REMIC SECURITIES

      The issuing entity relating to a series of securities may elect to be
treated as one or more REMICs. Qualification as a REMIC requires ongoing
compliance with certain conditions. Although a REMIC is not generally


                                       95



subject to federal income tax (see, however "--Residual Certificates" and
"--Prohibited Transactions"), if an issuing entity with respect to which a REMIC
election is made fails to comply with one or more of the ongoing requirements of
the Code for REMIC status during any taxable year, including the implementation
of restrictions on the purchase and transfer of the residual interests in a
REMIC as described under "Residual Certificates," the Code provides that an
issuing entity will not be treated as a REMIC for that year and thereafter. In
that event, the entity may be taxable as a separate corporation, and the related
securities (the "REMIC SECURITIES") may not be accorded the status or given the
tax treatment described below. While the Code authorizes the Treasury Department
to issue regulations providing relief upon an inadvertent termination of the
status of an issuing entity as a REMIC, no such regulations have been issued.
Any relief, moreover, may be accompanied by sanctions, such as the imposition of
a corporate tax on all or a portion of the REMIC's income for the period in
which the requirements for REMIC status are not satisfied. Assuming compliance
with all provisions of the related pooling and servicing agreement or trust
agreement, as applicable, each issuing entity that elects REMIC status will
qualify as a REMIC, and the related securities will be considered to be regular
interests ("REGULAR SECURITIES") or residual interests ("RESIDUAL CERTIFICATES")
in the REMIC. The related prospectus supplement for each series of securities
will indicate whether the issuing entity will make one or more REMIC elections
and whether a class of securities will be treated as a regular or residual
interest in the REMIC. With respect to each issuing entity for which a REMIC
election is to be made, tax counsel will issue an opinion confirming the
conclusions expressed above concerning the status of the issuing entity as a
REMIC and the status of the securities as representing regular or residual
interests in a REMIC.

      In general, with respect to each series of securities for which a REMIC
election is made, securities held by a thrift institution taxed as a "domestic
building and loan association" will constitute assets described in Code Section
7701(a)(19)(C); securities held by a real estate investment trust will
constitute "real estate assets" within the meaning of Code Section 856(c)(4)(A);
and interest on securities held by a real estate investment trust will be
considered "interest on obligations secured by mortgages on real property"
within the meaning of Code Section 856(c)(3)(B). If less than 95% of the REMIC's
assets are assets qualifying under any of these Code sections, the securities
will be qualifying assets only to the extent that the REMIC's assets are
qualifying assets. In addition, payments on mortgage loans held pending
distribution on the REMIC Securities will be considered to be real estate assets
for purposes of Code Section 856(c).

      In some instances the mortgage loans may not be treated entirely as assets
described in the foregoing sections. See, in this regard, the discussion of buy
down loans contained in "--Non-REMIC Securities--Single Class of Securities."
REMIC Securities held by a real estate investment trust will not constitute
"Government Securities" within the meaning of Code Section 856(c)(4)(A), and
REMIC Securities held by a regulated investment company will not constitute
"Government Securities" within the meaning of Code Section 851(b)(4)(A)(ii).
REMIC Securities held by certain financial institutions will constitute
"evidences of indebtedness" within the meaning of Code Section 582(c)(1).

      A "qualified mortgage" for REMIC purposes is any obligation (including
certificates of participation in an obligation) that is principally secured by
an interest in real property and that is transferred to the REMIC within a
prescribed time period in exchange for regular or residual interests in the
REMIC. The REMIC Regulations provide that manufactured housing or mobile homes
(not including recreational vehicles, campers or similar vehicles) that are
"single family residences" under Code Section 25(e)(10) will qualify as real
property without regard to state law classifications.

      Tiered REMIC Structures. For certain series of securities, two or more
separate elections may be made to treat designated portions of the related
issuing entity as separate REMICs (respectively, the "SUBSIDIARY REMIC" or
"REMICS" and the "MASTER REMIC") for federal income tax purposes. Upon the
issuance of such a series of securities, assuming compliance with all provisions
of the related agreement, the Master REMIC as well as each Subsidiary REMIC will
each qualify as a REMIC, and the REMIC Securities issued by the Master REMIC and
each Subsidiary REMIC, respectively, will be considered to evidence ownership of
Regular Securities or Residual Certificates in the related REMIC within the
meaning of the REMIC provisions. With respect to each issuing entity for which
more than one REMIC election is to be made, Sidley Austin LLP will issue an
opinion confirming the conclusions expressed above concerning the status of the
Master REMIC and each Subsidiary REMIC as a REMIC and the status of the
securities as regular or residual interests in a REMIC.

      To the extent more than one REMIC election is made with respect to
portions of an issuing entity, only the REMIC Securities issued by the Master
REMIC will be offered under this prospectus. Solely for purposes of


                                       96



determining whether the REMIC Securities issued by an issuing entity will be
"real estate assets" within the meaning of Code Section 856(c)(4)(A); whether
the REMIC Securities will be "loans secured by an interest in real property"
under Code Section 7701(a)(19)(C); and whether the income on the securities is
interest described in Code Section 856(c)(3)(B), all related Subsidiary REMICs
and the Master REMIC will be treated as one REMIC.

  A.  REGULAR SECURITIES

      General. Except as otherwise stated in this discussion, Regular Securities
will be treated for federal income tax purposes as debt instruments issued by
the REMIC and not as ownership interests in the REMIC or its assets. Holders of
Regular Securities that otherwise report income under a cash method of
accounting will be required to report income with respect to Regular Interest
Securities under an accrual method. For a general discussion of the tax
consequences of investing in Regular Interest Securities, see the discussion
above under "Taxation of Debt Securities."

      Non-Interest Expenses of the REMIC. Under the temporary Treasury
regulations, if the REMIC is considered to be a "single-class REMIC," a portion
of the REMIC's servicing, administrative and other non-interest expenses will be
allocated as a separate item to those Regular Securityholders that are
"pass-through interest holders." securityholders that are pass-through interest
holders should consult their own tax advisors about the impact of these rules on
an investment in the Regular Securities. See "Pass-Through of Non-Interest
Expenses of the REMIC under Residual Certificates."

  B.  RESIDUAL CERTIFICATES

      Allocation of the Income of the REMIC to the Residual Certificates. The
REMIC will not be subject to federal income tax except with respect to income
from prohibited transactions and certain other transactions. See "--Prohibited
Transactions and Other Taxes." Instead, each original holder of a Residual
Certificate will report on its federal income tax return, as ordinary income,
its share of the taxable income of the REMIC for each day during the taxable
year on which it owns any Residual Certificates. The taxable income of the REMIC
for each day will be determined by allocating the taxable income of the REMIC
for each calendar quarter ratably to each day in the quarter. An original
holder's share of the taxable income of the REMIC for each day will be based on
the portion of the outstanding Residual Certificates that the holder owns on
that day. The taxable income of the REMIC will be determined under an accrual
method and will be taxable to the holders of Residual Certificates without
regard to the timing or amounts of cash distributions by the REMIC. Ordinary
income derived from Residual Certificates will be "portfolio income" for
purposes of the taxation of taxpayers subject to the limitations on the
deductibility of "passive losses." As residual interests, the Residual
Certificates will be subject to tax rules, described below, that differ from
those that would apply if the Residual Certificates were treated for federal
income tax purposes as direct ownership interests in the securities or as debt
instruments issued by the REMIC.

      A Residual Certificateholder may be required to include taxable income
from the Residual Certificate in excess of the cash distributed. For example, a
structure where principal distributions are made serially on regular interests
(that is, a fast-pay, slow-pay structure) may generate that sort of mismatching
of income and cash distributions (that is, "PHANTOM INCOME"). This mismatching
may be caused by the use of certain required tax accounting methods by the
REMIC, variations in the prepayment rate of the underlying mortgage loans and
certain other factors. Depending upon the structure of a particular transaction,
the aforementioned factors may significantly reduce the after-tax yield of a
Residual Certificate to a Residual Certificateholder. Investors should consult
their own tax advisors concerning the federal income tax treatment of a Residual
Certificate and the impact of the tax treatment on the after-tax yield of a
Residual Certificate.

      Taxable Income of the REMIC Attributable to Residual Interests. The
taxable income of the REMIC will reflect a netting of the income from the
mortgage loans and the REMIC's other assets and the deductions allowed to the
REMIC for interest and OID on the Regular Securities and, except as described
under "--Regular Securities-- Non-Interest Expenses of the REMIC," other
expenses. REMIC taxable income is generally determined in the same manner as the
taxable income of an individual using the accrual method of accounting, except
that the limitations on deductibility of investment interest expense and
expenses for the production of income do not apply, all bad loans will be
deductible as business bad debts, and the limitation on the deductibility of
interest and expenses related to tax-exempt income is more restrictive than with
respect to individual. The REMIC's gross income includes interest, original
issue discount income, and market discount income, if any, on the mortgage
loans, as well as, income


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earned from temporary investments on reverse assets, reduced by the amortization
of any premium on the mortgage loans. In addition, a Residual Certificateholder
will recognize additional income due to the allocation of realized losses to the
Regular Securities due to defaults, delinquencies and realized losses on the
mortgage loans. The timing of the inclusion of the income by Residual
Certificateholders may differ from the time the actual loss is allocated to the
Regular Securities. The REMIC's deductions include interest and original issue
discount expense on the Regular Securities, servicing fees on the mortgage
loans, other administrative expenses of the REMIC and realized losses on the
mortgage loans. The requirement that Residual Certificateholders report their
pro rata share of taxable income or net loss of the REMIC will continue until
there are no securities of any class of the related series outstanding.

      For purposes of determining its taxable income, the REMIC will have an
initial aggregate tax basis in its assets equal to the sum of the issue prices
of the Regular Securities and the Residual Certificates (or, if a class of
securities is not sold initially, its fair market value). The aggregate basis
will be allocated among the mortgage loans and other assets of the REMIC in
proportion to their respective fair market value. A mortgage loan will be deemed
to have been acquired with discount or premium to the extent that the REMIC s
basis therein is less than or greater than its principal balance, respectively.
Any discount (whether market discount or OID) will be includible in the income
of the REMIC as it accrues, in advance of receipt of the cash attributable to
this income, under a method similar to the method described above for accruing
OID on the Regular Securities. The REMIC expects to elect under Code Section 171
to amortize any premium on the mortgage loans. Premium on any mortgage loan to
which the election applies would be amortized under a constant yield method. It
is not clear whether the yield of a mortgage loan would be calculated for this
purpose based on scheduled payments or taking account of the Prepayment
Assumption. Additionally, the election would not apply to the yield with respect
to any underlying mortgage loan originated on or before September 27, 1985.
Instead, premium with respect to that mortgage loan would be allocated among the
principal payments thereon and would be deductible by the REMIC as those
payments become due.

      The REMIC will be allowed a deduction for interest and OID on the Regular
Securities. The amount and method of accrual of OID will be calculated for this
purpose in the same manner as described above with respect to Regular Securities
except that the 0.25% per annum de minimis rule and adjustments for subsequent
holders described therein will not apply.

      A Residual Certificateholder will not be permitted to amortize the cost of
the Residual Certificate as an offset to its share of the REMIC's taxable
income. However, that taxable income will not include cash received by the REMIC
that represents a recovery of the REMIC's basis in its assets, and, as described
above, the issue price of the Residual Securities will be added to the issue
price of the Regular Securities in determining the REMIC's initial basis in its
assets. See "--Sale or Exchange of Residual Certificates." For a discussion of
possible adjustments to income of a subsequent holder of a Residual Certificate
to reflect any difference between the actual cost of the Residual Certificate to
the holder and the adjusted basis the Residual Certificate would have in the
hands of an original Residual Certificateholder, see "--Allocation of the Income
of the REMIC to the Residual Certificates."

      Net Losses of the REMIC. The REMIC will have a net loss for any calendar
quarter in which its deductions exceed its gross income. The net loss would be
allocated among the Residual Certificateholders in the same manner as the
REMIC's taxable income. The net loss allocable to any Residual Certificate will
not be deductible by the holder to the extent that the net loss exceeds the
holder's adjusted basis in the Residual Certificate. Any net loss that is not
currently deductible due to this limitation may only be used by the Residual
Certificateholder to offset its share of the REMIC's taxable income in future
periods (but not otherwise). The ability of Residual Certificateholders that are
individuals or closely held corporations to deduct net losses may be subject to
additional limitations under the Code.

      For purposes of determining REMIC taxable income or loss, the trustee
intends to treat Subsequent Recoveries in a way described under the caption
"Subsequent Recoveries."

      Pass-Through of Non-Interest Expenses of the REMIC. As a general rule, all
of the fees and expenses of a REMIC will be taken into account by holders of the
Residual Certificates. In the case of a single class REMIC, however, the
expenses and a matching amount of additional income will be allocated among the
Regular Securityholders and the Residual Certificateholders on a daily basis in
proportion to the relative amounts of income accruing to each security holder on
that day. In general terms, a single class REMIC is one that either would
qualify as a grantor trust if it were not a REMIC (treating all interests as
ownership interests, even if they would be


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classified as debt for federal income tax purposes) or is similar to a grantor
trust and is structured with the principal purpose of avoiding the single class
REMIC rules. The applicable prospectus supplement may apportion expenses to the
Regular Securities, but if it does not, then the expenses of the REMIC will be
allocated to holders of the related Residual Certificates in their entirety and
not to holders of the related Regular Securities.

      In the case of individuals (or trusts, estates or other persons that
compute their income in the same manner as individuals) who own an interest in a
Regular Security or a Residual Certificate directly or through a pass-through
interest holder that is required to pass miscellaneous itemized deductions
through to its owners or beneficiaries (e.g. a partnership, an S corporation or
a grantor trust), the trust expenses will be deductible under Code Section 67
only to the extent that those expenses, plus other "miscellaneous itemized
deductions" of the individual, exceed 2% of the individual's adjusted gross
income. In addition, Code Section 68 provides that the amount of itemized
deductions otherwise allowable for an individual whose adjusted gross income
exceeds a certain amount (the "APPLICABLE AMOUNT") will be reduced by the lesser
of 3% of the excess of the individual's adjusted gross income over the
Applicable Amount or 80% of the amount of itemized deductions otherwise
allowable for the taxable year. The amount of additional taxable income
recognized by Residual Certificateholders who are subject to these limitations
may be substantial. Further, holders (other than corporations) subject to the
alternative minimum tax may not deduct miscellaneous itemized deductions in
determining their alternative minimum taxable income. The REMIC is required to
report to each pass-through interest holder and to the IRS the holder's
allocable share, if any, of the REMIC's non-interest expenses. The term
"pass-through interest holder" generally refers to individuals, entities taxed
as individuals and certain pass-through entities, but does not include real
estate investment trusts. Residual Certificateholders that are pass-through
interest holders are encouraged to consult their own tax advisors about the
impact of these rules on an investment in the Residual Certificates.

      Excess Inclusions. A portion of the income on a Residual Certificate
(referred to in the Code as an "EXCESS INCLUSION") will be subject to federal
income tax in all events. Thus, for example, an excess inclusion may not be
offset by any unrelated losses, deductions or loss carryovers of a Residual
Certificateholder; will be treated as "unrelated business taxable income" within
the meaning of Code Section 512 if the Residual Certificateholder is a pension
fund or any other organization that is subject to tax only on its unrelated
business taxable income (see "-- Tax-Exempt Investors"); and is not eligible for
any reduction in the rate of withholding tax in the case of a Residual
Certificateholder that is a foreign investor. See "--Non-U.S. Persons."

      Except as discussed in the following paragraph, with respect to any
Residual Certificateholder, the excess inclusions is the excess, if any, of the
income of the Residual Certificateholder for that calendar quarter from its
Residual Certificate over the sum of the "daily accruals" for all days during
the calendar quarter on which the Residual Certificateholder holds the Residual
Certificate. For this purpose, the daily accruals with respect to a Residual
Certificate are determined by allocating to each day in the calendar quarter its
ratable portion of the product of the "adjusted issue price" of the Residual
Certificate at the beginning of the calendar quarter and 120 percent of the
"Federal long-term rate" in effect at the time the Residual Certificate is
issued. For this purpose, the "adjusted issue price" of a Residual Certificate
at the beginning of any calendar quarter equals the issue price of the Residual
Certificate, increased by the amount of daily accruals for all prior quarters,
and decreased (but not below zero) by the aggregate amount of payments made on
the Residual Certificate before the beginning of the same quarter.

      In the case of any Residual Certificates held by a real estate investment
trust, the aggregate excess inclusions with respect to the Residual
Certificates, reduced (but not below zero) by the real estate investment trust
taxable income (within the meaning of Code Section 857(b)(2), excluding any net
capital gain), will be allocated among the shareholders of the trust in
proportion to the dividends received by the shareholders from the trust, and any
amount so allocated will be treated as an excess inclusion with respect to a
Residual Certificate as if held directly by the shareholder. Regulated
investment companies, common issuing entities and certain cooperatives are
subject to similar rules.

      Payments. Any distribution made on a Residual Certificate to a Residual
Certificateholder will be treated as a non-taxable return of capital to the
extent it does not exceed the Residual Certificateholder's adjusted basis in the
Residual Certificate. To the extent a distribution exceeds the adjusted basis,
it will be treated as gain from the sale of the Residual Certificate.


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      Sale or Exchange of Residual Certificates. If a Residual Certificate is
sold or exchanged, the seller will generally recognize gain or loss equal to the
difference between the amount realized on the sale or exchange and its adjusted
basis in the Residual Certificate (except that the recognition of loss may be
limited under the "wash sale" rules). A holder's adjusted basis in a Residual
Certificate generally equals the cost of the Residual Certificate to the
Residual Certificateholder, increased by the taxable income of the REMIC that
was included in the income of the Residual Certificateholder with respect to the
Residual Certificate, and decreased (but not below zero) by the net losses that
have been allowed as deductions to the Residual Certificateholder with respect
to the Residual Certificate and by the distributions received thereon by the
Residual Certificateholder. In general, the gain or loss will be capital gain or
loss provided the Residual Certificate is held as a capital asset. However,
Residual Certificates will be "evidences of indebtedness" within the meaning of
Code Section 582(c)(1), so that gain or loss recognized from sale of a Residual
Certificate by a bank or thrift institution to which that section applies would
be ordinary income or loss.

      Except as provided in Treasury regulations yet to be issued, if the seller
of a Residual Certificate reacquires the Residual Certificate, or acquires any
other Residual Certificate, any residual interest in another REMIC or similar
interest in a "taxable mortgage pool" (as defined in Code Section 770 1(i))
during the period beginning six months before, and ending six months after, the
date of the sale, the sale will be subject to the "wash sale" rules of Code
Section 1091. In that event, any loss realized by the Residual Certificateholder
on the sale will not be deductible, but, instead, will increase the Residual
Certificateholder's adjusted basis in the newly acquired asset.

      Purchasers of a Residual Certificate are encouraged to consider carefully
the tax consequences of an investment in Residual Certificates discussed in the
prospectus and consult their own tax advisors with respect to those
consequences. See "Material Federal Income Tax Consequences -- REMIC Securities
-- b. Residual Certificates." Specifically, prospective holders of Residual
Certificates should consult their tax advisors regarding whether, at the time of
acquisition, a Residual Certificate will be treated as a "noneconomic" residual
interest, as a "tax avoidance potential" residual interest or as both. Among
other things, holders of noneconomic Residual Certificates should be aware of
REMIC regulations that may affect their ability to transfer their Residual
Certificates. See "Material Federal Income Tax Consequences -- Tax Restrictions
on Transfer of Residual Certificates -- Noneconomic Residual Certificates,"
"Material Federal Income Tax Consequences -- b. Residual Certificates -- Mark to
Market Rules," "-- Excess Inclusions " and "Material Federal Income Tax
Consequences -- Tax Related Restrictions on Transfers of Residual Certificates
-- Foreign Investors."

      Additionally, for information regarding Prohibited Transactions and
Treatment of Realized Losses, see "Material Federal Income Tax Consequences --
Prohibited Transactions and Other Taxes" and "-- REMIC Securities -- a. Regular
Securities -- Treatment of Realized Losses" in the prospectus.

      As a result of the Economic Growth and Tax Relief Reconciliation Act of
2001 (the "2001 ACT"), limitations imposed by section 68 of the Code on claiming
itemized deductions will be phased-out commencing in 2006, which will affect
individuals holding Residual Certificates. In addition, as a result of the Jobs
and Growth Tax Relief Reconciliation Act of 2003 (the "2003 ACT"), the backup
withholding rate has been reduced to 28%. Unless they are amended, these
provisions of the 2001 Act and the 2003 Act will no longer apply for taxable
years beginning on or after December 31, 2010. See "Material Federal Income Tax
Consequences" in the prospectus. Investors are encouraged to consult their own
tax advisors with respect to both statutes.

  C.  PROHIBITED TRANSACTIONS AND OTHER TAXES

      The Code imposes a tax on REMICs equal to 100 percent of the net income
derived from "prohibited transactions" (the "PROHIBITED TRANSACTIONS TAX") and
prohibits deducting any loss with respect to prohibited transactions. In
general, subject to certain specified exceptions, a prohibited transaction means
the disposition of a mortgage loan, the receipt of income from a source other
than a mortgage loan or certain other permitted investments, the receipt of
compensation for services, or gain from the disposition of an asset purchased
with the payments on the mortgage loans for temporary investment pending
distribution on the securities. It is not anticipated that the issuing entity
for any series of securities will engage in any prohibited transactions in which
it would recognize a material amount of net income.

      In addition, certain contributions to an issuing entity as to which an
election has been made to treat the issuing entity as a REMIC made after the day
on which the issuing entity issues all of its interest could result in the


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imposition of a tax on the issuing entity equal to 100% of the value of the
contributed property (the "CONTRIBUTIONS TAX"). No issuing entity for any series
of securities will accept contributions that would subject it to a Contributions
Tax.

      In addition, an issuing entity as to which an election has been made to
treat the issuing entity as a REMIC may also be subject to federal income tax at
the highest corporate rate on "net income from foreclosure property," determined
by reference to the rules applicable to real estate investment trusts. "Net
income from foreclosure property" generally means income from foreclosure
property other than qualifying income for a real estate investment trust.

      Where any Prohibited Transactions Tax, Contributions Tax, tax on net
income from foreclosure property or state or local income or franchise tax that
may be imposed on a REMIC relating to any series of securities results from a
breach of the related servicer's, trustee's or seller's obligations under the
related pooling and servicing agreement, sale and servicing agreement or
servicing agreement, as applicable, for the series, the tax will be borne by the
servicer, trustee or seller, as the case may be, out of its own funds or the
seller's obligation to repurchase a mortgage loan, the tax will be borne by the
seller.

If the servicer, trustee or seller, as the case may be, fails to pay or is not
required to pay the tax as provided above, the tax will be payable out of the
issuing entity for the series and will result in a reduction in amounts
available to be distributed to the security holders of the series.

  D.  ADMINISTRATIVE MATTERS

      Solely for the purpose of the administrative provisions of the Code, the
REMIC generally will be treated as a partnership and the Residual
Certificateholders will be treated as the partners if there is more than one
holder of the Residual Certificate. Certain information will be furnished
quarterly to each Residual Certificateholder who held a Residual Certificate on
any day in the previous calendar quarter.

      Each Residual Certificateholder is required to treat items on its return
consistently with their treatment on the REMIC s return, unless the Residual
Certificateholder either files a statement identifying the inconsistency or
establishes that the inconsistency resulted from incorrect information received
from the REMIC. The IRS may assert a deficiency resulting from a failure to
comply with the consistency requirement without instituting an administrative
proceeding at the REMIC level. Any person that holds a Residual Certificate as a
nominee for another person may be required to furnish the REMIC, in a manner to
be provided in Treasury regulations, with the name and address of the person and
other information.

  E.  TAX-EXEMPT INVESTORS

      Any Residual Certificateholder that is a pension fund or other entity that
is subject to federal income taxation only on its "unrelated business taxable
income" within the meaning of Code Section 512 will be subject to the tax on
that portion of the distributions received on a Residual Certificate that is
considered an excess inclusion. See "--Residual Certificates--Excess
Inclusions."

  F.  TAX-RELATED RESTRICTIONS ON TRANSFERS OF RESIDUAL CERTIFICATES

      Disqualified Organizations. An entity may not qualify as a REMIC unless
there are reasonable arrangements designed to ensure that residual interests in
the entity are not held by "disqualified organizations." Further, a tax is
imposed on the transfer of a residual interest in a REMIC to a "disqualified
organization." The amount of the tax equals the product of an amount (as
determined under the REMIC Regulations) equal to the present value of the total
anticipated "excess inclusions" with respect to the interest for periods after
the transfer and the highest marginal federal income tax rate applicable to
corporations. The tax is imposed on the transferor unless the transfer is
through an agent (including a broker or other middleman) for a disqualified
organization, in which event the tax is imposed on the agent. A "disqualified
organization" means the United States, any State, possession or political
subdivision of the United States, any foreign government, any international
organization or any agency or instrumentality of any of the foregoing entities
(provided that the term does not include an instrumentality if all its
activities are subject to tax and, except for Freddie Mac, a majority of its
board of directors is not selected by a governmental agency), any organization
(other than certain farmers cooperatives) generally exempt from federal


                                       101



income taxes unless the organization is subject to the tax on "unrelated
business taxable income" and a rural electric or telephone cooperative.

      A tax is imposed on a "pass-through entity" holding a residual interest in
a REMIC if at any time during the taxable year of the pass-through entity a
disqualified organization is the record holder of an interest in the entity. The
amount of the tax is equal to the product of the amount of excess inclusions for
the taxable year allocable to the interest held by the disqualified organization
and the highest marginal federal income tax rate applicable to corporations. The
pass-through entity otherwise liable for the tax, for any period during which
the disqualified organization is the record holder of an interest in the entity,
will be relieved of liability for the tax if the record holder furnishes to the
entity an affidavit that the record holder is not a disqualified organization
and, for the applicable period, the pass-through entity does not have actual
knowledge that the affidavit is false. For this purpose, a "pass-through entity"
means a regulated investment company, real estate investment trust, or common
issuing entity; a partnership, trust, or estate; and certain cooperatives.
Except as may be provided in Treasury regulations not yet issued, any person
holding an interest in a pass-through entity as a nominee for another will, with
respect to the interest, be treated as a pass-through entity. Large partnerships
(generally with 250 or more partners) will be taxable on excess inclusion income
as if all partners were disqualified organizations.

      To comply with these rules, the pooling and servicing agreement will
provide that no record or beneficial ownership interest in a Residual
Certificate may be purchased, transferred or sold, directly or indirectly,
without the express written consent of the servicer. The servicer will grant
consent to a proposed transfer only if it receives an affidavit from the
proposed transferee to the effect that it is not a disqualified organization and
is not acquiring the Residual Certificate as a nominee or agent for a
disqualified organization and a covenant by the proposed transferee to the
effect that the proposed transferee agrees to be bound by and to abide by the
transfer restrictions applicable to the Residual Certificate.

      Noneconomic Residual Certificates. The REMIC Regulations disregard, for
federal income tax purposes, any transfer of a Noneconomic Residual Certificate
to a "U.S. Person," as defined in the following section of this discussion,
unless no significant purpose of the transfer is to enable the transferor to
impede the assessment or collection of tax. In general, the definition of a U.
S. Person is the same as provided under "Certain Federal Income Tax
Consequences--Non-REMIC Certificates--Non-U.S. Persons," except that entities or
individuals that would otherwise be treated as Non-U.S. Persons, may be
considered U.S. Persons for this purpose if their income from the residual is
subject to tax under Code Section 871(b) or Code Section 882 (income effectively
connected with a U.S. trade or business). A Noneconomic Residual Certificate is
any Residual Certificate (including a Residual Certificate with a positive value
at issuance) unless, at the time of transfer, taking into account the Prepayment
Assumption and any required or permitted clean up calls or required liquidation
provided for in the REMIC's organizational documents, the present value of the
expected future distributions on the Residual Certificate at least equals the
product of the present value of the anticipated excess inclusions and the
highest corporate income tax rate in effect for the year in which the transfer
occurs and the transferor reasonably expects that the transferee will receive
distributions from the REMIC at or after the time at which taxes accrue on the
anticipated excess inclusions in an amount sufficient to satisfy the accrued
taxes. A significant purpose to impede the assessment or collection of tax
exists if the transferor, at the time of the transfer, either knew or should
have known that the transferee would be unwilling or unable to pay taxes due on
its share of the taxable income of the REMIC.

      Any transfer of the Residual Certificate will be disregarded for federal
tax purposes if a significant purpose of the transfer was to enable the seller
to impede the assessment or collection of tax. As set forth in Treasury
Regulations, a significant purpose to impede the assessment or collection of tax
exists if the seller, at the time of the transfer, either knew or should have
known that the transferee would be unwilling or unable to pay taxes due on its
share of the taxable income of the REMIC. Notwithstanding the above, a transfer
will be respected if (a) the transferor has performed reasonable investigations
of the transferee and has no knowledge or no reason to know that a transferee
intended to impede the assessment or collection of taxes, (b) the transfer is
not made to a foreign permanent establishment or fixed base of a U.S. taxpayer
(an "OFFSHORE LOCATION"), (c) the transferee represents that it will not cause
income from the Residual Certificate to be attributable to an offshore location
and (d) one of the two tests set forth in Treasury regulations issued on July
19, 2002 is satisfied.

      Under the first alternative test, a transfer by the holder of the Residual
Certificate will, assuming all other requirements of the safe harbor are met,
qualify for the safe harbor if the present value of the anticipated tax
liabilities associated with holding the residual interest does not exceed the
sum of the present value of: (a) any


                                       102



consideration given to the purchaser to acquire the interest; (b) the expected
future distributions on the interest; and (c) the anticipated tax savings
associated with holding the interest as the REMIC generates losses. For purposes
of this test, the transferee generally must use the highest corporate tax rate
and the discount rate must be equal to the Federal short-term rate prescribed by
section 1274(d) for the month of the transfer. Under the second alternative
test, a transfer by the holder of the Residual Certificate will, assuming all
other requirements of the safe harbor are met, qualify for the safe harbor if:
(a) the price paid by the transferee for the Residual Certificate would not
cause a reasonable person to believe the transferee does not intend to pay the
taxes associated with such certificate, (b) the transferee is an "eligible
corporation" and (c) for the two fiscal years preceding the transfer, the
transferee's gross assets for financial reporting purposes exceeded $100 million
and its net assets for financial reporting purposes exceeded $10 million
(excluding certain related party transactions).

      The Treasury Department has issued final regulations, effective May 11,
2004, that address the federal income tax treatment of "inducement fees"
received by transferees of noneconomic REMIC residual interests. The final
regulations require inducement fees to be included in income over a period
reasonably related to the period in which the related REMIC residual interest is
expected to generate taxable income or net loss allocable to the holder. The
final regulations provide two safe harbor methods that permit transferees to
include inducement fees in income either (i) in the same amounts and over the
same period that the taxpayer uses for financial reporting purposes, provided
that such period is not shorter than the period the REMIC is expected to
generate taxable income or (ii) ratably over the remaining anticipated weighted
average life of all the regular and residual interests issued by the REMIC,
determined based on actual distributions projected as remaining to be made on
such interests under the prepayment assumption. If the holder of a Residual
Certificate sells or otherwise disposes of the Residual Certificate, any
unrecognized portion of the inducement fee must be taken into account at the
time of the sale or disposition. The final regulations also provide that an
inducement fee shall be treated as income from sources within the United States.
In addition, the IRS has issued administrative guidance addressing the
procedures by which transferees of noneconomic REMIC residual interests may
obtain automatic consent from the IRS to change the method of accounting for
REMIC inducement fee income to one of the safe harbor methods provided in these
final regulations (including a change from one safe harbor method to the other
safe harbor method). Prospective purchasers of the Residual Certificates should
consult with their tax advisors regarding the effect of these final regulations
and the related guidance regarding the procedures for obtaining automatic
consent to change the method of accounting.

      As a result of the 2001 Act, limitations imposed by section 68 of the Code
on claiming itemized deductions will be phased-out commencing in 2006, which
will affect individuals holding Residual Certificate. In addition, the backup
withholding rate has been reduced to 28%. Unless the statute is amended, all
provisions of the 2001 and the 2003 Act will no longer apply for taxable years
beginning on or after December 31, 2010. Investors are encouraged to consult
their own tax advisors with respect to the acquisition, ownership and
disposition of the securities.

TAX STATUS AS A GRANTOR TRUST

      If a REMIC election is not made, the issuing entity will not be classified
as an association taxable as a corporation and that each issuing entity will be
classified as a grantor trust under subpart E, Part I of subchapter J of chapter
1 of subtitle A of the Code. In this case, owners of securities will be treated
for federal income tax purposes as owners of a portion of the issuing entity' s
assets as described below. Sidley Austin LLP will issue an opinion confirming
the above-stated conclusions for each issuing entity for which no REMIC election
is made.

  A.  SINGLE CLASS OF SECURITIES

      Characterization. The issuing entity may be created with one class of
securities. In this case, each securityholder will be treated as the owner of a
pro rata undivided interest in the interest and principal portions of the
issuing entity represented by the securities and will be considered the
equitable owner of a pro rata undivided interest in each of the mortgage loans
in the issuing entity. Any amounts received by a securityholder in lieu of
amounts due with respect to any mortgage loans because of a default or
delinquency in payment will be treated for federal income tax purposes as having
the same character as the payments they replace.

      Each securityholder will be required to report on its federal income tax
return in accordance with its method of accounting its pro rata share of the
entire income from the mortgage loans in the issuing entity represented by
securities, including interest, original issue discount ("OID"), if any,
prepayment charges,


                                       103



assumption fees, any gain recognized upon an assumption and late payment charges
received by the servicer. Under Code Sections 162 or 212 each security holder
will be entitled to deduct its pro rata share of servicing fees, prepayment
charges, assumption fees, any loss recognized upon an assumption and late
payment charges retained by the servicer, provided that the amounts are
reasonable compensation for services rendered to the issuing entity.
Securityholders that are individuals, estates or trusts will be entitled to
deduct their share of expenses only to the extent expenses of the issuing entity
plus their other miscellaneous itemized deductions (as defined in the Code)
exceed two percent of their adjusted gross income. A security holder using the
cash method of accounting must take into account its pro rata share of income
and deductions as and when collected by or paid to the servicer. A
securityholder using an accrual method of accounting must take into account its
pro rata share of income as it accrues, or when received if the income is
received before it accrues, and must take into account its pro rata share of
deductions as they accrue. If the servicing fees paid to the servicer are deemed
to exceed reasonable servicing compensation, the amount of any excess could be
considered as an ownership interest retained by the servicer (or any person to
whom the servicer assigned for value all or a portion of the servicing fees) in
a portion of the interest payments on the mortgage loans. The mortgage loans
would then be subject to the "coupon stripping" rules of the Code discussed
below.

      Generally, as to each series of securities:

      o         a certificate owned by a "domestic building and loan
          association" within the meaning of Code Section 7701(a)(19)
          representing principal and interest payments on mortgage loans will be
          considered to represent "loans ... secured by an interest in real
          property which is ... residential property" within the meaning of Code
          Section 7701(a)(19)(C)(v), to the extent that the mortgage loans
          represented by that certificate are of a type described in that Code
          section;

      o         a certificate owned by a real estate investment trust
          representing an interest in mortgage loans will be considered to
          represent "real estate assets" within the meaning of Code Section
          856(c)(4)(A), and interest income on the mortgage loans will be
          considered "interest on obligations secured by mortgages on real
          property" within the meaning of Code Section 856(c)(3)(B), to the
          extent that the mortgage loans represented by that certificate are of
          a type described in that Code section; and

      o         a certificate owned by a REMIC will represent an "obligation ...
          which is principally secured, directly or indirectly, by an interest
          in real property" within the meaning of Code Section 860G(a)(3).

      Buydown Loans. Certain issuing entities may hold buydown loans. These
loans can be secured not only by a mortgage on real property but also by a
pledged account that is drawn upon to subsidize the mortgagor's monthly mortgage
payments for a limited period of time. So long as the loan value of the real
property at least equals the amount of the loan, then for purposes of the
above-described requirements, the mortgage loan will be treated as fully secured
by real property. If the loan value of the real property is less than the amount
of the loan, then, a securityholder could be required to treat the loan as one
secured by an interest in real property only to the extent of the loan value of
the real property. The related prospectus supplement for any series of
securities that includes buydown loans will specify whether apportionment would
be required.

      Premium. The price paid for a security by a holder will be allocated to
the holder's undivided interest in each mortgage loan based on each mortgage
loan's relative fair market value, so that the holder's undivided interest in
each mortgage loan will have its own tax basis. A securityholder that acquires
an interest in mortgage loans at a premium generally may elect to amortize the
premium under a constant interest method, provided that the underlying mortgage
loans with respect to the mortgage loans were originated. Amortizable bond
premium will be treated as an offset to interest income on the security. The
basis for the security will be reduced to the extent that amortizable premium is
applied to offset interest payments.

      If a reasonable prepayment assumption is used to amortize premium, it
appears that any loss would be available, if at all, only if prepayments have
occurred at a rate faster than the reasonable assumed prepayment rate. It is not
clear whether any other adjustments would be required to reflect differences
between an assumed prepayment rate and the actual rate of prepayments.


                                       104



      Regulations dealing with amortizable bond premium (the "AMORTIZABLE BOND
PREMIUM REGULATIONS") do not apply to prepayable debt instruments subject to
Code Section 1272(a)(6). Absent further guidance from the IRS, the trustee
intends to account for amortizable bond premium in the manner described above.
Prospective purchasers of the securities are encouraged to consult their tax
advisors regarding the possible application of the Amortizable Bond Premium
Regulations.

      Original Issue Discount. The IRS has stated in published rulings that, in
circumstances similar to those described in this prospectus, the special rules
of the Code relating to "original issue discount" (currently Code Sections 1271
through 1273 and 1275) will be applicable to a security holder's interest in
those mortgage loans meeting the conditions necessary for these sections to
apply. OID generally must be reported as ordinary gross income as it accrues
under a constant interest method. See "--Multiple Classes of
Securities--Securities Representing Interests in Loans Other Than ARM Loans."

      Market Discount. A security holder that acquires an undivided interest in
mortgage loans may be subject to the market discount rules of Code Sections 1276
through 1278 to the extent an undivided interest in a mortgage loan is
considered to have been purchased at a market discount. The amount of market
discount is equal to the excess of the portion of the principal amount of the
mortgage loan allocable to the holder's undivided interest in the mortgage loans
over the holder's tax basis in the undivided interest. Market discount with
respect to a security will be considered to be zero if the amount allocable to
the security is less than 0.25% of the security's stated redemption price at
maturity multiplied by the weighted average maturity remaining after the date of
purchase. Treasury regulations implementing the market discount rules have not
yet been issued; therefore, investors are encouraged to consult their own tax
advisors regarding the application of these rules and the advisability of making
any of the elections allowed under Code Sections 1276 through 1278.

      The Code provides that any principal payment or any gain on disposition of
a market discount bond shall generally be treated as ordinary income to the
extent that it does not exceed the accrued market discount at the time of the
payment. The amount of accrued market discount for purposes of determining the
tax treatment of subsequent principal payments or dispositions of the market
discount bond is to be reduced by the amount so treated as ordinary income.

      The Code also grants the Treasury Department authority to issue
regulations providing for the computation of accrued market discount on debt
instruments, the principal of which is payable in more than one installment.
Although the Treasury Department has not yet issued regulations, rules described
in the relevant legislative history describes how market discount should be
accrued on instruments bearing market discount. According to the legislative
history, the holder of a market discount bond may elect to accrue market
discount either on the basis of a constant interest rate or according to one of
the following methods. If a security is issued with OID, the amount of market
discount that accrues during any accrual period would be equal to the product of
the total remaining market discount and a fraction, the numerator of which is
the OID accruing during the period and the denominator of which is the total
remaining OID at the beginning of the accrual period. For securities issued
without OID, the amount of market discount that accrues during a period is equal
to the product of the total remaining market discount and a fraction, the
numerator of which is the amount of stated interest paid during the accrual
period and the denominator of which is the total amount of stated interest
remaining to be paid at the beginning of the accrual period. For purposes of
calculating market discount under any of these methods in the case of
instruments that provide for payments that may be accelerated due to prepayments
of other obligations securing the instruments, the same prepayment assumption
applicable to calculating the accrual of OID will apply.

      A holder who acquired a security at a market discount also may be required
to defer, until the maturity date of the security or its earlier disposition in
a taxable transaction, the deduction of a portion of the amount of interest that
the holder paid or accrued during the taxable year on indebtedness incurred or
maintained to purchase or carry the security in excess of the aggregate amount
of interest (including OID) includible in the holder's gross income for the
taxable year with respect to the security. The amount of the net interest
expense deferred in a taxable year may not exceed the amount of market discount
accrued on the security for the days during the taxable year on which the holder
held the security and, in general, would be deductible when the market discount
is includible in income. The amount of any remaining deferred deduction is to be
taken into account in the taxable year in which the security matures or is
disposed of in a taxable transaction. In the case of a disposition in which gain
or loss is not recognized in whole or in part, any remaining deferred deduction
will be allowed to the extent of gain recognized on the disposition. This
deferral rule does not apply if the security holder elects to include the market
discount in income


                                       105



currently as it accrues on all market discount obligations acquired by the
security holder in that taxable year or thereafter.

      Election to Treat All Interest As OID. The OID Regulations permit a
securityholder to elect to accrue all interest, discount (including de minimis
market or original issue discount) and premium in income as interest, based on a
constant yield method. If an election to treat all interest as OID were to be
made with respect to a security with market discount, the securityholder would
be deemed to have made an election to include in income currently market
discount with respect to all other debt instruments having market discount that
the securityholder acquires during the year of the election or thereafter.
Similarly, a securityholder that makes this election for a security that is
acquired at a premium will be deemed to have made an election to amortize bond
premium with respect to all debt instruments having amortizable bond premium
that the securityholder owns or acquires. See "--Single Class of
Securities--Premium." The election to accrue interest, discount and premium on a
constant yield method with respect to a security cannot be revoked without the
consent of the IRS.

  B.  MULTIPLE CLASSES OF SECURITIES

      1. Stripped Bonds and Stripped Coupons

      Pursuant to Code Section 1286, the separation of ownership of the right to
receive some or all of the interest payments on an obligation from ownership of
the right to receive some or all of the principal payments results in the
creation of "stripped bonds" with respect to principal payments and "stripped
coupons" with respect to interest payments. For purposes of Code Sections 1271
through 1288, Code Section 1286 treats a stripped bond or a stripped coupon as
an obligation issued on the date that the stripped interest is created. If an
issuing entity is created with two classes of securities, one class of
securities may represent the right to principal and interest, or principal only,
on all or a portion of the mortgage loans (the "STRIPPED BOND SECURITIES"),
while the second class of securities may represent the right to some or all of
the interest on the same mortgage loans (the "STRIPPED COUPON SECURITIES").

      Servicing fees in excess of reasonable servicing fees ("EXCESS SERVICING")
will be treated under the stripped bond rules. If the excess servicing fee is
less than 100 basis points (i.e., 1% interest on the mortgage loan principal
balance) or the securities are initially sold with a de minimis discount (which
amount may be calculated without a prepayment assumption), any non-de minimis
discount arising from a subsequent transfer of the securities should be treated
as market discount. The IRS appears to require that reasonable servicing fees be
calculated on a mortgage loan by mortgage loan basis, which could result in some
mortgage loans being treated as having more than 100 basis points of interest
stripped off. See "--Non-REMIC Securities" and "Multiple Classes of Senior
Securities--Stripped Bonds and Stripped Coupons."

      Although current authority is not entirely clear, a Stripped Bond Security
should be treated as an interest in mortgage loans issued on the day the
security is purchased for purposes of calculating any OID. Generally, if the
discount on a mortgage loan is larger than a de minimis amount (as calculated
for purposes of the OID rules) a purchaser of the security will be required to
accrue the discount under the OID rules of the Code. See "--Non-REMIC
Securities" and "--Single Class of Securities--Original Issue Discount."
However, a purchaser of a Stripped Bond Security will be required to account for
any discount on the mortgage loans as market discount rather than OID if either
the amount of OID with respect to the mortgage loan is treated as zero under the
OID de minimis rule when the security was stripped or no more than 100 basis
points (including any amount of servicing fees in excess of reasonable servicing
fees) is stripped off of the issuing entity's mortgage loans.

      The precise tax treatment of Stripped Coupon Securities is substantially
uncertain. The Code could be read literally to require that OID computations be
made for each payment from each mortgage loan. However, it appears that all
payments from a mortgage loan underlying a Stripped Coupon Security should be
treated as a single installment obligation subject to the OID rules of the Code,
in which case, all payments from the mortgage loan would be included in the
mortgage loan's stated redemption price at maturity for purposes of calculating
income on the Stripped Coupon Security under the OID rules of the Code.

      Based on current authority under what circumstances, if any, the
prepayment of mortgage loans will give rise to a loss to the holder of a
Stripped Bond Security purchased at a premium or a Stripped Coupon Security is
unclear. If the security is treated as a single instrument (rather than an
interest in discrete mortgage loans) and the


                                       106



effect of prepayments is taken into account in computing yield with respect to
the security, it appears that no loss will be available as a result of any
particular prepayment unless prepayments occur at a rate faster than the assumed
prepayment rate. However, if a security is treated as an interest in discrete
mortgage loans, or if no prepayment assumption is used, then when a mortgage
loan is prepaid, any security so treated should be able to recognize a loss
equal to the portion of the unrecovered premium of the security that is
allocable to the mortgage loan.

      Holders of Stripped Bond Securities and Stripped Coupon Securities are
encouraged to consult with their own tax advisors regarding the proper treatment
of these securities for federal income tax purposes.

      2. Securities Representing Interests in Loans Other Than ARM Loans

      The original issue discount rules of Code Sections 1271 through 1275 will
generally be applicable to mortgages of corporations originated after May 27,
1969, mortgages of noncorporate mortgagors (other than individuals) originated
after July 1, 1982, and mortgages of individuals originated after March 2, 1984.
Under the OID Regulations, original issue discount could arise by the charging
of points by the originator of the mortgage in an amount greater than the
statutory de minimis exception, including a payment of points that is currently
deductible by the borrower under applicable Code provisions, or under certain
circumstances, by the presence of "teaser" rates (i.e., the initial rates on the
mortgage loans are lower than subsequent rates on the mortgage loans) on the
mortgage loans.

      OID on each security must be included in the owner's ordinary income for
federal income tax purposes as it accrues, in accordance with a constant
interest method that takes into account the compounding of interest, in advance
of receipt of the cash attributable to the income. The amount of OID required to
be included in an owner's income in any taxable year with respect to a security
representing an interest in mortgage loans other than mortgage loans with
interest rates that adjust periodically ("ARM LOANS") likely will be computed as
described under "-- Accrual of Original Issue Discount." The following
discussion is based in part on Treasury regulations issued under Code Sections
1271 through 1273 and 1275 (the "OID REGULATIONS") and in part on the provisions
of the Tax Reform Act of 1986 (the "1986 ACT"). The OID Regulations generally
are effective for debt instruments issued on or after April 4, 1994, but may be
relied upon as authority with respect to debt instruments issued after December
21, 1992. In applying these dates, the issued date of the mortgage loans should
be used, or, in the case of Stripped Bond Securities or Stripped Coupon
Securities, the date the securities are acquired. The holder of a securities
should be aware, however, that the OID Regulations do not adequately address
certain issues relevant to prepayable securities.

      Under the Code, the mortgage loans underlying the securities will be
treated as having been issued on the date they were originated with an amount of
OID equal to the excess of the mortgage loan's stated redemption price at
maturity over its issue price. The issue price of a mortgage loan is generally
the amount lent to the mortgagee, which may be adjusted to take into account
certain loan origination fees. The stated redemption price at maturity of a
mortgage loan is the sum of all payments to be made on the mortgage loan other
than payments that are treated as qualified stated interest payments. The
accrual of this OID, as described under "--Accrual of Original Issue Discount,"
will, unless otherwise specified in the related prospectus supplement, utilize
the original yield to maturity of the securities calculated based on a
reasonable assumed prepayment rate for the mortgage loans underlying the
securities (the "PREPAYMENT ASSUMPTION"), and will take into account events that
occur during the calculation period. The legislative history of the 1986 Act
(the "LEGISLATIVE HISTORY") provides, however, that the regulations will require
that the Prepayment Assumption be the prepayment assumption that is used in
determining the offering price of the security. No representation is made that
any security will prepay at the Prepayment Assumption or at any other rate.
However, no other legal authority provides guidance with regard to the proper
method for accruing OID on obligations that are subject to prepayment, and,
until further guidance is issued, the servicer intends to calculate and report
OID under the method described in "--Accrual of Original Issue Discount."

      Accrual of Original Issue Discount. Generally, the owner of a security
must include in gross income the sum of the "daily portions," as defined below,
of the OID on any security for each day on which it owns the security, including
the date of purchase but excluding the date of disposition. In the case of an
original owner, the daily portions of OID with respect to each component
generally will be determined as set forth under the OID Regulations. A
calculation will be made by the servicer or other entity specified in the
related prospectus supplement of the portion of OID that accrues during each
successive monthly accrual period (or shorter period from the date of original
issue) that ends on the day in the calendar year corresponding to each of the
distribution dates on the securities (or the day before each date). This will be
done, in the case of each full month accrual period, by


                                       107



adding the present value at the end of the accrual period (determined by using
as a discount factor the original yield to maturity of the respective component
under the Prepayment Assumption) of all remaining payments to be received under
the Prepayment Assumption on the respective component and any payments received
during the same accrual period, and subtracting from that total the "adjusted
issue price" of the respective component at the beginning of the same accrual
period. The adjusted issue price of a security at the beginning of the first
accrual period is its issue price; the adjusted issue price of a security at the
beginning of a subsequent accrual period is the adjusted issue price at the
beginning of the immediately preceding accrual period plus the amount of OID
allocable to that accrual period reduced by the amount of any payment made at
the end of or during that accrual period. The OID accruing during the accrual
period will then be divided by the number of days in the period to determine the
daily portion of OID for each day in the period. With respect to an initial
accrual period shorter than a full monthly accrual period, the daily portions of
OID must be determined according to an appropriate allocation under any
reasonable method.

      Original issue discount generally must be reported as ordinary gross
income as it accrues under a constant interest method that takes into account
the compounding of interest as it accrues rather than when received. However,
the amount of original issue discount includible in the income of a holder of an
obligation is reduced when the obligation is acquired after its initial issuance
at a price greater than the sum of the original issue price and the previously
accrued original issue discount, less prior payments of principal. Accordingly,
if mortgage loans acquired by a securityholder are purchased at a price equal to
the then unpaid principal amount of those mortgage loans, no original issue
discount attributable to the difference between the issue price and the original
principal amount of those mortgage loans (e.g., due to points) will be
includible by the holder. Other original issue discount on the mortgage loans
(e.g., that arising from a "teaser" rate) would still need to be accrued.

      3. Securities Representing Interests in ARM Loans

      The OID Regulations do not address the treatment of instruments, such as
the securities, which represent interests in ARM Loans. Additionally, the IRS
has not issued guidance under the Code's coupon stripping rules with respect to
instruments that represent interests in ARM Loans. In the absence of any
authority, the trustee will report OID on securities attributable to ARM Loans
("STRIPPED ARM OBLIGATIONS") to holders in a manner it believes is consistent
with the rules described under the heading "--Securities Representing Interests
in Loans Other Than ARM Loans" and with the OID Regulations. As such, for
purposes of projecting the remaining payments and the projected yield, the
assumed rate payable on the ARM Loans will be the fixed rate equivalent on the
issue date. Application of these rules may require inclusion of income on a
Stripped ARM Obligation in advance of the receipt of cash attributable to the
income. Further, the addition of interest deferred due to negative amortization
("DEFERRED INTEREST") to the principal balance of an ARM Loan may require the
inclusion of the interest deferred due to negative amortization in the income of
the securityholder when it accrues. Furthermore, the addition of Deferred
Interest to the security's principal balance will result in additional income
(including possibly OID income) to the securityholder over the remaining life of
the securities.

      Because the treatment of Stripped ARM Obligations is uncertain, investors
are encouraged to consult their tax advisors regarding how income will be
includible with respect to the securities.

  C.  SALE OR EXCHANGE OF A SECURITY

      Sale or exchange of a security before its maturity will result in gain or
loss equal to the difference, if any, between the amount received and the
owner's adjusted basis in the security. The adjusted basis of a security
generally will equal the seller's purchase price for the security, increased by
the OID included in the seller's gross income with respect to the security, and
reduced by principal payments on the security previously received by the seller.
The gain or loss will be capital gain or loss to an owner for which a security
is a "capital asset" within the meaning of Code Section 1221, and will be
long-term or short-term depending on whether the security has been owned for the
long-term capital gain holding period (currently more than one year).

      The securities will be "evidences of indebtedness" within the meaning of
Code Section 582(c)(1), so that gain or loss recognized from the sale of a
security by a bank or a thrift institution to which that section applies will be
ordinary income or loss.


                                       108



  D.  NON-U.S. PERSONS

      Generally, to the extent that a security evidences ownership in underlying
mortgage loans that were issued on or before July 18, 1984, interest or OID paid
by the person required to withhold tax under Code Section 1441 or 1442 to an
owner that is not a U.S. Person or a securityholder holding on behalf of an
owner that is not a U.S. Person will be subject to federal income tax, collected
by withholding, at a rate of 30% or any lower rate provided for interest by an
applicable tax treaty. Accrued OID recognized by the owner on the sale or
exchange of a security also will be subject to federal income tax at the same
rate. Generally, accrued OID payments would not be subject to withholding to the
extent that a security evidences ownership in mortgage loans issued after July
18, 1984, by natural persons if the securityholder complies with certain
identification requirements (including delivery of a statement, signed by the
securityholder under penalties of perjury, certifying that the securityholder is
not a U.S. Person and providing the name and address of the securityholder).
Additional restrictions apply to mortgage loans where the mortgagor is not a
natural person in order to qualify for the exemption from withholding. Any
foreclosure property owned by the trust could be treated as a U.S. real property
interest owned by securityholders.

      As used in this prospectus, a "U.S. PERSON" means

      o         a citizen or resident of the United States,

      o         a corporation or a partnership (including an entity treated as a
          corporation or partnership for U.S. federal income tax purposes)
          organized in or created under the laws of the United States or any
          State thereof or the District of Columbia (unless in the case of a
          partnership Treasury Regulations provide otherwise),

      o         an estate, the income of which from sources outside the United
          States is includible in gross income for federal income tax purposes
          regardless of its connection with the conduct of a trade or business
          within the United States, or

      o         a trust if a court within the United States is able to exercise
          primary supervision over the administration of the trust and one or
          more United States persons have authority to control all substantial
          decisions of the trust.

In addition, U.S. Persons would include certain trusts that can elect to be
treated as U.S. Persons. A "NON-U.S. PERSON" is a person other than a U.S.
Person.

      Except where specifically discussed, the discussion below deals with a
Non-U.S. Person who is not holding the securities as part of its trade or
business in the U.S., and because a Non-U.S. Person is not supposed to hold a
Residual Certificate, this summary does not address the consequences of a
Non-U.S. Person holding the Residual Securities. A Non-U.S. Person who is an
individual or corporation (or an entity treated as a corporation for federal
income tax purposes) holding the securities on its own behalf will not be
subject to United States federal income taxes on payments of principal, premium,
interest or original issue discount on a Security, unless such Non-U.S. Person
is a direct or indirect 10% or greater shareholder of us, a controlled foreign
corporation related to us or a bank receiving interest described in Code Section
881(c)(3)(A). To qualify for the exemption from taxation, the Withholding Agent,
as defined below, must have received a statement from the individual or
corporation that (i) is signed under penalties of perjury by the beneficial
owner of the Security, (ii) certifies that such owner is not a U.S. Holder, and
(iii) provides the beneficial owner's name and address.

      A "WITHHOLDING AGENT" is the last United States payor (or a non-U.S. payor
who is a qualified intermediary, U.S. branch of a foreign person, or withholding
foreign partnership) in the chain of payment prior to payment to a Non-U.S.
Person (which itself is not a Withholding Agent). Generally, this statement is
made on an IRS Form W-8BEN ("W-8BEN"), which is effective for the remainder of
the year of signature plus three full calendar years unless a change in
circumstances makes any information on the form incorrect. Notwithstanding the
preceding sentence, a W-8BEN with a U.S. taxpayer identification number will
remain effective until a change in circumstances makes any information on the
form incorrect, provided that the Withholding Agent reports at least annually to
the beneficial owner on IRS Form 1042-S. The beneficial owner must inform the
Withholding Agent within 30 days of such change and furnish a new W-8BEN. A
Non-U.S. Person who is not an individual or


                                       109



corporation (or an entity treated as a corporation for federal income tax
purposes) holding the securities on its own behalf may have substantially
increased reporting requirements. In particular, in the case of securities held
by a foreign partnership (or foreign trust), the partners (or beneficiaries)
rather than the partnership (or trust) will be required to provide the
certification discussed above, and the partnership (or trust) will be required
to provide certain additional information.

      A foreign Security holder whose income with respect to its investment in a
Security is effectively connected with the conduct of a U. S. trade or business
would generally be taxed as if the holder was a U. S. person provided the holder
provides to the Withholding Agent an IRS Form W-8ECI.

      Certain securities clearing organizations, and other entities who are not
beneficial owners, may be able to provide a signed statement to the Withholding
Agent. However, in such case, the signed statement may require a copy of the
beneficial owner's W-8BEN (or the substitute form).

      Generally, a Non-U.S. Person will not be subject to federal income taxes
on any amount which constitutes capital gain upon retirement or disposition of a
Security, unless such Non-U.S. Person is an individual who is present in the
United States for 183 days or more in the taxable year of the disposition and
such gain is derived from sources within the United States. Certain other
exceptions may be applicable, and a Non-U.S. Person should consult its tax
advisor in this regard.

      The securities will not be includible in the estate of a Non-U.S. Person
unless the individual is a direct or indirect 10% or greater shareholder of us
or, at the time of such individual's death, payments in respect of the
securities would have been effectively connected with the conduct by such
individual of a trade or business in the United States.

      Prospective investors are strongly urged to consult their own tax advisors
with respect to the Withholding Regulations.

  E.  BACKUP WITHHOLDING

      Backup withholding of United States federal income tax may apply to
payments made in respect of the securities to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the securities to a U.S. Holder must be reported to the IRS, unless
the U.S. Holder is an exempt recipient or establishes an exemption. Compliance
with the identification procedures described in the preceding section would
establish an exemption from backup withholding for those non-U.S. Persons who
are not exempt recipients.

      In addition, upon the sale of a security to (or through) a broker, the
broker must report the sale and withhold on the entire purchase price, unless
either (a) the broker determines that the seller is a corporation or other
exempt recipient or (b) the seller certifies that such seller is a non-U.S.
Person (and certain other conditions are met).

      Certification of the registered owner's non-U.S. status would be made
normally on an IRS Form W-8BEN under penalties of perjury, although in certain
cases it may be possible to submit other documentary evidence.

      Any amounts withheld under the backup withholding rules from a payment to
a beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States federal income tax provided the required
information is furnished to the IRS.

      Prospective investors are strongly urged to consult their own tax advisors
with respect to the Withholding Regulations.

FINAL TRUST REPORTING REGULATIONS

      On January 23, 2006, the IRS issued final regulations effective January 1,
2007, affecting the information reporting obligations of trustees of
"widely-held mortgage trusts" (that is, any grantor trust in which any interests
are


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held by "middlemen", and whose assets are mortgages or regular interests in a
REMIC, amounts received thereon and reasonably required reserve funds) and of
"middlemen" (a term that includes, among other things, a custodian of a person's
account, a nominee and a broker holding an interest for a customer in a street
name).

      Under the final regulations, the trustee would be required to report to
the IRS with respect to each beneficial owner of a grantor trust fractional
interest certificate who is not an "exempt recipient" (a term that includes
corporations, trusts, securities dealers, middlemen and certain other
non-individuals) and do not hold such certificates through a middleman, the
gross income of the trust and, if any trust assets were disposed of, the portion
of the gross proceeds relating to the trust assets that are allocable to such
beneficial owner. The same requirements would be imposed on middlemen holding on
behalf of beneficial owners of grantor trust fractional interest certificates.

      The final regulations will also require that the trustee make available
information regarding interest income and information necessary to compute any
original issue discount to (i) exempt recipients (including middlemen) and
non-calendar year taxpayers, upon request, in accordance with the requirements
of the final regulations and (ii) beneficial owners of grantor trust fractional
interest certificates who do not hold such certificates through a middleman. The
information must be provided to parties specified in part (i) by the later of
thirty days after the end of the first quarter for which the information was
requested or two weeks after the receipt of the request. The information must be
provided to parties specified in part (ii) at a time no later than March 15 of
the following tax year.

TAX CHARACTERIZATION OF THE ISSUING ENTITY AS A PARTNERSHIP

      Tax counsel will deliver its opinion that an issuing entity that is
intended to be treated as a partnership will not be a corporation or publicly
traded partnership taxable as a corporation for federal income tax purposes.
This opinion will be based on the assumption that the terms of the Trust
Agreement and related documents will be complied with, and on counsel's
conclusions that the nature of the income of the issuing entity will exempt it
from the rule that certain publicly traded partnerships are taxable as
corporations or the issuance of the securities has been structured as a private
placement under an IRS safe harbor, so that the issuing entity will not be
characterized as a publicly traded partnership taxable as a corporation.

      If the issuing entity were taxable as a corporation for federal income tax
purposes, the issuing entity would be subject to corporate income tax on its
taxable income. The issuing entity's taxable income would include all its
income, possibly reduced by its interest expense on the notes. That corporate
income tax could materially reduce cash available to make payments on the notes
and distributions on the certificates, and certificateholders could be liable
for that tax that is unpaid by the issuing entity.

TAX CONSEQUENCES TO HOLDERS OF THE NOTES

      Treatment of the Notes as Indebtedness. The issuing entity will agree, and
the noteholders will agree by their purchase of notes, to treat the notes as
debt for federal income tax purposes. Unless otherwise specified in the related
prospectus supplement, in the opinion of Tax Counsel, the notes will be
classified as debt for federal income tax purposes. The discussion below assumes
this characterization of the notes is correct.

      OID, Indexed Securities, etc. The discussion below assumes that all
payments on the notes are denominated in U.S. dollars, and that the notes are
not Indexed securities or Strip notes. Moreover, the discussion assumes that the
interest formula for the notes meets the requirements for "qualified stated
interest" under the OID regulations, and that any OID on the notes (that is, any
excess of the principal amount of the notes over their issue price) does not
exceed a de minimis amount (that is, 0.25% of their principal amount multiplied
by the number of full years included in their term), all within the meaning of
the OID regulations. If these conditions are not satisfied with respect to any
given series of notes, additional tax considerations with respect to the notes
will be disclosed in the applicable prospectus supplement.

      Interest Income on the Notes. Based on the above assumptions, except as
discussed in the following paragraph, the notes will not be considered issued
with OID. The stated interest thereon will be taxable to a noteholder as
ordinary interest income when received or accrued in accordance with the
noteholder's method of tax accounting. Under the OID regulations, a holder of a
note issued with a de minimis amount of OID must include the


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OID in income, on a pro rata basis, as principal payments are made on the note.
It is believed that any prepayment premium paid as a result of a mandatory
redemption will be taxable as contingent interest when it becomes fixed and
unconditionally payable. A purchaser who buys a note for more or less than its
principal amount will generally be subject, respectively, to the premium
amortization or market discount rules of the Code.

      A holder of a note that has a fixed maturity date of not more than one
year from the issue date of the note (a "SHORT-TERM NOTE") may be subject to
special rules. An accrual basis holder of a Short-Term Note (and certain cash
method holders, including regulated investment companies, as set forth in
Section 1281 of the Code) generally would be required to report interest income
as interest accrues on a straight-line basis over the term of each interest
period. Other cash basis holders of a Short-Term Note would, in general, be
required to report interest income as interest is paid (or, if earlier, upon the
taxable disposition of the Short-Term Note). However, a cash basis holder of a
Short-Term Note reporting interest income as it is paid may be required to defer
a portion of any interest expense otherwise deductible on indebtedness incurred
to purchase or carry the Short-Term Note until the taxable disposition of the
Short-Term Note. A cash basis taxpayer may elect under Section 1281 of the Code
to accrue interest income on all nongovernment debt obligations with a term of
one year or less, in which case the taxpayer would include interest on the
Short-Term Note in income as it accrues, but would not be subject to the
interest expense deferral rule referred to in the preceding sentence. Certain
special rules apply if a Short-Term Note is purchased for more or less than its
principal amount.

      Sale or Other Disposition. If a noteholder sells a note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the note. The
adjusted tax basis of a note to a particular noteholder will equal the holder's
cost for the note, increased by any market discount, acquisition discount, OID
and gain previously included by the noteholder in income with respect to the
note and decreased by the amount of bond premium (if any) previously amortized
and by the amount of principal payments previously received by the noteholder
with respect to the note. That gain or loss will be capital gain or loss if the
note was held as a capital asset, except for gain representing accrued interest
and accrued market discount not previously included in income. Capital losses
generally may be used only to offset capital gains.

      Foreign Holders. Interest payments made (or accrued) to a noteholder who
is a nonresident alien, foreign corporation or other non-United States person (a
"FOREIGN PERSON") generally will be considered "portfolio interest," and
generally will not be subject to United States federal income tax and
withholding tax, if the interest is not effectively connected with the conduct
of a trade or business within the United States by the foreign person and the
foreign person

o     is not actually or constructively a "10 percent shareholder" of the
      issuing entity or the seller (including a holder of 10% of the outstanding
      securities) or a "controlled foreign corporation" with respect to which
      the issuing entity or the seller is a "related person" within the meaning
      of the Code and

o     provides the owner trustee or other person who is otherwise required to
      withhold U.S. tax with respect to the notes (the "WITHHOLDING AGENT")
      with an appropriate statement, signed under penalties of perjury,
      certifying that the beneficial owner who is an individual or corporation
      for federal income tax purposes of the note is a foreign person and
      providing the foreign person's name and address.

Generally, this statement is made on an IRS Form W-8BEN (" W-8BEN"), which is
effective for the remainder of the year of signature plus three full calendar
years unless a change in circumstances makes any information on the form
incorrect. Notwithstanding the preceding sentence, a W-8BEN with a U.S. taxpayer
identification number will remain effective until a change in circumstances
makes any information on the form incorrect, provided that the Withholding Agent
reports at least one payment annually to the beneficial owner on IRS Form
1042-S. The beneficial owner must inform the Withholding Agent within 30 days of
any change and furnish a new W-8BEN. A noteholder who is not an individual or
corporation (or an entity treated as a corporation for federal income tax
purposes) holding the Notes on its own behalf may have substantially increased
reporting requirements. In particular, in the case of notes held by a foreign
partnership (or foreign trust), the partners (or beneficiaries) rather than the
partnership (or trust) will be required to provide the certification discussed
above, and the partnership (or trust) will be required to provide certain
additional information.


                                       112



      If a note is held through a securities clearing organization or certain
other financial institutions, the organization or institution may provide the
relevant signed statement to the withholding agent; in that case, however, the
signed statement must be accompanied by a Form W-8BEN or substitute form
provided by the foreign person that owns the note. If the interest is not
portfolio interest, then it will be subject to United States federal income and
withholding tax at a rate of 30 percent, unless reduced or eliminated pursuant
to an applicable tax treaty.

      Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a note by a foreign person will be exempt from United
States federal income and withholding tax, provided that the gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person and in the case of an individual foreign person,
the foreign person is not present in the United States for 183 days or more in
the taxable year.

      Backup Withholding. Each holder of a note (other than an exempt holder
such as a corporation, tax-exempt organization, qualified pension and
profit-sharing trust, individual retirement account or nonresident alien who
provides certification as to status as a nonresident) will be required to
provide, under penalties of perjury, a certificate containing the holder's name,
address, correct federal taxpayer identification number and a statement that the
holder is not subject to backup withholding. Should a nonexempt noteholder fail
to provide the required certification, the issuing entity will be required to
withhold on the amount otherwise payable to the holder, and remit the withheld
amount to the IRS as a credit against the holder's federal income tax liability.

      Possible Alternative Treatments of the Notes. If, contrary to the opinion
of Tax Counsel, the IRS successfully asserted that one or more of the notes did
not represent debt for federal income tax purposes, the notes might be treated
as equity interests in the issuing entity. If so treated, the issuing entity
might be taxable as a corporation with the adverse consequences described above
(and the taxable corporation would not be able to reduce its taxable income by
deductions for interest expense on notes recharacterized as equity).
Alternatively, and most likely in the view of special counsel to the depositor,
the issuing entity might be treated as a publicly traded partnership that would
not be taxable as a corporation because it would meet certain qualifying income
tests. Nonetheless, treatment of the notes as equity interests in that publicly
traded partnership could have adverse tax consequences to certain holders. For
example, income to certain tax-exempt entities (including pension funds) would
be "unrelated business taxable income," income to foreign holders generally
would be subject to U.S. tax and U.S. tax return filing and withholding
requirements, and individual holders might be subject to certain limitations on
their ability to deduct their share of the issuing entity's expenses.

TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES

      Treatment of the Issuing Entity as a Partnership. The issuing entity and
the servicer will agree, and the certificateholders will agree by their purchase
of certificates, to treat the issuing entity as a partnership for purposes of
federal and state income tax, franchise tax and any other tax measured in whole
or in part by income, with the assets of the partnership being the assets held
by the issuing entity, the partners of the partnership being the
certificateholders, and the notes being debt of the partnership. However, the
proper characterization of the arrangement involving the issuing entity, the
certificates, the notes, the issuing entity and the servicer is not clear
because there is no authority on transactions closely comparable to that
contemplated herein.

      A variety of alternative characterizations are possible. For example,
because the certificates have certain features characteristic of debt, the
certificates might be considered debt of the issuing entity. That
characterization would not result in materially adverse tax consequences to
certificateholders as compared to the consequences from treatment of the
certificates as equity in a partnership, described below. The following
discussion assumes that the certificates represent equity interests in a
partnership.

      Indexed Securities, etc. The following discussion assumes that all
payments on the certificates are denominated in U.S. dollars, none of the
certificates are Indexed securities or Strip certificates, and that a series of
securities includes a single class of certificates. If these conditions are not
satisfied with respect to any given series of certificates, additional tax
considerations with respect to the certificates will be disclosed in the
applicable prospectus supplement.

      Partnership Taxation. As a partnership, the issuing entity will not be
subject to federal income tax. Rather, each certificateholder will be required
to separately take into account the holder's distributive share of


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income, gains, losses, deductions and credits of the issuing entity. The issuing
entity's income will consist primarily of interest and finance charges earned on
the loans (including appropriate adjustments for market discount, OID and bond
premium) and any gain upon collection or disposition of loans. The issuing
entity's deductions will consist primarily of interest accruing with respect to
the notes, servicing and other fees, and losses or deductions upon collection or
disposition of loans.

      The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (here, the
Trust Agreement and related documents). The Trust Agreement will provide, in
general, that the certificateholders will be allocated taxable income of the
issuing entity for each month equal to the sum of (i) the interest that accrues
on the certificates in accordance with their terms for that month, including
interest accruing at the Pass-Through Rate for the month and interest on amounts
previously due on the certificates but not yet distributed; (ii) any issuing
entity income attributable to discount on the Loans that corresponds to any
excess of the principal amount of the certificates over their initial issue
price; (iii) prepayment premium payable to the certificateholders for the month;
and (iv) any other amounts of income payable to the certificateholders for the
month. That allocation will be reduced by any amortization by the issuing entity
of premium on loans that corresponds to any excess of the issue price of
certificates over their principal amount. All remaining taxable income of the
issuing entity will be allocated to the depositor. Based on the economic
arrangement of the parties, this approach for allocating issuing entity income
should be permissible under applicable Treasury regulations, although we can
give no assurance that the IRS would not require a greater amount of income to
be allocated to certificateholders. Moreover, even under the foregoing method of
allocation, certificateholders may be allocated income equal to the entire
Pass-Through Rate plus the other items described above even though the issuing
entity might not have sufficient cash to make current cash distributions of that
amount. Thus, cash basis holders will in effect be required to report income
from the certificates on the accrual basis and certificateholders may become
liable for taxes on issuing entity income even if they have not received cash
from the issuing entity to pay those taxes. In addition, because tax allocations
and tax reporting will be done on a uniform basis for all certificateholders but
certificateholders may be purchasing certificates at different times and at
different prices, certificateholders may be required to report on their tax
returns taxable income that is greater or less than the amount reported to them
by the issuing entity.

      All of the taxable income allocated to a certificateholder that is a
pension, profit sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) will constitute "unrelated business
taxable income" generally taxable to that holder under the Code.

      An individual taxpayer's share of expenses of the issuing entity
(including fees to the servicer but not interest expense) would be miscellaneous
itemized deductions. Those deductions might be disallowed to the individual in
whole or in part and might result in the holder being taxed on an amount of
income that exceeds the amount of cash actually distributed to the holder over
the life of the issuing entity.

      The issuing entity intends to make all tax calculations relating to income
and allocations to certificateholders on an aggregate basis. If the IRS were to
require that those calculations be made separately for each loan, the issuing
entity might be required to incur additional expense but it is believed that
there would not be a material adverse effect on certificateholders.

      Discount and Premium. It is believed that the loans were not issued with
OID, and, therefore, the issuing entity should not have OID income. However, the
purchase price paid by the issuing entity for the loans may be greater or less
than the remaining principal balance of the loans at the time of purchase. If
so, the loan will have been acquired at a premium or discount, as the case may
be. (As indicated above, the issuing entity will make this calculation on an
aggregate basis, but might be required to recompute it on a loan by loan basis.)

      If the issuing entity acquires the loans at a market discount or premium,
the issuing entity will elect to include that discount in income currently as it
accrues over the life of the loans or to offset that premium against interest
income on the loans. As indicated above, a portion of the market discount income
or premium deduction may be allocated to certificateholders.

      Section 708 Termination. Pursuant to Code Section 708, a sale or exchange
of 50% or more of the capital and profits in a partnership would cause a deemed
contribution of assets of the partnership (the "OLD PARTNERSHIP") to a new
partnership (the "NEW PARTNERSHIP") in exchange for interests in the new
partnership. Those interests would


                                       114



be deemed distributed to the partners of the old partnership in liquidation
thereof, which would not constitute a sale or exchange. Accordingly, if the
issuing entity were characterized as a partnership, then even if a sale of
certificates terminated the partnership under Code Section 708, the holder's
basis in its certificates would remain the same.

      Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the certificates sold.
A certificateholder's tax basis in a certificate will generally equal the
holder's cost increased by the holder's share of issuing entity income
(includible in income) and decreased by any distributions received with respect
to that certificate. In addition, both the tax basis in the certificates and the
amount realized on a sale of a certificate would include the holder's share of
the notes and other liabilities of the issuing entity. A holder acquiring
certificates at different prices may be required to maintain a single aggregate
adjusted tax basis in the certificates, and, upon sale or other disposition of
some of the certificates, allocate a portion of that aggregate tax basis to the
certificates sold (rather than maintaining a separate tax basis in each
certificate for purposes of computing gain or loss on a sale of that
certificate).

      Any gain on the sale of a certificate attributable to the holder's share
of unrecognized accrued market discount on the loans would generally be treated
as ordinary income to the holder and would give rise to special tax reporting
requirements. The issuing entity does not expect to have any other assets that
would give rise to those special reporting requirements. Thus, to avoid those
special reporting requirements, the issuing entity will elect to include market
discount in income as it accrues.

      If a certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the certificates that exceeds the aggregate
cash distributions with respect thereto, that excess will generally give rise to
a capital loss upon the retirement of the certificates.

      Allocations Among Transferors and Transferees. In general, the issuing
entity's taxable income and losses will be determined monthly and the tax items
for a particular calendar month will be apportioned among the certificateholders
in proportion to the principal amount of certificates owned by them as of the
close of the last day of that month. As a result, a holder purchasing
certificates may be allocated tax items (which will affect its tax liability and
tax basis) attributable to periods before the actual transaction.

      The use of a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of the issuing entity might be reallocated among the certificateholders. The
issuing entity's method of allocation between transferors and transferees may be
revised to conform to a method permitted by future regulations.

      Section 754 Election. In the event that a certificateholder sells its
certificates at a profit (loss), the purchasing certificateholder will have a
higher (lower) basis in the certificates than the selling certificateholder had.
The tax basis of the issuing entity's assets will not be adjusted to reflect
that higher (or lower) basis unless the issuing entity were to file an election
under Section 754 of the Code. In order to avoid the administrative complexities
that would be involved in keeping accurate accounting records, as well as
potentially onerous information reporting requirements, the issuing entity will
not make that election. As a result, certificateholders might be allocated a
greater or lesser amount of issuing entity income than would be appropriate
based on their own purchase price for certificates.

      Administrative Matters. The owner trustee is required to keep or have kept
complete and accurate books of the issuing entity. Those books will be
maintained for financial reporting and tax purposes on an accrual basis and the
fiscal year of the issuing entity will be the calendar year. The trustee will
file a partnership information return (IRS Form 1065) with the IRS for each
taxable year of the issuing entity and will report each certificateholder's
allocable share of items of issuing entity income and expense to holders and the
IRS on Schedule K-1. The issuing entity will provide the Schedule K-l
information to nominees that fail to provide the issuing entity with the
information statement described below and those nominees will be required to
forward that information to the beneficial owners of the certificates.
Generally, holders must file tax returns that are consistent with the
information return filed by the issuing entity or be subject to penalties unless
the holder notifies the IRS of all those inconsistencies.


                                       115



      Under Section 6031 of the Code, any person that holds certificates as a
nominee at any time during a calendar year is required to furnish the issuing
entity with a statement containing certain information on the nominee, the
beneficial owners and the certificates so held. That information includes (i)
the name, address and taxpayer identification number of the nominee and (ii) as
to each beneficial owner (x) the name, address and identification number of the
person, (y) whether the person is a United States person, a tax-exempt entity or
a foreign government, an international organization, or any wholly owned agency
or instrumentality of either of the foregoing, and (z) certain information on
certificates that were held, bought or sold on behalf of the person throughout
the year. In addition, brokers and financial institutions that hold certificates
through a nominee are required to furnish directly to the issuing entity
information as to themselves and their ownership of certificates. A clearing
agency registered under Section 17A of the Securities Exchange Act of 1934, as
amended is not required to furnish that information statement to the issuing
entity. The information referred to above for any calendar year must be
furnished to the issuing entity on or before the following January 31. Nominees,
brokers and financial institutions that fail to provide the issuing entity with
the information described above may be subject to penalties.

      The depositor will be designated as the tax matters partner in the related
Trust Agreement and, as such, will be responsible for representing the
certificateholders in any dispute with the IRS. The Code provides for
administrative examination of a partnership as if the partnership were a
separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which the
partnership information return is filed. Any adverse determination following an
audit of the return of the issuing entity by the appropriate taxing authorities
could result in an adjustment of the returns of the certificateholders, and,
under certain circumstances, a certificateholder may be precluded from
separately litigating a proposed adjustment to the items of the issuing entity.
An adjustment could also result in an audit of a certificateholder's returns and
adjustments of items not related to the income and losses of the issuing entity.

      Tax Consequences to Foreign Certificateholders. It is not clear whether
the issuing entity would be considered to be engaged in a trade or business in
the United States for purposes of federal withholding taxes with respect to
non-U.S. Persons because there is no clear authority dealing with that issue
under facts substantially similar to those described herein. Although it is not
expected that the issuing entity would be engaged in a trade or business in the
United States for those purposes, the issuing entity will withhold as if it were
so engaged in order to protect the issuing entity from possible adverse
consequences of a failure to withhold. The issuing entity expects to withhold on
the portion of its taxable income, as calculated for this purpose which may
exceed the distributions to certificateholders, that is allocable to foreign
certificateholders pursuant to Section 1446 of the Code, as if the income were
effectively connected to a U.S. trade or business. Subsequent adoption of
Treasury regulations or the issuance of other administrative pronouncements may
require the issuing entity to change its withholding procedures. In determining
a holder's withholding status, the issuing entity may rely on IRS Form W-8BEN,
IRS Form W-9 or the holder's certification of nonforeign status signed under
penalties of perjury. A holder who is not an individual or corporation (or an
entity treated as a corporation for federal income tax purposes) holding the
Notes on its own behalf may have substantially increased reporting requirements.
In particular, if the holder is a foreign partnership (or foreign trust), the
partners (or beneficiaries) rather than the partnership (or trust) will be
required to provide the certification discussed above, and the partnership (or
trust) will be required to provide certain additional information.

      Each foreign holder might be required to file a U.S. individual or
corporate income tax return (including, in the case of a corporation, the branch
profits tax) on its share of the issuing entity's income. Each foreign holder
must obtain a taxpayer identification number from the IRS and submit that number
in order to assure appropriate crediting of the taxes withheld. A foreign holder
generally would be entitled to file with the IRS a claim for refund with respect
to taxes withheld by the issuing entity taking the position that no taxes were
due because the issuing entity was not engaged in a U. S. trade or business.
However, interest payments made (or accrued) to a certificateholder who is a
foreign person generally will be considered guaranteed payments to the extent
the payments are determined without regard to the income of the issuing entity.
If these interest payments are properly characterized as guaranteed payments,
then the interest will not be considered "portfolio interest." As a result,
certificateholders will be subject to United States federal income tax and
withholding tax at a rate of 30 percent, unless reduced or eliminated pursuant
to an applicable treaty. In that case, a foreign holder would only be entitled
to claim a refund for that portion of the taxes in excess of the taxes that
should be withheld with respect to the guaranteed payments.


                                       116



      Backup Withholding. Distributions made on the certificates and proceeds
from the sale of the certificates will be subject to a "backup" withholding tax
if, in general, the certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code.

                            STATE TAX CONSIDERATIONS

      In addition to the federal income tax consequences described in "Certain
Federal Income Tax Considerations," potential investors are encouraged to
consider the state and local income tax consequences of the acquisition,
ownership, and disposition of the securities. State and local income tax law may
differ substantially from the corresponding federal law, and this discussion
does not purport to describe any aspect of the income tax laws of any state or
locality. Therefore, potential investors are encouraged to consult their own tax
advisors with respect to the various tax consequences of investments in the
securities.

                              ERISA CONSIDERATIONS

      Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan, as well as individual retirement
accounts, Keogh plans and other plans covered by Section 4975 of the Code, and
entities deemed to hold "plan assets" of any of the foregoing under the Plan
Assets Regulation (as defined below) (each such entity a "PLAN") from engaging
in certain transactions with persons that are "parties in interest" under ERISA
or "disqualified persons" under the Code with respect to such Plan. A violation
of these "prohibited transaction" rules may result in an excise tax or other
penalties and liabilities under ERISA and the Code for such persons or the
fiduciaries of the Plan. In addition, Title I of ERISA also requires fiduciaries
of a Plan subject to ERISA to make investments that are prudent, diversified and
in accordance with the governing plan documents.

EXEMPTIONS AVAILABLE TO DEBT INSTRUMENTS

      Certain transactions involving the issuer might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Plan that
purchased securities if assets of the issuer were deemed to be assets of the
Plan. Under a regulation issued by the United State Department of Labor (the
"PLAN ASSETS REGULATION"), the assets of the issuer would be treated as plan
assets of a Plan for the purposes of ERISA and the Code only if the Plan
acquired an "equity interest" in the issuer and none of the exceptions to plan
asset treatment contained in the Plan Assets Regulation was applicable. An
equity interest is defined under the Plan Assets Regulation as an interest other
than an instrument which is treated as indebtedness under applicable local law
and which has no substantial equity features. Although there is little guidance
on the subject, assuming the securities constitute debt for local law purposes,
the issuer believes that, at the time of their issuance, the security should not
be treated an equity interest in the issuer for purposes of the Plan Assets
Regulation. This determination is based in part upon the traditional debt
features of the securities, including the reasonable expectation of purchasers
of securities that the securities will be repaid when due, as well as the
absence of conversion rights, warrants and other typical equity features. The
debt treatment of the securities for ERISA purposes could change if the issuer
incurred losses. This risk of recharacterization is enhanced for securities that
are subordinated to other classes of securities.

      However, without regard to whether the securities are treated as equity
interests for purposes of the Plan Assets Regulation, the acquisition or holding
of securities by or on behalf of a Plan could be considered to give rise to a
prohibited transaction if the issuer, the servicer, the trustee, or any of their
respective affiliates is or becomes a party in interest or a disqualified person
with respect to such Plan. Certain exemptions from the prohibited transaction
rules could be applicable to the purchase and holding of securities by a Plan
depending on the type and circumstances of the plan fiduciary making the
decision to acquire such securities. Included among these exemptions are:
Prohibited Transaction Class Exemption ("PTCE") 96-23, regarding transactions
effected by "in-house asset managers"; PTCE 95-60, regarding investments by
insurance company general accounts; PTCE 91-38, regarding investments by bank
collective investment funds; PTCE 90-1, regarding investments by insurance
company pooled separate accounts; and PTCE 84-14, regarding transactions
effected by "qualified professional asset managers." By acquiring a security,
each purchaser will be deemed to represent that either (i) it is not acquiring
the securities with the assets of a Plan or (ii) the acquisition and holding of
the securities will not give rise to a non-exempt prohibited transaction under
ERISA, Section 4975 of the Code or any substantially similar applicable law.


                                       117



      Governmental plans, as defined in the Code and ERISA, are not subject to
Title I of ERISA, and are also not subject to the prohibited transaction
provisions under Section 4975 of the Code. However, state laws or regulations
governing the investment and management of the assets of such plans may contain
fiduciary and prohibited transaction requirements similar to those under ERISA
and the Code discussed above and may include other limitations on permissible
investments. Accordingly, fiduciaries of governmental plans, in consultation
with their advisors, should consider the requirements of their respective state
pension codes with respect to investments in the securities, and the
considerations discussed above, to the extent applicable.

      The issuing entity, the servicer, the trustee and the underwriter of the
securities of any series may be the sponsor of or investment advisor with
respect to one or more plans. Because they may receive certain benefits in
connection with the sale of the securities, the purchase of securities using
plan assets over which any of them has investment authority might be deemed to
be a violation of the prohibited transaction rules of ERISA and the Code for
which no exemption may be available. Accordingly, any plan for which the issuing
entity, the servicer, the trustee or the underwriter of the notes, or any of
their respective affiliates:

          o   has investment or administrative discretion with respect to plan
              assets to be invested in the securities;

          o   has authority or responsibility to give, or regularly gives,
              investment advice with respect to those plan assets, for a fee and
              pursuant to an agreement or understanding that the advice (i) will
              serve as a primary basis for investment decision with respect to
              those plan assets, and (ii) will be based on the particular
              investment needs for the plan; or

          o   is an employer maintaining or contributing to the plan,

may not invest in the securities unless an appropriate administrative prohibited
transaction exemption applies to the investment.

UNDERWRITER EXEMPTION

      The United States Department of Labor ("DOL") has granted to certain
underwriters individual administrative exemptions (the "UNDERWRITER EXEMPTIONS")
from certain of the prohibited transaction rules of ERISA and the related excise
tax provisions of Section 4975 of the Code with respect to the initial purchase,
the holding and the subsequent resale by Plans of securities, including
certificates, in pass-through entities, including trusts, that consist of
certain receivables, loans and other obligations that meet the conditions and
requirements of the Underwriter Exemptions, and with respect to transactions in
connection with the servicing, management and operation of the entity.

      While each Underwriter Exemption is an individual exemption separately
granted to a specific underwriter, the terms and conditions which generally
apply to the Underwriter Exemptions are substantially the following:

      o   the acquisition of the securities by a Plan is on terms (including the
          price for the securities) that are at least as favorable to the Plan
          as they would be in an arm's length transaction with an unrelated
          party;

      o   the rights and interests evidenced by the securities acquired by the
          Plan are not subordinated to the rights and interests evidenced by
          other securities of the issuer, unless the entity holds only certain
          types of assets, such as fully-secured mortgage loans on real property
          (a "DESIGNATED TRANSACTION");

      o   the securities acquired by the Plan have received a rating at the time
          of acquisition that is one of the three highest generic rating
          categories (four, in a Designated Transaction) from Standard & Poor's
          Ratings Services, a division of The McGraw-Hill Companies, Inc.
          ("S&P"), Moody's Investors Service, Inc. ("MOODY'S"), or Fitch Ratings
          ("FITCH"). However, the certificates must have been rated in one of
          the two highest generic rating categories by at least one of rating
          agency and may not be subordinated to any other security of the issuer
          if the loan-to value ratio of any single-family residential mortgage
          loan or home equity loan held in the trust exceeded 100% on the date
          of issuance of the certificate;


                                       118



      o   the trustee is not an affiliate of any other member of the Restricted
          Group, as defined below, other than an underwriter;

      o   the sum of all payments made to and retained by the underwriters in
          connection with the distribution of the securities represents not more
          than reasonable compensation for underwriting the securities; the sum
          of all payments made to and retained by the seller pursuant to the
          assignment of the loans to the issuer represents not more than the
          fair market value of the loans; the sum of all payments made to and
          retained by the servicer and any other servicer represents not more
          than reasonable compensation for its services under the agreement
          pursuant to which the loans are pooled and reimbursements of its
          reasonable expenses in connection therewith; and

      o   the Plan investing in the securities is an "accredited investor" as
          defined in Rule 501(a)(1) of Regulation D of the SEC under the
          Securities Act.

      The Underwriter Exemptions will not apply to any of the certificates if
any mortgage loan or other asset held in the trust (other than a single family
mortgage loan or home equity loan) has a loan-to-value ratio that exceeds 100%
on the date of issuance of the certificates or if any single-family residential
mortgage loan or home equity loan has a loan-to-value ratio that exceeds 125% on
the date of issuance of the certificates. As noted above, when the trust
contains single-family residential mortgage loans or home equity loans with a
loan-to-value ratio that exceeds 100% (but does not exceed 125%) on the date of
issuance, only certificates that are rated in one of the two highest rating
categories by a rating agency and that are not subordinated are eligible for
relief under the Underwriter Exemptions.

      The issuer must also meet the following requirements:

      o   the corpus of the issuer must consist solely of assets of the type
          that have been included in other investment pools;

      o   securities in other investment pools must have been rated in one of
          the three highest rating categories (four, in a Designated
          Transaction) of S&P, Moody's or Fitch for at least one year before the
          Plan's acquisition of securities; and

      o   securities evidencing interests in the other investment pools must
          have been purchased by investors other than Plans for at least one
          year before any Plan's acquisition of securities.

      In addition, if the issuer is a legal entity of certain types, the legal
document establishing the issuer must contain restrictions necessary to ensure
that the assets of the issuer may not be reached by creditors of the seller in
the event of its bankruptcy or insolvency.

      Moreover, the Underwriter Exemptions generally provide relief from certain
self-dealing and conflict of interest prohibited transactions that may occur
when the Plan fiduciary causes a Plan to acquire securities of an issuer holding
receivables as to which the fiduciary (or its affiliate) is an obligor provided
that, among other requirements:

      o   in the case of an acquisition in connection with the initial issuance
          of securities, at least fifty percent of each class of securities in
          which Plans have invested and at least fifty percent of the securities
          in the aggregate are acquired by persons independent of the Restricted
          Group;

      o   the fiduciary (or its affiliate) is an obligor with respect to five
          percent or less of the fair market value of the obligations contained
          in the investment pool;

      o   the Plan's investment in securities of any class does not exceed
          twenty-five percent of all of the securities of that class outstanding
          at the time of the acquisition; and

      o   immediately after the acquisition, no more than twenty-five percent of
          the assets of any Plan with respect to which the person is a fiduciary
          is invested in securities representing an interest in one or more
          issuers containing assets sold or serviced by the same entity.


                                       119



This relief is not available to Plans sponsored by the seller, any underwriter,
the trustee, the servicer, any servicer, any insurer with respect to the trust,
any obligor with respect to mortgage loans included in the issuing entity
constituting more than five percent of the aggregate unamortized principal
balance of the assets in the issuing entity, any counterparty to a permissible
notional principal contract included in the trust, or any affiliate of those
parties (the "RESTRICTED GROUP").

      The Underwriter Exemptions extend exemptive relief to specified
mortgage-backed and asset-backed securities transactions using pre-funded
accounts for trusts issuing pass-through securities. Mortgage loans or other
secured receivables supporting payments to securityholders, and having a value
equal to no more than twenty-five percent of the total principal amount of the
securities being offered by the trust, may be transferred to the trust within a
90-day or three-month period following the closing date, instead of being
required to be either identified or transferred on or before the closing date.
The relief is available when the pre-funding arrangements satisfy certain
conditions, including, without limitation, (a) all additional loans must meet
the same terms and conditions for determining eligibility as the initial loans;
(b) the additional loans may not result in a lower credit rating; and (c) the
characteristics of the additional loans must be substantially similar to those
of the loans described in this prospectus and the applicable prospectus
supplement, and the acquisition of the additional loans must be monitored by an
independent accountant or a credit support provider or other insurance provider
independent of the seller.

      The Underwriter Exemptions extend exemptive relief to certain
mortgage-backed and asset-backed securities transactions involving trusts that
contain swaps, provided any swap satisfies certain requirements and the other
requirements of the Underwriter Exemptions are met. Among other requirements,
the counterparty to the swap must maintain ratings at certain levels from rating
agencies, and the documentation for the swap must provide for certain remedies
if the rating declines. The swap must be an interest rate swap denominated in
U.S. dollars, may not be leveraged, and must satisfy several other criteria.
Securities of any class affected by the swap may be sold to plan investors only
if they are "qualified plan investors" that satisfy several requirements
relating to their ability to understand the terms of the swap and the effects of
the swap on the risks associated with an investment in the security.

      The rating of a security may change. If a class of securities no longer
has a required rating from at least one rating agency, securities of that class
will no longer be eligible for relief under the Underwriter Exemptions (although
a Plan that had purchased the security when it had a permitted rating would not
be required by the Underwriter Exemptions to dispose of it.) A security that
satisfies the requirements of the Underwriter Exemptions other than the rating
requirement may be eligible for purchase by an insurance company investing
assets of its general account that include plan assets when the requirements of
Sections I and III of PTCE 95-60 are met. If the ratings decline below one of
the four highest generic rating categories from S&P, Moody's or Fitch, each
transferee will be deemed to represent that either (a) it is not purchasing the
securities with plan assets of a Plan, or (b) it is an insurance company using
the assets of its general account (within the meaning of PTCE 95-60) to purchase
the securities and that it is eligible for and satisfies all of the requirements
of Sections I and III of PTCE 95-60.

      The prospectus supplement for each series of securities will indicate the
classes of securities offered thereby, if any, as to which it is expected that
an Underwriter Exemption will apply.

      Any Plan fiduciary that proposes to cause a Plan to purchase securities is
encouraged to consult with its counsel concerning the impact of ERISA and the
Code, the availability and applicability of any Underwriter Exemption or any
other exemptions from the prohibited transaction provisions of ERISA and the
Code and the potential consequences in their specific circumstances, before
making the investment. Moreover, each Plan fiduciary should determine whether
under the general fiduciary standards of investment prudence and diversification
an investment in the securities is appropriate for the Plan, taking into account
the overall investment policy of the Plan and the composition of the Plan's
investment portfolio.

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


                                       120



                                LEGAL INVESTMENT

      The prospectus supplement for each series of securities will specify
which, if any, of the classes of securities offered by it will constitute
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984 ("SMMEA"). Classes of securities that qualify as
"mortgage related securities" will be legal investments for those investors
whose authorized investments are subject to state regulation, to the same extent
as, under applicable law, obligations issued by or guaranteed as to principal
and interest by the United States constitute legal investments for them. Those
investors are persons, trusts, corporations, partnerships, associations,
business trusts and business entities (including depository institutions, life
insurance companies and pension funds) created pursuant to or existing under the
laws of the United States or of any state (including the District of Columbia
and Puerto Rico). Under SMMEA, if a state enacts legislation before October 4,
1991 specifically limiting the legal investment authority of those entities with
respect to "mortgage related securities," the securities will constitute legal
investments for entities subject to the legislation only to the extent provided
in it. Approximately twenty-one states adopted limiting legislation before the
October 4, 1991 deadline.

      SMMEA also amended the legal investment authority of federally-chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal in securities
without limitations as to the percentage of their assets represented by them,
federal credit unions may invest in mortgage related securities, and national
banks may purchase securities for their own account without regard to the
limitations generally applicable to investment securities set forth in 12 U.S.C.
24 (Seventh), subject in each case to regulations that the applicable federal
authority may prescribe. In this connection, federal credit unions should review
the National Credit Union Administration Letter to Credit Unions No. 96, as
modified by Letter to Credit Unions No. 108, which includes guidelines to assist
federal credit unions in making investment decisions for mortgage related
securities, and the its regulation "Investment and Deposit Activities" (12
C.F.R. Part 703), (regardless of whether the class of securities under
consideration for purchase constitutes a "mortgage related security").

      All depository institutions considering an investment in the securities
(regardless of whether the class of securities under consideration for purchase
constitutes a "mortgage related security") should review the Federal Financial
Institutions Examination Council's Supervisory Policy Statement on Securities
Activities (to the extent adopted by their respective regulators), setting
forth, in relevant part, certain securities trading and sales practices deemed
unsuitable for an institution's investment portfolio, and guidelines for (and
restrictions on) investing in mortgage derivative products, including "mortgage
related securities" that are "high-risk mortgage securities" as defined in the
policy statement. According to the policy statement, "high-risk mortgage
securities" include securities such as securities not entitled to distributions
allocated to principal or interest, or subordinated securities. Under the policy
statement, each depository institution must determine, before purchase (and at
stated intervals thereafter), whether a particular mortgage derivative product
is a "high-risk mortgage security," and whether the purchase (or retention) of
such a product would be consistent with the policy statement.

      The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines, or agreements generally
governing investments made by a particular investor, including "prudent
investor" provisions, percentage-of-assets limits and provisions that may
restrict or prohibit investment in securities that are not "interest bearing" or
"income paying."

      There may be other restrictions on the ability of certain investors,
including depository institutions, either to purchase securities or to purchase
securities representing more than a specified percentage of the investor's
assets. Investors are encouraged to consult their own legal advisors in
determining whether and to what extent the securities constitute legal
investments for them.

                             METHOD OF DISTRIBUTION

      Securities are being offered hereby in series from time to time (each
series evidencing a separate issuing entity) through any of the following
methods:

      o   by negotiated firm commitment underwriting and public reoffering by
          underwriters;


                                       121



      o   by agency placements through one or more placement agents primarily
          with institutional investors and dealers; and

      o   by placement directly by the depositor with institutional investors.

      A prospectus supplement will be prepared for each series which will
describe the method of offering being used for that series and will set forth
the identity of any of its underwriters and either the price at which the series
is being offered, the nature and amount of any underwriting discounts or
additional compensation to the underwriters and the proceeds of the offering to
the depositor, or the method by which the price at which the underwriters will
sell the securities will be determined. Each prospectus supplement for an
underwritten offering will also contain information regarding the nature of the
underwriters obligations, any material relationship between the depositor and
any underwriter and, where appropriate, information regarding any discounts or
concessions to be allowed or reallowed to dealers or others and any arrangements
to stabilize the market for the securities so offered. In firm commitment
underwritten offerings, the underwriters will be obligated to purchase all of
the securities of the series if any securities are purchased. Securities may be
acquired by the underwriters for their own accounts and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.

      Underwriters and agents may be entitled under agreements entered into with
the depositor to indemnification by the depositor against certain civil
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments which the underwriters or agents may be required to
make in respect thereof.

      In relation to each Member State of the European Economic Area that has
implemented the Prospectus Directive (each, a "RELEVANT MEMBER STATE"), each
underwriter will be required to represent and agree with the depositor that with
effect from and including the date on which the Prospectus Directive is
implemented in that Relevant Member State (the "RELEVANT IMPLEMENTATION DATE")
and with respect to any class of securities with a minimum denomination of less
than $100,000, it has not made and will not make an offer of securities to the
public in that Relevant Member State prior to the publication of a prospectus in
relation to the securities that has been approved by the competent authority in
that Relevant Member State or, where appropriate, approved in another Relevant
Member State and notified to the competent authority in that Relevant Member
State, all in accordance with the Prospectus Directive, except that it may, with
effect from and including the Relevant Implementation Date, make an offer of
securities to the public in that Relevant Member State at any time:

      (a)   to legal entities that are authorized or regulated to operate in the
            financial markets or, if not so authorized or regulated, whose
            corporate purpose is solely to invest in securities;

      (b)   to any legal entity that has two or more of (1) an average of at
            least 250 employees during the last fiscal year; (2) total assets of
            more than (euro)43,000,000 and (3) an annual net revenue of more
            than (euro)50,000,000, as shown in its last annual or consolidated
            financial statements; or

      (c)   in any other circumstances that do not require the publication by
            the depositor of a prospectus pursuant to Article 3 of the
            Prospectus Directive.

      For the purposes of this provision, the expression an "offer of securities
to the public" in relation to any class of securities of a series, which class
has a minimum denomination of less than $100,000, in any Relevant Member State
means the communication in any form and by any means of sufficient information
on the terms of the offer and the securities to be offered so as to enable an
investor to decide to purchase or subscribe the securities, as the same may be
varied in that Member State by any measure implementing the Prospectus Directive
in that Member State, and the expression "Prospectus Directive" means Directive
2003/7 1/EC and includes any relevant implementing measure in each Relevant
Member State.

      If a series is offered other than through underwriters, the prospectus
supplement relating to it will contain information regarding the nature of the
offering and any agreements to be entered into between the depositor and
purchasers of securities of the series.


                                       122



                                  LEGAL MATTERS

      The validity of the securities, including certain federal income tax
consequences with respect to the securities, will be passed upon for the
depositor by Sidley Austin LLP, New York, New York; Heller Ehrman LLP, New York,
New York; Mayer, Brown, Rowe & Maw LLP, New York, New York; or Thacher Proffitt
& Wood LLP, New York, New York.

                              FINANCIAL INFORMATION

      A new issuing entity will be formed for each series of securities and no
issuing entity will engage in any business activities or have any assets or
obligations before the issuance of the related series of securities.
Accordingly, no financial statements for any issuing entity will be included in
this prospectus or in the related prospectus supplement.

                                     RATING

      It is a condition to the issuance of the securities of each series offered
by this prospectus and by the prospectus supplement that they shall have been
rated in one of the four highest rating categories by the nationally recognized
statistical rating agency or agencies specified in the related prospectus
supplement.

      Ratings on mortgage pass-through securities address the likelihood of
receipt by securityholders of all distributions on the underlying mortgage
loans. These ratings address the structural, legal and issuer-related aspects
associated with the securities, the nature of the underlying mortgage loans and
the credit quality of the credit enhancer or guarantor, if any. Ratings on
mortgage pass-through securities do not represent any assessment of the
likelihood of principal prepayments by mortgagors or of the degree by which the
prepayments might differ from those originally anticipated. As a result,
securityholders might suffer a lower than anticipated yield, and, in addition,
holders of stripped pass-through securities in extreme cases might fail to
recoup their underlying investments.

      A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning rating
organization. Each security rating should be evaluated independently of any
other security rating.


                                       123



                            INDEX OF PRINCIPAL TERMS

                                                                            PAGE
                                                                            ----
1986 Act....................................................................107
2001 Act....................................................................100
2003 Act....................................................................100
Agency Securities............................................................19
Amortizable Bond Premium Regulations........................................105
Applicable Amount............................................................99
APR..........................................................................24
ARM Loans...................................................................107
Asset Conservation Act.......................................................86
Capitalized Interest Account.................................................69
CERCLA.......................................................................86
Class Security Balance.......................................................41
Clearstream, Luxembourg......................................................50
Code.....................................................................37, 88
Contingent Regulations.......................................................89
Contributions Tax...........................................................101
Cooperative..................................................................51
cooperative loans............................................................21
cooperatives.................................................................21
DBC..........................................................................50
Debt Securities..............................................................89
Deferred Interest...........................................................108
Designated Transaction......................................................118
DOL.........................................................................118
DTC..........................................................................49
Eleventh District............................................................47
ERISA.......................................................................117
Euroclear Operator...........................................................51
excess inclusion.............................................................99
excess servicing............................................................106
Exchange Act.................................................................32
FHA..........................................................................21
FHLBSF.......................................................................47
Fitch.......................................................................118
foreign person..............................................................112
Garn-St Germain Act..........................................................87
Global Securities............................................................52
Indenture....................................................................39
Insured Expenses.............................................................67
Issuing Entity Assets........................................................19
Legislative History.........................................................107
Liquidated Mortgage..........................................................75
market discount..............................................................92
Master REMIC.................................................................96
Moody's.....................................................................118
National Cost of Funds Index.................................................48
New CI ......................................................................50
new partnership.............................................................114
Non-U.S. Person.............................................................109
offshore location...........................................................102
OID.........................................................................103
OID Regulations.............................................................107
old partnership.............................................................114
OTS..........................................................................48
Payment Lag Securities.......................................................94
phantom income...............................................................97
Plan........................................................................117
Plan Assets Regulation......................................................117
pre-issuance accrued interest................................................94
Prepayment Assumption.......................................................107
Private Mortgage-Backed Securities...........................................19
Prohibited Transactions Tax.................................................100
PTCE........................................................................117
RCRA.........................................................................87
Regular Interest Securities..................................................89
Regular Securities...........................................................96
Regular Securityholders......................................................89
Relevant Implementation Date................................................122
Relevant Member State.......................................................122
Relief Act...............................................................13, 88
REMIC........................................................................88
REMIC Securities.............................................................96
REMICs.......................................................................96
Residual Certificates........................................................96
Restricted Group............................................................120
S&P.........................................................................118
SEC..........................................................................20
secured creditor exemption...................................................86
Securities Act...............................................................32
Security Account.............................................................67
Short-Term Note.............................................................112
Single Family Properties.....................................................22
SMMEA.......................................................................121
Stripped ARM Obligations....................................................108
Stripped Bond Securities....................................................106
Stripped Coupon Securities..................................................106
Subsequent Recoveries........................................................95
Subsidiary REMIC.............................................................96
Super-Premium Securities.....................................................90
Terms and Conditions.........................................................51
Title V......................................................................88
U.S. Person........................................................55, 102, 109
Underwriter Exemptions......................................................118
VA...........................................................................21
W-8BEN.................................................................109, 112
Withholding Agent...........................................................112


                                       124



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                      [THIS PAGE INTENTIONALLY LEFT BLANK.]

                  INDYMAC INDX MORTGAGE LOAN TRUST 2006-AR12
                                 ISSUING ENTITY



                               INDYMAC MBS, INC.
                                   DEPOSITOR




                           [INDYMAC BANK, F.S.B. LOGO]
                          SPONSOR, SELLER AND SERVICER




                                  $304,376,000

                                 (APPROXIMATE)




              MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2006-AR12


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

                             PROSPECTUS SUPPLEMENT

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


                              MERRILL LYNCH & CO.


     You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We
have not authorized anyone to provide you with different information.

     We are not offering the Series 2006-AR12 Mortgage Pass-Through
Certificates in any state where the offer is not permitted.

     Dealers will deliver a prospectus supplement and prospectus when acting as
underwriters of the Series 2006-AR12 Mortgage Pass-Through Certificates and
with respect to their unsold allotments or subscriptions. In addition, all
dealers selling the Series 2006-AR12 Mortgage Pass-Through Certificates will be
required to deliver a prospectus supplement and prospectus until ninety days
after the date of this prospectus supplement.




                                 July 27, 2006