Filed Pursuant to Rule 424(b)(5)
                                               Registration File No.: 333-125593

Prospectus Supplement
(To Prospectus Dated July 27, 2005)

                                  $787,383,100
                                  (APPROXIMATE)

                   MORGAN STANLEY MORTGAGE LOAN TRUST 2006-3AR
                                (ISSUING ENTITY)

                             MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2006-3AR

                          MORGAN STANLEY CAPITAL I INC.
                                   (DEPOSITOR)

                      MORGAN STANLEY MORTGAGE CAPITAL INC.
                              (SPONSOR AND SELLER)

                     WELLS FARGO BANK, NATIONAL ASSOCIATION
                                (MASTER SERVICER)

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

Morgan Stanley Mortgage Loan Trust 2006-3AR is issuing thirty-seven classes of
certificates, but is offering only twenty-seven of these classes of certificates
through this prospectus supplement.

Each class of certificates will receive monthly distributions of interest,
principal or both, commencing March 27, 2006.

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

You should read the section entitled "Risk Factors" starting on page S-15 of
this prospectus supplement and page 10 of the accompanying prospectus and
consider these factors before making a decision to invest in the certificates.

The certificates represent interests in the assets of the issuing entity only
and are not interests in or obligations of any other person.

Neither the certificates nor the underlying mortgage loans will be insured or
guaranteed by any governmental agency or instrumentality.

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

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

The Assets of the Issuing Entity--

o     The assets of the issuing entity will consist primarily of one loan group
      of fixed-rate, adjustable-rate and hybrid adjustable-rate mortgage loans
      and two loan groups of hybrid adjustable-rate mortgage loans, each of
      which are secured by first-lien mortgages on residential real properties
      with original terms to maturity of up to 30 years.

The Certificates--

o     The certificates will represent beneficial interests in the assets of the
      issuing entity, as described in this prospectus supplement.

Credit Enhancement--

o     For the certificates related to loan group 1--Subordination as described
      in this prospectus supplement under "Description of the
      Certificates--Allocation of Losses" and "Credit
      Enhancement--Subordination."

o     For the certificates related to loan group 2 and loan group
      3--Subordination and Cross-Collateralization as described in this
      prospectus supplement under "Description of the Certificates--Allocation
      of Losses" and "--Aggregate Certificate Group II--Transfer Payments" and
      "Credit Enhancement--Subordination."

      The Securities and Exchange Commission and state securities regulators
have not approved or disapproved of the offered certificates or determined if
this prospectus supplement or the accompanying prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.

      Morgan Stanley Capital I Inc. will not list the offered certificates on
any securities exchanges or on any automated quotation system of any securities
association.

      The certificates offered by this prospectus supplement will be purchased
by Morgan Stanley & Co. Incorporated and offered from time to time to the public
in negotiated transactions or otherwise at varying prices to be determined at
the time of sale. Proceeds to the depositor from the sale of the offered
certificates are anticipated to be approximately 101.32% of the principal
balance of these classes of certificates (excluding accrued interest) before the
deduction of expenses payable by the depositor, estimated to be approximately
$625,000. The offered certificates, other than the Class A-R Certificates, will
be available for delivery to investors in book-entry form through the facilities
of the Depository Trust Company, Clearstream, Luxembourg and the Euroclear
System on or about February 28, 2006.

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

                                 MORGAN STANLEY

February 24, 2006




   IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS SUPPLEMENT
                         AND THE ACCOMPANYING PROSPECTUS

      We provide information to you about the certificates in two separate
documents that provide more detail in progression: (1) the accompanying
prospectus, which provides general information, some of which may not apply to
your series of certificates, and (2) this prospectus supplement, which describes
the specific terms of your series of certificates. IF THE ACCOMPANYING
PROSPECTUS CONTEMPLATES MULTIPLE OPTIONS, YOU SHOULD RELY ON THE INFORMATION IN
THIS PROSPECTUS SUPPLEMENT AS TO THE APPLICABLE OPTION.

      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 Mortgage Pass-Through Certificates, Series
2006-3AR in any state or other jurisdiction where the offer is not permitted.

      For 90 days following the date of this prospectus supplement, all dealers
selling certificates will deliver a prospectus supplement and prospectus. This
requirement is in addition to the dealers' obligation to deliver a prospectus
when acting as underwriters of the certificates with respect to their unsold
allotments or subscriptions.

      We cannot sell the certificates to you unless you have received both this
prospectus supplement and the accompanying prospectus.

      We include cross-references in this prospectus supplement and the
accompanying prospectus to captions in these materials where you can find
further information concerning a particular topic. The table of contents in this
prospectus supplement and the table of contents in the accompanying prospectus
provide the pages on which these captions are located.

      Some of the terms used in this prospectus supplement are capitalized.
These capitalized terms have specified definitions, which can be located using
the "Index of Certain Definitions" at the end of this prospectus supplement.

      In this prospectus supplement, the terms "depositor," "we," "us" and "our"
refer to Morgan Stanley Capital I Inc.

      Morgan Stanley Capital I Inc.'s principal offices are located at 1585
Broadway, New York, New York 10036, and its phone number is (212) 761-4000.

                             EUROPEAN ECONOMIC AREA

      In relation to each Member State of the European Economic Area which has
implemented the Prospectus Directive (each, a "RELEVANT MEMBER STATE"), the
underwriter has represented and agreed that with effect from and including the
date on which the Prospectus Directive is implemented in that Relevant Member
State (the "RELEVANT IMPLEMENTATION DATE") it has not made and will not make an
offer of certificates to the public in that Relevant Member State prior to the
publication of a prospectus in relation to the certificates which 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 certificates to the public in
that Relevant Member State at any time:

      (a)   to legal entities which 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;


                                       iii



      (b)   to any legal entity which has two or more of (1) an average of at
least 250 employees during the last financial year; (2) a total balance sheet of
more than (euro)43,000,000 and (3) an annual net turnover of more than
(euro)50,000,000, as shown in its last annual or consolidated accounts; or

      (c)   in any other circumstances which do not require the publication by
the issuer of a prospectus pursuant to Article 3 of the Prospectus Directive.

      For the purposes of this provision, the expression an "offer of
certificates to the public" in relation to any certificates 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 certificates to be offered so as
to enable an investor to decide to purchase or subscribe the certificates, 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 2003/71/EC and includes any relevant implementing
measure in each Relevant Member State.


                                       iv



                        THE SERIES 2006-3AR CERTIFICATES



                                                                                         INITIAL RATING OF
                                                                                      OFFERED CERTIFICATES (2)
                                                                                    ---------------------------
                                                       PASS-
                                INITIAL PRINCIPAL     THROUGH
          CLASS                    BALANCE(1)          RATE        PRINCIPAL TYPES      MOODY'S         S&P
-----------------------------   -----------------  -------------   ----------------   ------------    --------

OFFERED CERTIFICATES
Class 1-A-1...................   $50,000,000       Floating Rate   Senior,                 Aaa          AAA
                                                      (3), (4)     Pass-Through,
                                                                   Super Senior

Class 1-A-2...................    $3,350,000       Floating Rate   Senior,                 Aa1          AAA
                                                      (3), (5)     Pass-Through,
                                                                   Support

Class 1-A-3...................  $314,433,000       Floating Rate   Senior,                 Aaa          AAA
                                                      (3), (6)     Pass-Through
Class 1-A-X...................   Notional (7)      Variable (3),   Senior, Notional        Aaa          AAA
                                                      (8), (9)     Amount,
                                                                   Interest-Only

Class 2-A-1...................   $67,000,000       Variable (10)   Senior,                 Aaa          AAA
                                                                   Pass-Through,
                                                                   Super Senior
Class 2-A-2...................    $9,354,000       Variable (10)   Senior,                 Aaa          AAA
                                                                   Pass-Through,
                                                                   Support
Class 2-A-3...................   $95,539,000       Variable (10)   Senior,                 Aaa          AAA
                                                                   Pass-Through,
                                                                   Super Senior
Class 2-A-4...................    $8,027,000       Variable (10)   Senior,                 Aa1          AAA
                                                                   Pass-Through,
                                                                   Support
Class 3-A-1...................  $181,162,000       Variable (11)   Senior,                 Aaa          AAA
                                                                   Pass-Through,
                                                                   Super Senior
Class 3-A-2...................   $15,220,000       Variable (11)   Senior,                 Aa1          AAA
                                                                   Pass-Through,
                                                                   Support
Class 1-M-X...................   Notional (7)      Variable (3),   Subordinate,            Aa1          AAA
                                                     (9), (12)     Notional Amount,
                                                                   Interest-Only

Class 1-M-1...................    $6,081,000       Floating Rate   Subordinate             Aa1          AA+
                                                     (3), (13)

Class 1-M-2...................    $2,746,000       Floating Rate   Subordinate             Aa2           AA
                                                     (3), (14)

Class 1-M-3...................    $2,157,000       Floating Rate   Subordinate             Aa3           AA
                                                     (3), (15)

Class 1-M-4...................    $1,962,000       Floating Rate   Subordinate             A1           AA-
                                                     (3), (16)

Class 1-M-5...................    $1,569,000       Floating Rate   Subordinate             A2            A+
                                                     (3), (17)

Class 1-M-6...................    $1,177,000       Floating Rate   Subordinate             A3            A
                                                     (3), (18)

Class 1-M-7...................    $1,177,000       Floating Rate   Subordinate            Baa1          BBB+
                                                     (3), (19)

Class 1-M-8...................    $1,373,000       Floating Rate   Subordinate            Baa2          BBB
                                                     (3), (20)

Class 1-M-9...................      $785,000       Floating Rate   Subordinate            Baa3          BBB-
                                                     (3), (21)

Class M-1.....................   $12,238,000       Variable (22)   Subordinate             Aa2           AA
Class M-2.....................    $2,651,000       Variable (22)   Subordinate             Aa3           AA-
Class M-3.....................    $4,079,000       Variable (22)   Subordinate              A2            A
Class M-4.....................    $1,632,000       Variable (22)   Subordinate              A3            A-
Class M-5.....................    $2,448,000       Variable (22)   Subordinate            Baa2          BBB
Class M-6.....................    $1,223,000       Variable (22)   Subordinate            Baa3          BBB-
Class A-R.....................          $100       Variable (10)   Senior, Residual        Aaa          AAA



                                        v





                                                                                         INITIAL RATING OF
                                                                                      OFFERED CERTIFICATES (2)
                                                                                    ---------------------------
                                                        PASS-
                                INITIAL PRINCIPAL     THROUGH
          CLASS                    BALANCE(1)           RATE       PRINCIPAL TYPES       MOODY'S        S&P
-----------------------------   -----------------  -------------   ----------------   ------------    --------

NON-OFFERED CERTIFICATES
Class 1-B-1...................      $588,000       Variable (23)   Subordinate             Ba1           BB+
Class 1-B-2...................    $1,373,000       Variable (23)   Subordinate             --            BB
Class 1-B-3...................    $2,158,000       Variable (23)   Subordinate             --             B
Class 1-B-4...................    $1,373,276       Variable (23)   Subordinate             --            --
Class B-1.....................    $1,836,000       Variable (22)   Subordinate             Ba2           BB
Class B-2.....................    $3,263,000       Variable (22)   Subordinate             --             B
Class B-3.....................    $2,244,317       Variable (22)   Subordinate             --            --
Class P-1.....................          $100          N/A (24)     N/A                     --            --
Class P-2.....................          $100          N/A (24)     N/A                     --            --
Class C.......................          $100          N/A (25)     N/A                     --            --


_____________
(1)   Approximate, subject to adjustment as described in this prospectus
      supplement.

(2)   A description of the ratings of the offered certificates is set forth
      under the heading "Ratings" in this prospectus supplement. The ratings of
      the LIBOR Certificates do not address the likelihood that any Net WAC
      Shortfall, as described in this prospectus supplement, will be paid to
      certificateholders.

(3)   The pass-through rates for the group 1 certificates will be subject to the
      weighted average adjusted net rate of the group 1 mortgage loans (the
      "Group 1 Net WAC") as described in this prospectus supplement under
      "Description of the Certificates."

(4)   The pass-through rate for the Class 1-A-1 Certificates for the interest
      accrual period related to any distribution date will be a per annum rate
      equal to one-month LIBOR + 0.25%, subject to a maximum pass-through rate
      of 11.50% per annum. The pass-through rate for the Class 1-A-1
      Certificates for the first distribution date will be a per annum rate of
      approximately 4.83063%.

(5)   The pass-through rate for the Class 1-A-2 Certificates for the interest
      accrual period related to any distribution date will be a per annum rate
      equal to one-month LIBOR + 0.40%, subject to a maximum pass-through rate
      of 11.50% per annum. The pass-through rate for the Class 1-A-2
      Certificates for the first distribution date will be a per annum rate of
      approximately 4.98063%.

(6)   The pass-through rate for the Class 1-A-3 Certificates for the interest
      accrual period related to any distribution date will be a per annum rate
      equal to one-month LIBOR + 0.26%, subject to a maximum pass-through rate
      of 11.50% per annum. The pass-through rate for the Class 1-A-3
      Certificates for the first distribution date will be a per annum rate of
      approximately 4.84063%.

(7)   Interest will accrue on the respective Notional Amounts of the Class 1-A-X
      and Class 1-M-X Certificates, initially equal to approximately
      $367,783,000 and $19,027,000, respectively, calculated as described in
      "Description of the Certificates -Notional Amount Certificates" at the per
      annum pass-through rates set forth below. These certificates will not
      receive any distributions of principal.

(8)   The pass-through rate for the Class 1-A-X Certificates for the interest
      accrual period related to any distribution date will be a per annum rate
      equal to the excess, if any, of (i) the Group 1 Net WAC over (ii) the
      weighted average of the pass-through rates for the Class 1-A-1, Class
      1-A-2 and Class 1-A-3 Certificates for the interest accrual period related
      to that distribution date and subject to other limitations described
      herein. The pass-through rate for the Class 1-A-X Certificates for the
      first distribution date will be a per annum rate of approximately
      1.14531%.

(9)   On each distribution date a portion of the interest otherwise
      distributable on the Class 1-A-X and Class 1-M-X Certificates may, in lieu
      of being distributed to such class of certificates, instead be deposited
      into the carryover shortfall reserve fund and will be used to pay certain
      Net WAC Shortfalls (i) in respect of the Class 1-A-1, Class 1-A-2 and
      Class 1-A-3 Certificates, in the case of the Class 1-A-X Certificates, and
      (ii) in respect of the Class 1-M-1, Class 1-M-2, Class 1-M-3, Class 1-M-4,
      Class 1-M-5, Class 1-M-6, Class 1-M-7, Class 1-M-8 and Class 1-M-9
      Certificates, in the case of the Class 1-M-X Certificates, in each case as
      described in this prospectus supplement under "Description of the
      Certificates--Interest" and "--The Reserve Fund and the Corridor
      Contracts."

(10)  The pass-through rate for the Class 2-A-1, Class 2-A-2, Class 2-A-3, Class
      2-A-4 and Class A-R Certificates for the interest accrual period related
      to any distribution date will be a per annum rate equal to the weighted
      average net mortgage rate on the group 2 mortgage loans. The pass-through
      rate for the Class 2-A-1, Class 2-A-2, Class 2-A-3, Class 2-A-4 and Class
      A-R Certificates for the first distribution date will be a per annum rate
      of approximately 5.91935%.

(11)  The pass-through rate for the Class 3-A-1 and Class 3-A-2 Certificates for
      the interest accrual period related to any distribution date will be a per
      annum rate equal to the weighted average net mortgage rate on the group 3
      mortgage loans. The pass-through rate for the Class 3-A-1 and Class 3-A-2
      Certificates for the first distribution date will be a per annum rate of
      approximately 6.11904%.

(12)  The pass-through rate for the Class 1-M-X Certificates for the interest
      accrual period related to any distribution date will be a per annum rate
      equal to the excess, if any, of (i) the Group 1 Net WAC over (ii) the
      weighted average of the pass-through rates for the Class 1-M-1, Class
      1-M-2, Class 1-M-3, Class 1-M-4, Class 1-M-5, Class 1-M-6, Class 1-M-7,
      Class 1-M-8 and Class 1-M-9 Certificates for the interest accrual period
      related to that distribution date and subject to other limitations
      described herein. The pass-through rate for the Class 1-M-X Certificates
      for the first distribution date will be a per annum rate of approximately
      0.77954%.


                                       vi



(13)  The pass-through rate for the Class 1-M-1 Certificates for the interest
      accrual period related to any distribution date will be a per annum rate
      equal to one-month LIBOR + 0.42 %, subject to a maximum pass-through rate
      of 11.50% per annum. The pass-through rate for the Class 1-M-1
      Certificates for the first distribution date will be a per annum rate of
      approximately 5.00063%.

(14)  The pass-through rate for the Class 1-M-2 Certificates for the interest
      accrual period related to any distribution date will be a per annum rate
      equal to one-month LIBOR + 0.44 %, subject to a maximum pass-through rate
      of 11.50% per annum. The pass-through rate for the Class 1-M-2
      Certificates for the first distribution date will be a per annum rate of
      approximately 5.02063%.

(15)  The pass-through rate for the Class 1-M-3 Certificates for the interest
      accrual period related to any distribution date will be a per annum rate
      equal to one-month LIBOR + 0.46 %, subject to a maximum pass-through rate
      of 11.50% per annum. The pass-through rate for the Class 1-M-3
      Certificates for the first distribution date will be a per annum rate of
      approximately 5.04063%.

(16)  The pass-through rate for the Class 1-M-4 Certificates for the interest
      accrual period related to any distribution date will be a per annum rate
      equal to one-month LIBOR + 0.56 %, subject to a maximum pass-through rate
      of 11.50% per annum. The pass-through rate for the Class 1-M-4
      Certificates for the first distribution date will be a per annum rate of
      approximately 5.14063%.

(17)  The pass-through rate for the Class 1-M-5 Certificates for the interest
      accrual period related to any distribution date will be a per annum rate
      equal to one-month LIBOR + 0.59 %, subject to a maximum pass-through rate
      of 11.50% per annum. The pass-through rate for the Class 1-M-5
      Certificates for the first distribution date will be a per annum rate of
      approximately 5.17063%.

(18)  The pass-through rate for the Class 1-M-6 Certificates for the interest
      accrual period related to any distribution date will be a per annum rate
      equal to one-month LIBOR + 0.68 %, subject to a maximum pass-through rate
      of 11.50% per annum. The pass-through rate for the Class 1-M-6
      Certificates for the first distribution date will be a per annum rate of
      approximately 5.26063%.

(19)  The pass-through rate for the Class 1-M-7 Certificates for the interest
      accrual period related to any distribution date will be a per annum rate
      equal to one-month LIBOR + 1.20 %, subject to a maximum pass-through rate
      of 11.50% per annum. The pass-through rate for the Class 1-M-7
      Certificates for the first distribution date will be a per annum rate of
      approximately 5.78063%.

(20)  The pass-through rate for the Class 1-M-8 Certificates for the interest
      accrual period related to any distribution date will be a per annum rate
      equal to one-month LIBOR + 1.35 %, subject to a maximum pass-through rate
      of 11.50% per annum. The pass-through rate for the Class 1-M-8
      Certificates for the first distribution date will be a per annum rate of
      approximately 5.93063%.

(21)  The pass-through rate for the Class 1-M-9 Certificates for the interest
      accrual period related to any distribution date will be a per annum rate
      equal to one-month LIBOR + 1.35 %, subject to a maximum pass-through rate
      of 11.50% per annum. The pass-through rate for the Class 1-M-9
      Certificates for the first distribution date will be a per annum rate of
      approximately 5.93063%.

(22)  The pass-through rate for each class of aggregate group II subordinated
      certificates for the interest accrual period related to any distribution
      date will be a per annum rate equal to the sum of: (1) the weighted
      average net mortgage rate on the group 2 mortgage loans multiplied by the
      excess of the aggregate stated principal balance of the group 2 mortgage
      loans as of the due date in the month preceding the month of that
      distribution date (after giving effect to prepayments received in the
      prepayment period related to such prior due date) over the aggregate of
      the class principal balances of the group 2 senior certificates
      immediately prior to that distribution date, and (2) the weighted average
      net mortgage rate on the group 3 mortgage loans multiplied by the excess
      of the aggregate stated principal balance of the group 3 mortgage loans as
      of the due date in the month preceding the month of that distribution date
      (after giving effect to prepayments received in the prepayment period
      related to such prior due date) over the aggregate of the class principal
      balances of the group 3 senior certificates immediately prior to that
      distribution date; divided by the aggregate of the class principal
      balances of the aggregate group II subordinated certificates immediately
      prior to that distribution date. The pass-through rate for each class of
      aggregate group II subordinated certificates for the first distribution
      date will be a per annum rate of approximately 6.02357%.

(23)  The pass-through rate for the Class 1-B-1, Class 1-B-2, Class 1-B-3 and
      Class 1-B-4 Certificates for the interest accrual period related to any
      distribution date will be a per annum rate equal to the Group 1 Net WAC.
      The pass-through rate for the Class 1-B-1, Class 1-B-2, Class 1-B-3 and
      Class 1-B-4 Certificates for the first distribution date will be a per
      annum rate of approximately 5.98586%.

(24)  The Class P-1 Certificates will receive all payments in respect of
      prepayment penalties on the mortgage loans in loan group 1 and are not
      entitled to receive any distributions of interest. The Class P-2
      Certificates will receive all payments in respect of prepayment penalties
      on all of the mortgage loans in loan group 2 and loan group 3 and are not
      entitled to receive any distributions of interest.

(25)  The Class C Certificates will be entitled to receive the excess proceeds,
      if any, of an auction of the group 1 mortgage loans and are not entitled
      to receive any distributions of interest.


                                       vii



                          TRANSACTION PARTIES OVERVIEW

The following diagram illustrates the various parties involved in this
transaction and their respective functions:




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

    Morgan Stanley                Wachovia Mortgage                   Wells Fargo Bank,            Originators of less than
     Credit Corp.                    Corporation                     National Association          10% of the Mortgage Loans
     (Originator)                   (Originator)                         (Originator)                    by Loan Group

----------------------           ------------------                 --------------------          ---------------------------
          |                               |                                    |                                  |
          ---------------------------------------------------------------------------------------------------------
                                                             |   |
                                            Mortgage Loans   |   | $
                                                             |   |
                                         -------------------------------------------

                                            Morgan Stanley Mortgage Capital Inc.
                                                  (Originator and Sponsor)

                                         -------------------------------------------
                                                                 |
                                                       Mortgage  |                                           -----------------------
-----------------------                                   Loans  |
                                                                 |                                              Wells Fargo Bank,
Morgan Stanley Capital                   -------------------------------------------                      ---- National Association
     Services Inc.                                                                                       |         (Custodian)
  (Corridor Contract                          Morgan Stanley Capital I Inc.                              |
     Counterparty)                                     (Depositor)                                       |   -----------------------
                                                                                                         |
-----------------------                  -------------------------------------------                     |
                 |                                |                   |                                  |    ----------------------
Payments of Net  |                       Mortgage |                   |                                  |
WAC Shortfalls   |                       Loans    |                   |  Certificates                    |    LaSalle Bank National
on the LIBOR     |                                |                   |                                  |         Association
Certificates     |                       -------------------------------------------                     |----     (Custodian)
                 -----------------------                                               Custody of        |
                                         Morgan Stanley Mortgage Loan Trust 2006-3AR    mortgage         |    ----------------------
                                                      (Issuing Entity)                 loan files        |
                                                                                       ------------------|   -----------------------
                        ----------------      LaSalle Bank National Association                          |
                        |                                 (Trustee)                                      |     JPMorgan Chase Bank ,
                        |                                                                           ---- |    National Association
  Master Servicer pays  |               -------------------------------------------                 |     ----      (Custodian)
    Trustee fee out of  |                         |                   |                             |
      master servicing  |                         |                   |                             |        -----------------------
          compensation  |        Master Servicing |                   |   Master Servicing and      |
                        |            Compensation |                   |  Securities Administration  |  Master Servicer pays
                        |                         |                   |                             |  Custodians fees out of
                        |               --------------------------------------------                |  master servicing
                        |                                                                           |  compensation
                        |                         Wells Fargo Bank, N.A.                            |
                        |                     (Master Servicer and Securities      -----------------
                        |                             Administrator)
                        ----------------
                                        --------------------------------------------
                                          |                                      |
   Servicing Fee (payable out of          |                                      |      Primary Mortgage
  interest paid on the mortgage loans)    |                                      |      Loan Servicing
                                          |                                      |
          --------------------------------------------------------------------------------------------------------
          |                          |                         |                         |                        |
----------------------       ------------------         ---------------          -----------------      ----------------------

     GMAC Mortgage             HSBC Mortgage             Morgan Stanley          Wachovia Mortgage        Wells Fargo Bank,
      Corporation            Corporation (USA)            Credit Corp.              Corporation          National Association
      (Servicer)                 (Servicer)                (Servicer)               (Servicer)                (Servicer)

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



                                      viii



                                                      TABLE OF CONTENTS

                                                    PROSPECTUS SUPPLEMENT


SUMMARY..................................................................................................................S-1
RISK FACTORS............................................................................................................S-15
      Certificates May Not Be Appropriate for Individual Investors......................................................S-15
      Credit Enhancement May Not Be Adequate............................................................................S-16
      There Are Risks Involving Unpredictability of Prepayments and the Effect of Prepayments on Yields.................S-18
      Your Yield Will Be Affected By The Interest-Only Feature Of Some Of The Mortgage Loans............................S-19
      Your Yield May Be Affected By Changes In Interest Rates...........................................................S-19
      Your Yield Will Be Affected By How Mortgage Loan Interest Rate Adjustments Are Limited............................S-20
      The Pass-Through Rates and Interest Distributions on the Group 1 Certificates are Subject to Special Risks........S-20
      The Corridor Contracts are Subject to Counterparty Risk...........................................................S-21
      High Balance Mortgage Loans Pose Special Risks....................................................................S-21
      High Loan-To-Value Ratios Increase Risk of Loss...................................................................S-21
      Payments in Full of a Balloon Loan Depend on the Borrower's Ability to Refinance the Balloon Loan or Sell
           the Mortgaged Property.......................................................................................S-21
      Inadequacy of Value of Properties Could Affect Severity of Losses.................................................S-22
      Bankruptcy of Borrowers May Adversely Affect Distributions on Certificates........................................S-22
      There Are Risks in Holding Subordinated Certificates..............................................................S-22
      Geographic Concentration Could Increase Losses on The Mortgage Loans..............................................S-23
      Hurricane Katrina And Its Aftermath May Pose Special Risks........................................................S-23
      Cross-Collateralization Among the Loan Groups in Aggregate Loan Group II; Limited Recourse........................S-24
      Recourse on Defective Mortgage Loans Is Limited; Limited Recourse.................................................S-24
      Rapid Prepayments on the Mortgage Loans in the related Loan Group Will Reduce the Yields on the Class
           1-A-X and Class 1-M-X Certificates...........................................................................S-24
      Bankruptcy or Insolvency May Affect the Timing and Amount of Distributions on the Certificates....................S-25
      You Could be Adversely Affected by Violations of Consumer Protection Laws.........................................S-25
      Failure of Servicers and Master Servicer to Perform May Adversely Affect Distributions on Certificates............S-26
      The Servicing Compensation May Be Insufficient To Engage Replacement Servicers or Master Servicer.................S-26
      Your Yield May be Affected if There is a Transfer of Servicing of Certain Mortgage Loans..........................S-26
      Limited Liquidity May Adversely Affect Market Value of Certificates...............................................S-26
      Rights of Beneficial Owners May Be Limited by Book-Entry System...................................................S-27
      Military Action and Terrorist Attacks.............................................................................S-27
      Risks Related to the Class A-R Certificates.......................................................................S-27
FORWARD-LOOKING STATEMENTS..............................................................................................S-28
DESCRIPTION OF THE MORTGAGE
     LOANS..............................................................................................................S-29
      General...........................................................................................................S-29
      Tabular Characteristics of the Mortgage Loans.....................................................................S-34
      Assignment of the Mortgage Loans; Representations and Warranties Relating to the Mortgage Loans...................S-54
      Loan Purchasing Guidelines and Underwriting Standards.............................................................S-56
      Loan Purchasing Guidelines - Morgan Stanley Mortgage Capital Inc..................................................S-56
THE SERVICERS...........................................................................................................S-57
      General...........................................................................................................S-57
      GMAC Mortgage Corporation.........................................................................................S-57
SERVICING OF THE MORTGAGE LOANS.........................................................................................S-60
      Servicing and Collection Procedures...............................................................................S-60
      Servicing Compensation and Payment of Expenses; Master Servicing Compensation; Administrative Fees................S-61
      Adjustment to Servicing Fees in Connection with Certain Prepaid Mortgage Loans....................................S-65
      Advances..........................................................................................................S-65
      Evidence as to Compliance.........................................................................................S-65
      Master Servicer Default; Servicer Default.........................................................................S-66
      Resignation of the Master Servicer or a Servicer; Assignment and Merger...........................................S-67



                                       ix





      Eligibility Requirements for Trustee and Securities Administrator; Resignation and Removal of Trustee or
            Securities Administrator....................................................................................S-67
      Seller's Retention of Servicing Rights............................................................................S-68
THE SPONSOR.............................................................................................................S-68
STATIC POOL INFORMATION.................................................................................................S-69
THE DEPOSITOR...........................................................................................................S-70
THE ISSUING ENTITY......................................................................................................S-70
THE TRUSTEE.............................................................................................................S-71
THE MASTER SERVICER AND SECURITIES ADMINISTRATOR........................................................................S-72
THE CUSTODIANS..........................................................................................................S-73
DESCRIPTION OF THE CERTIFICATES.........................................................................................S-73
      General...........................................................................................................S-73
      Senior Certificates...............................................................................................S-73
      Subordinated Certificates.........................................................................................S-74
      Class P Certificates..............................................................................................S-75
      Class C Certificates..............................................................................................S-75
      Designations......................................................................................................S-76
      Notional Amount Certificates......................................................................................S-78
      Forms and Denominations of Offered Certificates; Distributions to Certificates....................................S-78
      Book-Entry Certificates...........................................................................................S-79
      Physical Certificates.............................................................................................S-81
      Calculation of One-Month LIBOR....................................................................................S-82
      Payments on Mortgage Loans; Accounts..............................................................................S-82
      Priority of Distributions Among Certificates......................................................................S-83
      Group 1 Certificates..............................................................................................S-83
      Aggregate Group II Certificates...................................................................................S-84
      Investments of Amounts Held in Accounts...........................................................................S-86
      Interest..........................................................................................................S-86
      The Reserve Fund and the Corridor Contracts.......................................................................S-87
      Description of the Corridor Contract Counterparty.................................................................S-90
      Principal.........................................................................................................S-90
      Aggregate Certificate Group II - Subordinated Portions............................................................S-91
      Aggregate Certificate Group II--Transfer Payments.................................................................S-91
      Glossary..........................................................................................................S-92
      Allocation of Losses..............................................................................................S-98
      Subsequent Recoveries............................................................................................S-100
      Reports to Certificateholders....................................................................................S-100
      Last Scheduled Distribution Date.................................................................................S-103
      Structuring Assumptions..........................................................................................S-103
      Auction and Optional Termination of the Group 1 Certificates and Optional Termination of the Aggregate
            Group II Certificates......................................................................................S-113
      Voting Rights....................................................................................................S-114
      Amendment........................................................................................................S-114
      Certain Matters Regarding the Depositor, the Master Servicer, the Securities Administrator, the Servicers,
            the Custodians and the Trustee.............................................................................S-115
YIELD, PREPAYMENT AND WEIGHTED AVERAGE LIFE............................................................................S-116
      General..........................................................................................................S-116
      Prepayment Considerations and Risks..............................................................................S-117
      Sensitivity of the Class 1-A-X and Class 1-M-X Certificates......................................................S-118
      Weighted Average Lives of the Offered Certificates...............................................................S-120
      Decrement Tables.................................................................................................S-120
      The Subordinated Certificates....................................................................................S-123
CREDIT ENHANCEMENT.....................................................................................................S-124
      Subordination....................................................................................................S-124
      Excess Losses....................................................................................................S-124
USE OF PROCEEDS........................................................................................................S-126
MATERIAL FEDERAL INCOME TAX CONSEQUENCES...............................................................................S-126
      General..........................................................................................................S-126
      Taxation of Regular Certificates.................................................................................S-126
      The Class A-R Certificates.......................................................................................S-128
OTHER TAXES............................................................................................................S-129
ERISA MATTERS..........................................................................................................S-129
METHOD OF DISTRIBUTION.................................................................................................S-132
LEGAL MATTERS..........................................................................................................S-132
RATINGS................................................................................................................S-132
INDEX OF CERTAIN DEFINITIONS...........................................................................................S-134
ANNEX I  GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES...................................................I-1
ANNEX II  CORRIDOR CONTRACT SCHEDULES FOR THE LIBOR CERTIFICATES........................................................II-1



                                        x



                                                      TABLE OF CONTENTS

                                                         PROSPECTUS



SUMMARY OF PROSPECTUS......................................................................................................5
RISK FACTORS..............................................................................................................10
DESCRIPTION OF THE TRUST FUNDS............................................................................................27
      Assets..............................................................................................................27
      Mortgage Loans......................................................................................................27
      Mortgage-Backed Securities..........................................................................................29
      Government Securities...............................................................................................30
      Accounts............................................................................................................31
      Credit Support......................................................................................................31
      Cash Flow Agreements................................................................................................31
USE OF PROCEEDS...........................................................................................................32
YIELD CONSIDERATIONS......................................................................................................32
      General.............................................................................................................32
      Pass-Through Rate...................................................................................................32
      Timing of Payment of Interest.......................................................................................32
      Payments of Principal; Prepayments..................................................................................33
      Prepayments, Maturity and Weighted Average Life.....................................................................34
      Other Factors Affecting Weighted Average Life.......................................................................35
THE DEPOSITOR.............................................................................................................36
DESCRIPTION OF THE CERTIFICATES...........................................................................................37
      General.............................................................................................................37
      Categories of Classes of Certificates...............................................................................37
      Indices Applicable to Floating Rate and Inverse Floating Rate Classes...............................................40
      LIBOR...............................................................................................................40
      COFI................................................................................................................41
      Treasury Index......................................................................................................42
      Prime Rate..........................................................................................................42
      Distributions.......................................................................................................43
      Available Distribution Amount.......................................................................................43
      Distributions of Interest on the Certificates.......................................................................43
      Distributions of Principal of the Certificates......................................................................44
      Components..........................................................................................................45
      Distributions on the Certificates of Prepayment Premiums............................................................45
      Allocation of Losses and Shortfalls.................................................................................45
      Advances in Respect of Delinquencies................................................................................45
      Reports to Certificateholders.......................................................................................46
      Termination.........................................................................................................48
      Book-Entry Registration and Definitive Certificates.................................................................48
DESCRIPTION OF THE AGREEMENTS.............................................................................................53
      Assignment of Assets; Repurchases...................................................................................53
      Representations and Warranties; Repurchases.........................................................................55
      Certificate Account and Other Collection Accounts...................................................................56
      Collection and Other Servicing Procedures...........................................................................59
      Subservicers........................................................................................................60
      Realization Upon Defaulted Mortgage Loans...........................................................................60
      Hazard Insurance Policies...........................................................................................62
      Fidelity Bonds and Errors and Omissions Insurance...................................................................63
      Due-on-Sale Provisions..............................................................................................64
      Retained Interest; Servicing Compensation and Payment of Expenses...................................................64
      Evidence as to Compliance...........................................................................................64
      Matters Regarding a Master Servicer and the Depositor...............................................................65
      Events of Default...................................................................................................66
      Rights Upon Event of Default........................................................................................66
      Amendment...........................................................................................................67
      The Trustee.........................................................................................................68
      Duties of the Trustee...............................................................................................68
      Matters Regarding the Trustee.......................................................................................68
      Resignation and Removal of the Trustee..............................................................................69
DESCRIPTION OF CREDIT SUPPORT.............................................................................................69
      General.............................................................................................................69
      Subordinate Certificates............................................................................................70
      Cross-Support Provisions............................................................................................70
      Insurance or Guarantees for the Mortgage Loans......................................................................70
      Letter of Credit....................................................................................................70
      Insurance Policies and Surety Bonds.................................................................................71
      Reserve Funds.......................................................................................................71
      Credit Support for Mortgage-Backed Securities.......................................................................71
LEGAL ASPECTS OF MORTGAGE LOANS...........................................................................................72
      General.............................................................................................................72
      Types of Mortgage Instruments.......................................................................................72
      Interest in Real Property...........................................................................................73
      Cooperative Loans...................................................................................................73
      Foreclosure.........................................................................................................74
      Junior Mortgages....................................................................................................78
      Anti-Deficiency Legislation and Other Limitations on Lenders........................................................78
      Environmental Legislation...........................................................................................79
      Due-on-Sale Clauses.................................................................................................79
      Prepayment Charges..................................................................................................80
      Subordinate Financing...............................................................................................80
      Applicability of Usury Laws.........................................................................................80
      Alternative Mortgage Instruments....................................................................................81
      Servicemembers' Civil Relief Act....................................................................................82
      Forfeiture for Drug, RICO and Money Laundering Violations...........................................................82
FEDERAL INCOME TAX CONSEQUENCES...........................................................................................83
      General.............................................................................................................83
      Grantor Trust Funds.................................................................................................83
      a. Single Class of Grantor Trust Certificates.......................................................................83
      b. Multiple Classes of Grantor Trust Certificates...................................................................87
      c. Sale or Exchange of a Grantor Trust Certificate .................................................................90



                                       xi





d. Non-U.S. Persons.......................................................................................................91
e. Information Reporting and Backup Withholding...........................................................................91
REMICS....................................................................................................................92
a. Taxation of Owners of REMIC Regular Certificates.......................................................................93
b. Taxation of Owners of REMIC Residual Certificates.....................................................................102
Prohibited Transactions and Other Taxes..................................................................................107
Liquidation and Termination..............................................................................................107
Administrative Matters...................................................................................................108
Tax-Exempt Investors.....................................................................................................108
Residual Certificate Payments -- Non-U.S. Persons........................................................................108
Tax Related Restrictions on Transfers of REMIC Residual Certificates.....................................................109
      Reportable Transactions............................................................................................111
STATE TAX CONSIDERATIONS.................................................................................................111
ERISA CONSIDERATIONS.....................................................................................................112
      General............................................................................................................112
      Prohibited Transactions............................................................................................112
      Review by Plan Fiduciaries.........................................................................................115
LEGAL INVESTMENT.........................................................................................................116
PLAN OF DISTRIBUTION.....................................................................................................117
LEGAL MATTERS............................................................................................................119
FINANCIAL INFORMATION....................................................................................................119
RATING...................................................................................................................119
INCORPORATION OF INFORMATION BY REFERENCE................................................................................119
GLOSSARY OF TERMS........................................................................................................121



                                       xii



                                     SUMMARY

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

      WHILE THIS SUMMARY CONTAINS AN OVERVIEW OF CERTAIN CALCULATIONS,
DISTRIBUTION PRIORITIES AND OTHER INFORMATION TO AID YOUR UNDERSTANDING, YOU
SHOULD CAREFULLY READ THE FULL DESCRIPTIONS OF THE CALCULATIONS, DISTRIBUTION
PRIORITIES AND OTHER INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS BEFORE MAKING AN INVESTMENT DECISION.

RELEVANT PARTIES



                                    See "Transaction Parties Overview" in this prospectus supplement for a diagram
                                    that illustrates the various parties involved in the transaction and their
                                    functions.

   Issuing Entity.................  Morgan Stanley Mortgage Loan Trust 2006-3AR.  The issuing entity will be
                                    established under a pooling and servicing agreement, dated as of the cut-off
                                    date, among Morgan Stanley Capital I Inc., as depositor, Morgan Stanley
                                    Mortgage Capital Inc., as seller, Wells Fargo Bank, National Association, as
                                    master servicer and securities administrator, and LaSalle Bank National
                                    Association, as trustee.  The issuing entity will be a common law trust formed
                                    under the laws of the State of New York.

   Depositor......................  Morgan Stanley Capital I Inc., a Delaware corporation. The depositor's address
                                    is 1585 Broadway, New York, New York 10036, telephone number (212) 761-4000.
                                    See "The Depositor" in this prospectus supplement and in the accompanying
                                    prospectus.

   Sponsor and Seller.............  Morgan Stanley Mortgage Capital Inc., a New York corporation.  The sponsor and
                                    seller is an affiliate of the depositor, of Morgan Stanley & Co. Incorporated,
                                    the underwriter, and of the corridor contract counterparty.  The sponsor's and
                                    seller's address is 1221 Avenue of the Americas, New York, New York 10020.
                                    See "Description of the Mortgage Loans--Assignment of the Mortgage Loans;
                                    Representations and Warranties Relating to the Mortgage Loans" and "The
                                    Sponsor" in this prospectus supplement.

   Master Servicer,
   Securities Administrator
    and Auction Administrator.....  Wells Fargo Bank, National Association, a national banking association will act
                                    as master servicer, securities administrator, and in its capacity as securities
                                    administrator, as auction administrator under the pooling and servicing
                                    agreement. Wells Fargo's offices are located at Sixth Street and Marquette
                                    Avenue, Minneapolis, Minnesota 55479 for certificate transfer purposes, and for
                                    all other purposes at 9062 Old Annapolis Road, Columbia, Maryland, 21045. See
                                    "Servicing of the Mortgage Loans", "The Master Servicer and Securities
                                    Administrator" in this prospectus supplement.

   Originators....................  The sponsor previously acquired the mortgage loans from various correspondent
                                    lenders, other mortgage loan sellers who originated less than 10% of the
                                    mortgage loans and the following originators:

                                    o     Morgan Stanley Credit Corp.
                                          2500 Lake Cook Road
                                          Riverwoods, Illinois 60015



                                       S-1





                                    o     Wachovia Mortgage Corporation
                                          1100 Corporate Center Drive
                                          Raleigh, North Carolina 27607

                                    o     Wells Fargo Bank, National Association
                                          1 Home Campus
                                          Des Moines, Iowa 50328

                                    On the closing date, the sponsor will sell all of its interest in the mortgage
                                    loans (other than the servicing rights on the mortgage loans serviced by GMAC
                                    Mortgage Corporation) to the depositor.

   Servicers......................  The following entities will initially act as the direct servicers of the
                                    mortgage loans:

                                    o     GMAC Mortgage Corporation
                                          100 Witmer Road
                                          Horsham, Pennsylvania 19044

                                    See "The Servicers-- GMAC Mortgage Corporation" in this prospectus supplement.

                                    o     HSBC Mortgage Corporation (USA)
                                          2929 Walden Ave
                                          Depew, New York 14043

                                    o     Morgan Stanley Credit Corp.
                                          2500 Lake Cook Road
                                          Riverwoods, Illinois 60015

                                    o     Wachovia Mortgage Corporation
                                          1100 Corporate Center Drive
                                          Raleigh, North Carolina 27607

                                    o     Wells Fargo Bank, National Association
                                          1 Home Campus
                                          Des Moines, Iowa 50328

                                    We refer you to "Servicing of the Mortgage Loans" in this prospectus supplement
                                    for more information.

   Trustee........................  LaSalle Bank National Association having an address at 135 South LaSalle
                                    Street, Suite 1625, Chicago, Illinois 60603; Attn: Global-Securities and Trust
                                    Services MSM 2006-3AR. See "The Trustee" in this prospectus supplement.

   Custodians.....................  JPMorgan Chase Bank, National Association having an address at 2200 Chemsearch
                                    Boulevard, Suite 150, Irving, Texas 75062; and

                                    LaSalle Bank National Association having an address at 2571 Busse Road, Suite
                                    200, Elk Grove Village Illinois 60007.

                                    Wells Fargo Bank, National Association having an address at 24 Executive Park,
                                    Suite 100, Irvine, California 92614.

                                    See "The Custodians" in this prospectus supplement.



                                       S-2





   Rating Agencies................  Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies,
                                    Inc. and Moody's Investors Service, Inc. will issue ratings with respect to
                                    the offered certificates.

   Corridor Contract
    Counterparty.................   Morgan Stanley Capital Services Inc. See "Description of the
                                    Certificates--Description of the Corridor Contract Counterparty" in this
                                    prospectus supplement

RELEVANT DATES

   Cut-off Date...................  February 1, 2006.

   Closing Date...................  On or about February 28, 2006.

   Distribution Date..............  The 25th day of each month or, if that day is not a business day, the next
                                    business day, beginning March 27, 2006.

   Interest Accrual Period........  For the group 1 certificates (other than the Class 1-A-X, Class 1-M-X, Class
                                    1-B-1, Class 1-B-2, Class 1-B-3 and Class 1-B-4 Certificates) and any
                                    distribution date will be the period commencing on the 25th day of the month
                                    prior to the month in which that distribution date occurs and ending on the
                                    24th day of the month in which that distribution date occurs. For each other
                                    class of certificates and any distribution date, the calendar month immediately
                                    prior to the month in which the relevant distribution date occurs. Interest is
                                    required to be calculated on the basis of a 360-day year consisting of twelve
                                    30-day months.

   Record Date....................  For the group 1 certificates (other than the Class 1-A-X, Class 1-M-X, Class
                                    1-B-1, Class 1-B-2, Class 1-B-3 and Class 1-B-4 Certificates) and any
                                    distribution date, the business day immediately preceding that distribution
                                    date, or if the group 1 certificates (other than the Class 1-A-X, Class 1-M-X,
                                    Class 1-B-1, Class 1-B-2, Class 1-B-3 and Class 1-B-4 Certificates) are no
                                    longer book-entry certificates, the last business day of the calendar month
                                    preceding the month of that distribution date. For each other class of
                                    certificates and any distribution date, the last business day of the calendar
                                    month immediately prior to the month in which that distribution date occurs.

   Last Scheduled
     Distribution Date............  The last scheduled distribution date is the distribution date occurring in
                                    March 2036 which is the distribution date in the month following the
                                    scheduled maturity date for the latest maturing mortgage loan in the assets
                                    of the Issuing Entity.  The actual final distribution date of any class of
                                    certificates may be earlier or later, an could be substantially earlier, than
                                    such class' last scheduled distribution date.

OFFERED CERTIFICATES..............  We are offering the classes of certificates in the approximate original
                                    principal balance or notional amount, as applicable, set forth on pages v and
                                    vi of this prospectus supplement, subject to a permitted variance of plus or
                                    minus 5%.

                                    The certificates will consist of a total of thirty-seven classes. The Class
                                    1-B-1, Class 1-B-2, Class 1-B-3, Class 1-B-4, Class B-1, Class B-2, Class B-3,
                                    Class P-1, Class P-2 and Class C Certificates are not being offered through
                                    this prospectus supplement and the accompanying prospectus.

   Interest Distributions.........  The offered certificates will bear interest at the per annum rates calculated
                                    as set forth on pages vi and vii of this prospectus supplement.



                                       S-3





                                    The actual amount of interest you receive on your certificates on each
                                    distribution date will depend on:

                                    o     the amount of interest accrued on your certificates;

                                    o     the total amount of funds available for distribution to your
                                          certificates;

                                    o     the amount of any accrued interest not paid on your certificates on
                                          earlier distribution dates; and

                                    o     in the case of the Class 1-A-X and Class 1-M-X Certificates, the
                                          distributions of interest that each such class is entitled to receive on
                                          any distribution date may be used to pay certain carryover amounts to
                                          certain other classes of group 1 certificates.

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

   Principal Distributions........  On each distribution date, one or more classes of the offered certificates will
                                    be entitled to distributions of principal. The Class 1-A-X and Class 1-M-X
                                    Certificates are notional amount certificates and are not entitled to
                                    distributions of principal. See "Description of the Certificates--Principal" in
                                    this prospectus supplement for a detailed discussion of the amount and timing
                                    of principal distributions.

   Distribution Priorities........

      Group 1 Certificates

      As more fully described in this prospectus supplement, distributions on the Group 1 Certificates will be
      made on each Distribution Date primarily from Available Funds of Loan Group 1 for such Distribution Date
      in the following order of priority:

      --------------------------------------------------------------------------------------------------------
          to interest on each Class of Group 1 Senior Certificates entitled to receive interest on that
      Distribution Date, pro rata, based on their respective interest distribution amounts; except that the
      interest distribution amounts that would otherwise be distributed to the Class 1-A-X Certificates may
               first be reduced by amounts required to be deposited into the Reserve Fund and will
                               not be distributed to the Class 1-A-X Certificates;
      --------------------------------------------------------------------------------------------------------
                                                         |
                                                         |
      --------------------------------------------------------------------------------------------------------
       to principal of the Classes of Group 1 Senior Certificates then entitled to receive distributions of
                 principal, in each case up to the maximum amount of principal to be distributed
                                   to those Classes on that Distribution Date;
      --------------------------------------------------------------------------------------------------------
                                                         |
                                                         |
      --------------------------------------------------------------------------------------------------------
         from the Reserve Fund, to the Class 1-A-1, Class 1-A-2, Class 1-A-3 and Class 1-A-X Certificates
        as described under "Description of the Certificates--The Reserve Fund and the Corridor Contracts";
      --------------------------------------------------------------------------------------------------------
                                                         |
                                                         |
      --------------------------------------------------------------------------------------------------------
       to interest on the Class 1-M-X Certificates, based on its interest distribution amount; except that
                     the interest distribution amount that would otherwise be distributed to
      the Class 1-M-X Certificates may first be reduced by amounts required to be deposited into the Reserve
                        Fund and will not be distributed to the Class 1-M-X Certificates;
      --------------------------------------------------------------------------------------------------------
                                                         |
                                                         |



                                       S-4





      --------------------------------------------------------------------------------------------------------
            sequentially, to interest on and then principal of the Group 1 Subordinated Certificates,
           in the order of their priority of payment, in each case up to the maximum amount of interest
                   and principal to be distributed to those Classes on that Distribution Date;
      --------------------------------------------------------------------------------------------------------
                                                         |
                                                         |
      --------------------------------------------------------------------------------------------------------
          from the Reserve Fund, to the Class 1-M-1, Class 1-M-2, Class 1-M-3, Class 1-M-4, Class 1-M-5,
                             Class 1-M-6, Class 1-M-7, Class 1-M-8, Class 1-M-9, and
             Class 1-M-X Certificates as described under "Description of the Certificates--The Reserve
                                         Fund and the Corridor Contracts";
      --------------------------------------------------------------------------------------------------------
                                                         |
                                                         |
      --------------------------------------------------------------------------------------------------------
             on the Distribution Date immediately following a successful auction any excess auction
                                      proceeds to the Class C Certificates; and
      --------------------------------------------------------------------------------------------------------
                                                         |
                                                         |
      --------------------------------------------------------------------------------------------------------
                              any remaining amounts to the Class A-R Certificates.
      --------------------------------------------------------------------------------------------------------

      Aggregate Group II Certificates

      Distributions on the Group 2 Senior Certificates and Group 3 Senior Certificates will be made on
      each Distribution Date primarily from Available Funds of the related Loan Group for such
      Distribution Date and under certain circumstances from any Available Funds from the other Loan Group
      in Aggregate Loan Group II remaining after distributions to the other Classes of Senior Certificates
      related to Aggregate Loan Group II. Remaining Available Funds for Aggregate Loan Group II will then
      be used to make distributions on the Aggregate Group II Subordinated Certificates. These
      distributions will be made in the following order of priority:

      --------------------------------------------------------------------------------------------------------
        from Available Funds for the related Loan Group, to interest on each Class of Senior Certificates
          related to that Loan Group, pro rata, based on their respective interest distribution amounts;
      --------------------------------------------------------------------------------------------------------
                                                         |
                                                         |
      --------------------------------------------------------------------------------------------------------
              from Available Funds for the related Loan Group, to principal of the Classes of Senior
                        Certificates relating to each Loan Group then entitled to receive
               distributions of principal, in each case up to the maximum amount of principal to be
                             distributed to those Classes on that Distribution Date;
      --------------------------------------------------------------------------------------------------------
                                                         |
                                                         |
      --------------------------------------------------------------------------------------------------------
          from remaining Available Funds for Aggregate Loan Group II, to distributions of interest
                      on and principal solely in respect of cross-collateralization to
                 the Classes of the Senior Certificates in Aggregate Certificate Group II;
      --------------------------------------------------------------------------------------------------------
                                                         |
                                                         |
      --------------------------------------------------------------------------------------------------------
           from remaining Available Funds for Aggregate Loan Group II, sequentially, to interest
             on and then principal of the Aggregate Group II Subordinated Certificates, in the
       order of numerical class designations, in each case up to the maximum amount of interest and
                principal to be distributed to those Classes on that Distribution Date; and
      --------------------------------------------------------------------------------------------------------
                                                         |
                                                         |
      --------------------------------------------------------------------------------------------------------
                            any remaining amounts to the Class A-R Certificates.
      --------------------------------------------------------------------------------------------------------



                                       S-5





AMOUNTS AVAILABLE FOR
DISTRIBUTIONS ON THE
CERTIFICATES......................  The amount available for distributions on the offered
                                    certificates on any distribution date will generally consist of the following
                                    amounts (subject to the amounts to be netted as described below):

                                    o     all scheduled installments of interest (net of the related fees and
                                          expenses) and principal due and received on the mortgage loans in the
                                          applicable period, together with any advances with respect to them;

                                    o     all proceeds of any primary mortgage guaranty insurance policies and any
                                          other insurance policies with respect to the mortgage loans, to the
                                          extent the proceeds are not applied to the restoration of the related
                                          mortgaged property or released to the borrower in accordance with the
                                          applicable servicer's normal servicing procedures;

                                    o     net proceeds from the liquidation of defaulted mortgage loans during the
                                          applicable period, by foreclosure or otherwise during the calendar month
                                          preceding the month of the distribution date (to the extent the amounts
                                          do not exceed the unpaid principal balance of the mortgage loan, plus
                                          accrued interest);

                                    o     subsequent recoveries with respect to mortgage loans;

                                    o     partial or full prepayments collected during the applicable period,
                                          together with interest paid in connection with the prepayment and the
                                          compensating interest payable by the related servicer; and

                                    o     any substitution adjustment amounts or purchase price in respect of a
                                          deleted mortgage loan or a mortgage loan repurchased by the seller or the
                                          related originator.

RELATIONSHIP BETWEEN LOAN
GROUPS AND CERTIFICATE GROUPS.....  The certificates with a "1" prefix are sometimes referred to in this prospectus
                                    supplement as the group 1 certificates and they correspond to the mortgage
                                    loans in loan group 1. The certificates with a "2" prefix and the Class A-R
                                    Certificates are sometimes referred to in this prospectus supplement as the
                                    group 2 senior certificates and they correspond to the mortgage loans in loan
                                    group 2. The certificates with a "3" prefix are sometimes referred to in this
                                    prospectus supplement as the group 3 certificates and they correspond to the
                                    mortgage loans in loan group 3. The senior certificates with a "1" prefix are
                                    also referred to as the "group 1 senior certificates." The subordinated
                                    certificates with a "1" prefix are also referred to as the "group 1
                                    subordinated certificates." The other classes of subordinated certificates are
                                    referred to as the "aggregate group II subordinated certificates," and they
                                    correspond to the mortgage loans in "aggregate loan group II," which consists
                                    of loan group 2 and loan group 3. The group 2 senior certificates and the group
                                    3 senior certificates are referred to as the "aggregate group II senior
                                    certificates" and, together with the aggregate group II subordinated
                                    certificates, are referred to as the "aggregate group II certificates." Each of
                                    the group 1 certificates and the aggregate group II certificates are referred
                                    to as an "aggregate certificate group." The certificates generally receive
                                    distributions based on principal and interest collected from the mortgage loans
                                    in the corresponding loan group or loan groups.

                                    There is no cross-collateralization between the certificates related to loan
                                    group 1 and the certificates related to aggregate loan group II.



                                       S-6





                                    See "Description of the Certificates--General" and "--Book-Entry Certificates"
                                    in this prospectus supplement, "Description of the Mortgage Loans--General" in
                                    this prospectus supplement and "Description of the Trust Funds--Mortgage Loans"
                                    in the prospectus.

THE MORTGAGE LOANS................  The assets of the issuing entity will be comprised primarily of one group of
                                    fixed-rate, adjustable-rate and hybrid adjustable-rate mortgage loans (which
                                    are together referred to in this prospectus supplement as "loan group 1") and
                                    two groups of hybrid adjustable-rate mortgage loans (loan group 2 and loan
                                    group 3, which are together referred to in this prospectus supplement as
                                    "aggregate loan group II" and each of loan group 1 and aggregate loan group II
                                    are referred to as an "aggregate loan group"), all of which are secured by
                                    first priority mortgages or deeds of trust on residential one- to four- family
                                    properties and that have original terms to maturity of up to approximately 30
                                    years.

                                    The mortgage loans to be deposited into the trust on the closing date are
                                    expected to have the following approximate characteristics based on the stated
                                    principal balances of the mortgage loans as of February 1, 2006:



                                    Loan Group 1

                                    Number of Mortgage Loans:......................................................992
                                    Aggregate Scheduled Principal Balance:................................$392,302,276
                                    Range of Scheduled Principal Balances:.......................$50,000 to $2,000,000
                                    Average Scheduled Principal Balance:......................................$395,466
                                    Range of Current Mortgage Interest Rates:.........................3.875% to 8.625%
                                    Aggregate Original Principal Balance:.................................$394,484,126
                                    Weighted Average Current Mortgage Interest Rate:............................6.287%
                                    Weighted Average Maximum Mortgage Interest Rate (adjustable
                                    rate mortgage loans):......................................................11.817%
                                    Weighted Average Non-Zero Gross Margin (adjustable rate mortgage loans):....2.544%
                                    Weighted Average Months to Roll (adjustable rate mortgage loans):........39 months
                                    Weighted Average Original Term to Maturity:.............................360 months
                                    Weighted Average Remaining Scheduled
                                        Term to Maturity:...................................................354 months
                                    Weighted Average Original Loan-to-Value Ratio:..............................72.08%
                                    Weighted Average Original Effective Loan-to-Value Ratio:....................71.80%
                                    Owner-Occupied:.............................................................82.86%
                                    Weighted Average Credit Score:.................................................717
                                    Geographic Concentration of Mortgaged Properties
                                        Securing Mortgage Loans in Excess of 5% of the
                                        Aggregate Scheduled Principal Balance:              California..........43.89%
                                                                                            Florida.............11.44%

                                    Loan Group 2

                                    Number of Mortgage Loans:......................................................605
                                    Aggregate Scheduled Principal Balance:................................$195,035,228
                                    Range of Scheduled Principal Balances:.......................$46,730 to $2,900,000
                                    Average Scheduled Principal Balance:......................................$322,372
                                    Range of Current Mortgage Interest Rates:.........................4.625% to 8.375%
                                    Aggregate Original Principal Balance:.................................$195,284,747
                                    Weighted Average Current Mortgage Interest Rate:............................6.270%
                                    Weighted Average Maximum Mortgage Interest Rate:...........................11.984%
                                    Weighted Average Gross Margin:..............................................2.314%
                                    Weighted Average Months to Roll:.........................................57 months
                                    Weighted Average Original Term to Maturity:.............................360 months
                                    Weighted Average Remaining Scheduled
                                        Term to Maturity:...................................................357 months
                                    Weighted Average Original Loan-to-Value Ratio:..............................74.46%
                                    Weighted Average Original Effective Loan-to-Value Ratio:....................73.62%
                                    Owner-Occupied:.............................................................79.39%
                                    Weighted Average Credit Score:.................................................707



                                       S-7





                                    Geographic Concentration of Mortgaged Properties
                                        Securing Mortgage Loans in Excess of 5% of the
                                        Aggregate Scheduled Principal Balance:              California..........38.97%
                                                                                            Florida..............9.56%
                                                                                            New York.............8.74%

                                    Loan Group 3

                                    Number of Mortgage Loans:......................................................351
                                    Aggregate Scheduled Principal Balance:................................$212,881,189
                                    Range of Scheduled Principal Balances:.......................$59,661 to $1,999,000
                                    Average Scheduled Principal Balance:......................................$606,499
                                    Range of Current Mortgage Interest Rates:.........................5.000% to 8.125%
                                    Aggregate Original Principal Balance:.................................$213,076,295
                                    Weighted Average Current Mortgage Interest Rate:............................6.475%
                                    Weighted Average Maximum Mortgage Interest Rate:...........................12.406%
                                    Weighted Average Gross Margin:..............................................2.248%
                                    Weighted Average Months to Roll:.........................................82 months
                                    Weighted Average Original Term to Maturity:.............................360 months
                                    Weighted Average Remaining Scheduled
                                        Term to Maturity:...................................................358 months
                                    Weighted Average Original Loan-to-Value Ratio:..............................72.73%
                                    Weighted Average Original Effective Loan-to-Value Ratio:....................72.37%
                                    Owner-Occupied:.............................................................84.36%
                                    Weighted Average Credit Score:.................................................714
                                    Geographic Concentration of Mortgaged Properties
                                        Securing Mortgage Loans in Excess of 5% of the
                                        Aggregate Scheduled Principal Balance:              California..........61.31%
                                                                                            New York............10.76%

                                    See "Description of the Mortgage Loans" in this prospectus supplement.

SERVICING OF THE
  MORTGAGE LOANS..................  The master servicer will supervise the performance of each servicer under the
                                    related underlying servicing agreement to the extent required by the pooling
                                    and servicing agreement.

                                    Under the underlying servicing agreements, each servicer is generally obligated
                                    to make monthly advances of cash (to the extent such advances are deemed
                                    recoverable), which will be included with mortgage principal and interest
                                    collections, in an amount equal to any delinquent monthly payments due on the
                                    related mortgage loans serviced by that servicer on the immediately preceding
                                    determination date. The master servicer will be obligated to make any required
                                    advance if a servicer fails in its obligation to do so, to the extent described
                                    in this prospectus supplement and required by the pooling and servicing
                                    agreement. The master servicer and the servicers will be entitled to reimburse
                                    themselves for any such advances from future payments and collections
                                    (including insurance or liquidation proceeds) with respect to the related
                                    mortgage loans. However, neither the master servicer nor the servicers will be
                                    obligated to make advances which it determines to be nonrecoverable from future
                                    payments and collections on the related mortgage loans, and such parties will
                                    be entitled to reimbursement for advances subsequently determined to be
                                    nonrecoverable prior to any distributions to certificateholders.

                                    The servicers will also make interest payments out of their servicing fees to
                                    compensate in part for any shortfall in interest payments on the certificates
                                    which results from a mortgagor prepaying a related mortgage loan. If a servicer
                                    fails to make required payments in respect of such shortfalls, the master
                                    servicer will be obligated to reduce a portion of its master servicing
                                    compensation to the extent necessary to fund any such shortfalls.



                                       S-8




                                    Each servicer is entitled with respect to each mortgage loan serviced by it to
                                    a monthly servicing fee, which will be retained by the applicable servicer from
                                    such mortgage loan or payable monthly from amounts on deposit in the collection
                                    account. The servicing fee will be an amount equal to interest at one twelfth
                                    of a rate equal to between 0.250% and 0.375% on the stated principal balance of
                                    each mortgage loan. As of the cut-off date the weighted average servicing fee
                                    is equal to 0.328% per annum.

                                    For its compensation the master servicer will receive reinvestment income on
                                    amounts on deposit for the period from between the servicer remittance date and
                                    the Distribution Date. From its compensation, the master servicer will pay the
                                    fees of the Securities Administrator, the Trustee and any Custodians ongoing
                                    (safekeeping and loan file release only) fees.

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

RETENTION OF CERTAIN
  SERVICING RIGHTS................  The sponsor, as the original owner of the mortgage loans to be sold to the
                                    issuing entity will retain certain rights relating to the servicing by GMAC
                                    Mortgage Corporation of certain of the mortgage loans, including the right to
                                    terminate GMAC Mortgage Corporation as servicer at any time, without cause, as
                                    further specified in the pooling and servicing agreement.

                                    As of the cut-off date, the sponsor expects to transfer the servicing of
                                    approximately 5.22% of the group 1 mortgage loans from GMAC Mortgage
                                    Corporation to Wells Fargo Bank, National Association shortly after the closing
                                    date.

                                    See "Servicing of the Mortgage Loans--Seller's Retention of Servicing Rights"
                                    in this prospectus supplement.

REQUIRED REPURCHASES
OR SUBSTITUTIONS OF MORTGAGE
  LOANS...........................  The originators and the sponsor have each made or will make certain
                                    representations and warranties relating to the mortgage loans. If with respect
                                    to any mortgage loan any of the representations and warranties made by the
                                    originators or the sponsor are breached in any material respect as of the date
                                    made, or there exists any uncured material document defect, the related
                                    originator or the sponsor will be obligated to repurchase, or substitute for,
                                    the mortgage loan as further described in this prospectus supplement under
                                    "Description of The Mortgage Loans--Assignment of the Mortgage Loans;
                                    Representations and Warranties Relating to the Mortgage Loans."

CREDIT ENHANCEMENT................  Credit enhancement provides limited protection to holders of the certificates
                                    related to one or more loan groups against shortfalls in payments received on
                                    the related mortgage loans.  This transaction employs the following forms of
                                    credit enhancement for the offered certificates:

   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 payments of interest and principal.

                                    Within each aggregate certificate group, the related senior certificates will
                                    have a payment priority over the related subordinated certificates. Within the
                                    classes of subordinated certificates in certificate group 1, the Class 1-M
                                    Certificates will



                                       S-9





                                    have payment priority over the Class 1-B Certificates. The payment priority
                                    within the Class 1-M and Class 1-B Certificates is numerical order, with the
                                    class of certificates with the lowest numerical designation having the highest
                                    priority of payment. Similarly, within the classes of subordinated certificates
                                    in aggregate certificate group II, the Class M Certificates will have payment
                                    priority over the Class B Certificates. The payment priority within the Class M
                                    and Class B Certificates is numerical order, with the class of certificates
                                    with the lowest numerical designation having the highest priority of payment.

                                    Subordination is designed to provide the holders of certificates in an
                                    aggregate certificate group with a higher payment priority with protection
                                    against most losses realized when the remaining unpaid principal balance on 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 in an aggregate
                                    certificate group among the related classes of subordinated certificates,
                                    beginning with the related class of subordinated certificates with the lowest
                                    payment priority, before realized losses on the mortgage loans in a loan group
                                    are allocated to the related senior certificates. However, some losses such as
                                    special hazard losses, bankruptcy losses, and fraud losses on the mortgage
                                    loans in an aggregate loan group in excess of the amounts set forth in this
                                    prospectus supplement are, in general, allocated pro rata to each class of
                                    certificates related to the affected loan group (other than the notional amount
                                    certificates) instead of first being allocated to the related classes of
                                    subordinated certificates.

                                    The pooling and servicing agreement does not permit the allocation of realized
                                    losses to the Class P-1, Class P-2 or Class C Certificates.

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

   Shifting of Interests..........  Except under the circumstances described in "Description of the
                                    Certificates--Principal" in this prospectus supplement, the senior certificates
                                    in each aggregate certificate group will receive 100% of principal prepayments
                                    received on the mortgage loans in the related loan group until the seventh
                                    anniversary of the first distribution date, although the subordinated
                                    certificates in each aggregate certificate group will generally be entitled to
                                    receive their pro rata portion of scheduled principal payments on the mortgage
                                    loans in the related aggregate loan group on each distribution date. In each
                                    case, during the next four years, except under the circumstances described in
                                    this prospectus supplement, the senior certificates related to loan group 1 or
                                    aggregate loan group II, as applicable, will generally receive a
                                    disproportionately large, but decreasing, share of the principal prepayments on
                                    the mortgage loans in the related loan group or loan groups. This shifting
                                    interest feature will result in a quicker return of principal to the senior
                                    certificates and increases the likelihood that holders of the senior
                                    certificates will be paid the full amount of principal to which they are
                                    entitled.

Aggregate Group II Certificates--
   Cross-Collateralization........  In certain circumstances relating to a loan group in aggregate loan group II
                                    experiencing disproportionately high realized losses, principal and interest
                                    collected from the other loan group in aggregate loan group II may be applied
                                    to pay principal or interest, or both, to the senior certificates of the
                                    related aggregate certificate group experiencing such realized losses.

                                    There is no cross-collateralization between the certificates related to each
                                    aggregate loan group.



                                      S-10





                                    We refer you to "Description of the Certificates--Aggregate Certificate Group
                                    II--Transfer Payments" in this prospectus supplement for more information.

ALLOCATION OF REALIZED LOSSES.....  On each distribution date, the amount of any realized loss
                                    on the mortgage loans in a loan group will be allocated in the following order
                                    or priority:

                                    o     to the related subordinated certificates in the reverse order of their
                                          priority of payment, beginning with the most junior class of subordinated
                                          certificates outstanding, until their respective class principal balances
                                          are reduced to zero, and

                                    o     to the senior certificates in the related certificate group (other than
                                          any related notional amount certificates) in the manner, order and
                                          priority described in "Description of the Certificates--Priority of
                                          Distributions Among Certificates" and "--Allocation of Losses" in this
                                          prospectus supplement.

                                    In addition, if, on any distribution date, following all distributions and the
                                    allocation of realized losses, the aggregate class principal balance of all
                                    classes of certificates exceeds the aggregate stated principal balance of the
                                    mortgage loans in the related aggregate loan group, then the class principal
                                    balance of the class of subordinated certificates then outstanding with the
                                    lowest priority of payment in the related aggregate certificate group will be
                                    reduced by the amount of the excess.

                                    Notwithstanding the foregoing, certain realized losses on the mortgage loans in
                                    a loan group will be allocated to the related classes of senior certificates in
                                    the manner, order and priority described in the "Description of the
                                    Certificates--Allocation of Losses" in this prospectus supplement.

THE CORRIDOR CONTRACT
  AGREEMENTS......................  The holders of (i) in the aggregate, the Class 1-A-1, Class 1-A-2 and Class
                                    1-A-3 Certificates and (ii) in the aggregate, the Class 1-M-1, Class 1-M-2,
                                    Class 1-M-3, Class 1-M-4, Class 1-M-5, Class 1-M-6, Class 1-M-7, Class 1-M-8
                                    and Class 1-M-9 Certificates will each have the benefit of their own separate
                                    corridor contract provided by Morgan Stanley Capital Services Inc., as corridor
                                    contract counterparty. All obligations of the issuing entity under the corridor
                                    contracts will be paid on or prior to the closing date.

                                    The separate corridor contract relating to (i) in the aggregate, the Class
                                    1-A-1, Class 1-A-2 and Class 1-A-3 Certificates and (ii) in the aggregate, the
                                    Class 1-M-1, Class 1-M-2, Class 1-M-3, Class 1-M-4, Class 1-M-5, Class 1-M-6,
                                    Class 1-M-7, Class 1-M-8 and Class 1-M-9 Certificates will have the respective
                                    initial notional balance set forth below. In connection with each distribution
                                    date, commencing with the distribution date in April 2006 to and including the
                                    respective distribution dates set forth below, on the business day prior to
                                    each of these distribution dates, the corridor contract counterparty will be
                                    obligated under the corridor contracts to pay to the securities administrator,
                                    on behalf of the trustee, for the benefit of the holders of each of these
                                    classes of group 1 certificates an amount equal to the product of (a) the
                                    excess, if any, of the lesser of (i) the then current one-month LIBOR rate and
                                    (ii) the specified cap ceiling rate for such classes of group 1 certificates
                                    for that distribution date, over the specified cap strike rate for such classes
                                    of group 1 certificates for that distribution date, in each case calculated on
                                    a "30/360" basis, (b) the specified notional balance for such classes of group
                                    1 certificates and (c) 100. The corridor contract counterparty's respective
                                    obligations under each of the



                                      S-11





                                    corridor contracts will terminate immediately following the distribution date
                                    set forth below for such classes of certificates.


                                                                                              Corridor Contract
                                            Classes of                                         Final Scheduled
                                        LIBOR Certificates       Initial Notional Balance     Distribution Date
                                    --------------------------   ------------------------    -------------------

                                    Class 1-A-1, Class 1-A-2
                                    and Class 1-A-3...........         $3,602,313.13            November 2014

                                    Class 1-M-1, Class 1-M-2,
                                    Class 1-M-3, Class 1-M-4,
                                    Class 1-M-5, Class 1-M-6,
                                    Class 1-M-7, Class 1-M-8
                                    and Class 1-M-9...........           $190,214.93            November 2014

                                    The specified cap ceiling rates, cap strike rates and notional balances for
                                    each corridor contract are set forth in Annex II to this prospectus supplement.
                                    Amounts, if any, payable under any corridor contract with respect to any
                                    distribution date will be used to cover shortfalls in payments of interest on
                                    the classes of certificates to which the corridor contract relates as described
                                    in this prospectus supplement under "Description of the Certificates--The
                                    Reserve Fund and the Corridor Contracts."

THE RESERVE FUND..................  On each distribution date, (i) certain amounts otherwise distributable to the
                                    Class 1-A-X Certificates as interest will be deposited into the reserve fund
                                    and distributed to pay Net WAC Shortfalls remaining unpaid after application of
                                    payments under the related corridor contract, concurrently, to the Class 1-A-1,
                                    Class 1-A-2 and Class 1-A-3 Certificates, pro rata, in an amount up to their
                                    remaining respective accrued and unpaid Net WAC Shortfalls and (ii) certain
                                    amounts otherwise distributable to the Class 1-M-X Certificates as interest
                                    will be deposited into the reserve fund and distributed to pay Net WAC
                                    Shortfalls remaining unpaid after application of payments under the related
                                    corridor contract, sequentially, to the Class 1-M-1, Class 1-M-2, Class 1-M-3,
                                    Class 1-M-4, Class 1-M-5, Class 1-M-6, Class 1-M-7, Class 1-M-8 and Class 1-M-9
                                    Certificates, in that order, to the extent of any unpaid Net WAC Shortfalls for
                                    that distribution date and any prior distribution date. The Class 1-A-X and
                                    Class 1-M-X Certificates will not be reimbursed for any shortfalls resulting
                                    from the payment rules described in this paragraph.

                                    See "Description of the Certificates--The Reserve Fund and the Corridor
                                    Contracts" in this prospectus supplement.

REGISTRATION AND DENOMINATIONS
  OF THE CERTIFICATES.............  The offered certificates, other than the Class A-R Certificates, initially
                                    will be issued in book-entry form.  The Class A-R Certificates are expected to
                                    be issued in fully registered, certificated form.  No person acquiring an
                                    interest in the book-entry certificates will be entitled to receive a
                                    definitive certificate representing that person's interest in the assets of
                                    the issuing entity, except under limited circumstances as described in this
                                    prospectus supplement. Beneficial owners may elect to hold their interests
                                    through The Depository Trust Company. Transfers within DTC will be in
                                    accordance with the usual rules and operating procedures of DTC.

                                    The offered certificates (other than the Class 1-A-X, Class 1-M-X and Class A-R
                                    Certificates) will be issued and available only in book entry form, in
                                    denominations of $25,000 initial principal balance and integral multiples of
                                    $1,000 in excess of $25,000, except that one certificate of each class may be



                                      S-12





                                    issued in an amount less than $25,000. The Class 1-A-X and Class 1-M-X
                                    Certificates will be issued and available only in book entry form, in
                                    denominations of $100,000 initial notional amount and integral multiples of
                                    $1,000 in excess of $100,000. One certificate of each class of offered
                                    certificates may be issued in an amount less than the amount described above.
                                    The Class A-R Certificates will be issued as two certificates in the
                                    denominations specified in the pooling and servicing agreement.

                                    See "Description of the Certificates--Forms and Denominations of Offered
                                    Certificates; Distributions to Certificates" in this prospectus supplement.

OPTIONAL TERMINATION
  OR AUCTION......................  On any distribution date on or after the distribution date in the month in
                                    which the aggregate stated principal balance of the group 1 mortgage loans
                                    declines to 10% or less of the aggregate stated principal balance of the group
                                    1 mortgage loans as of the cut-off date, the auction administrator shall
                                    solicit bids for the purchase of the group 1 mortgage loans in accordance with
                                    the procedures set forth under "Description of the Certificates-- Auction and
                                    Optional Termination of the Group 1 Certificates and Optional Termination of
                                    the Aggregate Group II Certificates" in this prospectus supplement, and, to
                                    the extent the auction is successful, thereby effect the early retirement of
                                    the group 1 certificates.  In the event that the auction is unsuccessful,
                                    then, beginning on the subsequent distribution date, the master servicer shall
                                    have the right, at its option, to purchase all of the group 1 mortgage loans
                                    and any related REO properties owned by the issuing entity and thereby effect
                                    the early retirement of the group 1 certificates.

                                    On any distribution date on or after the distribution date following the month
                                    in which the aggregate stated principal balance of the aggregate group II
                                    mortgage loans declines to 1% or less of the aggregate stated principal balance
                                    of the aggregate group II mortgage loans as of the cut-off date, the master
                                    servicer shall have the right to purchase all of the aggregate group II
                                    mortgage loans and any related REO properties owned by the issuing entity and
                                    thereby effect the early retirement of the aggregate group II certificates.

TAX STATUS........................  For federal income tax purposes, the issuing entity (exclusive of the certain
                                    additional collateral, the corridor contracts and the assets held in the
                                    reserve fund) will comprise one or more REMICs: one or more underlying REMICs
                                    and the master REMIC.  Each underlying REMIC (if any) will hold the 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 one
                                    or more underlying REMICs (or if there are no underlying REMICs, the mortgage
                                    loans) and will issue the several classes of certificates, which, other than
                                    the Class A-R Certificates, will represent the regular interests in the master
                                    REMIC. In addition, the group 1 certificates (other than the Class 1-A-X,
                                    Class 1-M-X and Class 1-B Certificates) will represent a beneficial interest
                                    in the right to receive payments of Net WAC Shortfalls and the Class 1-A-X and
                                    Class 1-M-X Certificates will represent the obligation to make payments of Net
                                    WAC Shortfalls. The Class A-R Certificates will represent ownership of both
                                    the residual interest in the master REMIC and the residual interests in any
                                    underlying REMICs.



                                      S-13





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

ERISA CONSIDERATIONS..............  If you are a fiduciary of any employee benefit plan or other retirement
                                    arrangement subject to the Employee Retirement Income Security Act of 1974, as
                                    amended, or Section 4975 of the Internal Revenue Code of 1986, as amended, you
                                    should consult with counsel as to whether you can buy or hold an offered
                                    certificate.  Subject to a number of conditions, it is expected that offered
                                    certificates (other than the Class A-R Certificates) will be eligible for
                                    purchase by such investors. See "ERISA Matters" in this prospectus supplement.

LEGAL INVESTMENT..................  The offered certificates (other than the Class 1-M-5, Class 1-M-6, Class
                                    1-M-7, Class 1-M-8, Class 1-M-9, Class M-3, Class M-4, Class M-5 and Class M-6
                                    Certificates) will constitute "mortgage-related securities" for purposes of
                                    the Secondary Mortgage Market Enhancement Act of 1984, as amended, so long as
                                    they are rated in one of the two highest rating categories by at least one
                                    nationally recognized statistical rating agency.

                                    The Class 1-M-5, Class 1-M-6, Class 1-M-7, Class 1-M-8, Class 1-M-9, Class M-3,
                                    Class M-4, Class M-5 and Class M-6 Certificates will not constitute
                                    "mortgage-related securities." See "Legal Investment" in the accompanying
                                    prospectus.

CERTIFICATE RATINGS...............  On the closing date, the offered certificates must have ratings not lower than
                                    those set forth on page v of this prospectus supplement by Standard & Poor's
                                    Ratings Services, a division of The McGraw-Hill Companies, Inc. and by Moody's
                                    Investors Service, Inc.

                                    The depositor has requested that S&P and Moody's maintain ongoing surveillance
                                    of the ratings assigned to the offered certificates in accordance with their
                                    respective policies, but we cannot assure you that either S&P or Moody's will
                                    continue its surveillance of the ratings assigned to the offered certificates.

                                    A security rating is not a recommendation to buy, sell or hold securities and
                                    the assigning rating organization may revise or withdraw a rating at any time.
                                    The ratings do not address the possibility that holders of the offered
                                    certificates may suffer a lower than anticipated yield.

                                    See "Ratings" in this prospectus supplement for a discussion of the primary
                                    factors on which the ratings are based.



                                      S-14



                                  RISK FACTORS

      Before making an investment decision, you should carefully consider the
following risks which we believe describe the principal factors that make an
investment in the certificates speculative or risky. In particular, payments on
your certificates will depend on payments received on, and other recoveries with
respect to, the mortgage loans. Therefore, you should carefully consider the
risk factors relating to the mortgage loans.

      The certificates are complex securities. You should possess, either alone
or together with an investment advisor, the expertise necessary to evaluate the
information contained in this prospectus supplement and the accompanying
prospectus in the context of your financial situation and tolerance for risk.

      You should carefully consider, among other things, the factors described
below and under "Yield, Prepayment and Weighted Average Life" in this prospectus
supplement and "Risk Factors" in the accompanying prospectus before purchasing
the certificates.

CERTIFICATES MAY NOT BE APPROPRIATE FOR INDIVIDUAL INVESTORS

      The offered certificates are not suitable investments for all investors.
In particular, you should not purchase any class of offered certificates unless
you understand the prepayment, credit, liquidity and market risks associated
with that class because:

      o   The amounts you receive on your certificates will depend on the amount
          of the payments borrowers make on the related mortgage loans. Because
          we cannot predict the rate at which borrowers will repay their loans,
          you may receive distributions on your certificates in amounts that are
          larger or smaller than you expect. In addition, the life of your
          certificates may be longer or shorter than anticipated. Because of
          this, we cannot guarantee that you will receive distributions at any
          specific future date or in any specific amount. You bear the
          reinvestment risks resulting from a rate of principal payments that is
          faster or slower than you expect.

      o   The yield to maturity on your certificates will depend primarily on
          the purchase price of your certificates and the rate of principal
          payments and realized losses on the mortgage loans in the related
          aggregate loan group.

      o   Rapid prepayment rates on the mortgage loans are likely to coincide
          with periods of low prevailing interest rates. During these periods,
          the yield at which you may be able to reinvest amounts received as
          payments on your certificates may be lower than the yield on your
          certificates. Conversely, slow prepayment rates on the mortgage loans
          are likely to coincide with periods of high interest rates. During
          these periods, the amount of payments available to you for
          reinvestment at high rates may be relatively low.

      o   The mortgage loans in loan group 2 and loan group 3 have fixed
          interest rates for 5 years and 7 years, respectively, from the date of
          origination and then adjust based upon a specified index either
          semi-annually or annually, depending on the terms of the related
          mortgage note. These mortgage loans may have higher prepayments as
          they approach their first adjustment dates because the related
          mortgagors may want to avoid periodic changes to their monthly
          payments.

      o   If the mortgage loans in loan group 2 and loan group 3 with relatively
          higher mortgage rates prepay, the pass-through rate on the related
          classes of certificates may be reduced and your yield may be lower
          than you anticipate.

      o   All of the pass-through rates on the group 1 certificates are based to
          some extent on the weighted average of the net mortgage rates of the
          group 1 mortgage loans. If the mortgage loans in loan group 1 with
          relatively higher mortgage rates prepay, Group 1 Net WAC will be
          reduced and this could affect the yield on the group 1 certificates.


                                      S-15



CREDIT ENHANCEMENT MAY NOT BE ADEQUATE

      A decline in real estate values or in economic conditions generally could
increase the rates of delinquencies, foreclosures and losses on the mortgage
loans to a level that is significantly higher than those experienced currently.
This in turn will reduce the yield on your certificates, particularly if the
credit enhancement described in this prospectus supplement is not enough to
protect your certificates from these losses.

      The certificates are not insured by any financial guaranty insurance
policy. The subordination, loss allocation and shifting interest features
described in this prospectus supplement are intended to enhance the likelihood
that holders of more senior classes of certificates will receive regular
payments of interest and principal, but are limited in nature and may be
insufficient to cover all losses on the mortgage loans in the related aggregate
loan group.

      The amount of any realized losses, other than excess losses, experienced
on a mortgage loan in an aggregate loan group will be applied to reduce the
principal balance of the class of subordinated certificates in the related
aggregate certificate group with the highest numerical class designation, until
the principal balance of that class has been reduced to zero. If subordination
is insufficient to absorb losses on the mortgage loans in the related aggregate
loan group, then holders of more senior classes will incur realized losses and
may never receive all of their principal payments. You should consider the
following:

Risks with respect to Group 1 Subordinated Certificates

o   if you buy a Class 1-M-9 Certificate and losses on the group 1 mortgage
    loans exceed the total principal balance of the Class 1-B-1, Class 1-B-2,
    Class 1-B-3 and Class 1-B-4 Certificates, the principal balance of your
    certificate will be reduced proportionately with the principal balance of
    the other Class 1-M-9 Certificates, by the amount of that excess;

o   if you buy a Class 1-M-8 Certificate and losses on the group 1 mortgage
    loans exceed the total principal balance of the Class 1-M-9, Class 1-B-1,
    Class 1-B-2, Class 1-B-3 and Class 1-B-4 Certificates, the principal balance
    of your certificate will be reduced proportionately with the principal
    balance of the other Class 1-M-8 Certificates by the amount of that excess;

o   if you buy a Class 1-M-7 Certificate and losses on the group 1 mortgage
    loans exceed the total principal balance of the Class 1-M-8, Class 1-M-9,
    Class 1-B-1, Class 1-B-2, Class 1-B-3 and Class 1-B-4 Certificates, the
    principal balance of your certificate will be reduced proportionately with
    the principal balance of the other Class 1-M-7 Certificates by the amount of
    that excess;

o   if you buy a Class 1-M-6 Certificate and losses on the group 1 mortgage
    loans exceed the total principal balance of the Class 1-M-7, Class 1-M-8,
    Class 1-M-9, Class 1-B-1, Class 1-B-2, Class 1-B-3 and Class 1-B-4
    Certificates, the principal balance of your certificate will be reduced
    proportionately with the principal balance of the other Class 1-M-6
    Certificates by the amount of that excess;

o   if you buy a Class 1-M-5 Certificate and losses on the group 1 mortgage
    loans exceed the total principal balance of the Class 1-M-6, Class 1-M-7,
    Class 1-M-8, Class 1-M-9, Class 1-B-1, Class 1-B-2, Class 1-B-3 and Class
    1-B-4 Certificates, the principal balance of your certificate will be
    reduced proportionately with the principal balance of the other Class 1-M-5
    Certificates by the amount of that excess;

o   if you buy a Class 1-M-4 Certificate and losses on the group 1 mortgage
    loans exceed the total principal balance of the Class 1-M-5, Class 1-M-6,
    Class 1-M-7, Class 1-M-8, Class 1-M-9, Class 1-B-1, Class 1-B-2, Class 1-B-3
    and Class 1-B-4 Certificates, the principal balance of your certificate will
    be reduced proportionately with the principal balance of the other Class
    1-M-4 Certificates by the amount of that excess;

o   if you buy a Class 1-M-3 Certificate and losses on the group 1 mortgage
    loans exceed the total principal balance of the Class 1-M-4, Class 1-M-5,
    Class 1-M-6, Class 1-M-7, Class 1-M-8, Class 1-M-9, Class 1-B-1,


                                      S-16



    Class 1-B-2, Class 1-B-3 and Class 1-B-4 Certificates, the principal balance
    of your certificate will be reduced proportionately with the principal
    balance of the other Class 1-M-3 Certificates by the amount of that excess;

o   if you buy a Class 1-M-2 Certificate and losses on the group 1 mortgage
    loans exceed the total principal balance of the Class 1-M-3, Class 1-M-4,
    Class 1-M-5, Class 1-M-6, Class 1-M-7, Class 1-M-8, Class 1-M-9, Class
    1-B-1, Class 1-B-2, Class 1-B-3 and Class 1-B-4 Certificates, the principal
    balance of your certificate will be reduced proportionately with the
    principal balance of the other Class 1-M-2 Certificates by the amount of
    that excess; and

o   if you buy a Class 1-M-1 Certificate and losses on the group 1 mortgage
    loans exceed the total principal balance of the Class 1-M-2, Class 1-M-3,
    Class 1-M-4, Class 1-M-5, Class 1-M-6, Class 1-M-7, Class 1-M-8, Class
    1-M-9, Class 1-B-1, Class 1-B-2, Class 1-B-3 and Class 1-B-4 Certificates,
    the principal balance of your certificate will be reduced proportionately
    with the principal balance of the other Class 1-M-1 Certificates by the
    amount of that excess.

Risks with respect to Aggregate Group II Subordinate Certificates

o   if you buy a Class M-6 Certificate and losses on the mortgage loans in
    aggregate loan group II exceed the total principal balance of the Class B-1,
    Class B-2 and Class B-3 Certificates, the principal balance of your
    certificate will be reduced proportionately with the principal balance of
    the other Class M-6 Certificates by the amount of that excess;

o   if you buy a Class M-5 Certificate and losses on the mortgage loans in
    aggregate loan group II exceed the total principal balance of the Class M-6,
    Class B-1, Class B-2 and Class B-3 Certificates, the principal balance of
    your certificate will be reduced proportionately with the principal balance
    of the other Class M-5 Certificates by the amount of that excess;

o   if you buy a Class M-4 Certificate and losses on the mortgage loans in
    aggregate loan group II exceed the total principal balance of the Class M-5,
    Class M-6, Class B-1, Class B-2 and Class B-3 Certificates, the principal
    balance of your certificate will be reduced proportionately with the
    principal balance of the other Class M-4 Certificates by the amount of that
    excess;

o   if you buy a Class M-3 Certificate and losses on the mortgage loans in
    aggregate loan group II exceed the total principal balance of the Class M-4,
    Class M-5, Class M-6, Class B-1, Class B-2 and Class B-3 Certificates, the
    principal balance of your certificate will be reduced proportionately with
    the principal balance of the other Class M-3 Certificates by the amount of
    that excess;

o   if you buy a Class M-2 Certificate and losses on the mortgage loans in
    aggregate loan group II exceed the total principal balance of the Class M-3,
    Class M-4, Class M-5, Class M-6, Class B-1, Class B-2 and Class B-3
    Certificates, the principal balance of your certificate will be reduced
    proportionately with the principal balance of the other Class M-2
    Certificates by the amount of that excess; and

o   if you buy a Class M-1 Certificate and losses on the mortgage loans in
    aggregate loan group II exceed the total principal balance of the Class M-2,
    Class M-3, Class M-4, Class M-5, Class M-6, Class B-1, Class B-2 and Class
    B-3 Certificates, the principal balance of your certificate will be reduced
    proportionately with the principal balance of the other Class M-1
    Certificates by the amount of that excess.

Risks with respect to the Senior Certificates

o   after the aggregate class principal balance of the subordinated certificates
    in an aggregate certificate group has been reduced to zero, realized losses
    on the mortgage loans in a related loan group will reduce the class
    principal balances of the related senior certificates, in the manner, order
    and priority described in "Description of the Certificates--Priority of
    Distributions Among Certificates" and "--Allocation of Losses" in this
    prospectus supplement.


                                      S-17



      Furthermore, the subordinated certificates will provide only limited
protection against some categories of losses on the mortgage loans in the
related aggregate loan group such as bankruptcy losses, fraud losses and special
hazard losses in excess of the amounts specified in this prospectus supplement.
Any losses on the mortgage loans in a loan group in excess of those amounts will
be allocated pro rata among each class of senior certificates (other than the
notional amount certificates) related to that loan group and each related class
of subordinated certificates, even if the principal balance of each class of
related subordinated certificates has not been reduced to zero. You should note
that it is possible that a disproportionate amount of coverage for these types
of losses may be experienced by one loan group in aggregate loan group II which
could make certificates related to the other loan group in that aggregate loan
group more likely to suffer a loss.

      We refer you to "Description of the Certificates--Aggregate Certificate
Group II--Transfer Payments" in this prospectus supplement for more information.

THERE ARE RISKS INVOLVING UNPREDICTABILITY OF PREPAYMENTS AND THE EFFECT OF
PREPAYMENTS ON YIELDS

      The rate of principal distributions and yield to maturity on the
certificates will be directly related to the rate of principal payments on the
mortgage loans in the related loan group, in the case of the senior
certificates, or in the related aggregate loan group, in the case of the
subordinated certificates. For example, the rate of principal payments on the
mortgage loans will be affected by the following:

o   the amortization schedules of the mortgage loans; and

o   the rate of principal prepayments, including partial prepayments and full
    prepayments resulting from:

         o   refinancing by borrowers;

         o   liquidations of defaulted loans by a servicer; and

         o   repurchases of mortgage loans by an originator or the seller as a
             result of defective documentation or breaches of representations
             and warranties.

      The yield to maturity of the certificates will also be affected by the
exercise of the optional termination of the issuing entity by the master
servicer or, with respect to the group 1 mortgage loans, if a successful auction
occurs.

      With the exception of approximately 27.54% and 28.76% of the mortgage
loans in loan group 1 and aggregate loan group II, respectively, of the mortgage
loans by aggregate stated principal balance of the mortgage loans in that
aggregate loan group as of the cut-off date, all of the mortgage loans may be
prepaid in whole or in part at any time without payment of a prepayment penalty.
The rate of principal payments on mortgage loans is influenced by a wide variety
of economic, geographic, social and other factors, including general economic
conditions, the level of prevailing interest rates, the availability of
alternative financing and homeowner maturity. For example, if interest rates for
similar loans fall below the interest rates on the mortgage loans, the rate of
prepayment would generally be expected to increase. Conversely, if interest
rates on similar loans rise above the interest rates on the mortgage loans, the
rate of prepayment would generally be expected to decrease. We cannot predict
the rate at which borrowers will repay their mortgage loans. Please consider the
following:

      o   if you are purchasing any offered certificate (other than a notional
          amount certificate) at a discount, your yield may be lower than
          expected if principal payments on the related mortgage loans occur at
          a slower rate than you expected;

      o   if you are purchasing a notional amount certificate or an offered
          certificate at a premium, your yield may be lower than expected if
          principal payments on the related mortgage loans occur at a faster
          rate than you expected;


                                      S-18



      o   prospective purchasers of the notional amount certificates should
          carefully consider the risk that a rapid rate of principal payments
          and realized losses on the related mortgage loans could result in the
          failure of such purchasers to recover their initial investments;

      o   if the rate of default and the amount of losses on the related
          mortgage loans are higher than you expect, then your yield may be
          lower than you expect;

      o   the earlier a payment of principal occurs, the greater the impact on
          your yield. For example, if you purchase any offered certificate at a
          premium, although the average rate of principal payments is consistent
          with your expectations, if the rate of principal payments occurs
          initially at a rate higher than expected, which would adversely impact
          your yield, a subsequent reduction in the rate of principal payments
          will not offset any adverse yield effect; and

      o   the priorities governing payments of scheduled and unscheduled
          principal on the mortgage loans in each aggregate loan group will have
          the effect of accelerating the rate of principal payments to holders
          of the classes of the related senior certificates relative to the
          classes of the related subordinated certificates.

      Prepayment penalties on the mortgage loans in a loan group will be
distributed to the related class of Class P Certificates and will not be
available to the holders of other classes of certificates. See "Yield,
Prepayment and Weighted Average Life" and "Description of the
Certificates--Principal" in this prospectus supplement for a description of the
factors that may influence the rate and timing of prepayments on the mortgage
loans.

YOUR YIELD WILL BE AFFECTED BY THE INTEREST-ONLY FEATURE OF SOME OF THE MORTGAGE
LOANS

      Approximately 73.56%, 87.20% and 92.17% of the mortgage loans in loan
group 1, loan group 2 and loan group 3, respectively, in each case by aggregate
stated principal balance of the mortgage loans in that loan group as of the
cut-off date, require monthly payments of only accrued interest for a
substantial period of time after origination. During the interest-only period,
less principal will be available for distribution to the holders of the related
certificates than otherwise would be the case. In addition, these loans may have
a higher risk of default after the interest-only period due to the larger
outstanding balance and the increased monthly payment necessary to amortize
fully the mortgage loan. In addition, during the interest-only period, these
mortgage loans may be less likely to prepay since the perceived benefits from
refinancing may be less than if the mortgage loans were fully amortizing. As the
interest-only period approaches its end, however, these mortgage loans may be
more likely to be refinanced in order to avoid higher monthly payments necessary
to amortize fully the mortgage loans.

      Investors should consider the fact that interest-only loans reduce the
monthly payment required by borrowers during the interest-only period and
consequently the monthly housing expense used to qualify borrowers pursuant to
originators' underwriting guidelines. As a result, interest-only loans may allow
some borrowers to qualify for a mortgage loan who would not otherwise qualify
for a fully-amortizing mortgage loan or may allow them to qualify for a larger
loan than would otherwise be the case.

YOUR YIELD MAY BE AFFECTED BY CHANGES IN INTEREST RATES

      In the case of the mortgage loans in loan group 1 with mortgage rates that
adjust, after their respective initial fixed-rate periods, the mortgage rate on
each of these mortgage loans adjusts based upon one-month LIBOR, six-month
LIBOR, one-year LIBOR or one-year CMT, depending on the terms of the related
mortgage note. In the case of the mortgage loans in loan group 2 and loan group
3, after their respective initial fixed-rate periods, the mortgage rate on each
of these mortgage loans adjusts based upon six-month LIBOR, one-year LIBOR or
one-year CMT, depending on the terms of the related mortgage note. No prediction
can be made as to future levels of any of these indices or as to the timing of
any changes therein, each of which will directly affect the yields of the
related classes of certificates. See "Description of the Certificates --
Interest" in this prospectus supplement.


                                      S-19



YOUR YIELD WILL BE AFFECTED BY HOW MORTGAGE LOAN INTEREST RATE ADJUSTMENTS ARE
LIMITED

      The offered certificates will accrue interest at a pass-through rate that
is either based on or subject to the weighted average of the interest rates on
the mortgage loans in the related loan group, in the case of the senior
certificates, and on the mortgage loans in the related aggregate loan group, in
the case of the subordinated certificates, net of certain expenses of the
issuing entity. Substantially all of the mortgage loans with mortgage rates that
adjust have periodic and maximum limitations on adjustments to the interest rate
on these mortgage loans. Consequently, the operation of these interest rate caps
may limit increases in one or more pass-through rates for extended periods in a
rising interest rate environment.

THE PASS-THROUGH RATES AND INTEREST DISTRIBUTIONS ON THE GROUP 1 CERTIFICATES
ARE SUBJECT TO SPECIAL RISKS

      The pass-through rates on the group 1 certificates are subject to a cap
(the "GROUP 1 NET WAC ") equal to the weighted average of the mortgage rates of
the group 1 mortgage loans, net of certain expenses of the issuing entity.
Therefore, the prepayment of the group 1 mortgage loans with higher mortgage
rates may result in a lower pass-through rate on the group 1 certificates.

      In addition, the pass-through rates on the group 1 certificates (other
than the Class 1-A-X, Class 1-M-X, Class 1-B-1, Class 1-B-2, Class 1-B-3 and
Class 1-B-4 Certificates) for any distribution date will be equal to the value
of one-month LIBOR plus the related margin, but subject to both Group 1 Net WAC
and a maximum per annum rate of 11.50%. The pass-through rates of the Class
1-A-X and Class 1-M-X Certificates are also sensitive to the value of one-month
LIBOR. Your yield on the group 1 certificates will be sensitive to:

      (1)   the level of one-month LIBOR;

      (2)   the imposition of Group 1 Net WAC; and

      (3)   the maximum per annum rate of 11.50%.

      To the extent that amounts payable under the corridor contracts on a
distribution date are insufficient to cover Net WAC Shortfalls on the related
classes of the group 1 certificates on that distribution date, interest
distributions on the Class 1-A-X and Class 1-M-X Certificates may be used,
subject to the priorities described in this prospectus supplement. However,
there can be no assurance that the amounts otherwise distributable as interest
on the Class 1-A-X or Class 1-M-X Certificates will be sufficient to cover these
shortfalls, particularly because (i) with respect to the Class 1-A-X
Certificates, if the pass-through rates on the Class 1-A-1, Class 1-A-2 and
Class 1-A-3 Certificates are limited by Group 1 Net WAC, the pass-through rate
on the Class 1-A-X Certificates may be zero and (ii) with respect to the Class
1-M-X Certificates, if the pass-through rates on the Class 1-M-1, Class 1-M-2,
Class 1-M-3, Class 1-M-4, Class 1-M-5, Class 1-M-6, Class 1-M-7, Class 1-M-8 and
Class 1-M-9 Certificates are limited by Group 1 Net WAC, the pass-through rate
on the Class 1-M-X Certificates may be zero.

      To the extent that Group 1 Net WAC limits the amount of interest paid on
the group 1 certificates (other than the Class 1-A-X, Class 1-M-X, Class 1-B-1,
Class 1-B-2, Class 1-B-3 and Class 1-B-4 Certificates), the difference between
the weighted average net mortgage rate of the group 1 mortgage loans and the
pass-through rates of those classes of certificates, calculated without giving
effect to such limitation, will create a shortfall. However, on each
distribution date, any such resulting shortfall will only be paid first, from
any amounts distributable on the related corridor contract on that distribution
date and second, to the extent that the Class 1-A-X or Class 1-M-X Certificates
receive distributions of interest on that distribution date, from the portion of
those interest distribution amounts deposited into the reserve fund.
Accordingly, if the amounts described in the preceding sentence are not
sufficient to cover these shortfalls, they may remain unpaid.

      Although holders of each class of group 1 certificates (other than the
Class 1-A-X, Class 1-M-X, Class 1-B-1, Class 1-B-2, Class 1-B-3 and Class 1-B-4
Certificates) will be entitled to receive any related Net WAC Shortfall from and
to the limited extent of funds available for such payments in the reserve fund,
there is no assurance that those funds will be available or sufficient to pay
such Net WAC Shortfall. Such Net WAC Shortfalls will also be covered first by
amounts on deposit in the reserve fund from amounts payable under the corridor


                                      S-20



contract related to each such class, to the extent that, for any distribution
date, one-month LIBOR exceeds the applicable cap strike with respect to such
class of group 1 certificates and such distribution date.

      See "Description of the Certificates--Interest" and "--The Reserve Fund
and the Corridor Contracts" and "Yield, Prepayment and Weighted Average Life" in
this prospectus supplement for a description of factors that may influence the
rate and timing of prepayments on the mortgage loans.

THE CORRIDOR CONTRACTS ARE SUBJECT TO COUNTERPARTY RISK

      The assets of the issuing entity include the corridor contracts that will
require the corridor contract counterparty to make certain payments for the
benefit of the holders of the related group 1 certificates. To the extent that
payments on the group 1 certificates depend in part on payments to be received
by the securities administrator, on behalf of the trustee, under the corridor
contracts, the ability of the securities administrator to make such payments on
such classes of group 1 certificates will be subject to the credit risk of the
corridor contract counterparty.

HIGH BALANCE MORTGAGE LOANS POSE SPECIAL RISKS

      Approximately 47.75%, 40.88% and 72.66% of the mortgage loans in loan
group 1, loan group 2 and loan group 3, respectively, in each case by aggregate
stated principal balance of the mortgage loans in that loan group as of the
cut-off date, had principal balances greater than $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 related loan group and the pool
of mortgage loans as a whole.

HIGH LOAN-TO-VALUE RATIOS INCREASE RISK OF LOSS

      Loans with higher loan-to-value ratios may present a greater risk of loss
than loans with loan-to-value ratios of 80.00% or below. Approximately 2.02%,
6.78% and 1.53% of the mortgage loans in loan group 1, loan group 2, and loan
group 3, respectively, in each case by aggregate stated principal balance of the
mortgage loans in that loan group as of the cut-off date, had loan-to-value
ratios at origination in excess of 80.00%. Additionally, the determination of
the value of a mortgaged property used in the calculation of the loan-to-value
ratios or effective loan-to-value ratios of the loans may differ from the
appraised value of such mortgaged properties or the actual value of such
mortgaged properties.

PAYMENTS IN FULL OF A BALLOON LOAN DEPEND ON THE BORROWER'S ABILITY TO REFINANCE
THE BALLOON LOAN OR SELL THE MORTGAGED PROPERTY

      Approximately 0.44% and 0.16% of the mortgage loans in loan group 1 and
loan group 2, respectively, in each case by aggregate stated principal balance
of the mortgage loans in that loan group as of the cut-off date, are balloon
loans. Mortgage loans that are balloon loans may not be fully amortizing over
their terms to maturity and, thus, will require substantial principal payments,
i.e., balloon payments, at their stated maturity. Mortgage loans with balloon
payments involve a greater degree of risk because the ability of a borrower to
make a balloon payment typically will depend upon its ability either to timely
refinance the loan or to timely sell the related mortgaged property. The ability
of a borrower to accomplish either of these goals will be affected by a number
of factors, including:

      o   the level of available mortgage interest rates at the time of sale or
          refinancing;

      o   the borrower's equity in the related mortgaged property;

      o   the financial condition of the mortgagor;

      o   tax laws;


                                      S-21



      o   prevailing general economic conditions; and

      o   the availability of credit for single family real properties
          generally.

INADEQUACY OF VALUE OF PROPERTIES COULD AFFECT SEVERITY OF LOSSES

      Assuming that the related mortgaged properties provide adequate security
for the mortgage loans, substantial delays in recoveries may occur from the
foreclosure or liquidation of defaulted loans. We cannot assure you that the
values of the properties have remained or will remain at the levels in effect on
the dates of origination of the related loans. Further, liquidation expenses,
including legal fees, real estate taxes, and maintenance and preservation
expenses will reduce the proceeds payable on the mortgage loans and thereby
reduce the security for the mortgage loans. As a result, the risk that you will
suffer losses could increase. If any of the properties fail to provide adequate
security for the related loan, you may experience a loss. See "Legal Aspects of
Mortgage Loans--Foreclosure" in the accompanying prospectus.

BANKRUPTCY OF BORROWERS MAY ADVERSELY AFFECT DISTRIBUTIONS ON CERTIFICATES

      The application of federal and state laws, including bankruptcy and debtor
relief laws, may interfere with or adversely affect the ability to realize on
the properties, enforce deficiency judgments or pursue collection litigation
with respect to defaulted loans. As a consequence, borrowers who have defaulted
on their loans and sought, or are considering seeking, relief under bankruptcy
or debtor relief laws will have substantially less incentive to repay their
loans. As a result, these loans will likely experience more severe losses, which
may be total losses and could therefore increase the risk that you will suffer
losses. See "--Credit Enhancement May Not Be Adequate" above.

THERE ARE RISKS IN HOLDING SUBORDINATED CERTIFICATES

      The protections afforded the senior certificates in an aggregate
certificate group create risks for the related subordinated certificates. Prior
to any purchase of any subordinated certificates, consider the following factors
that may adversely impact your yield:

      o   Because the subordinated certificates in each aggregate certificate
          group receive interest and principal distributions after the senior
          certificates in that aggregate certificate group receive those
          distributions, there is a greater likelihood that those subordinated
          certificates will not receive the distributions to which they are
          entitled on any distribution date.

      o   If the servicer of a mortgage loan determines not to advance a
          delinquent payment on that mortgage loan because the servicer
          determines the amount is not recoverable from a borrower, there may be
          a shortfall in distributions on the related certificates which will
          impact the related subordinated certificates.

      o   Losses resulting from the liquidation of defaulted loans in an
          aggregate loan group will be allocated to the subordinated
          certificates in the related aggregate certificate group. A loss
          allocation results in a reduction in a certificate balance,
          potentially to zero, without a corresponding distribution of cash to
          the holder. A lower certificate balance will result in less interest
          accruing on the certificate.

      o   The earlier in the transaction that a loss on a related mortgage loan
          occurs, the greater the impact on your yield on the subordinated
          certificates.

      The pooling and servicing agreement does not permit the allocation of
realized losses on the mortgage loans to either class of Class P Certificates or
to the Class C Certificates. See "Description of the Certificates" and "Yield,
Prepayment and Weighted Average Life" in this prospectus supplement.


                                      S-22



      Except under the circumstances described in this prospectus supplement,
the subordinated certificates in each aggregate certificate group are not
entitled to a full proportionate share of principal prepayments on the mortgage
loans until the beginning of the twelfth year after the closing date. In
addition, if certain losses on the mortgage loans in an aggregate loan group
exceed stated levels, a portion of the principal distribution payable to classes
of the subordinated certificates in the related aggregate certificate group with
lower priorities of payment will be paid to the classes of subordinated
certificates in the related aggregate certificate group with higher priorities
of payment. Accordingly, the weighted average lives of the subordinated
certificates in each aggregate certificate group will be longer than would be
the case if distributions of principal were allocated among all of the classes
of certificates in the related aggregate certificate group at the same time. As
a result of the longer weighted average lives of the subordinated certificates,
the holders of these classes of certificates have a greater risk of suffering a
loss on their investments.

GEOGRAPHIC CONCENTRATION COULD INCREASE LOSSES ON THE MORTGAGE LOANS

      The yield to maturity on your certificates may be affected by the
geographic concentration of the mortgaged properties securing the mortgage
loans. Any concentration of the mortgaged properties securing the mortgage loans
in particular geographic regions might magnify the effect on the pool of
mortgage loans of adverse economic conditions or of special hazards in these
areas, such as earthquakes or tornadoes, and might increase the rate of
delinquencies, defaults and losses on the mortgage loans. Consequently, the
geographic concentration could result in shortfalls in distributions due on your
certificates more than would be the case if the mortgaged properties were more
geographically diversified.

      Approximately 43.89%, 38.97% and 61.31% of the mortgage loans in loan
group 1, loan group 2 and loan group 3, respectively, in each case by aggregate
stated principal balance of the mortgage loans in that loan group as of the
cut-off date, are secured by properties located 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 wildfires, earthquakes,
floods, mudslides and other natural disasters.

      In addition, certain Mortgage Loans are secured by properties located in
the Gulf Coast of Texas, Louisiana, Mississippi, Alabama, Florida, Georgia,
South Carolina and other states that frequently experience hurricanes and other
significant storms during the hurricane season.

      See "Description of the Mortgage Loans" in this prospectus supplement.

HURRICANE KATRINA AND ITS AFTERMATH MAY POSE SPECIAL RISKS

      At the end of August 2005, Hurricane Katrina and related windstorms,
floods and tornadoes caused extensive and catastrophic physical damage to
coastal and inland areas located in the Gulf Coast region of the United States
(parts of Louisiana, Mississippi, Alabama and Florida) and may have adversely
affected mortgaged properties located in certain other parts of the United
States. The seller or the related originator, as applicable, will represent and
warrant as of the closing date that no mortgaged property has been damaged so as
to materially affect the value of the mortgaged property. In the event of a
breach of that representation and warranty, the seller or the related
originator, as applicable, will be obligated to repurchase or substitute for the
related mortgage loan. Any damage to a mortgaged property that secures a
mortgage loan in the assets of the issuing entity occurring after the closing
date as a result of any other hurricane, windstorm, flood, tornado or casualty
will not cause a breach of this representation and warranty. Any repurchase
would have the effect of increasing the rate of principal payment on the
certificates.

      The full economic impact of Hurricane Katrina and its aftermath is
uncertain. Initial economic effects appear to include nationwide decreases in
petroleum availability with a corresponding increase in price, decreases in
chemical production and availability and regional interruptions in travel and
transportation, tourism and economic activity generally. It is not possible to
determine how long these effects may last or whether other effects will
subsequently arise or become apparent in connection with Hurricane Katrina and
its aftermath. No assurance can be given as to the effect of any of these events
on consumer confidence and the performance of the mortgage loans. Any adverse
impact resulting from any of these events would be borne by the holders of the
certificates.


                                      S-23



CROSS-COLLATERALIZATION AMONG THE LOAN GROUPS IN AGGREGATE LOAN GROUP II;
LIMITED RECOURSE

      Except as described in "Description of the Certificates--Aggregate
Certificate Group II--Transfer Payments," interest and principal on the
aggregate group II senior certificates will be allocated based on amounts
collected in respect of the mortgage loans in the related loan group. In the
case of the senior certificates in aggregate certificate group II, the mortgage
loans in aggregate loan group II will generally not be
"cross-collateralized"--interest and principal collections received from the
mortgage loans in a loan group in aggregate loan group II will only be available
for distribution to the related senior certificates and not to the senior
certificates related to the other loan group in aggregate loan group II. On the
other hand, collections from all of the mortgage loans in aggregate loan group
II will be available to make distributions to the aggregate group II
subordinated certificates.

      Because the aggregate group II subordinated certificates represent
interests in all of the mortgage loans in aggregate loan group II, the class
principal balances of the aggregate group II subordinated certificates could be
reduced to zero as a result of realized losses on the mortgage loans in a loan
group in aggregate loan group II. Therefore, the allocation of realized losses
on the mortgage loans in a loan group in aggregate loan group II to the
aggregate group II subordinated certificates will reduce the subordination
provided by the aggregate group II subordinated certificates to all of the
related classes of senior certificates, including the senior certificates
related to the mortgage loans in a loan group in aggregate loan group II that
did not suffer any losses. This will increase the likelihood that future
realized losses may be allocated to the senior certificates related to the
mortgage loans in a loan group in aggregate loan group II that did not suffer
those previous losses.

      There is no cross-collateralization between the certificates related to
each aggregate loan group.

RECOURSE ON DEFECTIVE MORTGAGE LOANS IS LIMITED; LIMITED RECOURSE

      The seller or an originator may be required to purchase mortgage loans
from the assets of the issuing entity in the event certain breaches of
representations and warranties made by it have not been cured. These purchases
will have the same effect on the holders of the offered certificates as a
prepayment of the mortgage loans. If the seller or the originator that made the
breached representation or warranty fails to repurchase that mortgage loan, it
will remain in the assets of the issuing entity.

      Neither the certificates nor the assets of the issuing entity will be
guaranteed by the depositor, the seller, the master servicer, the servicers, the
securities administrator, the trustee or any of their respective affiliates or
insured by any governmental agency. Consequently, if collections on the related
mortgage loans are insufficient to make all payments required on the
certificates and the protection against losses provided by subordination and
limited cross-collateralization is exhausted, you may incur a loss on your
investment.

RAPID PREPAYMENTS ON THE MORTGAGE LOANS IN THE RELATED LOAN GROUP WILL REDUCE
THE YIELDS ON THE CLASS 1-A-X AND CLASS 1-M-X CERTIFICATES

      The Class 1-A-X and Class 1-M-X Certificates receive distributions only of
interest. Distributions to the holders of the Class 1-A-X and Class 1-M-X
Certificates are based on the respective notional amounts for such classes of
certificates, calculated as described in this prospectus supplement under
"Description of the Certificates--Notional Amount Certificates". You should
fully consider the risks associated with an investment in the Class 1-A-X and
Class 1-M-X Certificates. If you invest in the Class 1-A-X or Class 1-M-X
Certificates and the mortgage loans in loan group 1 prepay faster than expected
or if the issuing entity is terminated earlier than expected, you may not fully
recover your initial investment.

      We refer you to "Yield, Prepayment and Weighted Average Life--Sensitivity
of the Class 1-A-X and Class 1-M-X Certificates" in this prospectus supplement
for more detail.


                                      S-24



BANKRUPTCY OR INSOLVENCY MAY AFFECT THE TIMING AND AMOUNT OF DISTRIBUTIONS ON
THE CERTIFICATES

      The seller and the depositor will treat the transfer of the mortgage loans
held by the issuing entity by the seller to the depositor as a sale for
accounting purposes. The depositor and the issuing entity will treat the
transfer of the mortgage loans from the depositor to the issuing entity as a
sale for accounting purposes. If these characterizations are correct, then if
the seller were to become bankrupt, the mortgage loans would not be part of the
seller's bankruptcy estate and would not be available to the seller's creditors.
If the seller becomes bankrupt, its bankruptcy trustee or one of the seller's
creditors may attempt to recharacterize the sale of the mortgage loans as a
borrowing by the seller, secured by a pledge of the mortgage loans. Presenting
this position to a bankruptcy court could prevent timely payments on the
certificates and even reduce the payments on the certificates. Similarly, if the
characterizations of the transfers as sales are correct, then if the depositor
were to become bankrupt, the mortgage 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 the depositor's creditors may attempt to recharacterize the sale of the
mortgage loans as a borrowing by the depositor, secured by a pledge of the
mortgage loans. Presenting this position to a bankruptcy court could prevent
timely payments on the certificates and even reduce the payments on the
certificates.

      If the master servicer becomes bankrupt, the bankruptcy trustee may have
the power to prevent the appointment of a successor to the master servicer. If
the master servicer becomes bankrupt and cash collections have been commingled
with the master servicer's own funds, the issuing entity may not have a
perfected interest in those collections. In this case the issuing entity might
be an unsecured creditor of the master servicer as to the commingled funds and
could recover only its share as a general creditor, which might be nothing.
Collections that are not commingled but still in an account of the master
servicer might also be included in the bankruptcy estate of the master servicer
even though the issuing entity may have a perfected security interest in them.
Their inclusion in the bankruptcy estate of the master servicer may result in
delays in payment and failure to pay amounts due on the certificates.

      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. 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 mortgage loans
and even to reduce the aggregate amount of payments on the mortgage loans.

YOU COULD BE ADVERSELY AFFECTED BY VIOLATIONS OF CONSUMER PROTECTION LAWS

      Applicable state laws generally regulate interest rates and other charges
and require certain disclosures. In addition, state and federal consumer
protection laws, unfair and deceptive practices acts and debt collection
practices acts may apply to the origination or collection of the mortgage loans.
Depending on the provisions of the applicable law, violations of these laws may
limit the ability of the servicers to collect all or part of the principal of or
interest on the mortgage loans, may entitle the borrower to a refund of related
amounts previously paid and, in addition, could subject the master servicer (in
its capacity as successor servicer) or the related servicer to damages and
administrative enforcement.

      The Federal Home Ownership and Equity Protection Act of 1994, commonly
known as HOEPA, prohibits inclusion of some provisions in mortgage loans that
have mortgage rates or origination costs in excess of prescribed levels, and
requires that borrowers be given certain disclosures prior to the consummation
of such mortgage loans. Some states, as in the case of Georgia, with respect to
Georgia's Fair Lending Act of 2002, have enacted, or may enact, similar laws or
regulations, which in some case impose restrictions and requirements greater
than those in HOEPA. Failure to comply with these laws, to the extent applicable
to any of the mortgage loans, could subject the issuing entity as an assignee of
the mortgage loans, to monetary penalties and could result in the borrowers
rescinding such mortgage loans against the issuing entity. Lawsuits have been
brought in various states making claims against assignees of high cost loans for
violations of state law. Named defendants in these cases have included numerous
participants within the secondary mortgage market, including some securitization
trusts. The


                                      S-25



originators and the seller have warranted that the mortgage loans do not include
any mortgage loan in violation of HOEPA or similar state laws. However, if the
assets of the issuing entity should include loans subject to HOEPA or in
material violation of similar state laws, it will have repurchase remedies
against the related originator or the seller, as applicable. See "Legal Aspects
of Mortgage Loans" in the accompanying prospectus.

FAILURE OF SERVICERS AND MASTER SERVICER TO PERFORM MAY ADVERSELY AFFECT
DISTRIBUTIONS ON CERTIFICATES

      The amount and timing of distributions on the certificates generally will
be dependent on servicers performing their respective servicing obligations and
on the master servicer performing its master servicing obligations in an
adequate and timely manner. See "Servicing of the Mortgage Loans--Servicing and
Collection Procedures" in this prospectus supplement. If a servicer or the
master servicer fails to perform its respective servicing or master servicing
obligations, this failure may result in the termination of that servicer or
master servicer. That termination, with its corresponding transfer of daily
collection activities, will likely increase the rates of delinquencies, defaults
and losses on the mortgage loans. As a result, shortfalls in the distributions
due on your certificates could occur.

THE SERVICING COMPENSATION MAY BE INSUFFICIENT TO ENGAGE REPLACEMENT SERVICERS
OR MASTER SERVICER

      The fees and expenses, including the servicing fee and master servicing
compensation, payable by that issuing entity are described in this prospectus
supplement under "Servicing of the Mortgage Loans-- Servicing Compensation and
Payment of Expenses; Master Servicing Compensation; Administrative Fees." In the
event it becomes necessary to replace a servicer or master servicer, no
assurance can be made that the servicing fee or master servicing compensation,
as applicable, will be sufficient to attract replacement servicers or a
replacement master servicer to accept an appointment for the related issuing
entity. In addition, to the extent the loans of any series have amortized
significantly at the time that a replacement servicer or a replacement master
servicer is sought, the compensation that would be payable to any such
replacement may not be sufficient to attract a replacement to accept an
appointment for the issuing entity.

YOUR YIELD MAY BE AFFECTED IF THERE IS A TRANSFER OF SERVICING OF CERTAIN
MORTGAGE LOANS

      The seller retained the right, subject to certain conditions, to terminate
GMAC Mortgage Corporation as servicer with respect to the related mortgage loans
and cause the transfer of the servicing of those mortgage loans to be
transferred to third parties. All transfers of servicing involve the risk of
disruption in collections due to data input errors, misapplied or misdirected
payments, system incompatibilities and other reasons. As a result, if the
servicing of these mortgage loans is transferred, the rates of delinquencies,
defaults and losses are likely to increase, at least for a period of time. There
can be no assurance as to the extent or duration of any disruptions associated
with the transfer of any servicing or as to what affect on the yield on your
certificates will be. In addition, even though a servicing transfer cannot occur
unless certain conditions set forth in the pooling and servicing agreement are
met, there can be no guarantee that a servicing transfer will not have an
adverse impact on the rates of delinquency, default and losses on the related
mortgage loans.

      As of the cut-off date, the sponsor expects to transfer the servicing of
approximately 5.22% of the group 1 mortgage loans from GMAC Mortgage Corporation
to Wells Fargo Bank, National Association shortly after the closing date.

LIMITED LIQUIDITY MAY ADVERSELY AFFECT MARKET VALUE OF CERTIFICATES

      A secondary market for the offered certificates may not develop or, if it
does develop, it may not provide you with liquidity of investment or continue
while your certificates are outstanding. Lack of liquidity could result in a
substantial decrease in the market value of your certificates. See "Risk
Factors--Lack of a Secondary Market May Make it Difficult for You to Resell Your
Certificates" in the accompanying prospectus.

      The secondary market for mortgage-backed securities has experienced
periods of illiquidity and can be expected to do so in the future. Illiquidity
means that there may not be any purchasers for your class of certificates.


                                      S-26



Although any class of certificates may experience illiquidity, it is more likely
that classes of certificates that are more sensitive to prepayment, credit or
interest rate risk will experience illiquidity.

RIGHTS OF BENEFICIAL OWNERS MAY BE LIMITED BY BOOK-ENTRY SYSTEM

      Unless you are the purchaser of a Class A-R Certificate, your ownership of
the offered certificates will be registered electronically with DTC. The lack of
physical certificates could:

      o   result in payment delays on your certificates because the securities
          administrator will be sending distributions on the certificates to DTC
          instead of directly to you;

      o   make it difficult for you to pledge your certificates if physical
          certificates are required by the party demanding the pledge; and

      o   hinder your ability to resell your certificates because some investors
          may be unwilling to buy certificates that are not in physical form.
          See "Description of the Certificates--Book-Entry Certificates" in this
          prospectus supplement and "Description of the Certificates--Book-Entry
          Registration and Definitive Certificates" in the accompanying
          prospectus.

MILITARY ACTION AND TERRORIST ATTACKS

      The effects that military action by U.S. forces in Iraq and Afghanistan or
other regions and terrorist attacks in the United States or other incidents and
related military action may have on the performance of the mortgage loans or on
the values of mortgaged properties cannot be determined at this time. Investors
should consider the possible effects on delinquency, default and prepayment
experience of the mortgage loans. Federal agencies and non-government lenders
have and may continue to defer, reduce or forgive payments and delay foreclosure
proceedings in respect of loans to borrowers affected in some way by recent and
possible future events. In addition, activation of a substantial number of U.S.
military reservists or members of the National Guard may significantly increase
the proportion of mortgage loans whose mortgage rates are reduced by application
of the Servicemembers' Civil Relief Act (formerly known as the Soldiers' and
Sailors' Civil Relief Act of 1940), or similar state laws, and neither the
master servicer nor the servicers will be required to advance for any interest
shortfall caused by any such reduction. Shortfalls in interest may result from
the application of the Servicemembers' Civil Relief Act or similar state laws.
Interest payable to senior and subordinated certificateholders will be reduced
on a pro rata basis by any reductions in the amount of interest collectible as a
result of application of the Servicemembers' Civil Relief Act or similar state
laws. See "Legal Aspects of Mortgage Loans--Servicemembers' Civil Relief Act" in
the accompanying prospectus.

RISKS RELATED TO THE CLASS A-R CERTIFICATES

      The holders of the Class A-R Certificates must include the taxable income
or loss of each REMIC created by the issuing entity in determining its federal
taxable income. It is not anticipated that the residual certificateholders will
receive distributions from the issuing entity. As such, prospective investors
are cautioned that the residual certificateholders' REMIC taxable income and the
tax liability associated therewith may be substantial during certain periods, in
which event the holders of those certificates must have sufficient sources of
funds to pay such tax liability. Furthermore, it is anticipated that all or a
substantial portion of the taxable income of the REMICs includible by the
holders of the residual certificates will be treated as "excess inclusion"
income. As such, the holder will (i) be unable to use net operating losses to
offset such income, (ii) treat such income as "unrelated business taxable
income" (if applicable), and (iii) if such holder is a foreign person, be
subject to 30% withholding tax to certain non-U.S. investors, with no exemption
or treaty reduction.

      Under the provisions of the Internal Revenue Code relating to REMICs, it
is likely that the residual certificates will be considered to be a
"non-economic residual interest." As such, a transfer of those certificates
would be disregarded if it had a significant purpose to impede the assessment or
collection of tax. Accordingly, the transferee affidavit used for transfers of
the residual certificates will require each transferee to affirm that it (i)


                                      S-27



historically has paid its debts as they have come due and intends to do so in
the future, (ii) understands that it may incur tax liabilities with respect to
the residual certificate in excess of cash flows generated by it, (iii) intends
to pay taxes associated with holding such residual certificates as such taxes
become due, (iv) will not cause the income from the residual certificates to be
attributable to a foreign permanent establishment or fixed base, within the
meaning of an applicable income tax treaty, of the transferee or any other
person and (v) will not transfer the residual certificates to any person or
entity that does not provide a similar affidavit. Each transferor must certify
in writing to the securities administrator that, as of the date of transfer, it
had no knowledge or reason to know that the affirmations made by the transferee
pursuant to the preceding sentence were false. Under the regulations, any
transfer of the Class A-R 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. 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 each
REMIC created by the issuing entity. 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 Class A-R 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. See "Material Federal Income Tax Consequences--The Class
A-R Certificates" and "ERISA Matters" in this prospectus supplement and "Federal
Income Tax Consequences--REMICs-Taxation of Owners of REMIC Residual
Certificates," and "Federal Income Tax Consequences--Tax-Related Restrictions on
Transfers of REMIC Residual Certificates" in the accompanying prospectus.

      An individual, trust or estate that holds a Class A-R Certificate (whether
the residual certificate is held directly or indirectly through certain
pass-through entities) also would have additional gross income with respect to,
but may be subject to limitations or disallowance of deductions for servicing
fees on the mortgage loans and other administrative expenses properly allocable
to such residual certificate in computing such holder's regular tax liability,
and may not be able to deduct such fees or expenses at all in computing such
holder's alternative minimum tax liability. As a result, the Class A-R
Certificates generally are not suitable investments for individuals or for
partnerships, estates or S corporations with individuals as partners,
beneficiaries or shareholders. The pooling and servicing agreement will require
that any such gross income and such fees and expenses will be allocable to
holders of the Class A-R Certificates in proportion to their respective
ownership interests. See "Federal Income Tax Consequences--REMICS-Taxation of
Owners of REMIC Residual Certificates" in the accompanying prospectus.
Furthermore, the federal income tax consequences of any consideration paid to a
transferee on a transfer of a Class A-R Certificate are unclear. Any transferee
of a Class A-R Certificate receiving such consideration should consult its tax
advisors.

      Due to the special tax treatment of residual interests, the effective
after-tax return of the Class A-R Certificates may be significantly lower than
would be the case if the Class A-R Certificates were taxed as debt instruments
and could be negative.

                           FORWARD-LOOKING STATEMENTS

      In this prospectus supplement and the accompanying prospectus, we use
certain forward-looking statements. These forward-looking statements are found
in the material, including each of the tables set forth under "Yield, Prepayment
and Weighted Average Life" in this prospectus supplement. Forward-looking
statements are also found elsewhere in this prospectus supplement and the
accompanying prospectus and include words like "expects," "intends,"
"anticipates," "estimates" and other similar words. These statements are
intended to convey our projections or expectations as of the date of this
prospectus supplement. These statements are inherently subject to a variety of
risks and uncertainties. Actual results could differ materially from those we
anticipate due to changes in, among other things:

      (1)   economic conditions and industry competition;

      (2)   political and/or social conditions; and


                                      S-28



      (3)   the law and government regulatory initiatives.

      We will not update or revise any forward-looking statement to reflect
changes in our expectations or changes in the conditions or circumstances on
which these statements were originally based.

                        DESCRIPTION OF THE MORTGAGE LOANS

GENERAL

      On the Closing Date, Morgan Stanley Mortgage Loan Trust 2006-3AR (the
"ISSUING ENTITY") will own approximately 1,948 mortgage loans (the "MORTGAGE
LOANS" or the "MORTGAGE POOL") with an aggregate unpaid principal balance of
approximately $800,218,693 (the "AGGREGATE CUT-OFF DATE POOL PRINCIPAL BALANCE")
as of February 1, 2006 (the "CUT-OFF DATE"), after deducting payments due on or
before the Cut-off Date. The Mortgage Loans are secured by first liens on fee
simple interests in one- to four-family residential properties (each, a
"MORTGAGED PROPERTY"). At the Cut-off Date, the Mortgage Loans have been
segregated into three loan groups ("LOAN GROUP 1", "LOAN GROUP 2" and "LOAN
GROUP 3", respectively, and each, a "LOAN GROUP"), each having the
characteristics set forth below as of the Cut-off Date:



                                               NUMBER OF MORTGAGE    APPROXIMATE AGGREGATE CUT-OFF
                    LOAN GROUP                       LOANS             DATE LOAN GROUP BALANCE
      --------------------------------------   ------------------   -------------------------------

      Loan Group 1
      (the "GROUP 1 MORTGAGE LOANS")........          992                   $392,302,276
      Loan Group 2
      (the "GROUP 2 MORTGAGE LOANS")........          605                   $195,035,228
      Loan Group 3
      (the "GROUP 3 MORTGAGE LOANS")........          351                   $212,881,189


      As described herein at "Description of the Certificates--General," the
Mortgage Loans have been segregated into Loan Groups for purposes of allocating
distributions among the Senior Certificates. All of the Mortgage Loans have
original terms to maturity of up to approximately 30 years. The mortgage loans
were selected for the inclusion in the mortgage pool from among mortgage loans
purchased by the Sponsor from correspondent lenders and mortgage loan
originators based on the Sponsor's assessment of investor preferences and rating
agency criteria.

      The "ASSETS OF THE ISSUING ENTITY" will include, in addition to the
Mortgage Pool, (i) the amounts held from time to time in one or more accounts
maintained in the name of the Trustee pursuant to the Pooling and Servicing
Agreement, (ii) the amounts held from time to time in the Custodial Accounts and
the Distribution Account maintained in the name of the Trustee pursuant to the
Pooling and Servicing Agreement, (iii) any property which initially secured a
Mortgage Loan and which is acquired by foreclosure or deed in lieu of
foreclosure, (iv) all insurance policies related to the Mortgage Loans and any
insurance proceeds, (v) the pledge agreements or guaranty agreements, as
applicable, in respect of the Additional Collateral Mortgage Loans, as described
below, (vi) all of the right, title and interest of the Depositor to the
mortgage loan purchase agreement, the underlying mortgage loan purchase
agreements and the underlying servicing agreements as described under
"Assignment of the Mortgage Loans; Representations and Warranties Relating to
the Mortgage Loans" below and (vii) the Corridor Contracts and the amounts on
deposit in the Reserve Fund. The rights in respect of the Additional Collateral,
the Corridor Contracts and amounts on deposit in the Reserve Fund (in each case,
as defined below) will not be part of any REMIC.

      The following is a summary description of the Mortgage Loans in each Loan
Group as of the Cut-off Date. The information presented herein does not take
into account any Mortgage Loans that have or may prepay in full or have been or
may be removed because of incomplete documentation or otherwise for the period
from the Cut-off Date to the Closing Date, or other Mortgage Loans that may be
substituted therefor. As a result, the information


                                      S-29



regarding the Mortgage Loans may vary from comparable information based upon the
actual composition of the Loan Groups as of the Closing Date, although such
variance will not be material.

      Whenever reference is made herein to a percentage of some or all of the
Mortgage Loans or some or all of a Loan Group, such percentage is determined on
the basis of the Stated Principal Balance (as defined below at "Description of
the Certificates--Interest") of the Mortgage Loans in the aggregate or in a
particular Loan Group as of the Cut-off Date.

      The following table sets forth, by Aggregate Cut-off Date Loan Group
Balance, the Mortgage Loans originated by each of Morgan Stanley Mortgage
Capital Inc. ("MSMC"), Morgan Stanley Credit Corp. ("MSCC"), Wachovia Mortgage
Corporation ("WACHOVIA"), Wells Fargo Bank, National Association ("WELLS FARGO
SERVICER") and other originators:



                                                             PERCENT
                                             PERCENT       ORIGINATED       PERCENT
                                          ORIGINATED IN      IN LOAN     ORIGINATED IN
ORIGINATOR                                 LOAN GROUP 1      GROUP 2     LOAN GROUP 3
----------------------------------------  -------------    ----------    -------------

MSMC
(the "MSMC MORTGAGE LOANS").............      56.34%         68.29%         82.28%
MSCC
(the "MSCC MORTGAGE LOANS").............       5.31%         16.44%         12.49%
Wachovia
(the "WACHOVIA MORTGAGE LOANS").........      14.77%          3.60%          0.14%
Wells Fargo Servicer
(the "WELLS FARGO SERVICER MORTGAGE
LOANS").................................      10.29%           N/A            N/A
Other
(the "OTHER MORTGAGE LOANS")............      13.28%         11.66%          5.09%


      Each of MSMC, MSCC, Wachovia, Wells Fargo Servicer and the various other
mortgage loan sellers who originated Mortgage Loans that account for less than
10% of any single Loan Group is referred to herein as an "ORIGINATOR".

      Additional Collateral Mortgage Loans. Certain of the Mortgage Loans with
loan-to-value ratios in excess of 80% are "ADDITIONAL COLLATERAL MORTGAGE
LOANS," which, in addition to being secured by real property, are secured by a
security interest in a limited amount of additional collateral owned by the
borrower or are supported by a third-party guarantee (together, the "ADDITIONAL
COLLATERAL"). In connection with the liquidation of an Additional Collateral
Mortgage Loan, the related Servicer will attempt to realize for the benefit of
the trust fund on the security interest in the Additional Collateral of a
defaulted Additional Collateral Mortgage Loan that is in liquidation. Such
Additional Collateral may no longer be required when the principal balance of
such Additional Collateral Mortgage Loan is reduced to a predetermined amount
set forth in the related pledge agreement or guaranty agreement, as applicable,
or when the loan-to-value ratio for such Additional Collateral Mortgage Loan is
reduced to the related Servicer's applicable loan-to-value ratio limit for such
Mortgage Loan by virtue of an increase in the appraised value of the mortgaged
property as determined by that servicer.

      On or prior to the Closing Date, the Depositor will have assigned to the
Trust Fund its rights under a limited purpose surety bond issued to the related
Originator by AMBAC Assurance Corporation (the "LIMITED PURPOSE SURETY BOND"),
which is intended to guarantee the receipt by the Trust Fund of certain
shortfalls in the net proceeds realized from the liquidation of any required
Additional Collateral (such amount not to exceed 30% of the original principal
amount of the related Additional Collateral Mortgage Loan) to the extent that
any such shortfall results in a loss of principal as an Additional Collateral
Mortgage Loan that becomes a Liquidated Mortgage Loan, as more particularly
described in, and as limited by, the terms and provisions of the Limited Purpose
Surety Bond.


                                      S-30



      Certain general information with respect to the Mortgage Loans as of the
Cut-off Date is set forth below. Prior to the Closing Date, Mortgage Loans may
be removed from Assets of the Issuing Entity and other mortgage loans may be
substituted therefor. The Depositor believes that the information set forth
herein with respect to the Mortgage Loans as presently constituted is
representative of the characteristics of the Mortgage Loans as they will be
constituted at the Closing Date, although the numerical data and certain other
characteristics of the Mortgage Loans described herein may vary within a range
of plus or minus 5%.

      None of the Mortgage Loans will be guaranteed by any governmental agency.
Pursuant to assignment, assumption and recognition agreements (the "ASSIGNMENT
AGREEMENTS"), each among the Depositor, the Seller, the related Originator or
Servicer, as applicable, and the Trustee, on behalf of the Issuing Entity, the
Seller and the Depositor will assign to the Trustee, on behalf of the Issuing
Entity, their respective interests in the underlying mortgage loan purchase
agreements (each, an "UNDERLYING MORTGAGE LOAN PURCHASE AGREEMENT") and/or the
underlying servicing agreements (each, an "UNDERLYING SERVICING AGREEMENT") with
respect to the Mortgage Loans originally entered into between the Seller and the
Originators. With respect to the MSMC Mortgage Loans, the Seller will assign its
interests in those Mortgage Loans, other than any retained servicing rights, to
the Depositor and the Trustee under a mortgage loan purchase agreement (the
"MORTGAGE LOAN PURCHASE AGREEMENT").

      The Mortgage Loans other than the MSMC Mortgage Loans have been acquired
by the Seller from the Originators in the ordinary course of its business. The
Seller purchased the MSMC Mortgage Loans directly from correspondent lenders on
its behalf. All of the Mortgage Loans were underwritten by the Originators
substantially in accordance with the related underwriting criteria specified
herein. See "--Loan Purchasing Guidelines and Underwriting Standards" below.
MSCC, Wachovia and Wells Fargo Servicer will service the MSCC Mortgage Loans,
Wachovia Mortgage Loans and Wells Fargo Servicer Mortgage Loans, respectively,
pursuant to existing underlying servicing agreements with the Seller, which
agreements, as they relate to the Mortgage Loans, have been assigned to the
Trustee, on behalf of the Issuing Entity. GMAC Mortgage Corporation ("GMAC") and
HSBC Mortgage Corporation (USA) ("HSBC") will service the other mortgage loans
of sellers who originated less than 10%. Wells Fargo Bank, National Association,
as master servicer ("WELLS FARGO" or, in such capacity, the "MASTER SERVICER")
will master service the Mortgage Loans.

      All of the Mortgage Loans provide for payments due on the first day of
each month (the "DUE DATE"). Due to the provisions for monthly advances by the
applicable Servicer, scheduled payments made by the borrowers either earlier or
later than the scheduled Due Dates thereof will not affect the amortization
schedule or the relative application of such payments to principal and interest.
Approximately 26.44%, 12.80% and 7.83% of the Group 1 Mortgage Loans, Group 2
Mortgage Loans and Group 3 Mortgage Loans, respectively, in each case by
Aggregate Cut-off Date Loan Group Balance, will provide for the amortization of
the amount financed over a series of substantially equal monthly payments.
Approximately 73.56%, 87.20% and 92.17% of the Group 1 Mortgage Loans, Group 2
Mortgage Loans and Group 3 Mortgage Loans, respectively, in each case by
Aggregate Cut-off Date Loan Group Balance, will provide that the related
mortgagors pay only interest on the principal balances of these Mortgage Loans
for up to 6, 12, 24, 36, 60 or 120 months (with respect to Loan Group 1), up to
24, 60 or 120 months (with respect to Loan Group 2) and up to 84 or 120 months
(with respect to Loan Group 3) after their origination, but require the entire
principal balances of these Mortgage Loans to be fully amortized over the
related remaining term of the Mortgage Loans (the "INTEREST ONLY LOANS"). Except
for approximately 27.54%, 27.92% and 29.53% of the Group 1 Mortgage Loans, Group
2 Mortgage Loans and Group 3 Mortgage Loans, respectively, in each case by
Aggregate Cut-off Date Loan Group Balance, the mortgagors may prepay their
Mortgage Loans at any time without penalty. Any prepayment penalties received on
these Mortgage Loans will be distributed to the related class of Class P
Certificates and will not be available for distribution to the Offered
Certificates.

      The mortgage rate (the "MORTGAGE RATE") of each of the Mortgage Loans with
an adjustable Mortgage Rate will be fixed for a certain period of time after the
origination of that Mortgage Loan (which, in the case of certain Group 1
Mortgage Loans may be as short as one month). Each mortgage note for the
Mortgage Loans will provide for adjustments to the Mortgage Rate thereon at the
end of the initial fixed-rate period and, either monthly, semi-annually or
annually thereafter, depending on the terms of the related mortgage note (each
such date, an "ADJUSTMENT DATE"), to equal the sum of, rounded to the nearest
0.125% of (1):


                                      S-31



      o   if such Mortgage Rate adjusts based upon the One-Month LIBOR Index,
          the average of the London interbank offered rates for one-month U.S.
          dollar deposits in the London market, generally as set forth in either
          The Wall Street Journal or some other source generally accepted in the
          residential mortgage loan origination business and specified in the
          related mortgage note, or, if such rate ceases to be published in The
          Wall Street Journal or becomes unavailable for any reason, then based
          upon a new index selected by the Master Servicer, based on comparable
          information, in each case, as most recently announced as of either 45
          days prior to, or the first business day of the month immediately
          preceding the month of, such Adjustment Date (the "ONE-MONTH LIBOR
          INDEX"); or

      o   if such Mortgage Rate adjusts based upon the Six-Month LIBOR Index,
          the average of the London interbank offered rates for six-month U.S.
          dollar deposits in the London market, generally as set forth in either
          The Wall Street Journal or some other source generally accepted in the
          residential mortgage loan origination business and specified in the
          related mortgage note, or, if such rate ceases to be published in The
          Wall Street Journal or becomes unavailable for any reason, then based
          upon a new index selected by the Master Servicer, based on comparable
          information, in each case, as most recently announced as of either 45
          days prior to, or the first business day of the month immediately
          preceding the month of, such Adjustment Date (the "SIX-MONTH LIBOR
          INDEX"); or

      o   if such Mortgage Rate adjusts based upon the One-Year LIBOR Index, the
          average of the London interbank offered rates for one-year U.S. dollar
          deposits in the London market, generally as set forth in either The
          Wall Street Journal or some other source generally accepted in the
          residential mortgage loan origination business and specified in the
          related mortgage note, or, if such rate ceases to be published in The
          Wall Street Journal or becomes unavailable for any reason, then based
          upon a new index selected by the Master Servicer, based on comparable
          information, in each case, as most recently announced as of either 45
          days prior to, or the first business day of the month immediately
          preceding the month of, such Adjustment Date (the "ONE-YEAR LIBOR
          INDEX"); or

      o   if such Mortgage Rate adjusts based upon the One-Year CMT Index, the
          weekly average yield 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) and most recently available as
          of the day specified in the related Mortgage Note (the "ONE-YEAR CMT
          INDEX", and each of the One-Month LIBOR Index, the Six-Month LIBOR
          Index, the One-Year LIBOR Index and the One-Year CMT Index, a
          "MORTGAGE INDEX"),

and (2) a fixed percentage amount specified in the related mortgage note (the
"GROSS MARGIN"); provided, however, that the Mortgage Rate for substantially all
of the Mortgage Loans will not increase or decrease by more than a certain
amount specified in the mortgage note (each limit on adjustments in the Mortgage
Rate is referred to as a "SUBSEQUENT PERIODIC RATE CAP"), with the exception of
the initial Adjustment Date for which the Mortgage Rate on substantially all of
the Mortgage Loans will not increase or decrease by more the certain amount
specified in the related mortgage note (each limit on initial adjustments in the
Mortgage Rate is referred to as a "INITIAL PERIODIC RATE CAP"). Adjustments to
the Mortgage Rate for each Mortgage Loan are subject to a lifetime maximum
interest rate (the "MAXIMUM MORTGAGE RATE"). Each Mortgage Loan specifies a
lifetime minimum interest rate (the "MINIMUM MORTGAGE RATE"), which in some
cases is equal to the Gross Margin for that Mortgage Loan.

      Approximately 2.95% of the Group 1 Mortgage Loans, by aggregate Cut-off
Date Loan Group Balance, have Mortgage Rates that adjust monthly beginning at
the origination of such Mortgage Loans. Approximately 6.09% of the Group 1
Mortgage Loans, by aggregate Cut-off Date Loan Group Balance, have Mortgage
Rates that adjust semi-annually beginning at the origination of such Mortgage
Loans. Approximately 0.51% of the Group 1 Mortgage Loans, by aggregate Cut-off
Date Loan Group Balance, have Mortgage Rates that adjust annually beginning at
the origination of such Mortgage Loans. Approximately 2.73% of the Group 1
Mortgage Loans, by aggregate Cut-off Date Loan Group Balance, are 2/6 Month
Mortgage Loans. Approximately 16.71% of the Group 1 Mortgage Loans, by aggregate
Cut-off Date Loan Group Balance, are 3/1 Mortgage Loans or 3/6 Month Mortgage
Loans. Approximately 38.26% of the Group 1 Mortgage Loans, by aggregate Cut-off
Date Loan Group Balance, and all of the Group 2 Mortgage Loans are 5/1 Mortgage
Loans or 5/6 Month Mortgage Loans. All of the


                                      S-32



Group 3 Mortgage Loans are 7/1 Mortgage Loans or 7/6 Month Mortgage Loans. A
"3/1 MORTGAGE LOAN," a "5/1 MORTGAGE LOAN" and a "7/1 MORTGAGE LOAN" has a
mortgage rate that is fixed for approximately 36, 60 and 84, respectively, after
origination thereof before the Mortgage Rate for that Mortgage Loan becomes
subject to annual adjustment based on a Mortgage Index described in the
preceding paragraph. A "2/6 MONTH MORTGAGE LOAN," "3/6 MONTH MORTGAGE LOAN," a
"5/6 MONTH MORTGAGE LOAN" and "7/6 MONTH MORTGAGE LOAN" has a mortgage rate that
is fixed for approximately 24, 36, 60 and 84 months, respectively, after
origination thereof before the Mortgage Rate for that Mortgage Loan becomes
subject to semi-annual adjustment based on a Mortgage Index described in the
preceding paragraph.

      The earliest first payment date, earliest stated maturity date and latest
stated maturity date of any Mortgage Loan in each Loan Group is set forth in the
following table:



                                                           EARLIEST STATED          LATEST STATED
                          EARLIEST FIRST PAYMENT DATE       MATURITY DATE           MATURITY DATE
                          ---------------------------    --------------------   ---------------------

Loan Group 1............       December 1, 2001            November 1, 2031       February 1, 2036
Loan Group 2............       February 1, 2005            January 1, 2035        February 1, 2036
Loan Group 3............          May 1, 2005               April 1, 2035         February 1, 2036


      As calculated using the MBA methodology, as of the Cut-off Date, none of
the Mortgage Loans were more than 30 days' delinquent. No more than 3% of the
Mortgage Loans, by aggregate Stated Principal Balance as of the Cut-off Date,
have been delinquent 30 days or more at least once since they were originated.
The Servicer of each of these Mortgage Loans has changed at least one time since
they were originated. A servicing transfer in some cases may have contributed to
the delinquency of the mortgage loan. No more than 0.10% of the Mortgage Loans
have been 60 or more days delinquent since they were originated.

      No Mortgage Loan had a Loan-to-Value Ratio at origination of more than
approximately 100%. Except with respect to the Additional Collateral Mortgage
Loans, each Mortgage Loan 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. The
policy provides coverage in an amount equal to a specified percentage times the
sum of the remaining principal balance of the related Mortgage Loan, the accrued
interest thereon and the related foreclosure expenses. With respect to
approximately 0.08% of the Group 2 Mortgage Loans by Aggregate Cut-off Date Loan
Group Balance (the "LPMI MORTGAGE LOANS"), the lender (rather than the borrower)
acquired the primary mortgage guaranty insurance and charged the related
borrower an interest premium. Except for these LPMI Mortgage Loans, no primary
mortgage guaranty insurance policy will be required with respect to any Mortgage
Loan if maintaining the policy is prohibited by applicable law or after the date
on which the related Loan-to-Value Ratio is 80% or less or, based on a new
appraisal, the principal balance of the mortgage loan represents 80% or less of
the new appraised value. The primary mortgage guaranty insurance policy will be
maintained for the life of the LPMI Mortgage Loans, unless otherwise prohibited
by law.

      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 the related Mortgage Loan at the date of determination and the
denominator of which is (a) in the case of a purchase, the lesser of the selling
price of the Mortgaged Property and its appraised value determined in an
appraisal obtained by the originator at origination of such Mortgage Loan, or
(b) in the case of a refinance, the appraised value of the Mortgaged Property at
the time of such refinance. The "EFFECTIVE 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 original principal amount of the related Mortgage Loan, less the
amount secured by the Additional Collateral required at the time of origination,
if any, and the denominator of which is the appraised value of the related
Mortgaged Property at such time or, in the case of a Mortgage Loan financing the
acquisition of the Mortgaged Property, the sales price of the Mortgaged
Property, if such sales price is less than such appraised value. 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 such
Mortgage Loans.


                                      S-33



      As set forth in the "Credit Scores" tables below, credit scores have been
supplied with respect to the mortgagors. Credit scores are obtained by many
mortgage lenders in connection with mortgage loan applications to help assess a
borrower's credit-worthiness. Credit scores are generated by models developed by
a third party which analyzed data on consumers in order to establish patterns
which are believed to be indicative of the borrower's probability of default.
The 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 history, types of credit, and
bankruptcy experience. Credit scores range from approximately 250 to
approximately 900, with higher scores indicating an individual with a more
favorable credit history compared to an individual with a lower score. However,
a credit score 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 credit scores were
developed to indicate a level of default probability over a two-year period
which does not correspond to the life of a mortgage loan. Furthermore, credit
scores were not developed specifically for use in connection with mortgage
loans, but for consumer loans in general. Therefore, a 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 credit score will be an accurate
predictor of the likely risk or quality of the related mortgage loan.

TABULAR CHARACTERISTICS OF THE MORTGAGE LOANS

         The following information sets forth in tabular format certain
information, as of the Cut-off Date, as to the Mortgage Loans. Other than with
respect to rates of interest, percentages (approximate) are stated by Stated
Principal Balance of the Mortgage Loans both in the related Aggregate Loan Group
II and in the related Loan Group as of the Cut-off Date and, due to rounding,
may not total 100%.


                                      S-34



                     TABULAR CHARACTERISTICS OF LOAN GROUP 1



                                                CURRENT MORTGAGE RATES(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
RANGE OF CURRENT                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
MORTGAGE RATES (%)                LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

3.501 - 4.000 ................       2        $      458,716.78         0.12%         3.966          748          58.46
4.001 - 4.500 ................      16             4,551,154.96         1.16          4.366          686          71.58
4.501 - 5.000 ................      81            30,320,234.85         7.73          4.824          712          72.02
5.001 - 5.500 ................      38            19,269,451.03         4.91          5.364          731          74.03
5.501 - 6.000 ................     239            88,876,744.14        22.66          5.836          733          71.27
6.001 - 6.500 ................     239           105,448,734.89        26.88          6.373          711          70.79
6.501 - 7.000 ................     262           104,463,850.33        26.63          6.805          714          72.42
7.001 - 7.500 ................      69            22,999,016.61         5.86          7.321          713          76.47
7.501 - 8.000 ................      33            13,372,403.92         3.41          7.779          692          74.22
8.001 - 8.500 ................      12             2,426,037.21         0.62          8.303          665          78.36
8.501 - 9.000 ................       1               115,931.51         0.03          8.625          619          80.00
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     992        $  392,302,276.23       100.00%         6.287          717          72.08
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average mortgage rate of the
          Mortgage Loans in Loan Group 1 is expected to be approximately 6.287%
          per annum.



                                       CURRENT MORTGAGE LOAN PRINCIPAL BALANCES(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
RANGE OF CURRENT MORTGAGE       MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
LOAN PRINCIPAL BALANCES ($)       LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

0.01 - 100,000.00 ............      42        $    3,308,937.57         0.84%         6.563          699          70.29
100,000.01 - 200,000.00 ......     189            28,498,662.11         7.26          6.449          701          74.14
200,000.01 - 300,000.00 ......     157            38,845,824.81         9.90          6.312          712          74.36
300,000.01 - 400,000.00 ......     143            50,178,479.09        12.79          6.150          713          72.71
400,000.01 - 500,000.00 ......     187            84,157,538.72        21.45          6.157          715          72.48
500,000.01 - 600,000.00 ......     130            70,523,806.02        17.98          6.200          723          73.40
600,000.01 - 700,000.00 ......      66            42,898,172.90        10.93          6.418          718          73.56
700,000.01 - 800,000.00 ......      25            18,406,875.41         4.69          6.353          724          68.69
800,000.01 - 900,000.00 ......      12            10,150,623.67         2.59          6.331          730          66.07
900,000.01 - 1,000,000.00 ....      30            29,071,489.67         7.41          6.484          719          65.86
1,000,000.01 - 1,500,000.00 ..       6             7,211,999.99         1.84          6.690          744          66.47
1,500,000.01
and above ....................       5             9,049,866.27         2.31          6.463          727          70.16
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     992        $  392,302,276.23       100.00%         6.287          717          72.08
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the average current Mortgage Loan principal
          balance of the Mortgage Loans in Loan Group 1 is approximately
          $395,466.00.


                                      S-35





                                                  DOCUMENTATION PROGRAM
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
DOCUMENTATION LEVEL               LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

Limited ......................     400        $  166,346,526.81        42.40%         6.471          716          73.29
Full/Alternative .............     342           118,217,554.66        30.13          5.837          715          72.78
No Ratio .....................     102            48,135,218.28        12.27          6.523          719          69.92
No Documentation .............     112            41,572,903.77        10.60          6.458          717          65.04
Stated Documentation .........      27            11,405,181.01         2.91          7.169          694          74.32
Lite .........................       9             6,624,891.70         1.69          5.407          775          85.23
                                ---------     -----------------     -----------
  TOTAL/WEIGHTED AVERAGE .....     992        $  392,302,276.23       100.00%         6.287          717          72.08
                                =========     =================     ===========




                                           ORIGINAL LOAN-TO-VALUE RATIOS(1)(2)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
RANGE OF ORIGINAL               MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
LOAN-TO-VALUE RATIOS (%)          LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

30.00 and below ..............       6        $    2,520,280.96         0.64%         5.931          760          25.75
30.01 - 35.00 ................       5               868,995.42         0.22          6.234          750          33.38
35.01 - 40.00 ................       9             2,695,286.31         0.69          5.704          742          37.80
40.01 - 45.00 ................      18             6,281,579.94         1.60          6.021          737          42.86
45.01 - 50.00 ................      25            12,454,026.56         3.17          6.263          736          47.86
50.01 - 55.00 ................      21             9,730,807.61         2.48          6.264          722          53.02
55.01 - 60.00 ................      51            26,388,135.88         6.73          6.115          711          58.24
60.01 - 65.00 ................      93            44,478,735.44        11.34          6.328          709          63.74
65.01 - 70.00 ................      89            39,211,739.16        10.00          6.317          707          68.55
70.01 - 75.00 ................      89            35,444,940.62         9.04          6.181          719          74.01
75.01 - 80.00 ................     566           204,315,301.77        52.08          6.356          717          79.65
80.01 - 85.00 ................       1               670,862.55         0.17          6.750          707          84.38
85.01 - 90.00 ................      12             3,220,922.62         0.82          6.041          730          89.99
90.01 - 95.00 ................       4               620,661.39         0.16          5.776          709          94.42
95.01 - 100.00  ..............       3             3,400,000.00         0.87          5.354          769          99.64
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     992        $  392,302,276.23       100.00%         6.287          717          72.08
                                =========     =================     ===========


      ________________

      (1) The weighted average original Loan-to-Value Ratio of the Mortgage
          Loans in Loan Group 1 by Aggregate Cut-off Date Loan Balance is
          approximately 72.08%.

      (2) Does not take into account any secondary financing on the Mortgage
          Loans in Loan Group 1 that may exist at the time of origination or any
          Additional Collateral.



                                      ORIGINAL EFFECTIVE LOAN-TO-VALUE RATIOS(1)(2)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
RANGE OF ORIGINAL               NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
EFFECTIVE LOAN-TO-              MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
VALUE RATIOS (%)                  LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

0.01 - 10.00 .................       1        $       50,000.00         0.01%         4.875          810          30.30
10.01 - 20.00 ................       2               152,000.00         0.04          6.368          768          14.57
20.01 - 30.00 ................       4             2,368,280.96         0.60          5.903          760          26.46
30.01 - 40.00 ................      13             3,514,281.73         0.90          5.847          743          36.81
40.01 - 50.00 ................      44            18,972,396.45         4.84          6.178          735          46.61
50.01 - 60.00 ................      72            36,118,943.49         9.21          6.155          714          56.83
60.01 - 70.00 ................     185            87,090,474.60        22.20          6.285          710          67.30
70.01 - 80.00 ................     654           239,523,452.44        61.06          6.331          717          78.82
80.01 - 90.00 ................      13             3,891,785.17         0.99          6.163          726          89.02
90.01 - 100.00  ..............       4               620,661.39         0.16          5.776          709          94.42
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     992        $  392,302,276.23       100.00%         6.287          717          72.08
                                =========     =================     ===========


      ________________

      (1) The weighted average original Loan-to-Value Ratio of the Mortgage
          Loans in Loan Group 1 by Aggregate Cut-off Date Loan Balance is
          approximately 71.80%.

      (2) Does not take into account any secondary financing on the Mortgage
          Loans in Loan Group 1 that may exist at the time of origination or any
          Additional Collateral.



                                                     CREDIT SCORE(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
RANGE OF CREDIT                 MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
SCORES                            LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

576 - 600 ....................       7        $    1,924,756.08         0.49%         7.096          593          65.24
601 - 625 ....................      37             9,955,649.14         2.54          6.798          616          67.78
626 - 650 ....................      88            27,583,129.96         7.03          6.312          638          74.29
651 - 675 ....................      95            39,846,253.86        10.16          6.363          664          71.09
676 - 700 ....................     170            67,527,452.01        17.21          6.326          688          73.09
701 - 725 ....................     183            76,231,892.81        19.43          6.270          712          73.47
726 - 750 ....................     153            57,818,977.91        14.74          6.257          738          73.20
751 - 775 ....................     136            56,304,994.22        14.35          6.225          763          69.78
776 - 800 ....................      94            44,457,181.74        11.33          6.124          786          72.64
801 - 825 ....................      29            10,651,988.50         2.72          6.369          807          62.73
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     992        $  392,302,276.23       100.00%         6.287          717          72.08
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average Credit Score of the
          Mortgagors related to the Mortgage Loans in Loan Group 1 is
          approximately 717.


                                      S-36





                                      STATE DISTRIBUTION OF MORTGAGED PROPERTIES(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
STATE                             LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

California ...................     358        $  172,180,099.24        43.89%         6.282          717          71.85
Florida ......................     106            44,893,881.71        11.44          6.426          726          71.13
Virginia .....................      40            16,987,741.06         4.33          6.560          708          74.80
New York .....................      34            14,186,362.32         3.62          6.523          712          73.94
Maryland .....................      27            11,394,341.51         2.90          6.282          698          72.07
New Jersey ...................      27            11,305,730.53         2.88          6.229          708          67.53
Arizona ......................      39            10,361,462.34         2.64          6.444          710          71.13
North Carolina ...............      26             9,741,588.64         2.48          6.183          734          70.76
Washington ...................      31             9,373,306.79         2.39          6.045          735          72.78
Georgia ......................      26             8,191,309.04         2.09          5.666          723          74.58
Other ........................     278            83,686,453.05        21.33          6.218          715          72.76
                                ---------     -----------------     -----------
  TOTAL/WEIGHTED AVERAGE .....     992        $  392,302,276.23       100.00%         6.287          717          72.08
                                =========     =================     ===========


      ________________

      (1) The Other row in the preceding table includes 31 other states and the
          District of Columbia. No more than approximately 0.83% of the Mortgage
          Loans in Loan Group 1 will be secured by mortgaged properties located
          in any one postal zip code area.



                                                PURPOSE OF MORTGAGE LOANS
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
LOAN PURPOSE                      LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

Purchase .....................     507        $  191,290,148.38        48.76%         6.320          723          77.15
Refinance - Cashout ..........     335           138,295,725.37        35.25          6.390          711          66.38
Refinance - Rate Term ........     150            62,716,402.48        15.99          5.962          709          69.18
                                ---------     -----------------     -----------
  TOTAL/WEIGHTED AVERAGE .....     992        $  392,302,276.23       100.00%         6.287          717          72.08
                                =========     =================     ===========




                                              TYPES OF MORTGAGED PROPERTIES
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
PROPERTY TYPE                     LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

Single Family Residence ......     647        $  260,699,147.13        66.45%         6.226          716          71.70
Planned Unit Development .....     188            73,679,171.52        18.78          6.367          721          74.08
Condominium ..................      88            30,415,744.12         7.75          6.337          722          72.30
2-4 Family ...................      64            26,197,308.55         6.68          6.634          710          69.98
Cooperative ..................       4             1,030,904.91         0.26          5.750          761          70.46
Townhouse ....................       1               280,000.00         0.07          6.875          690          80.00
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     992        $  392,302,276.23       100.00%         6.287          717          72.08
                                =========     =================     ===========




                                                    OCCUPANCY TYPES(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
OCCUPANCY TYPES                   LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

Primary ......................     801        $  325,061,489.54        82.86%         6.233          714          72.31
Investment ...................     141            45,266,986.01        11.54          6.677          726          68.66
Second Home ..................      50            21,973,800.68         5.60          6.293          737          75.75
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     992        $  392,302,276.23       100.00%         6.287          717          72.08
                                =========     =================     ===========


      ________________

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


                                      S-37





                                              REMAINING TERMS TO MATURITY(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
RANGE OF REMAINING              NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
TERMS  TO MATURITY              MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
(MONTHS)                          LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

301 - 330 ....................      36        $   13,596,932.51         3.47%         6.021          705          66.88
331 - 360 ....................     956           378,705,343.72        96.53          6.297          717          72.27
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     992        $  392,302,276.23       100.00%         6.287          717          72.08
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average remaining term to
          maturity of the Mortgage Loans in Loan Group 1 is approximately 354
          months.



                                                       SEASONING(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
RANGE OF REMAINING              NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
TERMS  TO MATURITY              MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
(MONTHS)                          LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

< = 0 ........................      11        $    3,311,400.00         0.84%         6.733          693          68.30
1 - 3 ........................     673           282,893,763.49        72.11          6.522          715          71.99
4 - 6 ........................     171            57,634,008.84        14.69          5.873          732          73.79
7 - 9 ........................      21             6,180,389.59         1.58          6.022          711          73.99
10 - 12 ......................      10             1,542,524.84         0.39          6.267          679          75.19
13 - 15 ......................       1               367,885.00         0.09          7.500          649          80.00
22 - 24 ......................       4             1,632,113.45         0.42          4.880          679          71.17
25 - 27 ......................      38            15,038,218.68         3.83          4.824          707          71.42
28 - 30 ......................      31            11,466,216.00         2.92          4.772          719          71.55
31 - 33 ......................       3               840,293.10         0.21          4.588          740          72.53
34 - 36 ......................       1               829,491.40         0.21          4.750          704          58.00
37 - 39 ......................      12             4,784,680.72         1.22          6.521          697          66.82
40 - 42 ......................      11             4,069,979.30         1.04          6.349          733          62.19
49 - 51 ......................       5             1,711,311.82         0.44          6.500          687          79.97
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     992        $  392,302,276.23       100.00%         6.287          717          72.08
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average seasoning of the Mortgage
          Loans in Loan Group 1 is approximately 5 months.



                                                       PRODUCT TYPE
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
PRODUCT TYPE                      LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

1 Month Arms - IO 10 Years ...      13        $   11,568,900.00         2.95%         7.058          735          71.93
1 Year Arms ..................       2               781,868.61         0.20          5.580          763          77.65
1 Year Arms - IO 1
Year .........................       3             1,232,000.00         0.31          5.330          744          80.00
2 Year Arms ..................      12             2,390,788.45         0.61          6.977          693          76.80
2 Year Arms - IO 10 Years ....      21             5,499,771.93         1.40          7.017          685          77.88
2 Year Arms - IO 2 Years .....       5             1,155,315.82         0.29          6.689          652          80.00
2 Year Arms - IO 5 Years .....       7             1,657,050.00         0.42          7.045          679          66.18
3 Year Arms ..................     118            43,670,654.59        11.13          5.330          709          70.20
3 Year Arms - IO 10 Years ....      28            11,396,667.13         2.91          6.385          704          77.66
3 Year Arms - IO 3 Years .....      17            10,028,051.31         2.56          5.538          742          84.58
3 Year Arms - IO 5 Years .....       1               471,200.00         0.12          6.500          696          79.88
5 Year Arms ..................      38            17,158,679.22         4.37          6.422          723          70.78
5 Year Arms - IO 10 Years ....     207           109,557,752.50        27.93          6.426          721          71.33
5 Year Arms - IO 5 Years .....      48            23,382,807.39         5.96          6.390          713          70.61
6 Month Arms .................       4             2,322,665.71         0.59          6.597          750          64.01
6 Month Arms - IO 10 Years ...      51            21,063,332.95         5.37          5.968          702          72.64
6 Month Arms - IO 6 Months ...       2               518,000.00         0.13          5.613          801          84.64
Baln 30/40 ...................       3             1,737,473.78         0.44          6.926          758          60.70
Fixed 30 .....................     126            35,649,234.64         9.09          6.405          712          71.66
Fixed 30 - IO 10
Years ........................     284            90,040,062.20        22.95          6.451          718          72.41
Fixed 30 - IO 5
Years ........................       2             1,020,000.00         0.26          6.298          747          51.53
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     992        $  392,302,276.23       100.00%         6.287          717          72.08
                                =========     =================     ===========



                                      S-38





                                   MORTGAGE INDEX OF THE ADJUSTABLE RATE MORTGAGE LOANS
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
MORTGAGE INDEX                    LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

One-Month LIBOR ..............      13        $   11,568,900.00         4.38%         7.058          735          71.93
Six-Month LIBOR ..............     307           130,273,374.94        49.37          6.331          712          74.56
One-Year LIBOR ...............     152            81,640,926.20        30.94          6.386          725          69.47
One-Year CMT .................     105            40,372,304.47        15.30          5.231          710          70.08
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     577        $  263,855,505.61       100.00%         6.211          716          72.18
                                =========     =================     ===========




                                  GROSS MARGINS OF THE ADJUSTABLE RATE MORTGAGE LOANS(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
GROSS MARGINS (%)                 LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

1.501 - 2.000 ................      31        $   17,459,667.01         6.62%         5.421          734          77.29
2.001 - 2.500 ................     318           163,753,021.20        62.06          6.428          721          71.22
2.501 - 3.000 ................     145            58,439,895.90        22.15          5.599          710          71.42
3.001 - 3.500 ................      23             7,617,127.44         2.89          6.163          707          80.05
3.501 - 4.000 ................       6             3,125,173.45         1.18          7.303          715          78.72
4.001 - 4.500 ................       3               735,857.15         0.28          6.242          663          80.00
4.501 - 5.000 ................      47            12,202,349.10         4.62          7.028          678          74.07
5.001 - 5.500 ................       1                56,723.24         0.02          7.050          650          80.00
5.501 - 6.000 ................       1                58,774.09         0.02          7.800          654          80.00
6.001 - 6.500 ................       1                75,524.68         0.03          8.500          640          80.00
6.501 - 7.000 ................       1               331,392.35         0.13          8.500          582          80.00
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     577        $  263,855,505.61       100.00%         6.211          716          72.18
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the non-zero weighted average Gross Margin of
          the Adjustable Rate Mortgage Loans in Loan Group 1 is approximately
          2.544%.



                             INITIAL PERIODIC CAPS OF THE ADJUSTABLE RATE MORTGAGE LOANS(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
INITIAL PERIODIC                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
CAPS (%)                          LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

Uncapped .....................       3        $    2,947,865.62         1.12%         6.045          756          63.44
0.501 - 1.000 ................      60            28,294,515.11        10.72          6.408          709          72.48
1.501 - 2.000 ................     144            51,439,642.34        19.50          5.558          708          71.08
2.501 - 3.000 ................      26             5,493,026.69         2.08          6.715          679          78.21
4.501 - 5.000 ................     139            77,562,222.82        29.40          6.497          727          69.06
5.001 - 5.500 ................       1               974,118.59         0.37          6.500          782          65.00
5.501 - 6.000 ................     204            97,144,114.44        36.82          6.245          715          75.17
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     577        $  263,855,505.61       100.00%         6.211          716          72.18
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the non-zero weighted average Initial Periodic
          Cap of the Adjustable Rate Mortgage Loans in Loan Group 1 is
          approximately 4.307%.



                            SUBSEQUENT PERIODIC CAPS OF THE ADJUSTABLE RATE MORTGAGE LOANS(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
SUBSEQUENT PERIODIC             MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
CAPS (%)                          LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

Uncapped .....................       4        $    3,921,984.21         1.49%         6.158          763          63.83
0.501 - 1.000 ................     156            66,645,695.70        25.26          6.523          711          72.95
1.501 - 2.000 ................     417           193,287,825.70        73.26          6.105          717          72.09
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     577        $  263,855,505.61       100.00%         6.211          716          72.18
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the non-zero weighted average Subsequent
          Periodic Cap of the Adjustable Rate Mortgage Loans in Loan Group 1 is
          approximately 1.744%.


                                      S-39





                             MAXIMUM MORTGAGE RATES OF THE ADJUSTABLE RATE MORTGAGE LOANS(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
RANGE OF MAXIMUM                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
MORTGAGE RATES (%)                LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

9.001 - 10.000  ..............       5        $    3,243,516.78         1.23%         7.118          681          66.05
10.001 - 11.000 ..............     143            58,149,915.44        22.04          5.256          715          68.72
11.001 - 12.000 ..............     205           100,770,474.73        38.19          6.165          728          71.87
12.001 - 13.000 ..............     184            86,448,446.89        32.76          6.636          706          74.28
13.001 - 14.000 ..............      32            13,910,037.41         5.27          7.492          718          76.58
14.001 - 15.000 ..............       7             1,257,589.68         0.48          8.305          672          79.16
15.001 - 16.000 ..............       1                75,524.68         0.03          8.500          640          80.00
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     577        $  263,855,505.61       100.00%         6.211          716          72.18
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average maximum mortgage rate of
          the Adjustable Rate Mortgage Loans in Loan Group 1 is expected to be
          approximately 11.817% per annum.



                                  MONTHS TO NEXT RATE ADJUSTMENT OF THE ADJUSTABLE RATE
                                                    MORTGAGE LOANS(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
RANGE OF MONTHS TO              NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
NEXT RATE                       MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
ADJUSTMENT                        LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

0 - 5 ........................      74        $   37,142,683.16        14.08%         6.283          718          71.72
6 - 11 .......................     102            39,084,275.13        14.81          5.280          713          70.70
12 - 17 ......................      11             2,744,512.61         1.04          5.488          671          74.75
18 - 23 ......................      37             9,429,527.04         3.57          7.049          686          75.78
24 - 29 ......................      10             2,147,788.52         0.81          5.970          733          71.41
30 - 35 ......................      50            23,207,480.04         8.80          6.085          715          80.33
48 - 53 ......................       5             2,700,445.41         1.02          6.047          711          73.65
54 - 59 ......................     284           145,624,893.70        55.19          6.422          720          71.07
60 - 65 ......................       4             1,773,900.00         0.67          6.779          700          74.24
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     577        $  263,855,505.61       100.00%         6.211          716          72.18
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average number of months to the
          next rate adjustment of the Adjustable Rate Mortgage Loans in Loan
          Group 1 is approximately 39 months.


                                      S-40



               TABULAR CHARACTERISTICS OF AGGREGATE LOAN GROUP II



                                                CURRENT MORTGAGE RATES(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
RANGE OF CURRENT                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
MORTGAGE RATES (%)                LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

4.501 - 5.000 ................       6        $    1,525,475.20         0.37%         4.970          749          72.67
5.001 - 5.500 ................      53            41,433,840.63        10.16          5.356          717          71.36
5.501 - 6.000 ................     196            79,390,325.03        19.46          5.858          722          71.20
6.001 - 6.500 ................     349           140,093,914.20        34.34          6.335          713          73.19
6.501 - 7.000 ................     230            94,237,091.39        23.10          6.793          703          74.73
7.001 - 7.500 ................      98            42,402,333.56        10.39          7.312          691          77.56
7.501 - 8.000 ................      22             8,210,237.26         2.01          7.774          696          79.08
8.001 - 8.500 ................       2               623,200.00         0.15          8.182          686          80.00
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     956        $  407,916,417.27       100.00%         6.377          710          73.55
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average mortgage rate of the
          Mortgage Loans in Aggregate Loan Group II is expected to be
          approximately 6.377% annum.



                                       CURRENT MORTGAGE LOAN PRINCIPAL BALANCES(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
RANGE OF CURRENT                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
MORTGAGE LOAN                   MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
PRINCIPAL BALANCES ($)            LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

0.01 - 100,000.00 ............      36        $    2,895,368.84         0.71%         6.674          688          74.18
100,000.01 - 200,000.00 ......     222            33,454,945.52         8.20          6.430          701          77.60
200,000.01 - 300,000.00 ......     134            33,524,169.12         8.22          6.364          692          76.71
300,000.01 - 400,000.00 ......     126            43,144,486.24        10.58          6.324          697          76.79
400,000.01 - 500,000.00 ......     132            60,471,374.57        14.82          6.516          709          75.68
500,000.01 - 600,000.00 ......     129            70,653,845.06        17.32          6.403          718          74.77
600,000.01 - 700,000.00 ......      68            44,310,668.60        10.86          6.443          714          74.65
700,000.01 - 800,000.00 ......      30            22,584,909.06         5.54          6.518          715          73.72
800,000.01 - 900,000.00 ......      14            12,078,115.56         2.96          6.640          693          72.97
900,000.01 - 1,000,000.00 ....      31            30,413,858.36         7.46          6.545          714          68.15
1,000,000.01 - 1,500,000.00 ..      16            20,484,245.70         5.02          6.461          697          67.74
1,500,000.01
and above ....................      18            33,900,430.64         8.31          5.604          744          62.99
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     956        $  407,916,417.27       100.00%         6.377          710          73.55
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the average current Mortgage Loan principal
          balance of the Mortgage Loans in Aggregate Loan Group II is
          approximately $426,690.81.


                                      S-41





                                                  DOCUMENTATION PROGRAM
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
DOCUMENTATION LEVEL               LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

Limited ......................     456        $  200,143,018.49        49.06%         6.485          715          75.55
Full/Alternative .............     215            88,977,712.21        21.81          6.022          705          74.97
No Documentation .............     143            52,421,256.43        12.85          6.540          702          65.32
No Ratio .....................      80            32,309,751.83         7.92          6.661          698          74.55
Stated Documentation .........      44            17,994,367.96         4.41          6.767          702          74.24
Lite .........................      18            16,070,310.35         3.94          5.451          732          64.98
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     956        $  407,916,417.27       100.00%         6.377          710          73.55
                                =========     =================     ===========




                                           ORIGINAL LOAN-TO-VALUE RATIOS(1)(2)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
RANGE OF ORIGINAL               MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
LOAN-TO-VALUE RATIOS (%)          LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

30.00 and below ..............       5        $    2,310,631.00         0.57%         5.577          745          23.72
30.01 - 35.00 ................       4             1,526,139.37         0.37          6.364          689          32.37
35.01 - 40.00 ................       2               224,613.93         0.06          6.125          682          37.88
40.01 - 45.00 ................       8             6,395,702.98         1.57          5.935          728          43.97
45.01 - 50.00 ................      10             5,966,692.68         1.46          5.879          706          48.07
50.01 - 55.00 ................      18            12,569,498.01         3.08          5.953          705          52.65
55.01 - 60.00 ................      30            16,385,039.04         4.02          6.117          701          58.00
60.01 - 65.00 ................      80            51,242,340.67        12.56          6.296          712          63.36
65.01 - 70.00 ................      63            32,968,256.75         8.08          6.477          692          68.96
70.01 - 75.00 ................      78            37,861,735.42         9.28          6.356          719          74.27
75.01 - 80.00 ................     607           223,982,380.39        54.91          6.484          711          79.73
80.01 - 85.00 ................       8             3,489,823.73         0.86          6.128          743          83.18
85.01 - 90.00 ................      22             5,581,530.34         1.37          6.635          724          89.57
90.01 - 95.00 ................      10             1,637,315.86         0.40          6.484          726          95.00
95.01 - 100.00  ..............      11             5,774,717.10         1.42          5.364          684          99.45
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     956        $  407,916,417.27       100.00%         6.377          710          73.55
                                =========     =================     ===========


      ________________

      (1) The weighted average original Loan-to-Value Ratio of the Mortgage
          Loans in Aggregate Loan Group II by Aggregate Cut-off Date Loan
          Balance is approximately 73.55%.

      (2) Does not take into account any secondary financing on the Mortgage
          Loans in Aggregate Loan Group II that may exist at the time of
          origination or any Additional Collateral.



                                      ORIGINAL EFFECTIVE LOAN-TO-VALUE RATIOS(1)(2)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
RANGE OF ORIGINAL               NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
EFFECTIVE LOAN-TO-              MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
VALUE  RATIOS (%)                 LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO    LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

10.01 - 20.00 ................       2        $      245,000.00         0.06%         5.577          787          14.59
20.01 - 30.00 ................       3             2,065,631.00         0.51          5.577          740          24.81
30.01 - 40.00 ................       6             1,750,753.30         0.43          6.334          688          33.08
40.01 - 50.00 ................      19            12,711,988.00         3.12          5.904          718          46.98
50.01 - 60.00 ................      51            30,694,241.05         7.52          6.005          698          58.11
60.01 - 70.00 ................     154            91,064,625.28        22.32          6.299          707          67.63
70.01 - 80.00 ................     685           261,844,115.81        64.19          6.466          712          78.94
80.01 - 90.00 ................      26             5,906,736.26         1.45          6.859          711          88.80
90.01 - 100.00  ..............      10             1,633,326.57         0.40          6.613          740          95.45
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     956        $  407,916,417.27       100.00%         6.377          710          73.55
                                =========     =================     ===========


      ________________

      (1) The weighted average original Loan-to-Value Ratio of the Mortgage
          Loans in Aggregate Loan Group II by Aggregate Cut-off Date Loan
          Balance is approximately 72.97%.

      (2) Does not take into account any secondary financing on the Mortgage
          Loans in Aggregate Loan Group II that may exist at the time of
          origination or any Additional Collateral.


                                      S-42





                                                     CREDIT SCORES(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
RANGE OF CREDIT                 MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
SCORES                            LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

576 - 600 ....................       2        $    1,092,000.00         0.27%         5.420          582          87.08
601 - 625 ....................      24            10,972,430.53         2.69          6.159          617          73.71
626 - 650 ....................      93            33,292,625.60         8.16          6.559          639          73.95
651 - 675 ....................     188            67,437,936.27        16.53          6.514          664          73.20
676 - 700 ....................     173            68,770,160.23        16.86          6.519          687          73.71
701 - 725 ....................     144            60,082,620.67        14.73          6.373          712          73.26
726 - 750 ....................     136            66,565,345.35        16.32          6.336          738          73.43
751 - 775 ....................     109            55,219,533.30        13.54          6.370          762          72.88
776 - 800 ....................      69            36,338,796.50         8.91          5.982          784          74.59
801 - 825 ....................      18             8,144,968.82         2.00          5.892          806          74.68
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     956        $  407,916,417.27       100.00%         6.377          710          73.55
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average Credit Score of the
          Mortgagors related to the Mortgage Loans in Aggregate Loan Group II is
          approximately 710.



                                      STATE DISTRIBUTION OF MORTGAGED PROPERTIES(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
STATE                             LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

California ...................     372        $  206,523,428.57        50.63%         6.397          717          72.64
New York .....................      76            39,959,618.58         9.80          6.282          692          72.07
Florida ......................      91            26,635,490.09         6.53          6.438          710          74.26
Virginia .....................      34            14,768,905.67         3.62          6.456          700          74.37
Arizona ......................      40            13,340,441.13         3.27          6.575          724          76.78
Illinois .....................      29            10,362,313.55         2.54          6.287          711          70.19
Massachusetts ................      20             9,888,739.15         2.42          6.437          694          73.62
Washington ...................      19             7,745,900.80         1.90          5.955          727          75.12
Minnesota ....................      39             7,387,657.75         1.81          6.826          696          78.10
Maryland .....................      15             6,645,659.32         1.63          6.560          699          78.92
Other ........................     221            64,658,262.66        15.85          6.272          704          75.52
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     956        $  407,916,417.27       100.00%         6.377          710          73.55
                                =========     =================     ===========


      ________________

      (1) The Other row in the preceding table includes 29 other states and the
          District of Columbia. No more than approximately 0.75% of the Mortgage
          Loans in Aggregate Loan Group II will be secured by mortgaged
          properties located in any one postal zip code area.



                                                PURPOSE OF MORTGAGE LOANS
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
LOAN PURPOSE                      LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

Purchase .....................     578        $  214,344,265.27        52.55%         6.471          715          78.27
Refinance - Cashout ..........     283           136,453,490.93        33.45          6.327          700          69.00
Refinance - Rate Term ........      95            57,118,661.07        14.00          6.143          717          66.73
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     956        $  407,916,417.27       100.00%         6.377          710          73.55
                                =========     =================     ===========




                                              TYPES OF MORTGAGED PROPERTIES
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
PROPERTY TYPE                     LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

Single Family Residence ......     510        $  236,225,864.55        57.91%         6.398          711          73.33
Planned Unit Development .....     218            85,357,273.06        20.93          6.278          711          74.30
2-4 Family ...................     107            48,611,796.48        11.92          6.608          709          73.14
Condominium ..................     109            33,377,640.89         8.18          6.255          704          75.00
Cooperative ..................      10             4,112,205.40         1.01          5.513          726          63.62
Townhouse ....................       2               231,636.89         0.06          6.349          728          79.99
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     956        $  407,916,417.27       100.00%         6.377          710          73.55
                                =========     =================     ===========




                                                    OCCUPANCY TYPES(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
OCCUPANCY TYPES                   LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

Primary ......................     729        $  334,433,764.18        81.99%         6.355          706          73.82
Investment ...................     181            52,180,827.58        12.79          6.544          724          72.14
Second Home ..................      46            21,301,825.51         5.22          6.319          736          72.81
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     956        $  407,916,417.27       100.00%         6.377          710          73.55
                                =========     =================     ===========


      ________________

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


                                      S-43





                                              REMAINING TERMS TO MATURITY(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
RANGE OF                        NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
REMAINING TERMS                 MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
TO MATURITY (MONTHS)              LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

331 - 360 ....................     956        $  407,916,417.27       100.00%         6.377          710          73.55
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     956        $  407,916,417.27       100.00%         6.377          710          73.55
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average remaining term to
          maturity of the Mortgage Loans in Aggregate Loan Group II is
          approximately 357 months.



                                                       SEASONING(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
RANGE OF                        NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
REMAINING TERMS                 MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
TO MATURITY (MONTHS)              LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

<= 0 .........................      10        $    5,476,700.00         1.34%         6.836          699          70.17
1 - 3 ........................     610           284,659,140.24        69.78          6.538          708          73.64
4 - 6 ........................     284            98,828,279.81        24.23          6.009          717          73.36
7 - 9 ........................      41            16,531,866.64         4.05          5.701          721          73.63
10 - 12 ......................      10             2,157,930.58         0.53          6.032          698          78.40
13 - 15 ......................       1               262,500.00         0.06          5.875          629          75.00
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     956        $  407,916,417.27       100.00%         6.377          710          73.55
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average seasoning of the Mortgage
          Loans in Aggregate Loan Group II is approximately 3 months.



                                                       PRODUCT TYPE
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
PRODUCT TYPE                      LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

5 Year Arms ..................      91        $   24,661,119.57         6.05%         6.407          720          70.91
5 Year Arms - IO 10 Years ....     411           117,786,722.21        28.88          6.480          700          76.86
5 Year Arms - IO 2 Years .....       1               287,031.76         0.07          5.875          770          63.89
5 Year Arms - IO 5 Years .....     101            51,988,447.39        12.74          5.723          714          70.73
5-6 Year Arm Baln
30/40 ........................       1               311,907.34         0.08          7.875          647          80.00
7 Year Arms ..................      27            16,660,869.66         4.08          6.516          713          70.89
7 Year Arms - IO 10 Years ....     246           149,880,773.18        36.74          6.638          711          72.89
7 Year Arms - IO 7 Years .....      78            46,339,546.16        11.36          5.934          721          72.84
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     956        $  407,916,417.27       100.00%         6.377          710          73.55
                                =========     =================     ===========




                                   MORTGAGE INDEX OF THE ADJUSTABLE RATE MORTGAGE LOANS
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
MORTGAGE INDEX                    LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

Six-Month LIBOR ..............     624        $  282,766,328.84        69.32%         6.374          711          73.30
One-Year LIBOR ...............     329           124,187,199.71        30.44          6.387          709          74.13
One-Year CMT .................       3               962,888.72         0.24          5.918          749          72.48
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     956        $  407,916,417.27       100.00%         6.377          710          73.55
                                =========     =================     ===========



                                      S-44





                                  GROSS MARGINS OF THE ADJUSTABLE RATE MORTGAGE LOANS(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
GROSS MARGINS (%)                 LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

1.501 - 2.000 ................      70        $   58,655,205.96        14.38%         5.497          723          70.23
2.001 - 2.500 ................     784           315,828,869.46        77.42          6.534          708          74.28
2.501 - 3.000 ................      77            25,583,753.66         6.27          6.379          706          71.60
3.001 - 3.500 ................      16             5,247,516.09         1.29          6.657          727          75.91
3.501 - 4.000 ................       2               823,600.00         0.20          6.392          702          77.72
4.501 - 5.000 ................       4             1,191,454.37         0.29          6.752          650          70.57
5.501 - 6.000 ................       1               158,017.73         0.04          7.125          801          80.00
6.001 - 6.500 ................       2               428,000.00         0.10          6.435          748          80.00
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     956        $  407,916,417.27       100.00%         6.377          710          73.55
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average Gross Margin of the
          Adjustable Rate Mortgage Loans in Aggregate Loan Group II is
          approximately 2.279%.



                             INITIAL PERIODIC CAPS OF THE ADJUSTABLE RATE MORTGAGE LOANS(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
INITIAL PERIODIC                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
CAPS (%)                          LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

1.501 - 2.000 ................      16        $    6,717,239.07         1.65%         5.750          732          74.66
2.501 - 3.000 ................       4             1,191,454.37         0.29          6.752          650          70.57
4.501 - 5.000 ................     245            62,750,295.91        15.38          6.472          707          77.11
5.501 - 6.000 ................     691           337,257,427.92        82.68          6.370          711          72.88
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     956        $  407,916,417.27       100.00%         6.377          710          73.55
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average Initial Periodic Cap of
          the Adjustable Rate Mortgage Loans in Aggregate Loan Group II is
          approximately 5.771%.



                            SUBSEQUENT PERIODIC CAPS OF THE ADJUSTABLE RATE MORTGAGE LOANS(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
SUBSEQUENT PERIODIC             MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
CAPS (%)                          LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

0.501 - 1.000 ................     237        $   58,187,607.33        14.26%         6.545          703          76.32
1.501 - 2.000 ................     715           349,004,711.96        85.56          6.349          712          73.08
2.001 - 2.500 ................       4               724,097.98         0.18          6.221          685          78.74
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     956        $  407,916,417.27       100.00%         6.377          710          73.55
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average Subsequent Periodic Cap
          of the Adjustable Rate Mortgage Loans in Aggregate Loan Group II is
          approximately 1.858%.



                                                MAXIMUM MORTGAGE RATES(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
RANGE OF MAXIMUM                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
MORTGAGE RATES (%)                LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

9.001 - 10.000  ..............       3        $      574,702.27         0.14%         4.919          747          76.74
10.001 - 11.000 ..............      59            21,263,994.26         5.21          5.784          722          72.67
11.001 - 12.000 ..............     346           139,121,466.19        34.11          5.895          716          72.87
12.001 - 13.000 ..............     472           206,557,737.20        50.64          6.566          709          73.36
13.001 - 14.000 ..............      75            39,918,517.35         9.79          7.392          692          77.26
14.001 - 15.000 ..............       1               480,000.00         0.12          8.125          683          80.00
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     956        $  407,916,417.27       100.00%         6.377          710          73.55
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average maximum mortgage rate of
          the Adjustable Rate Mortgage Loans in Aggregate Loan Group II is
          expected to be approximately 12.204% per annum.



                                            MONTHS TO NEXT RATE ADJUSTMENT(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
RANGE OF MONTHS                 NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
TO NEXT RATE                    MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
ADJUSTMENT                        LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

42 - 47 ......................       1        $      262,500.00         0.06%         5.875          629          75.00
48 - 53 ......................      46            15,319,380.08         3.76          5.700          713          75.39
54 - 59 ......................     557           179,114,148.19        43.91          6.317          706          74.37
60 - 65 ......................       1               339,200.00         0.08          7.375          646          80.00
72 - 77 ......................       5             3,370,417.14         0.83          5.917          741          68.68
78 - 83 ......................     337           204,373,271.86        50.10          6.476          713          72.87
84 - 89 ......................       9             5,137,500.00         1.26          6.800          702          69.52
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     956        $  407,916,417.27       100.00%         6.377          710          73.55
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average number of months to the
          next rate adjustment of the Adjustable Rate Mortgage Loans in
          Aggregate Loan Group II is approximately 70 months.


                                      S-45



                     TABULAR CHARACTERISTICS OF LOAN GROUP 2



                                                CURRENT MORTGAGE RATES(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
RANGE OF CURRENT                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
MORTGAGE RATES (%)                LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

4.501 - 5.000 ................       5        $      960,475.20         0.49%         4.952          733          80.44
5.001 - 5.500 ................      30            27,899,830.89        14.31          5.324          715          67.75
5.501 - 6.000 ................     135            43,218,982.82        22.16          5.850          717          72.06
6.001 - 6.500 ................     222            63,739,196.51        32.68          6.308          705          75.25
6.501 - 7.000 ................     135            38,706,092.28        19.85          6.794          700          77.80
7.001 - 7.500 ................      63            17,356,432.33         8.90          7.322          692          79.50
7.501 - 8.000 ................      14             3,011,018.24         1.54          7.782          676          80.05
8.001 - 8.500 ................       1               143,200.00         0.07          8.375          695          80.00
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     605        $  195,035,228.27       100.00%         6.270          707          74.46
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average mortgage rate of the
          Mortgage Loans in Loan Group 2 is expected to be approximately 6.270%
          per annum.



                                       CURRENT MORTGAGE LOAN PRINCIPAL BALANCES(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
RANGE OF CURRENT                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
MORTGAGE LOAN                   MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
PRINCIPAL BALANCES ($)            LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

0.01 - 100,000.00 ............      34        $    2,740,707.66         1.41%         6.711          687          76.34
100,000.01 - 200,000.00 ......     212            31,890,021.31        16.35          6.449          700          77.92
200,000.01 - 300,000.00 ......     128            31,952,913.21        16.38          6.374          691          76.79
300,000.01 - 400,000.00 ......     111            37,642,827.48        19.30          6.366          698          76.26
400,000.01 - 500,000.00 ......      25            11,069,034.08         5.68          6.572          686          74.78
500,000.01 - 600,000.00 ......      41            22,422,422.21        11.50          6.280          722          76.26
600,000.01 - 700,000.00 ......      20            13,083,360.13         6.71          6.395          705          77.27
700,000.01 - 800,000.00 ......       7             5,286,526.95         2.71          6.641          732          76.44
800,000.01 - 900,000.00 ......       6             5,197,915.56         2.67          6.556          687          72.54
900,000.01 - 1,000,000.00 ....       4             3,955,069.04         2.03          6.396          734          63.19
1,000,000.01 - 1,500,000.00 ..       3             3,648,000.00         1.87          5.819          692          80.08
1,500,000.01
or above .....................      14            26,146,430.64        13.41          5.452          741          62.40
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     605        $  195,035,228.27       100.00%         6.270          707          74.46
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the average current Mortgage Loan principal
          balance of the Mortgage Loans in Loan Group 2 is approximately
          $322,372.28.



                                                  DOCUMENTATION PROGRAM
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
DOCUMENTATION LEVEL               LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

Limited ......................     263        $   82,363,664.35        42.23%         6.376          711          76.85
Full/Alternative .............     147            47,807,865.02        24.51          5.970          703          75.65
No Documentation .............     103            28,789,631.75        14.76          6.474          700          67.78
No Ratio .....................      51            16,834,570.47         8.63          6.714          689          76.73
Lite .........................      12            12,004,179.47         6.15          5.399          737          63.94
Stated Documentation .........      29             7,235,317.21         3.71          6.641          700          78.11
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     605        $  195,035,228.27       100.00%         6.270          707          74.46
                                =========     =================     ===========



                                      S-46





                                           ORIGINAL LOAN-TO-VALUE RATIOS(1)(2)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
RANGE OF ORIGINAL               MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
LOAN-TO-VALUE RATIOS (%)          LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

30.00 or below ...............       3        $    2,065,631.00         1.06%         5.577          740          24.81
30.01 - 35.00 ................       2               326,139.37         0.17          6.172          675          33.94
35.01 - 40.00 ................       2               224,613.93         0.12          6.125          682          37.88
40.01 - 45.00 ................       6             3,286,702.98         1.69          5.612          737          43.24
45.01 - 50.00 ................       7             4,241,692.68         2.17          5.685          696          47.98
50.01 - 55.00 ................       5             4,568,719.54         2.34          5.530          729          53.23
55.01 - 60.00 ................      19             8,259,561.94         4.23          6.022          689          57.63
60.01 - 65.00 ................      38            18,997,445.67         9.74          6.083          711          63.51
65.01 - 70.00 ................      33            12,130,272.36         6.22          6.224          690          68.99
70.01 - 75.00 ................      36            11,376,352.53         5.83          6.212          718          74.46
75.01 - 80.00 ................     410           116,330,201.58        59.65          6.422          706          79.78
80.01 - 85.00 ................       7             3,140,231.39         1.61          6.170          742          83.13
85.01 - 90.00 ................      19             4,257,630.34         2.18          6.906          712          89.68
90.01 - 95.00 ................      10             1,637,315.86         0.84          6.484          726          95.00
95.01 - 100.00  ..............       8             4,192,717.10         2.15          5.309          675          99.25
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     605        $  195,035,228.27       100.00%         6.270          707          74.46
                                =========     =================     ===========


      ________________

      (1) The weighted average original Loan-to-Value Ratio of the Mortgage
          Loans in Loan Group 2 by Aggregate Cut-off Date Loan Balance is
          approximately 74.46%.

      (2) Does not take into account any secondary financing on the Mortgage
          Loans in Loan Group 2 that may exist at the time of origination or any
          Additional Collateral.



                                      ORIGINAL EFFECTIVE LOAN-TO-VALUE RATIOS(1)(2)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
RANGE OF ORIGINAL               NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
EFFECTIVE LOAN-TO-              MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
VALUE RATIOS (%)                  LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

20.01 - 30.00 ................       3        $    2,065,631.00         1.06%         5.577          740          24.81
30.01 - 40.00 ................       4               550,753.30         0.28          6.153          678          35.55
40.01 - 50.00 ................      13             7,528,395.66         3.86          5.653          714          45.91
50.01 - 60.00 ................      27            14,567,985.48         7.47          5.785          692          61.16
60.01 - 70.00 ................      77            35,575,345.89        18.24          6.045          708          68.89
70.01 - 80.00 ................     446           127,706,554.11        65.48          6.403          707          79.31
80.01 - 90.00 ................      25             5,407,236.26         2.77          6.950          706          88.69
90.01 - 100.00  ..............      10             1,633,326.57         0.84          6.613          740          95.45
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     605        $  195,035,228.27       100.00%         6.270          707          74.46
                                =========     =================     ===========


      ________________

      (1) The weighted average original Loan-to-Value Ratio of the Mortgage
          Loans in Loan Group 2 by Aggregate Cut-off Date Loan Balance is
          approximately 73.62%.

      (2) Does not take into account any secondary financing on the Mortgage
          Loans in Loan Group 2 that may exist at the time of origination or any
          Additional Collateral.



                                                     CREDIT SCORES(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
RANGE OF CREDIT                 MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
SCORES                            LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

576 - 600 ....................       1        $      697,000.00         0.36%         5.375          577          96.81
601 - 625 ....................      17             6,892,177.82         3.53          5.927          615          75.86
626 - 650 ....................      69            18,532,305.95         9.50          6.515          638          76.26
651 - 675 ....................     135            35,471,416.38        18.19          6.416          663          75.00
676 - 700 ....................     109            30,732,732.39        15.76          6.343          688          74.59
701 - 725 ....................      95            30,690,879.45        15.74          6.298          712          72.89
726 - 750 ....................      69            26,177,386.27        13.42          6.260          737          72.57
751 - 775 ....................      60            23,154,104.89        11.87          6.299          763          73.87
776 - 800 ....................      41            19,007,189.47         9.75          5.862          784          76.58
801 - 825 ....................       9             3,680,035.65         1.89          5.602          805          71.54
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     605        $  195,035,228.27       100.00%         6.270          707          74.46
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average Credit Score of the
          Mortgagors related to the Mortgage Loans in Loan Group 2 is
          approximately 707.



                                      STATE DISTRIBUTION OF MORTGAGED PROPERTIES(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
STATE                             LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

California ...................     168        $   76,008,420.18        38.97%         6.095          720          73.61
Florida ......................      77            18,642,787.45         9.56          6.510          701          74.54
New York .....................      29            17,044,038.33         8.74          6.009          693          66.20
Virginia .....................      23             8,624,140.50         4.42          6.578          692          76.29
Arizona ......................      30             8,234,942.47         4.22          6.496          721          77.19
Minnesota ....................      38             6,838,192.32         3.51          6.883          697          78.92
Georgia ......................      20             4,612,233.95         2.36          6.399          695          79.11
Illinois .....................      21             4,595,554.55         2.36          6.319          700          78.43
Nevada .......................      17             4,471,090.12         2.29          6.653          688          83.07
Maryland .....................      11             4,400,508.36         2.26          6.493          682          79.27
Other ........................     171            41,563,320.04        21.31          6.296          699          75.32
                                ---------     -----------------     -----------
  TOTAL/WEIGHTED AVERAGE .....     605        $  195,035,228.27       100.00%         6.270          707          74.46
                                =========     =================     ===========


      ________________

      (1) The Other row in the preceding table includes 26 other states and the
          District of Columbia. No more than approximately 1.49% of the Mortgage
          Loans in Loan Group 2 will be secured by mortgaged properties located
          in any one postal zip code area.


                                      S-47





                                                PURPOSE OF MORTGAGE LOANS
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
LOAN PURPOSE                      LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

Purchase .....................     403        $  110,098,270.08        56.45%         6.402          710          79.43
Refinance - Cashout ..........     150            59,757,186.12        30.64          6.181          693          68.06
Refinance - Rate Term ........      52            25,179,772.07        12.91          5.903          723          67.90
                                ---------     -----------------     -----------
  TOTAL/WEIGHTED AVERAGE .....     605        $  195,035,228.27       100.00%         6.270          707          74.46
                                =========     =================     ===========




                                              TYPES OF MORTGAGED PROPERTIES
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
PROPERTY TYPE                     LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

Single Family Residence ......     292        $  100,767,287.38        51.67%         6.318          704          74.31
Planned Unit Development .....     159            50,608,340.37        25.95          6.182          709          74.66
Condominium ..................      89            21,681,870.95        11.12          6.150          709          77.34
2-4 Family ...................      58            19,194,837.31         9.84          6.484          712          73.68
Cooperative ..................       5             2,551,255.37         1.31          5.511          711          57.19
Townhouse ....................       2               231,636.89         0.12          6.349          728          79.99
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     605        $  195,035,228.27       100.00%         6.270          707          74.46
                                =========     =================     ===========




                                                    OCCUPANCY TYPES(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
OCCUPANCY TYPES                   LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

Primary ......................     432        $  154,840,083.45        79.39%         6.219          703          74.64
Investment ...................     141            29,888,946.11        15.32          6.485          716          74.47
Second Home ..................      32            10,306,198.71         5.28          6.408          738          71.76
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     605        $  195,035,228.27       100.00%         6.270          707          74.46
                                =========     =================     ===========


      ________________

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



                                              REMAINING TERMS TO MATURITY(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
RANGE OF REMAINING              NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
TERMS TO MATURITY               MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
(MONTHS)                          LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

331 - 360 ....................     605        $  195,035,228.27       100.00%         6.270          707          74.46
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     605        $  195,035,228.27       100.00%         6.270          707          74.46
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average remaining term to
          maturity of the Mortgage Loans in Loan Group 2 is approximately 357
          months.



                                                       SEASONING(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
RANGE OF REMAINING              NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
TERMS TO MATURITY               MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
(MONTHS)                          LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

<= 0 .........................       1        $      339,200.00         0.17%         7.375          646          80.00
1 - 3 ........................     337           118,331,040.98        60.67          6.427          704          74.73
4 - 6 ........................     220            60,783,107.21        31.17          6.103          710          73.65
7 - 9 ........................      37            13,221,110.68         6.78          5.651          715          74.89
10 - 12 ......................       9             2,098,269.40         1.08          6.008          699          78.49
13 - 15 ......................       1               262,500.00         0.13          5.875          629          75.00
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     605        $  195,035,228.27       100.00%         6.270          707          74.46
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average seasoning of the Mortgage
          Loans in Loan Group 2 is approximately 3 months.



                                                       PRODUCT TYPE
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
PRODUCT TYPE                      LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

5 Year Arms ..................      91        $   24,661,119.57        12.64%         6.407          720          70.91
5 Year Arms - IO 10 Years ....     411           117,786,722.21        60.39          6.480          700          76.86
5 Year Arms - IO 2 Years .....       1               287,031.76         0.15          5.875          770          63.89
5 Year Arms - IO 5 Years .....     101            51,988,447.39        26.66          5.723          714          70.73
5-6 Year Arm Baln
30/40 ........................       1               311,907.34         0.16          7.875          647          80.00
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     605        $  195,035,228.27       100.00%         6.270          707          74.46
                                =========     =================     ===========



                                      S-48





                                   MORTGAGE INDEX OF THE ADJUSTABLE RATE MORTGAGE LOANS
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
MORTGAGE INDEX                    LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

One-Year CMT .................       3        $      962,888.72         0.49%         5.918          749          72.48
Six-Month LIBOR ..............     379           129,732,422.95        66.52          6.239          709          74.24
One-Year LIBOR ...............     223            64,339,916.60        32.99          6.337          702          74.92
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     605        $  195,035,228.27       100.00%         6.270          707          74.46
                                =========     =================     ===========




                                  GROSS MARGINS OF THE ADJUSTABLE RATE MORTGAGE LOANS(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
GROSS MARGINS (%)                 LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

1.501 - 2.000 ................      28        $   32,064,599.53        16.44%         5.375          722          67.43
2.001 - 2.500 ................     492           139,135,502.69        71.34          6.455          702          76.42
2.501 - 3.000 ................      63            17,594,537.86         9.02          6.306          711          71.66
3.001 - 3.500 ................      14             4,275,516.09         2.19          6.592          727          75.20
3.501 - 4.000 ................       1               187,600.00         0.10          6.875          677          70.00
4.501 - 5.000 ................       4             1,191,454.37         0.61          6.752          650          70.57
5.501 - 6.000 ................       1               158,017.73         0.08          7.125          801          80.00
6.001 - 6.500 ................       2               428,000.00         0.22          6.435          748          80.00
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     605        $  195,035,228.27       100.00%         6.270          707          74.46
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average Gross Margin of the
          Adjustable Rate Mortgage Loans in Loan Group 2 is approximately
          2.314%.



                              INITIAL PERIODIC CAPS OF THE ADJUSTABLE RATE MORTGAGE LOANS(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
INITIAL PERIODIC                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
CAPS (%)                          LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

1.501 - 2.000 ................       6        $      903,139.46         0.46%         6.247          727          79.48
2.501 - 3.000 ................       4             1,191,454.37         0.61          6.752          650          70.57
4.501 - 5.000 ................     230            55,108,367.07        28.26          6.486          705          77.65
5.501 - 6.000 ................     365           137,832,267.37        70.67          6.180          708          73.18
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     605        $  195,035,228.27       100.00%         6.270          707          74.46
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average Initial Periodic Cap of
          the Adjustable Rate Mortgage Loans in Loan Group 2 is approximately
          5.680%.



                            SUBSEQUENT PERIODIC CAPS OF THE ADJUSTABLE RATE MORTGAGE LOANS(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
SUBSEQUENT PERIODIC             MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
CAPS (%)                          LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

0.501 - 1.000 ................     225        $   51,784,841.81        26.55%         6.543          702          76.94
1.501 - 2.000 ................     376           142,526,288.48        73.08          6.171          708          73.53
2.001 - 2.500 ................       4               724,097.98         0.37          6.221          685          78.74
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     605        $  195,035,228.27       100.00%         6.270          707          74.46
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the non-zero weighted average Subsequent
          Periodic Cap of the Adjustable Rate Mortgage Loans in Loan Group 2 is
          approximately 1.735%.



                             MAXIMUM MORTGAGE RATES OF THE ADJUSTABLE RATE MORTGAGE LOANS(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
RANGE OF MAXIMUM                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
MORTGAGE RATES (%)                LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

9.001 - 10.000  ..............       3        $      574,702.27         0.29%         4.919          747          76.74
10.001 - 11.000 ..............      46            13,898,326.73         7.13          5.855          712          73.11
11.001 - 12.000 ..............     261            89,561,420.85        45.92          5.923          712          72.97
12.001 - 13.000 ..............     261            80,024,181.32        41.03          6.584          702          75.67
13.001 - 14.000 ..............      34            10,976,597.10         5.63          7.409          686          79.37
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     605        $  195,035,228.27       100.00%         6.270          707          74.46
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average maximum mortgage rate of
          the Adjustable Rate Mortgage Loans in Loan Group 2 is expected to be
          approximately 11.984% per annum.



                                  MONTHS TO NEXT RATE ADJUSTMENT OF THE ADJUSTABLE RATE
                                                    MORTGAGE LOANS(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
RANGE OF MONTHS                 NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
TO NEXT RATE                    MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
ADJUSTMENT                        LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

42 - 47 ......................       1        $      262,500.00         0.13%         5.875          629          75.00
48 - 53 ......................      46            15,319,380.08         7.85          5.700          713          75.39
54 - 59 ......................     557           179,114,148.19        91.84          6.317          706          74.37
60 - 65 ......................       1               339,200.00         0.17          7.375          646          80.00
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     605        $  195,035,228.27       100.00%         6.270          707          74.46
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average number of months to the
          next rate adjustment of the Adjustable Rate Mortgage Loans in Loan
          Group 2 is approximately 57 months.


                                      S-49



                     TABULAR CHARACTERISTICS OF LOAN GROUP 3



                                                CURRENT MORTGAGE RATES(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
RANGE OF CURRENT                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
MORTGAGE RATES (%)                LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

4.501 - 5.000 ................       1        $      565,000.00         0.27%         5.000          775          59.47
5.001 - 5.500 ................      23            13,534,009.74         6.36          5.422          722          78.81
5.501 - 6.000 ................      61            36,171,342.21        16.99          5.867          728          70.18
6.001 - 6.500 ................     127            76,354,717.69        35.87          6.358          720          71.47
6.501 - 7.000 ................      95            55,530,999.11        26.09          6.793          704          72.58
7.001 - 7.500 ................      35            25,045,901.23        11.77          7.305          690          76.22
7.501 - 8.000 ................       8             5,199,219.02         2.44          7.770          707          78.52
8.001 - 8.500 ................       1               480,000.00         0.23          8.125          683          80.00
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     351        $  212,881,189.00       100.00%         6.475          714          72.73
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average mortgage rate of the
          Mortgage Loans in Loan Group 3 is expected to be approximately 6.475%
          per annum.



                                       CURRENT MORTGAGE LOAN PRINCIPAL BALANCES(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
RANGE OF CURRENT                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
MORTGAGE LOAN                   MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
PRINCIPAL BALANCES ($)            LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

0.01 - 100,000.00 ............       2        $      154,661.18         0.07%         6.030          715          35.88
100,000.01 - 200,000.00 ......      10             1,564,924.21         0.74          6.028          708          71.03
200,000.01 - 300,000.00 ......       6             1,571,255.91         0.74          6.151          703          74.99
300,000.01 - 400,000.00 ......      15             5,501,658.76         2.58          6.034          693          80.40
400,000.01 - 500,000.00 ......     107            49,402,340.49        23.21          6.503          715          75.88
500,000.01 - 600,000.00 ......      88            48,231,422.85        22.66          6.460          717          74.08
600,000.01 - 700,000.00 ......      48            31,227,308.47        14.67          6.464          718          73.55
700,000.01 - 800,000.00 ......      23            17,298,382.11         8.13          6.480          710          72.89
800,000.01 - 900,000.00 ......       8             6,880,200.00         3.23          6.702          698          73.29
900,000.01 - 1,000,000.00 ....      27            26,458,789.32        12.43          6.567          711          68.89
1,000,000.01 - 1,500,000.00 ..      13            16,836,245.70         7.91          6.599          698          65.06
1,500,000.01
and above ....................       4             7,754,000.00         3.64          6.116          752          64.96
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     351        $  212,881,189.00       100.00%         6.475          714          72.73
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the average current Mortgage Loan principal
          balance of the Mortgage Loans in Loan Group 3 is approximately
          $606,499.11.



                                                  DOCUMENTATION PROGRAM
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
DOCUMENTATION LEVEL               LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

Limited ......................     193        $  117,779,354.14        55.33%         6.562          719          74.63
Full/Alternative .............      68            41,169,847.19        19.34          6.083          708          74.19
No Documentation .............      40            23,631,624.68        11.10          6.620          705          62.33
No Ratio .....................      29            15,475,181.36         7.27          6.603          709          72.17
Stated Documentation .........      15            10,759,050.75         5.05          6.851          704          71.63
Lite .........................       6             4,066,130.88         1.91          5.603          718          68.07
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     351        $  212,881,189.00       100.00%         6.475          714          72.73
                                =========     =================     ===========




                                           ORIGINAL LOAN-TO-VALUE RATIOS(1)(2)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
RANGE OF ORIGINAL               MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
LOAN-TO-VALUE RATIOS (%)          LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

30.00 and below ..............       2        $      245,000.00         0.12%         5.577          787          14.59
30.01 - 35.00 ................       2             1,200,000.00         0.56          6.417          693          31.94
40.01 - 45.00 ................       2             3,109,000.00         1.46          6.277          719          44.73
45.01 - 50.00 ................       3             1,725,000.00         0.81          6.357          729          48.29
50.01 - 55.00 ................      13             8,000,778.47         3.76          6.195          692          52.31
55.01 - 60.00 ................      11             8,125,477.10         3.82          6.213          714          58.37
60.01 - 65.00 ................      42            32,244,895.00        15.15          6.422          713          63.27
65.01 - 70.00 ................      30            20,837,984.39         9.79          6.625          694          68.95
70.01 - 75.00 ................      42            26,485,382.89        12.44          6.418          719          74.19
75.01 - 80.00 ................     197           107,652,178.81        50.57          6.552          717          79.67
80.01 - 85.00 ................       1               349,592.34         0.16          5.750          745          83.64
85.01 - 90.00 ................       3             1,323,900.00         0.62          5.762          761          89.22
95.01 - 100.00  ..............       3             1,582,000.00         0.74          5.508          709         100.00
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     351        $  212,881,189.00       100.00%         6.475          714          72.73
                                =========     =================     ===========


      ________________

      (1) The weighted average original Loan-to-Value Ratio of the Mortgage
          Loans in Loan Group 3 by Aggregate Cut-off Date Loan Balance is
          approximately 72.73%.

      (2) Does not take into account any secondary financing on the Mortgage
          Loans in Loan Group 3 that may exist at the time of origination or any
          Additional Collateral.


                                      S-50





                                      ORIGINAL EFFECTIVE LOAN-TO-VALUE RATIOS(1)(2)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
RANGE OF ORIGINAL               NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
EFFECTIVE LOAN-TO-              MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
VALUE RATIOS (%)                  LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

10.01 - 20.00 ................       2        $      245,000.00         0.12%         5.577          787          14.59
30.01 - 40.00 ................       2             1,200,000.00         0.56          6.417          693          31.94
40.01 - 50.00 ................       6             5,183,592.34         2.43          6.268          724          48.54
50.01 - 60.00 ................      24            16,126,255.57         7.58          6.204          703          55.37
60.01 - 70.00 ................      77            55,489,279.39        26.07          6.461          706          66.83
70.01 - 80.00 ................     239           134,137,561.70        63.01          6.526          717          78.59
80.01 - 90.00 ................       1               499,500.00         0.23          5.875          773          90.00
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     351        $  212,881,189.00       100.00%         6.475          714          72.73
                                =========     =================     ===========


      ________________

      (1) The weighted average original Loan-to-Value Ratio of the Mortgage
          Loans in Loan Group 3 by Aggregate Cut-off Date Loan Balance is
          approximately 72.37%.

      (2) Does not take into account any secondary financing on the Mortgage
          Loans in Loan Group 3 that may exist at the time of origination or any
          Additional Collateral.



                                                     CREDIT SCORES(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
RANGE OF CREDIT                 MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
SCORES                            LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

576 - 600 ....................       1        $      395,000.00         0.19%         5.500          592          69.92
601 - 625 ....................       7             4,080,252.71         1.92          6.550          621          70.09
626 - 650 ....................      24            14,760,319.65         6.93          6.614          640          71.05
651 - 675 ....................      53            31,966,519.89        15.02          6.622          664          71.21
676 - 700 ....................      64            38,037,427.84        17.87          6.662          687          72.99
701 - 725 ....................      49            29,391,741.22        13.81          6.452          713          73.65
726 - 750 ....................      67            40,387,959.08        18.97          6.386          738          73.98
751 - 775 ....................      49            32,065,428.41        15.06          6.421          761          72.16
776 - 800 ....................      28            17,331,607.03         8.14          6.114          784          72.41
801 - 825 ....................       9             4,464,933.17         2.10          6.131          806          77.26
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     351        $  212,881,189.00       100.00%         6.475          714          72.73
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average Credit Score of the
          Mortgagors related to the Mortgage Loans in Loan Group 3 is
          approximately 714.



                                      STATE DISTRIBUTION OF MORTGAGED PROPERTIES(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
STATE                             LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

California ...................     204        $  130,515,008.39        61.31%         6.574          715          72.07
New York .....................      47            22,915,580.25        10.76          6.485          691          76.45
Florida ......................      14             7,992,702.64         3.75          6.270          732          73.61
Massachusetts ................      10             6,644,706.56         3.12          6.441          689          71.95
Virginia .....................      11             6,144,765.17         2.89          6.285          711          71.68
Illinois .....................       8             5,766,759.00         2.71          6.261          719          63.63
Arizona ......................      10             5,105,498.66         2.40          6.704          729          76.12
Washington ...................       7             4,026,550.00         1.89          5.966          734          76.31
Connecticut ..................       3             3,160,000.00         1.48          6.149          740          76.72
New Jersey ...................       4             3,029,260.18         1.42          6.194          751          66.80
Other ........................      33            17,580,358.15         8.26          6.130          713          74.44
                                ---------     -----------------     -----------
  TOTAL/WEIGHTED AVERAGE .....     351        $  212,881,189.00       100.00%         6.475          714          72.73
                                =========     =================     ===========


      ________________

      (1) The Other row in the preceding table includes 17 other states and the
          District of Columbia. No more than approximately 1.44% of the Mortgage
          Loans in Loan Group 3 will be secured by mortgaged properties located
          in any one postal zip code area.



                                                PURPOSE OF MORTGAGE LOANS
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
LOAN PURPOSE                      LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

Purchase .....................     175        $  104,245,995.19        48.97%         6.545          720          77.04
Refinance - Cashout ..........     133            76,696,304.81        36.03          6.440          705          69.74
Refinance - Rate Term ........      43            31,938,889.00        15.00          6.332          713          65.82
                                ---------     -----------------     -----------
  TOTAL/WEIGHTED AVERAGE .....     351        $  212,881,189.00       100.00%         6.475          714          72.73
                                =========     =================     ===========




                                              TYPES OF MORTGAGED PROPERTIES
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
PROPERTY TYPE                     LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

Single Family Residence ......     218        $  135,458,577.17        63.63%         6.457          716          72.60
Planned Unit Development .....      59            34,748,932.69        16.32          6.418          715          73.79
2-4 Family ...................      49            29,416,959.17        13.82          6.688          707          72.79
Condominium ..................      20            11,695,769.94         5.49          6.448          696          70.68
Cooperative ..................       5             1,560,950.03         0.73          5.517          750          74.13
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     351        $  212,881,189.00       100.00%         6.475          714          72.73
                                =========     =================     ===========



                                      S-51





                                                    OCCUPANCY TYPES(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
OCCUPANCY TYPES                   LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

Primary ......................     297        $  179,593,680.73        84.36%         6.471          710          73.12
Investment ...................      40            22,291,881.47        10.47          6.623          735          69.03
Second Home ..................      14            10,995,626.80         5.17          6.236          734          73.79
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     351        $  212,881,189.00       100.00%         6.475          714          72.73
                                =========     =================     ===========


      ________________

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



                                              REMAINING TERMS TO MATURITY(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
RANGE OF REMAINING              NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
TERMS TO MATURITY               MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
(MONTHS)                          LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

331 - 360 ....................     351        $  212,881,189.00       100.00%         6.475          714          72.73
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     351        $  212,881,189.00       100.00%         6.475          714          72.73
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average remaining term to
          maturity of the Mortgage Loans in Loan Group 3 is approximately 358
          months.



                                                       SEASONING(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
RANGE OF REMAINING              NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
TERMS TO MATURITY               MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
(MONTHS)                          LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

<= 0 .........................       9        $    5,137,500.00         2.41%         6.800          702          69.52
1 - 3 ........................     273           166,328,099.26        78.13          6.617          710          72.87
4 - 6 ........................      64            38,045,172.60        17.87          5.858          728          72.90
7 - 9 ........................       4             3,310,755.96         1.56          5.899          743          68.56
10 - 12 ......................       1                59,661.18         0.03          6.875          658          75.00
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     351        $  212,881,189.00       100.00%         6.475          714          72.73
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average seasoning of the Mortgage
          Loans in Loan Group 3 is approximately 2 months.



                                                       PRODUCT TYPE
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
PRODUCT TYPE                      LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

7 Year Arms ..................      27        $   16,660,869.66         7.83%         6.516          713          70.89
7 Year Arms - IO 10 Years ....     246           149,880,773.18        70.41          6.638          711          72.89
7 Year Arms - IO 7 Years .....      78            46,339,546.16        21.77          5.934          721          72.84
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     351        $  212,881,189.00       100.00%         6.475          714          72.73
                                =========     =================     ===========




                                   MORTGAGE INDEX OF THE ADJUSTABLE RATE MORTGAGE LOANS
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
MORTGAGE INDEX                    LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

Six-Month LIBOR ..............     245        $  153,033,905.89        71.89%         6.488          712          72.50
One-Year LIBOR ...............     106            59,847,283.11        28.11          6.441          717          73.29
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     351        $  212,881,189.00       100.00%         6.475          714          72.73
                                =========     =================     ===========




                                  GROSS MARGINS OF THE ADJUSTABLE RATE MORTGAGE LOANS(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
                                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
GROSS MARGINS (%)                 LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

1.501 - 2.000 ................      42        $   26,590,606.43        12.49%         5.644          725          73.60
2.001 - 2.500 ................     292           176,693,366.77        83.00          6.595          713          72.59
2.501 - 3.000 ................      14             7,989,215.80         3.75          6.539          697          71.48
3.001 - 3.500 ................       2               972,000.00         0.46          6.945          730          79.04
3.501 - 4.000 ................       1               636,000.00         0.30          6.250          710          80.00
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     351        $  212,881,189.00       100.00%         6.475          714          72.73
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average Gross Margin of the
          Adjustable Rate Mortgage Loans in Loan Group 3 is approximately
          2.248%.


                                      S-52





                              INITIAL PERIODIC CAPS OF THE ADJUSTABLE RATE MORTGAGE LOANS(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
INITIAL PERIODIC                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
CAPS (%)                          LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

1.501 - 2.000 ................      10        $    5,814,099.61         2.73%         5.673          733          73.91
4.501 - 5.000 ................      15             7,641,928.84         3.59          6.371          723          73.20
5.501 - 6.000 ................     326           199,425,160.55        93.68          6.502          713          72.67
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     351        $  212,881,189.00       100.00%         6.475          714          72.73
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average Initial Periodic Cap of
          the Adjustable Rate Mortgage Loans in Loan Group 3 is approximately
          5.855%.



                            SUBSEQUENT PERIODIC CAPS OF THE ADJUSTABLE RATE MORTGAGE LOANS(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
SUBSEQUENT PERIODIC             MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
CAPS (%)                          LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

0.501 - 1.000 ................      12        $    6,402,765.52         3.01%         6.564          706          71.26
1.501 - 2.000 ................     339           206,478,423.48        96.99          6.472          714          72.77
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     351        $  212,881,189.00       100.00%         6.475          714          72.73
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average Subsequent Periodic Cap
          of the Adjustable Rate Mortgage Loans in Loan Group 3 is approximately
          1.970%.



                             MAXIMUM MORTGAGE RATES OF THE ADJUSTABLE RATE MORTGAGE LOANS(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
                                NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
RANGE OF MAXIMUM                MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
MORTGAGE RATES (%)                LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

10.001 - 11.000 ..............      13        $    7,365,667.53         3.46%         5.648          740          71.85
11.001 - 12.000 ..............      85            49,560,045.34        23.28          5.846          724          72.70
12.001 - 13.000 ..............     211           126,533,555.88        59.44          6.555          713          71.90
13.001 - 14.000 ..............      41            28,941,920.25        13.60          7.385          694          76.46
14.001 - 15.000 ..............       1               480,000.00         0.23          8.125          683          80.00
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     351        $  212,881,189.00       100.00%         6.475          714          72.73
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average maximum mortgage rate of
          the Adjustable Rate Mortgage Loans in Loan Group 3 is expected to be
          approximately 12.406% per annum.



                                  MONTHS TO NEXT RATE ADJUSTMENT OF THE ADJUSTABLE RATE
                                                    MORTGAGE LOANS(1)
-------------------------------------------------------------------------------------------------------------------------
                                                                    PERCENT OF                                   WEIGHTED
                                                  AGGREGATE          AGGREGATE                                   AVERAGE
RANGE OF MONTHS                 NUMBER OF         PRINCIPAL          PRINCIPAL       WEIGHTED                    ORIGINAL
TO NEXT RATE                    MORTGAGE           BALANCE            BALANCE        AVERAGE       WEIGHTED      SUBJECT
ADJUSTMENT                        LOANS          OUTSTANDING        OUTSTANDING     COUPON (%)   AVERAGE FICO     LTV (%)
------------------------------  ---------     -----------------     -----------     ----------   ------------    --------

72 - 77 ......................       5        $    3,370,417.14         1.58%         5.917          741          68.68
78 - 83 ......................     337           204,373,271.86        96.00          6.476          713          72.87
84 - 89 ......................       9             5,137,500.00         2.41          6.800          702          69.52
                                ---------     -----------------     -----------
   TOTAL/WEIGHTED AVERAGE ....     351        $  212,881,189.00       100.00%         6.475          714          72.73
                                =========     =================     ===========


      ________________

      (1) As of the Cut-off Date, the weighted average number of months to the
          next rate adjustment of the Adjustable Rate Mortgage Loans in Loan
          Group 3 is approximately 82 months.


                                      S-53



ASSIGNMENT OF THE MORTGAGE LOANS; REPRESENTATIONS AND WARRANTIES RELATING TO THE
MORTGAGE LOANS

      Under the Assignment Agreements and the mortgage loan purchase agreement,
Morgan Stanley Mortgage Capital Inc. (the "SELLER") will sell the Mortgage Loans
to the Depositor and the Depositor will sell the Mortgage Loans to the Issuing
Entity. Pursuant to the Assignment Agreements, the Seller will transfer its
rights and obligations under the underlying mortgage loan purchase agreements
with respect to certain representations, warranties and covenants made by the
Originators relating to, among other things, certain characteristics of the
Mortgage Loans. Pursuant to the Pooling and Servicing Agreement and the mortgage
loan purchase agreement, the Seller will make certain representations,
warranties and covenants relating to certain characteristics of certain Mortgage
Loans. Subject to the limitations described below, the Originator or the Seller
will be obligated as described herein to purchase or substitute a similar
mortgage loan for any related Mortgage Loan as to which there exists deficient
documentation or as to which there has been an uncured breach of any such
representation or warranty relating to the characteristics of the Mortgage Loan
that materially and adversely affects the value of such Mortgage Loan or the
interests of the Certificateholders in such Mortgage Loan (a "DEFECTIVE MORTGAGE
LOAN"). See "Description of the Agreements--Assignment of Assets; Repurchases"
and "--Representations and Warranties; Repurchases" in the accompanying
prospectus.

      Pursuant to a pooling and servicing agreement (the "POOLING AND SERVICING
AGREEMENT"), dated as of the Cut-off Date, among Morgan Stanley Capital I Inc.,
as Depositor (the "DEPOSITOR"), Wells Fargo Bank, National Association ("WELLS
FARGO"), as Master Servicer (in such capacity, the "MASTER SERVICER") and as
Securities Administrator (in such capacity, the "SECURITIES ADMINISTRATOR"),
Morgan Stanley Mortgage Capital Inc., as seller, and LaSalle Bank National
Association, as trustee (the "TRUSTEE") of the Issuing Entity, on the Closing
Date the Depositor will sell, transfer, assign, set over and otherwise convey
without recourse to the Trustee, in its capacity as Trustee, all of its rights
to the Mortgage Loans and its rights and obligations under the Assignment
Agreements (including the right to enforce the Originators' purchase
obligations) and under the mortgage loan purchase agreement. The obligations of
the Originators and the Seller with respect to the Certificates are limited to
their respective obligations to purchase or substitute for Defective Mortgage
Loans.

      In connection with such transfer and assignment of the Mortgage Loans, the
Depositor will deliver or cause to be delivered to the Trustee or its custodian,
among other things, the original promissory note or a lost note affidavit and a
copy of the promissory note (the "MORTGAGE NOTE") (and any modification or
amendment thereto) endorsed in blank without recourse, the original instrument
creating a first lien on the related Mortgaged Property (the "MORTGAGE") with
evidence of recording indicated thereon, an assignment in recordable form of the
Mortgage, all recorded intervening assignments of the Mortgage and any
modifications to such Mortgage Note and Mortgage (except for any such document
other than Mortgage Notes not available on the Closing Date, which will be
delivered to or on behalf of the Trustee as soon as the same is available to the
Depositor) (collectively, the "MORTGAGE FILE"). Assignments of the Mortgage
Loans to the Trustee (or its nominee) will be recorded in the appropriate public
office for real property records, except in states where, in the opinion of
counsel, such recording is not required to protect the Trustee's interest in the
Mortgage Loans against the claim of any subsequent transferee or any successor
to or creditor of the Depositor.

      The related Originators, pursuant to their respective the Assignment
Agreements, and/or the Sponsor pursuant to the mortgage loan purchase agreement
or the Pooling and Servicing Agreement, will make certain representations and
warranties regarding the Mortgage Loans which will include, among other things
that:

      o   as of the cut-off date, the information about the Mortgage Loans in
          this prospectus supplement was true and correct in all material
          respects;

      o   except as otherwise described in this prospectus supplement, each
          Mortgage Loan is secured by a first lien on the related mortgaged
          property is the subject of a primary insurance policy;

      o   the Sponsor and Seller had good title to the Mortgage Loans and,
          except as otherwise described in this prospectus supplement, no
          Mortgage Loan is subject to offsets, defenses or counterclaims except
          as may be provided under the Servicemembers Civil Relief Act or
          similar state laws;


                                      S-54



      o   to the best of the Sponsor's or Originator's knowledge, the mortgaged
          property securing each Mortgage Loan is free of material damage and is
          in good repair;

      o   each Mortgage Loan complied in all material respects with all
          applicable local, state and federal laws at the time of origination;
          and

      o   to the best of the Sponsor's or Originator's knowledge, there is no
          delinquent tax or assessment lien against the mortgaged property any
          Mortgage Loan.

      The Trustee or a Custodian on its behalf will review each Mortgage File
within the time period specified in the Pooling and Servicing Agreement or
promptly after the Trustee's receipt of any document permitted to be delivered
after the Closing Date. The Trustee or a Custodian on behalf of the Trustee will
hold such Mortgage Files in trust for the benefit of the Certificateholders in
accordance with their respective customary procedures, including storing the
documents in fire-resistant facilities. If at the end of such specified period,
any document in a Mortgage File is found to be missing or not in compliance with
the review requirements set forth in the Pooling and Servicing Agreement and the
related Originator or the Seller, as applicable, does not cure such omission or
noncompliance within the time period required under the applicable underlying
mortgage loan purchase agreement or the Mortgage Loan Purchase Agreement, as
applicable, and such omission or noncompliance is deemed to have a material and
adverse affect on the value of that Mortgage Loan, then the applicable
Originator, pursuant to such underlying mortgage loan purchase agreement, as
modified by the related Assignment Agreement, or the Seller pursuant to the
Pooling and Servicing Agreement or the mortgage loan purchase agreement, is
obligated to purchase the related Defective Mortgage Loan from the assets of the
Issuing Entity. In addition if one of the above representations or any other
representation or warranty with respect to a Mortgage Loan in the mortgage loan
purchase agreement or an Assignment Agreement, as applicable, is breached then
the applicable Originator, pursuant to such underlying mortgage loan purchase
agreement, as modified by the related Assignment Agreement, or the Seller
pursuant to the Pooling and Servicing Agreement or the mortgage loan purchase
agreement, is obligated to purchase the related Defective Mortgage Loan from the
assets of the Issuing Entity. If required to repurchase a Mortgage Loan, the
Seller or the related Originator as applicable will be required to repurchase
that Mortgage Loan at a price equal to the sum of (a) 100% of the Stated
Principal Balance thereof and (b) unpaid accrued interest thereon from the Due
Date to which interest was last paid by the mortgagor to the Due Date
immediately preceding the repurchase. Rather than purchase the Defective
Mortgage Loan as provided above, the applicable Originator or the Seller may
remove such Mortgage Loan (a "DELETED MORTGAGE LOAN") from the Mortgage Pool and
substitute in its place one or more mortgage loans of like kind (such loan a
"REPLACEMENT MORTGAGE LOAN"); provided, however, that such substitution is
permitted only within two years after the Closing Date and may not be made
unless an opinion of counsel is provided to the effect that such substitution
would 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 related underlying servicing
agreement, (i) have an outstanding principal balance, after deduction of all
scheduled payments due in the month of substitution, not in excess of the Stated
Principal Balance of the Deleted Mortgage Loan (the amount of any shortfall to
be deposited in the Distribution Account in the month of substitution (a
"SUBSTITUTION ADJUSTMENT AMOUNT")), (ii) have a maximum Mortgage Rate not less
than (and not more than two percentage points greater than) the maximum mortgage
rate of the Deleted Mortgage Loan, (iii) have a Loan-to-Value Ratio equal to or
less than that of the Deleted Mortgage Loan, (iv) have a remaining term to
maturity not greater than (and not more than one year less than) that of the
Deleted Mortgage Loan, (v) is otherwise acceptable to the Seller, (vi) have the
same adjustment date as that of the Deleted Mortgage Loan, (vii) have a minimum
Mortgage Rate not less than that of the Deleted Mortgage Loan, (viii) have the
same Index as that of the Deleted Mortgage Loan and (ix) comply with all of the
representations and warranties set forth in the related underlying servicing
agreement, as modified by the related Assignment Agreement. This cure,
repurchase or substitution obligation constitutes the sole remedy available to
the Certificateholders or the Trustee for omission of, or a material defect in,
a Mortgage File.


                                      S-55



LOAN PURCHASING GUIDELINES AND UNDERWRITING STANDARDS

      General. Each of the Originators, and in certain circumstances the Seller,
will represent and warrant that each of the Mortgage Loans originated and/or
sold by it was underwritten in accordance with standards consistent with those
utilized by mortgage lenders generally during the period of origination. The
Seller will represent and warrant that each of the Mortgage Loans sold by it
conformed to the requirements of its seller guide.

      The following information has been provided by the Seller or the related
Originator, as applicable, and neither the Depositor nor the underwriter makes
any representations or warranties as to the accuracy or completeness of such
information.

LOAN PURCHASING GUIDELINES - MORGAN STANLEY MORTGAGE CAPITAL INC.

      General. For a description of Morgan Stanley Mortgage Capital Inc. ("MSMC"
or the "SPONSOR") please see "The Sponsor" in this prospectus supplement.

      Loan Purchasing Guidelines. The standards applicable to the purchase of
mortgage loans by Morgan Stanley Mortgage Capital Inc. typically differ from,
and are, with respect to a substantial number of mortgage loans, generally less
stringent than, the underwriting standards established by Fannie Mae or Freddie
Mac primarily with respect to original principal balances, loan-to-value ratios,
borrower income, required documentation, interest rates, borrower occupancy of
the mortgaged property and/or property types. To the extent the programs reflect
underwriting standards different from those of Fannie Mae and Freddie Mac, the
performance of the mortgage loans thereunder may reflect higher delinquency
rates and/or credit losses. In addition, certain exceptions to the loan
purchasing guidelines described herein are made in the event that compensating
factors are demonstrated by a prospective borrower.

      Generally, each mortgagor will have been required to complete an
application designed to provide to the original lender pertinent credit
information concerning the mortgagor. As part of the description of the
mortgagor's financial condition, the mortgagor will have furnished information
with respect to its assets, liabilities, income (except as described below),
credit history, employment history and personal information, and furnished an
authorization to apply for a credit report which summarizes the mortgagor's
credit history with local merchants and lenders and any record of bankruptcy.
The mortgagor may also have been required to authorize verifications of deposits
at financial institutions where the mortgagor had demand or savings accounts. In
the case of investment properties and two- to four-unit dwellings, income
derived from the mortgaged property may have been considered for loan purchasing
purposes, in addition to the income of the mortgagor from other sources.

With respect to mortgaged property consisting of vacation or second homes, no
income derived from the property generally will have been considered for loan
purchasing purposes. In the case of certain borrowers with acceptable payment
histories, no income will be required to be stated (or verified) in connection
with the loan application.

      Based on the data provided in the application and certain verification (if
required), a determination is made by the original lender that the mortgagor's
monthly income (if required to be stated) will be sufficient to enable the
mortgagor to meet its monthly obligations on the mortgage loan and other
expenses related to the property such as property taxes, utility costs, standard
hazard insurance and other fixed obligations other than housing expenses.
Generally, scheduled payments on a mortgage loan during the first year of its
term plus taxes and insurance and all scheduled payments on obligations that
extend beyond ten months equal no more than a specified percentage of the
prospective mortgagor's gross income. The percentage applied varies on a case by
case basis depending on a number of loan purchasing criteria, including the LTV
ratio of the mortgage loan. The originator may also consider the amount of
liquid assets available to the mortgagor after origination.

      Certain of the mortgage loans have been originated under alternative,
reduced documentation, no-stated-income, no-documentation, no-ratio or stated
income/stated assets programs, which require less documentation and verification
than do traditional full documentation programs. Generally, under an alternative
documentation program, the borrower provides alternate forms of documentation to
verify employment, income and assets. Under a reduced documentation program, no
verification of one of either a mortgagor's income or a mortgagor's assets is


                                      S-56



undertaken by the originator. Under a no-stated-income program or a no-ratio
program, certain borrowers with acceptable payment histories will not be
required to provide any information regarding income and no other investigation
regarding the borrower's income will be undertaken. Under a stated income/stated
assets program, no verification of both a mortgagor's income and a mortgagor's
assets is undertaken by the originator. Under a no-documentation program, no
verification of a mortgagor's income or assets is undertaken by the originator
and such information may not even be stated by the mortgagor. The loan
purchasing decisions for such mortgage loans may be based primarily or entirely
on an appraisal of the mortgaged property and the LTV ratio at origination.

      The adequacy of the mortgaged property as security for repayment of the
related mortgage loan will generally have been determined by an appraisal in
accordance with pre-established appraisal procedure guidelines for appraisals
established by or acceptable to the originator. All appraisals conform to the
Uniform Standards of Professional Appraisal Practice adopted by the Appraisal
Standards Board of the Appraisal Foundation and must be on forms acceptable to
Fannie Mae and/or Freddie Mac. Appraisers may be staff appraisers employed by
the originator or independent appraisers selected in accordance with
pre-established appraisal procedure guidelines established by the originator.
The appraisal procedure guidelines generally will have required the appraiser or
an agent on its behalf to personally inspect the property and to verify whether
the property was in good condition and that construction, if new, had been
substantially completed. The appraisal generally will have been based upon a
market data analysis of recent sales of comparable properties and, when deemed
applicable, an analysis based on income generated from the property or a
replacement cost analysis based on the current cost of constructing or
purchasing a similar property.

                                  THE SERVICERS

GENERAL

      Each Servicer will initially have primary responsibility for servicing the
Mortgage Loans originated and/or sold by it, including, but not limited to, all
collection, advancing and loan-level reporting obligations, maintenance of
escrow accounts, maintenance of insurance and enforcement of foreclosure
proceedings with respect to the Mortgage Loans and related Mortgaged Properties.
All of the Mortgage Loans will be master serviced by Wells Fargo Bank, National
Association.

      The following information has been provided by the Servicer listed below,
and neither the Depositor nor the underwriter makes any representations or
warranties as to the accuracy or completeness of such information.

GMAC MORTGAGE CORPORATION

      The Sponsor has contracted with GMAC to service the Mortgage Loans owned
by the Issuing Entity with respect to which the Sponsor owns the servicing
rights (the "SPONSOR SERVICING RIGHTS MORTGAGE LOANS"). GMAC did not originate
any of the Sponsor Servicing Rights Mortgage Loans. The Sponsor has the right to
terminate GMAC as servicer of the Sponsor Servicing Rights Mortgage Loans at any
time, without cause, and sell the servicing rights to a third party as described
in "Servicing of the Mortgage Loans -Seller's Retention of Servicing Rights" in
this prospectus supplement.

      General. GMAC Mortgage Corporation ("GMACM") is a Pennsylvania corporation
and a wholly-owned subsidiary of GMAC Residential Holding Corporation, which is
a wholly owned subsidiary of Residential Capital Corporation ("RESCAP"). ResCap
is a wholly-owned subsidiary of GMAC Mortgage Group, Inc., which is a
wholly-owned subsidiary of General Motors Acceptance Corporation ("GMAC"). GMAC
is a wholly-owned subsidiary of General Motors Corporation.

      GMAC entered the residential real estate finance business in 1985 through
its acquisition of Colonial Mortgage Service Company, which was formed in 1926,
and the loan administration, servicing operations and portfolio of Norwest
Mortgage, which entered the residential mortgage loan business in 1906. These
businesses formed the original basis of what is now GMACM.


                                      S-57



      GMACM maintains its executive and principal offices at 100 Witmer Road,
Horsham, Pennsylvania 19044. Its telephone number is (215) 682 1000.

      The diagram below illustrates the ownership structure among the parties
affiliated with GMACM.

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

                           General Motors Corporation

                        --------------------------------
                                        |
                                        |
                    -----------------------------------------

                      General Motors Acceptance Corporation
                                     (GMAC)

                    -----------------------------------------
                                        |
                                        |
                       -----------------------------------

                         Residential Capital Corporation
                                    (ResCap)

                       -----------------------------------
                                        |
                                        |
                         -------------------------------

                            GMAC Mortgage Corporation

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

      Servicing Activities. GMACM generally retains the servicing rights with
respect to loans it sells or securitizes, and also occasionally purchases
mortgage servicing rights from other servicers or acts as a subservicer of
mortgage loans (and does not hold the corresponding mortgage servicing right
asset). The following table sets forth the types of residential mortgage loans
comprising GMACM's primary servicing portfolio for which GMACM holds the
corresponding mortgage servicing rights.

      As of December 31, 2004, GMACM acted as primary servicer and owned the
corresponding servicing rights on approximately 2 million residential mortgage
loans having an aggregate unpaid principal balance of $218 billion, and GMACM
acted as subservicer (and did not own the corresponding servicing rights) on
approximately 99,082 residential mortgage loans having an aggregate principal
balance of over $13.9 billion.

      As servicer, GMACM collects and remits mortgage loan payments, responds to
borrower inquiries, accounts for principal and interest, holds custodial and
escrow funds for payment of property taxes and insurance premiums, counsels or
otherwise works with delinquent borrowers, supervises foreclosures and property
dispositions and generally administers the mortgage loans.

      GMAC Mortgage Corporation Servicing Experience. The following tables set
forth the mortgage loans serviced by GMAC Mortgage Corporation for the periods
indicated, and the annual average number of such loans for the same period. GMAC
Mortgage Corporation was the servicer of a residential mortgage loan portfolio
of approximately $150.4 billion, $12.5 billion, $21.2 billion and $6.67 billion
during the year ended December 31, 2002 backed by prime conforming mortgage
loans, prime non-conforming mortgage loans, government mortgage loans and
second-lien mortgage loans, respectively. GMAC Mortgage Corporation was the
servicer of a residential mortgage loan portfolio of approximately $182.6
billion, $30.7 billion, $18.2 billion and $12.0 billion during the nine months
ended September 30, 2005 backed by prime conforming mortgage loans, prime
non-conforming mortgage loans, government mortgage loans and second-lien
mortgage loans, respectively. The percentages shown


                                      S-58



under "Percentage Change from Prior Year" represent the ratio of (a) the
difference between the current and prior year volume over (b) the prior year
volume.




                                             GMAC MORTGAGE CORPORATION
                                            PRIMARY SERVICING PORTFOLIO
                                                  ($ IN MILLIONS)
                 ---------------------------------------------------------------------------------
                                                    For the
                                                      Nine
                                                     Months
                                                     Ended
                                                   September
                                                      30,         For the Year Ended December 31,
                                                   ----------    ---------------------------------


                                                      2005         2004         2003       2002

                 Prime Conforming Mortgage Loans
                 --------------------------------------------
                       No. of Loans...........      1,380,985    1,323,249   1,308,284   1,418,843
                       Dollar Amount of Loans.       $182,644     $165,521    $153,601    $150,421
                       Percentage Change......         10.34%        7.76%       2.11%     N/A

                 Prime Non-Conforming Mortgage Loans
                 --------------------------------------------
                       No. of Loans...........         66,266       53,119      34,041      36,225
                       Dollar Amount of Loans.        $30,739      $23,604     $13,937     $12,543
                       Percentage Change......         30.23%       69.36%      11.12%     N/A

                 Government Mortgage Loans
                 --------------------------------------------
                       No. of Loans...........        184,665      191,844     191,023     230,085
                       Dollar Amount of Loans.        $18,241      $18,328     $17,594     $21,174
                       Percentage Change......        (0.47)%        4.17%    (16.91)%     N/A

                 Second Lien Mortgage Loans
                 --------------------------------------------
                       No. of Loans...........        377,049      350,334     282,128     261,416
                       Dollar Amount of Loans.        $12,044      $10,374      $7,023      $6,666
                       Percentage Change......         16.10%       47.71%       5.36%     N/A

                 Total Mortgage Loans Serviced
                 --------------------------------------------
                       No. of Loans...........      2,008,965    1,918,546   1,815,476   1,946,569
                       Dollar Amount of Loans.       $243,668     $217,827    $192,155    $190,803
                       Percentage Change......         11.86%       13.36%       0.71%     N/A


      Billing and Payment Procedures. As servicer, GMACM collects and remits
mortgage loan payments, responds to borrower inquiries, accounts for principal
and interest, holds custodial and escrow funds for payment of property taxes and
insurance premiums, counsels or otherwise works with delinquent borrowers,
supervises foreclosures and property dispositions and generally administers the
loans. GMACM sends monthly invoices or annual coupon books to borrowers to
prompt the collection of the outstanding payments. Borrowers may elect for
monthly payments to be deducted automatically from bank accounts on the same day
every month or may take advantage of on demand ACH payments made over the
internet or via phone.


                                      S-59



                         SERVICING OF THE MORTGAGE LOANS

SERVICING AND COLLECTION PROCEDURES

      Servicing functions to be performed by each Servicer under the related
underlying servicing agreement include collection and remittance of principal
and interest payments, administration of mortgage escrow accounts, collection of
certain insurance claims and, if necessary, foreclosure. When used in this
prospectus supplement with respect to servicing obligations, the term Servicer
includes a subservicer.

      Each Servicer will make reasonable efforts to collect all payments called
for under each Mortgage Loan serviced by it and will, consistent with the
related underlying servicing agreement or the Pooling and Servicing Agreement,
as applicable, and any primary mortgage insurance policy, follow such collection
procedures as are customary with respect to mortgage loans that are comparable
to the Mortgage Loans serviced by it. Consistent with the above, such Servicer
may, in its discretion, (i) waive any assumption fee, late payment or other
charge in connection with a Mortgage Loan and (ii) to the extent not consistent
with the coverage of such Mortgage Loan by a primary mortgage insurance policy,
arrange with a mortgagor a schedule for the liquidation of delinquencies. Prior
approval or consent may be required for certain servicing activities such as
modification of the terms of any Mortgage Loan and the sale of any defaulted
Mortgage Loan or REO Property.

      Each Servicer may enter into subservicing agreements with subservicers for
the servicing and administration of the mortgage loans. However, no subservicing
agreement will take effect until 30 days after written notice is received by
both the Master Servicer and the Sponsor. The terms of any subservicing
agreement may not be inconsistent with any of the provisions of the Pooling and
Servicing Agreement or the related underlying servicing agreement as modified by
the related Assignment Agreement. Any subservicing agreement will include the
provision that such agreement may be immediately terminated by the Sponsor or
the Master Servicer without fee, in accordance with the terms of the Pooling and
Servicing Agreement, in the event that the applicable Servicer, for any reason,
is no longer a Servicer (including termination due to an event of default).

      Each Servicer will remain obligated and primarily liable to the Master
Servicer for the servicing and administering of the mortgage loans in accordance
with the provisions of the Pooling and Servicing Agreement without diminution of
such obligation or liability by virtue of the subservicing agreements or
arrangements or by virtue of indemnification from the subservicer and to the
same extent and under the same terms and conditions as if the applicable
servicer alone were servicing and administering the mortgage loans. The
applicable servicer will be solely liable for all fees owed by it to any
subservicer, regardless of whether the applicable servicer's compensation is
sufficient to pay the subservicer fees.

      Pursuant to each underlying servicing agreement, each Servicer will
deposit collections on the Mortgage Loans serviced by it into the Custodial
Account established by it. Each Custodial Account is required to be kept
segregated from operating accounts of the related Servicer and to meet the
eligibility criteria set forth in the related underlying servicing agreement.
Amounts on deposit in the related Custodial Account may be invested by the
related Servicer in certain permitted investments unless otherwise prohibited by
the related underlying servicing agreement. Any losses resulting from such
investments are required to be reimbursed to such Custodial Account by the
related Servicer out of its own funds. The Servicers are not permitted to
commingle funds in the Custodial Accounts with any other funds or assets.

      Each servicer will be required to act with respect to mortgage loans in
default, or as to which default is reasonably foreseeable, in accordance with
procedures set forth in the Pooling and Servicing Agreement. These procedures
among other things, may result in (i) foreclosing on the mortgage loan, (ii)
accepting the deed to the related mortgaged property in lieu of foreclosure,
(iii) granting the borrower under the mortgage loan a modification or
forbearance, which may consist of waiving, modifying or varying any term of such
mortgage loan (including modifications that would change the mortgage interest
rate, forgive the payment of principal or interest, or extend the final maturity
date of such mortgage loan) or (iv) accepting payment from the borrower of an
amount less than the principal balance of the mortgage loan in final
satisfaction of the mortgage loan. In addition, the final maturity date of any
mortgage loan may not be extended beyond the Last Scheduled Distribution Date
for the offered certificates.


                                      S-60



      On or before the Closing Date, the Securities Administrator, on behalf of
the Trustee, will establish the Distribution Account into which each Servicer
will remit all amounts required to be deposited therein pursuant to the related
underlying servicing agreement (net of such Servicer's servicing compensation)
on, with respect to each Servicer, the 18th day of each month (or, if the 18th
is not a Business Day, then no later than the immediately following Business
Day) (such date, the "SERVICER REMITTANCE DATE").

      Events of default under the underlying servicing agreements include, among
other things, (i) any failure of the Servicers to remit to the Distribution
Account any required payment which continues unremedied for a specified period;
(ii) any failure by the Servicers duly to observe or perform in any material
respect any of the covenants or agreements in the related underlying servicing
agreement, which continues unremedied for a specified period after the giving of
written notice of such failure to the Servicer; and (iii) certain events of
insolvency and certain actions by or on behalf of the Servicers indicating their
insolvency, reorganization or inability to pay their obligations.

      In the event of a default by a Servicer under its underlying servicing
agreement, the Master Servicer will have the right to remove such Servicer and
will exercise that right if it considers such removal to be in the best interest
of the Certificateholders. In the event that the Master Servicer removes a
Servicer, the Master Servicer will, in accordance with the Pooling and Servicing
Agreement, act as successor servicer under the related underlying servicing
agreement or will appoint a successor servicer reasonably acceptable to the
Depositor and the Trustee. In connection with the removal of a Servicer, the
Master Servicer will be entitled to be reimbursed from the assets of the Issuing
Entity for all of its reasonable costs associated with the termination of such
Servicer and the transfer of servicing to a successor servicer.

SERVICING COMPENSATION AND PAYMENT OF EXPENSES; MASTER SERVICING COMPENSATION;
ADMINISTRATIVE FEES

      All funds collected on the Mortgage Loans that are available for
distribution to Certificateholders will be net of the certain fees payable on
each Mortgage Loan. On each Distribution Date, the Servicers, the Master
Servicer, each Custodian, the Securities Administrator and the Trustee will be
entitled to their fees and reimbursement of certain expenses (including
indemnification payments) prior to the Certificateholders receiving any
distributions. The Servicing Fee for any Distribution Date and for any Mortgage
Loan will be an amount equal to one-twelfth of the Servicing Fee rate described
below on the Stated Principal Balance of such Mortgage Loan. The fees of the
Trustee, each Custodian and the Securities Administrator are payable by the
Master Servicer out if its master servicing compensation.

      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:


                                      S-61





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

FEES

Master Servicing           Reinvestment income on amounts on   Compensation        Amounts on deposit in the         Monthly
Compensation / Master      deposit for the period from                             Distribution Account
Servicer                   between the Servicer Remittance
                           Date and the Distribution Date.
                           (3) (4)

Servicing Fee/MSCC         Equal to 1/12 of the product of     Compensation (5)    Payments made by obligors with    Monthly
                           (1) the principal balance of such                       respect to the MSCC Mortgage
                           Mortgage Loans as of the first                          Loans.
                           day of the related Due Period and
                           (2) a per annum rate (the
                           "Servicing Fee Rate") equal to
                           0.250%.

Servicing Fee/GMAC         Equal to 1/12 of the product of     Compensation (5)    Payments made by obligors         Monthly
                           (i) the principal balance of such                       with respect to the
                           Mortgage Loans as of the first                          Mortgage Loans serviced
                           day of the related Due Period and                       by GMAC, each, a "GMAC
                           (ii) a Servicing Fee Rate which                         SERVICED MORTGAGE LOAN."
                           is between 0.250% and 0.375%. As
                           of the Cut-off Date the weighted
                           average Servicing Fee Rate on the
                           GMAC Serviced Mortgage Loans is
                           approximately 0.351% per annum.

Servicing Fee/HSBC         Equal to 1/12 of the product of     Compensation (5)    Payments made by obligors with    Monthly
                           (i) the principal balance of such                       respect to the Mortgage Loans
                           Mortgage Loans as of the first                          serviced by HSBC, each, an
                           day of the related Due Period and                       "HSBC SERVICED MORTGAGE LOAN."
                           (ii) a Servicing Fee Rate which
                           is 0.250% per annum.

Servicing Fee/Wachovia     Equal to 1/12 of the product of     Compensation (5)    Payments made by obligors with    Monthly
                           (1) the principal balance of such                       respect to the Wachovia Mortgage
                           Mortgage Loans as of the first                          Loans.
                           day of the related Due Period and
                           (2) a Servicing Fee Rate of
                           between 0.250% and 0.375% per
                           annum. As of the Cut-off Date the
                           weighted average Servicing Fee
                           Rate on the Wachovia Serviced
                           Mortgage Loans is approximately
                           0.257% per annum.

Servicing Fee/Wells Fargo  Equal to 1/12 of the product of     Compensation (5)    Payments made by obligors with    Monthly
Servicer                   (i) the principal balance of such                       respect to the Mortgage Loans
                           Mortgage Loans as of the first                          serviced by Wells Fargo
                           day of the related Due Period and                       Servicer, each, a "WELLS FARGO
                           (ii) a Servicing Fee Rate which                         SERVICED MORTGAGE LOAN."
                           is 0.250% per annum.



                                      S-62





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

Trustee Fee/Trustee        As determined between the Master    Compensation        Payable by the Master Servicer    As determined
                           Servicer and the Trustee                                out of Master Servicer            between the
                                                                                   Compensation                      Master
                                                                                                                     Servicer and
                                                                                                                     the Trustee

Custodian Fee/Custodian    As determined between the Master    Compensation        Payable by the Master Servicer    As determined
                           Servicer and the Custodian                              out of Master Servicer            between the
                                                                                   Compensation                      Master
                                                                                                                     Servicer and
                                                                                                                     the Custodian


Securities Administrator   As determined between the Master    Compensation        Payable by the Master Servicer    As determined
Fee/Securities             Servicer and the Securities                             out of Master                     between the
Administrator              Administrator (3)                                       Servicer Compensation             Master
                                                                                                                     Servicer and
                                                                                                                     the Securities
                                                                                                                     Administrator

LPMI Fee/Mortgage          A fee equal to the product of (x)   Mortgage Insurance  Payments made by related          Monthly
Insurance Provider         a per annum rate equal to 0.610%    Premium             Servicer directly to mortgage
                           and (y) the principal balance of                        insurance provider out of
                           each LPMI Mortgage Loan as of the                       interest paid on LPMI Mortgage
                           first day of the related Due                            Loan by borrower prior to
                           Period.                                                 remittance to the Issuing
                                                                                   Entity.

EXPENSES

Insured expenses/Master    Expenses incurred by the Master     Reimbursement of    To the extent the expenses are    Time to time
Servicer and respective    Servicer and respective Servicers   Expenses            covered by an insurance policy
Servicers                                                                          with respect to the Mortgage
                                                                                   Loan

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

Indemnification expenses/  Amounts for which the respective    Indemnification     Amounts on deposit on the         Time to time
respective Servicers       Servicers are entitled to                               Custodial Account prior to the
                           indemnification.                                        transfer to the Distribution
                                                                                   Account

Indemnification expenses/  Amounts for which the Seller,       Indemnification     Amounts on deposit on the         Time to time
the Seller, Master         Master Servicer, Trustee,                               Distribution Account prior to
Servicer, Trustee,         Custodians and Depositor are                            distributions to
Custodians and Depositor   entitled to indemnification.                            Certificateholders



                                      S-63



______________

(1)   If the Trustee succeeds to the position of Master Servicer and/or
      Securities Administrator, it will be entitled to receive the same fees and
      expenses of the Master Servicer or Securities Administrator, as
      applicable, 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.

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

(3)   If the positions of Securities Administrator and Master Servicer currently
      occupied by Wells Fargo Bank, National Association are subsequently
      assumed by multiple entities, then any succeeding entities will be
      entitled in the aggregate to the Master Servicer Compensation.

(4)   The "SERVICER REMITTANCE DATE" shall be the 18th day of each month (or, if
      the 18th is not a Business Day, then no later than the immediately
      following Business Day).

(5)   As further compensation, if permitted under the related underlying
      servicing agreement, funds credited to the Custodial Account established
      by a Servicer may be invested at the discretion of such Servicer for its
      own benefit in permitted investments.

(6)   Reimbursement of Servicing 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.

      The amount of each Servicer's respective Servicing Fees is subject to
adjustment with respect to prepaid Mortgage Loans serviced or master serviced
thereby, as described below under "--Adjustment to Servicing Fees in Connection
with Certain Prepaid Mortgage Loans."

      The net mortgage rate (the "NET MORTGAGE RATE") with respect to any
Mortgage Loan is the related Mortgage Rate minus the related Expense Fee Rate.
The weighted average net mortgage rate (the "WEIGHTED AVERAGE NET MORTGAGE
RATE") for any Loan Group and Distribution Date is the weighted average of the
Net Mortgage Rates of each Mortgage Loan in that Loan Group, weighted on the
basis of their respective Stated Principal Balances as of the Due Date in the
month preceding the month of the applicable Distribution Date.

      The "EXPENSE FEE RATE" with respect to each Mortgage Loan and any
Distribution Date will be the related Servicing Fee Rate and, if applicable, the
interest premium charged by the related lenders for mortgage insurance on the
LPMI Mortgage Loans.


                                      S-64



ADJUSTMENT TO SERVICING FEES IN CONNECTION WITH CERTAIN PREPAID MORTGAGE LOANS

      When a borrower prepays a Mortgage Loan in full or in part between Due
Dates, the borrower is required to pay interest on the amount prepaid only to
the date of prepayment and not thereafter. Principal prepayments by borrowers
received by a Servicer or the Master Servicer during the related Prepayment
Period for a Distribution Date will be distributed to Certificateholders on the
related Distribution Date. Thus, less than one month's interest may have been
collected on Mortgage Loans that have been prepaid with respect to any
Distribution Date. Pursuant to each underlying servicing agreement, the related
Servicer, or the Master Servicer, pursuant to the Pooling and Servicing
Agreement, will be required to make payments in respect of certain prepayment
interest shortfalls from its own funds with respect to Mortgage Loans serviced
by such Servicer or the Master Servicer, as applicable.

      The Servicers are each obligated to compensate the assets of the Issuing
Entity for prepayment interest shortfalls on the Mortgage Loans that they
service. The amount of the compensation may be limited by their Servicing Fees
for that Prepayment Period or by the provisions of the underlying servicing
agreements. The Master Servicer is obligated to reduce a portion of its master
servicing compensation for the related Distribution Date to the extent necessary
to fund any prepayment interest shortfalls required to be paid but not paid by
the Servicers. The amount of interest available to be paid to Certificateholders
will be reduced by any uncompensated prepayment interest shortfalls (referred to
as "NET PREPAYMENT INTEREST SHORTFALLS").

ADVANCES

      Subject to the limitations described in the following paragraph, each
Servicer will be required to advance prior to each Distribution Date, from its
own funds, or funds in its Custodial Account that are not otherwise required to
be remitted to the Distribution Account for such Distribution Date, an amount
equal to the scheduled payment of interest at the related Net Mortgage Rate and
scheduled principal payment on each Mortgage Loan serviced by it which were due
on the related Due Date and which were not received prior to the 15th calendar
day of each month or such other date as may be specified in the related
underlying servicing agreement (each such date, the "DETERMINATION DATE" and any
such advance, a "MONTHLY ADVANCE"). The Master Servicer will be obligated to
make any required Monthly Advance if a Servicer fails in its obligation to do
so, to the extent provided in the Pooling and Servicing Agreement and the
related underlying servicing agreement.

      Monthly Advances are intended to maintain a regular flow of scheduled
interest and principal payments on the Certificates rather than to guarantee or
insure against losses. Each Servicer is obligated to make Monthly Advances with
respect to delinquent payments of interest and principal on each Mortgage Loan
serviced by it, to the extent that such Monthly Advances are, in its good faith
judgment, recoverable from future payments and collections or insurance payments
or proceeds of liquidation of the related Mortgage Loans. If a Servicer fails to
make a Monthly Advance as required under the related underlying servicing
agreement, the Master Servicer will be required to make, or shall cause the
successor servicer to make, a Monthly Advance in accordance with the terms of
the Pooling and Servicing Agreement; provided, however, that in no event will
the Master Servicer be required to make a Monthly Advance that is not, in its
reasonable judgment, recoverable from future payments and collections or
insurance payments or proceeds of liquidation of the related Mortgage Loans. If
a Servicer determines on any Determination Date to make a Monthly Advance, such
Monthly Advance will be included with the payment to Certificateholders on the
related Distribution Date. Any failure by the Master Servicer to make a Monthly
Advance, as required under the Pooling and Servicing Agreement, will constitute
a Master Servicer Default thereunder, in which case the successor Master
Servicer (which may be the Trustee) will be obligated to make such Monthly
Advance.

EVIDENCE AS TO COMPLIANCE

      Each Servicer and the other transaction parties specified in the Pooling
and Servicing Agreement, is required to deliver to the Depositor, the Master
Servicer and the rating agencies in March of each year, starting in 2007, an
officer's certificate stating that:

      o      a review of the activities of that Servicer during the preceding
calendar year and of performance under the Pooling and Servicing Agreement has
been made under such officer's supervision; and


                                      S-65



      o      to the best of such officer's knowledge, based on such review, the
servicer has fulfilled all of its obligations under the Pooling and Servicing
Agreement for such year, or, if there has been a default in the fulfillment of
any such obligation, specifying each such default known to such officer and the
nature and status of such default, including the steps being taken by the
servicer to remedy such default.

      In addition, in March of each year, commencing with March 2007, each
servicer, each custodian, the Master Servicer, the Securities Administrator and
the Trustee, to the extent they provide a "servicing" function (as defined in
Regulation AB (17 CFR 229.1100 et seq.) ("REG AB") to the Issuing Entity, will
be required to deliver to the Depositor an Assessment of Compliance, with
respect to each Form 10-K filed, that contains the following:

      o      a statement of the party's responsibility for assessing compliance
with the servicing criteria applicable to it;

      o      a statement that the party used the criteria in Item 1122(d) of Reg
AB to assess compliance with the applicable servicing criteria;

      o      the party's assessment of compliance with the applicable servicing
criteria during and as of the end of the prior calendar month, setting forth any
material instance of noncompliance identified by the party; and

      o      a statement that a registered public accounting firm has issued an
attestation report on the party's assessment of compliance with the applicable
servicing criteria during and as of the end of the prior calendar month.

      Each party that is required to deliver an Assessment of Compliance will
also be required to simultaneously deliver an Attestation report of a registered
public accounting firm, prepared in accordance with the standards for
attestation engagements issued or adopted by the Public Company Accounting
Oversight Board, that expresses an opinion, or states that an opinion cannot be
expressed, concerning the party's assessment of compliance with the applicable
servicing criteria. You may obtain copies of these statements and reports for a
particular Issuing Entity without charge upon written request to the Securities
Administrator at the address provided in this prospectus supplement.

MASTER SERVICER DEFAULT; SERVICER DEFAULT

      Events of default by the Master Servicer under the Pooling and Servicing
Agreement (each, a "MASTER SERVICER DEFAULT") include (i) any failure by the
Master Servicer to make a Monthly Advance as required under the Pooling and
Servicing Agreement, unless cured as specified therein; (ii) any failure by the
Master Servicer duly to observe or perform in any material respect any of its
other covenants or agreements in the Pooling and Servicing Agreement which
continues unremedied for a specified period after the giving of written notice
of such failure to the Master Servicer; and (iii) certain events of insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceeding and certain actions by on or behalf of the Master Servicer indicating
its insolvency, reorganization or inability to pay its obligations.

      If the Master Servicer is in default in its obligations under the Pooling
and Servicing Agreement, the Trustee may, and must if directed to do so by
Certificateholders having more than 50% of the Class Principal Balance
applicable to each Class of Certificates affected thereby, terminate the Master
Servicer and either appoint a successor Master Servicer in accordance with the
Pooling and Servicing Agreement or succeed to the responsibilities of the Master
Servicer. See "--Resignation of the Master Servicer or a Servicer; Assignment
and Merger" below. In connection with the removal of the Master Servicer, the
Master Servicer will be responsible for the reasonable costs associated with the
transfer of master servicing to its successor (which may be the Trustee) and if
the Master Servicer does not make such payments, the Trustee will be entitled to
be reimbursed from the assets of the Issuing Entity for all of its reasonable
costs associated with the termination of the Master Servicer and the transfer of
master servicing to a successor master servicer.

      If a Servicer is in default in its obligations under the applicable
underlying servicing agreement, the Master Servicer may, at its option,
terminate the defaulting Servicer and either appoint a successor Servicer in
accordance with the applicable underlying servicing agreement and the Pooling
and Servicing Agreement or succeed to the


                                      S-66



responsibilities of the terminated Servicer. Notwithstanding the foregoing, the
Master Servicer shall terminate any Servicer who fails to make the required
Monthly Advance as required under the underlying servicing agreement and assume
(or appoint a successor servicer to assume) the role of the successor servicer
to that Servicer. The successor servicer will then make all required Monthly
Advances.

RESIGNATION OF THE MASTER SERVICER OR A SERVICER; ASSIGNMENT AND MERGER

      Neither the Master Servicer nor any Servicer may resign from its
obligations and duties under the Pooling and Servicing Agreement or its
underlying servicing agreement, as applicable, or assign or transfer its rights,
duties or obligations except (i) upon a determination that its duties thereunder
are no longer permissible under applicable law or (ii) with the approval of the
Depositor, which approval may not be unreasonably withheld. No such resignation
will become effective until a successor servicer or master servicer has assumed
the related Servicer's or the Master Servicer's respective obligations and
duties under such underlying servicing agreement or the Pooling and Servicing
Agreement, as applicable. The Pooling and Servicing Agreement provides that, if
Wells Fargo is removed in its capacity as either Master Servicer or Securities
Administrator, it will be required to resign or be removed in its other
capacity.

      Any person into which the Master Servicer or a Servicer may be merged or
consolidated, any person resulting from any merger or consolidation which the
Master Servicer or a Servicer is a party, any person succeeding to the business
of the Master Servicer or a Servicer or any person to whom the Master Servicer
or a Servicer assigns or transfers its duties and obligations, will be the
successor of the Master Servicer or such Servicer under the Pooling and
Servicing Agreement or the related underlying servicing agreement, as
applicable.

      Each Servicer has agreed that, after that Servicer has received notice of
termination, the Master Servicer may execute and deliver, on behalf of the
terminated 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 Mortgage Loans and related documents. Each
Servicer has agreed to cooperate with the Master Servicer in effecting its
termination, including the transfer to the Master Servicer for all cash amounts
that shall at the time be credited to the related Custodial Accounts, or
thereafter be received with respect to the Mortgage Loans. Upon request of the
Master Servicer, each Servicer has also agreed, at its expense, to deliver to
the assuming party all documents and records relating to any subservicing
arrangement and the Mortgage Loans being serviced by it and an accounting of
amounts collected held by it and otherwise us its best efforts to effect the
orderly and efficient transfer of the servicing of those Mortgage Loans to the
assuming party. No additional funds have been reserved to pay for any expenses
not paid by the Servicer in connection with a servicing transfer but will then
be required to be paid by the Issuing Entity.

ELIGIBILITY REQUIREMENTS FOR TRUSTEE AND SECURITIES ADMINISTRATOR; RESIGNATION
AND REMOVAL OF TRUSTEE OR SECURITIES ADMINISTRATOR

      Each of the Trustee and the Securities Administrator must 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. The Trustee must have a combined capital and surplus of at least
$50,000,000, be subject to supervision or examination by federal or state
authority and have a credit rating that would not cause any of the rating
agencies to reduce their respective then current ratings of the certificates. In
case at any time the Trustee or the Securities Administrator ceases to be
eligible, the Trustee or the Securities Administrator, as applicable, will
resign in the manner and with the effect as specified below.

      The Trustee or the Securities Administrator may at any time resign its
position by giving written notice of resignation to the Depositor, the Master
Servicer, the Sponsor, each servicer and each rating agency not less than 60
days before the date specified in such notice, when such resignation is to take
effect, and acceptance by a successor Trustee or Securities Administrator
meeting the above eligibility requirements. If no successor Trustee or
Securities Administrator meeting the eligibility requirements has been so
appointed and has accepted appointment within 30 days after the giving of such
notice or resignation, the resigning Trustee or Securities Administrator may
petition


                                      S-67



any court of competent jurisdiction for the appointment of a successor Trustee
or Securities Administrator, as applicable.

      If at any time the Trustee or the Securities Administrator ceases to meet
the eligibility requirements and fails to resign after written request by the
Depositor, or if at any time the Trustee or the Securities Administrator becomes
incapable of acting, or is adjudged as bankrupt or insolvent, or a receiver of
the Trustee or the Securities Administrator or of its property is appointed, or
any public officer takes charge or control of the Trustee or the Securities
Administrator or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, or 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 such tax would be avoided by the appointment of a different
Trustee, then the Depositor or the applicable servicer may remove the Trustee or
the Securities Administrator and appoint a successor Trustee or a successor
Securities Administrator, as applicable. The Pooling and Servicing Agreement
provides that, if Wells Fargo is removed in its capacity as either Master
Servicer or Securities Administrator, it will be required to resign or be
removed in its other capacity.

      The holders of certificates entitled to a majority of the voting rights
may at any time remove the Trustee or the Securities Administrator and appoint a
successor Trustee or Securities Administrator by written instrument or
instruments, signed by such holders or their attorneys-in-fact duly authorized.

      Any resignation or removal of the Trustee or the Securities Administrator
and appointment of a successor Trustee or Securities Administrator will become
effective upon acceptance of appointment by the successor Trustee or Securities
Administrator, as applicable.

SELLER'S RETENTION OF SERVICING RIGHTS

      Although the Seller is selling the Mortgage Loans to the Issuing Entity on
the Closing Date, with respect to certain of the Mortgage Loans, the Seller may
have retained the right to terminate GMAC as servicer of those Mortgage Loans
without cause and transfer the servicing to a third party. Should the Seller
choose to do so, the transfer must meet certain conditions set forth in the
Pooling and Servicing Agreement, including that the Seller must provide 30 days'
notice, the terminated Servicer must be reimbursed for any unreimbursed Monthly
Advances, Servicing Fees and any related expenses, and the replacement Servicer
must be qualified to service mortgage loans for Fannie Mae and Freddie Mac. Any
such successor must be reasonably acceptable to the Master Servicer and the
Seller shall have received prior confirmation from the Rating Agencies that the
transfer of the servicing of these Mortgage Loans will not result in a
downgrade, qualification or withdrawal of the then current rating of the
Certificates. The preceding sentence notwithstanding, the Seller shall not be
required to get a no-downgrade letter from the Rating Agencies if: (i) the
Rating Agencies received prior written notice of the transfer of the servicing
rights and the name of the successor Servicer, (ii) such successor Servicer has
a servicing rating in the highest category of Fitch or Moody's to the extent
that Fitch or Moody's, respectively, is a Rating Agency, and such successor
Servicer has a servicer evaluation ranking in one of the two highest categories
of S&P to the extent that S&P is a Rating Agency, and (iii) such successor
Servicer shall service the related Mortgage Loans under either the Purchase and
Servicing Agreement together with the related Assignment Agreement under which
such Mortgage Loans are currently being serviced or under another Servicing
Agreement together with a related Assignment Agreement that have already been
reviewed and approved by the Rating Agencies.

      As of the Cut-off Date, the Sponsor expects to transfer the servicing of
approximately 5.22% of the Group 1 Mortgage Loans from GMAC Mortgage Corporation
to Wells Fargo Bank, National Association shortly after the Closing Date.

                                   THE SPONSOR

      The Sponsor is Morgan Stanley Mortgage Capital Inc., a New York
corporation ("MSMC"). MSMC is the parent of the Depositor and an affiliate,
through common parent ownership, of Morgan Stanley Capital Services Inc. and of
Morgan Stanley & Co., one of the underwriters. Morgan Stanley Mortgage Capital
Inc., is an affiliate of the Depositor and an indirect wholly owned subsidiary
of Morgan Stanley (NYSE:MS). The executive offices of MSMC are located at 1585
Broadway, New York, New York 10036, telephone number (212) 761-4000. Morgan


                                      S-68



Stanley Mortgage Capital Inc. provides warehouse and repurchase financing to
mortgage lenders and purchases closed, first- and subordinate-lien residential
mortgage loans for securitization or resale, or for its own investment. MSMC
also originates commercial mortgage loans. MSMC does not currently service
loans. Instead, MSMC contracts with other entities (including its affiliate,
Morgan Stanley Credit Corp.) to service the loans on its behalf.

      MSMC acquires residential mortgage loans through bulk purchases and also
through purchases of single loans through MSMC's conduit loan purchase program.
The mortgage loans purchased through its conduit program generally conform to
its conduit origination standards.

      Prior to acquiring any residential mortgage loans, MSMC conducts a review
of the related mortgage loan seller that is based upon the credit quality of the
selling institution. MSMC's review process may include reviewing select
financial information for credit and risk assessment and conducting an
underwriting guideline review, senior level management discussion and/or
background checks. The scope of the loan due diligence varies based on the
credit quality of the mortgage loans.

      The underwriting guideline review entails a review of the mortgage loan
origination processes and systems. In addition, such review may involve a
consideration of corporate policy and procedures relating to state and federal
predatory lending, origination practices by jurisdiction, historical loan level
loss experience, quality control practices, significant litigation and/or
material investors.

      As mentioned above, MSMC currently contracts with its affiliate and with
third party servicers for servicing the mortgage loans that it originates or
acquires. Third party servicers are also assessed based upon the servicing
rating and the credit quality of the servicing institution. The servicers may be
reviewed for their systems and reporting capabilities, review of collection
procedures and confirmation of servicers' ability to provide loan-level data. In
addition, MSMC may conduct background checks, meet with senior management to
determine whether the servicer complies with industry standards or otherwise
monitor the servicer on an ongoing basis.

      MSMC has been the sponsor of securitizations backed by residential
mortgage loans, including prime and alt-a mortgage loans, since 2004. The
following table describes the approximate volume of prime and alt-a mortgage
loan securitizations (first-lien mortgage loans) sponsored by MSMC since 2004:

                     YEAR                  APPROXIMATE VOLUME
              -------------------     --------------------------
                     2004                    $7.44 billion
                     2005                    $7.51 billion

      As a sponsor, MSMC acquires mortgage loans and initiates their
securitization by transferring the mortgage loans to the Depositor or another
entity that acts in a similar capacity as the Depositor, which loans will
ultimately be transferred to the Issuing Entity for the related securitization.
In coordination with Morgan Stanley & Co. Incorporated, MSMC works with rating
agencies, loan sellers and servicers in structuring the securitization
transaction.

                             STATIC POOL INFORMATION

      Information concerning the Sponsor's prior residential mortgage loan
securitizations involving fixed- and adjustable-rate mortgage loans secured by
first-mortgages or deeds of trust in residential real properties issued by the
Depositor is available on the internet at
http://www.morganstanley.com/institutional/abs_spi/Prime_AltA.html. On this
website, you can view for each of these securitizations, summary pool
information as of the applicable securitization cut-off date and delinquency,
cumulative loss, and prepayment information as of each distribution date by
securitization for the past two years, or since the applicable securitization
closing date if the applicable securitization closing date occurred less than
two years from the date of this prospectus supplement. These prior transactions
include, among other transactions, prior securitizations of the sponsor of
mortgage loans purchased from the Originators. Each of the mortgage loan
securitizations identified on this website is unique, and the characteristics of
each securitized mortgage loan pool varies from each other as well as from the
mortgage loans to


                                      S-69



be included in the Issuing Entity. 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 mortgage loan
securitizations is likely not to be indicative of the future performance of the
mortgage loans to be included in the Issuing Entity.

      In the event any changes or updates are made to the information available
on the website, the Depositor will provide to any person a copy of the
information as it existed as of the date of this prospectus supplement upon
request who writes or calls the Depositor at 1585 Broadway, New York, New York
10036, Attention: Prospectus Department, telephone number (212) 761-4000.

      The information available on the website relating to any mortgage loan
securitizations issued prior to January 1, 2006 is not deemed to be part of this
prospectus supplement, the accompanying prospectus or the Depositor's
registration statement.

                                  THE DEPOSITOR

      Morgan Stanley Capital I Inc., the Depositor, is an affiliate, through
common parent ownership, of the Sponsor, Morgan Stanley Capital Services Inc.
(the Corridor Contract Counterparty) and Morgan Stanley & Co. Incorporated, and
is a direct, wholly-owned subsidiary of Morgan Stanley (NYSE:MS) and was
incorporated in the State of Delaware on January 28, 1985. The principal
executive offices of Morgan Stanley Capital I Inc. are located at 1585 Broadway,
37th Floor, New York, New York 10036. Its telephone number is (212) 761-4000.

      Morgan Stanley Capital I Inc. does not have, nor is it expected in the
future to have, any significant assets.

      The Depositor has been engaged since its incorporation in the
securitization of loans and other asset types included within the description of
the assets of the Issuing Entity in this prospectus. The Depositor is engaged in
the business of acting as Depositor of trusts that issue series of certificates
that represent interests in, the assets of the Issuing Entity. The Depositor
acquires assets specifically for inclusion in a securitization from the sellers
in privately negotiated transactions.

      The certificate of incorporation of the Depositor limits its activities to
those necessary or convenient to carry out its securitization activities. The
Depositor will have limited obligations with respect to a series of
certificates. The Depositor will obtain representations and warranties from the
Sponsor or other sellers or originators regarding the loans or other assets of
the Issuing Entity. The Depositor will also assign to the Trustee for the
related series the Depositor's rights with respect to those representations and
warranties. In addition, after the issuance of a series of certificates, the
Depositor may have limited obligations with respect to that series which may
include making filings necessary to maintain the perfected status of a Trustee's
securities interest or lien on the related assets, appointing a successor Master
Servicer, Securities Administrator or other transaction participant that resigns
or is otherwise removed and preparation of reports filed under the Exchange Act.

      Neither the Depositor nor any of the Depositor's affiliates will insure or
guarantee distributions on the certificates of any series.

                               THE ISSUING ENTITY

      Morgan Stanley Mortgage Loan Trust 2006-3AR, the Issuing Entity, will be
formed on the closing date pursuant to the Pooling and Servicing Agreement. The
Issuing Entity will be a New York common law trust with no officers or directors
and no continuing duties other than to hold and service the mortgage loans and
related assets and issue the certificates. The fiscal year end for the Issuing
Entity will be December 31, commencing with December 31, 2006.

      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,


                                      S-70



or incur any liabilities, other than those described in this prospectus
supplement. Since 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.

      Since 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 or not the Issuing Entity would
be characterized as a "business trust."

                                   THE TRUSTEE

      LaSalle Bank National Association will be the Trustee and a Custodian
under the Pooling and Servicing Agreement. LaSalle Bank National Association is
a national banking association formed under the federal laws of the United
States of America. Its parent company, LaSalle Bank Corporation, is a subsidiary
of ABN AMRO Bank N.V., a Netherlands banking corporation. LaSalle has extensive
experience serving as Trustee on securitizations of residential mortgage loans.
Since January 1994, LaSalle has served as Trustee or paying agent on over 358
residential mortgage-backed security transactions involving assets similar to
the mortgage loans. As of January 1, 2006, LaSalle's portfolio of residential
mortgage-backed security transactions for which it serves as Trustee numbers 281
with an outstanding certificate balance of approximately $82.7 billion. The
Depositor and Master Servicer may maintain other banking relationships in the
ordinary course of business with the Trustee. The Trustee's corporate trust
office is located at 135 South LaSalle Street, Suite 1625, Chicago, Illinois,
60603. Attention: Global Securities and Trust Services - MSM 2006-3AR or at such
other address as the Trustee may designate from time to time.

      In its capacity as Custodian, LaSalle will hold the mortgage loan files
exclusively for the use and benefit of the trust. The Custodian will not have
any duty or obligation to inspect, review or examine any of the documents,
instruments, certificates or other papers relating to the mortgage loans
delivered to it to determine that the same are valid. The disposition of the
mortgage loan files will be governed by the Pooling and Servicing Agreement.
LaSalle provides custodial services on over 1000 residential, commercial and
asset-backed securitization transactions and maintains almost 2.5 million
custodial files in its two vault locations in Elk Grove, Illinois and Irvine,
California. LaSalle's two vault locations can maintain a total of approximately
6 million custody files. All custody files are segregated and maintained in
secure and fire resistant facilities in compliance with customary industry
standards. The vault construction complies with Fannie Mae/Ginnie Mae guidelines
applicable to document custodians. LaSalle maintains disaster recovery protocols
to ensure the preservation of custody files in the event of force majeure and
maintains, in full force and effect, such fidelity bonds and/or insurance
policies as are customarily maintained by banks which act as custodians. LaSalle
uses unique tracking numbers for each custody file to ensure segregation of
collateral files and proper filing of the contents therein and accurate file
labeling is maintained through a monthly quality assurance process. LaSalle uses
a licensed collateral review system to track and monitor the receipt and
movement internally or externally of custody files and any release or
reinstatement of collateral.

      LaSalle Bank National Association and Morgan Stanley Mortgage Capital Inc.
("MSMC") are parties to a custodial agreement whereby LaSalle, for
consideration, provides custodial services to MSMC for certain residential
mortgage loans purchased by it. Pursuant to this custodial agreement, LaSalle is
currently providing custodial services for most of the mortgage loans to be sold
by MSMC to the Depositor in connection with this securitization. The terms of
the custodial agreement are customary for the residential mortgage-backed
securitization industry providing for the delivery, receipts, review and
safekeeping of mortgage loan files.


                                      S-71



                THE MASTER SERVICER AND SECURITIES ADMINISTRATOR

      Wells Fargo Bank, National Association ("WELLS FARGO") will act as
Securities Administrator and Master Servicer under the Pooling and Servicing
Agreement. Wells Fargo is a national banking association and a wholly-owned
subsidiary of Wells Fargo & Company. A diversified financial services company
with approximately $397 billion in assets, 24 million customers and 143,000
employees, Wells Fargo & Company is a U.S. bank holding company, providing
banking, insurance, trust, mortgage and consumer finance services throughout the
United States and internationally. Wells Fargo provides retail and commercial
banking services and corporate trust, custody, securities lending, securities
transfer, cash management, investment management and other financial and
fiduciary services. The Depositor, the Sponsor and the Servicers may maintain
banking and other commercial relationships with Wells Fargo and its affiliates.
Wells Fargo's principal corporate trust offices are located at 9062 Old
Annapolis Road, Columbia, Maryland 21045-1951 and its office for certificate
transfer services is located at Sixth Street and Marquette Avenue, Minneapolis,
Minnesota 55479.

      Securities Administrator. Under the terms of the Pooling and Servicing
Agreement, Wells Fargo is responsible for securities administration, which
includes pool performance calculations, distribution calculations and the
preparation and filing of monthly distribution reports. As Securities
Administrator, Wells Fargo is responsible for the preparation of all REMIC tax
returns on behalf of the Issuing Entity and the preparation of monthly reports
on Form 10-D in regards to distribution and pool performance information and
annual reports on Form 10-K that are required to be filed with the Securities
and Exchange Commission on behalf of the Issuing Entity. Wells Fargo has been
engaged in the business of securities administration since June 30, 1995. As of
November 30, 2005, Wells Fargo was acting as Securities Administrator with
respect to more than $700,000,000,000 of outstanding residential mortgage-backed
securities.

      Master Servicer. Wells Fargo acts as Master Servicer pursuant to the
Pooling and Servicing Agreement. The Master Servicer is responsible for the
aggregation of monthly Servicer reports and remittances and for the oversight of
the performance of the Servicers under the terms of their respective underlying
servicing agreements. In particular, the Master Servicer independently
calculates monthly loan balances based on servicer data, compares its results to
servicer loan-level reports and reconciles any discrepancies with the servicers.
The Master Servicer also reviews the servicing of defaulted loans for compliance
with the terms of the Pooling and Servicing Agreement. In addition, upon the
occurrence of certain Servicer events of default under the terms of any
underlying servicing agreement, the Master Servicer may be required to enforce
certain remedies on behalf of the Issuing Entity against such defaulting
Servicer. Wells Fargo has been engaged in the business of master servicing since
June 30, 1995. As of November 30, 2005, Wells Fargo was acting as Master
Servicer for approximately 940 series of residential mortgage-backed securities
with an aggregate outstanding principal balance of approximately
$428,268,679,337.

      The Master Servicer will not be ultimately responsible for the performance
of the servicing activities by a Servicer under its supervision as Master
Servicer, except as described under "Servicing of the Mortgage Loans--Servicing
Compensation and Payment of Expenses; Master Servicing Compensation;
Administrative Fees," "--Adjustment to Servicing Fees in Connection with Certain
Prepaid Mortgage Loans" and "--Advances" above.

      In particular, upon the failure of any Servicer to make a required advance
of delinquent monthly payments on the Mortgage Loans serviced by it, the Master
Servicer will be required to terminate that defaulting Servicer and to make such
advance to the extent that the Master Servicer determines that such advance is
recoverable from subsequent payments or recoveries on the related Mortgage Loan.

      Wells Fargo may also act as a custodian with respect to the mortgage files
related to certain of the mortgage loans owned by the Issuing Entity pursuant to
a custodial agreement. In that capacity, Wells Fargo Bank is responsible to hold
and safeguard the mortgage notes and other contents of the mortgage files on
behalf of the Trustee and the Certificateholders. Wells Fargo Bank maintains
each mortgage loan file is a separate file folder marked with a unique bar code
to assure loan-level file integrity and to assist in inventory management. Files
are segregated by transaction or investor. Wells Fargo Bank has been engaged in
the mortgage document custody business for more than 25 years. Wells Fargo Bank
maintains document custody facilities in its Minneapolis, Minnesota headquarters
and in three regional offices located in Richfield, Minnesota, Irvine,
California, and Salt Lake City, Utah. Wells Fargo Bank maintains mortgage
custody vaults in each of those locations with an aggregate


                                      S-72



capacity of over eleven million files. As of November 30, 2005, Wells Fargo Bank
was acting as custodian on more than nine million files.

      Wells Fargo serves or has served within the past two years as loan file
custodian for various mortgage loans owned by the Sponsor or an affiliate of the
Sponsor and anticipates that one or more of those mortgage loans may be included
in the assets of the Issuing Entity. The terms of the custodial agreement under
which those services are provided by Wells Fargo are customary for the
mortgage-backed securitization industry and provide for the delivery, receipt,
review and safekeeping of mortgage loan files.

                                 THE CUSTODIANS

      LaSalle Bank National Association, JPMorgan Chase Bank, National
Association and Wells Fargo Bank, National Association (each, a "CUSTODIAN" and
together, the "CUSTODIANS") will each act as a Custodian of the mortgage loan
files. JPMorgan Chase Bank, National Association and Wells Fargo Bank, National
Association will each as a Custodian under their respective custody agreement.
LaSalle Bank National Association will act as a Custodian pursuant to the
Pooling and Servicing Agreement.

      The principal executive office of LaSalle Bank National Association is
located at 2571 Busse Road, Suite 200, Elkgrove Village, Illinois 60007, and its
telephone number is (847) 766-6429.

      The principal executive office of JPMorgan Chase Bank, National
Association is located at 1111 Fannin Street, 12th Floor, Houston, Texas 77002,
and its telephone number is (713) 427-6401.

      The principal executive office of Wells Fargo Bank, National Association
is located at 24 Executive Park, Suite 100, Irvine, California 92614, and its
telephone number is (949) 757-5100.

      Each of the above Custodians will act as custodian of the mortgage loan
files pursuant to their respective custody agreement. The Custodians will be
responsible to hold and safeguard the mortgage notes and other contents of the
mortgage files on behalf of the certificateholders. The Custodians segregates
files for which they act as custodian by boarding each file in an electronic
tracking system, which identifies the owner of the file and the file's specific
location in the Custodians' vault.

                         DESCRIPTION OF THE CERTIFICATES

GENERAL

      On or about February 28, 2006 (the "CLOSING DATE"), the Certificates will
be issued pursuant to the Pooling and Servicing Agreement. Set forth below are
summaries of the specific terms and provisions of the Pooling and Servicing
Agreement. The following summaries 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 herein by reference.

SENIOR CERTIFICATES

The Morgan Stanley Mortgage Loan Trust 2006-3AR, Mortgage Pass-Through
Certificates, Series 2006-3AR will include the following eleven Classes of
Certificates (the "SENIOR CERTIFICATES") which are offered hereby:


                                      S-73



o     Class 1-A-1 Certificates;

o     Class 1-A-2 Certificates;

o     Class 1-A-3 Certificates;

o     Class 1-A-X Certificates;

o     Class 2-A-1 Certificates;

o     Class 2-A-2 Certificates;

o     Class 2-A-3 Certificates;

o     Class 2-A-4 Certificates;

o     Class 3-A-1 Certificates;

o     Class 3-A-2 Certificates; and

o     Class A-R Certificates.

SUBORDINATED CERTIFICATES

      In addition to the Senior Certificates, the Morgan Stanley Mortgage Loan
Trust 2006-3AR, Mortgage Pass-Through Certificates, Series 2006-3AR, will also
include the following twenty-three Classes of Subordinated Certificates (the
"SUBORDINATED CERTIFICATES"):

The Subordinated Certificates related to Loan Group 1 (which are together the
"GROUP 1 SUBORDINATED CERTIFICATES") will include

            (a) the Class 1-M-X Certificates, which are entitled to receive
      distributions of interest before all other Classes of Group 1 Subordinated
      Certificates,

            (b) the Class 1-M-1 Certificates, which are subordinate to the Group
      1 Senior Certificates,

            (c) the Class 1-M-2 Certificates, which are subordinate to the Group
      1 Senior Certificates and the Class 1-M-1 Certificates,

            (d) the Class 1-M-3 Certificates, which are subordinate to the Group
      1 Senior Certificates and the Class 1-M-1 and Class 1-M-2 Certificates,

            (e) the Class 1-M-4 Certificates, which are subordinate to the Group
      1 Senior Certificates and the Class 1-M-1, Class 1-M-2 and Class 1-M-3
      Certificates,

            (f) the Class 1-M-5 Certificates, which are subordinate to the Group
      1 Senior Certificates and the Class 1-M-1, Class 1-M-2, Class 1-M-3 and
      Class 1-M-4 Certificates,

            (g) the Class 1-M-6 Certificates, which are subordinate to the Group
      1 Senior Certificates and the Class 1-M-1, Class 1-M-2, Class 1-M-3, Class
      1-M-4 and Class 1-M-5 Certificates,

            (h) the Class 1-M-7 Certificates, which are subordinate to the Group
      1 Senior Certificates and the Class 1-M-1, Class 1-M-2, Class 1-M-3, Class
      1-M-4, Class 1-M-5 and Class 1-M-6 Certificates,

            (i) the Class 1-M-8 Certificates, which are subordinate to the Group
      1 Senior Certificates and the Class 1-M-1, Class 1-M-2, Class 1-M-3, Class
      1-M-4, Class 1-M-5, Class 1-M-6 and Class 1-M-7 Certificates,

            (j) the Class 1-M-9 Certificates, which are subordinate to the Group
      1 Senior Certificates and the Class 1-M-1, Class 1-M-2, Class 1-M-3, Class
      1-M-4, Class 1-M-5, Class 1-M-6, Class 1-M-7 and Class 1-M-8 Certificates,

            (k) the Class 1-B-1 Certificates, which are subordinate to the Group
      1 Senior Certificates and the Class 1-M-1, Class 1-M-2, Class 1-M-3, Class
      1-M-4, Class 1-M-5, Class 1-M-6, Class 1-M-7, Class 1-M-8 and Class 1-M-9
      Certificates,

            (l) the Class 1-B-2 Certificates, which are subordinate to the Group
      1 Senior Certificates, the Class 1-M-1, Class 1-M-2, Class 1-M-3, Class
      1-M-4, Class 1-M-5, Class 1-M-6, Class 1-M-7, Class 1-M-8, Class 1-M-9 and
      Class 1-B-1 Certificates,


                                      S-74



            (m) the Class 1-B-3 Certificates, which are subordinate to the Group
      1 Senior Certificates, the Class 1-M-1, Class 1-M-2, Class 1-M-3, Class
      1-M-4, Class 1-M-5, Class 1-M-6, Class 1-M-7, Class 1-M-8 and Class 1-M-9,
      Class 1-B-1 and Class 1-B-2 Certificates, and

            (n) the Class 1-B-4 Certificates, which are subordinate to the Group
      1 Senior Certificates, the Class 1-M-1, Class 1-M-2, Class 1-M-3, Class
      1-M-4, Class 1-M-5, Class 1-M-6, Class 1-M-7, Class 1-M-8, Class 1-M-9,
      Class 1-B-1, Class 1-B-2 and Class 1-B-3 Certificates.

The Subordinated Certificates related to Aggregate Loan Group II (which are
together the "AGGREGATE GROUP II SUBORDINATED CERTIFICATES") will include

            (a) the Class M-1 Certificates, which are subordinate to the Group 2
      and Group 3 Senior Certificates,

            (b) the Class M-2 Certificates, which are subordinate to the Group 2
      and Group 3 Senior Certificates and the Class M-1 Certificates,

            (c) the Class M-3 Certificates, which are subordinate to the Group 2
      and Group 3 Senior Certificates and the Class M-1 and Class M-2
      Certificates,

            (d) the Class M-4 Certificates, which are subordinate to the Group 2
      and Group 3 Senior Certificates and the Class M-1, Class M-2 and Class M-3
      Certificates,

            (e) the Class M-5 Certificates, which are subordinate to the Group 2
      and Group 3 Senior Certificates and the Class M-1, Class M-2, Class M-3
      and Class M-4 Certificates,

            (f) the Class M-6 Certificates, which are subordinate to the Group 2
      and Group 3 Senior Certificates and the Class M-1, Class M-2, Class M-3,
      Class M-4 and Class M-5 Certificates,

            (g) the Class B-1 Certificates, which are subordinate to the Group 2
      and Group 3 Senior Certificates and the Class M-1, Class M-2, Class M-3,
      Class M-4, Class M-5 and Class M-6 Certificates,

            (h) the Class B-2 Certificates, which are subordinate to the Group 2
      and Group 3 Senior Certificates and the Class M-1, Class M-2, Class M-3,
      Class M-4, Class M-5, Class M-6 and Class B-1 Certificates, and

            (i) the Class B-3 Certificates, which are subordinate to the Group 2
      and Group 3 Senior Certificates and the Class M-1, Class M-2, Class M-3,
      Class M-4, Class M-5, Class M-6, Class B-1 and Class B-2 Certificates.

CLASS P CERTIFICATES

      In addition to the Senior Certificates and the Subordinated Certificates,
the Morgan Stanley Mortgage Loan Trust 2006-3AR will also issue the Class P-1
and Class P-2 Certificates, which are together referred to in this prospectus
supplement as the "CLASS P CERTIFICATES." Each class of Class P Certificates
will have an initial certificate principal balance of $100 and will not be
entitled to distributions in respect of interest. The Class P-1 Certificates
will be entitled to all prepayment charges received in respect of all of the
Group 1 Mortgage Loans. The Class P-2 Certificates will be entitled to all
prepayment charges received in respect of all of the Aggregate Group II Mortgage
Loans. Such amounts will not be available for distribution to the Holders of the
Offered Certificates.

CLASS C CERTIFICATES

      In addition to the Senior Certificates, the Subordinated Certificates and
the Class P Certificates, the Morgan Stanley Mortgage Loan Trust 2006-3AR will
also issue the Class C Certificates. The Class C Certificates will have an
initial certificate principal balance of $100 and will not be entitled to
distributions in respect of interest. The Class C Certificates will be entitled
to receive the excess proceeds, if any, of an auction of the Mortgage Loans.
Such amounts will not be available for distribution to the Holders of the
Offered Certificates.


                                      S-75



      All Classes of Subordinated Certificates, other than the Class 1-B-1,
Class 1-B-2, Class 1-B-3, Class 1-B-4, Class B-1, Class B-2 and Class B-3
Certificates, and the Class P-1, Class P-2 and Class C Certificates (together,
the "PRIVATELY OFFERED CERTIFICATES"), are offered by this prospectus
supplement. The Privately Offered Certificates are not offered under this
prospectus supplement. Accordingly, the description of the Privately Offered
Certificates provided in this prospectus supplement is solely for informational
purposes.

DESIGNATIONS

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

o   The Class 1-A-1, Class 1-A-2, Class 1-A-3 and Class 1-A-X Certificates are
    referred to as the "GROUP 1 SENIOR CERTIFICATES."

o   The Class 2-A-1, Class 2-A-2, Class 2-A-3, Class 2-A-4 and Class A-R
    Certificates are referred to as the "GROUP 2 SENIOR CERTIFICATES."

o   The Class 3-A-1 and Class 3-A-2 Certificates are referred to as the "GROUP 3
    SENIOR CERTIFICATES."

o   The Group 2 and Group 3 Senior Certificates are together referred to as the
    "AGGREGATE GROUP II SENIOR CERTIFICATES."

o   The Group 1 Senior Certificates, Group 2 Senior Certificates and Group 3
    Senior Certificates are each referred to as a "SENIOR CERTIFICATE GROUP."

o   The Group 1 Subordinated Certificates and the Aggregate Group II
    Subordinated Certificates are each referred to as an "AGGREGATE SUBORDINATED
    CERTIFICATE GROUP."

o   The Group 1 Senior Certificates and the Group 1 Subordinated Certificates
    are together referred to as the "GROUP 1 CERTIFICATES."

o   The Aggregate Group II Senior Certificates and the Aggregate Group II
    Subordinated Certificates are together referred to as the "AGGREGATE GROUP
    II CERTIFICATES."

o   Each group of the Group 1 Certificates and the Aggregate Group II
    Certificates are referred to as an "AGGREGATE CERTIFICATE GROUP."

o   The Class 1-A-1, Class 1-A-2, Class 1-A-3, Class 1-M-1, Class 1-M-2, Class
    1-M-3, Class 1-M-4, Class 1-M-5, Class 1-M-6, Class 1-M-7, Class 1-M-8 and
    Class 1-M-9 Certificates are also referred to as the "LIBOR CERTIFICATES."

o   The Class 1-M-1, Class 1-M-2, Class 1-M-3, Class 1-M-4, Class 1-M-5, Class
    1-M-6, Class 1-M-7, Class 1-M-8 and Class 1-M-9 Certificates are referred to
    as the "CLASS 1-M CERTIFICATES."

o   The Class 1-B-1, Class 1-B-2, Class 1-B-3 and Class 1-B-4 Certificates are
    referred to as the "CLASS 1-B CERTIFICATES."

o   The Class M-1, Class M-2, Class M-3, Class M-4, Class M-5 and Class M-6
    Certificates are referred to as the "CLASS M CERTIFICATES."

o   The Class B-1, Class B-2 and Class B-3 Certificates are referred to as the
    "CLASS B CERTIFICATES."

o   The Class 1-A-X and Class 1-M-X Certificates are also referred to as the
    "NOTIONAL AMOUNT CERTIFICATES."

o   The Class A-R Certificates are also referred to as the "RESIDUAL
    CERTIFICATES."


                                      S-76



      The Offered Certificates will be issued by the Issuing Entity in the
initial Class Principal Balances and initial Notional Amounts set forth set
forth on page v in the table under "The Series 2006-3AR Certificates." The
Privately Offered Certificates will be issued in the approximate initial Class
Principal Balances set forth on page vi of this prospectus supplement. The
initial Class Principal Balances and initial Notional Amounts of each Class of
Certificates may be increased or decreased by up to 5% to the extent that the
Stated Principal Balance of the Mortgage Loans is increased or decreased as
described at "Description of the Mortgage Loans."

      The "CLASS PRINCIPAL BALANCE" of any Class of Certificates (other than the
Notional Amount Certificates) as of any Distribution Date is the initial Class
Principal Balance of the Class listed on pages v and vi of this prospectus
supplement reduced by the sum of:

      o   all amounts previously distributed to holders of Certificates of the
          Class as payments of principal, and

      o   the amount of Realized Losses (including Excess Losses) allocated to
          the Class;

provided, however, that the Class Principal Balance of each Class of
Certificates to which Realized Losses have been allocated will be increased,
sequentially in the order of payment priority, by the amount of Subsequent
Recoveries on the related Mortgage Loans distributed as principal to any related
Class of Certificates, but not by more than the amount of Realized Losses
previously allocated to reduce the Class Principal Balance of such Class of
Certificates.

      In addition, the Class Principal Balance of the Class of Subordinated
Certificates in an Aggregate Subordinated Certificate Group then outstanding
with the lowest priority of payment will be reduced if and to the extent that
the aggregate Class Principal Balance of all Classes of Certificates in the
related Aggregate Certificate Group, following all distributions and the
allocation of Realized Losses on the Mortgage Loans in the related Aggregate
Loan Group II on any Distribution Date exceeds the aggregate Stated Principal
Balance of the Mortgage Loans in the related Aggregate Loan Group II as of the
Due Date occurring in the month of the Distribution Date.

      The Notional Amount Certificates do not have Class Principal Balances and
are not entitled to any distributions in respect of principal of the Mortgage
Loans.

      The initial Class Principal Balance of each of the Class P-1, Class P-2
and Class C Certificates is equal to $100. The Pooling and Servicing Agreement
does not permit the allocation of Realized Losses to either class of Class P
Certificates or the Class C Certificates.

      The Group 1 Senior Certificates will evidence in the aggregate an initial
beneficial ownership interest in the Mortgage Loans in Loan Group 1 of
approximately 93.75% and the Aggregate Group II Senior Certificates will
evidence in the aggregate an initial beneficial ownership interest in the
Mortgage Loans in Loan Group II of approximately 92.25%. The initial beneficial
ownership of each Class of Subordinated Certificates in the related Aggregate
Loan Group is approximately as follows:


                                      S-77



THE GROUP 1                                                          BENEFICIAL
SUBORDINATED CERTIFICATES                                             INTEREST
-------------------------------                                     ------------
Class 1-M-1......................................................      1.55%
Class 1-M-2......................................................      0.70%
Class 1-M-3......................................................      0.55%
Class 1-M-4......................................................      0.50%
Class 1-M-5......................................................      0.40%
Class 1-M-6......................................................      0.30%
Class 1-M-7......................................................      0.30%
Class 1-M-8......................................................      0.35%
Class 1-M-9......................................................      0.20%
Class 1-B-1......................................................      0.15%
Class 1-B-2......................................................      0.35%
Class 1-B-3......................................................      0.55%
Class 1-B-4......................................................      0.35%

THE AGGREGATE GROUP II                                               BENEFICIAL
SUBORDINATED CERTIFICATES                                             INTEREST
-------------------------------                                     ------------
Class M-1........................................................      3.00%
Class M-2........................................................      0.65%
Class M-3........................................................      1.00%
Class M-4........................................................      0.40%
Class M-5........................................................      0.60%
Class M-6........................................................      0.30%
Class B-1........................................................      0.45%
Class B-2........................................................      0.80%
Class B-3........................................................      0.55%

      Distributions of interest and principal on the Subordinated Certificates
in each Aggregate Certificate Group will be based on interest and principal, as
applicable, received on, or advanced with respect to, all of the Mortgage Loans
in the related Aggregate Loan Group. There is no cross-collateralization between
the certificates in each Aggregate Certificate Group.

NOTIONAL AMOUNT CERTIFICATES

      The Class 1-A-X and Class 1-M-X Certificates are Notional Amount
Certificates.

      The "NOTIONAL AMOUNT" of the Class 1-A-X Certificates for the interest
accrual period related to any Distribution Date will be equal to the aggregate
Class Principal Balance of the Class 1-A-1, Class 1-A-2 and Class 1-A-3
Certificates immediately prior to the Distribution Date. The initial Notional
Amount of the Class 1-A-X Certificates is approximately $367,783,000 (subject to
the permitted variance described in this prospectus supplement).

      The Notional Amount of the Class 1-M-X Certificates for the interest
accrual period related to any Distribution Date will be equal to the aggregate
Class Principal Balance of the Class 1-M Certificates immediately prior to the
Distribution Date. The initial Notional Amount of the Class 1-M-X Certificates
is approximately $19,027,000 (subject to the permitted variance described in
this prospectus supplement).

FORMS AND DENOMINATIONS OF OFFERED CERTIFICATES; DISTRIBUTIONS TO CERTIFICATES

      The Offered Certificates, other than the Class A-R Certificates, will be
issued in book-entry form as described below. The Offered Certificates will be
issued in the minimum dollar denominations described in the table below, except
that one Certificate of each Class may be issued in a different denomination.


                                      S-78



                                      ORIGINAL         MINIMUM
            CLASS                CERTIFICATE FORM   DENOMINATION   DENOMINATION
-------------------------------  ----------------   ------------   ------------
Offered Certificates
(other than the Notional Amount
Certificates and Class A-R
Certificates)                        Book-Entry        $25,000         $1,000

Notional Amount Certificates         Book-Entry        $100,000        $1,000

Class A-R Certificates                Physical           $100           N/A

      Distributions on the Certificates will be made by the Securities
Administrator, on behalf of 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 March 2006 (each, a "DISTRIBUTION DATE"), to the persons in whose names such
Certificates are registered on the applicable Record Date. For this purpose, a
"BUSINESS DAY" is any day other than (i) a Saturday or Sunday, or (ii) a day on
which banking institutions in the City of New York, New York, the states of
Maryland or Minnesota or the city in which the Corporate Trust Office of the
Trustee is located are authorized or obligated by law or executive order to be
closed. The "RECORD DATE" for the LIBOR Certificates and any Distribution Date
will be the Business Day immediately preceding that Distribution Date, or if the
LIBOR Certificates are no longer Book-Entry Certificates, the Record Date will
be the last Business Day of the calendar month preceding the month of that
Distribution Date. For each other Class of Offered Certificates and any
Distribution Date, the Record Date will be the last Business Day of the calendar
month immediately prior to the month in which that Distribution Date occurs.

      On each Distribution Date distributions on the Certificates will be made
by check mailed to the address of the holder of the certificate (the
"CERTIFICATEHOLDER") entitled thereto as it appears on the applicable
certificate register or, in the case of a Certificateholder who holds the Class
A-R Certificate or who holds Certificates with an aggregate initial Class
Principal Balance of $1,000,000 or more or who holds a Notional Amount
Certificate and who has so notified the Securities Administrator 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 payment in retirement of the Certificates will
be made only upon presentment and surrender of such Certificates at the
Corporate Trust Office of the Securities Administrator. See "--Book-Entry
Certificates" below for the method of payment to beneficial owners of Book-Entry
Certificates.

BOOK-ENTRY CERTIFICATES

      The Offered Certificates of each Class, other than the Class A-R
Certificates, will be issued as "BOOK-ENTRY CERTIFICATES." Persons acquiring
beneficial ownership interests in the offered certificates will hold
certificates through The Depository Trust Company ("DTC") or indirectly through
organizations which are participants in that system. The book-entry certificates
of each Class will be issued in one or more certificates which equal the
aggregate Certificate Principal Balance or Notional Amount of that class and
will initially be registered in the name of Cede & Co., the nominee of DTC.
Except as described below, no person acquiring a book-entry certificate will be
entitled to receive a physical 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. Beneficial
owners will not be Certificateholders as that term is used in the Pooling and
Servicing Agreement. Beneficial owners are only permitted to exercise their
rights indirectly through DTC and participants of DTC.

      The beneficial 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 that maintains the beneficial owner's account for that
purpose. In turn, the financial intermediary's ownership of the 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 beneficial owner's financial
intermediary is not a DTC participant.


                                      S-79



      Beneficial owners will receive all distributions of principal of and
interest on the book-entry certificates from the Securities Administrator
through DTC and the participants of DTC. While the book-entry certificates are
outstanding, except under the circumstances described below, under the rules,
regulations and procedures creating and affecting DTC and its operations, DTC is
required to make book-entry transfers among the DTC participants on whose behalf
it acts with respect to the book-entry certificates and is required to receive
and transmit distributions of principal of, and interest on, the book-entry
certificates. Participants and indirect participants of DTC with whom beneficial
owners have accounts with respect to book-entry certificates are similarly
required to make book-entry transfers and receive and transmit the distributions
on behalf of their respective beneficial owners. Accordingly, although
beneficial owners will not possess certificates representing their respective
interests in the book-entry certificates, the rules of DTC provide a mechanism
by which beneficial owners will receive distributions and will be able to
transfer their interest.

      Certificateholders will not receive or be entitled to receive certificates
representing their respective interests in the book-entry certificates, except
under the limited circumstances described below. Unless and until Definitive
Certificates are issued, Certificateholders who are not participants of DTC may
transfer ownership of book-entry certificates only through participants of DTC
and indirect participants of DTC by instructing the participants and indirect
participants to transfer book-entry certificates, by book-entry transfer,
through DTC for the account of the purchasers of the book-entry certificates,
which account is maintained with their respective participants of DTC. Under the
rules of DTC 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 of DTC will make debits or
credits, as the case may be, on their records on behalf of the selling and
purchasing Certificateholders.

      For information with respect to tax documentation procedures relating to
the certificates, see "Federal Income Tax Consequences--REMICs-Taxation of
Owners of REMIC Regular Certificates" in the accompanying prospectus.

      Transfers between participants of DTC will occur in accordance with DTC
rules.

      In accordance with its normal procedures, DTC is expected to record the
positions held by each DTC 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 rules of
DTC, as in effect from time to time.

      Distributions on the book-entry certificates will be made on each
Distribution Date by the Securities Administrator to Cede & Co., as nominee of
DTC. DTC will be responsible for crediting the amount of such payments to the
accounts of the applicable DTC participants in accordance with DTC's normal
procedures. Each DTC participant will be responsible for disbursing such
payments to the beneficial owners of the book-entry certificates that it
represents and to each financial intermediary for which it acts as agent. Each
financial intermediary will be responsible for disbursing funds to the
beneficial owners of the book-entry certificates that it represents.

      Under a book-entry format, beneficial owners of the book-entry
certificates may experience some delay in their receipt of payments, since such
payments will be forwarded by the Securities Administrator to Cede & Co. Because
DTC can only act on behalf of DTC participants, the ability of a beneficial
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
the book-entry certificates, may be limited due to the lack of physical
certificates for the book-entry certificates. In addition, issuance of the
book-entry certificates in book-entry form may reduce the liquidity of those
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 relating to the Issuing Entity will be provided
to Cede & Co., as nominee of DTC. These reports may be made available by Cede &
Co. to beneficial owners upon request, in accordance with the rules, regulations
and procedures creating and affecting the DTC participants to whose DTC accounts
the book-entry certificates of such beneficial owners are credited.


                                      S-80



      DTC has advised the Securities Administrator 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 the book-entry certificates. DTC may take actions, at the
direction of the related participants of DTC, 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 beneficial owners of the
book-entry certificates, or their nominees, rather than to DTC, only if:

      (1)   DTC or the Depositor advises the Trustee or Securities
Administrator 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 certificates and the Depositor is unable to locate a qualified
successor; or

      (2)   beneficial owners having percentage interests aggregating not less
than 51% of the book-entry certificates advise the Trustee or Securities
Administrator and DTC through the financial intermediaries and the DTC
participants 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 immediately
preceding paragraph, the Securities Administrator will be required to notify all
beneficial owners of the occurrence of the event and the availability through
DTC of Definitive Certificates. Upon surrender by DTC of the certificates
representing the book-entry certificates and instructions for re-registration,
the Securities Administrator will issue Definitive Certificates. The Securities
Administrator will then recognize the holders of the Definitive Certificates as
Certificateholders under the Pooling and Servicing Agreement.

      Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of book-entry certificates among participants of DTC, it is under no
obligation to perform or continue to perform such procedures and such procedures
may be discontinued at any time.

      None of the Depositor, the Master Servicer, the Servicers, the Securities
Administrator or the Trustee will have any responsibility for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of the book-entry certificates held by Cede & Co., as nominee for DTC,
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests or the transfer thereof.

PHYSICAL CERTIFICATES

      The Residual Certificates will be issued in fully-registered, certificated
form. The Residual Certificates will be transferable and exchangeable on a
certificate register to be maintained at the Corporate Trust Office of the
Securities Administrator. Under the Pooling and Servicing Agreement, the
Securities Administrator will be required to maintain, or cause to be
maintained, a register of certificates. No service charge will be made for any
registration of transfer or exchange of the Residual Certificates but payment of
a sum sufficient to cover any tax or other governmental charge may be required
by the Securities Administrator. The Residual Certificates will be subject to
certain restrictions on transfer. See "Material Federal Income Tax
Consequences--The Class A-R Certificates," and "ERISA Matters" below.

      Distributions of principal and interest, if any, on each Distribution Date
on the Residual Certificates will be made to the persons in whose names such
certificates are registered at the close of business on the Record Date.
Distributions will be made by check or money order mailed to the person entitled
to them at the address appearing in the certificate register or, to the extent
permitted in the Pooling and Servicing Agreement, upon written request by the
Certificateholder to the Securities Administrator, by wire transfer to a United
States depository institution designated by such Certificateholder and
acceptable to the Securities Administrator or by such other means of payment as
such Certificateholder and the Securities Administrator may agree; provided,
however, that the final distribution in retirement of the Residual Certificates
will be made only upon presentation and surrender of such


                                      S-81



certificates at the office or agency of the Securities Administrator specified
in the notice to the holders of the Residual Certificates of such final
distribution.

CALCULATION OF ONE-MONTH LIBOR

      One-month LIBOR ("LIBOR") shall be established by the Securities
Administrator, except in the case of the initial Interest Accrual Period. As to
any Interest Accrual Period for the LIBOR Certificates, one-month LIBOR will
equal the rate for United States dollar deposits for one month which appears on
the Telerate Screen Page 3750 as of 11:00 A.M., London time, on the second LIBOR
Business Day prior to the first day of such Interest Period. "TELERATE SCREEN
PAGE 3750" means the display designated as page 3750 on the Bridge Telerate
Service (or such other page as may replace page 3750 on that service for the
purpose of displaying London interbank offered rates of major banks). If such
rate does not appear on such page (or such other page as may replace that page
on that service, or if such service is no longer offered, such other service for
displaying one-month LIBOR or comparable rates as may be selected by the
Securities Administrator after consultation with the Seller), the rate will be
the Reference Bank Rate. The "REFERENCE BANK RATE" for any Interest Accrual
Period will be determined on the basis of the rates at which deposits in U.S.
Dollars are offered by the reference banks (which shall be three major banks
that are engaged in transactions in the London interbank market, selected by the
Securities Administrator after consultation with the Seller) as of 11:00 A.M.,
London time, on the second LIBOR Business Day prior to the first day of such
Interest Accrual Period to prime banks in the London interbank market for a
period of one month. "LIBOR BUSINESS DAY" means any day other than (i) a
Saturday or a Sunday or (ii) a day on which banking institutions in the city of
London, England and New York, New York are required or authorized by law to be
closed. The Securities Administrator will request the principal London office of
each of the reference banks to provide a quotation of its rate. If at least two
such quotations are provided, the rate will be the arithmetic mean of the
quotations. If on such date fewer than two quotations are provided as requested,
the rate will be the arithmetic mean of the rates quoted by one or more major
banks in New York City, selected by the Securities Administrator after
consultation with the Seller, as of 11:00 A.M., New York City time, on such date
for loans in U.S. Dollars to leading European banks for a period of one month.
If no such quotations can be obtained, LIBOR will remain the same as the prior
Distribution Date.

      One-month LIBOR for the initial Interest Accrual Period will be 4.58063%.

      The establishment of LIBOR as to each Interest Accrual Period by the
Securities Administrator and the Securities Administrator's calculation of the
rate of interest applicable to the LIBOR Certificates for the related Interest
Accrual Period shall (in the absence of manifest error) be final and binding.

PAYMENTS ON MORTGAGE LOANS; ACCOUNTS

      On or prior to the Closing Date, each Servicer will establish and maintain
or cause to be established and maintained an account or accounts for the
collection of payments on the Mortgage Loans which will be separate from such
Servicer's or Master Servicer's (in its capacity as successor servicer) other
assets (each, a "CUSTODIAL ACCOUNT"). Each of the Servicers will be required to
deposit into their respective Custodial Accounts the following:

          o   all payments on account of principal on the Mortgage Loans,
              including principal prepayments;

          o   all payments on account of interest on the Mortgage Loans, net of
              the related Servicing Fee and any lender paid mortgage insurance
              premiums;

          o   all payments on account of Prepayment Penalties on the Mortgage
              Loans;

          o   all insurance proceeds, Subsequent Recoveries and liquidation
              proceeds, other than proceeds to be applied to the restoration or
              repair of a mortgaged property or released to the mortgagor in
              accordance with that Servicer's normal servicing procedures;


                                      S-82



          o   any amount required to be deposited by that Servicer pursuant to
              the related underlying servicing agreement in connection with any
              losses on permitted investments for which it is responsible;

          o   any amounts received by that Servicer with respect to primary
              mortgage insurance and in respect of net monthly rental income
              from REO Property;

          o   all Substitution Adjustment Amounts; and

          o   all Advances made by that Servicer.

      On or prior to the Closing Date, the Securities Administrator will
establish an account (the "DISTRIBUTION ACCOUNT"), which will be maintained with
the Securities Administrator in trust for the benefit of the Certificateholders.
On the 18th day of each month (or, if such 18th day is not a Business Day, on
the immediately following Business Day), each Servicer will remit all amounts on
deposit in the related Custodial Account to the Distribution Account. On each
Distribution Date, to the extent of the Available Distribution Amount on deposit
in the Distribution Account, the Securities Administrator will withdraw the
Available Funds related to each Loan Group to pay the Certificateholders.

PRIORITY OF DISTRIBUTIONS AMONG CERTIFICATES

      As more fully described in this prospectus supplement, distributions on
the Group 1 Certificates will be made on each Distribution Date primarily from
Available Funds of Loan Group 1 for such Distribution Date. Distributions on the
Group 2 Senior Certificates and Group 3 Senior Certificates will be made on each
Distribution Date primarily from Available Funds of the related Loan Group for
such Distribution Date and, as described below under "--Aggregate Certificate
Group II--Transfer Payments," from any Available Funds from the other Loan Group
in Aggregate Loan Group II remaining after distributions to the Senior
Certificates related to the other Loan Group in Aggregate Certificate Group II.
Distributions on the Aggregate Group II Subordinated Certificates will be based
on any remaining Available Funds for Aggregate Loan Group II for such
Distribution Date, in each case after giving effect to distributions on all
Classes of Senior Certificates in the Aggregate Certificate Group II as
described in the preceding two sentences.

      The following chart illustrates generally the distribution priorities and
subordination features applicable to the Offered Certificates.

GROUP 1 CERTIFICATES

      As more fully described in this prospectus supplement, distributions on
the Group 1 Certificates will be made on each Distribution Date primarily from
Available Funds of Loan Group 1 for such Distribution Date in the following
order of priority:

--------------------------------------------------------------------------------
  to interest on each Class of Group 1 Senior Certificates entitled to receive
     interest on that Distribution Date, pro rata, based on their respective
  interest distribution amounts; except that the interest distribution amounts
       that would otherwise be distributed to the Class 1-A-X Certificates
 may first be reduced by amounts required to be deposited into the Reserve Fund
          and will not be distributed to the Class 1-A-X Certificates;
--------------------------------------------------------------------------------
                                       |
                                       |
--------------------------------------------------------------------------------
   to principal of the Classes of Group 1 Senior Certificates then entitled to
  receive distributions of principal in the order and subject to the priorities
 set forth under "Description of the Certificates -- Principal," in each case up
  to the maximum amount of principal to be distributed to those Classes on that
                               Distribution Date;
--------------------------------------------------------------------------------
                                       |
                                       |


                                      S-83



--------------------------------------------------------------------------------
  from the Reserve Fund, to the Class 1-A-1, Class 1-A-2, Class 1-A-3 and Class
   1-A-X Certificates as described under "Description of the Certificates--The
                    Reserve Fund and the Corridor Contracts";
--------------------------------------------------------------------------------
                                       |
                                       |
--------------------------------------------------------------------------------
 to interest on the Class 1-M-X Certificates, based on its interest distribution
    amount; except that the interest distribution amount that would otherwise
       be distributed to the Class 1-M-X Certificates may first be reduced
    by amounts required to be deposited into the Reserve Fund and will not be
                  distributed to the Class 1-M-X Certificates;
--------------------------------------------------------------------------------
                                       |
                                       |
--------------------------------------------------------------------------------
          sequentially, to interest on and then principal of the Group
          1 Subordinated Certificates, in the order of their priorities
   of payment, in each case up to the maximum amount of interest and principal
         to be distributed to those Classes on that Distribution Date;
--------------------------------------------------------------------------------
                                       |
                                       |
--------------------------------------------------------------------------------
     from the Reserve Fund, to the Class 1-M and Class 1-M-X Certificates as
   described under "Description of the Certificates--The Reserve Fund and the
                              Corridor Contracts";
--------------------------------------------------------------------------------
                                       |
                                       |
--------------------------------------------------------------------------------
     on the Distribution Date immediately following a successful auction any
            excess auction proceeds to the Class C Certificates; and
--------------------------------------------------------------------------------
                                       |
                                       |
--------------------------------------------------------------------------------
              any remaining amounts to the Class A-R Certificates.
--------------------------------------------------------------------------------

AGGREGATE GROUP II CERTIFICATES

      Distributions on the Group 2 Senior Certificates and Group 3 Senior
Certificates will be made on each Distribution Date primarily from Available
Funds of the related Loan Group for such Distribution Date and under certain
circumstances from any Available Funds from the other Loan Group in Aggregate
Loan Group II remaining after distributions to the other Classes of Senior
Certificates related to Aggregate Loan Group II. Remaining Available Funds for
Aggregate Loan Group II will then be used to make distributions on the Aggregate
Group II Subordinated Certificates. These distributions will be made in the
following order of priority:

--------------------------------------------------------------------------------
   from Available Funds for the related Loan Group, to interest on each Class
   of Senior Certificates related to that Loan Group, pro rata, based on their
                    respective interest distribution amounts;
--------------------------------------------------------------------------------
                                        |
                                        |
--------------------------------------------------------------------------------
  from Available Funds for the related Loan Group, to principal of the Classes
       of Senior Certificates relating to each Loan Group then entitled to
 receive distributions of principal, in the order and subject to the priorities
  set forth under "Description of the Certificates -- Principal," in each case
        up to the maximum amount of principal to be distributed to those
                       Classes on that Distribution Date;
--------------------------------------------------------------------------------
                                        |
                                        |


                                      S-84



--------------------------------------------------------------------------------
     from remaining Available Funds for Aggregate Loan Group II, to interest
 on and principal of the Classes of the Senior Certificates not relating to that
   Loan Group but in Aggregate Certificate Group II subject to the limitations
  set forth under "Description of the Certificates--Aggregate Certificate Group
              II--Transfer Payments" in this prospectus supplement;
--------------------------------------------------------------------------------
                                        |
                                        |
--------------------------------------------------------------------------------
    from remaining Available Funds for Aggregate Loan Group II, sequentially,
    to interest on and then principal of the Aggregate Group II Subordinated
    Certificates, in the order of numerical class designations, in each case
  up to the maximum amount of interest and principal to be distributed to those
                     Classes on that Distribution Date; and
--------------------------------------------------------------------------------
                                        |
                                        |
--------------------------------------------------------------------------------
              any remaining amounts to the Class A-R Certificates.
--------------------------------------------------------------------------------

      "AVAILABLE FUNDS" for a Loan Group for any Distribution Date will be equal
to the sum of:

      o   all scheduled installments of interest (net of the related Expense
          Fees) and principal due on the Mortgage Loans in that Loan Group on
          the Due Date in the month in which the Distribution Date occurs and
          received before the related Determination Date, together with any
          advances with respect to them;

      o   all proceeds of any primary mortgage guaranty insurance policies and
          any other insurance policies with respect to the Mortgage Loans in
          that Loan Group, to the extent the proceeds are not applied to the
          restoration of the related mortgaged property or released to the
          mortgagor in accordance with the related Servicer's normal servicing
          procedures and all other cash amounts received and retained in
          connection with (a) the liquidation of defaulted Mortgage Loans in
          that Loan Group, by foreclosure or otherwise during the calendar month
          preceding the month of the Distribution Date (in each case, net of
          unreimbursed expenses incurred in connection with a liquidation or
          foreclosure and unreimbursed advances, if any) and (b) any Subsequent
          Recoveries with respect to Mortgage Loans in that Loan Group;

      o   all partial or full prepayments with respect to Mortgage Loans in that
          Loan Group received during the related Prepayment Period; and

      o   amounts received with respect to the Distribution Date as the
          Substitution Adjustment Amount or purchase price in respect of a
          deleted Mortgage Loan or a Mortgage Loan in that Loan Group
          repurchased by the Seller or the related Originator as of the
          Distribution Date;

      o   reduced by amounts in reimbursement for Monthly Advances previously
          made and other amounts as to which the Servicers are entitled to
          reimbursement from the Custodial Accounts pursuant to the underlying
          servicing agreements, and as to which the Master Servicer, the
          Securities Administrator, the Trustee and/or any custodian, as
          applicable, are entitled with respect to the Mortgage Loans in the
          related Loan Group or otherwise allocable to the Certificates related
          to that Loan Group to be reimbursed from the Distribution Account or
          otherwise pursuant to the Pooling and Servicing Agreement, the
          underlying servicing agreements or the custody agreements, as
          applicable;

plus, in the case of a Loan Group in Aggregate Loan Group II,

      o   Transfer Payments Received, plus interest thereon, for such Loan Group
          and Distribution Date;


                                      S-85



minus, in the case of a Loan Group in Aggregate Loan Group II,

      o   Transfer Payments Made, plus interest thereon, for such Loan Group and
          Distribution Date.

INVESTMENTS OF AMOUNTS HELD IN ACCOUNTS

      The Custodial Accounts and the Distribution Account. All funds in the
Custodial Accounts and the Distribution Account will be invested in permitted
investments at the direction of the related servicer and the Master Servicer,
respectively. All income and gain net of any losses realized from the investment
will be for the benefit of the Master Servicer as compensation and will be
remitted to it monthly as described herein.

      The amount of any losses incurred in a Custodial Account or the
Distribution Account in respect of the investments will be deposited by the
related servicer in its Custodial Account or, with respect to the Distribution
Account, deposited by the Master Servicer into the Distribution Account out of
their own funds immediately as realized.

INTEREST

      The Classes of Certificates will have the respective pass-through rates
described on pages vi and vii hereof.

      On each Distribution Date, to the extent of funds available therefor, each
interest-bearing Class of Certificates will be entitled to receive an amount
allocable to interest for the related interest accrual period. This "INTEREST
DISTRIBUTION AMOUNT" for any interest-bearing Class will be equal to the sum of
(a) interest at the applicable pass-through rate on the related Class Principal
Balance or Notional Amount, as applicable, immediately prior to the applicable
Distribution Date and (b) the sum of the amounts, if any, by which the amount
described in clause (a) above on each prior Distribution Date exceeded the
amount actually distributed as interest on the prior Distribution Dates and not
subsequently distributed (which are called unpaid interest amounts).

      With respect to each Distribution Date for all of the interest bearing
certificates other than the LIBOR Certificates, the "INTEREST ACCRUAL PERIOD"
will be the calendar month preceding the month of the Distribution Date. With
respect to the LIBOR Certificates, the Interest Accrual Period will be the
period commencing on the 25th day of the month prior to the month in which that
Distribution Date occurs and ending on the 24th day of the month in which that
Distribution Date occurs. Each Interest Accrual Period will be deemed to consist
of 30 days. Interest will be calculated and payable on the basis of a 360-day
year divided into twelve 30-day months.

      The interest entitlement described above for each Class of Certificates
for any Distribution Date will be reduced by the amount of Net Interest
Shortfalls experienced by (a) the related Loan Group, with respect to the Senior
Certificates and (b) the related Aggregate Loan Group, with respect to the
Subordinated Certificates. With respect to any Distribution Date and Loan Group,
the "NET INTEREST SHORTFALL" is equal to

      o   any net prepayment interest shortfalls for that Loan Group and
          Distribution Date, and

      o   the amount of interest that would otherwise have been received with
          respect to any Mortgage Loan in that Loan Group that was the subject
          of a Relief Act Reduction or a Special Hazard Loss, Fraud Loss, Debt
          Service Reduction or Deficient Valuation, after the exhaustion of the
          respective amounts of coverage provided by the Subordinated
          Certificates for those types of losses.

      Notwithstanding the foregoing, on each Distribution Date, the respective
interest distribution amounts that would otherwise be distributed to each class
of Notional Amount Certificates will each be reduced by the related Required
Reserve Fund Deposit (as defined below) and will not be distributed or
reimbursable to the Notional Amount Certificates.

      Net Interest Shortfalls for a Loan Group on any Distribution Date will be
allocated pro rata among all interest-bearing Classes of the Senior Certificates
in the related Senior Certificate Group and the Classes of


                                      S-86



Subordinated Certificates in the related Aggregate Certificate Group on such
Distribution Date, based on the amount of interest each such Class of
Certificates would otherwise be entitled to receive (or, in the case of the
Subordinated Certificates, be deemed to be entitled to receive based on each
Subordinated Class' share of the related Subordinated Portion, as described more
fully below) on such Distribution Date, in each case before taking into account
any reduction in such amounts from such Net Interest Shortfalls.

      For purposes of allocating Net Interest Shortfalls for a Loan Group to the
related Subordinated Certificates on any Distribution Date, the amount of
interest each such Class of Subordinated Certificates would otherwise be deemed
to be entitled to receive from Available Funds for that Loan Group on such
Distribution Date will be equal to an amount of interest at the pass-through
rate on a balance equal to that Class' pro rata share of the related
Subordinated Portion for that Distribution Date and Loan Group. Notwithstanding
the foregoing, on any Distribution Date after a Senior Termination Date, Net
Interest Shortfalls for the related Loan Group will be allocated to the related
Classes of Subordinated Certificates based on the amount of interest each such
Class of Subordinated Certificates would otherwise be entitled to receive on
that Distribution Date.

      A "RELIEF ACT REDUCTION" is a reduction in the amount of the monthly
interest payment on a Mortgage Loan pursuant to the Servicemembers' Civil Relief
Act. See "Legal Aspects of Mortgage Loans--Servicemembers' Civil Relief Act" in
the accompanying prospectus. With respect to any Distribution Date, a net
prepayment interest shortfall for a Loan Group is the amount by which the
aggregate of prepayment interest shortfalls experienced by the Mortgage Loans in
that Loan Group during the portion of the related Prepayment Period occurring in
the calendar month preceding the month of the Distribution Date exceeds the
aggregate amount payable on the Distribution Date by the Servicers and the
Master Servicer as described under "Servicing of the Mortgage Loans--Adjustment
to Servicing Fees in Connection with Certain Prepaid Mortgage Loans" in this
prospectus supplement. A prepayment interest shortfall is the amount by which
interest paid by a borrower in connection with a prepayment of principal on a
Mortgage Loan is less than one month's interest at the related mortgage rate on
the Stated Principal Balance of the Mortgage Loan. Each Class' pro rata share of
the Net Interest Shortfalls on the related Mortgage Loans will be based on the
amount of interest the Class otherwise would have been entitled to receive on
such Distribution Date.

      If on a particular Distribution Date, Available Funds for a Loan Group in
the Distribution Account applied in the order described above under "--Priority
of Distributions Among Certificates" are not sufficient to make a full
distribution of the interest entitlement on the Certificates related to that
Loan Group, interest will be distributed on each Class of Certificates of equal
priority based on the amount of interest it would otherwise have been entitled
to receive in the absence of the shortfall. Any unpaid interest amount will be
carried forward and added to the amount holders of each Class of Certificates
will be entitled to receive on the next Distribution Date. A shortfall could
occur, for example, if losses realized on the related Mortgage Loans were
exceptionally high or were concentrated in a particular month. Any unpaid
interest amount so carried forward will not bear interest.

THE RESERVE FUND AND THE CORRIDOR CONTRACTS

      The Reserve Fund. Pursuant to the Pooling and Servicing Agreement, the
Securities Administrator will establish and maintain an account (the "RESERVE
FUND"), which is held in trust by the Securities Administrator on behalf of the
Trustee and the Holders of the LIBOR Certificates and the Class 1-A-X and Class
1-M-X Certificates. The Reserve Fund will not be an asset of any REMIC. The
Reserve Fund will be the sole source of payments to the holders of the LIBOR
Certificates with respect to any Net WAC Shortfalls on such Certificates. The
Reserve Fund will comprise two sub accounts: the "CLASS 1-A-X SUB ACCOUNT" and
the "CLASS 1-M-X SUB ACCOUNT" and each, a "SUB ACCOUNT"). On each Distribution
Date, (i) Current Interest that would otherwise be distributable with respect to
the Class 1-A-X Certificates will be deposited instead in the Class 1-A-X Sub
Account and (ii) Current Interest that would otherwise be distributable with
respect to the Class 1-M-X Certificates will be deposited instead in the Class
1-M-X Sub Account, in each case, to the extent of the applicable "Required
Reserve Fund Deposit" for such class in the manner described below.

      For any Distribution Date, the "REQUIRED RESERVE FUND DEPOSIT" for the
Class 1-A-X Certificates will be an amount equal to the lesser of (i) the
Current Interest for the Class 1-A-X Certificates for such Distribution Date and
(ii) the amount required to bring the balance on deposit in the Class 1-A-X Sub
Account up to an amount equal


                                      S-87



to the sum of (a) the aggregate Net WAC Shortfalls for the Class 1-A-1, Class
1-A-2 and Class 1-A-3 Certificates for such Distribution Date remaining unpaid
after application of payments under the related Corridor Contract on that
Distribution Date and (b) $1,000.

      For any Distribution Date, the "Required Reserve Fund Deposit" for the
Class 1-M-X Certificates will be an amount equal to the lesser of (i) the
Current Interest for the Class 1-M-X Certificates for such Distribution Date and
(ii) the amount required to bring the balance on deposit in the Class 1-M-X Sub
Account up to an amount equal to the sum of (a) the Net WAC Shortfalls for such
Distribution Date with respect to the Class 1-M Certificates remaining unpaid
after application of payments under the related Corridor Contract, and (b)
$1,000.

      For any Distribution Date, the Securities Administrator will deposit into
the appropriate Sub Account of the Reserve Fund any Required Reserve Fund
Deposit for such date.

      On any Distribution Date for which a Net WAC Shortfall exists with respect
to the Class 1-A-1, Class 1-A-2 and Class 1-A-3 Certificates, the Securities
Administrator will withdraw the amounts on deposit in the Class 1-A-X Sub
Account and distribute them to the holders of the Class 1-A-1, Class 1-A-2 and
Class 1-A-3 Certificates, concurrently on a pro rata basis, in each case in an
amount up to their Net WAC Shortfalls remaining unpaid after giving effect their
respective Corridor Contracts.

      On any Distribution Date for which a Net WAC Shortfall exists with respect
to the Class 1-M-1, Class 1-M-2, Class 1-M-3, Class 1-M-4, Class 1-M-5, Class
1-M-6, Class 1-M-7, Class 1-M-8 or Class 1-M-9 Certificates, the Securities
Administrator will withdraw the amounts on deposit in the Class 1-M-X Sub
Account and distribute them sequentially, to the holders of the Class 1-M-1,
Class 1-M-2, Class 1-M-3, Class 1-M-4, Class 1-M-5, Class 1-M-6, Class 1-M-7,
Class 1-M-8 and Class 1-M-9 Certificates, in that order, in each case in an
amount up to their Net WAC Shortfalls remaining unpaid after giving effect their
Corridor Contract.

      If, immediately after any Distribution Date, the amount on deposit in any
Sub Account of the Reserve Fund exceeds the initial deposit therein, the
Securities Administrator will distribute such excess to the Holders of the
Certificates that deposited such amounts in the relevant Sub Account. On the
Distribution Date on which the aggregate Class Principal Balance of the Group 1
Senior Certificates is reduced to zero, the Securities Administrator shall
distribute any amounts remaining in the Class 1-A-X Sub Account to the
Underwriter and such amounts will not be available for distribution to
certificateholders. On the Distribution Date on which the aggregate Class
Principal Balance of the Group 1 Subordinated Certificates is reduced to zero,
the Securities Administrator shall distribute any amounts remaining in the Class
1-M-X Sub Account to the Underwriter and such amounts will not be available for
distribution to certificateholders.

      "CURRENT INTEREST" for each Class of Group 1 Certificates and any
Distribution Date will equal the amount of interest accrued during the related
Interest Accrual Period on the related Class Principal Balance immediately prior
to that Distribution Date (or, in the case of the Notional Amount Certificates,
the related Notional Amount for that Distribution Date) at such Class's
Pass-Through Rate.


                                      S-88



      "NET WAC SHORTFALLS" for any Class of LIBOR Certificates and any
Distribution Date will equal the sum of

      (i)   the excess, if any, of an amount that would have been the Current
Interest for such class if the Pass-Through Rate for such class were calculated
without regard to Group 1 Net WAC (but subject to a maximum Pass-Through Rate of
11.50%) for that Distribution Date, over the actual Current Interest for such
Class for such Distribution Date;

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

      (iii) interest for the applicable Interest Accrual Period on the
amount described in clause (ii) above based on the applicable Pass-Through Rate
for such Class of LIBOR Certificates (determined without regard to the Group 1
Net WAC, but subject to a maximum Pass-Through Rate of 11.50%).

      The Corridor Contracts. The LIBOR Certificates will have the benefit of
the Corridor Contracts (each, a "CORRIDOR CONTRACT") provided by Morgan Stanley
Capital Services Inc., as Corridor Contract Counterparty (the "CORRIDOR CONTRACT
COUNTERPARTY"). All obligations of the Issuing Entity under the Corridor
Contracts will be paid on or prior to the closing date.

      The separate Corridor Contract relating to (i) in the aggregate, the Class
1-A-1, Class 1-A-2 and Class 1-A-3 Certificates and (ii) in the aggregate, the
Class 1-M Certificates will have the respective initial notional balance set
forth below. In connection with each Distribution Date, commencing with the
Distribution Date in April 2006 to and including the respective Distribution
Dates set forth below, on the Business Day prior to each of these Distribution
Dates, the Corridor Contract Counterparty will be obligated under the Corridor
Contracts to pay to the Securities Administrator, on behalf of the Trustee, for
the benefit of the holders of each of these Classes of Group 1 Certificates an
amount equal to the product of (a) the excess, if any, of the lesser of (i) the
then current one-month LIBOR rate and (ii) the specified cap ceiling rate for
such Classes of Group 1 Certificates for that Distribution Date, over the
specified cap strike rate for such Classes of Group 1 Certificates for that
Distribution Date, in each case calculated on a "30/360" basis, (b) the
specified notional balance set forth below for such Classes of Group 1
Certificates and (c) 100. The Corridor Contract Counterparty's respective
obligations under each of the Corridor Contracts will terminate immediately
following the Distribution Date set forth below for such Classes of
Certificates.



                                                                         CORRIDOR CONTRACT
               CLASSES OF                             INITIAL NOTIONAL    FINAL SCHEDULED
           LIBOR CERTIFICATES                             BALANCE        DISTRIBUTION DATE
------------------------------------------------      ----------------   -----------------

Class 1-A-1, Class 1-A-2 and Class 1-A-3 .......       $3,602,313.13       November 2014

Class 1-M-1, Class 1-M-2, Class 1-M-3,
Class 1-M-4, Class 1-M-5, Class 1-M-6,
Class 1-M-7, Class 1-M-8 and Class 1-M-9 .......        $190,214.93        November 2014


      The specified Cap Ceiling Rates, Cap Strike Rates and Notional Balances
for each Corridor Contract are set forth on Annex II to this prospectus
supplement.

      Amounts, if any, payable under any Corridor Contract with respect to any
Distribution Date will be used to cover shortfalls in payments of interest on
the Classes of LIBOR Certificates to which the Corridor Contract relates, if the
Pass-Through Rates on those Classes of Certificates are limited for any of the
Distribution Dates for which such Classes of LIBOR Certificates has the benefit
of the related Corridor Contract due to the imposition of the Group 1 Net WAC on
their respective Pass-Through Rates described in this prospectus supplement.
These amounts will be payable to the related Classes of LIBOR Certificates on a
pro rata basis, in each case in an amount up to their respective Net WAC
Shortfalls.

      Each Corridor Contract shall provide that the Corridor Contract
Counterparty agrees that to the extent it is not able to deliver to the Issuing
Entity the financial information, if any, required to be provided by the Issuing
Entity under Item 1115(b) of Reg AB, the Corridor Contract Counterparty shall
assign its rights and obligations


                                      S-89



under the Corridor Contract to a substitute counterparty, which may be an
affiliate of the Corridor Contract Counterparty. For purposes of the preceding
sentence, any substitute counterparty (or any entity providing a guaranty in
connection with the substitute counterparty's obligations under the related
corridor contract) shall have the same credit rating from each Rating Agency as
the resigning counterparty (or any entity providing a guaranty in connection
with the counterparty's obligations under the related corridor contract) or
shall have obtained from each Rating Agency a confirmation that such assignment
would not cause it to reduce, qualify or withdraw its rating of the Offered
Certificates.

      The Corridor Contracts will be governed by and construed in accordance
with the law of the State of New York. The obligations of the Corridor Contract
Counterparty are limited to those specifically set forth in the Corridor
Contracts.

      The Sponsor believes that the significance percentage for each of the
Class 1-A-1, Class 1-A-2 and Class 1-A-3 Corridor Contract and the Class 1-M
Corridor Contract will be less than 10% as of the Closing Date. The Sponsor
calculated the significance percentage by reference to the "SIGNIFICANCE
ESTIMATE" of each of these Corridor Contracts, which in each case is determined
based on a reasonable good faith estimate of maximum probable exposure
represented by that Corridor Contract made in substantially the same manner as
that used in the Sponsor's internal risk management process in respect of
similar instruments. The "SIGNIFICANCE PERCENTAGE" is the percentage that the
amount of the significance estimate represents of the aggregate Class Principal
Balance of the Classes of Offered Certificates that have the benefit of the
related Corridor Contract.

DESCRIPTION OF THE CORRIDOR CONTRACT COUNTERPARTY

      The Corridor Contract Counterparty, is a Delaware corporation that is a
wholly-owned, unregulated, special purpose subsidiary of Morgan Stanley ("MORGAN
STANLEY"). The Corridor Contract Counterparty conducts business in the
over-the-counter derivatives market, engaging in a variety of derivatives
products, including interest rate swaps, currency swaps, credit default swaps
and interest rate options with institutional clients. The obligations of the
Corridor Contract Counterparty are 100% guaranteed by Morgan Stanley.

      As of the date hereof, Morgan Stanley is rated "AA-" by Fitch Ratings,
"A+" by Standard & Poor's Rating Services and "Aa3" by Moody's Investors
Service, Inc.

PRINCIPAL

      Principal Amount. On each Distribution Date, from remaining Available
Funds after distributions in respect of interest, the Principal Amount for each
Loan Group will be distributed as principal with respect to the related Senior
Certificates in an amount up to the related Senior Principal Distribution Amount
for such Loan Group and as principal of the related Subordinated Certificates,
as a portion of the related Subordinated Principal Distribution Amount.

      The "PRINCIPAL AMOUNT" for any Distribution Date and Loan Group will equal
the sum of:

          1.  all monthly payments of principal due on each Mortgage Loan (other
              than a Liquidated Mortgage Loan) in that Loan Group on the related
              Due Date,

          2.  the principal portion of the purchase price of each Mortgage Loan
              in that Loan Group that was repurchased by the Seller pursuant to
              the Pooling and Servicing Agreement or the related Originator
              pursuant to the related underlying mortgage loan purchase
              agreement as of the Distribution Date,

          3.  the Substitution Adjustment Amount in connection with any deleted
              Mortgage Loan in that Loan Group received with respect to the
              Distribution Date,


                                      S-90



          4.  any insurance proceeds or liquidation proceeds allocable to
              recoveries of principal of Mortgage Loans in that Loan Group that
              are not yet Liquidated Mortgage Loans received during the calendar
              month preceding the month of the Distribution Date,

          5.  with respect to each Mortgage Loan in that Loan Group that became
              a Liquidated Mortgage Loan during the calendar month preceding the
              month of the Distribution Date, the amount of the liquidation
              proceeds allocable to principal received with respect to that
              Mortgage Loan, and, if such Liquidated Mortgage Loan is an
              Additional Collateral Mortgage Loan, the principal portion of the
              proceeds of any related Additional Collateral,

          6.  all partial and full principal prepayments by borrowers on the
              Mortgage Loans in that Loan Group received during the related
              Prepayment Period, and

          7.  any Subsequent Recoveries on the Mortgage Loans in that Loan Group
              received during the calendar month preceding the month of the
              Distribution Date,

plus, in the case of a Loan Group in Aggregate Loan Group II,

      o   any Transfer Payments Received for such Loan Group and Distribution
          Date,

minus, in the case of a Loan Group in Aggregate Loan Group II,

      o   any Transfer Payments Made for such Loan Group and Distribution Date.

AGGREGATE CERTIFICATE GROUP II - SUBORDINATED PORTIONS

      A portion of each of Loan Group 2 and Loan Group 3 is related to the
Aggregate Group II Subordinated Certificates. Each such portion (a "SUBORDINATED
PORTION") for any Distribution Date will be equal to the aggregate Stated
Principal Balance of the Mortgage Loans in the related Loan Group in Aggregate
Loan Group II as of the Due Date in the month preceding the month of such
Distribution Date minus the sum of the Class Principal Balances of the Senior
Certificates in the related Senior Certificate Group in Aggregate Certificate
Group II immediately prior to such Distribution Date.

AGGREGATE CERTIFICATE GROUP II--TRANSFER PAYMENTS

      Transfer Payments will be made with respect to Aggregate Certificate Group
II if there are disproportionate Realized Losses in one Loan Group in Aggregate
Loan Group II as described herein. If on any Distribution Date the aggregate
Class Principal Balance of the Aggregate Group II Senior Certificates related to
a Loan Group of Aggregate Group II Mortgage Loans immediately prior to such
Distribution Date is greater than the aggregate Stated Principal Balance of the
Mortgage Loans in that Loan Group of Aggregate Group II Mortgage Loans on the
Due Date in the month preceding the month of such Distribution Date (the
"UNDERCOLLATERALIZED GROUP"), then the following will occur:

      o   the Available Funds in each other Loan Group of Aggregate Group II
          Mortgage Loans that is not an Undercollateralized Group (each, an
          "OVERCOLLATERALIZED GROUP") will be reduced, after distributions of
          interest to the Aggregate Group II Senior Certificates of the
          Overcollateralized Group, by an amount equal to one month's interest
          on the Transfer Payment Received by the Undercollateralized Group at
          the pass-through rate applicable to the Undercollateralized Group and
          that amount will be added to the Available Funds of the
          Undercollateralized Group; and

      o   the portion of the Available Funds in respect of principal on the
          Mortgage Loans in the Overcollateralized Group of Aggregate Group II
          Mortgage Loans, after distributions of principal to the Aggregate
          Group II Senior Certificates of each Overcollateralized Group, will be
          distributed, to the extent of the portion of Available Funds available
          therefor, to the Aggregate Group II Senior Certificates of each
          Undercollateralized Group until the Class Principal Balance of the
          Senior


                                      S-91



          Certificates of each Undercollateralized Group equals the aggregate
          Stated Principal Balance of the Mortgage Loans in the related Loan
          Group of Aggregate Group II Mortgage Loans.

      Consequently, the Aggregate Group II Subordinated Certificates will not
receive any distributions of principal until each Undercollateralized Group of
Aggregate Group II Mortgage Loans is no longer undercollateralized.

      On each Distribution Date, the "TRANSFER PAYMENT" for the
Undercollateralized Group of Aggregate Group II Mortgage Loans will equal the
excess, if any, of the Class Principal Balance of the Aggregate Group II Senior
Certificates immediately prior to such Distribution Date related to such
Undercollateralized Group of Aggregate Group II Mortgage Loans over the
aggregate Stated Principal Balance of the Mortgage Loans in such Loan Group of
Aggregate Group II Mortgage Loans on the Due Date in the month preceding the
month of such Distribution Date. The Transfer Payment received by the
Undercollateralized Group is referred to as a "TRANSFER PAYMENT RECEIVED." The
Transfer Payment made by the Overcollateralized Group is referred to as a
"TRANSFER PAYMENT MADE."

      All or a portion of the distributions to the Aggregate Group II Senior
Certificates pursuant to the transfer payment provisions described above may be
made on the Distribution Date in the month following the month during which such
Transfer Payment occurs (without any additional distribution of interest or
earnings thereon with respect to such delay).

      Senior Principal Distribution Amount. On each Distribution Date, the
Principal Amount for a Loan Group, up to the amount of the related Senior
Principal Distribution Amount for the Distribution Date, will be distributed as
principal of the following Classes of Senior Certificates, in the following
order of priority:

      The Group 1 Senior Certificates

      o   with respect to Loan Group 1, concurrently, to the Class 1-A-1, Class
          1-A-2 and Class 1-A-3 Certificates, pro rata, until their respective
          Class Principal Balances are reduced to zero.

      The Group 2 Senior Certificates

      o   with respect to Loan Group 2, sequentially, as follows:

            1.    to the Class A-R Certificates, until its Class Principal
      Balance is reduced to zero; and

            2.    concurrently, to the Class 2-A-1, Class 2-A-2, Class 2-A-3 and
      Class 2-A-4 Certificates, pro rata, until their respective Class Principal
      Balances are reduced to zero.

      The Group 3 Senior Certificates

      o   with respect to Loan Group 3, concurrently, to the Class 3-A-1 and
          Class 3-A-2 Certificates, pro rata, until their respective Class
          Principal Balances are reduced to zero

      In addition, on each Distribution Date, the related Class P Distribution
Amount shall be distributed to the Class P-1 and Class P-2 Certificates.

GLOSSARY

      The capitalized terms used herein shall have the following meanings:

      "CLASS P DISTRIBUTION AMOUNT" for each Distribution Date and the Class P-1
Certificates is an amount equal to the total of all prepayment penalties
received on the Group 1 Mortgage Loans since the Due Date related to the prior
Distribution Date. The Class P Distribution Amount for each Distribution Date
and the Class P-2


                                      S-92



Certificates is an amount equal to the total of all prepayment penalties
received on the Aggregate Group II Mortgage Loans since the Due Date related to
the prior Distribution Date. Neither Class P Distribution Amount is part of the
Available Distribution Amount and is therefore not available for distributions
to the Classes of Offered Certificates.

      "DUE DATE" means, with respect to a Mortgage Loan, the day of the calendar
month on which scheduled payments are due on that Mortgage Loan. With respect to
any Distribution Date, the related Due Date is the first day of the calendar
month in which that Distribution Date occurs.

      "PREPAYMENT PERIOD" means, for any Mortgage Loan and any Distribution
Date, the calendar month preceding that Distribution Date.

      The "SENIOR PRINCIPAL DISTRIBUTION AMOUNT" for any Distribution Date and
Loan Group will equal the sum of

      o   the related Senior Percentage of all amounts described in clauses 1.
          through 4. of the definition of Principal Amount for that Loan Group
          and that Distribution Date,

      o   for each Mortgage Loan in that Loan Group that became a Liquidated
          Mortgage Loan during the calendar month preceding the month of the
          Distribution Date, the lesser of

               o  the related Senior Percentage of the Stated Principal Balance
                  of the Mortgage Loan as of the Due Date in the month preceding
                  the month of that Distribution Date and

               o  either (i) the related Senior Prepayment Percentage of the
                  amount of the liquidation proceeds allocable to principal
                  received on the Mortgage Loan or (ii) if an Excess Loss was
                  sustained on the Liquidated Mortgage Loan during the preceding
                  calendar month, the related Senior Percentage of the amount of
                  the liquidation proceeds allocable to principal received on
                  the Mortgage Loan,

      o   the sum of the related Senior Prepayment Percentage of amounts
          described in clauses 6. and 7. of the definition of Principal Amount
          for that Loan Group and that Distribution Date, and

      o   any Transfer Payments Received for that Loan Group and Distribution
          Date;

provided, however, that if a Bankruptcy Loss that is an Excess Loss is sustained
on a Mortgage Loan in that Loan Group that is not a Liquidated Mortgage Loan,
that Senior Principal Distribution Amount will be reduced on the related
Distribution Date by the related Senior Percentage of the principal portion of
the Bankruptcy Loss; provided, further, however, that on any Distribution Date
after a Senior Termination Date, the Senior Principal Distribution Amount for
the remaining Senior Certificates in the related Aggregate Certificate Group
will be calculated pursuant to the above formula based on all the Mortgage Loans
in the related Aggregate Loan Group, as opposed to only the Mortgage Loans in
the related Loan Group.

      "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 liquidation proceeds received with respect to that
Mortgage Loan through the last day of the related Prepayment Period. The "POOL
PRINCIPAL BALANCE" equals the aggregate of the Stated Principal Balances of the
Mortgage Loans in an Aggregate Loan Group. The "LOAN GROUP PRINCIPAL BALANCE"
with respect to any Loan Group equals the aggregate of the Stated Principal
Balances of the Mortgage Loans in that Loan Group.

      The "SENIOR PERCENTAGE" for any Senior Certificate Group and Distribution
Date is the percentage equivalent of a fraction, the numerator of which is the
aggregate of the Class Principal Balances of each Class of


                                      S-93



Senior Certificates (other than the Notional Amount Certificates) of such Senior
Certificate Group immediately before that Distribution Date and the denominator
of which is the aggregate of the Stated Principal Balances of the Mortgage Loans
in the related Loan Group as of the Due Date occurring in the month prior to the
month of that Distribution Date (after giving effect to prepayments in the
Prepayment Period related to such prior Due Date); provided, however, that on
any Distribution Date after a Senior Termination Date, in the case of the
Aggregate Group II Certificates, the Senior Percentage of the remaining Senior
Certificate Group in the related Aggregate Certificate Group is the percentage
equivalent of a fraction, the numerator of which is the aggregate Class
Principal Balance of each class of Senior Certificates (other than the Notional
Amount Certificates) of such remaining Senior Certificate Group immediately
prior to such Distribution Date and the denominator of which is the aggregate
Class Principal Balance of all Classes of Certificates (other than the Notional
Amount Certificates) in that Aggregate Certificate Group immediately prior to
such Distribution Date.

      For any Distribution Date on and prior to a Senior Termination Date, the
"SUBORDINATED PERCENTAGE" for (x) the Group 1 Subordinated Certificates relating
to Loan Group 1, and (y) the portion of the Aggregate Group II Subordinated
Certificates relating to Loan Group 2 and Loan Group 3, as applicable, in each
case will be calculated as the difference between 100% and the Senior Percentage
of the Senior Certificate Group relating to that Loan Group on such Distribution
Date. After a Senior Termination Date, the Subordinated Percentage for the
Aggregate Group II Subordinated Certificates will represent the entire interest
of the Aggregate Group II Subordinated Certificates in Loan Group II and will be
calculated as the difference between 100% and the Senior Percentage for the
Aggregate Group II Senior Certificates for such Distribution Date.

      The "SENIOR PREPAYMENT PERCENTAGE" of a Senior Certificate Group for any
Distribution Date occurring (x) during the seven years beginning on the first
Distribution Date, with respect to the Group 1 Senior Certificates, and (y)
during the seven years beginning on the first Distribution Date, with respect to
the Aggregate Group II Senior Certificates, in each case will equal 100%.
Thereafter, each Senior Prepayment Percentage will be subject to gradual
reduction as described in the following paragraph. This disproportionate
allocation of unscheduled payments of principal will have the effect of
accelerating the amortization of the Senior Certificates (other than the
Notional Amount Certificates) which receive these unscheduled payments of
principal while, in the absence of Realized Losses, increasing the interest in
the Mortgage Loans in the related Aggregate Loan Group evidenced by the related
Subordinated Certificates. Increasing the respective interest of an Aggregate
Subordinated Certificate Group relative to that of the related Aggregate Senior
Certificate Group is intended to preserve the availability of the subordination
provided by those Subordinated Certificates.

      Within each of the Group 1 Senior Certificates and the Aggregate Group II
Senior Certificates, the Senior Prepayment Percentage of each such Senior
Certificate Group for any Distribution Date occurring on or after the seventh
anniversary of the first Distribution Date will be as follows: for any
Distribution Date in the first year thereafter, the related Senior Percentage
plus 70% of the related Subordinated Percentage for such Distribution Date; for
any Distribution Date in the second year thereafter, the related Senior
Percentage plus 60% of the related Subordinated Percentage for the Distribution
Date; for any Distribution Date in the third year thereafter, the related Senior
Percentage plus 40% of the related Subordinated Percentage for such Distribution
Date; for any Distribution Date in the fourth year thereafter, the related
Senior Percentage plus 20% of the related Subordinated Percentage for such
Distribution Date; and for any Distribution Date thereafter, the related Senior
Percentage for such Distribution Date (unless on any Distribution Date the
Senior Percentage of a related Senior Certificate Group exceeds the Senior
Percentage of such Senior Certificate Group as of the Closing Date, in which
case such Senior Prepayment Percentage for the Distribution Date will once again
equal 100%).

      Notwithstanding the foregoing, no decrease in the Senior Prepayment
Percentage for an Aggregate Loan Group will occur unless both of the step down
conditions listed below are satisfied with respect to the Mortgage Loans in that
Aggregate Loan Group:

      o   with respect to Loan Group 1, the outstanding principal balance of all
          Mortgage Loans in Loan Group I delinquent 60 days or more (including
          Mortgage Loans in foreclosure, real estate owned by the Issuing Entity
          and Mortgage Loans in which the mortgagors are in bankruptcy)
          (averaged over the preceding six month period), as a percentage of the
          aggregate Class Principal Balance of the Group 1 Subordinated
          Certificates, does not equal or exceed 50%, or


                                      S-94



      o   with respect to each Loan Group in Aggregate Loan Group II, the
          outstanding principal balance of all Mortgage Loans in that Loan Group
          delinquent 60 days or more (including Mortgage Loans in foreclosure,
          real estate owned by the Issuing Entity and Mortgage Loans in which
          the mortgagors are in bankruptcy) (averaged over the preceding six
          month period), as a percentage of (a) if such date is on or prior to a
          Senior Termination Date, the Subordinated Percentage for such Loan
          Group of the aggregate Stated Principal Balance of the Mortgage Loans
          in that Loan Group, or (b) if such date is after a Senior Termination
          Date, the aggregate Class Principal Balance of the Aggregate Group II
          Subordinated Certificates, does not equal or exceed 50%, and

      o   with respect to each Aggregate Loan Group, cumulative Realized Losses
          on all of the Mortgage Loans in that Aggregate Loan Group do not
          exceed

              o   commencing with the Distribution Date on the seventh
                  anniversary of the first Distribution Date, 30% of the
                  aggregate Class Principal Balance of the related Aggregate
                  Subordinated Certificate Group as of the Closing Date (with
                  respect to each Aggregate Subordinated Certificate Group, the
                  related "ORIGINAL SUBORDINATE PRINCIPAL BALANCE"),

              o   commencing with the Distribution Date on the eighth
                  anniversary of the first Distribution Date, 35% of the related
                  original subordinate principal balance,

              o   commencing with the Distribution Date on the ninth anniversary
                  of the first Distribution Date, 40% of the related original
                  subordinate principal balance,

              o   commencing with the Distribution Date on the tenth anniversary
                  of the first Distribution Date, 45% of the related original
                  subordinate principal balance, and

              o   commencing with the Distribution Date on the eleventh
                  anniversary of the first Distribution Date, 50% of the related
                  original subordinate principal balance.

      Notwithstanding the preceding two paragraphs, with respect to either
Aggregate Subordinated Certificate Group, if (x) on or before the Distribution
Date in February 2009, the Aggregate Subordinated Percentage for that Aggregate
Subordinated Certificate Group is at least 200% of the related Aggregate
Subordinated Percentage as of the Closing Date, the delinquency test set forth
above is satisfied with respect to the Mortgage Loans in that Aggregate Loan
Group and cumulative Realized Losses on the Mortgage Loans in the related
Aggregate Loan Group do not exceed 20% of the related original subordinate
principal balance, the Senior Prepayment Percentage for each Loan Group in that
Aggregate Loan Group will equal the related Senior Percentage for that
Distribution Date plus 50% of the amount equal to 100% minus the related Senior
Percentage and (y) after the Distribution Date in February 2009, the Aggregate
Subordinated Percentage for that Aggregate Subordinated Certificate Group is at
least 200% of the related Aggregate Subordinated Percentage as of the closing
date, the delinquency test set forth above is satisfied with respect to the
Mortgage Loans in that Aggregate Loan Group and cumulative Realized Losses on
the Mortgage Loans in the related Aggregate Loan Group do not exceed 30% of the
related original subordinate principal balance (the "TWO TIMES TEST"), the
Senior Prepayment Percentage for each Loan Group in that Aggregate Loan Group
will equal the related Senior Percentage.

      Notwithstanding the foregoing, if on any Distribution Date the Senior
Percentage of a Senior Certificate Group exceeds the initial Senior Percentage
of such Senior Certificate Group as of the Closing Date, in which case the
Senior Prepayment Percentage for each Loan Group in that Aggregate Loan Group
for such Distribution Date will once again equal 100%.

      If on any Distribution Date the allocation to the Class or Classes of
Senior Certificates then entitled to distributions of principal of full and
partial principal prepayments and other amounts in the percentage required above
would reduce the outstanding Class Principal Balance of the Class or Classes
below zero, the distribution to the Class or Classes of Certificates of the
related Senior Percentage and/or Senior Prepayment Percentage, as


                                      S-95



applicable, of the related principal amounts for the Distribution Date will be
limited to the percentage necessary to reduce the related Class Principal
Balance(s) to zero.

      The "SUBORDINATED PREPAYMENT PERCENTAGE" for a Loan Group as of any
Distribution Date will be calculated as the difference between 100% and the
related Senior Prepayment Percentage.

      The "SENIOR TERMINATION DATE" for a Senior Certificate Group of Aggregate
Group II Certificates is the date on which the aggregate Class Principal Balance
of the Senior Certificates of such Senior Certificate Group is reduced to zero.

      The "AGGREGATE SUBORDINATED PERCENTAGE" for any Distribution Date and
Aggregate Loan Group is a fraction, expressed as a percentage, the numerator of
which is equal to the aggregate Class Principal Balance of the Subordinated
Certificates in the related Aggregate Certificate Group immediately prior to
such Distribution Date and the denominator of which is the aggregate Stated
Principal Balance of all the Mortgage Loans in that Aggregate Loan Group as of
the Due Date in the month preceding the month of such Distribution Date.

      SUBORDINATED PRINCIPAL DISTRIBUTION AMOUNT--The Group 1 Subordinated
Certificates. On each Distribution Date and with respect to Loan Group 1, to the
extent of Available Funds available therefor, the Principal Amount for Loan
Group 1, up to the amount of the Subordinated Principal Distribution Amount for
Loan Group 1 for the Distribution Date, will be distributed as principal of the
Group 1 Subordinated Certificates. Except as provided below under "Subordinated
Principal Distribution Amount - General," each Class of Group 1 Subordinated
Certificates will be entitled to receive its pro rata share of the related
Subordinated Principal Distribution Amount from Loan Group 1 (based on its
respective Class Principal Balance), in each case to the extent of the amount
available from Available Funds from Loan Group 1 for distribution of principal.
Distributions of principal of the Group 1 Subordinated Certificates will be made
sequentially to the Classes of Group 1 Subordinated Certificates, first to the
Class 1-M Certificates, beginning with the Class 1-M-1 Certificates, and then to
the Class 1-B Certificates, beginning with the Class 1-B-1 Certificates, in the
order of their numerical Class designations, in each case until their respective
Class Principal Balances are reduced to zero. For purposes of allocating
distributions and losses to the Group 1 Subordinated Certificates, the Class 1-M
Certificates have higher priority payment priorities than the Class 1-B
Certificates. Within the Class 1-M and Class 1-B Certificates, the payment
priorities are in numerical order.

      SUBORDINATED PRINCIPAL DISTRIBUTION AMOUNT--The Group II Aggregate
Subordinated Certificates. On each Distribution Date and with respect to
Aggregate Loan Group II, to the extent of Available Funds available therefor,
the Principal Amount for Loan Group 2 and Loan Group 3, up to the amount of the
Subordinated Principal Distribution Amount for Loan Group 2 and Loan Group 3 for
the Distribution Date, will be distributed as principal of the Aggregate Group
II Subordinated Certificates. Except as provided below under "Subordinated
Principal Distribution Amount - General," each Class of Aggregate Group II
Subordinated Certificates will be entitled to receive its pro rata share of the
related Subordinated Principal Distribution Amount from Aggregate Loan Group II
(based on its respective Class Principal Balance), in each case to the extent of
the amount available from Available Funds from Aggregate Loan Group II for
distribution of principal. Distributions of principal of the Aggregate Group II
Subordinated Certificates will be made sequentially to the Classes of Aggregate
Group II Subordinated Certificates, first to the Class M Certificates, beginning
with the Class M-1 Certificates, and then to the Class B Certificates, beginning
with the Class B-1 Certificates, in the order of their numerical Class
designations, in each case until their respective Class Principal Balances are
reduced to zero. For purposes of allocating distributions and losses to the
Aggregate Group II Subordinated Certificates, the Class M Certificates have
higher priority payment priorities than the Class B Certificates. Within the
Class M and Class B Certificates, the payment priorities are in numerical order.

      SUBORDINATED PRINCIPAL DISTRIBUTION AMOUNT - GENERAL. With respect to each
Class of Subordinated Certificates in an Aggregate Subordinated Certificate
Group (other than the Class of Subordinated Certificates in that Aggregate
Certificate Group then outstanding with the highest priority of distribution),
if on any Distribution Date the sum of the related Class Subordination
Percentages of such Class and all Classes of Subordinated Certificates in that
Aggregate Certificate Group which have higher numerical Class designations than
such Class (with respect to each Aggregate Certificate Group, the related
"APPLICABLE CREDIT SUPPORT PERCENTAGE") is less than


                                      S-96



the Applicable Credit Support Percentage for such Class on the date of issuance
of the Certificates (with respect to each Aggregate Certificate Group, the
related "ORIGINAL APPLICABLE CREDIT SUPPORT PERCENTAGE"), no distribution of
partial principal prepayments and principal prepayments in full from any Loan
Group in the related Aggregate Loan Group will be made to any of those Classes
of Subordinated Certificates in that Aggregate Certificate Group (the
"RESTRICTED CLASSES") and the amount of partial principal prepayments and
principal prepayments in full otherwise distributable to the Restricted Classes
in that Aggregate Certificate Group will be allocated among the remaining
Classes of Subordinated Certificates in that Aggregate Certificate Group, pro
rata, based upon their respective Class Principal Balances, and distributed in
the sequential order described above.

      The "CLASS SUBORDINATION PERCENTAGE" with respect to any Distribution Date
and each Class of Subordinated Certificates in an Aggregate Certificate Group,
will equal the fraction, expressed as a percentage, the numerator of which is
the Class Principal Balance of the Class of Subordinated Certificates
immediately before the Distribution Date and the denominator of which is the
aggregate of the Class Principal Balances of all Classes of Certificates in the
related Aggregate Certificate Group immediately before the Distribution Date.

      The approximate Original Applicable Credit Support Percentages for the
Subordinated Certificates in each Aggregate Certificate Group on the date of
issuance of the certificates are expected to be as follows:

THE GROUP 1                                             ORIGINAL APPLICABLE
SUBORDINATED CERTIFICATES                            CREDIT SUPPORT PERCENTAGE
---------------------------------------            -----------------------------
Class 1-M-1........................................             6.25%
Class 1-M-2........................................             4.70%
Class 1-M-3........................................             4.00%
Class 1-M-4........................................             3.45%
Class 1-M-5........................................             2.95%
Class 1-M-6........................................             2.55%
Class 1-M-7........................................             2.25%
Class 1-M-8........................................             1.95%
Class 1-M-9........................................             1.60%
Class 1-B-1........................................             1.40%
Class 1-B-2........................................             1.25%
Class 1-B-3........................................             0.90%
Class 1-B-4........................................             0.35%

THE AGGREGATE GROUP II                                   ORIGINAL APPLICABLE
SUBORDINATED CERTIFICATES                             CREDIT SUPPORT PERCENTAGE
---------------------------------------            -----------------------------
Class M-1..........................................             7.75%
Class M-2..........................................             4.75%
Class M-3..........................................             4.10%
Class M-4..........................................             3.10%
Class M-5..........................................             2.70%
Class M-6..........................................             2.10%
Class B-1..........................................             1.80%
Class B-2..........................................             1.35%
Class B-3..........................................             0.55%

      The "SUBORDINATED PRINCIPAL DISTRIBUTION AMOUNT" for any Loan Group and
Distribution Date will equal the sum of

      o   the Subordinated Percentage for that Loan Group of all amounts
          described in clauses 1. through 4. of the definition of Principal
          Amount for that Loan Group and that Distribution Date,


                                      S-97



      o   for each Mortgage Loan in that Loan Group that became a Liquidated
          Mortgage Loan during the calendar month preceding the month of the
          Distribution Date, the liquidation proceeds allocable to principal
          received on the Mortgage Loan, after application of the amounts
          pursuant to the second bulleted item of the definition of Senior
          Principal Distribution Amount for that Loan Group up to the related
          Subordinated Percentage of the Stated Principal Balance of the
          Liquidated Mortgage Loan as of the Due Date in the month preceding the
          month of that Distribution Date, and

      o   the related Subordinated Prepayment Percentage for that Loan Group of
          the sum of the amounts described in clauses 6. and 7. of the
          definition of Principal Amount for that Loan Group and that
          Distribution Date

minus, in the case of a Loan Group in Aggregate Loan Group II,

      o   any Transfer Payments Made for that Loan Group;

provided, however, that if a Bankruptcy Loss that is an Excess Loss is sustained
on a Mortgage Loan in that Loan Group that is not a Liquidated Mortgage Loan,
the Subordinated Principal Distribution Amount will be reduced on the related
Distribution Date by the Subordinated Percentage of the principal portion of the
Bankruptcy Loss.

      On any Distribution Date, in the case of the Group 1 Subordinated
Certificates, or after a Senior Termination Date, in the case of the Aggregate
Group II Certificates, with respect to the Senior Certificates in an Aggregate
Certificate Group, the Subordinated Principal Distribution Amount for the
Subordinated Certificates in that Aggregate Certificate Group will not be
calculated by Loan Group but will be calculated pursuant to the formula set
forth above based on the applicable Subordinated Percentage or Subordinated
Prepayment Percentage, as applicable, for the Subordinated Certificates in that
Aggregate Subordinated Certificate Group for such Distribution Date with respect
to all of the Mortgage Loans in the related Aggregate Loan Group, as opposed to
the Mortgage Loans only in the related Loan Group.

      Residual Certificates. The Class A-R Certificates will remain outstanding
for so long as the Issuing Entity shall exist, whether or not they are receiving
current distributions of principal or interest. In addition to distributions of
interest and principal as described above, on each Distribution Date, the
holders of the Class A-R Certificates will be entitled to receive certain
amounts as described in the Pooling and Servicing Agreement. It is not
anticipated that there will be any significant amounts remaining for that
distribution.

ALLOCATION OF LOSSES

      With respect to each Aggregate Certificate Group, the related "SENIOR
CREDIT SUPPORT DEPLETION DATE" is the date on which the aggregate Class
Principal Balance of the Subordinated Certificates in that Aggregate Certificate
Group has been reduced to zero.

      Allocation of Losses - Loan Group 1

      On each Distribution Date, the amount of any Realized Loss with respect to
Loan Group 1, other than any Excess Loss, will be allocated first to the Group 1
Subordinated Certificates, in the reverse order of their numerical Class
designations (beginning with the Class of Group 1 Subordinated Certificates then
outstanding with the highest numerical Class designation), in each case until
the Class Principal Balance of the respective Class of Certificates has been
reduced to zero, and then to the Senior Certificates (other than the Notional
Amount Certificates), pro rata, based upon their respective Class Principal
Balances, except that any Realized Losses on the Group 1 Mortgage Loans that
would otherwise be allocated to the Class 1-A-1 Certificates will instead be
allocated to the Class 1-A-2 Certificates, until its Class Principal Balance is
reduced to zero.

      On each Distribution Date, Excess Losses on the Mortgage Loans in Loan
Group 1 will be allocated pro rata among the Group 1 Senior Certificates (other
than any related Notional Amount Certificates) and the Group 1 Subordinated
Certificates pro rata based on their Class Principal Balances immediately prior
to that Distribution Date. Notwithstanding the foregoing, on any Distribution
Date on and after the related Senior Credit Support


                                      S-98



Depletion Date, any Excess Loss on the Mortgage Loans in Loan Group 1 will be
allocated pro rata among the Classes of Senior Certificates (other than the
Notional Amount Certificates) related to that Loan Group based on their
respective Class Principal Balances immediately prior to such Distribution Date.

      Unlike Realized Losses, any Excess Losses on the Group 1 Mortgage Loans
will be allocated proportionately among all related Classes of Certificates,
including the Class 1-A-1 Certificates, without any reallocation of those Excess
Losses to the Class 1-A-2 Certificates.

      Allocation of Losses - Aggregate Loan Group II

      On each Distribution Date, the amount of any Realized Loss with respect to
any Loan Group in Aggregate Loan Group II, other than any Excess Loss, will be
allocated first to the Aggregate Group II Subordinated Certificates, in the
reverse order of their numerical Class designations (beginning with the Class of
Aggregate Group II Subordinated Certificates then outstanding with the highest
numerical Class designation), in each case until the Class Principal Balance of
the respective Class of Certificates has been reduced to zero, and then to the
Senior Certificates (other than any related Notional Amount Certificates) of the
related Senior Certificate Group, pro rata, based upon their respective Class
Principal Balances except that (i) any Realized Losses on the Group 2 Mortgage
Loans that would otherwise be allocated to the Class 2-A-1 or Class 2-A-3
Certificates will instead be allocated to the Class 2-A-2 and Class 2-A-4
Certificates, respectively, until their respective Class Principal Balances are
reduced to zero and (ii) any Realized Losses on the Group 3 Mortgage Loans that
would otherwise be allocated to the Class 3-A-1 Certificates will instead be
allocated to the Class 3-A-2 Certificates, until its Class Principal Balance is
reduced to zero.

      On each Distribution Date, Excess Losses on the Mortgage Loans in a Loan
Group in Aggregate Loan Group II will be allocated pro rata among the Classes of
Senior Certificates (other than the Notional Amount Certificates) of the related
Senior Certificate Group and the Aggregate Group II Subordinated Certificates as
follows: (i) in the case of the Senior Certificates, the Senior Percentage of
such Excess Loss will be allocated among the Classes of Senior Certificates
(other than the Notional Amount Certificates) in the related Senior Certificate
Group pro rata based on their Class Principal Balances immediately prior to that
Distribution Date and (ii) in the case of the Aggregate Group II Subordinated
Certificates the Subordinated Percentage of such Excess Loss will be allocated
among the Classes of Aggregate Group II Subordinated Certificates pro rata based
on each Class' share of the related Subordinated Portion for the related Loan
Group; provided, however, on any Distribution Date after a Senior Termination
Date for an Aggregate Group II Senior Certificate Group, such Excess Losses on
the Mortgage Loans in the related Loan Group will be allocated to the Senior
Certificates (other than any related Notional Amount Certificates) and the
Subordinated Certificates in the related Aggregate Certificate Group based upon
their respective Class Principal Balances immediately prior to such Distribution
Date.

      Unlike Realized Losses, any Excess Losses on the Group 2 Mortgage Loans
will be allocated proportionately among all related Classes of Certificates,
including the Class 2-A-1 and Class 2-A-3 Certificates, without any reallocation
of those Excess Losses to the Class 2-A-2 or Class 2-A-4 Certificates.
Similarly, unlike Realized Losses, any Excess Losses on the Group 3 Mortgage
Loans will be allocated proportionately among all related Classes of
Certificates, including the Class 3-A-1 Certificates, without any reallocation
of those Excess Losses to the Class 3-A-2 Certificates.

      Allocation of Losses - General

      Because principal distributions are paid to some Classes of Certificates
(other than the Notional Amount Certificates) before other Classes of
Certificates, holders of the certificates that are entitled to receive principal
later bear a greater risk of being allocated Realized Losses on the Mortgage
Loans than holders of Classes that are entitled to receive principal earlier.

      The Pooling and Servicing Agreement does not permit the allocation of
Realized Losses to either class of Class P Certificates or to the Class C
Certificates.


                                      S-99



      In general, a "REALIZED LOSS" means, for a Liquidated Mortgage Loan, the
amount by which the remaining unpaid principal balance of the Mortgage Loan
exceeds the amount of liquidation proceeds (which for this purpose includes the
principal portion of the proceeds of any Additional Collateral with respect to
any Liquidated Mortgage Loan that is an Additional Collateral Mortgage Loan)
applied to the principal balance of the related Mortgage Loan. "EXCESS LOSSES"
for an Aggregate Loan Group are Special Hazard Losses in excess of the related
Special Hazard Loss Coverage Amount, Bankruptcy Losses in excess of the related
Bankruptcy Loss Coverage Amount and Fraud Losses in excess of the related Fraud
Loss Coverage Amount. "BANKRUPTCY LOSSES" are losses that are incurred as a
result of Debt Service Reductions and Deficient Valuations. "SPECIAL HAZARD
LOSSES" are Realized Losses in respect of Special Hazard Mortgage Loans. "FRAUD
LOSSES" are losses sustained on a Liquidated Mortgage Loan by reason of a
default arising from fraud, dishonesty or misrepresentation. See "Credit
Enhancement--Subordination" in this prospectus supplement and "Description of
Credit Support--Subordinate Certificates" in the accompanying prospectus.

      A "LIQUIDATED MORTGAGE LOAN" is a defaulted Mortgage Loan as to which the
related Servicer has determined that all recoverable liquidation and insurance
proceeds have been received. A "Special Hazard Mortgage Loan" is a Liquidated
Mortgage Loan as to which the ability to recover the full amount due thereunder
was substantially impaired by a hazard not insured against under a standard
hazard insurance policy of the type described in the accompanying prospectus
under "Description of the Agreements--Hazard Insurance Policies." See
"Description of the Certificates--Subordinated Certificates" in this prospectus
supplement and "Description of Credit Support--Subordinate Certificates" in the
accompanying prospectus.

SUBSEQUENT RECOVERIES

      The Pooling and Servicing Agreement will provide that Class Principal
Balances that have been reduced because of allocations of Realized Losses may
also be increased as a result of Subsequent Recoveries. If a final liquidation
of a Mortgage Loan resulted in a Realized Loss and thereafter the related
Servicer receives a recovery specifically related to that Mortgage Loan, such
recovery (net of any reimbursable expenses) shall be distributed to the
Certificateholders in the same manner as prepayments received in the related
Prepayment Period, to the extent that the related Realized Loss was allocated to
any Class of Certificates. In addition, the Class Principal Balance of each
Class of Certificates 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
Certificates in the related Aggregate Certificate Group. However, the Class
Principal Balance of each such Class of Certificates will not be increased by
more than the amount of Realized Losses previously applied to reduce the Class
Principal Balance of each such Class of Certificates. Holders of certificates
whose Class Principal 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 Principal Balance of a Class of Certificates was
previously reduced to zero. Accordingly, each Class of Certificates will be
considered to remain outstanding until the dissolution of the related Issuing
Entity.

      "SUBSEQUENT RECOVERIES" are unexpected recoveries, net of reimbursable
expenses, received by the related Servicer and remitted by it to the Securities
Administrator, with respect to a Liquidated Mortgage Loan that resulted in a
Realized Loss in a month prior to the month of receipt of such recoveries.

      An increase in a Certificate Balance caused by a Subsequent Recovery
should be treated by the Certificateholder as ordinary (or capital) income to
the extent that the Certificateholder claimed an ordinary (or capital) deduction
for any decrease in the Certificate Balance caused by Realized Losses. Potential
investors and holders of the certificates are urged to consult their own tax
advisors regarding the appropriate timing, amount and character of any income
realized with respect to their certificates as a result of Subsequent
Recoveries.

REPORTS TO CERTIFICATEHOLDERS

      On each Distribution Date, the Securities Administrator will make
available to the Trustee, the Depositor, each Certificateholder and the Rating
Agencies a statement (based on information received from the Master Servicer and
each Servicer) generally setting forth, among other things:


                                     S-100



      o   the amount of the distributions, separately identified, with respect
          to each Class of Certificates;

      o   the amount of the distributions set forth in the first clause above
          allocable to principal, separately identifying the aggregate amount of
          any principal prepayments, liquidation proceeds or other unscheduled
          recoveries of principal included in that amount;

      o   the amount of the distributions set forth in the first clause above
          allocable to interest and how it was calculated;

      o   the amount of any unpaid Interest Shortfall, both distributed and
          remaining unpaid with respect to each Class of Certificates, and with
          respect to the LIBOR Certificates, the amount paid under the Corridor
          Contracts;

      o   the Class Principal Balance or Notional Amount, as applicable, of each
          Class of Certificates after giving effect to the distribution of
          principal on that Distribution Date;

      o   if the distribution to the holders of such class of certificates is
          less than the full amount that would be distributable to such holders
          if there were sufficient funds available therefor, the amount of the
          shortfall and the allocation of the shortfall as between principal and
          interest, to the extent not otherwise reported;

      o   the aggregate Stated Principal Balance of the Mortgage Loans in each
          Loan Group and in each Aggregate Loan Group at the end of the related
          Prepayment Period, and the applicable Weighted Average Net Mortgage
          Rate and weighted average remaining term to maturity of each Loan
          Group, each Aggregate Loan Group and the Mortgage Pool at the
          beginning of the related Due Period;

      o   the Senior Percentage and the Subordinated Percentage for each Loan
          Group and each Aggregate Loan Group for the following Distribution
          Date;

      o   the Senior Prepayment Percentage and Subordinate Prepayment Percentage
          for each Loan Group and for each Aggregate Loan Group for the
          following Distribution Date;

      o   in the aggregate and with respect to each Loan Group, the amount of
          the Servicing Fee paid to or retained by the Master Servicer (as
          successor servicer) and by each Servicer;

      o   in the aggregate and with respect to each Loan Group, the amount of
          Monthly Advances for the related Due Period;

      o   in the aggregate and with respect to each Loan Group, the number and
          aggregate principal balance of the Mortgage Loans that were (A)
          delinquent (exclusive of Mortgage Loans in foreclosure) using the MBA
          Method (1) 30 to 59 days, (2) 60 to 89 days and (3) 90 or more days,
          (B) in foreclosure and delinquent (1) 30 to 59 days, (2) 60 to 89 days
          and (3) 90 or more days and (C) in bankruptcy as of the close of
          business on the last day of the calendar month preceding that
          Distribution Date;

      o   in the aggregate and with respect to each Loan Group, the total
          number, principal balance and market value (if available) of any REO
          properties as of the close of business on the last day of the
          preceding Due Period;

      o   in the aggregate and with respect to each Loan Group, the amount of
          Realized Losses incurred during the preceding calendar month;

      o   in the aggregate and with respect to each Loan Group, the cumulative
          amount of Realized Losses incurred since the Closing Date;


                                     S-101



      o   the Class Principal Balance or Notional Amount, as applicable, of each
          Class of Certificates after giving effect to the distribution of
          principal on the Distribution Date;

      o   if applicable, the Special Hazard Loss Coverage Amount, each Fraud
          Loss Coverage Amount and the Bankruptcy Loss Coverage Amount, in each
          case as of the related Determination Date;

      o   the Pass-Through Rate for each Class of Certificates for that
          Distribution Date;

      o   the total amount of prepayment penalties received with respect to such
          Distribution Date; and

      o   the Record Date for such distribution date.

      The Securities Administrator may make available each month, to any
interested party, the monthly statement to Certificateholders via the Securities
Administrator's website. The Securities Administrator's website will be located
at www.ctslink.com, and assistance in using the website can be obtained by
calling the Securities Administrator's customer service desk at (301) 815-6600.
Parties that are unable to use the above distribution option are entitled to
have a paper copy mailed to them via first class mail by notifying the
Securities Administrator at the following address: Wells Fargo Bank, National
Association, P.O. Box 98, Columbia, Maryland 21046 (or for overnight deliveries
at 9062 Old Annapolis Road, Columbia, Maryland 21045). The Securities
Administrator will have the right to change the way such reports are distributed
in order to make such distributions more convenient and/or more accessible, and
the Securities Administrator will provide timely and adequate notification to
such parties regarding any such changes.

      In addition, within a reasonable period of time after the end of each
calendar year, the Securities Administrator will, upon request, prepare and
deliver to the Depositor and each holder of a Certificate of record during the
previous calendar year a statement containing information necessary to enable
holders of the Certificates to prepare their tax returns. These statements will
not have been examined and reported upon by an independent public accountant.

      The Securities Administrator will make available on its website statements
to the certificateholders containing information with respect to principal and
interest payments and the Issuing Entity, as is described above. Copies of these
statements will be filed with the SEC through its EDGAR system located at
"http://www.sec.gov" under the name of the Issuing Entity as an exhibit to the
monthly distribution reports on Form 10-D for the Certificates for so long as
that Issuing Entity is subject to the reporting requirement of the Securities
Exchange Act of 1934, as amended. In addition, each Servicer will be required to
furnish to the Master Servicer or the Depositor, as applicable, the compliance
statements, Assessments of Compliance and Attestation Reports detailed under
"Servicing of the Mortgage Loans--Evidence as to Compliance." Copies of these
statements and reports will be filed with the SEC under the name of the related
Issuing Entity as an exhibit to such Issuing Entity's annual statement on Form
10-K for the related series of Certificates.

      In addition, the Depositor will cause to be filed, on behalf of the
Issuing Entity, the reports required under the Securities Act and under Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934. These reports
include (but are not limited to):

      o   Reports on Form 8-K (Current Report), following the issuance of the
          certificates of the Issuing Entity, including as Exhibits to the Form
          8-K the agreements described in this prospectus supplement;

      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 each
          Distribution Date; and


                                     S-102



      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 Master Servicer intends to file with the SEC
any reports required under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
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.
The Issuing Entity will have a separate file number assigned by the SEC, which
will be available after the Closing Date, and all of the above filings will be
made under that file number.

LAST SCHEDULED DISTRIBUTION DATE

      The "LAST SCHEDULED DISTRIBUTION DATE" for the Group 1 Certificates is the
Distribution Date in March 2036, which is the Distribution Date in the month
following the scheduled maturity date for the latest maturing Mortgage Loan in
Loan Group 1. The Last Scheduled Distribution Date for the Aggregate Group II
Certificates is the Distribution Date in March 2036, which is the Distribution
Date in the month following the scheduled maturity date for the latest maturing
Mortgage Loan in Aggregate Loan Group II. The actual final Distribution Date of
any Class of Certificates may be earlier or later, and could be substantially
earlier, than such class' Last Scheduled Distribution Date.

STRUCTURING ASSUMPTIONS

      Unless otherwise specified, the information in the 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":


                                     S-103



      o   Loan Group 1 consists of 126 Mortgage Loans with the following
          characteristics:

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



                                           CURRENT     ORIGINAL   REMAINING   INITIAL    SUBSEQUENT
                                CURRENT      NET       TERM TO     TERM TO    PERIODIC    PERIODIC
                   PRINCIPAL    MORTGAGE   MORTGAGE    MATURITY   MATURITY      RATE        RATE
     INDEX         BALANCE($)   RATE (%)   RATE (%)    (MONTHS)   (MONTHS)    CAP (%)      CAP (%)
--------------- -------------   --------   --------    --------   ---------   --------   -----------

6 Month LIBOR      449,064.61   6.81159     6.43659      360         359      2.00000      2.00000
6 Month LIBOR      161,000.00   6.87500     6.50000      360         360      2.00000      2.00000
6 Month LIBOR       65,502.34   7.50000     7.12500      360         358      2.00000      2.00000
6 Month LIBOR      324,424.94   6.62500     6.25000      360         358      2.00000      2.00000
6 Month LIBOR      224,093.94   7.12902     6.75402      360         357      3.00000      1.00000
6 Month LIBOR      134,298.77   8.19365     7.81865      360         350      3.00000      1.00000
6 Month LIBOR      975,680.61   6.94421     6.56921      360         354      3.00000      1.00000
6 Month LIBOR       56,723.24   7.05000     6.67500      360         350      3.00000      1.00000
6 Month LIBOR      180,000.00   6.34000     5.96500      360         358      3.00000      1.00000
6 Month LIBOR      101,795.82   6.34000     5.96500      360         350      3.00000      1.00000
6 Month LIBOR      409,520.00   5.72819     5.35319      360         350      3.00000      1.00000
6 Month LIBOR      464,000.00   7.75000     7.37500      360         356      5.00000      1.00000
6 Month LIBOR      835,800.00   7.14319     6.76819      360         359      2.00000      2.00000
6 Month LIBOR      821,250.00   6.94422     6.56922      360         358      2.00000      2.00000
6 Month LIBOR      229,200.00   7.62500     7.25000      360         359      2.00000      2.00000
6 Month LIBOR    3,056,950.00   7.41150     7.03650      360         359      2.00000      2.00000
6 Month LIBOR      142,146.00   7.25000     6.87500      360         359      2.00000      2.00000
6 Month LIBOR    2,071,475.93   6.35240     5.97740      360         356      3.00000      1.00000
1 Year LIBOR       312,142.78   5.55977     5.18477      360         355      2.00000      2.00000
1 Year LIBOR       555,917.13   6.35812     5.98312      360         354      6.00000      2.00000
1 Year CMT      39,901,720.28   5.24258     4.99258      360         329      2.00000      2.00000
1 Year CMT         470,584.19   4.25000     4.00000      360         330      6.00000      2.00000
1 Year LIBOR       114,901.63   5.82500     5.45000      360         349      2.00000      2.00000
1 Year LIBOR       132,000.00   5.57500     5.20000      360         350      2.00000      2.00000
1 Year LIBOR       496,000.00   6.12500     5.75000      360         354      6.00000      2.00000
1 Year LIBOR       208,000.00   5.75000     5.37500      360         351      6.00000      2.00000
1 Year LIBOR       544,000.00   6.25000     5.87500      360         358      2.00000      2.00000
1 Year LIBOR     2,973,170.30   6.40402     6.02902      360         357      6.00000      2.00000
1 Year LIBOR       583,200.00   6.75000     6.37500      360         359      6.00000      2.00000
1 Year LIBOR       572,000.00   6.50000     6.12500      360         358      6.00000      2.00000
1 Year LIBOR       163,000.00   6.75000     6.37500      360         358      6.00000      2.00000


                                                                    RATE        REMAINING
                   GROSS     MAXIMUM     MINIMUM    MONTHS TO       RESET     INTEREST-ONLY
                  MARGIN    MORTGAGE    MORTGAGE    NEXT RATE     FREQUENCY      PERIOD
     INDEX          (%)     RATE (%)    RATE (%)    ADJUSTMENT    (MONTHS)      (MONTHS)
--------------    -------   --------    --------    ----------    ---------   -------------

6 Month LIBOR     5.00000   12.81159     6.81159        23            6            N/A
6 Month LIBOR     5.00000   12.87500     6.87500        24            6            N/A
6 Month LIBOR     5.00000   13.50000     7.50000        22            6            N/A
6 Month LIBOR     5.00000   12.62500     6.62500        22            6            N/A
6 Month LIBOR     5.00000   12.12902     5.00000        21            6            N/A
6 Month LIBOR     6.12118   15.19365     8.19365        14            6            N/A
6 Month LIBOR     4.65957   12.78478     4.65957        18            6            N/A
6 Month LIBOR     5.09000   14.05000     7.05000        14            6            N/A
6 Month LIBOR     5.00000   12.34000     6.34000        22            6            22
6 Month LIBOR     4.38000   13.34000     6.34000        14            6            14
6 Month LIBOR     3.67759   12.72819     4.74967        14            6            14
6 Month LIBOR     5.00000   12.75000     5.00000        20            6            20
6 Month LIBOR     5.00000   13.14319     7.14319        23            6            59
6 Month LIBOR     5.00000   12.94422     6.94422        22            6            58
6 Month LIBOR     5.00000   13.62500     7.62500        23            6            119
6 Month LIBOR     5.00000   13.41150     6.47182        23            6            119
6 Month LIBOR     5.00000   13.25000     7.25000        23            6            119
6 Month LIBOR     3.98355   12.22574     3.09192        20            6            116
1 Year LIBOR      2.25000   11.05539     2.25000        31           12            N/A
1 Year LIBOR      2.25000   12.35812     2.25000        30           12            N/A
1 Year CMT        2.74615   10.88835     2.74615        9            12            N/A
1 Year CMT        2.75000   10.25000     2.75000        6            12            N/A
1 Year LIBOR      2.45000   11.82500     2.45000        25           12            25
1 Year LIBOR      2.45000   11.57500     2.45000        26           12            26
1 Year LIBOR      2.25000   12.12500     2.25000        30           12            30
1 Year LIBOR      2.25000   11.75000     2.25000        27           12            27
1 Year LIBOR      2.25000   11.25000     4.25000        34           12            118
1 Year LIBOR      2.25000   12.40402     2.25000        33           12            117
1 Year LIBOR      2.25000   12.75000     2.25000        35           12            119
1 Year LIBOR      2.25000   12.50000     2.25000        34           12            118
1 Year LIBOR      2.25000   12.75000     2.25000        34           12            118



                                     S-104



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



                                           CURRENT     ORIGINAL   REMAINING   INITIAL    SUBSEQUENT
                                CURRENT      NET       TERM TO     TERM TO    PERIODIC    PERIODIC
                   PRINCIPAL    MORTGAGE   MORTGAGE    MATURITY   MATURITY      RATE        RATE
     INDEX         BALANCE($)   RATE (%)   RATE (%)    (MONTHS)   (MONTHS)    CAP (%)      CAP (%)
---------------  ------------   --------   --------    --------   ---------   --------   -----------

6 Month LIBOR      238,273.70    6.25000    5.87500      360         359      2.00000      2.00000
6 Month LIBOR      384,318.77    6.62500    6.25000      360         358      2.00000      2.00000
6 Month LIBOR    1,063,285.76    7.44962    7.07462      360         357      3.00000      1.00000
6 Month LIBOR      160,847.24    6.25000    5.87500      360         357      3.00000      1.00000
6 Month LIBOR      583,564.74    5.71435    5.33935      360         356      6.00000      2.00000
6 Month LIBOR      147,878.68    7.00000    6.62500      360         358      2.00000      1.00000
6 Month LIBOR    8,929,271.00    5.47164    5.21309      360         356      6.00000      2.00000
6 Month LIBOR      471,200.00    6.50000    6.12500      360         358      2.00000      2.00000
6 Month LIBOR      628,000.00    6.75000    6.37500      360         358      6.00000      2.00000
6 Month LIBOR      644,000.00    7.62500    7.25000      360         359      2.00000      2.00000
6 Month LIBOR    3,054,996.83    6.22943    5.85443      360         356      6.00000      1.91386
6 Month LIBOR      576,000.00    5.87500    5.50000      360         358      6.00000      2.00000
6 Month LIBOR    1,658,300.00    6.03611    5.66111      360         358      6.00000      2.00000
1 Year LIBOR       444,607.39    6.62500    6.25000      360         359      6.00000      2.00000
1 Year LIBOR     6,669,484.23    5.93878    5.66362      360         356      5.00000      2.00000
1 Year LIBOR       459,613.55    6.87500    6.50000      360         359      6.00000      2.00000
1 Year LIBOR     1,001,957.19    6.22304    5.84804      360         359      5.00000      2.00000
1 Year LIBOR       480,800.00    5.87500    5.50000      360         354      6.00000      2.00000
1 Year LIBOR    37,586,666.66    6.51512    6.25426      360         358      5.00000      2.00000
1 Year LIBOR     1,781,000.00    6.68831    6.31331      360         357      5.00000      2.00000
1 Year LIBOR    21,510,796.73    6.41900    6.04400      360         358      6.00000      2.00000
1 Year LIBOR     3,037,800.00    6.14753    5.77253      360         358      6.00000      2.00000
6 Month LIBOR       80,000.00    8.12500    7.75000      360         360      6.00000      2.00000
6 Month LIBOR      115,305.38    6.87500    6.50000      360         357      3.00000      1.00000
6 Month LIBOR      155,743.45    6.99900    6.62400      360         358      4.99100      1.00000
6 Month LIBOR    2,231,177.66    6.57732    6.20232      360         358      5.00000      1.00000
6 Month LIBOR      938,536.98    6.16351    5.78851      360         358      5.00000      1.00000
6 Month LIBOR      143,511.91    6.87500    6.50000      360         356      5.00000      1.00000
6 Month LIBOR    4,588,757.42    7.00880    6.63380      360         357      6.00000      2.00000
6 Month LIBOR      703,721.89    6.50000    6.12500      360         358      6.00000      2.00000
6 Month LIBOR      628,219.36    5.98254    5.60754      360         357      6.00000      2.00000
6 Month LIBOR    2,226,570.00    6.74876    6.37376      360         359      6.00000      2.00000
6 Month LIBOR    8,676,849.82    6.73591    6.47660      360         358      5.00000      1.00000


                                                                    RATE        REMAINING
                   GROSS     MAXIMUM     MINIMUM    MONTHS TO       RESET     INTEREST-ONLY
                  MARGIN    MORTGAGE    MORTGAGE    NEXT RATE     FREQUENCY      PERIOD
     INDEX          (%)     RATE (%)    RATE (%)    ADJUSTMENT    (MONTHS)      (MONTHS)
--------------    -------   --------    --------    ----------    ---------   -------------

6 Month LIBOR     5.00000   12.25000     5.00000        35             6           N/A
6 Month LIBOR     5.00000   12.62500     6.62500        34             6           N/A
6 Month LIBOR     5.62022   12.76129     5.62022        33             6           N/A
6 Month LIBOR     5.00000   11.25000     5.00000        33             6           N/A
6 Month LIBOR     2.25000   11.71435     2.25000        32             6           N/A
6 Month LIBOR     2.25000   13.00000     2.25000        34             6           34
6 Month LIBOR     2.01711   11.47164     2.01711        32             6           32
6 Month LIBOR     5.00000   12.50000     6.50000        34             6           58
6 Month LIBOR     2.25000   12.75000     2.25000        34             6           118
6 Month LIBOR     5.00000   13.62500     7.62500        35             6           119
6 Month LIBOR     2.50119   12.22943     2.50119        32             6           116
6 Month LIBOR     2.25000   11.87500     2.25000        34             6           118
6 Month LIBOR     2.25000   12.03611     2.25000        34             6           118
1 Year LIBOR      2.25000   12.62500     2.25000        59            12           N/A
1 Year LIBOR      2.25000   10.93878     2.25000        56            12           N/A
1 Year LIBOR      2.25000   12.87500     2.25000        59            12           N/A
1 Year LIBOR      2.75000   11.22304     2.75000        59            12           59
1 Year LIBOR      2.25000   11.87500     2.25000        54            12           54
1 Year LIBOR      2.25732   11.51512     2.25732        58            12           118
1 Year LIBOR      2.25000   11.68831     2.25000        57            12           117
1 Year LIBOR      2.26006   12.41900     2.26006        58            12           118
1 Year LIBOR      2.25000   12.14753     2.25000        58            12           118
6 Month LIBOR     2.25000   14.12500     2.25000        60             6           N/A
6 Month LIBOR     5.00000   11.87500     5.00000        57             6           N/A
6 Month LIBOR     3.50000   11.99900     3.50000        58             6           N/A
6 Month LIBOR     3.01746   11.57732     3.01746        58             6           N/A
6 Month LIBOR     2.66351   11.16351     2.66351        58             6           N/A
6 Month LIBOR     5.00000   11.87500     2.25000        56             6           N/A
6 Month LIBOR     2.25000   13.00880     2.25000        57             6           N/A
6 Month LIBOR     2.25000   12.50000     2.25000        58             6           N/A
6 Month LIBOR     3.12398   11.98254     3.68015        57             6           N/A
6 Month LIBOR     2.25000   12.74876     2.25000        59             6           59
6 Month LIBOR     2.25931   11.73591     2.25931        58             6           58



                                     S-105



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



                                           CURRENT     ORIGINAL   REMAINING   INITIAL    SUBSEQUENT
                                CURRENT       NET      TERM TO     TERM TO    PERIODIC    PERIODIC
                   PRINCIPAL    MORTGAGE   MORTGAGE    MATURITY   MATURITY      RATE        RATE
     INDEX         BALANCE($)   RATE (%)   RATE (%)    (MONTHS)   (MONTHS)    CAP (%)      CAP (%)
---------------  ------------   --------   --------    --------   ---------   --------   -----------

6 Month LIBOR    10,996,630.38   6.08303    5.77855      360         356      6.00000      2.00000
6 Month LIBOR     2,266,000.00   6.73023    6.35523      360         360      6.00000      2.00000
6 Month LIBOR       650,000.00   5.99900    5.62400      360         359      4.99100      1.00000
6 Month LIBOR    12,306,189.93   6.59352    6.21852      360         358      5.00000      1.00000
6 Month LIBOR       130,800.00   6.87500    6.50000      360         356      5.00000      1.00000
6 Month LIBOR     4,826,304.99   6.38139    6.00639      360         359      5.00000      1.00000
6 Month LIBOR     7,001,254.00   6.43651    6.06151      360         358      6.00000      2.00000
6 Month LIBOR     2,090,800.00   6.78276    6.40776      360         358      6.00000      2.00000
6 Month LIBOR    14,929,984.19   6.06082    5.68582      360         358      6.00000      2.00000
6 Month LIBOR     1,440,156.00   6.06272    5.68772      360         358      6.00000      2.00000
1 Month LIBOR     1,000,000.00   6.62500    6.25000      342         340      Uncapped     Uncapped
1 Month LIBOR       948,100.00   5.87500    5.50000      347         345      Uncapped     Uncapped
1 Month LIBOR     4,564,000.00   7.12171    6.74671      360         358      1.00000      1.00000
1 Month LIBOR     2,504,000.00   7.59703    7.22203      360         358      1.00000      1.00000
1 Month LIBOR     1,076,800.00   7.07336    6.69836      360         357      1.00000      1.00000
1 Month LIBOR       720,000.00   7.50000    7.12500      360         358      1.00000      1.00000
1 Month LIBOR       756,000.00   6.50000    6.12500      360         359      6.00000      1.00000
6 Month LIBOR       838,043.78   6.99615    6.62115      360         359      1.00000      1.00000
6 Month LIBOR       510,503.34   6.12500    5.75000      360         359      1.00000      1.00000
6 Month LIBOR       974,118.59   6.50000    6.12500      360         359      5.50000      Uncapped
6 Month LIBOR        50,000.00   5.50000    5.12500      360         355      1.00000      1.00000
6 Month LIBOR       468,000.00   5.62500    5.25000      360         358      6.00000      1.00000
6 Month LIBOR       377,000.00   7.00000    6.62500      360         359      1.00000      1.00000
6 Month LIBOR       999,765.62   5.62500    5.25000      341         337      Uncapped     Uncapped
6 Month LIBOR     9,077,514.00   5.54452    5.16952      360         358      1.00000      1.00000
6 Month LIBOR     6,114,960.00   6.51606    6.14106      360         358      1.00000      1.00000
6 Month LIBOR       504,483.99   6.01823    5.64323      360         358      1.00000      1.00000
6 Month LIBOR       660,000.00   4.75000    4.37500      360         358      1.00000      1.00000
6 Month LIBOR       177,210.00   5.87500    5.50000      360         357      1.00000      1.00000
6 Month LIBOR     1,120,000.00   6.67857    6.30357      360         359      1.00000      1.00000
6 Month LIBOR       450,000.00   5.12500    4.75000      360         355      2.00000      2.00000
6 Month LIBOR       375,999.34   5.75000    5.37500      360         358      6.00000      2.00000
6 Month LIBOR       700,000.00   6.87500    6.50000      360         358      6.00000      1.00000


                                                                    RATE        REMAINING
                   GROSS     MAXIMUM     MINIMUM    MONTHS TO       RESET     INTEREST-ONLY
                  MARGIN    MORTGAGE    MORTGAGE    NEXT RATE     FREQUENCY      PERIOD
     INDEX          (%)     RATE (%)    RATE (%)    ADJUSTMENT    (MONTHS)      (MONTHS)
--------------    -------   --------    --------    ----------    ---------   -------------

6 Month LIBOR     2.10895   12.08303     2.10895        56            6            56
6 Month LIBOR     2.25000   12.73023     2.25000        60            6            120
6 Month LIBOR     2.50000   10.99900     2.50000        59            6            119
6 Month LIBOR     3.05471   11.59352     3.05471        58            6            118
6 Month LIBOR     2.25000   11.87500     2.25000        56            6            116
6 Month LIBOR     2.78064   11.38139     2.78368        59            6            119
6 Month LIBOR     2.28130   12.43651     2.28130        58            6            118
6 Month LIBOR     2.25000   12.78276     2.25000        58            6            118
6 Month LIBOR     2.25472   12.06082     2.25472        58            6            118
6 Month LIBOR     2.25000   12.06272     2.25000        58            6            118
1 Month LIBOR     2.50000   12.00000     2.50000        1             1            118
1 Month LIBOR     1.75000   12.00000     1.75000        1             1            118
1 Month LIBOR     2.25000   13.12171     2.25000        1             1            118
1 Month LIBOR     2.75000    9.99900     2.75000        1             1            118
1 Month LIBOR     2.38039   12.03261     2.38039        1             1            117
1 Month LIBOR     2.25000   13.50000     2.25000        1             1            118
1 Month LIBOR     2.25000   12.50000     2.25000        2             1            119
6 Month LIBOR     2.25000   12.99615     2.25000        5             6            N/A
6 Month LIBOR     2.25000   12.12500     2.25000        5             6            N/A
6 Month LIBOR     2.25000   12.00000     2.25000        5             6            N/A
6 Month LIBOR     2.25000   11.50000     2.25000        1             6             1
6 Month LIBOR     3.25000   11.62500     3.25000        4             6             4
6 Month LIBOR     2.25000   13.00000     2.25000        5             6            119
6 Month LIBOR     1.87500   12.00000     1.87500        2             6            116
6 Month LIBOR     2.72329   11.54452     2.72885        4             6            118
6 Month LIBOR     2.32809   12.51606     2.63018        4             6            118
6 Month LIBOR     3.25000   12.01823     3.25000        4             6            118
6 Month LIBOR     2.50000   10.75000     2.50000        4             6            118
6 Month LIBOR     3.25000   11.87500     3.25000        3             6            117
6 Month LIBOR     2.25000   12.67857     2.25000        5             6            119
6 Month LIBOR     2.00000   11.12500     2.25000        1             6            115
6 Month LIBOR     2.75000   11.75000     2.75000        4             6            118
6 Month LIBOR     2.25000   12.87500     2.25000        4             6            118



                                     S-106



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



                                           CURRENT     ORIGINAL   REMAINING   INITIAL    SUBSEQUENT
                                CURRENT       NET      TERM TO     TERM TO    PERIODIC    PERIODIC
                   PRINCIPAL    MORTGAGE   MORTGAGE    MATURITY   MATURITY      RATE        RATE
     INDEX         BALANCE($)   RATE (%)   RATE (%)    (MONTHS)   (MONTHS)    CAP (%)      CAP (%)
---------------  ------------   --------   --------    --------   ---------   --------   -----------

6 Month LIBOR      506,400.00    6.50000    6.12500      360         358      6.00000      2.00000
1 Year LIBOR       781,868.61    5.58010    5.20510      360         356      2.00000      2.00000
1 Year LIBOR     1,232,000.00    5.33036    4.95536      360         357      2.00000      2.00000
Fixed            1,100,075.37    6.95513    6.70513      360*        359        N/A          N/A
Fixed              637,398.41    6.87500    6.62500      360*        359        N/A          N/A
Fixed           24,466,277.00    6.33944    6.08944      360         357        N/A          N/A
Fixed              670,899.31    6.87500    6.62500      360         359        N/A          N/A
Fixed               97,923.55    7.25000    7.00000      360         359        N/A          N/A
Fixed               90,644.90    7.12500    6.87500      360         349        N/A          N/A
Fixed              863,377.87    6.73246    6.48246      360         357        N/A          N/A
Fixed              126,014.28    7.12500    6.87500      360         351        N/A          N/A
Fixed              201,448.83    5.88081    5.63081      360         355        N/A          N/A
Fixed            6,222,866.79    6.50901    6.25901      360         358        N/A          N/A
Fixed              462,000.00    7.87500    7.62500      360         359        N/A          N/A
Fixed              117,947.63    5.75000    5.50000      360         357        N/A          N/A
Fixed            2,329,834.48    6.23675    5.98675      360         357        N/A          N/A
Fixed              136,000.00    5.80000    5.55000      360         353        N/A          N/A
Fixed              884,000.00    6.37500    6.12500      360         358        N/A          N/A
Fixed           49,414,431.49    6.51915    6.26915      360         358        N/A          N/A
Fixed            5,032,969.75    6.60009    6.35009      360         358        N/A          N/A
Fixed              296,000.00    6.50000    6.25000      360         359        N/A          N/A
Fixed              430,600.00    6.30231    6.05231      360         357        N/A          N/A
Fixed              132,000.00    7.87500    7.62500      360         352        N/A          N/A
Fixed              188,000.00    6.75000    6.50000      360         359        N/A          N/A
Fixed              212,000.00    7.00000    6.75000      360         359        N/A          N/A
Fixed           23,357,855.53    6.25316    6.00316      360         357        N/A          N/A
Fixed              166,000.00    6.50000    6.25000      360         359        N/A          N/A
Fixed              359,650.00    5.87500    5.62500      360         356        N/A          N/A
Fixed           10,450,555.43    6.48434    6.23434      360         358        N/A          N/A


                                                                    RATE        REMAINING
                   GROSS     MAXIMUM     MINIMUM    MONTHS TO       RESET     INTEREST-ONLY
                  MARGIN    MORTGAGE    MORTGAGE    NEXT RATE     FREQUENCY      PERIOD
     INDEX          (%)     RATE (%)    RATE (%)    ADJUSTMENT    (MONTHS)      (MONTHS)
--------------    -------   --------    --------    ----------    ---------   -------------

6 Month LIBOR     2.25000   12.50000     2.25000         4             6           118
1 Year LIBOR      2.75000   11.58010     2.75000         8            12           N/A
1 Year LIBOR      2.25000   11.33036     2.25000         9            12            9
Fixed              N/A         N/A         N/A          N/A           N/A          N/A
Fixed              N/A         N/A         N/A          N/A           N/A          N/A
Fixed              N/A         N/A         N/A          N/A           N/A          N/A
Fixed              N/A         N/A         N/A          N/A           N/A          N/A
Fixed              N/A         N/A         N/A          N/A           N/A          N/A
Fixed              N/A         N/A         N/A          N/A           N/A          N/A
Fixed              N/A         N/A         N/A          N/A           N/A          N/A
Fixed              N/A         N/A         N/A          N/A           N/A          N/A
Fixed              N/A         N/A         N/A          N/A           N/A          N/A
Fixed              N/A         N/A         N/A          N/A           N/A          N/A
Fixed              N/A         N/A         N/A          N/A           N/A          N/A
Fixed              N/A         N/A         N/A          N/A           N/A          N/A
Fixed              N/A         N/A         N/A          N/A           N/A          N/A
Fixed              N/A         N/A         N/A          N/A           N/A          53
Fixed              N/A         N/A         N/A          N/A           N/A          58
Fixed              N/A         N/A         N/A          N/A           N/A          118
Fixed              N/A         N/A         N/A          N/A           N/A          118
Fixed              N/A         N/A         N/A          N/A           N/A          119
Fixed              N/A         N/A         N/A          N/A           N/A          117
Fixed              N/A         N/A         N/A          N/A           N/A          112
Fixed              N/A         N/A         N/A          N/A           N/A          119
Fixed              N/A         N/A         N/A          N/A           N/A          119
Fixed              N/A         N/A         N/A          N/A           N/A          117
Fixed              N/A         N/A         N/A          N/A           N/A          119
Fixed              N/A         N/A         N/A          N/A           N/A          116
Fixed              N/A         N/A         N/A          N/A           N/A          118


*     Balloon Loan with original amortization of 480 months.


                                     S-107



o     Loan Group 2 consists of 55 Mortgage Loans with the following
      characteristics:
--------------------------------------------------------------------------------



                                           CURRENT     ORIGINAL   REMAINING   INITIAL    SUBSEQUENT
                                CURRENT      NET       TERM TO     TERM TO    PERIODIC    PERIODIC
                   PRINCIPAL    MORTGAGE   MORTGAGE    MATURITY   MATURITY      RATE        RATE
     INDEX         BALANCE($)   RATE (%)   RATE (%)    (MONTHS)   (MONTHS)    CAP (%)      CAP (%)
---------------  ------------   --------   --------    --------   ---------   --------   -----------

6 Month LIBOR      311,907.34    7.87500    7.50000      360*        359      6.00000      2.00000
1 Year LIBOR       246,474.07    5.92674    5.55174      360         353      2.00000      2.00000
1 Year LIBOR     1,287,865.14    5.93066    5.56765      360         355      5.00000      2.00000
1 Year LIBOR       134,437.88    7.75000    7.37500      360         357      5.62500      2.00000
1 Year LIBOR     7,477,179.32    6.40657    6.03157      360         357      6.00000      2.00607
1 Year LIBOR       653,890.14    6.33034    5.95534      360         359      6.00000      2.00000
1 Year CMT         145,106.45    6.87500    6.50000      360         356      2.00000      2.00000
1 Year CMT         118,482.27    5.00000    4.62500      360         353      5.00000      2.00000
1 Year LIBOR       124,600.00    6.62500    6.25000      360         359      6.00000      2.00000
1 Year LIBOR       125,600.00    6.00000    5.62500      360         359      6.00000      2.00000
1 Year LIBOR       384,700.00    6.29647    5.92147      360         350      2.00000      2.00000
1 Year LIBOR       126,858.94    6.00000    5.62500      360         350      2.00000      2.00000
1 Year LIBOR     2,603,901.79    5.78529    5.41029      360         356      5.00000      2.00000
1 Year LIBOR       287,192.00    5.12500    4.75000      360         356      5.00000      2.00000
1 Year LIBOR     4,625,745.67    6.26196    5.88696      360         355      6.00000      2.01319
1 Year LIBOR       514,288.00    5.98002    5.60502      360         354      6.00000      2.09666
1 Year LIBOR       244,000.00    7.25000    6.87500      360         358      6.00000      2.00000
1 Year CMT         699,300.00    5.87500    5.50000      360         358      5.00000      2.00000
1 Year LIBOR     3,573,101.19    6.44211    6.12572      360         357      5.00000      2.00000
1 Year LIBOR       610,800.00    6.25139    5.87639      360         359      5.00000      2.00000
1 Year LIBOR    26,778,347.52    6.36110    5.98610      360         357      6.00000      2.00000
1 Year LIBOR       845,000.00    7.50000    7.12500      360         359      6.00000      2.00000
1 Year LIBOR    11,622,616.94    6.36538    5.99038      360         357      6.00000      2.00000
1 Year LIBOR       380,000.00    6.00000    5.62500      360         357      6.00000      2.00000
1 Year LIBOR     1,302,118.00    6.30822    5.93322      360         358      6.00000      2.00000
1 Year LIBOR       391,200.00    6.25000    5.87500      360         359      6.00000      2.00000
6 Month LIBOR       67,954.37    8.00000    7.62500      360         357      3.00000      1.00000
6 Month LIBOR      595,000.00    6.37500    6.00000      360         357      3.00000      1.00000
6 Month LIBOR    3,492,510.40    6.82379    6.44879      360         357      5.00000      1.00000
6 Month LIBOR    8,352,707.94    6.42033    6.04533      360         357      6.00000      1.75311
6 Month LIBOR      358,612.25    6.05908    5.68408      360         358      6.00000      2.00000


                                                                    RATE        REMAINING
                   GROSS     MAXIMUM     MINIMUM    MONTHS TO       RESET     INTEREST-ONLY
                  MARGIN    MORTGAGE    MORTGAGE    NEXT RATE     FREQUENCY      PERIOD
     INDEX          (%)     RATE (%)    RATE (%)    ADJUSTMENT    (MONTHS)      (MONTHS)
--------------    -------   --------    --------    ----------    ---------   -------------

6 Month LIBOR     2.25000   13.87500     2.25000        59             6           N/A
1 Year LIBOR      2.66380   11.55891     2.66380        53            12           N/A
1 Year LIBOR      2.32540   10.93066     2.32540        55            12           N/A
1 Year LIBOR      2.25000   13.37500     2.25000        57            12           N/A
1 Year LIBOR      2.49687   12.40657     2.49687        57            12           N/A
1 Year LIBOR      2.25000   12.33034     2.25000        59            12           N/A
1 Year CMT        3.37500   11.87500     3.37500        56            12           N/A
1 Year CMT        2.75000   10.00000     2.75000        53            12           N/A
1 Year LIBOR      2.25000   12.62500     2.25000        59            12           59
1 Year LIBOR      2.25000   12.00000     2.25000        59            12           59
1 Year LIBOR      2.30235   12.29647     2.30235        50            12           50
1 Year LIBOR      2.25000   12.00000     2.25000        50            12           50
1 Year LIBOR      2.33686   10.95900     2.33686        56            12           56
1 Year LIBOR      2.75000   11.12500     2.75000        56            12           56
1 Year LIBOR      2.25000   12.26196     2.25000        55            12           55
1 Year LIBOR      2.25000   11.98002     2.25000        54            12           54
1 Year LIBOR      2.25000   13.25000     2.25000        58            12           58
1 Year CMT        2.75000   10.87500     2.75000        58            12           58
1 Year LIBOR      2.25000   11.44211     2.25000        57            12           117
1 Year LIBOR      2.25000   11.25139     2.25000        59            12           119
1 Year LIBOR      2.28119   12.36110     2.28119        57            12           117
1 Year LIBOR      2.25000   13.50000     2.25000        59            12           119
1 Year LIBOR      2.25000   12.36835     2.25000        57            12           117
1 Year LIBOR      2.25000   12.00000     2.25000        57            12           117
1 Year LIBOR      2.25000   12.30822     2.25000        58            12           118
1 Year LIBOR      2.25000   12.25000     2.25000        59            12           119
6 Month LIBOR     5.00000   13.00000     5.00000        57             6           N/A
6 Month LIBOR     5.00000   11.37500     5.00000        57             6           N/A
6 Month LIBOR     2.73389   11.84457     2.80774        57             6           N/A
6 Month LIBOR     2.37855   12.42033     2.37862        57             6           N/A
6 Month LIBOR     2.25000   12.05908     2.25000        58             6           N/A



                                     S-108



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



                                           CURRENT     ORIGINAL   REMAINING   INITIAL    SUBSEQUENT
                                CURRENT      NET       TERM TO     TERM TO    PERIODIC    PERIODIC
                   PRINCIPAL    MORTGAGE   MORTGAGE    MATURITY   MATURITY      RATE        RATE
     INDEX         BALANCE($)   RATE (%)   RATE (%)    (MONTHS)   (MONTHS)    CAP (%)      CAP (%)
---------------  ------------   --------   --------    --------   ---------   --------   -----------

6 Month LIBOR      449,502.72    5.78640    5.41140      360         355      6.00000      1.00000
6 Month LIBOR      133,578.26    5.75000    5.37500      360         357      6.00000      2.00000
6 Month LIBOR      838,126.97    6.00222    5.62722      360         355      6.00000      1.26441
6 Month LIBOR      309,691.39    6.00000    5.62500      360         359      6.00000      2.00000
6 Month LIBOR      287,031.76    5.87500    5.50000      360         350      6.00000      2.00000
6 Month LIBOR      528,500.00    7.01490    6.63990      360         357      3.00000      1.00000
6 Month LIBOR    5,588,704.27    6.31915    6.05058      360         356      5.00000      1.00000
6 Month LIBOR   36,135,056.72    5.51542    5.25134      360         355      6.00000      2.00000
6 Month LIBOR      196,000.00    7.25000    6.87500      360         359      6.00000      2.00000
6 Month LIBOR      324,000.00    6.62500    6.25000      360         359      6.00000      2.00000
6 Month LIBOR   16,649,290.95    6.60609    6.22562      360         356      5.00000      1.00000
6 Month LIBOR      736,000.00    7.50000    7.12500      360         357      5.00000      1.00000
6 Month LIBOR      534,397.21    6.69367    6.31867      360         356      5.00000      1.00000
6 Month LIBOR       97,986.35    6.87500    6.50000      360         356      5.00000      1.00000
6 Month LIBOR      151,920.00    6.50000    6.12500      360         356      5.00000      1.00000
6 Month LIBOR      121,930.00    6.87500    6.50000      360         356      5.00000      1.00000
6 Month LIBOR    7,105,430.47    6.37780    6.00280      360         357      5.00000      1.00000
6 Month LIBOR    2,402,077.00    7.13660    6.76160      360         358      5.00000      1.00000
6 Month LIBOR    9,047,478.03    6.47168    6.09668      360         357      5.00000      1.00000
6 Month LIBOR   20,769,330.28    6.51247    6.13747      360         357      6.00000      1.97223
6 Month LIBOR   10,387,407.00    6.52596    6.15096      360         358      6.00000      2.00000
6 Month LIBOR      326,621.92    5.75000    5.37500      360         356      6.00000      1.00000
6 Month LIBOR    2,459,441.35    6.35443    5.97943      360         356      6.00000      1.75228
6 Month LIBOR      974,228.00    6.20884    5.83384      360         357      6.00000      2.00000


                                                                    RATE        REMAINING
                   GROSS     MAXIMUM     MINIMUM    MONTHS TO       RESET     INTEREST-ONLY
                  MARGIN    MORTGAGE    MORTGAGE    NEXT RATE     FREQUENCY      PERIOD
     INDEX          (%)     RATE (%)    RATE (%)    ADJUSTMENT    (MONTHS)      (MONTHS)
--------------    -------   --------    --------    ----------    ---------   -------------

6 Month LIBOR     2.75000   11.78640     2.75000        55            6            N/A
6 Month LIBOR     2.75000   11.75000     2.75000        57            6            N/A
6 Month LIBOR     2.61780   12.00222     2.61780        55            6            N/A
6 Month LIBOR     2.25000   12.00000     2.25000        59            6            N/A
6 Month LIBOR     2.25000   11.87500     2.25000        50            6            14
6 Month LIBOR     5.00000   12.01490     5.00000        57            6            57
6 Month LIBOR     2.25000   11.31915     2.25000        56            6            56
6 Month LIBOR     2.02816   11.51542     2.02816        55            6            55
6 Month LIBOR     2.25000   13.25000     2.25000        59            6            119
6 Month LIBOR     2.25000   12.62500     2.25000        59            6            119
6 Month LIBOR     2.39918   11.60394     2.39918        56            6            116
6 Month LIBOR     2.25000   12.50000     2.25000        57            6            117
6 Month LIBOR     2.25000   11.69367     2.25000        56            6            116
6 Month LIBOR     2.25000   11.87500     2.25000        56            6            116
6 Month LIBOR     2.25000   11.50000     2.25000        56            6            116
6 Month LIBOR     2.25000   11.87500     2.25000        56            6            116
6 Month LIBOR     2.53905   11.37780     2.54112        57            6            117
6 Month LIBOR     2.25000   12.13660     2.27014        58            6            118
6 Month LIBOR     2.67798   11.47168     2.67798        57            6            117
6 Month LIBOR     2.27426   12.51247     2.27426        57            6            117
6 Month LIBOR     2.30757   12.52596     2.30757        58            6            118
6 Month LIBOR     2.75000   11.75000     2.75000        56            6            116
6 Month LIBOR     2.37386   12.35443     2.37386        56            6            116
6 Month LIBOR     2.25000   12.20884     2.25000        57            6            117


*     Balloon Loan with original amortization of 480 months.


                                     S-109



o     Loan Group 3 consists of 41 Mortgage Loans with the following
      characteristics:
--------------------------------------------------------------------------------



                                           CURRENT     ORIGINAL   REMAINING   INITIAL    SUBSEQUENT
                                CURRENT      NET       TERM TO     TERM TO    PERIODIC    PERIODIC
                   PRINCIPAL    MORTGAGE   MORTGAGE    MATURITY   MATURITY      RATE        RATE
     INDEX         BALANCE($)   RATE (%)   RATE (%)    (MONTHS)   (MONTHS)    CAP (%)      CAP (%)
---------------  ------------   --------   --------    --------   ---------   --------   -----------

1 Year LIBOR     1,179,104.57    5.80709    5.55709      360         355      2.00000      2.00000
1 Year LIBOR     2,695,010.39    6.43114    6.05614      360         358      6.00000      2.00000
1 Year LIBOR       480,000.00    6.75000    6.37500      360         359      6.00000      2.00000
1 Year LIBOR       580,000.00    7.00000    6.62500      360         360      6.00000      2.00000
1 Year LIBOR     2,101,915.04    5.86413    5.61413      360         355      2.00000      2.00000
1 Year LIBOR     2,533,080.00    5.45096    5.20096      360         354      2.00000      2.00000
1 Year LIBOR     1,168,000.00    6.42080    6.04580      360         358      5.00000      2.00000
1 Year LIBOR     2,449,149.02    6.15168    5.77668      360         356      6.00000      2.00000
1 Year LIBOR       436,000.00    7.75000    7.37500      360         358      6.00000      2.00000
1 Year LIBOR       637,500.00    7.12500    6.75000      360         359      6.00000      2.00000
1 Year LIBOR       524,000.00    7.37500    7.00000      360         360      6.00000      2.00000
1 Year LIBOR       510,000.00    6.00000    5.62500      360         360      6.00000      2.00000
1 Year LIBOR     2,059,133.17    6.14227    5.76727      360         357      5.00000      2.00000
1 Year LIBOR    35,504,706.92    6.55767    6.18267      360         357      6.00000      2.00000
1 Year LIBOR       484,000.00    6.37500    6.00000      360         359      6.00000      2.00000
1 Year LIBOR     4,121,684.00    6.49156    6.11656      360         358      6.00000      2.00000
1 Year LIBOR     2,384,000.00    6.35455    5.97955      360         358      6.00000      2.00000
6 Month LIBOR    2,733,167.47    6.80924    6.43424      360         359      6.00000      2.00000
6 Month LIBOR    1,498,739.82    6.87500    6.50000      360         359      6.00000      2.00000
6 Month LIBOR    3,589,357.00    6.50911    6.13411      360         358      6.00000      1.86121
6 Month LIBOR    2,599,024.86    6.35083    5.97583      360         358      6.00000      2.00000
6 Month LIBOR      797,418.12    7.12500    6.75000      360         356      6.00000      1.00000
6 Month LIBOR    1,569,047.43    6.32286    5.94786      360         358      6.00000      2.00000
6 Month LIBOR    1,259,795.67    6.37675    6.00175      360         357      5.00000      1.00000
6 Month LIBOR   34,094,106.43    5.84737    5.56986      360         356      6.00000      2.00000
6 Month LIBOR      600,000.00    6.12500    5.75000      360         358      6.00000      2.00000
6 Month LIBOR      420,000.00    6.87500    6.50000      360         359      5.00000      1.00000
6 Month LIBOR    7,547,000.00    6.82331    6.44831      360         359      6.00000      2.00000
6 Month LIBOR    1,861,500.00    6.91942    6.54442      360         359      6.00000      2.00000
6 Month LIBOR      950,500.00    6.31714    5.94214      360         359      6.00000      2.00000
6 Month LIBOR    1,639,900.00    6.97564    6.60064      360         359      6.00000      2.00000


                                                                    RATE        REMAINING
                   GROSS     MAXIMUM     MINIMUM    MONTHS TO       RESET     INTEREST-ONLY
                  MARGIN    MORTGAGE    MORTGAGE    NEXT RATE     FREQUENCY      PERIOD
     INDEX          (%)     RATE (%)    RATE (%)    ADJUSTMENT    (MONTHS)      (MONTHS)
--------------    -------   --------    --------    ----------    ---------   -------------

1 Year LIBOR      2.25000   10.80709     2.25000        79            12           N/A
1 Year LIBOR      2.44416   12.43114     2.44416        82            12           N/A
1 Year LIBOR      2.25000   12.75000     2.25000        83            12           83
1 Year LIBOR      2.25000   13.00000     2.25000        84            12           84
1 Year LIBOR      2.25000   10.86413     2.25000        79            12           79
1 Year LIBOR      2.25000   10.45096     2.25000        78            12           78
1 Year LIBOR      3.20291   11.42080     3.20291        82            12           82
1 Year LIBOR      2.25000   12.15168     2.25000        80            12           80
1 Year LIBOR      2.25000   13.75000     2.25000        82            12           82
1 Year LIBOR      2.25000   13.12500     2.25000        83            12           83
1 Year LIBOR      2.25000   13.37500     2.25000        84            12           120
1 Year LIBOR      2.25000   12.00000     2.25000        84            12           120
1 Year LIBOR      2.25000   11.14227     2.25000        81            12           117
1 Year LIBOR      2.27223   12.55767     2.27223        81            12           117
1 Year LIBOR      2.25000   12.37500     2.25000        83            12           119
1 Year LIBOR      2.25000   12.49156     2.25000        82            12           118
1 Year LIBOR      2.25000   12.35455     2.25000        82            12           118
6 Month LIBOR     2.25000   12.80924     2.25000        83             6           N/A
6 Month LIBOR     2.25000   12.87500     2.25000        83             6           N/A
6 Month LIBOR     2.31939   12.50911     2.86144        82             6           N/A
6 Month LIBOR     2.25000   12.35083     2.25000        82             6           N/A
6 Month LIBOR     2.75000   13.12500     2.75000        80             6           N/A
6 Month LIBOR     2.25000   12.32286     2.25000        82             6           N/A
6 Month LIBOR     2.53718   11.37675     2.53718        81             6           81
6 Month LIBOR     2.05502   11.84737     2.05502        80             6           80
6 Month LIBOR     2.25000   12.12500     2.25000        82             6           82
6 Month LIBOR     3.12500   11.87500     3.12500        83             6           119
6 Month LIBOR     2.25000   12.82331     2.25000        83             6           119
6 Month LIBOR     2.25000   12.91942     2.25000        83             6           119
6 Month LIBOR     2.51854   12.31714     2.51854        83             6           119
6 Month LIBOR     2.25000   12.97564     2.25000        83             6           119



                                     S-110



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



                                           CURRENT     ORIGINAL   REMAINING   INITIAL    SUBSEQUENT
                                CURRENT      NET       TERM TO     TERM TO    PERIODIC    PERIODIC
                   PRINCIPAL    MORTGAGE   MORTGAGE    MATURITY   MATURITY      RATE        RATE
     INDEX         BALANCE($)   RATE (%)   RATE (%)    (MONTHS)   (MONTHS)    CAP (%)      CAP (%)
---------------  ------------   --------   --------    --------   ---------   --------   -----------

6 Month LIBOR    2,287,000.00    6.45614    6.08114      360         357      5.00000      1.00000
6 Month LIBOR      448,000.00    6.37500    6.00000      360         356      5.00000      1.00000
6 Month LIBOR   49,936,054.40    6.67556    6.30056      360         358      6.00000      1.98613
6 Month LIBOR   16,326,894.69    6.60141    6.22641      360         358      6.00000      2.00000
6 Month LIBOR    1,452,000.00    6.33609    5.96109      360         358      6.00000      2.00000
6 Month LIBOR      428,000.00    7.00000    6.62500      360         358      6.00000      2.00000
6 Month LIBOR      580,800.00    7.87500    7.50000      360         358      6.00000      2.00000
6 Month LIBOR   12,271,600.00    6.59264    6.21764      360         358      6.00000      2.00000
6 Month LIBOR      492,000.00    7.25000    6.87500      360         358      6.00000      2.00000
6 Month LIBOR    7,652,000.00    6.89531    6.52031      360         358      6.00000      2.00000


                                                                    RATE        REMAINING
                   GROSS     MAXIMUM     MINIMUM    MONTHS TO       RESET     INTEREST-ONLY
                  MARGIN    MORTGAGE    MORTGAGE    NEXT RATE     FREQUENCY      PERIOD
     INDEX          (%)     RATE (%)    RATE (%)    ADJUSTMENT    (MONTHS)      (MONTHS)
--------------    -------   --------    --------    ----------    ---------   -------------

6 Month LIBOR     2.70671   11.45614     2.70671        81            6            117
6 Month LIBOR     2.62500   11.37500     2.62500        80            6            116
6 Month LIBOR     2.26587   12.64946     2.27588        82            6            118
6 Month LIBOR     2.25000   12.60141     2.25000        82            6            118
6 Month LIBOR     2.32782   12.33609     2.32782        82            6            118
6 Month LIBOR     2.25000   13.00000     2.25000        82            6            118
6 Month LIBOR     2.25000   13.87500     2.25000        82            6            118
6 Month LIBOR     2.25000   12.59264     2.25000        82            6            118
6 Month LIBOR     2.25000   13.25000     2.25000        82            6            118
6 Month LIBOR     2.25000   12.89531     2.25000        82            6            118



                                     S-111



      o   the Mortgage Loans prepay at the specified constant percentages of the
          related Prepayment Assumption,

      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 in each Loan Group 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   the scheduled monthly payment for each Mortgage Loan is calculated
          based on its principal balance, mortgage rate and remaining term to
          maturity (in the case of a balloon loan, the remaining amortization
          term to maturity), so that each Mortgage Loan will amortize in amounts
          sufficient to repay the remaining principal balance of such Mortgage
          Loan by its remaining term to maturity (in the case of a balloon loan,
          the remaining amortization term to maturity), in some cases following
          an interest only period, as indicated in the table above,

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

      o   the initial Class Principal Balance or initial Notional Amount, as
          applicable, of each Class of Certificates is as set forth on pages v
          and vi hereof,

      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   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 February 28, 2006,

      o   neither the Seller nor any Originator is required to repurchase or
          substitute for any Mortgage Loan,

      o   the levels of the One-Month LIBOR, Six-Month LIBOR, One-Year LIBOR,
          and One-Year CMT Indices remain constant at 4.58063%, 4.96000%,
          5.13100% and 4.68100%, respectively,

      o   except as otherwise specifically set forth in the decrement tables
          below, the Master Servicer does not exercise either of its respective
          options to repurchase the Group 1 Mortgage Loans or the Aggregate
          Group II Mortgage Loans as described under "--Auction and Optional
          Termination of the Group 1 Certificates and Optional Termination of
          the Aggregate Group II Certificates," and a successful auction does
          not occur,

      o   no Class of Certificates becomes a Restricted Class,

      o   the Mortgage Rate on each Mortgage Loan will be adjusted on each
          interest adjustment date (as necessary) to a rate equal to the
          applicable Mortgage Index (as described above), plus the Gross Margin,
          subject to Maximum Mortgage Rates, Minimum Mortgage Rates and Periodic
          Rate Caps (as applicable),

      o   scheduled monthly payments on each Mortgage Loan will be adjusted in
          the month immediately following the interest adjustment date (as
          necessary) for such Mortgage Loan to equal the fully amortizing
          payment described above, and


                                     S-112



      o   the initial Class Principal Balance of each class of Class P and the
          Class C Certificates is $0.

      Prepayments of mortgage loans commonly are measured relative to a
prepayment standard or model. The model used in this prospectus supplement with
respect to the Adjustable-Rate Mortgage Loan assumes a constant prepayment rate
("CPR"), which represents an assumed rate of prepayment each month of the then
outstanding principal balance of a pool of mortgage loans. A 100% prepayment
assumption ("PPC") used in this prospectus supplement with respect to the
Fixed-Rate Mortgage Loans assumes a CPR of 8% per annum of the then outstanding
principal balance of such mortgage loans in the first month of the life of the
mortgage loans and an additional 1.0909090909% (precisely 12%/11) per annum in
the second through eleventh months. Beginning in the twelfth month and in each
month thereafter during the life of the mortgage loans, a 100% Prepayment
Assumption with respect to the Fixed-Rate Mortgage Loans assumes a CPR of 20%
per annum each month. 0% CPR assumes no prepayments. No Prepayment Assumption
purports to be either a historical description of the prepayment experience of
any pool of mortgage loans or a prediction of the anticipated rate of prepayment
of any pool of mortgage loans, including the Mortgage Loans. There is no
assurance that prepayments of any of the Mortgage Loans will occur at any
constant prepayment rate.

      The prepayment scenario (the "PREPAYMENT SCENARIO") used with respect to
the Group 1 Certificates assumes that the Mortgage Loans prepay at the following
percentages of the related Prepayment Assumption:

                                  ASSUMED PREPAYMENTS ON THE MORTGAGE LOANS
                             ---------------------------------------------------
        MORTGAGE RATE          I          II        III         IV         V
--------------------------   ------   ---------   --------   ---------  --------
Fixed Rate................   0% PPC   50% PPC     100% PPC   150% PPC   200% PPC
Adjustable Rate...........   0% CPR   12.5% CPR   25% CPR    37.5% CPR  50% CPR

      While it is assumed that each of the Mortgage Loans prepays at the
specified constant percentages of CPR or PPC, as applicable, this is not likely
to be the case. Moreover, discrepancies may exist between the characteristics of
the actual Mortgage Loans which will be delivered to or on behalf of the Trustee
and characteristics of the mortgage loans used in preparing the tables.

AUCTION AND OPTIONAL TERMINATION OF THE GROUP 1 CERTIFICATES AND OPTIONAL
TERMINATION OF THE AGGREGATE GROUP II CERTIFICATES

      Auction and Optional Termination - Group 1 Certificates. On any
Distribution Date on or after the first Distribution Date on which the aggregate
outstanding Stated Principal Balance of the Group 1 Mortgage Loans and any
related REO Property owned by the Issuing Entity as of the related Due Date is
equal to or less than 10% of the aggregate Stated Principal Balance of the Group
1 Mortgage Loans as of the Cut-off Date (such Distribution Date and any
subsequent Distribution Date, an "OPTIONAL TERMINATION DATE"), the Auction
Administrator shall solicit bids for the purchase of the Group 1 Mortgage Loans
from at least three institutions that are regular purchasers and/or sellers in
the secondary market of residential whole mortgage loans similar to the Group 1
Mortgage Loans. If the Auction Administrator receives at least three bids for
the Group 1 Mortgage Loans, any related REO Property and any other property
related to Loan Group 1 remaining in the assets of the Issuing Entity
(collectively, the "GROUP 1 ASSETS"), and one of those bids is at least equal to
the Minimum Auction Price, the Auction Administrator shall sell the Group 1
Assets to the highest bidder (the "AUCTION PURCHASER") at the price offered by
the Auction Purchaser (the "MORTGAGE LOAN AUCTION PRICE"). If the Auction
Administrator receives less than three bids, or does not receive any bid that is
at least equal to the Minimum Auction Price, the Auction Administrator shall,
subject to the Master Servicer's right to repurchase the Group 1 Mortgage Loans
described below, on each six-month anniversary of the initial Optional
Termination Date for the Group 1 Mortgage Loans, repeat these auction procedures
until the Auction Administrator receives a bid that is at least equal to the
Minimum Auction Price, at which time the Auction Administrator shall sell the
Group 1 Assets to the Auction Purchaser at that Mortgage Loan Auction Price;
provided, however, that the Auction Administrator shall not be required to
repeat these auction procedures on any Distribution Date for any six-month
anniversary of the initial Optional Termination Date unless the Auction
Administrator reasonably believes that there is a reasonable likelihood of
receiving a bid of at least the Minimum Auction Price.


                                     S-113



      The "MINIMUM AUCTION PRICE" with respect to any Distribution Date on which
an auction is being held, will equal the sum of (a) 100% of the current
aggregate principal balance of the Group 1 Mortgage Loans, plus accrued interest
thereon, (b) the fair market value of any related REO Property in the assets of
the Issuing Entity and all other property related to Loan Group 1 in the assets
of the Issuing Entity being purchased, (c) any unreimbursed servicing advances
related to the Group 1 Mortgage Loans and (d) any expenses incurred by the
Auction Administrator relating to the Auction process.

      Commencing with the first Distribution Date following the first Optional
Termination Date for the Group 1 Mortgage Loans, if an auction is held but the
Auction Administrator does not receive the Minimum Auction Price, then the
Master Servicer will have the option, subject to the provisions of the Pooling
and Servicing Agreement, to purchase the Group 1 Assets for a price equal to the
sum of (a) 100% of the aggregate Stated Principal Balance of the Group 1
Mortgage Loans, plus accrued interest thereon, (b) the fair market value of any
related REO Property and (c) any unreimbursed servicing advances related to the
Group 1 Mortgage Loans. On the Distribution Date on which the proceeds of an
Auction are distributed, the excess, if any of the amount of the highest bid
over the Mortgage Loan Auction Price will be distributed to the Class C
Certificates.

      Optional Termination - Aggregate Group II Certificates. On any
Distribution Date on or after the first Distribution Date on which the aggregate
outstanding Stated Principal Balance of the Aggregate Group II Mortgage Loans
and any related REO Property owned by the Issuing Entity as of the related Due
Date is equal to or less than 1% of the aggregate Stated Principal Balance of
the Aggregate Group II Mortgage Loans as of the Cut-off Date, the Master
Servicer will have the option to purchase the Aggregate Group II Mortgage Loans
and any REO Properties and apply the proceeds to redeem the Aggregate Group II
Certificates at a price equal to 100% of the then aggregate outstanding Class
Principal Balance of the Aggregate Group II Certificates, plus accrued interest
thereon through the end of the related Interest Accrual Period immediately
preceding the related Distribution Date.

      In the event that the Master Servicer chooses to exercise any of the
optional redemption rights described above or there is no successful auction of
the Group 1 Mortgage Loans, the related Classes of Certificates will be retired
and any funds or property remaining in the Assets of the Issuing Entity related
to the Mortgage Loans so purchased by the Master Servicer will be liquidated. In
the event that the Master Servicer chooses to exercise both of the optional
redemption rights described above, the Issuing Entity will be dissolved.

VOTING RIGHTS

      Voting rights will be allocated among the classes of Certificates in
proportion to their respective Class Principal Balances or Notional Amounts, as
applicable, and among Certificates of such class in proportion to their
Percentage Interests. The Pooling and Servicing Agreement does not allocate any
voting rights to either class of Class P Certificates.

      The "PERCENTAGE INTEREST" of a Certificate will be a fraction, expressed
as a percentage, the numerator of which is that Certificate's Certificate
Principal Balance or Notional Amount, and the denominator of which is the
applicable Class Principal Balance or Notional Amount.

AMENDMENT

      The Pooling and Servicing Agreement may be amended by the parties thereto,
without the consent of any of the holders of certificates issued by the Issuing
Entity under the Pooling and Servicing Agreement:

      o   to cure any ambiguity;

      o   to conform the Pooling and Servicing Agreement to the prospectus and
          this prospectus supplement provided to investors in connection with
          the initial offering of the certificates;


                                     S-114



      o   to correct, modify or supplement any provision in the Pooling and
          Servicing Agreement which may be inconsistent with any other provision
          in the Pooling and Servicing Agreement;

      o   to make any other provisions with respect to matters or questions
          arising under the Pooling and Servicing Agreement which are not
          inconsistent with the provisions thereof; or

      o   to comply with any requirements imposed by the Internal Revenue Code;

provided that the amendment--other than an amendment for the purpose specified
in the fourth bullet point above--will not, as evidenced by an opinion of
counsel to that effect, adversely affect in any material respect the interests
of any holder of certificates covered by the Pooling and Servicing Agreement.

      The Pooling and Servicing Agreement may also be amended by the Depositor,
the Master Servicer, the Securities Administrator and the Trustee, with the
consent of the holders of certificates affected thereby evidencing not less than
66 2/3% of the voting rights, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the Pooling and
Servicing Agreement or of modifying in any manner the rights of the
certificateholders; provided, however, that no such amendment may:

      o   reduce in any manner the amount of, or delay the timing of, payments
          received on Mortgage Loans which are required to be distributed on any
          certificate, without the consent of that certificateholder; or

      o   reduce the aforesaid percentages of certificateholders of which are
          required to consent to any such amendment.

      However, the Trustee will not consent to any amendment of the Pooling and
Servicing Agreement unless it shall first have received an opinion of counsel to
the effect that the amendment will not result in the imposition of a tax on the
Issuing Entity or cause the Issuing Entity to fail to qualify as a REMIC at any
time that the certificates are outstanding.

CERTAIN MATTERS REGARDING THE DEPOSITOR, THE MASTER SERVICER, THE SECURITIES
ADMINISTRATOR, THE SERVICERS, THE CUSTODIANS AND THE TRUSTEE

      The Pooling and Servicing Agreement provides that none of the Depositor,
the Master Servicer, the Securities Administrator or the Trustee, or any of
their respective directors, officers, employees or agents will be under any
liability to the Certificateholders for any action taken, or for refraining from
the taking of any action, in good faith pursuant to the Pooling and Servicing
Agreement, or for errors in judgment. The underlying servicing agreements as
modified by the Assignment Agreements may provide that none of the Servicers or
any of their respective directors, officers, employees or agents will be under
any liability to the Certificateholders for any action taken, or for refraining
from the taking of any action, in good faith pursuant to those agreements, or
for errors in judgment. The custody agreements may provide that neither the
custodians nor any of their respective directors, officers, employees or agents
will be under any liability to the certificateholders for any action taken, or
for refraining from the taking of any action, in good faith pursuant to those
agreements, or for errors in judgment. However, none of the Depositor, the
Servicers, the Master Servicer, the Securities Administrator, any custodian or
the Trustee will be protected against liability arising from any breach of
representations or warranties made by it or from any liability which may be
imposed by reason of their willful misfeasance, bad faith or negligence (or
gross negligence, to the extent specified by the related agreement) in the
performance of its duties or by reason of its reckless disregard of obligations
and duties under the related agreement.

      The Depositor, the Servicers, the Master Servicer, the Securities
Administrator, any custodian or the Trustee and their respective directors,
officers, employees or agents will be indemnified by the Issuing Entity and held
harmless against any loss, liability or expense incurred in connection with,
among other things, the performance of their respective duties pursuant to the
related agreement or the certificates, other than any loss, liability or expense
incurred by reason of their willful misfeasance, bad faith or negligence (or
gross negligence, to


                                     S-115



the extent specified by the related agreement) in the performance of their
respective duties or by reason of any reckless disregard of their respective
obligations and duties.

      None of the Depositor, the Servicers, the Master Servicer, the Securities
Administrator, any custodian nor the Trustee is obligated to appear in,
prosecute or defend any legal action that is not incidental to their respective
duties which may involve it in any expense or liability, provided that, in
accordance with the related agreement. The Depositor, the Servicers, the Master
Servicer, the Securities Administrator, any custodian or the Trustee, as
applicable, may undertake any action any of them deem necessary or desirable in
respect of their respective rights and duties, as set forth in the related
agreement. In the event that the Depositor, the Servicers, the Master Servicer,
the Securities Administrator, any custodian or the Trustee undertakes any such
action, the legal expenses and costs of such action and any resulting liability
will be expenses, costs and liabilities of the Issuing Entity, and the
Depositor, the Servicers, the Master Servicer, the Securities Administrator, any
custodian or the Trustee, as applicable, will be entitled to be reimbursed for
such expenses, costs and liabilities out of the Assets of the Issuing Entity.

                   YIELD, PREPAYMENT AND WEIGHTED AVERAGE LIFE

GENERAL

      The effective yield to the holders of each interest-bearing Class of
Certificates, other than the LIBOR Certificates, will be lower than the yield
otherwise produced by the applicable rate at which interest is passed through to
the holders and the purchase price of the certificates because monthly
distributions will not be payable to the holders until the 25th day (or, if that
day is not a business day, the following business day) of the month following
the month in which interest accrues on the Mortgage Loans (without any
additional distribution of interest or earnings on them for the delay).

      Delinquencies on the Mortgage Loans that are not advanced by the related
Servicer or by the Master 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 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
of the Senior Certificate Group to which the shortfall relates pro rata. If, as
a result of the shortfalls, the aggregate of the Class Principal Balances of all
Classes of Certificates in an Aggregate Certificate Group exceeds the aggregate
Stated Principal Balance of the Mortgage Loans in the related Aggregate Loan
Group as of the related Due Date, the Class Principal Balance of the Class of
Subordinated Certificates in that Aggregate Certificate Group then outstanding
with the highest numerical Class designation will be reduced by the amount of
the excess. In addition, following a Senior Credit Support Depletion Date with
respect to an Aggregate Certificate Group, if an Excess Loss occurs with respect
to a Mortgage Loan in the related Aggregate Loan Group, that Excess Loss will be
allocated, pro rata, among the Classes of Senior Certificates (other than the
Notional Amount Certificates) in the related Loan Group, based on their
respective Class Principal Balances immediately prior to such Distribution Date.

      Net Interest Shortfalls will adversely affect the yields on the Classes of
Offered Certificates. In addition, although all losses on the Mortgage Loans in
a Loan Group initially will be borne by the related Subordinated Certificates,
in the reverse order of their numerical Class designations, Excess Losses will
be borne by all Classes of applicable Certificates (other than the Notional
Amount Certificates) on a pro rata basis. As a result, the yields on the Offered
Certificates will depend on the rate and timing of Realized Losses, including
Excess Losses on the Mortgage Loans in the related Loan Group, in the case of
the Senior Certificates, or, in the case of the Subordinated Certificates, the
related Aggregate Loan Group. Excess Losses could occur at a time when one or
more Classes of Subordinated Certificates in an Aggregate Certificate Group are
still outstanding and otherwise available to absorb other types of Realized
Losses on the Mortgage Loans in the related Aggregate Loan Group.

      Notwithstanding the foregoing, any Realized Losses, other than Excess
Losses, on the Mortgage Loans in an aggregate loan group occurring after the
related Senior Credit Support Depletion Date will be allocated to the related
Classes of Senior Certificates in the manner, order and priority described under
"Description of the Certificates--Allocation of Losses" in this prospectus
supplement.


                                     S-116



PREPAYMENT CONSIDERATIONS AND RISKS

      The rate of principal payments 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 related to that Class of Certificates. The rate
of principal payments on the Mortgage Loans will in turn be affected by the
amortization schedules of the Mortgage Loans and by the rate of principal
prepayments, including for this purpose, prepayments resulting from refinancing,
liquidations of the Mortgage Loans due to defaults, casualties, condemnations
and repurchases by the Seller or the related Originator. Except for certain of
the Mortgage Loans, each of which has a prepayment penalty if the related
mortgagor prepays such Mortgage Loan during a period ranging from four months to
five years after origination, the Mortgage Loans may be prepaid by the
mortgagors at any time without a prepayment penalty. Because certain of the
Mortgage Loans may contain prepayment penalties, the rate of principal
prepayments may be less than the rate of principal prepayments for Mortgage
Loans that did not have prepayment penalties. The holders of the Class P-1
Certificates will be entitled to all prepayment penalties received on the Group
1 Mortgage Loans and the holders of the Class P-2 Certificates will be entitled
to all prepayment penalties received on the Aggregate Group II Mortgage Loans.
Those amounts will not be available for distribution on the other Classes of
Certificates. The Mortgage Loans are subject to the "due-on-sale" provisions
included therein. See "Description of the Mortgage Loans" in this prospectus
supplement. In addition, certain of the Mortgage Loans in each Loan Group do not
provide for any payments of principal for an extended period following their
origination. These Mortgage Loans may involve a greater degree of risk because,
if the related mortgagor defaults, the outstanding principal balance of the
Mortgage Loans will be higher than for amortizing Mortgage Loans. During their
interest-only periods, the Interest Only Loans may be less likely to prepay as
the interest-only feature may reduce the perceived benefits of refinancing due
to the smaller monthly payment. However, as an Interest Only Loan approaches the
end of its interest-only period, it may be more likely to be prepaid, even if
market interest rates at the time are only slightly higher or lower than the
interest rate on that Interest Only Loan as the related borrowers seek to avoid
increases in their respective monthly mortgage payment. In addition, the
Mortgage Loans in Aggregate Loan Group II have Mortgage Rates which will not
adjust for a period of up to ten years after origination.

      Prepayments, liquidations and purchases of the Mortgage Loans in a Loan
Group will result in distributions on the Offered Certificates related to that
Loan Group of principal amounts which would otherwise be distributed over the
remaining terms of those Mortgage Loans. This includes any optional purchase by
the Master Servicer of defaulted Mortgage Loans and any optional repurchase of
the remaining Mortgage Loans in each of the Aggregate Loan Groups in connection
with the dissolution of the Issuing Entity, in each case as described in this
prospectus supplement. Since 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 in that Loan
Group, in the case of the Senior Certificates, and in that Aggregate Loan Group,
in the case of the Subordinated Certificates. Further, an investor should
consider the risk that, in the case of any Offered Certificate purchased at a
discount (other than the Notional Amount Certificates), a slower than
anticipated rate of principal payments (including prepayments) on the related
Mortgage Loans could result in an actual yield to the investor that is lower
than the anticipated yield and, in the case of any Notional Amount Certificate
or any Offered Certificate purchased at a premium, a faster than anticipated
rate of principal payments on the related Mortgage Loans could result in an
actual yield to the investor that is lower than the anticipated yield. Investors
in the Notional Amount Certificates should carefully consider the risk that a
rapid rate of principal payments on the related Mortgage Loans could result in
the failure of the investors to recover their initial investments.

      Certain of the Group 1 Mortgage Loans will consist of hybrid adjustable
rate mortgage loans subject to initial fixed rate periods of between 1 month and
5 years and all of the Aggregate Group II Mortgage Loans will consist of hybrid
adjustable rate mortgage loans subject to initial fixed rate periods of between
5 and 7 years. Adjustable rate mortgage loans may be subject to a greater rate
of principal prepayments in a declining interest rate environment. For example,
if prevailing interest rates fall significantly, adjustable rate mortgage loans
could be subject to higher prepayment rates than if prevailing interest rates
remain constant because the availability of fixed


                                     S-117



rate mortgage loans at lower interest rates may encourage mortgagors to
refinance their adjustable rate mortgage loans to a lower fixed interest rate.
Prepayments on the hybrid adjustable-rate mortgage loans and the Interest Only
Mortgage Loans may differ as they approach their respective first Adjustment
Dates. No assurance can be given as to the level of prepayment that the Mortgage
Loans will experience.

      The Mortgage Rate applicable to all of the Mortgage Loans and any
Adjustment Date will be based on the Mortgage Index value most recently
announced as of a date generally 45 days prior to such Adjustment Date. Thus, if
the Mortgage Index value rises, the lag in time before the corresponding
Mortgage Rate increases will, all other things being equal, slow the upward
adjustment of the pass-through rate on the related certificates. See
"Description of the Mortgage Loans" in this prospectus supplement.

      The rate of prepayment on the related Mortgage Loans will affect the
pass-through rates on the Offered Certificates. Prepayments of Mortgage Loans
with Mortgage Rates in excess of the then-current Weighted Average Mortgage Rate
for a Loan Group may reduce the pass-through rates on the related Senior
Certificates. Mortgage loans with higher Mortgage Rates may prepay at faster
rates than Mortgage Loans with relatively lower Mortgage Rates in response to a
given change in market interest rates. Any such disproportionate rate of
prepayments may adversely affect the pass-through rate on the Subordinated
Certificates. In addition, differences in the rates of prepayments or of
Realized Losses as among the Mortgage Loans in an Aggregate Loan Group may
adversely affect the pass-through rate on the related Subordinated Certificates
by reducing the weighting factor used to determine that pass-through rate.

      As described in this prospectus supplement under "Description of the
Certificates--Principal," the Senior Prepayment Percentage of all principal
prepayments on the Mortgage Loans in a Loan Group will be initially distributed
to the related Classes of Senior Certificates then entitled to receive principal
prepayment distributions. This may result in all (or a disproportionate
percentage) of the principal prepayments being distributed to holders of the
Classes of Senior Certificates and none (or less than their pro rata share) of
the principal prepayments being distributed to holders of the related
Subordinated Certificates during the periods of time described in the definition
of each Senior Prepayment Percentage. In addition, because the step-down in each
Senior Prepayment Percentage is dependent on the performance of the entire Loan
Group rather than a particular Loan Group, the poor performance of one Loan
Group may prevent a group of Subordinated Certificates from receiving
distributions of principal prepayments from any of the Mortgage Loans in the
related Loan Group.

      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 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 payments 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 payments.

SENSITIVITY OF THE CLASS 1-A-X AND CLASS 1-M-X CERTIFICATES

      The yield to maturity of the Class 1-A-X and Class 1-M-X Certificates will
be sensitive to the rate and timing of principal payments (including
prepayments, liquidations, repurchases and defaults) on the Group 1 Mortgage
Loans, which may fluctuate significantly from time to time. A faster rate of
principal payments on the Group 1 Mortgage Loans than that assumed will have a
material negative effect on the yield to maturity of the Class 1-A-X and Class
1-M-X Certificates. An investor should fully consider the associated risks,
including the risk that a relatively fast rate of principal payments (including
prepayments, liquidations, repurchases and defaults) on the Group 1 Mortgage
Loans will have a material negative effect on the yield to investors in the
Class 1-A-X and Class 1-M-X Certificates and could result in the failure of
investors in the Class 1-A-X and Class 1-M-X Certificates to recoup their
initial investment.

      The following table (the "YIELD TABLE") were prepared on the basis of the
Structuring Assumptions (except for the pricing assumptions that are listed
below) and demonstrate the sensitivity of the pre-tax yields on the Class 1-A-X
and Class 1-M-X Certificates to various constant rates of prepayment by
projecting the aggregate payments


                                     S-118



of interest on such Certificates and the corresponding pre-tax yields on a
corporate bond equivalent ("CBE") basis, assuming distributions on the Group 1
Mortgage Loans are made as set forth in the Pooling and Servicing Agreement.



                            SENSITIVITY OF THE CLASS 1-A-X CERTIFICATES TO PREPAYMENTS
                                           (PRE-TAX YIELD TO MATURITY)

                                                                       PREPAYMENT SCENARIO
                                                ------------------------------------------------------------------
ASSUMED PURCHASE PRICE                              I             II           III             IV           V
----------------------                          ---------     ---------      --------       --------    ----------

1.2500%..................................        123.94%       104.82%        84.39%         62.39%        38.43%
1.5000%..................................        102.93%        84.76%        65.45%         44.67%        22.06%
1.7500%..................................         88.23%        70.74%        52.24%         32.34%        10.70%
2.0000%..................................         77.37%        60.38%        42.50%         23.27%         2.38%
2.2500%..................................         69.01%        52.41%        35.02%         16.32%       (3.97)%
2.5000%..................................         62.36%        46.07%        29.09%         10.82%       (8.97)%
2.7500%..................................         56.93%        40.91%        24.27%          6.35%      (13.02)%


_______________

*     The prices do not include accrued interest. Accrued interest has been
      added to the prices in calculating the yields set forth in the table
      above.



                            SENSITIVITY OF THE CLASS 1-M-X CERTIFICATES TO PREPAYMENTS
                                           (PRE-TAX YIELD TO MATURITY)

                                                                       PREPAYMENT SCENARIO
                                                ------------------------------------------------------------------
ASSUMED PURCHASE PRICE                              I             II           III             IV           V
----------------------                          ---------     ---------      --------       --------    ----------

2.2500%..................................         52.60%        51.21%        44.03%         35.87%        25.94%
2.5000%..................................         47.80%        46.20%        38.53%         30.07%        19.96%
2.7500%..................................         43.85%        42.05%        33.95%         25.24%        14.98%
3.0000%..................................         40.54%        38.54%        30.07%         21.14%        10.75%
3.2500%..................................         37.71%        35.52%        26.74%         17.60%         7.10%
3.5000%..................................         35.26%        32.90%        23.83%         14.52%         3.92%
3.7500%..................................         33.12%        30.59%        21.27%         11.81%         1.11%

________________

*     The prices do not include accrued interest. Accrued interest has been
      added to the prices in calculating the yields set forth in the table
      above.

      Based upon the above assumptions, at approximately 205% with respect to
the Class 1-A-X Certificates, and at approximately 241% with respect to the
Class 1-M-X Certificates, in each case, of the related Prepayment Assumption (at
an assumed purchase price of 2.00%, with respect to the Class 1-A-X
Certificates, and at an assumed purchase price of 3.00%, with respect to the
Class 1-M-X Certificates, of the Notional Amount, excluding accrued interest,
but adding accrued interest to the price for purposes of calculating yield), the
pre-tax yields to maturity of the Class 1-A-X and Class 1-M-X Certificates will
be approximately 0%. If the rate of prepayments on the Group 1 Mortgage Loans
were to exceed the applicable levels for as little as one month, while equaling
such level for all other months, the Class 1-A-X and Class 1-M-X Certificates
would not fully recoup their initial investment.

      The pre-tax yields set forth in the preceding tables were calculated by
determining the monthly discount rates which, when applied to the assumed
streams of cash flows to be paid on the Class 1-A-X and Class 1-M-X
Certificates, would cause the discounted present value of such assumed stream of
cash flows to the Closing Date to equal the assumed purchase prices (plus
accrued interest), and converting such monthly rates to CBE rates. Such
calculation does not take into account the interest rates at which funds
received by Certificateholders as distributions on the Class 1-A-X and Class
1-M-X Certificates may be reinvested and consequently does not purport to
reflect the return on any investment in such classes of certificates when such
reinvestment rates are considered.


                                     S-119



      It is highly unlikely that the Group 1 Mortgage Loans will prepay at the
same rate until maturity or that all of the Group 1 Mortgage Loans will prepay
at the same rate or time or that prepayments will be spread evenly among Group 1
Mortgage Loans with differing gross margins. As a result of these factors, the
pre-tax yields on the Class 1-A-X and Class 1-M-X Certificates are likely to
differ from those shown in such tables, even if all of the Group 1 Mortgage
Loans prepay, on average, at the indicated percentages of the related Prepayment
Assumption. No representation is made as to the actual rate of principal
payments on the Group 1 Mortgage Loans (or the Mortgage Rates thereon) for any
period or over the lives of the Class 1-A-X and Class 1-M-X Certificates or as
to the yields on such Certificates. Investors must make their own decisions as
to the appropriate prepayment assumptions to be used in deciding whether to
purchase the Class 1-A-X or Class 1-M-X Certificates.

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 Principal
Balance or Notional Amount, as applicable, 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 Class Principal Balance or Notional
Amount, as applicable, of the certificate referred to in clause (a).

      For a discussion of the factors which may influence the rate of payments
(including prepayments) of the Mortgage Loans, see "--Prepayment Considerations
and Risks" above and "Yield 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 in the
related Loan Group or Loan Groups increases. However, the weighted average lives
of the Offered Certificates will depend upon a variety of other factors,
including the timing of changes in such rate of principal payments, the priority
sequence of distributions of principal of the related Classes of Certificates
and the distribution of the amount available for distribution of principal to
the related Classes of Senior Certificates in accordance with the rules
governing the priorities of payment among the Classes of Senior Certificates set
forth in this prospectus supplement. 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 Principal Balances or
Notional Amounts, 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 affected at various constant percentages of the
related Prepayment Assumption, see the Decrement Tables under the next heading.

DECREMENT TABLES

      The following tables indicate the percentages of the initial Class
Principal Balances and initial Notional Amounts of the Classes of Offered
Certificates (other than the Class 1-A-X and Class 1-M-X Certificates) that
would be outstanding after each of the dates shown at various constant
percentages of the related 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 in any Loan
Group will have the precise characteristics described in this prospectus
supplement or all of the Mortgage Loans in any Loan Group will prepay at the
constant percentages of the related 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 related Prepayment Assumption, even if the
remaining term to maturity of the Mortgage Loans in any Loan Group is consistent
with the remaining terms to maturity of the Mortgage Loans specified in the
structuring assumptions.


                                     S-120





                                     PERCENT OF INITIAL CLASS PRINCIPAL BALANCES OUTSTANDING

                                                 CLASS 1-A-1,                         CLASS 2-A-1, CLASS 2-A-2,
                                         CLASS 1-A-2 AND CLASS 1-A-3                 CLASS 2-A-3 AND CLASS 2-A-4
                                    --------------------------------------       ------------------------------------
                                             PREPAYMENT SCENARIO                          PERCENTAGE OF CPR
                                    --------------------------------------       ------------------------------------
DISTRIBUTION DATE                     I        II      III     IV      V           0%     15%    25%     35%     50%
-----------------                   -----     -----   -----  -----   -----       -----  ------  -----   -----   -----

Initial........................      100       100     100    100     100         100    100     100     100     100
February 2007..................      100        88      76     64      53         100     84      73      62      46
February 2008..................       99        77      57     40      27         100     70      52      38      21
February 2009..................       99        67      42     25      13         100     58      38      23       9
February 2010..................       99        58      32     16       7          99     48      28      15       5
February 2011..................       98        50      25     11       4          99     40      21      10       2
February 2012..................       98        44      19      7       2          98     34      16       6       1
February 2013..................       97        38      15      5       1          98     29      12       4       1
February 2014..................       96        34      11      3       1          97     24       9       3       *
February 2015..................       96        30       9      2       *          96     20       7       2       *
February 2016..................       95        26       7      1       *          95     17       5       1       *
February 2017..................       92        22       5      1       *          93     14       4       1       *
February 2018..................       90        19       4      1       *          91     12       3       *       *
February 2019..................       87        17       3      *       *          88     10       2       *       *
February 2020..................       84        14       2      *       *          85      8       1       *       *
February 2021..................       81        12       2      *       *          82      7       1       *       *
February 2022..................       78        10       1      *       *          79      5       1       *       *
February 2023..................       74         9       1      *       *          76      4       1       *       *
February 2024..................       71         7       1      *       *          72      4       *       *       *
February 2025..................       67         6       *      *       *          68      3       *       *       *
February 2026..................       62         5       *      *       *          63      2       *       *       *
February 2027..................       58         4       *      *       *          59      2       *       *       *
February 2028..................       52         3       *      *       *          54      1       *       *       *
February 2029..................       47         3       *      *       *          48      1       *       *       *
February 2030..................       41         2       *      *       *          43      1       *       *       *
February 2031..................       35         2       *      *       *          36      1       *       *       *
February 2032..................       28         1       *      *       *          30      *       *       *       *
February 2033..................       21         1       *      *       *          22      *       *       *       *
February 2034..................       14         *       *      *       *          15      *       *       *       *
February 2035..................        6         *       *      *       *           6      *       *       *       *
February 2036..................        0         0       0      0       0           0      0       0       0       0
Weighted Average Life
   (in years)**................     21.18     7.01     3.62   2.27    1.57       21.45   5.50    3.23    2.15    1.32




                                         CLASS 3-A-1 AND CLASS 3-A-2                          CLASS A-R
                                    --------------------------------------       ------------------------------------
                                              PERCENTAGE OF CPR                           PERCENTAGE OF CPR
                                    --------------------------------------       ------------------------------------
DISTRIBUTION DATE                     0%       15%     25%    35%     50%         0%     15%     25%     35%     50%
-----------------                   -----     -----   -----  -----   -----       -----  ------  -----   -----   -----

Initial........................      100       100     100    100     100         100    100     100     100     100
February 2007..................      100        84      73     62      46           0      0       0       0       0
February 2008..................      100        70      52     38      21           0      0       0       0       0
February 2009..................      100        58      38     23       9           0      0       0       0       0
February 2010..................      100        48      28     15       5           0      0       0       0       0
February 2011..................       99        40      21     10       2           0      0       0       0       0
February 2012..................       99        34      16      6       1           0      0       0       0       0
February 2013..................       99        29      12      4       1           0      0       0       0       0
February 2014..................       99        25       9      3       *           0      0       0       0       0
February 2015..................       98        21       7      2       *           0      0       0       0       0
February 2016..................       97        17       5      1       *           0      0       0       0       0
February 2017..................       95        15       4      1       *           0      0       0       0       0
February 2018..................       92        12       3      *       *           0      0       0       0       0
February 2019..................       90        10       2      *       *           0      0       0       0       0
February 2020..................       87         8       1      *       *           0      0       0       0       0
February 2021..................       84         7       1      *       *           0      0       0       0       0
February 2022..................       81         5       1      *       *           0      0       0       0       0
February 2023..................       77         4       1      *       *           0      0       0       0       0
February 2024..................       73         4       *      *       *           0      0       0       0       0
February 2025..................       69         3       *      *       *           0      0       0       0       0
February 2026..................       65         2       *      *       *           0      0       0       0       0
February 2027..................       60         2       *      *       *           0      0       0       0       0
February 2028..................       55         1       *      *       *           0      0       0       0       0
February 2029..................       50         1       *      *       *           0      0       0       0       0
February 2030..................       44         1       *      *       *           0      0       0       0       0
February 2031..................       37         1       *      *       *           0      0       0       0       0
February 2032..................       31         *       *      *       *           0      0       0       0       0
February 2033..................       23         *       *      *       *           0      0       0       0       0
February 2034..................       15         *       *      *       *           0      0       0       0       0
February 2035..................        7         *       *      *       *           0      0       0       0       0
February 2036..................        0         0       0      0       0           0      0       0       0       0
Weighted Average Life
   (in years)**................     21.78     5.54     3.24   2.15    1.32        0.07   0.07    0.07    0.07    0.07


______________

*     Indicates greater than zero but less than 0.50%

**    Determined as specified under "Weighted Average Lives of the Offered
      Certificates" herein.


                                     S-121





                                     PERCENT OF INITIAL CLASS PRINCIPAL BALANCES OUTSTANDING

                                                                                    AGGREGATE GROUP II SUBORDINATED
                                       GROUP 1 SUBORDINATED CERTIFICATES                     CERTIFICATES
                                    --------------------------------------       ------------------------------------
                                              PREPAYMENT SCENARIO                          PERCENTAGE OF CPR
                                    --------------------------------------       ------------------------------------
DISTRIBUTION DATE                     I        II      III     IV      V           0%     15%    25%     35%     50%
-----------------                   -----     -----   -----  -----   -----       -----  ------  -----   -----   -----

Initial........................      100       100     100    100     100         100    100     100     100     100
February 2007..................      100       100     100    100     100         100    100     100     100     100
February 2008..................       99        99      99     94      79         100    100     100      93      71
February 2009..................       99        99      96     76      58         100    100      92      75      50
February 2010..................       99        99      73     50      32          99     99      69      49      25
February 2011..................       98        98      56     33      18          99     89      51      32      13
February 2012..................       98        94      43     21      10          99     75      38      20       6
February 2013..................       97        82      33     14       5          98     64      29      13       3
February 2014..................       96        72      25      9       3          98     54      21       9       2
February 2015..................       96        64      19      6       2          97     46      16       6       1
February 2016..................       95        56      15      4       1          96     38      12       4       *
February 2017..................       92        48      11      3       1          94     32       9       2       *
February 2018..................       90        41       9      2       *          92     26       6       1       *
February 2019..................       87        36       6      1       *          89     22       5       1       *
February 2020..................       84        30       5      1       *          86     18       3       1       *
February 2021..................       81        26       4      *       *          83     15       2       *       *
February 2022..................       78        22       3      *       *          80     12       2       *       *
February 2023..................       74        19       2      *       *          76     10       1       *       *
February 2024..................       71        16       1      *       *          73      8       1       *       *
February 2025..................       67        13       1      *       *          69      6       1       *       *
February 2026..................       62        11       1      *       *          64      5       *       *       *
February 2027..................       58         9       1      *       *          59      4       *       *       *
February 2028..................       52         7       *      *       *          54      3       *       *       *
February 2029..................       47         6       *      *       *          49      2       *       *       *
February 2030..................       41         4       *      *       *          43      2       *       *       *
February 2031..................       35         3       *      *       *          37      1       *       *       *
February 2032..................       28         2       *      *       *          30      1       *       *       *
February 2033..................       21         2       *      *       *          23      1       *       *       *
February 2034..................       14         1       *      *       *          15      *       *       *       *
February 2035..................        6         *       *      *       *           7      *       *       *       *
February 2036..................        0         0       0      0       0           0      0       0       0       0
Weighted Average Life
   (in years)**................     21.18    12.12     6.57   4.67    3.60       21.63   9.86    6.11    4.57    3.20


______________

*     Indicates greater than zero but less than 0.50%

**    Determined as specified under "Weighted Average Lives of the Offered
      Certificates" herein.


                                     S-122



THE SUBORDINATED CERTIFICATES

      The weighted average life of, and the yield to maturity on, each Class of
Subordinated Certificates in an Aggregate Subordinated Certificate Group, 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 the related Aggregate Loan Group. 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 included in the related Aggregate Loan Group as described
under "Description of the Mortgage Loans" in this prospectus supplement. If the
actual rate and severity of losses on the Mortgage Loans in an Aggregate Loan
Group is higher than those assumed by a holder of a related 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 the related 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 such Mortgage Loans are consistent with an investor's expectations. In
general, the earlier a loss on a Mortgage Loan occurs, the greater the effect on
the yield to maturity of a Class of Certificates related to that Mortgage Loan.
Realized Losses on the Mortgage Loans in an Aggregate Loan Group will reduce the
Class Principal Balance of the Class of Subordinated Certificates in the related
Aggregate Certificate Group to the extent of any losses allocated to it (as
described under "Description of the Certificates -- Allocation of Losses" in
this prospectus supplement), without the receipt of cash attributable to the
reduction. In addition, shortfalls in cash available for distributions from the
Mortgage Loans in an Loan Group on the related Subordinated Certificates will
result in a reduction in the Class Principal Balance of the Class of
Subordinated Certificates in that Aggregate Certificate Group then outstanding
with the highest numerical Class designation if and to the extent that the
aggregate of the Class Principal Balances of all Classes of Certificates,
following all distributions and the allocation of Realized Losses on the
Mortgage Loans in that Aggregate Loan Group on a Distribution Date, exceeds the
aggregate Stated Principal Balance of the Mortgage Loans in the related
Aggregate Loan Group as of the Due Date occurring in the month of the
Distribution Date. This result may be more likely with respect to the Aggregate
Group II Subordinated Certificates due to the multiple Loan Group structure and
the provisions requiring Transfer Payments and interest thereon prior to
distributions to the related Aggregate Subordinated Certificate Group. As a
result of the reductions, less interest will accrue on the Class of Subordinated
Certificates than otherwise would be the case. The yield to maturity of the
Subordinated Certificates will also be affected by the disproportionate
allocation of principal prepayments to the Senior Certificates in the related
Aggregate Certificate Group, Net Interest Shortfalls and other cash shortfalls
in Available Funds. See "Description of the Certificates -- Allocation of
Losses" in this prospectus supplement.

      If on any Distribution Date, the Applicable Credit Support Percentage for
any Class of Subordinated Certificates, other than the Class of Subordinated
Certificates in an Aggregate Subordinated Certificate Group then outstanding
with the highest priority of distribution, is less than its Original Applicable
Credit Support Percentage, all partial principal prepayments and principal
prepayments in full on the Mortgage Loans in the related Aggregate Loan Group
available for distribution on the Subordinated Certificates in that Aggregate
Subordinated Certificate Group will be allocated solely to that Class and all
other Classes of Subordinated Certificates in that Aggregate Subordinated
Certificate Group with lower numerical Class designations, thereby accelerating
their amortization relative to that of the Restricted Classes and reducing the
weighted average lives of the related Classes of Subordinated Certificates
receiving the distributions. Accelerating the amortization of the Classes of
Subordinated Certificates with lower numerical Class designations in an
Aggregate Subordinated Certificate Group relative to the other Classes of
Subordinated Certificates in that Aggregate Subordinated Certificate Group is
intended to preserve the availability of the subordination provided by the other
Classes.


                                     S-123



                               CREDIT ENHANCEMENT

SUBORDINATION

      Realized Losses and Excess Losses on the Mortgage Loans in a Loan Group
that occur after the Senior Credit Support Depletion Date will be allocated
among the related Classes of Senior Certificates in the manner, order and
priority described under "Description of the Certificates--Allocation of Losses"
in this prospectus supplement.

      The rights of the holders of the Subordinated Certificates in an Aggregate
Certificate Group to receive distributions with respect to the Mortgage Loans in
the related Aggregate Loan Group will be subordinated to the rights of the
holders of the related Senior Certificates and the rights of the holders of each
Class of Subordinated Certificates (other than, in the case of Certificate Group
1, the Class 1-M-1 Certificates, and in the case of Aggregate Certificate Group
II, the Class M-1 Certificates) to receive the distributions will be further
subordinated to the rights of the Class or Classes of Subordinated Certificates
in that Aggregate Certificate Group with lower numerical class designations, in
each case only to the extent described in this prospectus supplement. The
subordination of the Subordinated Certificates in an Aggregate Certificate Group
to the Senior Certificates in that Aggregate Certificate Group and the
subordination within an Aggregate Certificate Group of the Classes of
Subordinated Certificates with higher numerical class designations to those with
lower numerical class designations is intended to increase the likelihood of
receipt, respectively, by the senior Certificateholders and the holders of
Subordinated Certificates with lower numerical class designations of the maximum
amount to which they are entitled on any Distribution Date and to provide the
holders protection against Realized Losses, other than Excess Losses. Realized
Losses, other than Excess Losses, on the Mortgage Loans in a Loan Group will be
allocated to the Class of Subordinated Certificates in the related Aggregate
Certificate Group then outstanding with the highest numerical class designation.

EXCESS LOSSES

      The Group 1 Subordinated Certificates and the Aggregate Group II
Subordinated Certificates will provide limited protection to the related Classes
of Certificates of higher relative priority against

          o   Special Hazard Losses in an initial amount expected to be up to
              approximately $4,000,000 and $5,800,000, respectively, (each, a
              "SPECIAL HAZARD LOSS COVERAGE AMOUNT"),

          o   Bankruptcy Losses in an initial amount expected to be up to
              approximately $150,000 and $150,000, respectively, (each, a
              "BANKRUPTCY LOSS COVERAGE AMOUNT") and

          o   Fraud Losses in an initial amount expected to be up to
              approximately $11,769,068 and $12,237,493, respectively, (each, a
              "FRAUD LOSS COVERAGE AMOUNT").

      Each Special Hazard Loss Coverage Amount will be reduced, from time to
time, to be an amount equal on any Distribution Date to the lesser of

          o   that Special Hazard Loss Coverage Amount as of the Closing Date
              less the amount, if any, of losses attributable to Special Hazard
              Mortgage Loans in the related Aggregate Loan Group incurred since
              the Closing Date, or

          o   the greatest of

              o   1% of the aggregate of the principal balances of the Mortgage
                  Loans,

              o   twice the principal balance of the largest Mortgage Loan or


                                     S-124



              o   the aggregate Stated Principal Balance of the Mortgage Loans
                  secured by mortgaged properties located in the single
                  California postal zip code area having the highest aggregate
                  principal balance of any zip code area.

All principal balances for the purpose of this definition will be calculated as
of the first day of the month before the month in which the Distribution Date
occurs after giving effect to scheduled installments of principal and interest
on the Mortgage Loans then due, whether or not paid.

      The Fraud Loss Coverage Amount for the Group 1 Mortgage Loans will be
reduced, from time to time, by the amount of Fraud Losses allocated to the Group
1 Certificates. In addition, the Fraud Loss Coverage Amount for the Group 1
Mortgage Loans will be reduced on the fifth anniversary of the cut-off date, to
zero and on the first, second, third and fourth anniversaries of the cut-off
date, to an amount equal to the lesser of (x) 2%, in the case of the first
anniversary, and 1%, in the case of the second, third and fourth anniversaries,
of the then current aggregate Stated Principal Balance of the Group 1 Mortgage
Loans and (y) the excess of the Fraud Loss Coverage Amount as of the preceding
anniversary of the Cut-off Date over the cumulative amount of Fraud Losses
allocated to the Group 1 Certificates since the preceding anniversary.

      The Fraud Loss Coverage Amount for the Aggregate Group II Mortgage Loans
will be reduced, from time to time, by the amount of Fraud Losses allocated to
the Aggregate Group II Certificates. In addition, the Fraud Loss Coverage Amount
for the Aggregate Group II Mortgage Loans will be reduced on the fifth
anniversary of the cut-off date, to zero and on the first, second, third and
fourth anniversaries of the cut-off date, to an amount equal to the lesser of
(x) 2%, in the case of the first anniversary, and 1%, in the case of the second,
third and fourth anniversaries, of the then current aggregate Stated Principal
Balance of the Aggregate Group II Mortgage Loans and (y) the excess of the Fraud
Loss Coverage Amount as of the preceding anniversary of the Cut-off Date over
the cumulative amount of Fraud Losses allocated to the Aggregate Group II
Certificates since the preceding anniversary.

      Each Bankruptcy Loss Coverage Amount will be reduced, from time to time,
by the amount of Bankruptcy Losses allocated to the Certificates in the related
Aggregate Certificate Group.

      The amount of coverage provided by the Subordinated Certificates in an
Aggregate Certificate Group for Special Hazard Losses, Bankruptcy Losses and
Fraud Losses may be cancelled or reduced from time to time for each of the risks
covered, provided that the then current ratings of the Certificates assigned by
the Rating Agencies are not adversely affected as a result. In addition, a
reserve fund or other form of credit enhancement may be substituted for the
protection provided by either Aggregate Group of Subordinated Certificates for
Special Hazard Losses, Bankruptcy Losses and Fraud Losses.

      A "DEFICIENT VALUATION" is a bankruptcy proceeding whereby the bankruptcy
court may establish the value of the Mortgaged Property at an amount less than
the then outstanding principal balance of the Mortgage Loan secured by the
Mortgaged Property or may reduce the outstanding principal balance of a Mortgage
Loan. In the case of a reduction in that value of the related Mortgaged
Property, the amount of the secured debt could be reduced to that value, and the
holder of the Mortgage Loan thus would become an unsecured creditor to the
extent the outstanding principal balance of the Mortgage Loan exceeds the value
so assigned to the Mortgaged Property by the bankruptcy court. In addition,
other modifications of the terms of a Mortgage Loan can result from a bankruptcy
proceeding, including the reduction (a "DEBT SERVICE REDUCTION") of the amount
of the monthly payment on the related Mortgage Loan. However, none of these
shall be considered a Debt Service Reduction or Deficient Valuation so long as
the related Servicer is pursuing any other remedies that may be available with
respect to the related Mortgage Loan and either the Mortgage Loan has not
incurred payment default or scheduled monthly payments of principal and interest
are being advanced by the related Servicer without giving effect to any Debt
Service Reduction or Deficient Valuation.


                                     S-125



                                 USE OF PROCEEDS

      The net proceeds from the sale of the Offered Certificates will be applied
by the Depositor to pay for the acquisition of the Mortgage Loans from the
Seller. See "Use of Proceeds" in the accompanying prospectus and "Method of
Distribution" in this prospectus supplement.

                    MATERIAL FEDERAL INCOME TAX CONSEQUENCES

GENERAL

      For federal income tax purposes, the Issuing Entity (exclusive of the
Additional Collateral, the Corridor Contracts and the assets held in the 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 (if any) will be referred to as an "underlying REMIC". Each underlying
REMIC (if any) will issue multiple classes of uncertificated, regular interests
(the "underlying REMIC Regular Interests") that will be held by another REMIC
above it in a tiered structure. The assets of the lowest underlying REMIC (or
the Master REMIC if there is no underlying REMIC) will consist of the Mortgage
Loans and any other assets designated in the Pooling and Servicing Agreement.
The Master REMIC will issue the Certificates (excluding the Class A-R
Certificate, the "Regular Certificates"). The Regular Certificates will be
designated as the regular interests in the Master REMIC. The Class A-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.
Aggregate distributions on the underlying REMIC Regular Interests held by the
Master REMIC (if any) will equal the aggregate distributions on the Regular
Certificates issued by the Master REMIC.

      The Regular Interest component of the LIBOR Certificates and the other
classes of Regular Certificates will be treated as debt instruments issued by
the Master REMIC for federal income tax purposes. In addition, each class of
LIBOR Certificates will represent a beneficial interest in the right to receive
payments of Net WAC Shortfalls and the Class 1-A-X and Class 1-M-X Certificates
will represent the obligation to make payments of their respective Required
Reserve Fund Deposits.

      Upon the issuance of the Certificates, Sidley Austin LLP ("TAX COUNSEL"),
will deliver its opinion concluding, assuming compliance with the Pooling and
Servicing Agreement, for federal income tax purposes, that each REMIC created
under the Pooling and Servicing Agreement will qualify as a REMIC within the
meaning of Section 860D of the Internal Revenue Code of 1986, as amended (the
"CODE"), and that the Regular Certificates will represent regular interests in a
REMIC. Moreover, Tax Counsel will deliver an opinion concluding that any rights
of the holders of the LIBOR Certificates to receive Net WAC Shortfalls will
represent, for federal income tax purposes, contractual rights coupled with
regular interests within the meaning of Treasury regulations Section
1.860G-2(i). The term "CAP CONTRACT" refers to the rights of the holders of the
LIBOR Certificates to receive payments of Net WAC Shortfalls.

TAXATION OF REGULAR CERTIFICATES

      The following discussion assumes that the rights and obligations of the
holders of the LIBOR Certificates under the Cap Contract will be treated as
rights and obligations under a notional principal contract rather than as a
partnership for federal income tax purposes. If these rights and obligations
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 WAC Shortfalls to holders of the LIBOR
Certificates who are non-U.S. Persons. Prospective investors in the LIBOR and
Notional Amount Certificates should consult their tax advisors regarding their
appropriate tax treatment.

      A holder of a LIBOR, Class 1-A-X or Class 1-M-X Certificate must allocate
the purchase price for such Certificate between two components--the REMIC
Regular Interest component and the Cap Contract component. The Cap Contract
component should further be viewed as deemed obligations of the Corridor
Contract Counterparty and the certificateholders of the Notional Amount
Certificates. Holders of Class 1-A-X and Class 1-M-X


                                     S-126



Certificates will be treated as having received a premium from the holders of
the LIBOR Certificates in return for the obligation to make their respective
Required Reserve Fund Deposits and as applying such premium towards the purchase
of the Class 1-A-X or Class 1-M-X Certificates. For information reporting
purposes, it will be assumed in accordance with the Pooling and Servicing
Agreement that, with respect to any LIBOR Certificate, the Cap Contract
component will have an insubstantial value relative to the value of the Regular
Interest component. The IRS could, however, argue that the Cap Contract
component has a greater value, and if that argument were to be sustained, the
Regular Interest component of the LIBOR Certificates could be viewed as having
been issued with either an additional amount of original issue discount ("OID")
(which could cause the total amount of discount to exceed a statutorily defined
de minimis amount) or with less premium (which would reduce the amount of
premium available to be used as an offset against interest income). See "Federal
Income Tax Consequences--REMICs-Taxation of Owners of REMIC Regular
Certificates- Original Issue Discount and Premium" in the accompanying
prospectus.

      Upon the sale, exchange, or other disposition of a LIBOR Certificate,
Class 1-A-X or Class 1-M-X Certificate, the holder must allocate the amount
realized between the two components of the certificate (that is, the Regular
Interest component and the Cap Contract component) based on the relative fair
market values of those components at the time of sale. Assuming that these
certificates are held as "capital assets" within the meaning of section 1221 of
the Code, gain or loss on the disposition of an interest in the Cap Contract
component should be capital gain or loss, and, gain or loss on the disposition
of the Regular Interest component should, subject to the limitation described
below, be capital gain or loss. Gain attributable to the Regular Interest
component of such a certificate will be treated as ordinary income, however, to
the extent such gain does not exceed the excess, if any, of:

      (1)   the amount that would have been includable in the holder's gross
income with respect to the Regular Interest component had income thereon accrued
at a rate equal to 110% of the applicable federal rate as defined in section
1274(d) of the Code determined as of the date of purchase of the certificate

over

      (2)   the amount actually included in such holder's income.

As stated above, a portion of the purchase price paid by a holder to acquire a
LIBOR Certificate will be attributable to the Cap Contract component of such
certificate. The portion of the overall purchase price attributable to the Cap
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 constant interest method, the price paid for an interest
rate cap agreement 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 Cap Contract
component of such a certificate.

      Any payments received by a holder of a LIBOR Certificate of Net WAC
Shortfalls will be treated as periodic payments on an interest rate cap
agreement. To the extent the sum of such periodic payments for any year exceeds
that year's amortized price of the Cap Contract component, such excess is
ordinary income to a holder of a LIBOR Certificate and allowable as an ordinary
deduction to a Class 1-A-X or Class 1-M-X Certificateholder to the extent of any
Required Reserve Fund Deposit made by such Certificates. If for any year the
amount of that year's amortized price exceeds the sum of the periodic payments,
such excess is allowable as an ordinary deduction to a holder of a LIBOR
Certificate and ordinary income to a holder of any Class 1-A-X or Class 1-M-X
Certificates to the extent that the amortized price attributable to the right to
receive Net WAC Shortfalls from such Certificates exceeds any Required Reserve
Fund Deposit made by such Certificates. In the case of an individual, such
deduction will be (i) an "item of preference" for purposes of the "alternative
minimum tax" imposed by section 55 of the Code, (ii) subject to the 2% floor
imposed on miscellaneous itemized deductions under section 67 of the Code and
(iii) may be subject to the overall limitation on itemized deductions imposed
under section 68 of the Code.

      Income on the Regular Interest component of the LIBOR Certificates and the
other classes of Regular Certificates must be reported under an accrual method
of accounting. Under the accrual method of accounting,


                                     S-127



interest income may be required to be included in a holder's gross income in
advance of the holder's actual receipt of that interest income.

      The Notional Amount Certificates will, and the other classes of offered
certificates may, be treated for federal income tax purposes as having been
issued with an amount of Original Issue Discount ("OID"). Although the tax
treatment is not entirely certain, the Notional Amount Certificates will be
treated as having OID for federal income tax purposes in an amount equal to the
excess of (1) the sum of all payments on the Notional Amount Certificates,
determined under the Prepayment Assumption (as defined herein), over (2) the
price at which the Notional Amount Certificates are issued. 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% PPC for the Fixed-Rate Mortgage Loans, and 25%
CPR, for the Adjustable-Rate Mortgage Loans (the "PREPAYMENT ASSUMPTION"). No
representation is made that the mortgage loans will prepay at the foregoing rate
or any other rate. Although the tax treatment of the Regular Certificates is
uncertain, in accordance with the Pooling and Servicing Agreement the Securities
Administrator will treat interest payments in respect of the Regular
Certificates as "qualified stated interest" within the meaning of the Code. See
"Federal Income Tax Consequences - REMICs -Taxation of Owners of REMIC Regular
Certificates - Original Issue Discount and Premium" in the accompanying
prospectus. If the holders of any Regular Certificates are treated as holding
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 "Federal Income Tax Consequences -- REMICs-Taxation of Owners of
REMIC Regular Certificates -- Premium" in the accompanying prospectus.

      Computing accruals of OID in the manner described in the accompanying
prospectus may (depending on the actual rate of prepayments during the accrual
period) result in the accrual of negative amounts of OID on the certificates
issued with OID in an accrual period. Holders will be entitled to offset
negative accruals of OID only against future OID accrual on their certificates.
Although unclear, a holder of a Notional Amount Certificate may be entitled to
deduct a loss to the extent that its remaining basis exceeds the maximum amount
of future payments to which the Certificateholder would be entitled if there
were no further prepayments of the Mortgage Loans.

      As described more fully under "Federal Income Tax Consequences" in the
accompanying prospectus, the offered certificates will represent "real estate
assets" under Section 856(c)(5)(B) of the Internal Revenue Code of 1986, as
amended (the "Code") and qualifying assets under Section 7701(a)(19)(C) of the
Code in the same (or greater) proportion that the Assets of the Issuing Entity
will be so treated, and income on the Regular Interest component of the LIBOR
Certificates, Class 1-A-X and Class 1-M-X Certificates and the other classes of
offered certificates will represent "interest on obligations secured by
mortgages on real property or on interests in real property" under Section
856(c)(3)(B) of the Code in the same (or greater) proportion that the income on
the assets of the Issuing Entity will be so treated. The Regular Interest
component of the LIBOR Certificates, Class 1-A-X and Class 1-M-X Certificates
and the other classes of Regular Certificates will represent qualified mortgages
under Section 860G(a) (3) of the Code if acquired by a REMIC within the
prescribed time periods of the Code. The Cap Contract component of a LIBOR
Certificate, Class 1-A-X or Class 1-M-X Certificate will not, however, qualify
as an asset described in Section 7701(a)(19)(C) of the Code, as a real estate
asset under Section 856(c)(5)(B) of the Code, or a qualified mortgage under
Section 860G(a)(3) of the Code. Due to their obligations under the Cap Contract,
investors in the Class 1-A-X and Class 1-M-X Certificates should consult their
tax advisors before resecuritizing those classes of Certificates in a REMIC.

THE CLASS A-R CERTIFICATES

      The holders of the Class A-R Certificates must include the taxable income
of each underlying REMIC (if any) 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
Class A-R 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. See "Federal Income Tax Consequences--Tax Related
Restrictions on Transfers of REMIC Residual Certificates" in the accompanying
prospectus.


                                     S-128



      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 Class A-R Certificate (that is, one of the Class A-R
Certificates) are encouraged to consider carefully the tax consequences of an
investment in Class A-R Certificates discussed in the accompanying prospectus
and consult their tax advisors with respect to those consequences. See "Federal
Income Tax Consequences -- REMICs--Taxation of Owners of REMIC Residual
Certificates" in the accompanying prospectus. Specifically, prospective holders
of Class A-R Certificates should consult their tax advisors regarding whether,
at the time of acquisition, a Class A-R 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 Class A-R
Certificates should be aware of REMIC regulations that may affect their ability
to transfer their Class A-R Certificates. See "Federal Income Tax Consequences
-- Tax Related Restrictions on Transfers of REMIC Residual Certificates,"
"--REMICs-- Taxation of Owners of REMIC Residual Certificates-- Mark-to-Market
Rules" and "--Excess Inclusions" and "Federal Income Tax Consequences --
Residual Certificate Payments - Non-U.S. Persons" in the accompanying
prospectus.

      Additionally, for information regarding certain transactions prohibited to
REMICs and the treatment of Realized Losses, see "Federal Income Tax
Consequences --Prohibited Transactions and Other Taxes" and "Federal Income Tax
Consequences -- REMICs -- Taxation of Owners of REMIC Regular Certificates --
Effects of Defaults and Delinquencies" in the accompanying prospectus.

                                   OTHER TAXES

      No representations are made regarding the tax consequences of the
purchase, ownership or disposition of the certificates under any state, local or
foreign tax law. All investors are encouraged to consult their own advisors
regarding the federal, state, local or foreign tax consequences of purchasing,
owning or disposing of the certificates.

                                  ERISA MATTERS

      The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and Section 4975 of the Code impose requirements on certain employee benefit
plans--and on certain other retirement plans and arrangements, including
individual retirement accounts and annuities, Keogh plans and collective
investment funds and separate accounts in which plans, accounts or arrangements
are invested (together, "PLANS"), and on persons who are fiduciaries with
respect to these Plans.

      ERISA prohibits "parties in interest" with respect to a Plan from engaging
in certain transactions involving the Plan and its assets unless a statutory,
regulatory or administrative exemption applies to the transaction. Section 4975
of the Code imposes certain excise taxes on prohibited transactions involving
plans described under that section; ERISA authorizes the imposition of civil
penalties for prohibited transactions involving plans not covered under Section
4975 of the Code. Any Plan fiduciary which proposes to cause a Plan to acquire
any of the Offered Certificates should consult with its counsel with respect to
the potential consequences under ERISA and the Code of the Plan's acquisition
and ownership of such certificates. See "ERISA Considerations" in the
accompanying prospectus.

      Certain employee benefit plans, including governmental plans and certain
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
accompanying prospectus, subject to the provisions of other applicable federal
and state law. Any such plan which 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.


                                     S-129



      Investments by Plans that are subject to ERISA are subject to 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 which 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.

      The U.S. Department of Labor has granted to the Underwriter an
administrative exemption (the "EXEMPTION"), which exempts from the application
of the prohibited transaction rules transactions relating to:

o   the acquisition, holding and sale by Plans of certain securities issued by a
    trust with respect to which the Underwriter or any of its affiliates is the
    sole underwriter or the manager or co-manager of the underwriting syndicate,
    and

o   the servicing, operation and management of such trusts,

provided that the general conditions and certain other requirements set forth in
the Exemption are satisfied.

      Among the conditions which must be satisfied for the Exemption to apply:

o   The acquisition of the Offered Certificates by a Plan is on terms (including
    the price for the certificates) 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 Offered Certificates acquired by the Plan have received a rating at the
    time of such acquisition that is one of the four highest generic rating
    categories from a rating agency identified in the exemption, such as S&P,
    Fitch or Moody's.

o   The Trustee is not an affiliate of any other member of the "RESTRICTED
    GROUP" (defined below in the second following paragraph), other than an
    Underwriter.

o   The sum of all payments made to and retained by the Underwriter in
    connection with the distribution of the Offered Certificates represents not
    more than reasonable compensation for Underwriting the Offered Certificates;
    the sum of all payments made to and retained by the Seller and the Depositor
    pursuant to the assignment of the trust assets to the Issuing Entity
    represents not more than the fair market value of such assets; the sum of
    all payments made to and retained by any Servicer represents not more than
    reasonable compensation for the Servicer's services under the related
    Purchaser and Servicing Agreement and reimbursements of such person's
    reasonable expenses in connection therewith.

o   The Plan investing in the Offered Certificates is an "accredited investor"
    as defined in Rule 501(a)(1) of Regulation D of the SEC under the Securities
    Act of 1933.

      The Issuing Entity must also meet each of the requirements listed below:

o   The Mortgage Pool must consist solely of assets of the type that have been
    included in other investment pools.

o   Certificates representing beneficial ownership in such other investment
    pools must have been rated in one of the four highest generic rating
    categories by a rating agency for at least one year prior to the Plan's
    acquisition of Offered Certificates.

o   Certificates evidencing beneficial ownership in such other investment pools
    must have been purchased by investors other than Plans for at least one year
    prior to any Plan's acquisition of Offered Certificates.

      Moreover, the Exemption provides relief from certain self-dealing/conflict
of interest prohibited transactions that may occur when the Plan fiduciary
causes a Plan to acquire an interest in a trust holding receivables as to which
the fiduciary (or its affiliate) is an obligor provided, among other
requirements, that:


                                     S-130



o   in the case of an acquisition in connection with the initial issuance of
    Certificates, at least 50% of each Class of Certificates in which Plans have
    invested and at least 50% of the aggregate interests in the assets of the
    Issuing Entity are acquired by persons independent of the restricted group;

o   such fiduciary (or its affiliate) is an obligor with respect to not more
    than 5% of the fair market value of the obligations of the Issuing Entity;

o   the Plan's investment in Offered Certificates of any class does not exceed
    25% of all of the Certificates of that class outstanding at the time of the
    acquisition; and

o   immediately after the acquisition, no more than 25% of the assets of any
    Plan with respect to which such person is a fiduciary are invested in
    securities representing indebtedness of one or more issuers containing
    assets sold or serviced by the same entity.

This relief does not apply to Plans sponsored by members of the "restricted
group" consisting of the Seller, the Depositor, the Master Servicer, any
Servicer, the Trustee, each underwriter, any obligor with respect to Mortgage
Loans included in the Assets of the Issuing Entity constituting more than 5% of
the aggregate unamortized principal balance of the Assets of the Issuing Entity,
a provider of credit enhancement to the Issuing Entity, a counterparty to an
eligible swap agreement held by the Issuing Entity or any affiliate of one of
these parties.

      It is expected that the Exemption will apply to the acquisition and
holding by Plans of the Offered Certificates (except for the Class A-R
Certificate) and that all conditions of the Exemption other than those within
the control of the investors will be met.

      The rating of a class of Offered Certificates may change. If a class of
Offered Certificates no longer has a rating of at least "BBB-" from at least one
rating agency, 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). However, insurance company general accounts investing assets of Plans
may be eligible to purchase such Offered Certificates pursuant to Sections I and
III of PTCE 95-60.

      BECAUSE THE CHARACTERISTICS OF THE CLASS A-R CERTIFICATE MAY NOT MEET THE
REQUIREMENTS OF THE EXEMPTION DISCUSSED ABOVE OR ANY OTHER ISSUED EXEMPTION
UNDER ERISA INCLUDING PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 83-1, THE
PURCHASE AND HOLDING OF THE CLASS A-R CERTIFICATE BY A PLAN, INCLUDING
INDIVIDUAL RETIREMENT ACCOUNTS AND OTHER PLANS SUBJECT TO SECTION 4975 OF THE
CODE, MAY RESULT IN PROHIBITED TRANSACTIONS AND THE IMPOSITION OF EXCISE TAXES
OR CIVIL PENALTIES. CONSEQUENTLY, THE ACQUISITION AND TRANSFER OF THE CLASS A-R
CERTIFICATE WILL NOT BE REGISTERED BY THE SECURITIES ADMINISTRATOR UNLESS THE
SECURITIES ADMINISTRATOR ON BEHALF OF THE TRUSTEE RECEIVES:

o   a representation from the acquiror or transferee of the Class A-R
    Certificate to the effect that the transferee is not an employee benefit
    plan subject to Section 406 of ERISA or a plan or arrangement subject to
    Section 4975 of the Code, or a person acting on behalf of any such plan or
    arrangement or using the assets of any such plan or arrangement to effect
    such transfer;

o   a representation that the transferee is an insurance company which is
    purchasing the Class A-R Certificate with funds contained in an "insurance
    company general account" (as such term is defined in Section V(e) of PTCE
    95-60) and that the purchase and holding of the Class A-R Certificate are
    eligible for exemptive relief under Sections I and III of PTCE 95-60; or

o   an opinion of counsel satisfactory to the Securities Administrator and the
    certificate registrar to the effect that the proposed transfer will not (i)
    constitute or result in a non-exempt prohibited transaction under ERISA or
    Section 4975 of the Code or (ii) subject the certificate registrar, the
    Trustee, the Depositor, the Master Servicer,


                                     S-131



    any Servicer, or the Securities Administrator to any obligation in addition
    to those undertaken by them in the Pooling and Servicing Agreement.

      Prospective Plan investors should consult with their legal advisors
concerning the impact of ERISA and the Code, the applicability of the Exemption,
described above, and PTCE 83-1, described in the accompanying prospectus, and
the potential consequences in their specific circumstances prior to making an
investment in the Offered Certificates. Moreover, each Plan fiduciary should
determine whether under the general fiduciary standards of investment prudence
and diversification, an investment 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 in no respect a
representation by the Issuing Entity or the 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 Morgan Stanley & Co. Incorporated (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. In connection with the sale
of the Offered Certificates, the Underwriter may be deemed to have received
compensation from the Depositor in the form of underwriting discounts.

      The Underwriter intends to make a secondary market in the Offered
Certificates, but has no obligation to do so. There can be no 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. The Offered Certificates will not
be listed on any national securities exchange.

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

      The Underwriter is an affiliate of the Depositor, the Seller and Sponsor
and the Corridor Contract Counterparty.

                                  LEGAL MATTERS

      The validity of the Certificates will be passed upon for the Depositor by
Sidley Austin LLP, New York, New York. Certain tax matters will be passed upon
for the Depositor by Sidley Austin LLP. Sidley Austin LLP will act as counsel
for the Underwriter.

                                     RATINGS

      It is a condition of the issuance of the Certificates that they receive
the respective ratings set forth on pages v and vi of this prospectus supplement
by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies,
Inc. ("S&P"), and by Moody's Investors Service, Inc. ("MOODY'S" and, together
with S&P, the "RATING AGENCIES").

      The ratings assigned to mortgage pass-through certificates address the
likelihood of the receipt of all payments on the Mortgage Loans by the related
Certificateholders under the agreements pursuant to which such certificates are
issued. The rating assigned to the Class A-R Certificates only addresses the
return of its Class Principal Balance. The rating assigned to the notional
amount certificates does not address whether investors will recoup their initial
investment. The ratings of the LIBOR Certificates do not address the likelihood
that any Net WAC Shortfall will be paid to certificateholders. Such ratings take
into consideration the credit quality of the related


                                     S-132



Mortgage Pool, including any credit support providers, structural and legal
aspects associated with such certificates, and the extent to which the payment
stream on the Mortgage Pool is adequate to make the payments required by such
certificates. Ratings on such certificates do not, however, constitute a
statement regarding frequency of prepayments of the Mortgage Loans.

      The ratings assigned to the Offered Certificates should be evaluated
independently from similar ratings on other types of securities. A 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 such other rating
agency. The rating assigned by such other rating agency to the Offered
Certificates could be lower than the respective ratings assigned by the Rating
Agencies.

      The Depositor has requested that S&P and Moody's maintain ongoing
surveillance of the ratings assigned to the offered certificates in accordance
with their respective policies, but we cannot assure you that either S&P or
Moody's will continue their surveillance of the ratings assigned to the offered
certificates.


                                     S-133



                          INDEX OF CERTAIN DEFINITIONS

2/6 Month Mortgage Loan....................................................S-33
3/1 Mortgage Loan..........................................................S-33
3/6 Month Mortgage Loan....................................................S-33
5/1 Mortgage Loan..........................................................S-33
5/6 Month Mortgage Loan....................................................S-33
7/1 Mortgage Loan..........................................................S-33
7/6 Month Mortgage Loan....................................................S-33
Additional Collateral......................................................S-30
Additional Collateral Mortgage Loans.......................................S-30
Adjustment Date............................................................S-32
aggregate certificate group.................................................S-7
Aggregate Certificate Group................................................S-76
Aggregate Cut-off Date Loan Group Balance..................................S-29
Aggregate Cut-off Date Pool Principal Balance..............................S-29
aggregate group II certificates.............................................S-6
Aggregate Group II Certificates............................................S-76
aggregate group II senior certificates......................................S-6
Aggregate Group II Senior Certificates.....................................S-76
aggregate group II subordinated certificates................................S-6
Aggregate Group II Subordinated Certificates...............................S-75
aggregate loan group........................................................S-7
aggregate loan group II................................................S-6, S-7
Aggregate Subordinated Certificate Group...................................S-76
Aggregate Subordinated Percentage..........................................S-96
Applicable Credit Support Percentage.......................................S-97
Assets of the Issuing Entity...............................................S-29
Assignment Agreements......................................................S-31
Auction Purchaser.........................................................S-113
Available Funds............................................................S-85
Bankruptcy Loss Coverage Amount...........................................S-125
Bankruptcy Losses.........................................................S-100
book-entry certificates....................................................S-79
Business Day...............................................................S-79
Cap Contract..............................................................S-127
CBE.......................................................................S-119
Certificateholder..........................................................S-79
Class 1-A-X Sub Account....................................................S-88
Class 1-B Certificates.....................................................S-76
Class 1-M Certificates.....................................................S-76
Class 1-M-X Sub Account....................................................S-88
Class B Certificates.......................................................S-76
Class M Certificates.......................................................S-76
Class P Certificates.......................................................S-75
Class P Distribution Amount................................................S-93
Class Principal Balance....................................................S-77
Class Subordination Percentage.............................................S-97
Closing Date...............................................................S-73
Code......................................................................S-127
Corridor Contract..........................................................S-89
Corridor Contract Counterparty.............................................S-89
CPR.......................................................................S-113
Current Interest...........................................................S-89
Custodial Account..........................................................S-82
Custodian..................................................................S-73
Custodians.................................................................S-73
Cut-off Date...............................................................S-29
Debt Service Reduction....................................................S-126
Defective Mortgage Loan....................................................S-54
Deficient Valuation.......................................................S-126
Deleted Mortgage Loan......................................................S-55
Depositor..................................................................S-54
Determination Date.........................................................S-65
Distribution Account.......................................................S-83
Distribution Date..........................................................S-79
DTC.....................................................................S-79, 1
Due Date.............................................................S-31, S-93
Effective Loan-to-Value Ratio..............................................S-34
ERISA.....................................................................S-130
Excess Losses.............................................................S-100
Exemption.................................................................S-131
Expense Fee Rate...........................................................S-64
Fraud Loss Coverage Amount................................................S-125
Fraud Losses..............................................................S-100
Global Securities.............................................................1
GMAC.................................................................S-31, S-57
GMAC Serviced Mortgage Loan................................................S-62
GMACM......................................................................S-57
Gross Margin...............................................................S-33
Group 1 Assets............................................................S-113
Group 1 Certificates.......................................................S-76
Group 1 Mortgage Loans.....................................................S-29
Group 1 Net WAC............................................................S-20
Group 1 Net WAC..............................................................vi
group 1 senior certificates.................................................S-6
Group 1 Senior Certificates................................................S-76
group 1 subordinated certificates...........................................S-6
Group 1 Subordinated Certificates..........................................S-74
Group 2 Mortgage Loans.....................................................S-29
Group 2 Senior Certificates................................................S-76
Group 3 Mortgage Loans.....................................................S-29
Group 3 Senior Certificates................................................S-76
HSBC.......................................................................S-31
HSBC Serviced Mortgage Loan................................................S-62
Initial Periodic Rate Cap..................................................S-33
Interest Accrual Period....................................................S-86
interest distribution amount...............................................S-86
Interest Only Loans........................................................S-32
Issuing Entity.............................................................S-29
Last Scheduled Distribution Date..........................................S-103
LIBOR......................................................................S-82
LIBOR Business Day.........................................................S-82
LIBOR Certificates.........................................................S-76


                                     S-134



Limited Purpose Surety Bond................................................S-31
Liquidated Mortgage Loan..................................................S-100
Loan Group.................................................................S-29
loan group 1................................................................S-7
Loan Group 1...............................................................S-29
Loan Group 2...............................................................S-29
Loan Group 3...............................................................S-29
Loan Group Principal Balance...............................................S-94
Loan-to-Value Ratio........................................................S-34
LPMI Mortgage Loans........................................................S-34
Master Servicer......................................................S-31, S-54
Master Servicer Default....................................................S-66
Maximum Mortgage Rate......................................................S-33
Minimum Auction Price.....................................................S-114
Minimum Mortgage Rate......................................................S-33
Monthly Advance............................................................S-65
Moody's...................................................................S-133
Morgan Stanley.............................................................S-90
Mortgage...................................................................S-54
Mortgage File..............................................................S-54
Mortgage Index.............................................................S-33
Mortgage Loan Auction Price...............................................S-113
Mortgage Loan Purchase Agreement...........................................S-31
Mortgage Loans.............................................................S-29
Mortgage Note..............................................................S-54
Mortgage Pool..............................................................S-29
Mortgage Rate..............................................................S-32
Mortgaged Property.........................................................S-29
MSCC.......................................................................S-30
MSCC Mortgage Loans........................................................S-30
MSMC.....................................................S-30, S-56, S-68, S-71
MSMC Mortgage Loans........................................................S-30
Net Interest Shortfall.....................................................S-86
Net Mortgage Rate..........................................................S-64
net prepayment interest shortfalls.........................................S-65
Net WAC Shortfalls.........................................................S-89
Notional Amount............................................................S-78
Notional Amount Certificates...............................................S-77
OID................................................................S-128, S-129
One-Month LIBOR Index......................................................S-32
One-Year CMT Index.........................................................S-33
One-Year LIBOR Index.......................................................S-32
Optional Termination Date.................................................S-113
Original Applicable Credit Support Percentage..............................S-97
original subordinate principal balance.....................................S-95
Originator.................................................................S-30
Other Mortgage Loans.......................................................S-30
Overcollateralized Group...................................................S-91
Percentage Interest.......................................................S-114
Plans.....................................................................S-130
Pool Principal Balance.....................................................S-94
Pooling and Servicing Agreement............................................S-54
PPC.......................................................................S-113
Prepayment Assumption.....................................................S-129
Prepayment Period..........................................................S-93
Prepayment Scenario.......................................................S-113
Principal Amount...........................................................S-90
Privately Offered Certificates.............................................S-76
Prospectus Directive.........................................................iv
PTCE......................................................................S-132
Rating Agencies...........................................................S-133
Realized Loss.............................................................S-100
Record Date................................................................S-79
Reference Bank Rate........................................................S-82
Reg AB.....................................................................S-66
Relevant Implementation Date................................................iii
Relevant Member State.......................................................iii
Relief Act Reduction.......................................................S-87
Replacement Mortgage Loan..................................................S-55
Required Reserve Fund Deposit..............................................S-88
ResCap.....................................................................S-57
Reserve Fund...............................................................S-88
Residual Certificates......................................................S-77
Restricted Classes.........................................................S-97
restricted group..........................................................S-131
S&P.......................................................................S-133
Securities Administrator...................................................S-54
Seller.....................................................................S-54
Senior Certificate Group...................................................S-76
Senior Certificates........................................................S-73
Senior Credit Support Depletion Date.......................................S-99
Senior Percentage..........................................................S-94
Senior Prepayment Percentage...............................................S-94
Senior Principal Distribution Amount.......................................S-93
Senior Termination Date....................................................S-96
Servicer Remittance Date.............................................S-61, S-64
Servicing Fee Rate.........................................................S-62
Significance Estimate......................................................S-90
Significance Percentage....................................................S-90
Six-Month LIBOR Index......................................................S-32
Special Hazard Loss Coverage Amount.......................................S-125
Special Hazard Losses.....................................................S-100
Sponsor....................................................................S-56
Sponsor Servicing Rights Mortgage Loans....................................S-57
Stated Principal Balance...................................................S-94
structuring assumptions...................................................S-103
Sub Account................................................................S-88
Subordinated Certificates..................................................S-74
Subordinated Percentage....................................................S-94
Subordinated Portion.......................................................S-91
Subordinated Prepayment Percentage.........................................S-96
Subordinated Principal Distribution Amount.................................S-98
Subsequent Periodic Rate Cap...............................................S-33
Subsequent Recoveries.....................................................S-101
Substitution Adjustment Amount.............................................S-55
Tax Counsel...............................................................S-127
Telerate Screen Page 3750..................................................S-82
Transfer Payment...........................................................S-92
Transfer Payment Made......................................................S-92
Transfer Payment Received..................................................S-92


                                     S-135



Trustee....................................................................S-54
Two Times Test.............................................................S-96
U.S. Person...................................................................4
Undercollateralized Group..................................................S-91
underlying mortgage loan purchase agreement................................S-31
underlying servicing agreement.............................................S-31
Underwriter...............................................................S-133
Wachovia...................................................................S-30
Wachovia Mortgage Loans....................................................S-30
Weighted Average Net Mortgage Rate.........................................S-64
Wells Fargo....................................................S-31, S-54, S-72
Wells Fargo Serviced Mortgage Loan.........................................S-62
Wells Fargo Servicer.......................................................S-30
Wells Fargo Servicer Mortgage Loans........................................S-30
Yield Table...............................................................S-119


                                     S-136



                                     ANNEX I

          GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES

      Except in certain limited circumstances, the Offered Certificates 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 any of The Depository Trust Company ("DTC"), Clearstream or
Euroclear. The Global Securities will be tradable as home market instruments in
both the European and U.S. domestic markets. Initial settlement and all
secondary trades will settle in same-day funds.

      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 DTC
Participants holding Certificates will be effected on a delivery-against-payment
basis through the respective Depositaries of Clearstream and Euroclear (in such
capacity) and as DTC Participants.

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

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
Depositaries, which in turn will hold such positions in accounts as DTC
Participants.

      Investors electing to hold their Global Securities through DTC 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.

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

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 DTC Participants. Secondary market trading between DTC
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.


                                       I-1



      Trading between DTC Seller and Clearstream or Euroclear purchaser. When
Global Securities are to be transferred from the account of a DTC Participant to
the account of a Clearstream Participant or a Euroclear Participant, the
purchaser will send instructions to Clearstream or Euroclear through a
Clearstream Participant or Euroclear Participant at least one business day prior
to settlement. Clearstream or Euroclear will instruct the respective Depositary,
as the case may be, to receive the Global Securities against payment. Payment
will include interest accrued on the Global Securities from and including the
last coupon payment date to and excluding the settlement date, on the basis of
the actual number of days in such accrual period, and a year assumed to consist
of 360 days. For transactions settling on the 31st of the month, payment will
include interest accrued to and excluding the first day of the following month.
Payment will then be made by the respective Depositary of the DTC 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 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.

      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.

      Since the settlement is taking place during New York business hours, DTC
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 DTC Participants a cross-market transaction
will settle no differently than a trade between two DTC 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 DTC Participant. The seller will send
instructions to Clearstream or Euroclear through a Clearstream Participant or
Euroclear Participant at least one business day prior to settlement. In these
cases Clearstream or Euroclear will instruct the respective Depositary, as
appropriate, to deliver the Global Securities to the DTC Participant's account
against payment. Payment will include interest accrued on the Global Securities
from and including the last Coupon payment to and excluding the settlement date
on the basis of the actual number of days in such accrual period and a year
assumed to consist of 360 days. For transactions settling on the 31st of the
month, payment will include interest accrued to and excluding the first day of
the following month. 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). Should the Clearstream Participant
or Euroclear Participant have a line of credit with its respective clearing
system and elect to be in debt in anticipation of receipt of the sale proceeds
in its account, the back-valuation will extinguish any overdraft incurred over
that one-day period. If settlement is not completed on the intended value date
(i.e., the trade


                                       I-2



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 DTC Participants for delivery to Clearstream Participants
or Euroclear Participants should note that these trades would automatically fail
on the sale side unless affirmative action were taken. At least three techniques
should be readily available to eliminate this potential problem:

            1.  borrowing through Clearstream or Euroclear 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 U.S. from a DTC
                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 DTC
                Participant is at least one day prior to the value date for the
                sale to the Clearstream Participant or Euroclear Participant.

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 30% 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:

      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.

      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).

      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),

      U.S. Federal Income Tax Reporting Procedure. 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 effective
until the third succeeding calendar year from the date such form is signed.

      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


                                       I-3



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 October 20,
1996, and treated as United States persons prior to such 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.


                                      I-4





                                                        ANNEX II

                                 CORRIDOR CONTRACT SCHEDULES FOR THE LIBOR CERTIFICATES

                                     CLASS 1-A-1, CLASS 1-A-2
                                   AND CLASS 1-A-3 CERTIFICATES                         CLASS 1-M CERTIFICATES
                          -----------------------------------------------     -------------------------------------------
                            NOTIONAL          CAP                              NOTIONAL            CAP        CAP CEILING
DISTRIBUTION DATES         BALANCE ($)      STRIKE (%)    CAP CEILING (%)     BALANCE ($)       STRIKE (%)        (%)
-----------------------   ------------      ----------    ---------------     -----------       ----------    -----------

April 25, 2006.........   3,602,313.13        5.770           11.230          190,214.93          5.330          10.790
May 25, 2006...........   3,527,139.02        5.821           11.230          190,159.60          5.381          10.790
June 25, 2006..........   3,452,295.98        5.841           11.230          190,104.03          5.401          10.790
July 25, 2006..........   3,377,777.50        5.929           11.230          190,048.22          5.489          10.790
August 25, 2006........   3,303,579.98        5.965           11.230          189,992.08          5.525          10.790
September 25, 2006.....   3,229,713.16        5.986           11.230          189,936.09          5.546          10.790
October 25, 2006.......   3,156,178.20        5.988           11.230          189,880.08          5.548          10.790
November 25, 2006......   3,082,981.16        5.992           11.230          189,823.82          5.552          10.790
December 25, 2006......   3,010,139.34        6.194           11.230          189,767.43          5.754          10.790
January 25, 2007.......   2,938,281.99        6.234           11.230          189,717.87          5.794          10.790
February 25, 2007......   2,867,992.80        6.240           11.230          189,668.03          5.800          10.790
March 25, 2007.........   2,799,275.51        6.239           11.230          189,617.99          5.799          10.790
April 25, 2007.........   2,732,093.38        6.241           11.230          189,567.65          5.801          10.790
May 25, 2007...........   2,666,411.92        6.246           11.230          189,517.03          5.806          10.790
June 25, 2007..........   2,602,195.48        6.245           11.230          189,465.99          5.805          10.790
July 25, 2007..........   2,539,412.93        6.285           11.230          189,414.64          5.845          10.790
August 25, 2007........   2,478,032.00        6.291           11.230          189,363.01          5.851          10.790
September 25, 2007.....   2,418,022.10        6.297           11.230          189,311.14          5.857          10.790
October 25, 2007.......   2,359,353.73        6.297           11.230          189,259.16          5.857          10.790
November 25, 2007......   2,301,994.39        6.322           11.230          189,206.88          5.882          10.790
December 25, 2007......   2,245,915.39        6.518           11.230          189,154.37          6.078          10.790
January 25, 2008.......   2,191,155.82        6.564           11.230          189,107.48          6.124          10.790
February 25, 2008......   2,137,615.45        6.592           11.230          189,060.30          6.152          10.790
March 25, 2008.........   2,085,268.27        6.594           11.230          189,012.92          6.154          10.790
April 25, 2008.........   2,034,086.81        6.593           11.230          188,965.30          6.153          10.790
May 25, 2008...........   1,984,043.73        6.599           11.230          188,917.33          6.159          10.790
June 25, 2008..........   1,935,113.72        6.602           11.230          188,869.01          6.162          10.790
July 25, 2008..........   1,887,271.79        6.646           11.230          188,820.34          6.206          10.790
August 25, 2008........   1,840,494.35        6.673           11.230          188,771.40          6.233          10.790
September 25, 2008.....   1,794,758.00        6.690           11.230          188,722.23          6.250          10.790
October 25, 2008.......   1,750,039.87        6.690           11.230          188,672.90          6.250          10.790
November 25, 2008......   1,706,316.18        6.877           11.230          188,623.29          6.437          10.790
December 25, 2008......   1,663,550.73        7.084           11.230          188,571.82          6.644          10.790
January 25, 2009.......   1,624,406.22        7.185           11.230          186,478.71          6.745          10.790
February 25, 2009......   1,586,158.81        7.224           11.230          184,409.14          6.784          10.790
March 25, 2009.........   1,548,788.69        6.669           11.230          182,362.91          6.783          10.790
April 25, 2009.........   1,514,821.90        6.657           11.230          178,363.47          6.781          10.790
May 25, 2009...........   1,481,607.23        6.653           11.230          174,452.59          6.785          10.790
June 25, 2009..........   1,449,128.09        6.645           11.230          170,628.32          6.785          10.790
July 25, 2009..........   1,417,368.10        6.644           11.230          166,888.73          6.787          10.790
August 25, 2009........   1,386,311.21        6.639           11.230          163,231.92          6.788          10.790
September 25, 2009.....   1,355,941.47        6.627           11.230          159,656.01          6.786          10.790
October 25, 2009.......   1,326,243.33        6.618           11.230          156,159.19          6.784          10.790
November 25, 2009......   1,297,202.08        6.609           11.230          152,739.72          6.781          10.790
December 25, 2009......   1,268,802.76        6.595           11.230          149,395.82          6.781          10.790
January 25, 2010.......   1,241,031.37        6.596           11.230          146,125.87          6.785          10.790
February 25, 2010......   1,213,873.80        6.592           11.230          142,928.19          6.787          10.790
March 25, 2010.........   1,187,316.25        6.583           11.230          139,801.15          6.784          10.790
April 25, 2010.........   1,161,345.20        6.575           11.230          136,743.18          6.781          10.790
May 25, 2010...........   1,135,947.65        6.566           11.230          133,752.73          6.779          10.790
June 25, 2010..........   1,111,110.80        6.559           11.230          130,828.30          6.777          10.790
July 25, 2010..........   1,086,822.16        6.549           11.230          127,968.43          6.775          10.790
August 25, 2010........   1,063,069.47        6.537           11.230          125,171.65          6.772          10.790
September 25, 2010.....   1,039,840.10        6.534           11.230          122,436.50          6.775          10.790
October 25, 2010.......   1,017,122.44        6.522           11.230          119,761.60          6.774          10.790
November 25, 2010......     994,905.84        6.815           11.230          117,145.69          6.995          10.790
December 25, 2010......     973,177.70        6.907           11.230          114,587.30          7.080          10.790



                                      II-1





                                     CLASS 1-A-1, CLASS 1-A-2
                                   AND CLASS 1-A-3 CERTIFICATES                         CLASS 1-M CERTIFICATES
                          -----------------------------------------------     -------------------------------------------
                            NOTIONAL          CAP                              NOTIONAL            CAP        CAP CEILING
DISTRIBUTION DATES         BALANCE ($)      STRIKE (%)    CAP CEILING (%)     BALANCE ($)       STRIKE (%)        (%)
-----------------------   ------------      ----------    ---------------     -----------       ----------    -----------

January 25, 2011.......     951,937.03        8.908           11.230          112,086.31          8.468          10.790
February 25, 2011......     931,155.20        9.017           11.230          109,639.34          8.577          10.790
March 25, 2011.........     910,828.31        9.042           11.230          107,245.94          8.602          10.790
April 25, 2011.........     890,949.08        9.036           11.230          104,905.25          8.596          10.790
May 25, 2011...........     871,507.48        9.029           11.230          102,616.09          8.589          10.790
June 25, 2011..........     852,493.76        9.023           11.230          100,377.31          8.583          10.790
July 25, 2011..........     833,898.44        9.016           11.230           98,187.79          8.576          10.790
August 25, 2011........     815,712.21        9.009           11.230           96,046.45          8.569          10.790
September 25, 2011.....     797,925.99        9.002           11.230           93,952.20          8.562          10.790
October 25, 2011.......     780,530.88        8.996           11.230           91,904.00          8.556          10.790
November 25, 2011......     763,518.20        8.989           11.230           89,900.84          8.549          10.790
December 25, 2011......     746,879.47        8.982           11.230           87,941.70          8.542          10.790
January 25, 2012.......     730,606.42        8.976           11.230           86,025.62          8.536          10.790
February 25, 2012......     714,690.89        8.969           11.230           84,151.64          8.529          10.790
March 25, 2012.........     699,124.98        8.962           11.230           82,318.82          8.522          10.790
April 25, 2012.........     683,900.92        8.955           11.230           80,526.26          8.515          10.790
May 25, 2012...........     669,011.13        8.949           11.230           78,773.05          8.509          10.790
June 25, 2012..........     654,448.20        8.942           11.230           77,058.34          8.502          10.790
July 25, 2012..........     640,204.90        8.935           11.230           75,381.25          8.495          10.790
August 25, 2012........     626,274.14        8.928           11.230           73,740.97          8.488          10.790
September 25, 2012.....     612,648.99        8.922           11.230           72,136.67          8.482          10.790
October 25, 2012.......     599,322.69        8.915           11.230           70,567.55          8.475          10.790
November 25, 2012......     586,288.62        8.908           11.230           69,032.85          8.468          10.790
December 25, 2012......     573,540.31        8.901           11.230           67,531.79          8.461          10.790
January 25, 2013.......     561,071.44        8.894           11.230           66,063.64          8.454          10.790
February 25, 2013......     548,875.83        8.887           11.230           64,627.66          8.447          10.790
March 25, 2013.........     536,947.42        8.881           11.230           63,223.15          8.441          10.790
April 25, 2013.........     525,280.31        8.874           11.230           61,849.40          8.434          10.790
May 25, 2013...........     513,868.73        8.867           11.230           60,505.73          8.427          10.790
June 25, 2013..........     502,707.01        8.860           11.230           59,191.49          8.420          10.790
July 25, 2013..........     491,789.65        8.853           11.230           57,906.02          8.413          10.790
August 25, 2013........     481,111.24        8.846           11.230           56,648.69          8.406          10.790
September 25, 2013.....     470,666.50        8.840           11.230           55,418.87          8.400          10.790
October 25, 2013.......     460,450.27        8.833           11.230           54,215.95          8.393          10.790
November 25, 2013......     450,457.50        8.826           11.230           53,039.35          8.386          10.790
December 25, 2013......     440,683.26        8.819           11.230           51,888.47          8.379          10.790
January 25, 2014.......     431,122.73        8.812           11.230           50,762.76          8.372          10.790
February 25, 2014......     421,771.19        8.805           11.230           49,661.66          8.365          10.790
March 25, 2014.........     412,624.02        8.798           11.230           48,584.62          8.358          10.790
April 25, 2014.........     403,676.73        8.792           11.230           47,531.12          8.352          10.790
May 25, 2014...........     394,924.90        8.785           11.230           46,500.63          8.345          10.790
June 25, 2014..........     386,364.23        8.778           11.230           45,492.65          8.338          10.790
July 25, 2014..........     377,990.49        8.771           11.230           44,506.68          8.331          10.790
August 25, 2014........     369,799.57        8.764           11.230           43,542.24          8.324          10.790
September 25, 2014.....     361,787.45        8.757           11.230           42,598.85          8.317          10.790
October 25, 2014.......     353,950.18        8.750           11.230           41,676.04          8.310          10.790
November 25, 2014......     346,283.90        8.743           11.230           40,773.37          8.303          10.790
December 25, 2014
  and thereafter.......           0.00        0.000           0.000                 0.00          0.000          0.000



                                      II-2

PROSPECTUS

                          MORGAN STANLEY CAPITAL I INC.
                                    DEPOSITOR

                       MORTGAGE PASS-THROUGH CERTIFICATES
                     (ISSUABLE IN SERIES BY SEPARATE TRUSTS)

                                   ----------

     Morgan Stanley Capital I Inc. will offer one or more series of
certificates, which represent beneficial ownership interests in the related
trust. The assets of each trust will primarily be:

     o    conventional, fixed or adjustable interest rate mortgage loans secured
          by first liens or junior liens, or first and junior liens on one- to
          four-family residential properties, including mortgage participations;

     o    mortgage pass-through certificates and mortgage-backed securities;

     o    direct obligations of the United States or other governmental
          agencies; or

     o    any combination of the above.

     The certificates of any series will not be obligations of Morgan Stanley
Capital I Inc. or any of its affiliates, and neither the certificates of any
series nor the underlying mortgage loans are insured or guaranteed by any
governmental agency.

                                   ----------

             Investing in any series of certificates involves risks.
           See "Risk Factors" beginning on page 10 of this prospectus.

                                   ----------

     The Securities and Exchange Commission and state securities regulators have
not approved or disapproved the certificates or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.

                                   ----------

                                 MORGAN STANLEY

                  The date of this prospectus is July 27, 2005



              IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
              PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT

     Information about the certificates being offered to you is contained in two
separate documents that progressively provide more detail:

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

          o    the accompanying prospectus supplement, which describes the
               specific terms of your series of certificates. If the terms of a
               particular series of certificates vary between this prospectus
               and the accompanying prospectus supplement, you should rely on
               the information in the prospectus supplement.

     You should rely only on the information contained 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 prospectus supplement. This prospectus and the accompanying prospectus
supplement include cross references to sections in these materials where you can
find further related discussions. The tables of contents in this prospectus and
the prospectus supplement identify the pages where these sections are located.

     Morgan Stanley Capital I Inc.'s principal executive office is located at
1585 Broadway, 37th Floor, New York, New York 10036, and Morgan Stanley Capital
I Inc.'s telephone number is (212) 761-4000.


                                        2



                                TABLE OF CONTENTS


                                                                                  PAGE
                                                                                  ----

SUMMARY OF PROSPECTUS...........................................................     5
RISK FACTORS....................................................................    10
DESCRIPTION OF THE TRUST FUNDS..................................................    27
   Assets.......................................................................    27
   Mortgage Loans...............................................................    27
   Mortgage-Backed Securities...................................................    29
   Government Securities........................................................    30
   Accounts.....................................................................    31
   Credit Support...............................................................    31
   Cash Flow Agreements.........................................................    31
USE OF PROCEEDS.................................................................    32
YIELD CONSIDERATIONS............................................................    32
   General......................................................................    32
   Pass-Through Rate............................................................    32
   Timing of Payment of Interest................................................    32
   Payments of Principal; Prepayments...........................................    33
   Prepayments, Maturity and Weighted Average Life..............................    34
   Other Factors Affecting Weighted Average Life................................    35
THE DEPOSITOR...................................................................    36
DESCRIPTION OF THE CERTIFICATES.................................................    37
   General......................................................................    37
   Categories of Classes of Certificates........................................    37
   Indices Applicable to Floating Rate and Inverse Floating Rate Classes........    40
   LIBOR........................................................................    40
   COFI.........................................................................    41
   Treasury Index...............................................................    42
   Prime Rate...................................................................    42
   Distributions................................................................    43
   Available Distribution Amount................................................    43
   Distributions of Interest on the Certificates................................    43
   Distributions of Principal of the Certificates...............................    44
   Components...................................................................    45
   Distributions on the Certificates of Prepayment Premiums.....................    45
   Allocation of Losses and Shortfalls..........................................    45
   Advances in Respect of Delinquencies.........................................    45
   Reports to Certificateholders................................................    46
   Termination..................................................................    48
   Book-Entry Registration and Definitive Certificates..........................    48
DESCRIPTION OF THE AGREEMENTS...................................................    53
   Assignment of Assets; Repurchases............................................    53
   Representations and Warranties; Repurchases..................................    55
   Certificate Account and Other Collection Accounts............................    56
   Collection and Other Servicing Procedures....................................    59
   Subservicers.................................................................    60
   Realization Upon Defaulted Mortgage Loans....................................    60
   Hazard Insurance Policies....................................................    62
   Fidelity Bonds and Errors and Omissions Insurance............................    63
   Due-on-Sale Provisions.......................................................    64
   Retained Interest; Servicing Compensation and Payment of Expenses............    64
   Evidence as to Compliance....................................................    64
   Matters Regarding a Master Servicer and the Depositor........................    65
   Events of Default............................................................    66
   Rights Upon Event of Default.................................................    66
   Amendment....................................................................    67
   The Trustee..................................................................    68
   Duties of the Trustee........................................................    68



                                        3





   Matters Regarding the Trustee................................................    68
   Resignation and Removal of the Trustee.......................................    69
DESCRIPTION OF CREDIT SUPPORT...................................................    69
   General......................................................................    69
   Subordinate Certificates.....................................................    70
   Cross-Support Provisions.....................................................    70
   Insurance or Guarantees for the Mortgage Loans...............................    70
   Letter of Credit.............................................................    70
   Insurance Policies and Surety Bonds..........................................    71
   Reserve Funds................................................................    71
   Credit Support for Mortgage-Backed Securities................................    71
LEGAL ASPECTS OF MORTGAGE LOANS.................................................    72
   General......................................................................    72
   Types of Mortgage Instruments................................................    72
   Interest in Real Property....................................................    73
   Cooperative Loans............................................................    73
   Foreclosure..................................................................    74
   Junior Mortgages.............................................................    78
   Anti-Deficiency Legislation and Other Limitations on Lenders.................    78
   Environmental Legislation....................................................    79
   Due-on-Sale Clauses..........................................................    79
   Prepayment Charges...........................................................    80
   Subordinate Financing........................................................    80
   Applicability of Usury Laws..................................................    80
   Alternative Mortgage Instruments.............................................    81
   Servicemembers' Civil Relief Act.............................................    82
   Forfeiture for Drug, RICO and Money Laundering Violations....................    82
FEDERAL INCOME TAX CONSEQUENCES.................................................    83
   General......................................................................    83
   Grantor Trust Funds..........................................................    83
   a. Single Class of Grantor Trust Certificates................................    83
   b. Multiple Classes of Grantor Trust Certificates............................    87
   c. Sale or Exchange of a Grantor Trust Certificate...........................    90
   d. Non-U.S. Persons..........................................................    91
   e. Information Reporting and Backup Withholding..............................    91
   REMICS.......................................................................    92
   a. Taxation of Owners of REMIC Regular Certificates..........................    93
   b. Taxation of Owners of REMIC Residual Certificates.........................   102
   Prohibited Transactions and Other Taxes......................................   107
   Liquidation and Termination..................................................   107
   Administrative Matters.......................................................   108
   Tax-Exempt Investors.........................................................   108
   Residual Certificate Payments--Non-U.S. Persons..............................   108
   Tax Related Restrictions on Transfers of REMIC Residual Certificates.........   109
   Reportable Transactions......................................................   111
STATE TAX CONSIDERATIONS........................................................   111
ERISA CONSIDERATIONS............................................................   112
   General......................................................................   112
   Prohibited Transactions......................................................   112
   Review by Plan Fiduciaries...................................................   115
LEGAL INVESTMENT................................................................   116
PLAN OF DISTRIBUTION............................................................   117
LEGAL MATTERS...................................................................   119
FINANCIAL INFORMATION...........................................................   119
RATING..........................................................................   119
INCORPORATION OF INFORMATION BY REFERENCE.......................................   119
GLOSSARY OF TERMS...............................................................   121



                                        4



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

                              SUMMARY OF PROSPECTUS

     This summary highlights selected information from this prospectus. It does
not contain all of the information you need to consider in making your
investment decision. TO UNDERSTAND ALL OF THE TERMS OF A SERIES OF CERTIFICATES,
READ THIS ENTIRE DOCUMENT AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT CAREFULLY.

                RELEVANT PARTIES FOR EACH SERIES OF CERTIFICATES

Issuer........................   Each series of certificates will be issued by a
                                 separate trust. Each trust will be formed
                                 pursuant to a pooling and servicing agreement
                                 among Morgan Stanley Capital I Inc., one or
                                 more servicers and a trustee.

Depositor.....................   Morgan Stanley Capital I Inc. a wholly-owned
                                 subsidiary of Morgan Stanley.

Master Servicer...............   The servicer or servicers for substantially all
                                 the mortgage loans for each series of
                                 certificates, which servicer(s) may be
                                 affiliates of Morgan Stanley Capital I Inc.,
                                 will be named in the related prospectus
                                 supplement.

Trustee.......................   The trustee for each series of certificates
                                 will be named in the related prospectus
                                 supplement.

                               THE MORTGAGE ASSETS

General.......................   Each trust will own the related mortgage loan,
                                 including mortgage participations, or
                                 mortgage-backed securities or both or, if
                                 specified in the applicable prospectus
                                 supplement, direct obligations of the United
                                 States or other governmental agencies. You
                                 should refer to the applicable prospectus
                                 supplement for the precise characteristics or
                                 expected characteristics of the mortgage loans
                                 and mortgage-backed securities included in each
                                 trust fund.

Mortgage Loans................   The mortgage loans in each trust will be
                                 conventional, fixed or adjustable interest rate
                                 mortgage loans, or mortgage participations,
                                 secured by first liens or junior liens or first
                                 and junior liens on one- to four-family
                                 residential properties or shares issued by
                                 cooperative housing corporations. Unless
                                 otherwise provided in the related prospectus
                                 supplement, all mortgage loans will have
                                 individual principal balances at origination of
                                 not less than $25,000 and original terms to
                                 maturity of not more than 40 years. All
                                 mortgage loans will have been originated by
                                 persons other than Morgan Stanley Capital I
                                 Inc.

Mortgage-Backed Securities....   The mortgage-backed securities in each trust
                                 will be mortgage pass-through certificates or
                                 other mortgage-backed securities evidencing
                                 interests in or secured by conventional, fixed
                                 or adjustable rate mortgage loans secured by
                                 first liens or junior liens or first and junior
                                 liens on one- to four-family residential
                                 properties or shares issued by cooperative
                                 housing corporations.

Government Securities.........   Each trust may own, in addition to the mortgage
                                 loans and mortgage-backed securities, direct
                                 obligations of the United States or other
                                 governmental agencies which provide for payment
                                 of interest or principal or both.

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


                                        5



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

                                  OTHER ASSETS

Other Assets..................   If so specified in the applicable prospectus
                                 supplement, the trust fund may include the
                                 following agreements and other similar
                                 agreements:

                                 o    guaranteed investment contracts;

                                 o    interest rate exchange agreements;

                                 o    interest rate cap or floor contracts;

                                 o    currency exchange contracts; or

                                 o    other swap or notional balance contracts.

                               CREDIT ENHANCEMENT

Subordination.................   A series of certificates may include one or
                                 more classes of senior certificates and one or
                                 more classes of subordinate certificates. The
                                 rights of the holders of subordinate
                                 certificates of a series to receive
                                 distributions will be subordinated to such
                                 rights of the holders of the senior
                                 certificates of the same series to the extent
                                 and in the manner specified in the applicable
                                 prospectus supplement.

                                 Subordination is intended to enhance the
                                 likelihood of the timely receipt by the senior
                                 certificateholders of their proportionate
                                 shares of scheduled monthly principal and
                                 interest payments on the related mortgage loans
                                 and to protect them from losses. This
                                 protection will be effected by:

                                 o    the preferential right of the senior
                                      certificateholders to receive, prior to
                                      any distribution being made in respect of
                                      the related subordinate certificates on
                                      each distribution date, current
                                      distributions on the related mortgage
                                      loans and mortgage-backed securities of
                                      principal and interest due them on each
                                      distribution date out of the funds
                                      available for distributions on such date;

                                 o    the right of such holders to receive
                                      future distributions on the mortgage loans
                                      and mortgage-backed securities that would
                                      otherwise have been payable to the holders
                                      of subordinate certificates;

                                 o    the prior allocation to the subordinate
                                      certificates of all or a portion of losses
                                      realized on the underlying mortgage loans
                                      and mortgage-backed securities; or

                                 o    any combination of the above.

Other Types of Credit
Enhancement...................   If so specified in the applicable prospectus
                                 supplement, the certificates of any series, or
                                 any one or more classes of a series may be
                                 entitled to the benefits of other types of
                                 credit enhancement, including but not limited
                                 to:

                                 o    limited guarantee

                                 o    financial guaranty insurance policy

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


                                        6



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

                                 o    surety bond

                                 o    letter of credit

                                 o    mortgage pool insurance policy

                                 o    reserve fund

                                 o    cross-support

                                 o    any credit support will be described in
                                      the applicable prospectus supplement.

                          DISTRIBUTIONS ON CERTIFICATES

General.......................   Each series of certificates will consist of one
                                 or more classes of certificates that will be
                                 entitled, to the extent of funds available, to
                                 one of the following:

                                 o    principal and interest payments in respect
                                      of the related mortgage loans and
                                      mortgage-backed securities;

                                 o    principal distributions, with no interest
                                      distribution;

                                 o    interest distributions, with no principal
                                      distributions;

                                 o    sequential or concurrent distributions of
                                      principal;

                                 o    senior or subordinate distributions of
                                      interest or principal or both;

                                 o    distributions of interest after an
                                      interest accrual period; or

                                 o    such other distributions as are described
                                      in the applicable prospectus supplement.

Interest Distributions........   With respect to each series of certificates,
                                 other than classes of certificates which may be
                                 entitled to disproportionately low, nominal or
                                 no interest distributions, interest on the
                                 related mortgage loans and mortgage-backed
                                 securities at the weighted average of their
                                 mortgage rates--net of servicing fees and other
                                 amounts as described in this prospectus or in
                                 the applicable prospectus supplement, will be
                                 passed through to holders of the related
                                 classes of certificates in accordance with the
                                 particular terms of each such class of
                                 certificates. The terms of each class of
                                 certificates will be described in the related
                                 prospectus supplement.

                                 Except as otherwise specified in the applicable
                                 prospectus supplement, interest on each class
                                 of certificates of each series will accrue at
                                 the fixed, floating or weighted average
                                 pass-through rate for each class indicated in
                                 the applicable prospectus supplement on their
                                 outstanding principal balance or notional
                                 amount.

Principal.....................   With respect to a series of certificates,
                                 principal payments including prepayments on the
                                 related mortgage loans and mortgage-backed
                                 securities will be passed through to holders of
                                 the related certificates or otherwise applied
                                 in accordance with the related pooling and
                                 servicing agreement on each distribution date.
                                 Distributions in reduction of

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


                                        7



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

                                 certificate balance will be allocated among the
                                 classes of certificates of a series in the
                                 manner specified in the applicable prospectus
                                 supplement.

Distribution Dates............   The dates upon which distributions on each
                                 series of certificates will be made will be
                                 specified in the related prospectus supplement.

Advances......................   Unless otherwise provided in the related
                                 prospectus supplement, in the event that a
                                 payment on a mortgage loan is delinquent, the
                                 master servicer will be obligated to make
                                 advances that the master servicer determines
                                 are recoverable. The master servicer will be
                                 reimbursed for advances as described in this
                                 prospectus and in the related prospectus
                                 supplement. The prospectus supplement for any
                                 series of certificates relating to a trust that
                                 includes mortgage-backed securities will
                                 describe any corresponding advancing obligation
                                 of any person in connection with such
                                 mortgage-backed securities.

                ADDITIONAL ASPECTS OF EACH SERIES OF CERTIFICATES

Termination...................   If so specified in the prospectus supplement
                                 with respect to a series of certificates, all,
                                 but not less than all, of the mortgage loans
                                 and mortgage-backed securities in the related
                                 trust fund and any property acquired with
                                 respect to such mortgage loans may be purchased
                                 by the party as is specified in the applicable
                                 prospectus supplement. Any such purchase must
                                 be made in the manner and at the price
                                 specified in such prospectus supplement. If so
                                 provided in the related prospectus supplement
                                 with respect to a series, upon the reduction of
                                 the certificate balance of a specified class or
                                 classes of certificates by a specified
                                 percentage or amount or on and after a date
                                 specified in the related prospectus supplement,
                                 the party specified in the related prospectus
                                 supplement will solicit bids for the purchase
                                 of all of the trust's assets, or of a
                                 sufficient portion of such assets to retire
                                 such class or classes, or purchase such assets
                                 at a price set forth in the related prospectus
                                 supplement. In addition, if so provided in the
                                 related prospectus supplement, certain classes
                                 of certificates may be purchased subject to
                                 similar conditions.

Forms of Certificates.........   The certificates will be issued either:

                                 o    in book-entry form through the facilities
                                      of The Depository Trust Company; or

                                 o    in fully registered, certificated form.

                                 If you own book-entry certificates, you will
                                 not receive physical certificates representing
                                 your ownership interest in such book-entry
                                 certificates, except under extraordinary
                                 circumstances. Instead, The Depository Trust
                                 Company will effect payments and transfers by
                                 means of its electronic recordkeeping services,
                                 acting through participating organizations.
                                 This may result in delays in your receipt of
                                 distributions and may restrict your ability to
                                 pledge your securities. Your rights with
                                 respect to book-entry certificates may
                                 generally only be exercised through The
                                 Depository Trust Company and its participating
                                 organizations.

Tax Status of Certificates....   The treatment of the certificates for federal
                                 income tax purposes will depend on:

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                                        8



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                                 o    whether a "real estate mortgage investment
                                      conduit" election is made with respect to
                                      a series of certificates; and

                                 o    if a "real estate mortgage investment
                                      conduit" election is made, whether the
                                      certificates are regular interests or
                                      residual interests.

                                 If a "real estate mortgage investment conduit"
                                 election is not made, the certificates will be
                                 treated as interests in a grantor trust.

ERISA Considerations..........   If you are a fiduciary of any employee benefit
                                 plan subject to the fiduciary responsibility
                                 provisions of the Employee Retirement Income
                                 Security Act of 1974, as amended, also known as
                                 ERISA, you should carefully review with your
                                 own legal advisors whether the purchase or
                                 holding of certificates could give rise to a
                                 transaction prohibited or otherwise
                                 impermissible under ERISA or the Internal
                                 Revenue Code.

Legal Investment..............   The applicable prospectus supplement will
                                 specify whether the class or classes of
                                 certificates offered will constitute "mortgage
                                 related securities" for purposes of the
                                 Secondary Mortgage Market Enhancement Act of
                                 1984, as amended. If your investment authority
                                 is subject to legal restrictions, you should
                                 consult your own legal advisors to determine
                                 whether and to what extent such certificates
                                 constitute legal investments for you.

Rating........................   Certificates of any series will not be offered
                                 pursuant to this prospectus and a prospectus
                                 supplement unless each offered class of
                                 certificates offered is rated in one of the
                                 four highest rating categories by at least one
                                 nationally recognized statistical rating
                                 organization.

                                 o    A security rating is not a recommendation
                                      to buy, sell or hold the certificates of
                                      any series and is subject to revision or
                                      withdrawal at any time by the assigning
                                      rating agency.

                                 o    Ratings do not address the effect of
                                      prepayments on the yield you may
                                      anticipate when you purchase your
                                      certificates.

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


                                        9



                                  RISK FACTORS

     You should consider, among other things, the following factors in
connection with the purchase of certificates. The risks and uncertainties
described below, together with those in the related prospectus supplement under
"Risk Factors," summarize the material risks relating to your certificates.

LACK OF A SECONDARY MARKET MAY
   MAKE IT DIFFICULT FOR YOU
   TO RESELL YOUR CERTIFICATES   The liquidity of your certificates may be
                                 limited. You should consider that:

                                 o    a secondary market for the certificates of
                                      any series may not develop, or if it does,
                                      it may not provide you with liquidity of
                                      investment, or it may not continue for the
                                      life of the certificates of any series;

                                 o    the prospectus supplement for any series
                                      of certificates may indicate that an
                                      underwriter intends to establish a
                                      secondary market in such certificates, but
                                      no underwriter will be obligated to do so;
                                      and

                                 o    unless specified in the applicable
                                      prospectus supplement, the certificates
                                      will not be listed on any securities
                                      exchange.

                                 Certain classes of securities may not
                                 constitute "mortgage related securities" for
                                 purposes of the Secondary Mortgage Market
                                 Enhancement Act of 1984, as amended.
                                 Accordingly, many institutions that lack the
                                 legal authority to invest in securities that do
                                 not constitute "mortgage related securities"
                                 will not be able to invest in such securities,
                                 thereby limiting the market for those
                                 securities. If your investment activities are
                                 subject to legal investment laws and
                                 regulations, regulatory capital requirements or
                                 review by regulatory authorities, then you may
                                 be subject to restrictions on investment in the
                                 securities. You should consult your own legal
                                 advisors for assistance in determining the
                                 suitability of and consequences to you of the
                                 purchase, ownership, and sale of the
                                 securities. We refer you to "Legal Investment"
                                 for additional information.

THE TRUST FUND'S ASSETS MAY BE
   INSUFFICIENT TO PAY YOUR
   CERTIFICATES IN FULL          Except for any related insurance policies and
                                 any reserve fund or credit enhancement
                                 described in the applicable prospectus
                                 supplement, the sole source of payment on your
                                 certificates will be proceeds from the assets
                                 included in the trust fund for each series of
                                 certificates and any form of credit enhancement
                                 specified in the related prospectus supplement.
                                 You will not have any claim against, or
                                 security interest in, the trust fund for any
                                 other series. In addition, in general, there is
                                 no recourse to Morgan Stanley Capital I Inc. or
                                 any other entity, and neither the certificates
                                 nor the underlying mortgage loans are
                                 guaranteed or insured by any governmental
                                 agency or instrumentality or any other entity.
                                 Therefore, if the trust fund's assets are
                                 insufficient to pay you your expected return,
                                 in most situations you will not receive payment
                                 from any other source. Exceptions include:

                                 o    loan repurchase obligations in connection
                                      with a breach of certain of the
                                      representations and warranties; and


                                       10



                                 o    advances on delinquent loans, to the
                                      extent the master servicer deems the
                                      advance will be recoverable.

                                 Because some of the representations and
                                 warranties with respect to the mortgage loans
                                 and mortgage-backed securities may have been
                                 made or assigned in connection with transfers
                                 of the mortgage loans and mortgage-backed
                                 securities prior to the closing date, the
                                 rights of the trustee and the
                                 certificateholders with respect to those
                                 representations or warranties will be limited
                                 to their rights as assignees. Unless the
                                 related prospectus supplement so specifies,
                                 neither Morgan Stanley Capital I Inc., the
                                 master servicer nor any affiliate thereof will
                                 have any obligation with respect to
                                 representations or warranties made by any other
                                 entity. There may be accounts, as described in
                                 the related prospectus supplement maintained as
                                 credit support. The amounts in these accounts
                                 may be withdrawn amounts and will not be
                                 available for the future payment of principal
                                 or interest on the certificates. If a series of
                                 certificates consists of one or more classes of
                                 subordinate certificates, the amount of any
                                 losses or shortfalls in collections of assets
                                 on any distribution date will be borne first by
                                 one or more classes of the subordinate
                                 certificates, as described in the related
                                 prospectus supplement.

                                 Thereafter, those losses or shortfalls will be
                                 borne by the remaining classes of certificates,
                                 in the priority and manner and subject to the
                                 limitations specified in the related prospectus
                                 supplement.

CREDIT ENHANCEMENT IS LIMITED
   IN AMOUNT AND COVERAGE        With respect to each series of certificates,
                                 credit enhancement may be provided to cover
                                 losses on the underlying mortgage loans and
                                 mortgage-backed securities up to specified
                                 amounts.

                                 Regardless of the form of credit enhancement
                                 provided:

                                 o    the amount of coverage will be limited in
                                      amount and in most cases will be subject
                                      to periodic reduction in accordance with a
                                      schedule or formula;

                                 o    the amount of coverage may provide only
                                      very limited coverage as to certain types
                                      of losses such as hazard losses,
                                      bankruptcy losses and fraud losses, and
                                      may provide no coverage as to certain
                                      other types of losses; and

                                 o    all or a portion of the credit enhancement
                                      for any series of certificates will
                                      generally be permitted to be reduced,
                                      terminated or substituted for, if each
                                      applicable rating agency indicates that
                                      the then-current ratings will not be
                                      adversely affected.

                                 In the event losses exceed the amount of
                                 coverage provided by any credit enhancement or
                                 losses of a type not covered by any credit
                                 enhancement occur, such losses will be borne by
                                 the holders of the related certificates. The
                                 rating of any series of certificates by any
                                 applicable rating agency may be lowered
                                 following the initial issuance thereof as a
                                 result of the downgrading of the obligations of
                                 any applicable credit support provider, or as a
                                 result of losses on the related mortgage loans
                                 in excess of the levels contemplated by such
                                 rating agency at the time of its initial rating
                                 analysis.


                                       11



                                 None of Morgan Stanley Capital I Inc., any
                                 servicer, or any of their affiliates, will have
                                 any obligation to replace or supplement any
                                 credit enhancement, or to take any other action
                                 to maintain any rating of any class of
                                 certificates.

CHANGES IN CONDITIONS IN THE
   REAL ESTATE MARKET WILL
   AFFECT MORTGAGE LOAN
   PERFORMANCE                   An investment in securities such as the
                                 certificates, which generally represent
                                 interests in pools of residential mortgage
                                 loans, may be affected by a decline in real
                                 estate values and changes in the borrower's
                                 financial condition. There is no assurance that
                                 the values of the mortgaged properties securing
                                 the mortgage loans underlying any series of
                                 certificates have remained or will remain at
                                 their levels on the dates of origination of the
                                 related mortgage loans.

                                 If the residential real estate market should
                                 experience an overall decline in property
                                 values such that the outstanding balances of
                                 the mortgage loans contained in a particular
                                 trust fund and any secondary financing on the
                                 mortgaged properties, become equal to or
                                 greater than the value of the mortgaged
                                 properties, delinquencies, foreclosures and
                                 losses could be higher than those now generally
                                 experienced in the mortgage lending industry
                                 and those experienced in the servicer's or
                                 other servicers' servicing portfolios.

                                 To the extent that losses on mortgage loans
                                 underlying a series are not covered by credit
                                 enhancement, holders of certificates of the
                                 series will bear all risk of loss resulting
                                 from default by borrowers. Such loss may also
                                 be greater than anticipated as a result of a
                                 decline in real estate values.

GEOGRAPHIC CONCENTRATION MAY
   INCREASE RATES OF LOSS AND
   DELINQUENCY                   In addition to risk factors related to the
                                 residential real estate market generally,
                                 certain geographic regions of the United States
                                 from time to time will experience weaker
                                 regional economic conditions and housing
                                 markets or be directly or indirectly affected
                                 by natural disasters or civil disturbances such
                                 as earthquakes, hurricanes, floods, eruptions
                                 or riots. Mortgage assets in such areas will
                                 experience higher rates of loss and delinquency
                                 than on mortgage loans generally. Although
                                 mortgaged properties located in certain
                                 identified flood zones will be required to be
                                 covered, to the maximum extent available, by
                                 flood insurance, no mortgaged properties will
                                 otherwise be required to be insured against
                                 earthquake damage or any other loss not covered
                                 by standard hazard insurance policies.

                                 The ability of borrowers to make payments on
                                 the mortgage assets may also be affected by
                                 factors which do not necessarily affect
                                 property values, such as adverse economic
                                 conditions generally, in particular geographic
                                 areas or industries, or affecting particular
                                 segments of the borrowing community--such as
                                 borrowers relying on commission income and
                                 self-employed borrowers. Such occurrences may
                                 accordingly affect the actual rates of
                                 delinquencies, foreclosure and losses with
                                 respect to any trust fund.


                                       12



THE RATE OF PREPAYMENT ON
   MORTGAGE ASSETS MAY
   ADVERSELY AFFECT AVERAGE
   LIVES AND YIELDS ON
   CERTIFICATES                  The yield of the certificates of each series
                                 will depend in part on the rate of principal
                                 payment on the mortgage loans and
                                 mortgage-backed securities, including
                                 prepayments, liquidations due to defaults and
                                 mortgage loan repurchases. Such yield may be
                                 adversely affected, depending upon whether a
                                 particular certificate is purchased at a
                                 premium or a discount, by a higher or lower
                                 than anticipated rate of prepayments on the
                                 related mortgage loans and mortgage-backed
                                 securities, in particular:

                                 The yield on classes of certificates entitling
                                 their holders primarily or exclusively to
                                 payments of interest or primarily or
                                 exclusively to payments of principal will be
                                 extremely sensitive to the rate of prepayments
                                 on the related mortgage loans and
                                 mortgage-backed securities; and the yield on
                                 certain classes of certificates may be
                                 relatively more sensitive to the rate of
                                 prepayment of specified mortgage loans and
                                 mortgage-backed securities than other classes
                                 of certificates.

                                 The rate of prepayments on mortgage loans is
                                 influenced by a number of factors, including:

                                 o    prevailing mortgage market interest rates;

                                 o    local and national economic conditions;

                                 o    homeowner mobility; and

                                 o    the ability of the borrower to obtain
                                      refinancing.

                                 In addition, your yield may be adversely
                                 affected by interest shortfalls which may
                                 result from the timing of the receipt of
                                 prepayments or liquidations to the extent that
                                 such interest shortfalls are not covered by
                                 aggregate fees payable to the servicer or other
                                 mechanisms specified in the applicable
                                 prospectus supplement. Your yield will be also
                                 adversely affected to the extent that losses on
                                 the mortgage loans and mortgage-backed
                                 securities in the related trust fund are
                                 allocated to your certificates and may be
                                 adversely affected to the extent of unadvanced
                                 delinquencies on the mortgage loans and
                                 mortgage-backed securities in the related trust
                                 fund. Classes of certificates identified in the
                                 applicable prospectus supplement as subordinate
                                 certificates are more likely to be affected by
                                 delinquencies and losses than other classes of
                                 certificates.

RATINGS ON CERTIFICATES
   REFLECT LIMITED ASSESSMENTS   Any rating assigned by a rating agency to a
                                 class of certificates will reflect such rating
                                 agency's assessment solely of the likelihood
                                 that holders of certificates of such class will
                                 receive payments to which they are entitled
                                 under the related pooling and servicing
                                 agreement. A rating will not constitute an
                                 assessment of the likelihood that principal
                                 prepayments, including those caused by
                                 defaults, on the related mortgage loans and
                                 mortgage-backed securities will be made, the
                                 degree to which the rate of such prepayments
                                 might differ from that originally anticipated
                                 or the likelihood of early optional termination
                                 of the series of certificates. A rating will
                                 not address the possibility that prepayment at
                                 higher or lower rates than anticipated by an
                                 investor may cause such investor to experience
                                 a lower than anticipated yield or that an
                                 investor purchasing a certificate at a
                                 significant premium might fail


                                       13



                                 to recoup its initial investment under certain
                                 prepayment scenarios. Each prospectus
                                 supplement will identify any payment to which
                                 holders of certificates of the related series
                                 are entitled that is not covered by the
                                 applicable rating.

                                 The amount, type and nature of credit support,
                                 if any, established with respect to a series of
                                 certificates will be determined on the basis of
                                 criteria established by each rating agency.
                                 These criteria are sometimes based upon an
                                 actuarial analysis of the behavior of mortgage
                                 loans in a larger group. The historical data
                                 supporting any such actuarial analysis may not
                                 accurately reflect future experience or
                                 accurately predict the actual delinquency,
                                 foreclosure or loss experience of the mortgage
                                 loans and mortgage-backed securities included
                                 in any trust fund.

RATINGS DO NOT GUARANTY VALUE    If one or more rating agencies downgrade
                                 certificates of a series, your certificate will
                                 decrease in value. Because none of Morgan
                                 Stanley Capital I Inc., the seller, the master
                                 servicer, the trustee or any affiliate has any
                                 obligation to maintain a rating of a class of
                                 certificates, you will have no recourse if your
                                 certificate decreases in value.

PAYMENTS IN FULL OF A BALLOON
   LOAN DEPEND ON THE
   BORROWER'S ABILITY TO
   REFINANCE THE BALLOON LOAN
   OR SELL THE MORTGAGED
   PROPERTY                      Certain of the mortgage loans may not be fully
                                 amortizing over their terms to maturity and,
                                 thus, will require substantial principal
                                 payments, i.e., balloon payments, at their
                                 stated maturity. Mortgage loans with balloon
                                 payments involve a greater degree of risk
                                 because the ability of a borrower to make a
                                 balloon payment typically will depend upon its
                                 ability either to timely refinance the loan or
                                 to timely sell the related mortgaged property.
                                 The ability of a borrower to accomplish either
                                 of these goals will be affected by a number of
                                 factors, including:

                                 o    the level of available mortgage interest
                                      rates at the time of sale or refinancing;

                                 o    the borrower's equity in the related
                                      mortgaged property;

                                 o    the financial condition of the mortgagor;

                                 o    tax laws;

                                 o    prevailing general economic conditions;
                                      and

                                 o    the availability of credit for single
                                      family real properties generally.

MORTGAGE LOANS SECURED BY
   JUNIOR LIENS MAY ONLY BE
   SATISFIED AFTER THE RELATED
   FIRST LIEN MORTGAGE HAS
   BEEN SATISFIED                Certain of the mortgage loans may be secured by
                                 junior liens and the related first liens may
                                 not be included in the trust fund. The primary
                                 risk to holders of mortgage loans secured by
                                 junior liens is the possibility that adequate
                                 funds will not be received in connection with a
                                 foreclosure of the related first lien to
                                 satisfy fully both the first lien and the
                                 mortgage loan. In the event that a holder of
                                 the first lien forecloses on a mortgaged
                                 property, the proceeds of the foreclosure or
                                 similar sale will be applied first to the
                                 payment of court costs and fees in connection
                                 with the foreclosure, second to real estate
                                 taxes, third in


                                       14



                                 satisfaction of all principal, interest,
                                 prepayment or acceleration penalties, if any,
                                 and any other sums due and owing to the holder
                                 of the first lien. The claims of the holder of
                                 the first lien will be satisfied in full out of
                                 proceeds of the liquidation of the mortgage
                                 loan, if such proceeds are sufficient, before
                                 the trust fund as holder of the junior lien
                                 receives any payments in respect of the
                                 mortgage loan. In the event that such proceeds
                                 from a foreclosure or similar sale of the
                                 related mortgaged property were insufficient to
                                 satisfy both loans in the aggregate, the trust
                                 fund, as the holder of the junior lien, and,
                                 accordingly, holders of the certificates, would
                                 bear the risk of delay in distributions while a
                                 deficiency judgment against the borrower was
                                 being obtained and the risk of loss if the
                                 deficiency judgment were not realized upon.

OBLIGORS MAY DEFAULT IN
   PAYMENT OF MORTGAGE LOANS     If so specified in the related prospectus
                                 supplement, in order to maximize recoveries on
                                 defaulted mortgage loans, a servicer or a
                                 subservicer will be permitted within prescribed
                                 parameters to extend and modify mortgage loans
                                 that are in default or as to which a payment
                                 default is imminent, including in particular
                                 with respect to balloon payments. While any
                                 such entity generally will be required to
                                 determine that any such extension or
                                 modification is reasonably likely to produce a
                                 greater recovery on a present value basis than
                                 liquidation, such extensions or modifications
                                 may not increase the present value of receipts
                                 from or proceeds of mortgage loans.

THE HOLDERS OF SUBORDINATE
   CERTIFICATES WILL BEAR A
   GREATER RISK OF PAYMENT
   DELAYS AND LOSSES             The rights of holders of subordinate
                                 certificates to receive distributions to which
                                 they would otherwise be entitled with respect
                                 to the mortgage loans and mortgage-backed
                                 securities will be subordinate to the rights of
                                 the servicer to receive its fee and
                                 reimbursement for advances and the holders of
                                 senior certificates to the extent described in
                                 this prospectus. As a result of the foregoing,
                                 investors must be prepared to bear the risk
                                 that they may be subject to delays in payment
                                 and may not recover their initial investments
                                 in the subordinate certificates.

                                 The yields on the subordinate certificates may
                                 be extremely sensitive to the loss experience
                                 of the mortgage loans and mortgage-backed
                                 securities and the timing of any such losses.
                                 If the actual rate and amount of losses
                                 experienced by the mortgage loans and
                                 mortgage-backed securities exceed the rate and
                                 amount of such losses assumed by an investor,
                                 the yields to maturity on the subordinate
                                 certificates may be lower than anticipated.

MORTGAGE LOAN ACCELERATION
   CLAUSES MAY NOT BE
   ENFORCEABLE                   Mortgages may contain a due-on-sale clause,
                                 which permits the lender to accelerate the
                                 maturity of the mortgage loan if the borrower
                                 sells, transfers or conveys the related
                                 mortgaged property or its interest in the
                                 mortgaged property. Mortgages may also include
                                 a debt-acceleration clause, which permits the
                                 lender to accelerate the debt upon a monetary
                                 or non-monetary default of the borrower. Such
                                 clauses are generally enforceable subject to
                                 certain exceptions. The courts of all states
                                 will enforce clauses providing for acceleration
                                 in the event of a material payment default. The
                                 equity courts of any state, however, may refuse
                                 the foreclosure of a mortgage or deed of trust
                                 when an acceleration of the indebtedness would
                                 be inequitable or unjust or the circumstances
                                 would render the acceleration unconscionable.


                                       15



THERE ARE RESTRICTIONS ON
   INVESTORS SUBJECT TO ERISA    Generally, ERISA applies to investments made by
                                 employee benefit plans and transactions
                                 involving the assets of such plans. Due to the
                                 complexity of regulations which govern such
                                 plans, prospective investors that are subject
                                 to ERISA are urged to consult their own counsel
                                 regarding consequences under ERISA of
                                 acquisition, ownership and disposition of the
                                 certificates of any series. In particular,
                                 investors that are insurance companies should
                                 consult with their counsel with respect to the
                                 United States Supreme Court case, John Hancock
                                 Mutual Life Insurance Co. v. Harris Trust &
                                 Savings Bank.

IF YOUR CERTIFICATES ARE
   INTEREST ONLY CERTIFICATES,
   THE RETURN ON YOUR
   INVESTMENT WILL BE
   ESPECIALLY SENSITIVE TO
   PREPAYMENTS ON THE LOANS      An investment in interest only certificates is
                                 especially sensitive to prepayments on the
                                 loans held by the related trust because
                                 payments on interest only certificates depend
                                 entirely on the interest payments received on
                                 the loans. When borrowers prepay their loans,
                                 no further interest payments are made on such
                                 loans, and therefore no further amounts from
                                 such loans are available to make payments on
                                 the interest only certificates. If borrowers
                                 prepay their loans at a particularly high rate,
                                 investors in interest only certificates may not
                                 recover their initial investments.

PREPAYMENTS ON THE LOANS COULD
   LEAD TO SHORTFALLS IN THE
   DISTRIBUTION OF INTEREST ON
   YOUR CERTIFICATES             When a voluntary principal prepayment is made
                                 by the borrower on a loan (excluding any
                                 payments made upon liquidation of any loan),
                                 the borrower is generally charged interest only
                                 up to the date of the prepayment, instead of
                                 for a full month. However, principal
                                 prepayments will only be passed through to the
                                 holders of the certificates on the distribution
                                 date that follows the prepayment period in
                                 which the prepayment was received by the
                                 applicable servicer. If and to the extent
                                 described in the related prospectus supplement,
                                 the applicable servicer will be obligated,
                                 without any right of reimbursement, for the
                                 amount of shortfalls in interest collections
                                 that are attributable to the difference between
                                 the interest paid by a borrower in connection
                                 with those principal prepayments and thirty (or
                                 such other number as may be specified in the
                                 related prospectus supplement) days' interest
                                 on the prepaid loans, but only to the extent
                                 those shortfalls do not exceed all or the
                                 specified percentage set forth in the
                                 prospectus supplement of the servicing fees for
                                 that distribution date payable to that
                                 servicer.

                                 For trusts to which this obligation of the
                                 servicer is applicable, if the servicer fails
                                 to make such payments or the resulting
                                 shortfall exceeds the applicable portion of the
                                 servicing fees payable to that servicer for the
                                 month, there will be fewer funds available for
                                 the distribution of interest on the
                                 certificates. In addition, no such payments
                                 from any servicer will be available to cover
                                 prepayment interest shortfalls resulting from
                                 involuntary prepayments such as liquidation of
                                 a defaulted loan. Such shortfalls of interest,
                                 if they result in the inability of the trust to
                                 pay the full amount of the current interest on
                                 the certificates, will result in a reduction
                                 the yield on your certificates.


                                       16



IF THE TRUST INCLUDES A
   PRE-FUNDING ACCOUNT AND IF
   THE FUNDS ON DEPOSIT IN THE
   PRE-FUNDING ACCOUNT ARE NOT
   USED TO PURCHASE ADDITIONAL
   LOANS, THOSE FUNDS WILL BE
   DISTRIBUTED AS A PAYMENT OF
   PRINCIPAL, WHICH MAY
   ADVERSELY AFFECT THE YIELD
   ON THE AFFECTED
   CERTIFICATES                  If, as described in the related prospectus
                                 supplement, the trust includes a pre-funding
                                 account and if all of the money originally
                                 deposited in the pre-funding account has not
                                 been used by the end of the pre-funding period
                                 as described in the related prospectus
                                 supplement, the remaining amount will be
                                 applied as a payment of principal on the
                                 following distribution date to the holders of
                                 the certificates in the manner described in the
                                 prospectus supplement. If the amount of cash is
                                 substantial, the affected certificates will
                                 receive a significant unexpected early payment
                                 of principal. These payments could adversely
                                 affect your yield, particularly if you
                                 purchased the affected certificates at a
                                 premium.

                                 Any purchase of additional loans by the trust
                                 using funds on deposit in the pre-funding
                                 account will be subject to the following
                                 conditions, among others:

                                 o    each additional loan must satisfy
                                      specified statistical criteria and
                                      representations and warranties; and

                                 o    additional loans will not be selected in a
                                      manner that is believed to be adverse to
                                      the interests of the holders of the
                                      certificates.

                                 The ability of the related seller to acquire
                                 subsequent loans meeting the requirements for
                                 inclusion in the loan pool may be affected as a
                                 result of a variety of social and economic
                                 factors. Economic factors include interest
                                 rates, unemployment levels, the rate of
                                 inflation and consumer perception of economic
                                 conditions generally. However, we cannot assure
                                 you as to whether or to what extent economic or
                                 social factors will affect the seller's ability
                                 to acquire additional loans and therefore the
                                 ability of the trust to fully utilize the
                                 amount deposited into the pre-funding account.

YOUR INVESTMENT WILL BE
   SUBJECT TO COUNTERPARTY
   RISK IF PAYMENTS ON YOUR
   CERTIFICATES ARE DEPENDANT
   TO ANY DEGREE ON PAYMENT ON
   CASH FLOW AGREEMENTS          The assets of the trust may, if specified in
                                 the related prospectus supplement, include
                                 agreements, such as interest rate swaps, caps,
                                 floors or other similar agreements which will
                                 require the provider of such instrument to make
                                 payments to the trust under the circumstances
                                 described in the prospectus supplement. If
                                 payments on one or more classes of the
                                 securities of the related series depend in part
                                 on payments to be received under such a cash
                                 flow agreement, the ability of the trust to
                                 make payments on the applicable classes will be
                                 subject to the credit risk of the provider of
                                 the cash flow agreement. The related prospectus
                                 supplement will describe any mechanism, such as
                                 the payment of "breakage fees," which may exist
                                 to facilitate replacement of a cash flow
                                 agreement upon the default or credit impairment
                                 of the provider of the agreement. However,
                                 there can be no assurance that any such
                                 mechanism will be successful in enabling the
                                 related trust to obtain a replacement cash flow
                                 agreement in the event the credit of its
                                 provider


                                       17



                                 becomes impaired, and the yield on the
                                 affected classes of certificates could be
                                 adversely affected as a result.

THE INTEREST RATES OF THE
   CERTIFICATES WITH
   ADJUSTABLE INTEREST RATES
   MAY BE LIMITED BY THE
   EFFECT OF INTEREST RATES ON
   THE LOANS AND OTHER FACTORS   The certificates may accrue interest at
                                 interest rates based on an index plus a
                                 specified margin as specified in the related
                                 prospectus supplement, but are subject to
                                 certain limitations. Those limitations on the
                                 interest rates for such certificates may, in
                                 part, be based on the weighted average of the
                                 interest rates on the loans net of certain fees
                                 and expenses of the trust.

                                 A variety of factors, in addition to those
                                 described in the next Risk Factor, could limit
                                 the interest rates and adversely affect the
                                 yield to maturity on such certificates. Some of
                                 these factors are described below:

                                 o    The interest rates on fixed-rate loans
                                      will not adjust, and the interest rates on
                                      adjustable-rate loans may be based on a
                                      variety of indexes, as specified in the
                                      related prospectus supplement.
                                      Adjustable-rate loans generally have
                                      periodic, minimum and maximum limitations
                                      on adjustments to their interest rates,
                                      and, as discussed in the next Risk Factor,
                                      most adjustable-rate loans will not have
                                      the first adjustment to their interest
                                      rates for some period of time after the
                                      origination of those loans. As a result of
                                      the limit on the interest rates for the
                                      certificates bearing an adjustable
                                      interest rate, these certificates may
                                      accrue less interest than they would
                                      accrue if their interest rates were based
                                      solely on the applicable index plus the
                                      specified margins.

                                 o    The index for the loans may change at
                                      different times and in different amounts
                                      than the index for the certificates. As a
                                      result, it is possible that interest rates
                                      on certain of the adjustable-rate loans
                                      may decline while the interest rates on
                                      such certificates are stable or rising. It
                                      is also possible that the interest rates
                                      on certain of the adjustable-rate loans
                                      and the interest rates for such
                                      certificates may decline or increase
                                      during the same period, but that the
                                      interest rates on such certificates may
                                      decline more slowly or increase more
                                      rapidly.

                                 o    If prepayments, defaults and liquidations
                                      occur more rapidly on the loans with
                                      relatively higher interest rates than on
                                      the loans with relatively lower interest
                                      rates, the interest rates on the
                                      securities with adjustable interest rates
                                      that are subject to cap based on weighted
                                      average net-mortgage rates are more likely
                                      to be limited.

                                 o    To the extent specified in the related
                                      prospectus supplement, if the interest
                                      rates on securities with adjustable
                                      interest rates are limited for any
                                      distribution date due to a cap based on
                                      the weighted average net interest rates of
                                      the loans or any particular groups, the
                                      resulting interest shortfalls may be
                                      recovered by the holders of these
                                      certificates on the same distribution date
                                      or on future distribution dates on a
                                      subordinated basis to the extent that on
                                      that distribution date or future
                                      distribution dates there are available
                                      funds remaining after certain other
                                      distributions on the certificates


                                       18



                                 and the payment of certain fees and expenses of
                                 the trust. These shortfalls suffered by such
                                 certificates may, to the extent specified in
                                 the related prospectus supplement, also be
                                 covered by amounts payable under an interest
                                 rate cap or other similar agreement relating to
                                 such certificates. However, we cannot assure
                                 you that these funds, if available, will be
                                 sufficient to fully cover these shortfalls.

IF THE CREDIT ENHANCEMENT FOR
   YOUR CERTIFICATES IS
   PROVIDED IN WHOLE OR IN
   PART BY
   OVERCOLLATERALIZATION, THE
   INTEREST GENERATED BY THE
   LOANS MAY BE INSUFFICIENT
   TO MAINTAIN THE REQUIRED
   LEVEL OF
   OVERCOLLATERALIZATION         For certificates credit enhanced by
                                 overcollateralization, the weighted average of
                                 the net interest rates on the loans is expected
                                 to be higher than the weighted average of the
                                 interest rates on the certificates. In such
                                 cases, the loans are expected to generate more
                                 interest than is needed to pay interest owed on
                                 the certificates and to pay certain fees and
                                 expenses of the trust. Any remaining interest
                                 generated by the loans will then be used to
                                 absorb losses that occur on the loans. After
                                 these financial obligations of the trust are
                                 covered, the available excess interest
                                 generated by the loans will be used to maintain
                                 overcollateralization at the required level
                                 determined as provided in the related
                                 agreement. We cannot assure you, however, that
                                 enough excess interest will be generated to
                                 absorb losses or to maintain the required level
                                 of overcollateralization. The factors described
                                 below, as well as the factors described in the
                                 previous Risk Factor, will affect the amount of
                                 excess interest that the loans will generate:

                                 o    Every time a loan is prepaid in full,
                                      excess interest may be reduced because the
                                      loan will no longer be outstanding and
                                      generating interest or, in the case of a
                                      partial prepayment, the loan will be
                                      generating less interest.

                                 o    Every time a loan is liquidated or written
                                      off, excess interest may be reduced
                                      because those loans will no longer be
                                      outstanding and generating interest.

                                 o    If the rates of delinquencies, defaults or
                                      losses on the loans turn out to be higher
                                      than expected, excess interest will be
                                      reduced by the amount necessary to
                                      compensate for any shortfalls in cash
                                      available to make required distributions
                                      on the certificates.

                                 o    To the extent the mortgage pool includes
                                      adjustable-rate loans, such loans may have
                                      interest rates that adjust based on an
                                      index that is different from the index
                                      used to determine the interest rates on
                                      the certificates that bear adjustable
                                      rates of interest, and any fixed-rate
                                      loans have interest rates that do not
                                      adjust. In addition, the first adjustment
                                      of the interest rates for any adjustable
                                      rate loans may not occur for a significant
                                      period after the date of origination. As a
                                      result, the interest rates on any
                                      adjustable rate certificates may increase
                                      relative to the weighted average of the
                                      interest rates on the loans, or the
                                      interest rate on any adjustable rate
                                      certificates may remain constant as the
                                      weighted average of the interest rates on
                                      the loans declines. In either case, this
                                      would require that more of the interest
                                      generated by the loans be applied to cover
                                      interest on the securities.


                                       19



                                 o    If prepayments, defaults and liquidations
                                      occur more rapidly on the loans with
                                      relatively higher interest rates that on
                                      the loans with relatively lower interest
                                      rates, the amount of excess interest
                                      generated by the loans will be less than
                                      would otherwise be the case.

                                 o    Investors in certificates, and
                                      particularly subordinate certificates,
                                      should consider the risk that the
                                      overcollateralization may not be
                                      sufficient to protect your securities from
                                      losses.

THE VALUE OF YOUR CERTIFICATES
   MAY BE ADVERSELY AFFECTED
   BY LOSSES ON THE LOANS EVEN
   IF LOSSES ARE NOT ALLOCATED
   TO YOUR CERTIFICATES          If the rate of default and the amount of losses
                                 on the loans is higher than you expect, then
                                 your yield may be lower than you expect.
                                 Liquidations of defaulted loans, whether or not
                                 realized losses are incurred upon the
                                 liquidations, are likely to result in an
                                 earlier return of principal to senior
                                 certificates and are likely to influence the
                                 yield on such certificates in a manner similar
                                 to the manner in which principal prepayments on
                                 the loans would influence the yield on such
                                 certificates. You may be particularly affected
                                 if credit enhancement is provided in the form
                                 of overcollateralization as described in the
                                 applicable prospectus supplement. Such
                                 overcollateralization provisions are intended
                                 to result in an accelerated rate of principal
                                 distributions to holders of the securities then
                                 entitled to principal distributions at any time
                                 that the overcollateralization provided by the
                                 loan pool falls below the required level. An
                                 earlier return of principal to the holders of
                                 the certificates as a result of the
                                 overcollateralization provisions will influence
                                 the yield on the certificates in a manner
                                 similar to the manner in which principal
                                 prepayments on the loans will influence the
                                 yield on the certificates.

                                 The value of your certificates may be reduced
                                 if the rate of default or the amount of losses
                                 is higher than expected. If the performance of
                                 loans is substantially worse than assumed by
                                 the rating agencies, the ratings of any class
                                 of the certificates may be lowered or withdrawn
                                 in the future. This may reduce the value of
                                 those certificates. No one will be required to
                                 supplement any credit enhancement or to take
                                 any other action to maintain any rating of the
                                 certificates.

NEWLY ORIGINATED LOANS MAY BE
   MORE LIKELY TO DEFAULT,
   WHICH MAY CAUSE LOSSES ON
   THE CERTIFICATES              Defaults on loans tend to occur at higher rates
                                 during the early years of the loans. The loans
                                 described in the related prospectus supplement
                                 may primarily have been originated within the
                                 12 months prior to their sale to the trust. In
                                 any such case, the trust may experience higher
                                 rates of default than if the loans had been
                                 outstanding for a longer period of time.

DECLINING PROPERTY VALUES AND
   DELAYS AND EXPENSES
   INHERENT IN FORECLOSURE
   PROCEDURES COULD DELAY
   DISTRIBUTIONS TO YOU OR
   RESULT IN LOSSES              Delays Due to Liquidation Procedures.
                                 Substantial delays may occur before defaulted
                                 loans are liquidated and the proceeds forwarded
                                 to investors. Property foreclosure actions are
                                 regulated by state statutes and rules and, like
                                 many lawsuits, are characterized by significant
                                 delays and expenses if defenses or
                                 counterclaims are made. As a result,


                                       20



                                 foreclosure actions can sometimes take several
                                 years to complete and property proceeds may not
                                 cover the defaulted loan amount. Expenses
                                 incurred in the course of liquidating defaulted
                                 loans will be applied to reduce the foreclosure
                                 proceeds available to investors. Also, some
                                 states prohibit a mortgage lender from
                                 obtaining a judgment against the borrower for
                                 amounts not covered by property proceeds if the
                                 property is sold outside of a judicial
                                 proceeding. As a result, you may experience
                                 delays in receipt of moneys or reductions in
                                 payable to you.

                                 There is no assurance that the value of the
                                 trust assets for any series of securities at
                                 any time will equal or exceed the principal
                                 amount of the outstanding certificates of the
                                 series. If trust assets have to be sold because
                                 of an event of default or otherwise, providers
                                 of services to the trust (including the
                                 trustee, the master servicer and the credit
                                 enhancer, if any) generally will be entitled to
                                 receive the proceeds of the sale to the extent
                                 of their unpaid fees and other amounts due them
                                 before any proceeds are paid to
                                 certificateholders. As a result, you may not
                                 receive the full amount of interest and
                                 principal due on your certificate.

                                 Decline in Property Values May Increase Loan
                                 Losses. Your investment may be adversely
                                 affected by declines in property values. If the
                                 outstanding balance of a loan or contract and
                                 any secondary financing on the underlying
                                 property is greater than the value of the
                                 property, there is an increased risk of
                                 delinquency, foreclosure and loss. A decline in
                                 property values could extinguish the value of a
                                 junior mortgagee's interest in a property and,
                                 thus, reduce proceeds payable to the
                                 certificateholders.

                                 We refer you to "Material Legal Aspects of the
                                 Loans--Anti-Deficiency Legislation and other
                                 Limitations on Lenders" for additional
                                 information.

THE TRUST MAY CONTAIN LOANS
   SECURED BY JUNIOR LIENS;
   THESE LOANS ARE MORE LIKELY
   THAN LOANS SECURED BY
   SENIOR LIENS TO EXPERIENCE
   LOSSES                        The trust may contain loans that are in a
                                 junior lien position. Mortgages or deeds of
                                 trust securing junior loans will be satisfied
                                 after the claims of the senior mortgage holders
                                 and the foreclosure costs are satisfied. In
                                 addition, a junior mortgage lender may only
                                 foreclose in a manner that is consistent with
                                 the rights of the senior mortgage lender. As a
                                 result, the junior mortgage lender generally
                                 must either pay the related senior mortgage
                                 lender in full at or before the foreclosure
                                 sale or agree to make the regular payments on
                                 the senior mortgage. Since the trust will not
                                 have any source of funds to satisfy any senior
                                 mortgage or to continue making payments on that
                                 mortgage, the trust's ability as a practical
                                 matter to foreclose on any junior mortgage will
                                 be limited. In addition, since foreclosure
                                 proceeds first retire any senior liens, the
                                 foreclosure proceeds may not be sufficient to
                                 pay all amounts owed to you.

THE LOANS WILL BE UNDERWRITTEN
   USING VARYING STANDARDS,
   AND LESS STRINGENT
   UNDERWRITING STANDARDS AND
   THE RESULTANT POTENTIAL FOR
   DELINQUENCIES ON THE LOANS
   COULD LEAD TO LOSSES ON
   YOUR CERTIFICATES             The trust may contain loans that were made, in
                                 part, to borrowers who, for one reason or
                                 another, are not able, or do not wish, to
                                 obtain financing from traditional sources.
                                 These loans may be considered to


                                       21



                                 be of a riskier nature than loans made by
                                 traditional sources of financing, so that the
                                 holders of the certificates may be deemed to be
                                 at greater risk than if the loans were made to
                                 other types of borrowers. In this event, the
                                 underwriting standards used in the origination
                                 of the loans held by the trust will generally
                                 be less stringent than those of Fannie Mae or
                                 Freddie Mac with respect to a borrower's credit
                                 history and in certain other respects.
                                 Borrowers on the loans may have an impaired or
                                 unsubstantiated credit history. As a result of
                                 this less stringent approach to underwriting,
                                 the loans purchased by the trust for your
                                 series of certificates may experience higher
                                 rates of delinquencies, defaults and
                                 foreclosures than loans underwritten in a
                                 manner which is more similar to the Fannie Mae
                                 and Freddie Mac guidelines.

SOME TYPES OF LOANS MAY BE
   MORE PRONE TO DEFAULTS AND
   THE TRUST MAY CONTAIN LARGE
   CONCENTRATIONS OF THESE
   LOANS                         Because your certificates represent an interest
                                 in the loans held by the related trust, your
                                 investment may be affected by a decline in real
                                 estate values and changes in individual
                                 borrowers' financial conditions. You should be
                                 aware that the value of the mortgaged
                                 properties may decline. If the outstanding
                                 balance of a loan and any secondary financing
                                 on the underlying property is greater than the
                                 value of the property, there is an increased
                                 risk of delinquency, foreclosure and losses. If
                                 the residential real estate market experiences
                                 an overall decline in property values, the
                                 rates of delinquencies, foreclosures and losses
                                 could be higher than those now generally
                                 experienced in the lending industry. To the
                                 extent your certificates are not covered by
                                 credit enhancements, you will bear all of the
                                 risks resulting from defaults by borrowers.

                                 In addition, certain types of loans which have
                                 higher than average rates of default may be
                                 included in the trust that issues your
                                 securities. The following types of loans may be
                                 included:

                                 o    loans that are subject to "negative
                                      amortization." The principal balances of
                                      such loans may be increased to amounts
                                      greater than the value of the underlying
                                      property. This increases the likelihood of
                                      default;

                                 o    loans that do not fully amortize over
                                      their terms to maturity, which are
                                      sometimes referred to as balloon loans.
                                      Such loans require a large payment at
                                      their stated maturity. These loans involve
                                      a greater degree of risk because the
                                      ability of a borrower to make this final
                                      payment typically depends on the ability
                                      to refinance the loan or sell the related
                                      mortgaged property;

                                 o    loans that provide for escalating or
                                      variable interest payments by the
                                      borrower. The borrower may have qualified
                                      for such loans based on an income level
                                      sufficient to make the initial payments
                                      only. As the payments increase, the
                                      likelihood of default will increase; and

                                 o    loans that are concentrated in certain
                                      regions, states or zip code areas of the
                                      United States. Such geographic units may
                                      experience weak economic conditions and
                                      housing markets. This may cause higher
                                      rates of loss and delinquency.


                                       22



                                 We refer you to "The Trust Fund - The Loans"
                                 for additional information. The related
                                 prospectus supplement will disclose the extent
                                 to which any of these or other types of special
                                 risk loans are present in the pool applicable
                                 to your securities.

SOME OF THE LOANS MAY HAVE AN
   INITIAL INTEREST-ONLY
   PERIOD, WHICH MAY RESULT IN
   INCREASED DELINQUENCIES AND
   LOSSES                        To the extent specified in the related
                                 prospectus supplement, certain loans may be
                                 interest-only until for a period of months or
                                 years after the date of origination. During
                                 this period, the payment made by the related
                                 borrower will be less than it would be if the
                                 principal of the loan was required to amortize.
                                 In addition, the loan principal balance will
                                 not be reduced because there will be no
                                 scheduled monthly payments of principal during
                                 this period. As a result, no principal payments
                                 will be made on the securities with respect to
                                 these loans during their interest-only period
                                 unless there is a principal prepayment.

                                 After the initial interest-only period, the
                                 scheduled monthly payment on these loans will
                                 increase, which may result in increased
                                 delinquencies by the related borrowers. In
                                 addition, losses may be greater on these loans
                                 as a result of there being no principal
                                 amortization during the early years of these
                                 loans. Although the amount of principal
                                 included in each scheduled monthly payment for
                                 a traditional loan is relatively small during
                                 the first few years after the origination of a
                                 loan, in the aggregate, the amount can be
                                 significant. Any resulting delinquencies and
                                 losses, to the extent not covered by available
                                 credit enhancement, will be allocated to the
                                 securities in reverse order of seniority.

                                 Loans with an initial interest-only period are
                                 relatively new in the mortgage marketplace. The
                                 performance of these loans may be significantly
                                 different from loans that amortize from
                                 origination. In particular, the failure by the
                                 related borrower to build equity in the
                                 property may affect the delinquency, loss and
                                 prepayment experience with respect to these
                                 loans.

IF CONSUMER PROTECTION LAWS
   ARE VIOLATED IN THE
   ORIGINATION OR SERVICING OF
   THE LOANS, LOSSES ON YOUR
   INVESTMENT COULD RESULT       There has been an increased focus by state and
                                 federal banking regulatory agencies, state
                                 attorneys general offices, the Federal Trade
                                 Commission, the U.S. Department of Justice, the
                                 U.S. Department of Housing and Urban
                                 Development and state and local governmental
                                 authorities on certain lending practices by
                                 some companies in the subprime industry,
                                 sometimes referred to as "predatory lending"
                                 practices. Sanctions have been imposed by
                                 state, local and federal governmental agencies
                                 for practices including, but not limited to,
                                 charging borrowers excessive fees, imposing
                                 higher interest rates than the borrower's
                                 credit risk warrants and failing to adequately
                                 disclose the material terms of loans to the
                                 borrowers.

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


                                       23



                                 The loans are also subject to federal laws,
                                 including:

                                 o    the Federal Truth in Lending Act and
                                      Regulation Z promulgated under that Act,
                                      which require certain disclosures to the
                                      borrowers regarding the terms of the
                                      loans;

                                 o    the Equal Credit Opportunity Act and
                                      Regulation B promulgated under that Act,
                                      which prohibit discrimination on the basis
                                      of age, race, color, sex, religion,
                                      marital status, national origin, receipt
                                      of public assistance or the exercise of
                                      any right under the Consumer Credit
                                      Protection Act, in the extension of
                                      credit; and

                                 o    the Fair Credit Reporting Act, which
                                      regulates the use and reporting of
                                      information related to the borrower's
                                      credit experience.

                                 Violations of certain provisions of these
                                 federal, state and local laws may limit the
                                 ability of the servicers to collect all or part
                                 of the principal of, or interest on, the loans
                                 and in addition could subject the trust to
                                 damages and administrative enforcement
                                 (including disgorgement of prior interest and
                                 fees paid). In particular, an originator's
                                 failure to comply with certain requirements of
                                 these federal, state or local laws could
                                 subject the trust (and other assignees of the
                                 loans) to monetary penalties, and result in the
                                 obligors' rescinding the loans against either
                                 the trust or subsequent holders of the loans.

                                 The loan seller, and other responsible parties
                                 making representations with respect to the
                                 mortgage loans, will represent that each
                                 mortgage loan sold by it is in compliance with
                                 applicable federal, state and local laws and
                                 regulations. In addition, such party will
                                 represent that none of the mortgage loans sold
                                 by it are covered by the Home Ownership and
                                 Equity Protection Act of 1994 or are classified
                                 as a "high cost home," "threshold," "covered,"
                                 "high risk home," "predatory," or similar loan
                                 under any other applicable federal, state or
                                 local law. In the event of a breach of any such
                                 representations, such party will be obligated
                                 to cure such breach or repurchase or replace
                                 the affected mortgage loan, in the manner and
                                 to the extent described in the related
                                 prospectus supplement.

LOSSES COULD RESULT IF
   VIOLATIONS OF ENVIRONMENTAL
   LAWS OCCURRED AFFECTING THE
   MORTGAGED PROPERTIES          Under the laws of some states, contamination of
                                 a property may give rise to a lien on the
                                 property to assure the costs of cleanup. In
                                 several states, a lien to assure cleanup has
                                 priority over the lien of an existing mortgage.
                                 In addition, the trust issuing your
                                 certificates, because it is a mortgage holder,
                                 may be held responsible for the costs
                                 associated with the clean up of hazardous
                                 substances released at a property. Those costs
                                 could result in a loss to the
                                 certificateholders.

                                 We refer you to "Material Legal Aspects of the
                                 Loans--Environmental Risks" for additional
                                 information.

DELAY IN RECEIPT OF
   LIQUIDATION PROCEEDS;
   LIQUIDATION PROCEEDS MAY BE
   LESS THAN THE LOAN BALANCE    Substantial delays could be encountered in
                                 connection with the liquidation of delinquent
                                 loans. Further, reimbursement of advances made
                                 on a loan, liquidation expenses such as legal
                                 fees, real estate


                                       24



                                 taxes, hazard insurance and maintenance and
                                 preservation expenses may reduce the portion of
                                 liquidation proceeds payable on the securities.
                                 If a mortgaged property fails to provide
                                 adequate security for the loan, you will incur
                                 a loss on your investment if the credit
                                 enhancements are insufficient to cover the
                                 loss.

THE BANKRUPTCY OF THE
   DEPOSITOR OR A SELLER MAY
   DELAY OR REDUCE COLLECTIONS
   ON LOANS                      Neither the United States Bankruptcy Code nor
                                 similar applicable state insolvency laws
                                 prohibit the depositor from filing a voluntary
                                 application for bankruptcy relief under
                                 applicable law. However, the transactions
                                 contemplated by the related prospectus will be
                                 structured so that

                                 o    the voluntary or involuntary application
                                      for bankruptcy relief by the depositor is
                                      unlikely,

                                 o    in the event of a bankruptcy filing by the
                                      depositor, the loans backing your series
                                      of securities should be treated by the
                                      bankruptcy court as property of the
                                      related trust and not as part of the
                                      bankrupt estate of the depositor, and

                                 o    a bankruptcy filing by a seller which is
                                      an affiliate of the depositor from whom
                                      the depositor acquires the loans should
                                      not result in consolidation of the assets
                                      and liabilities of the depositor with
                                      those of such seller.

                                 These steps include the creation of the
                                 depositor as a separate, limited purpose
                                 subsidiary, the certificate of incorporation of
                                 which contains limitations on the nature of the
                                 depositor's business, restrictions on the
                                 ability of the depositor to commence voluntary
                                 or involuntary cases or proceedings under
                                 insolvency laws without the prior unanimous
                                 affirmative vote of all its directors and the
                                 structuring of each transfer of loans from the
                                 depositor to the related trust as a sale rather
                                 than a pledge. However, there can be no
                                 assurance that the activities of the depositor
                                 would not result in a court concluding that the
                                 assets and liabilities of the depositor should
                                 be consolidated with those of such a seller, or
                                 that the transfer of loans to the trust would
                                 in fact be treated by a court as a sale.

                                 The trust assets will be acquired by the
                                 depositor, either directly or through
                                 affiliates, from sellers. Each seller will
                                 transfer its related loans to the depositor and
                                 the depositor will transfer the loans to the
                                 related trust. If a seller were to become a
                                 debtor in a bankruptcy case, a creditor or
                                 trustee, or the debtor itself, may take the
                                 position that the transfer of the loans by the
                                 seller should be characterized as a pledge of
                                 the related loans to secure a borrowing of such
                                 debtor, with the result that the depositor or
                                 the trust is deemed to be a creditor of such
                                 seller, secured by a pledge of the applicable
                                 loans.

                                 An attempt to recharacterize the loan transfers
                                 related to your series of certificates, if
                                 successful, could result in delays in payments
                                 of collections on the loans or reductions in
                                 the amount of such payments which could result
                                 in losses on the certificates, or in a trustee
                                 in bankruptcy electing to accelerate payment by
                                 liquidating the loans. Even if such an attempt
                                 were unsuccessful, delays in payments on the
                                 loans and resulting delays or losses on the
                                 certificates could result.


                                       25



THE LOAN SELLER OR OTHER
   RESPONSIBLE PARTIES MAY NOT
   BE ABLE TO REPURCHASE
   DEFECTIVE LOANS               Each loan seller or another responsible party
                                 will make various representations and
                                 warranties related to the loans. If any such
                                 loan seller or responsible party fails to cure
                                 a material breach of its representations and
                                 warranties with respect to any loan in a timely
                                 manner, then it would be required to repurchase
                                 or, if so specified in the related prospectus
                                 supplement, substitute for the defective loan.
                                 It is possible that any such loan seller or
                                 responsible party may not be capable of
                                 repurchasing or substituting any defective
                                 loans, for financial or other reasons. The
                                 inability of any such party to repurchase or
                                 substitute for defective loans would likely
                                 cause the loans to experience higher rates of
                                 delinquencies, defaults and losses. As a
                                 result, shortfalls in the distributions due on
                                 the certificates could occur.

EXTERNAL EVENTS MAY INCREASE
   THE RISK OF LOSS ON THE
   LOANS                         In response to previously executed and
                                 threatened terrorist attacks in the United
                                 States and foreign countries, the United States
                                 has initiated military operations and has
                                 placed a substantial number of armed forces
                                 reservists and members of the National Guard on
                                 active duty status. It is possible that the
                                 number of reservists and members of the
                                 National Guard placed on active duty status in
                                 the near future may increase. To the extent
                                 that a member of the military, or a member of
                                 the armed forces reserves or National Guard who
                                 is called to active duty is a borrower of a
                                 loan in the trust, the interest rate limitation
                                 of the Servicemembers Civil Relief Act, and any
                                 comparable state law, will apply. Generally,
                                 substantially all of the loans in the trust for
                                 a series of certificates are expected to have
                                 interest rates which exceed such limitation, if
                                 applicable. This may result in interest
                                 shortfalls on the loans, which may result in
                                 shortfalls of interest on your certificates.

DRUG, RICO AND MONEY
   LAUNDERING VIOLATIONS COULD
   LEAD TO PROPERTY
   FORFEITURES                   Federal law provides that property purchased or
                                 improved with assets derived from criminal
                                 activity or otherwise tainted, or used in the
                                 commission of certain offenses, can be seized
                                 and ordered forfeited to the United States of
                                 America. The offenses which can trigger such a
                                 seizure and forfeiture include, among others,
                                 violations of the Racketeer Influenced and
                                 Corrupt Organizations Act, the Bank Secrecy
                                 Act, the anti-money laundering laws and
                                 regulations, including the USA Patriot Act of
                                 2001 and the regulations issued pursuant to
                                 that Act, as well as the narcotic drug laws. In
                                 many instances, the United States may seize the
                                 property even before a conviction occurs.

                                 In the event of a forfeiture proceeding, a
                                 lender may be able to establish its interest in
                                 the property by proving that (1) its mortgage
                                 was executed and recorded before the commission
                                 of the illegal conduct from which the assets
                                 used to purchase or improve the property were
                                 derived or before the commission of any other
                                 crime upon which the forfeiture is based, or
                                 (2) the lender, at the time of the execution of
                                 the mortgage, did not know or was reasonably
                                 without cause to believe that the property was
                                 subject to forfeiture. However, there is no
                                 assurance that such a defense would be
                                 successful.


                                       26



                         DESCRIPTION OF THE TRUST FUNDS

     Capitalized terms are defined in the "Glossary of Terms" beginning on page
101.

ASSETS

     The primary assets of each trust fund will include:

          o    single family mortgage loans, including mortgage participations;

          o    pass-through certificates or other mortgage-backed securities
               evidencing interests in or secured by one or more mortgage loans
               or mortgage participations;

          o    direct obligations of the United States or other governmental
               agencies which are not subject to redemption prior to maturity at
               the option of the issuer and are:

               o    interest-bearing securities;

               o    non-interest-bearing securities;

               o    originally interest-bearing securities from which coupons
                    representing the right to payment of interest have been
                    removed;

               o    interest-bearing securities from which the right to payment
                    of principal has been removed; or

          o    a combination of mortgage loans, mortgage-backed securities and
               government securities.

     The mortgage loans and mortgage-backed securities will not be guaranteed or
insured by Morgan Stanley Capital I Inc. or any of its affiliates or, unless
otherwise provided in the prospectus supplement, by any governmental agency or
instrumentality or by any other person. Each asset will be selected by Morgan
Stanley Capital I Inc. for inclusion in a trust fund from among those purchased,
either directly or indirectly, from a prior holder thereof, which may be an
affiliate of Morgan Stanley Capital I Inc. and, with respect to mortgage loans
and mortgage-backed securities, which prior holder may or may not be the
originator of the mortgage loans or the issuer of the mortgage-backed
securities.

     The certificates will be entitled to payment from the assets of the related
trust fund. If so specified in the related prospectus supplement, the
certificates will also be entitled to payments in respect of the assets of
another trust fund or trust funds established by Morgan Stanley Capital I Inc.
If specified in the related prospectus supplement, the assets of a trust fund
will consist of certificates representing beneficial ownership interests in
another trust fund that contains the assets.

MORTGAGE LOANS

     General

     To the extent specified in the related prospectus supplement, the mortgage
loans will be secured by:

          o    liens on mortgaged properties consisting of one- to four-family
               residential properties or security interests in shares issued by
               private cooperative housing corporations; or

          o    liens on mortgaged properties located in any one of the fifty
               states, the District of Columbia or the Commonwealth of Puerto
               Rico, or, if so specified in the related prospectus supplement,
               mortgaged properties may be located elsewhere.


                                       27



To the extent specified in the related prospectus supplement, the mortgage loans
will be secured by first liens or junior liens, or both, mortgages or deeds of
trust or other similar security instruments creating a first or junior lien on
mortgaged property. The mortgaged properties may include apartments owned by
cooperatives. The mortgaged properties may include leasehold interests in
properties, the title to which is held by third party lessors. To the extent
specified in the related prospectus supplement, the term of any such leasehold
shall exceed the term of the related mortgage note by at least five years. Each
mortgage loan will have been originated by a person other than Morgan Stanley
Capital I Inc. The related prospectus supplement will indicate if any originator
is an affiliate of Morgan Stanley Capital I Inc. The mortgage loans will be
evidenced by promissory notes secured by mortgages or deeds of trust creating a
lien on the mortgaged properties.

     Mortgage Loan Information in Prospectus Supplements

     Each prospectus supplement will contain information, as of the date of that
prospectus supplement and to the extent then applicable and specifically known
to Morgan Stanley Capital I Inc., with respect to the mortgage loans, including:

          o    the aggregate outstanding principal balance and the largest,
               smallest and average outstanding principal balance of the
               mortgage loans as of the applicable cut-off date;

          o    the type of property securing the mortgage loans;

          o    the weighted average, by principal balance, of the original and
               remaining terms to maturity of the mortgage loans;

          o    the earliest and latest origination date and maturity date of the
               mortgage loans;

          o    the weighted average, by principal balance, of the loan-to-value
               ratios at origination of the mortgage loans;

          o    the mortgage rates or range of mortgage rates and the weighted
               average mortgage rate borne by the mortgage loans;

          o    the states or, if applicable, countries in which most of the
               mortgaged properties are located;

          o    information with respect to the prepayment provisions, if any, of
               the mortgage loans;

          o    any interest retained by a seller;

          o    with respect to mortgage loans with adjustable mortgage rates,
               the index, the frequency of the adjustment dates, the highest,
               lowest and weighted average note margin and pass-through margin,
               and the maximum mortgage rate or monthly payment variation at the
               time of any adjustment thereof and over the life of the loan and
               the frequency of monthly payment adjustments; and

          o    information regarding the payment characteristics of the mortgage
               loans, including without limitation balloon payment and other
               amortization provisions.

     If specific information respecting the mortgage loans is not known to
Morgan Stanley Capital I Inc. at the time certificates are initially offered,
more general information of the nature described above will be provided in the
prospectus supplement, and specific information will be set forth in a report
which will be available to purchasers of the related certificates at or before
the initial issuance thereof and will be filed as part of a Current Report on
Form 8-K with the Securities and Exchange Commission within fifteen days after
the initial issuance.


                                       28



     Payment Provisions of the Mortgage Loans

     Unless otherwise specified in the related prospectus supplement, all of the
mortgage loans will:

          o    have individual principal balances at origination of not less
               than $25,000;

          o    have original terms to maturity of not more than 40 years; and

          o    provide for payments of principal, interest or both, on due dates
               that occur monthly, quarterly or semi-annually or at another
               interval as is specified in the related prospectus supplement.

     Each mortgage loan may provide for no accrual of interest or for accrual of
interest at a Mortgage Rate. Each mortgage loan may provide for scheduled
payments to maturity or payments that adjust from time to time to accommodate
changes in the mortgage rate or to reflect the occurrence of specified events.
Each mortgage loan may also provide for negative amortization or accelerated
amortization, in each case as described in the related prospectus supplement.
Each mortgage loan may be fully amortizing or require a balloon payment due on
its stated maturity date, in each case as described in the related prospectus
supplement. Each mortgage loan may contain prohibitions on prepayment or require
payment of a premium or a yield maintenance penalty in connection with a
prepayment, in each case as described in the related prospectus supplement.

     In the event that holders of any class or classes of offered certificates
will be entitled to all or a portion of any prepayment premiums collected in
respect of mortgage loans, the related prospectus supplement will specify the
method or methods by which these amounts will be allocated.

MORTGAGE-BACKED SECURITIES

     Any mortgage-backed security will have been issued pursuant to a pooling
and servicing agreement, a trust agreement, an indenture or similar agreement. A
seller or servicer or both of the underlying mortgage loans or underlying
mortgage-backed securities will have entered into an agreement with a trustee or
a custodian or with the original purchaser of the interest in the underlying
mortgage loans or mortgage-backed securities evidenced by the mortgage-backed
securities.

     Distributions of any principal or interest, as applicable, will be made on
mortgage-backed securities on the dates specified in the related prospectus
supplement. The mortgage-backed securities may be issued in one or more classes
with characteristics similar to the classes of certificates described in this
prospectus. Any principal or interest distributions will be made on the
mortgage-backed securities by the related trustee or servicer. The issuer of the
mortgage-backed securities or a servicer or other person specified in the
related prospectus supplement may have the right or obligation to repurchase or
substitute assets underlying the mortgage-backed securities after a certain date
or under other circumstances specified in the related prospectus supplement.

     Enhancement in the form of reserve funds, subordination or other forms of
credit support similar to that described for the certificates under "Description
of Credit Support" may be provided with respect to the mortgage-backed
securities. The type, characteristics and amount of the credit support, if any,
will be a function of certain characteristics of the mortgage loans or
underlying mortgage-backed securities evidenced by or securing the
mortgage-backed securities and other factors. The type, characteristics and
amount of the credit support generally will have been established for the
mortgage-backed securities on the basis of requirements of any rating agency
that may have assigned a rating to the mortgage-backed securities or the initial
purchasers of the mortgage-backed securities.

     The prospectus supplement for a series of certificates evidencing interests
in mortgage assets that include mortgage-backed securities will specify, to the
extent available:

          o    the aggregate approximate initial and outstanding principal
               amount or notional amount, as applicable, and type of the
               mortgage-backed securities to be included in the trust fund;

          o    the original and remaining term to stated maturity of the
               mortgage-backed securities, if applicable;


                                       29



          o    whether the mortgage-backed securities are entitled only to
               interest payments, only to principal payments or to both;

          o    the pass-through or bond rate of the mortgage-backed securities
               or formula for determining the rates, if any;

          o    the applicable payment provisions for the mortgage-backed
               securities, including, but not limited to, any priorities,
               payment schedules and subordination features;

          o    the issuer, servicer and trustee, as applicable;

          o    certain characteristics of the credit support, if any, such as
               subordination, reserve funds, insurance policies, letters of
               credit or guarantees relating to the related underlying mortgage
               loans, the underlying mortgage-backed securities or directly to
               such mortgage-backed securities;

          o    the terms on which the related underlying mortgage loans or
               underlying mortgage-backed securities for such mortgage-backed
               securities or the mortgage-backed securities may, or are required
               to, be purchased prior to their maturity;

          o    the terms on which mortgage loans or underlying mortgage-backed
               securities may be substituted for those originally underlying the
               mortgage-backed securities;

          o    the applicable servicing fees;

          o    the type of information in respect of the underlying mortgage
               loans described under "--Mortgage Loans--Mortgage Loan
               Information in Prospectus Supplements" above, and the type of
               information in respect of the underlying mortgage-backed
               securities described in this paragraph;

          o    the characteristics of any cash flow agreements that are included
               as part of the trust fund evidenced or secured by the
               mortgage-backed securities; and

          o    whether the mortgage-backed securities are in certificated form,
               book-entry form or held through a depository such as The
               Depository Trust Company or the Participants Trust Company.

GOVERNMENT SECURITIES

     The prospectus supplement for a series of certificates evidencing interests
in assets of a trust fund that include government securities will specify, to
the extent available:

          o    the aggregate approximate initial and outstanding principal
               amounts or notional amounts, as applicable, and types of the
               government securities to be included in the trust fund;

          o    the original and remaining terms to stated maturity of the
               government securities;

          o    whether the government securities are entitled only to interest
               payments, only to principal payments or to both;

          o    the interest rates of the government securities or the formula to
               determine the rates, if any;

          o    the applicable payment provisions for the government securities;
               and

          o    to what extent, if any, the obligation evidenced thereby is
               backed by the full faith and credit of the United States.


                                       30



ACCOUNTS

     Each trust fund will include one or more accounts established and
maintained on behalf of the certificateholders into which the person or persons
designated in the related prospectus supplement will, to the extent described in
this prospectus and in such prospectus supplement deposit all payments and
collections received or advanced with respect to the assets and other assets in
the trust fund. Such an account may be maintained as an interest bearing or a
non-interest bearing account, and funds held in the account may be held as cash
or invested in certain short-term, investment grade obligations, in each case as
described in the related prospectus supplement. See "Description of the
Agreements--Certificate Account and Other Collection Accounts."

CREDIT SUPPORT

     If so provided in the related prospectus supplement, partial or full
protection against defaults and losses on the assets in the related trust fund
may be provided to one or more classes of certificates in the related series:

          o    in the form of subordination of one or more other classes of
               certificates in the series; or

          o    by one or more other types of credit support, such as a letter of
               credit, insurance policy, guarantee, reserve fund or another type
               of credit support, or a combination thereof.

     The amount and types of coverage, the identification of the entity
providing the coverage, if applicable, and related information with respect to
each type of credit support, if any, will be described in the prospectus
supplement for a series of certificates. See "Risk Factors--Credit Enhancement
is Limited in Amount and Coverage" and "Description of Credit Support."

CASH FLOW AGREEMENTS

     If so provided in the related prospectus supplement, the trust fund may
include guaranteed investment contracts pursuant to which moneys held in the
funds and accounts established for the related series will be invested at a
specified rate. The trust fund may also include other agreements, such as:

          o    interest rate exchange agreements,

          o    interest rate cap or floor agreements,

          o    currency exchange agreements,

          o    swap agreements,

          o    notional balance agreements, or

          o    similar agreements provided to reduce the effects of interest
               rate or currency exchange rate fluctuations on the assets or on
               one or more classes of certificates. Currency exchange agreements
               might be included in the trust fund if some or all of the
               mortgage loans and mortgage-backed securities, such as mortgage
               loans secured by mortgaged properties located outside the United
               States, were denominated in a non-United States currency. The
               principal terms of any guaranteed investment contract or other
               agreement, including, without limitation, provisions relating to
               the timing, manner and amount of payments and provisions relating
               to termination, will be described in the prospectus supplement
               for the related series. In addition, the related prospectus
               supplement will provide information with respect to the obligor
               under any cash flow agreement.


                                       31



                                 USE OF PROCEEDS

     The net proceeds to be received from the sale of the certificates will be
applied by Morgan Stanley Capital I Inc. to the purchase of assets and to pay
for certain expenses incurred in connection with the purchase of assets and sale
of certificates. Morgan Stanley Capital I Inc. expects to sell the certificates
from time to time, but the timing and amount of offerings of certificates will
depend on a number of factors, including the volume of assets acquired by Morgan
Stanley Capital I Inc., prevailing interest rates, availability of funds and
general market conditions.

                              YIELD CONSIDERATIONS

GENERAL

     The yield on any offered certificate will depend on the price paid by the
certificateholder, the pass-through rate of the certificate, the receipt and
timing of receipt of distributions on the certificate and the weighted average
life of the assets in the related trust fund, which may be affected by
prepayments, defaults, liquidations or repurchases. See "Risk Factors."

PASS-THROUGH RATE

     Certificates of any class within a series may have fixed, variable or
adjustable pass-through rates, which may or may not be based upon the interest
rates borne by the assets in the related trust fund. The prospectus supplement
with respect to any series of certificates will specify:

          o    the pass-through rate for each class of certificates or, in the
               case of a variable or adjustable pass-through rate, the method of
               determining the pass-through rate;

          o    the effect, if any, of the prepayment of any mortgage loan or
               mortgage-backed security on the pass-through rate of one or more
               classes of certificates; and

          o    whether the distributions of interest on the certificates of any
               class will be dependent, in whole or in part, on the performance
               of any obligor under a cash flow agreement.

     The effective yield to maturity to each holder of certificates entitled to
payments of interest will be below that otherwise produced by the applicable
pass-through rate and purchase price of the certificate because, while interest
may accrue on each asset during a certain period, the distribution of interest
will be made on a day which may be several days, weeks or months following the
period of accrual.

TIMING OF PAYMENT OF INTEREST

     Each payment of interest on the certificates or addition to the certificate
balance of a class of accrual certificates on a distribution date will include
interest accrued during the interest accrual period for such distribution date.
As indicated in this prospectus under "--Pass-Through Rate" above, if the
interest accrual period ends on a date other than a distribution date for the
related series, the yield realized by the holders of the certificates may be
lower than the yield that would result if the interest accrual period ended on
that distribution date. In addition, if so specified in the related prospectus
supplement, interest accrued for an interest accrual period for one or more
classes of certificates may be calculated on the assumption that:

          o    distributions of principal,

          o    additions to the certificate balance of accrual certificates, and

          o    allocations of losses on the assets.


                                       32



may be made on the first day of the interest accrual period for a distribution
date and not on that distribution date. This method would produce a lower
effective yield than if interest were calculated on the basis of the actual
principal amount outstanding during an interest accrual period. The interest
accrual period for any class of offered certificates will be described in the
related prospectus supplement.

PAYMENTS OF PRINCIPAL; PREPAYMENTS

     The yield to maturity on the certificates will be affected by the rate of
principal payments on the assets, including principal prepayments on mortgage
loans resulting from both voluntary prepayments by the borrowers and involuntary
liquidations. The rate at which principal prepayments occur on the mortgage
loans will be affected by a variety of factors, including, without limitation,
the terms of the mortgage loans, the level of prevailing interest rates, the
availability of mortgage credit and economic, demographic, geographic, tax,
legal and other factors. In general, however, if prevailing interest rates fall
significantly below the mortgage rates on the mortgage loans comprising or
underlying the assets in a particular trust fund, the mortgage loans are likely
to be the subject of higher principal prepayments than if prevailing rates
remain at or above the rates borne by the mortgage loans. In this regard, it
should be noted that assets may consist of mortgage loans with different
mortgage rates and the stated pass-through or pay-through interest rate of
mortgage-backed securities may be a number of percentage points higher or lower
than certain of the underlying mortgage loans. The rate of principal payments on
some or all of the classes of certificates of a series:

          o    will correspond to the rate of principal payments on the assets
               in the related trust fund;

          o    is likely to be affected by the existence of lock-out periods and
               prepayment premium provisions of the mortgage loans underlying or
               comprising the assets; and

          o    is likely to be affected to the extent the servicer of any
               mortgage loan is able to enforce the lockout period and
               prepayment premium provisions.

Mortgage loans with a lock-out period or a prepayment premium provision, to the
extent enforceable, generally would be expected to experience a lower rate of
principal prepayments than otherwise identical mortgage loans without these
provisions, with shorter lock-out periods or with lower prepayment premiums.

     If the purchaser of a certificate offered at a discount calculates its
anticipated yield to maturity based on an assumed rate of distributions of
principal that is faster than that actually experienced on the assets, the
actual yield to maturity will be lower than that so calculated. Conversely, if
the purchaser of a certificate offered at a premium calculates its anticipated
yield to maturity based on an assumed rate of distributions of principal that is
slower than that actually experienced on the assets, the actual yield to
maturity will be lower than that so calculated. In either case, if so provided
in the prospectus supplement for a series of certificates, the effect on yield
on one or more classes of the certificates of the series of prepayments of the
assets in the related trust fund may be mitigated or exacerbated by any
provisions for sequential or selective distribution of principal to these
classes.

     When a full prepayment is made on a mortgage loan, the borrower is charged
interest on the principal amount of the mortgage loan so prepaid for the number
of days in the month actually elapsed up to the date of the prepayment. To the
extent specified in the related prospectus supplement, the effect of prepayments
in full will be to reduce the amount of interest paid in the following month to
holders of certificates entitled to payments of interest because interest on the
principal amount of any mortgage loan so prepaid will be paid only to the date
of prepayment rather than for a full month. To the extent specified in the
related prospectus supplement, a partial prepayment of principal is applied so
as to reduce the outstanding principal balance of the related mortgage loan as
of the due date in the month in which the partial prepayment is received. As a
result, to the extent set forth in the related prospectus supplement, the effect
of a partial prepayment on a mortgage loan will be to reduce the amount of
interest passed through to holders of certificates in the month following the
receipt of the partial prepayment by an amount equal to one month's interest at
the applicable pass-through rate on the prepaid amount.

     The timing of changes in the rate of principal payments on the mortgage
loans and mortgage-backed securities may significantly affect an investor's
actual yield to maturity, even if the average rate of distributions of principal
is consistent with an investor's expectation. In general, the earlier a
principal payment is received on the mortgage loans


                                       33



and mortgage-backed securities and distributed on a certificate, the greater the
effect on the investor's yield to maturity. The effect on an investor's yield of
principal payments occurring at a rate higher or lower than the rate anticipated
by the investor during a given period may not be offset by a subsequent like
decrease or increase in the rate of principal payments.

PREPAYMENTS, MATURITY AND WEIGHTED AVERAGE LIFE

     The rates at which principal payments are received on the assets included
in or comprising a trust fund and the rate at which payments are made from any
credit support or cash flow agreement for the related series of certificates may
affect the ultimate maturity and the weighted average life of each class of a
series. Prepayments on the mortgage loans comprising or underlying the mortgage
loans and mortgage-backed securities in a particular trust fund will generally
accelerate the rate at which principal is paid on some or all of the classes of
the certificates of the related series.

     If so provided in the prospectus supplement for a series of certificates,
one or more classes of certificates may have a final scheduled distribution
date, which is the date on or prior to which the certificate balance thereof is
scheduled to be reduced to zero, calculated on the basis of the assumptions
applicable to that series set forth in the related prospectus supplement.

     Weighted average life refers to the average amount of time that will elapse
from the date of issue of a security until each dollar of principal of the
security will be repaid to the investor. The weighted average life of a class of
certificates of a series will be influenced by the rate at which principal on
the mortgage loans comprising or underlying the mortgage loans and
mortgage-backed securities is paid to that class. The principal may be in the
form of scheduled amortization or prepayments which include prepayments, in
whole or in part, and liquidations due to default.

     In addition, the weighted average life of the certificates may be affected
by the varying maturities of the mortgage loans comprising or underlying the
mortgage-backed securities. If any mortgage loans comprising or underlying the
assets in a particular trust fund have actual terms to maturity of less than
those assumed in calculating final scheduled distribution dates for the classes
of certificates of the related series, one or more classes of certificates may
be fully paid prior to their respective final scheduled distribution dates, even
in the absence of prepayments. Accordingly, the prepayment experience of the
assets will, to some extent, be a function of the mix of mortgage rates and
maturities of the mortgage loans comprising or underlying the assets. See
"Description of the Trust Funds."

     Prepayments on loans are also commonly measured relative to a prepayment
standard or model, such as the Constant Prepayment Rate prepayment model--also
known as CPR--or the Standard Prepayment Assumption prepayment model--also known
as SPA, each as described below. CPR represents a constant assumed rate of
prepayment each month relative to the then outstanding principal balance of a
pool of loans for the life of the loans. SPA represents an assumed rate of
prepayment each month relative to the then outstanding principal balance of a
pool of loans. A Prepayment Assumption of 100% of SPA assumes prepayment rates
of 0.2% per annum of the then outstanding principal balance of the loans in the
first month of the life of the loans and an additional 0.2% per annum in each
month thereafter until the thirtieth month. Beginning in the thirtieth month and
in each month thereafter during the life of the loans, 100% of SPA assumes a
constant prepayment rate of 6% per annum each month.

     Neither CPR nor SPA nor any other prepayment model or assumption purports
to be a historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of loans, including the mortgage
loans underlying or comprising the mortgage loans and mortgage-backed
securities.

     In general, if interest rates fall below the mortgage rates on fixed-rate
mortgage loans, the rate of prepayment would be expected to increase.

     The prospectus supplement with respect to each series of certificates will
contain tables, if applicable, setting forth the projected weighted average life
of each class of offered certificates of the series and the percentage of the
initial certificate balance of each class that would be outstanding on specified
distribution dates. The information in these tables will be based on the
assumptions stated in the prospectus supplement, including assumptions that
prepayments on the mortgage loans comprising or underlying the related assets
are made at rates corresponding to various percentages of CPR, SPA or at other
rates specified in the prospectus supplement. These tables and


                                       34



assumptions are intended to illustrate the sensitivity of weighted average life
of the certificates to various prepayment rates and will not be intended to
predict or to provide information that will enable investors to predict the
actual weighted average life of the certificates. It is unlikely that prepayment
of any mortgage loans comprising or underlying the mortgage loans and
mortgage-backed securities for any series will conform to any particular level
of CPR, SPA or any other rate specified in the related prospectus supplement.

OTHER FACTORS AFFECTING WEIGHTED AVERAGE LIFE

     Type of Mortgage Asset

     If so specified in the related prospectus supplement, a number of mortgage
loans may have balloon payments due at maturity. Because the ability of a
borrower to make a balloon payment typically will depend upon its ability either
to refinance the loan or to sell the related mortgaged property, there is a risk
that mortgage loans having balloon payments may default at maturity. In the case
of defaults, recovery of proceeds may be delayed by, among other things,
bankruptcy of the borrower or adverse conditions in the market where the
property is located. In order to minimize losses on defaulted mortgage loans,
the servicer may, to the extent and under the circumstances set forth in the
related prospectus supplement, be permitted to modify mortgage loans that are in
default or as to which a payment default is imminent. Any defaulted balloon
payment or modification that extends the maturity of a mortgage loan will tend
to extend the weighted average life of the certificates, thereby lengthening the
period of time elapsed from the date of issuance of a certificate until it is
retired.

     With respect to certain mortgage loans, including adjustable rate loans,
the mortgage rate at origination may be below the rate that would result if the
index and margin relating thereto were applied at origination. Under the
applicable underwriting standards, the borrower under each mortgage loan
generally will be qualified on the basis of the mortgage rate in effect at
origination. The repayment of any mortgage loan may thus be dependent on the
ability of the borrower to make larger level monthly payments following the
adjustment of the mortgage rate.

     In addition, certain mortgage loans may be subject to temporary buydown
plans pursuant to which the monthly payments made by the borrower during the
early years of the mortgage loan will be less than the scheduled monthly
payments thereon. The periodic increase in the amount paid by the borrower of a
buydown mortgage loan during or at the end of the applicable buydown period may
create a greater financial burden for the borrower, who might not have otherwise
qualified for a mortgage, and may accordingly increase the risk of default with
respect to the related mortgage loan.

     The mortgage rates on adjustable rate loans subject to negative
amortization generally adjust monthly and their amortization schedules adjust
less frequently. During a period of rising interest rates as well as immediately
after origination (initial mortgage rates are generally lower than the sum of
the applicable index at origination and the related margin over the index at
which interest accrues), the amount of interest accruing on the principal
balance of the mortgage loans may exceed the amount of the minimum scheduled
monthly payment thereon. As a result, a portion of the accrued interest on
negatively amortizing mortgage loans may be added to the principal balance
thereof and will bear interest at the applicable mortgage rate. The addition of
any Deferred Interest to the principal balance of any related class or classes
of certificates will lengthen the weighted average life thereof and may
adversely affect yield to holders thereof, depending upon the price at which
those certificates were purchased.

     In addition, with respect to an adjustable rate loan subject to negative
amortization, during a period of declining interest rates, it might be expected
that each minimum scheduled monthly payment on that mortgage loan would exceed
the amount of scheduled principal and accrued interest on the principal balance
of that mortgage loan. Since the excess will be applied to reduce the principal
balance of the related class or classes of certificates, the weighted average
life of those certificates will be reduced and may adversely affect yield to
holders thereof, depending upon the price at which those certificates were
purchased.

     Defaults

     The rate of defaults on the mortgage loans will also affect the rate and
timing of principal payments on the assets and thus the yield on the
certificates. In general, defaults on mortgage loans are expected to occur with
greater frequency in their early years. The rate of default on mortgage loans
which are refinance or limited documentation mortgage loans, and on mortgage
loans with high loan-to-value ratios, may be higher than for other types of
mortgage


                                       35



loans. Furthermore, the rate and timing of prepayments, defaults and
liquidations on the mortgage loans will be affected by the general economic
condition of the region of the country in which the related mortgaged properties
are located. The risk of delinquencies and loss is greater and prepayments are
less likely in regions where a weak or deteriorating economy exists, as may be
evidenced by, among other factors, increasing unemployment or falling property
values.

     Foreclosures

     The number of foreclosures and the principal amount of the mortgage loans
comprising or underlying the mortgage loans and mortgage-backed securities that
are foreclosed in relation to the number and principal amount of mortgage loans
that are repaid in accordance with their terms will affect the weighted average
life of the mortgage loans comprising or underlying the mortgage loans and
mortgage-backed securities and that of the related series of certificates.

     Refinancing

     At the request of a borrower, the servicer or a subservicer may allow the
refinancing of a mortgage loan in any trust fund by accepting prepayments on
that loan and permitting a new loan secured by a mortgage on the same property.
In the event of a refinancing, the new loan would not be included in the related
trust fund and, therefore, the refinancing would have the same effect as a
prepayment in full of the related mortgage loan. The master servicer or a
subservicer may, from time to time, implement programs designed to encourage
refinancing. These programs may include, without limitation, modifications of
existing loans, general or targeted solicitations, the offering of pre-approved
applications, reduced origination fees or closing costs, or other financial
incentives. In addition, subservicers may encourage the refinancing of mortgage
loans, including defaulted mortgage loans, that would permit creditworthy
borrowers to assume the outstanding indebtedness of those mortgage loans.

     Due-on-Sale Clauses

     Acceleration of mortgage payments as a result of transfers of underlying
mortgaged property is another factor affecting prepayment rates that may not be
reflected in the prepayment standards or models used in the relevant prospectus
supplement. A number of the mortgage loans comprising or underlying the assets
may include "due-on-sale" clauses that allow the holder of the mortgage loans to
demand payment in full of the remaining principal balance of the mortgage loans
upon sale, transfer or conveyance of the related mortgaged property. With
respect to any mortgage loans, unless otherwise provided in the related
prospectus supplement, the servicer will generally enforce any due-on-sale
clause to the extent it has knowledge of the conveyance or proposed conveyance
of the underlying mortgaged property and it is entitled to do so under
applicable law. However, the servicer will not take any action in relation to
the enforcement of any due-on-sale provision which would adversely affect or
jeopardize coverage under any applicable insurance policy. See "Legal Aspects of
Mortgage Loans--Due-on-Sale Clauses" and "Description of the
Agreements--Due-on-Sale Provisions."

                                  THE DEPOSITOR

     Morgan Stanley Capital I Inc., the depositor, is a direct wholly-owned
subsidiary of Morgan Stanley and was incorporated in the State of Delaware on
January 28, 1985. The principal executive offices of Morgan Stanley Capital I
Inc. are located at 1585 Broadway, 37th Floor, New York, New York 10036. Its
telephone number is (212) 761-4000.

     Morgan Stanley Capital I Inc. does not have, nor is it expected in the
future to have, any significant assets.


                                       36



                         DESCRIPTION OF THE CERTIFICATES

GENERAL

     The certificates of each series, including any class of certificates not
offered by this prospectus, will represent the entire beneficial ownership
interest in the trust fund created pursuant to the related Agreement. Each
series of certificates will consist of one or more classes of certificates that
may:

          o    provide for the accrual of interest thereon based on fixed,
               variable or adjustable rates;

          o    be senior or subordinate to one or more other classes of
               certificates in respect of distributions on the certificates;

          o    be entitled to principal distributions, with disproportionately
               low, nominal or no interest distributions;

          o    be entitled to interest distributions, with disproportionately
               low, nominal or no principal distributions;

          o    provide for distributions of accrued interest thereon commencing
               only following the occurrence of events, such as the retirement
               of one or more other classes of certificates of the series;

          o    provide for payments of principal sequentially, based on
               specified payment schedules, from only a portion of the assets in
               the trust fund or based on specified calculations, to the extent
               of available funds, in each case as described in the related
               prospectus supplement;

          o    provide for distributions based on a combination of two or more
               components thereof with one or more of the characteristics
               described in this paragraph including a stripped principal
               certificate component and a stripped interest certificate
               component; or

          o    do all or any combination of the above.

     If so specified in the related prospectus supplement, distributions on one
or more classes of a series of certificates may be limited to collections from a
designated portion of the mortgage loans in the related mortgage pool. Any of
the foregoing may be included in the certificates being offered to you.

     Each class of offered certificates of a series will be issued in minimum
denominations corresponding to the certificate balances or, in case of stripped
interest certificates, notional amounts or percentage interests specified in the
related prospectus supplement. The transfer of any offered certificates may be
registered and these certificates may be exchanged without the payment of any
service charge payable in connection with the registration of transfer or
exchange. However, Morgan Stanley Capital I Inc. or the trustee or any agent
thereof may require payment of a sum sufficient to cover any tax or other
governmental charge. One or more classes of certificates of a series may be
issued in definitive form or in book-entry form, as provided in the related
prospectus supplement. See "Risk Factors--Book-Entry Certificates May Experience
Decreased Liquidity and Payment Delay" and "Description of the
Certificates--Book-Entry Registration and Definitive Certificates." Definitive
certificates will be exchangeable for other certificates of the same class and
series of a like aggregate certificate balance, notional amount or percentage
interest but of different authorized denominations. See "Risk Factors--Lack of a
Secondary Market May Make it Difficult for You to Resell Your Certificates" and
"--The Trust Fund's Assets May be Insufficient to Pay Your Certificates in
Full."

CATEGORIES OF CLASSES OF CERTIFICATES

     The certificates of any series may be comprised of one or more classes.
Classes of certificates, in general, fall into different categories. The
following chart identifies and generally describes the more typical categories.
The prospectus supplement for a series of certificates may identify the classes
which comprise that series by reference to the following categories.


                                       37



CATEGORIES OF CLASSES                              DEFINITION
------------------------------   -----------------------------------------------
Principal Types

Accretion Directed............   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 Mortgage Assets or other
                                 assets of the trust fund 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 Certificates........   A class consisting of "components." The
                                 components of a class of component certificates
                                 may have different principal and interest
                                 payment characteristics but together constitute
                                 a single class. Each component of a class of
                                 component certificates may be identified as
                                 falling into one or more of the categories in
                                 this chart.

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
                                 of) (1) principal prepayments on the underlying
                                 Mortgage Assets that are allocated
                                 disproportionately to the senior certificates
                                 because of the shifting interest structure of
                                 the certificates in the trust and/or (2)
                                 scheduled principal payments on the underlying
                                 Mortgage Assets, as specified in the related
                                 prospectus supplement. During the lock-out
                                 period, the portion of the principal
                                 distributions on the underlying Mortgage Assets
                                 that the NAS class is locked out of will be
                                 distributed to the other classes of senior
                                 certificates.

Notional Amount Certificates..   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
                                 Mortgage Assets. These two rates are the
                                 endpoints for the "structuring range" for the
                                 planned principal class. The planned principal
                                 classes in any series of certificates 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 certificates
                                 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 Mortgage Assets. These two rates
                                 are the endpoints for the "structuring range"
                                 for the scheduled principal class.

Sequential Pay................   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


                                       38



                                 single class that receives principal payments
                                 before or after all other classes in the same
                                 series of certificates may be identified as a
                                 sequential pay class.

Strip.........................   A class that receives a constant proportion, or
                                 "strip," of the principal payments on the
                                 underlying Mortgage Assets or other assets of
                                 the trust fund.

Super Senior..................   A class that will not bear its proportionate
                                 share of realized losses (other than excess
                                 losses) as its share is directed to another
                                 class, referred to as the "support class" until
                                 the class certificate balance of the support
                                 class is reduced to zero.

Support Class.................   A class that absorbs the realized losses other
                                 than excess losses that would otherwise be
                                 allocated to a Super Senior class after the
                                 related classes of subordinated certificates
                                 are no longer outstanding.

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
                                 Mortgage 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
                                 Mortgage Assets or other assets of the trust
                                 fund 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


                                       39



                                 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

     The indices applicable to floating rate and inverse floating rate classes
will be LIBOR, COFI, the Treasury Index, the Prime Rate, in each case calculated
as described in this prospectus or any other index described in the related
prospectus supplement.

LIBOR

     On the date specified in the related prospectus supplement for any class of
certificates the interest rate of which is determined by reference to an index
designated as LIBOR, the calculation agent designated in the prospectus
supplement will determine LIBOR for the related interest accrual period. On that
determination date, the calculation agent will determine the quotations, as of
11:00 a.m., London time, offered by the principal London office of each of the
designated reference banks meeting the criteria set forth below, for making
one-month United States dollar deposits in the London Interbank market. The
calculation agent will determine those quotations by reference to the Reuters
Screen LIBO Page, as defined in the International Swap Dealers Association, Inc.
Code of Standard Wording, Assumptions and Provisions for Swaps, 1986 Edition, or
to the Telerate Screen Page 3750. In lieu of relying on the quotations for those
reference banks that appear at that time on the Reuters Screen LIBO Page or on
the Telerate Screen Page 3750, the calculation agent may request each of the
reference banks to provide offered quotations at that time.

     LIBOR will be established as follows:

          (1) 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%).

          (2) 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 rate is the rate per annum which the calculation agent
determines to be either (a) 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 quotations are, in the
opinion of the calculation agent, being so made, or (b) in the event that the
calculation agent can determine no 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.

          (3) 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 (2)
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 deemed to be the per annum rate specified as
such in the related prospectus supplement.

     Each reference bank shall be a leading bank engaged in transactions in
Eurodollar deposits in the international Eurocurrency market; shall not control,
be controlled by, or be under common control with the calculation agent; and
shall have an established place of business in London. If any reference bank
should be unwilling or unable to act or if appointment of any reference bank is
terminated, another leading bank meeting the criteria specified above will be
appointed.


                                       40



     The establishment of LIBOR on each LIBOR determination date by the
calculation agent and its calculation of the rate of interest for the applicable
classes for the related interest accrual period shall, in the absence of
manifest error, be final and binding.

COFI

     On the date specified in the related prospectus supplement for any class of
certificates the interest rate of which is determined by reference to an index
designated as COFI, the calculation agent designated in the prospectus
supplement will ascertain the Eleventh District Cost of Funds Index for the
related interest accrual period. 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 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, or 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:

          o    savings deposits,

          o    time deposits,

          o    FHLBSF advances,

          o    repurchase agreements, and

          o    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 with
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 prior to 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, since, 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. In addition, 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


                                       41



guarantee the announcement" of the index on an exact date. On the tenth day, or
any other day of the month specified in the related prospectus supplement, COFI
for each class of COFI certificates for the interest accrual period commencing
in that month shall be the most recently published Eleventh District Cost of
Funds Index, unless the most recently published index relates to a month prior
to the third preceding month. If the most recently published Eleventh District
Cost of Funds Index relates to a month prior to the third preceding month, COFI
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 Cost of Funds Index published by the OTS. 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 COFI
is based on the National Cost of Funds Index it will be based on the most
recently published index, unless the most recently published index, as of the
tenth or other designated day of the month in which an interest accrual period
commences, relates to a month prior to the fourth preceding month. In that case,
the index applicable to each class of COFI certificates, for that interest
accrual period and each succeeding interest accrual period will be based on
LIBOR, as determined by the calculation agent in accordance with the agreement
relating to the related series of certificates. 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, particularly if LIBOR is the alternative index,
could increase its volatility.

     The establishment of COFI by the calculation agent 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

     On the date specified in the related prospectus supplement for any class of
certificates the interest rate of which is determined by reference to an index
denominated as a Treasury Index, the calculation agent designated in the
prospectus supplement will ascertain the Treasury Index for Treasury securities
of the maturity and for the period, or, if applicable, date, specified in the
prospectus supplement. As described in the related prospectus supplement, the
Treasury Index for any period means the average of the yield for each business
day during the period specified in the related prospectus supplement, and for
any date means the yield for that date, expressed as a per annum percentage
rate, on

     (1) U.S. Treasury securities adjusted to the "constant maturity" specified
in that prospectus supplement or

     (2) if no "constant maturity" is so specified, U.S. Treasury securities
trading on the secondary market having the maturity specified in that 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
that week, then it will use the Statistical Release from the immediately
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. In the event that the Treasury Index is no longer
published, a new index based upon comparable data and methodology will be
designated in accordance with the agreement relating to the particular series of
certificates. 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

     On the date specified in the related prospectus supplement for any class of
certificates the interest rate of which is determined by reference to an index
denominated as the Prime Rate, the calculation agent designated in the
prospectus supplement will ascertain the Prime Rate for the related interest
accrual period. As described in the related prospectus supplement, 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, or if not so published, the
"Prime Rate" as published in a


                                       42



newspaper of general circulation selected by the calculation agent in its sole
discretion, on the related determination date. If a prime rate range is given,
then the average of the range will be used. In the event that the Prime Rate is
no longer published, a new index based upon comparable data and methodology will
be designated in accordance with the agreement relating to the particular series
of certificates. 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.

DISTRIBUTIONS

     Distributions on the certificates of each series will be made by or on
behalf of the trustee on each distribution date as specified in the related
prospectus supplement from the Available Distribution Amount for the series and
the distribution date. Except as otherwise specified in the related prospectus
supplement, distributions other than the final distribution will be made to the
persons in whose names the certificates are registered on the Record Date, and
the amount of each distribution will be determined as of the close of business
on the date specified in the related prospectus supplement. All distributions
with respect to each class of certificates on each distribution date will be
allocated pro rata among the outstanding certificates in the class or by random
selection, as described in the related prospectus supplement or otherwise
established by the related trustee. Payments will be made either:

          o    by wire transfer in immediately available funds to the account of
               a certificateholder at a bank or other entity having appropriate
               wire transfer facilities, if the certificateholder has so
               notified the trustee or other person required to make the
               payments no later than the date specified in the related
               prospectus supplement and, if so provided in the related
               prospectus supplement, holds certificates in the requisite amount
               specified in the related prospectus supplement, or

          o    by check mailed to the address of the person entitled thereto as
               it appears on the certificate register;

provided, however, that the final distribution in retirement of the certificates
whether definitive certificates or book-entry certificates, will be made only
upon presentation and surrender of the certificates at the location specified in
the notice to certificateholders of the final distribution.

AVAILABLE DISTRIBUTION AMOUNT

     All distributions on the certificates of each series on each distribution
date will be made from the Available Distribution Amount, in accordance with the
terms described in the related prospectus supplement.

     The entire Available Distribution Amount will be distributed among the
related certificates, including any certificates not offered hereby, on each
distribution date, and accordingly will be released from the trust fund and will
not be available for any future distributions.

DISTRIBUTIONS OF INTEREST ON THE CERTIFICATES

     Each class of certificates, other than classes of Stripped Principal
Certificates that have no pass-through rate, may have a different pass-through
rate, which will be a fixed, variable or adjustable rate at which interest will
accrue on the class or a component thereof. The related prospectus supplement
will specify the pass-through rate for each class or component or, in the case
of a variable or adjustable pass-through rate, the method for determining the
pass-through rate. If so specified in the related prospectus supplement,
interest on the certificates will be calculated on the basis of a 360-day year
consisting of twelve 30-day months.

     Distributions of interest in respect of the certificates of any class will
be made on each distribution date--other than any class of accrual certificates,
which will be entitled to distributions of accrued interest commencing only on
the distribution date, or under the circumstances specified in the related
prospectus supplement, and any class of Stripped Principal Certificates that are
not entitled to any distributions of interest--based on the accrued certificate
interest for the class and the distribution date, subject to the sufficiency of
the portion of the Available Distribution Amount allocable to the class on the
distribution date. Prior to the time interest is distributable on any class of
accrual certificates, the amount of accrued certificate interest otherwise
distributable on the class will be added to the certificate balance thereof on
each distribution date. Unless otherwise provided in the prospectus supplement,
accrued


                                       43



certificate interest on stripped interest certificates will be equal to interest
accrued for a specified period on the outstanding certificate balance of the
stripped interest certificates immediately prior to the distribution date, at
the applicable pass-through rate, reduced as described below. To the extent
specified in the prospectus supplement, accrued certificate interest on stripped
interest certificates will be equal to interest accrued for a specified period
on the outstanding notional amount of the stripped interest certificates
immediately prior to each distribution date, at the applicable pass-through
rate, reduced as described below in the next paragraph.

     The method of determining the notional amount for any class of stripped
interest certificates will be described in the related prospectus supplement.
Reference to notional amount is solely for convenience in certain calculations
and does not represent the right to receive any distributions of principal.
Unless otherwise provided in the related prospectus supplement, the accrued
certificate interest on a series of certificates will be reduced in the event of
prepayment interest shortfalls, which are shortfalls in collections of interest
for a full accrual period resulting from prepayments prior to the due date in
the accrual period on the mortgage loans comprising or underlying the mortgage
loans and mortgage-backed securities in the trust fund for the series. The
particular manner in which these shortfalls are to be allocated among some or
all of the classes of certificates of that series will be specified in the
related prospectus supplement. The related prospectus supplement will also
describe the extent to which the amount of accrued certificate interest that is
otherwise distributable on, or, in the case of accrual certificates, that may
otherwise be added to the certificate balance of, a class of offered
certificates may be reduced as a result of any other contingencies, including:

          o    delinquencies,

          o    losses, and

          o    Deferred Interest

on or in respect of the mortgage loans comprising or underlying the mortgage
loans and mortgage-backed securities in the related trust fund. To the extent
specified in the related prospectus supplement, any reduction in the amount of
accrued certificate interest otherwise distributable on a class of certificates
by reason of the allocation to the class of a portion of any Deferred Interest
on the mortgage loans comprising or underlying the mortgage loans and
mortgage-backed securities in the related trust fund will result in a
corresponding increase in the certificate balance of the class. See "Risk
Factors--The Rate of Prepayment on Mortgage Assets May Adversely Affect Average
Lives and Yields on Certificates" and "Yield Considerations."

DISTRIBUTIONS OF PRINCIPAL OF THE CERTIFICATES

     The certificates of each series, other than certain classes of stripped
interest certificates, will have a certificate balance. The certificate balance
will equal the maximum principal amount that the holder will be entitled to
receive out of future cash flow on the assets in the trust fund. The outstanding
certificate balance of a certificate will be reduced to the extent of
distributions of principal and, if and to the extent so provided in the related
prospectus supplement, by the amount of losses incurred in respect of the
related assets. The outstanding certificate balance may be increased in respect
of Deferred Interest on the related mortgage loans to the extent provided in the
related prospectus supplement. The outstanding certificate balance may be
increased, in the case of accrual certificates prior to the distribution date on
which distributions of interest are required to commence, by any related accrued
certificate interest. Unless otherwise provided in the related prospectus
supplement, the initial aggregate certificate balance of all classes of
certificates of a series will not be greater than the outstanding aggregate
principal balance of the related assets as of the applicable cut-off date. The
initial aggregate certificate balance of a series and each class thereof will be
specified in the related prospectus supplement. Unless otherwise provided in the
related prospectus supplement, distributions of principal will be made on each
distribution date to the class or classes of certificates entitled to the
distributions of principal in accordance with the provisions described in the
prospectus supplement until the certificate balance of that class has been
reduced to zero. Stripped Interest Certificates with no certificate balance are
not entitled to any distributions of principal.


                                       44



COMPONENTS

     To the extent specified in the related prospectus supplement, distribution
on a class of certificates may be based on a combination of two or more
different components as described under "--General" above. The descriptions set
forth under "--Distributions of Interest on the Certificates" and
"--Distributions of Principal of the Certificates" above also relate to
components of a class of certificates. In this case, references to certificate
balance and pass-through rate refer to the principal balance, if any, of any
component and the pass-through rate, if any, on any component, respectively.

DISTRIBUTIONS ON THE CERTIFICATES OF PREPAYMENT PREMIUMS

     If so provided in the related prospectus supplement, prepayment premiums
that are collected on the mortgage loans and mortgage-backed securities in the
related trust fund will be distributed on each distribution date to the class or
classes of certificates entitled thereto in accordance with the provisions
described in the prospectus supplement.

ALLOCATION OF LOSSES AND SHORTFALLS

     If so provided in the prospectus supplement for a series of certificates
consisting of one or more classes of subordinate certificates, on any
distribution date in respect of which losses or shortfalls in collections on the
mortgage loans and mortgage-backed securities have been incurred, the amount of
losses or shortfalls will be borne first by a class of subordinate certificates
in the priority and manner and subject to the limitations specified in the
prospectus supplement. See "Description of Credit Support" for a description of
the types of protection that may be included in a trust fund against losses and
shortfalls on mortgage loans and mortgage-backed securities comprising the trust
fund.

ADVANCES IN RESPECT OF DELINQUENCIES

     With respect to any series of certificates evidencing an interest in a
trust fund, unless otherwise provided in the related prospectus supplement, the
master servicer or another entity described in the prospectus supplement will be
required as part of its servicing responsibilities to advance on or before each
distribution date its own funds or funds held in the certificate account that
are not included in the Available Distribution Amount for the distribution date,
in an amount equal to the aggregate of payments of principal other than any
balloon payments, and interest, net of related servicing fees and retained
interest loans and mortgage-backed securities, that were due on the mortgage
loans in the trust fund during the related Due Period and were delinquent on the
related Determination Date. The advances will be made subject to the master
servicer's or another entity's good faith determination that the advances will
be reimbursable from Related Proceeds. In the case of a series of certificates
that includes one or more classes of subordinate certificates and if so provided
in the related prospectus supplement, the master servicer's or another entity's
advance obligation may be limited only to the portion of the delinquencies
necessary to make the required distributions on one or more classes of senior
certificates. The advance obligation may be subject to the master servicer's or
another entity's good faith determination that the advances will be reimbursable
not only from Related Proceeds but also from collections on other assets
otherwise distributable on one or more classes of subordinate certificates. See
"Description of Credit Support."

     Advances are intended to maintain a regular flow of scheduled interest and
principal payments to holders of the class or classes of certificates. Advances
do not guaranty or insure against losses. Unless otherwise provided in the
related prospectus supplement, advances of the master servicer's or another
entity's funds will be reimbursable only out of Related Proceeds and, if so
provided in the prospectus supplement, out of any amounts otherwise
distributable on one or more classes of subordinate certificates of the series.
However, advances will be reimbursable from amounts in the certificate account
prior to distributions being made on the certificates, to the extent that the
master servicer or another entity shall determine in good faith that the advance
is a nonrecoverable advance. If advances have been made by the master servicer
from excess funds in the certificate account, the master servicer is required to
replace the funds in the certificate account on any future distribution date to
the extent that funds in the certificate account on the distribution date are
less than payments required to be made to certificateholders on that date. If so
specified in the related prospectus supplement, the obligations of the master
servicer or another entity to make advances may be secured by a cash advance
reserve fund, a surety bond, a letter of credit or another form of limited
guaranty. If applicable, information regarding the characteristics of, and the
identity of any obligor on, any surety bond, will be set forth in the related
prospectus supplement.


                                       45



     If and to the extent so provided in the related prospectus supplement, the
master servicer or another entity will be entitled to receive interest at the
rate specified in the related prospectus supplement on its outstanding advances
and will be entitled to pay itself interest periodically from general
collections on the assets prior to any payment to certificateholders or as
otherwise provided in the related Agreement and described in the prospectus
supplement.

     The prospectus supplement for any series of certificates evidencing an
interest in a trust fund that includes mortgage-backed securities will describe
any corresponding advancing obligation of any person in connection with such
mortgage-backed securities.

REPORTS TO CERTIFICATEHOLDERS

     Unless otherwise provided in the prospectus supplement, with each
distribution to holders of any class of certificates of a series, the servicer
or the trustee, as provided in the related prospectus supplement, will forward
or cause to be forwarded to each holder, to Morgan Stanley Capital I Inc. and to
the other parties as may be specified in the related Agreement, a statement
setting forth, in each case to the extent applicable and available:

     (1) the amount of the distribution to holders of certificates of that class
applied to reduce the certificate balance thereof;

     (2) the amount of the distribution to holders of certificates of that class
allocable to accrued certificate interest;

     (3) the amount of the distribution allocable to prepayment premiums;

     (4) the amount of related servicing compensation received by a servicer
and, if payable directly out of the related trust fund, by any subservicer and
any other customary information as that servicer or trustee deems necessary or
desirable, or that a certificateholder reasonably requests, to enable
certificateholders to prepare their tax returns;

     (5) the aggregate amount of advances included in that distribution, and the
aggregate amount of unreimbursed advances at the close of business on that
distribution date;

     (6) the aggregate principal balance of the assets at the close of business
on that distribution date;

     (7) the number and aggregate principal balance of mortgage loans in respect
of which:

          o    one scheduled payment is delinquent;

          o    two scheduled payments are delinquent;

          o    three or more scheduled payments are delinquent; and

          o    foreclosure proceedings have been commenced;

     (8) with respect to any mortgage loan liquidated during the related Due
Period:

          o    the portion of liquidation proceeds payable or reimbursable to
               the servicer or any other entity in respect of such mortgage
               loan; and

          o    the amount of any loss to certificateholders;

     (9) with respect to each REO property relating to a mortgage loan and
included in the trust fund as of the end of the related Due Period:

          o    the loan number of the related mortgage loan; and

          o    the date of acquisition;


                                       46



     (10) with respect to each REO property relating to a mortgage loan and
included in the trust fund as of the end of the related Due Period:

          o    the book value;

          o    the principal balance of the related mortgage loan immediately
               following the distribution date, calculated as if the mortgage
               loan were still outstanding taking into account certain limited
               modifications to the terms thereof specified in the Agreement;

          o    the aggregate amount of unreimbursed servicing expenses and
               unreimbursed advances in respect thereof; and

          o    if applicable, the aggregate amount of interest accrued and
               payable on related servicing expenses and related advances;

     (11) with respect to any REO property sold during the related Due Period:

          o    the aggregate amount of sale proceeds;

          o    the portion of sales proceeds payable or reimbursable to the
               servicer in respect of the REO property or the related mortgage
               loan; and

          o    the amount of any loss to certificateholders in respect of the
               related mortgage loan;

     (12) the aggregate certificate balance or notional amount, as the case may
be, of each class of certificates including any class of certificates not
offered hereby at the close of business on the distribution date, separately
identifying any reduction in the certificate balance due to the allocation of
any loss and increase in the certificate balance of a class of accrual
certificates in the event that accrued certificate interest has been added to
the balance;

     (13) the aggregate amount of principal prepayments made during the related
Due Period;

     (14) the amount deposited in the reserve fund, if any, on the distribution
date;

     (15) the amount remaining in the reserve fund, if any, as of the close of
business on the distribution date;

     (16) the aggregate unpaid accrued certificate interest, if any, on each
class of certificates at the close of business on the distribution date;

     (17) in the case of certificates with a variable pass-through rate, the
pass-through rate applicable to the distribution date, and, if available, the
immediately succeeding distribution date, as calculated in accordance with the
method specified in the related prospectus supplement;

     (18) in the case of certificates with an adjustable pass-through rate, for
statements to be distributed in any month in which an adjustment date occurs,
the adjustable pass-through rate applicable to the distribution date and the
immediately succeeding distribution date as calculated in accordance with the
method specified in the related prospectus supplement;

     (19) as to any series which includes credit support, the amount of coverage
of each instrument of credit support included therein as of the close of
business on the distribution date; and

     (20) the aggregate amount of payments by the borrowers of:

          o    default interest;

          o    late charges; and


                                       47



          o    assumption and modification fees collected during the related Due
               Period.

     In the case of information furnished pursuant to subclauses (1)-(4) above,
the amounts shall be expressed as a dollar amount per minimum denomination of
certificates or for another specified portion thereof. In addition, in the case
of information furnished pursuant to subclauses (1), (2), (12), (16) and (17)
above, the amounts shall also be provided with respect to each component, if
any, of a class of certificates. The servicer or the trustee, as specified in
the related prospectus supplement, will forward or cause to be forwarded to each
holder, to Morgan Stanley Capital I Inc. and to any other parties as may be
specified in the Agreement, a copy of any statements or reports received by the
servicer or the trustee, as applicable, with respect to any mortgage-backed
securities. The prospectus supplement for each series of offered certificates
will describe any additional information to be included in reports to the
holders of certificates.

     Within a reasonable period of time after the end of each calendar year, the
servicer or the trustee, as provided in the related prospectus supplement, shall
furnish to each person who at any time during the calendar year was a holder of
a certificate a statement containing the information set forth in subclauses
(1)-(4) above, aggregated for the calendar year or the applicable portion of the
calendar year during which the person was a certificateholder. This obligation
of the servicer or the trustee shall be deemed to have been satisfied to the
extent that substantially comparable information shall be provided by the
servicer or the trustee pursuant to any requirements of the Internal Revenue
Code as are from time to time in force. See "Description of the
Certificates--Book-Entry Registration and Definitive Certificates."

TERMINATION

     The obligations created by the related Agreement for each series of
certificates will terminate upon the payment to certificateholders of that
series of all amounts held in the certificate account or by the servicer, if
any, or the trustee and required to be paid to them pursuant to the Agreement
following the earlier of:

          o    the final payment or other liquidation of the last asset subject
               thereto or the disposition of all property acquired upon
               foreclosure of any mortgage loan subject thereto; and

          o    the purchase of all of the assets of the trust fund by the party
               entitled to effect the termination, under the circumstances and
               in the manner set forth in the related prospectus supplement.

     In no event, however, will the trust fund created by the Agreement continue
beyond the date specified in the related prospectus supplement. Written notice
of termination of the Agreement will be given to each certificateholder, and the
final distribution will be made only upon presentation and surrender of the
certificates at the location to be specified in the notice of termination.

     If so specified in the related prospectus supplement, a series of
certificates may be subject to optional early termination through the repurchase
of the assets in the related trust fund by the party specified in the related
prospectus supplement, under the circumstances and in the manner set forth in
the related prospectus supplement. If so provided in the related prospectus
supplement, upon the reduction of the certificate balance of a specified class
or classes of certificates by a specified percentage or amount, the party
specified in the related prospectus supplement will solicit bids for the
purchase of all assets of the trust fund, or of a sufficient portion of the
assets to retire the class or classes or purchase the class or classes at a
price set forth in the related prospectus supplement, in each case, under the
circumstances and in the manner set forth in the related prospectus supplement.

BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES

     As described in the related prospectus supplement, if not issued in fully
registered form, each class of certificates will be registered as book-entry
certificates. Persons acquiring beneficial ownership interests in the
certificates--the certificate owners--will hold their certificates through The
Depository Trust Company in the United States, or, if provided in the related
prospectus supplement, Clearstream Banking (formerly Cedelbank) or Euroclear
Bank S.A./N.V., as operator of the Euroclear System in Europe, or indirectly
through organizations that are Participants in these systems. The Depository
Trust Company is referred to as "DTC." Clearstream Banking, societe anonyme is
referred to as "Clearstream." The Euroclear System is referred to as
"Euroclear."


                                       48



     The book-entry certificates will be issued in one or more certificates
which equal the aggregate principal balance of the certificates and will
initially be registered in the name of Cede & Co., the nominee of DTC or one of
the relevant depositories. If the aggregate principal amount of any book-entry
certificate exceeds $500 million, one certificate will be issued with respect to
each $500 million of principal amount and an additional certificate will be
issued with respect to any remaining principal amount. Clearstream and Euroclear
will hold omnibus positions on behalf of their participants through customers'
securities accounts in Clearstream's and Euroclear's names on the books of their
respective depositaries which in turn will hold those positions in customers'
securities accounts in the depositaries' names on the books of DTC. Citibank,
N.A., will act as depositary for Clearstream and The Chase Manhattan Bank will
act as depositary for Euroclear. Except as described in this prospectus, no
person acquiring a book-entry certificate will be entitled to receive a physical
certificate representing that certificate. Unless and until definitive
certificates are issued, it is anticipated that the only certificateholders of
the certificates will be Cede & Co., as nominee of DTC or one of the relevant
depositories. Certificate owners are only permitted to exercise their rights
indirectly through participants and DTC.

     Purchases of book-entry certificates under the DTC system must be made by
or through Participants, which will receive a credit for the book-entry
certificates on DTC's records. The ownership interest of each certificateholder
is in turn to be recorded on the Participants' or Securities Intermediaries'
records. The Securities Intermediary's ownership of a book-entry certificate
will be recorded on the records of DTC or of a participating firm that acts as
agent for the Securities Intermediary, whose interest will in turn be recorded
on the records of DTC, if the beneficial owner's Securities Intermediary is not
a Participant and on the records of Clearstream or Euroclear, as appropriate.
certificateholders will not receive written confirmation from DTC of their
purchase, but certificateholders are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the Participant or indirect participant through which the
certificateholder entered into the transaction. Transfers of ownership interests
in the book-entry certificates are to be accomplished by entries made on the
books of Participants and indirect participants acting on behalf of
certificateholders. certificateholders will not receive certificates
representing their ownership interests in the book-entry certificates, except in
the event that use of the book-entry system for the book-entry certificates is
discontinued.

     To facilitate subsequent transfers, all book-entry certificates deposited
by Participants with DTC are registered in the name of DTC's partnership
nominee, Cede & Co., or such other name as may be requested by an authorized
representative of DTC. The deposit of book-entry certificates with DTC and their
registration in the name of Cede & Co. or such other nominee do not effect any
change in beneficial ownership. DTC has no knowledge of the actual
certificateholders of the book-entry certificates; DTC's records reflect only
the identity of the Participants to whose accounts such book-entry certificates
are credited, which may or may not be the certificateholders. The Participants
and indirect participants will remain responsible for keeping account of their
holdings on behalf of their customers.

     Conveyance of notices and other communications by DTC to Participants, by
Participants to indirect participants, and by Participants and indirect
participants to certificateholders will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.

     Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or
vote with respect to the book-entry certificates. Under its usual procedures,
DTC mails an omnibus proxy to the issuer as soon as possible after the record
date. The omnibus proxy assigns Cede & Co.'s consenting or voting rights to
those Participants to whose accounts the book-entry certificates are credited on
the record date (identified in a listing attached to the omnibus proxy).

     Distributions on the book-entry certificates will be made to Cede & Co., or
such other nominee as may be requested by an authorized representative of DTC.
DTC's practice is to credit Participants' accounts, upon DTC's receipt of funds
and corresponding detail information from the issuer or agent on the payable
date in accordance with their respective holdings shown on DTC's records.
Payments by Participants to certificateholders will be governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such Participant and not of DTC, agent, or issuer,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of distributions to Cede & Co. (or such other nominee as
may be requested by an authorized representative of DTC) is the responsibility
of issuer or agent, disbursement of such payments to Participants shall be the
responsibility of DTC, and disbursement of such payments to the
certificateholders shall be the responsibility of Participants and indirect
participants.


                                       49



     Because of time zone differences, credits of certificates received in
Clearstream 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. Credits or any transactions in
certificates settled during the processing will be reported to the relevant
Euroclear or Clearstream Participants on that business day. Cash received in
Clearstream or Euroclear as a result of sales of certificates by or through a
Clearstream Participant or Euroclear Participant to a DTC participant will be
received with value on the DTC settlement date but will be available in the
relevant Clearstream or Euroclear cash account only as of the business day
following settlement in DTC.

     Transfers between participants will occur in accordance with the DTC rules.
Transfers between Clearstream 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
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, each of which is a participating
member of DTC. However, such cross-market transactions will require delivery of
instructions to the relevant European international clearing system by the
counterparty in that system in accordance with its rules and procedures and
within its established deadlines. 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 certificates in DTC, and
making or receiving payment in accordance with normal procedures for same day
funds settlement applicable to DTC. Clearstream Participants and Euroclear
Participants may not deliver instructions directly to the relevant depositaries
for Clearstream or Euroclear.

     DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its Participants deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Participants include
securities brokers and dealers, banks, trust companies, clearing corporations,
and certain other organizations. DTC is owned by a number of its Participants
and Members of the National Securities Clearing Corporation, Government
Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets
Clearing Corporation, as well as by the New York Stock Exchange, Inc., the
American Stock Exchange LLC, and the National Association of Securities Dealers,
Inc. Access to the DTC system is also available to others such as securities
brokers and dealers, banks, and trust companies that clear through or maintain a
custodial relationship with a Direct Participant, either directly or indirectly.
The rules applicable to DTC and its Participants and indirect participants are
on file with the Securities and Exchange Commission.

     Clearstream is a duly licensed bank organized as a "societe anonyme",
limited company, under the laws of Luxembourg. Clearstream holds securities for
its Participant organizations and facilitates the clearance and settlement of
securities transactions between Clearstream Participants through electronic
book-entry changes in accounts of Clearstream Participants, thus eliminating the
need for physical movement of certificates. Transactions may be settled in
Clearstream in any of 37 currencies, including United States dollars.
Clearstream provides to its Clearstream Participants, among other things,
services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing.
Clearstream interfaces with domestic markets in several countries. As a licensed
bank, Clearstream is regulated by the Luxembourg Monetary Institute. Clearstream
Participants are recognized financial institutions around the world, including
underwriters, securities brokers and dealers, banks, trust companies, clearing
corporations and other organizations. Indirect access to Clearstream is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Clearstream
participant, either directly or indirectly.

     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 movement of certificates and any risk from lack of
simultaneous transfers of securities and cash. Transactions may 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


                                       50



generally similar to the arrangements for cross-market transfers with DTC
described above. Euroclear is operated by the Brussels.

     Belgium office of Euroclear Bank, as Euroclear Operator, under contract
with Euroclear Clearance Systems S.C., a Belgian cooperative corporation. All
operations are conducted by Euroclear Bank, and all Euroclear securities
clearance accounts and Euroclear cash accounts are accounts with the Euroclear
operator, not the Belgian cooperative. The Belgian cooperative establishes
policy for Euroclear on behalf of Euroclear participants. Euroclear participants
include banks, 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 holds securities and book-entry interests in
securities for participating organizations and facilitates the clearance and
settlement of securities transactions between Euroclear Participants, and
between Euroclear Participants and Participants of certain other securities
intermediaries through electronic book-entry changes in accounts of such
Participants or other securities intermediaries. Non-Participants of Euroclear
may hold and transfer book-entry interests in the offered certificates through
accounts with a direct Participant of Euroclear or any other securities
intermediary that holds a book-entry interest in the offered certificates
through one or more securities intermediaries standing between such other
securities intermediary and the Euroclear Operator.

     Securities clearance accounts and cash accounts for Euroclear participants
with Euroclear Bank are governed by the Terms and Conditions Governing Use of
Euroclear and the related Operating Procedures of the Euroclear system and
applicable Belgian law. 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 certificates
may experience some delay in their receipt of payments, since payments will be
forwarded by the trustee to Cede & Co., as nominee of DTC. Distributions with
respect to certificates held through Clearstream or Euroclear will be credited
to the cash accounts of Clearstream participants or Euroclear participants in
accordance with the relevant system's rules and procedures, to the extent
received by the relevant depositary. Distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
See "Material Federal Income Tax Consequences--Tax Treatment of Foreign
Investors" and "--Tax Consequences to Holders of the Notes--Backup Withholding."
Because DTC can only act on behalf of Securities Intermediaries, the ability of
a beneficial owner to pledge book-entry certificates to persons or entities that
do not participate in the depository system, may be limited due to the lack of
physical certificates for book-entry certificates.

     Monthly and annual reports on the trust fund will be provided to Cede &
Co., as nominee of DTC, and may be made available by Cede & Co. to beneficial
owners upon request, in accordance with the rules, regulations and procedures
creating and affecting the depository, and to the Securities Intermediaries to
whose DTC accounts the book-entry certificates of those beneficial owners are
credited.

     DTC has advised the depositor 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 applicable agreement only at
the direction of one or more Securities Intermediaries to whose DTC accounts the
book-entry certificates are credited, to the extent that actions are taken on
behalf of Securities Intermediaries whose holdings include those book-entry
certificates. Clearstream or the Euroclear operator, as the case may be, will
take any other action permitted to be taken by a certificateholder under the
agreement on behalf of a Clearstream participant or Euroclear participant only
in accordance with its and DTC's relevant rules and procedures. DTC may take
actions, at the direction of the related participants, with respect to some
certificates which conflict with actions taken with respect to other
certificates.

     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 that event and the availability through DTC of
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 then will
recognize the holders of the definitive certificates as certificateholders under
the applicable agreement.


                                       51



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

     None of the master servicer, the depositor or the trustee will have any
responsibility for any aspect of the records relating to or payments made on
account of beneficial ownership interests of the book-entry certificates held by
Cede & Co., as nominee of DTC, or for maintaining, supervising or reviewing any
records relating to the beneficial ownership interests.


                                       52



                          DESCRIPTION OF THE AGREEMENTS

     The certificates will be offered pursuant to a pooling and servicing
agreement or a trust agreement.

          o    A pooling and servicing agreement will be used where the trust
               fund includes mortgage loans. The parties to a pooling and
               servicing agreement will be Morgan Stanley Capital I Inc., a
               trustee and a master servicer appointed as of the date of the
               pooling and servicing agreement. If a master servicer is not
               appointed, a servicer, with, generally, the same obligations as
               described in this prospectus with respect to the master servicer,
               unless otherwise specified in the prospectus supplement, will be
               appointed. This servicer will service all or a significant number
               of mortgage loans directly without a subservicer. References in
               this prospectus to master servicer and its rights and
               obligations, to the extent set forth in the related prospectus
               supplement, shall be deemed to also be references to any servicer
               servicing mortgage loans directly.

          o    A trust agreement will be used where the trust fund does not
               include mortgage loans. The parties to a trust agreement will be
               Morgan Stanley Capital I Inc. and a trustee. A manager or
               administrator may be appointed pursuant to the trust agreement
               for any trust fund to administer the trust fund.

     The provisions of each Agreement will vary depending upon the nature of the
certificates to be issued thereunder and the nature of the related trust fund. A
form of a pooling and servicing agreement has been filed as an exhibit to the
registration statement of which this prospectus is a part. Any trust agreement
will generally conform to the form of pooling and servicing agreement filed
herewith, but will not contain provisions with respect to the servicing and
maintenance of mortgage loans. The following summaries describe some of the
provisions that may appear in each Agreement. The prospectus supplement for a
series of certificates will describe any provision of the Agreement relating to
a series that materially differs from the description thereof contained in this
prospectus. The summaries do not purport to be complete and are subject to, and
are qualified in their entirety by reference to, all of the provisions of the
Agreement for each trust fund and the description of the provisions in the
related prospectus supplement. Morgan Stanley Capital I Inc. will provide a copy
of the Agreement, without exhibits, relating to any series of certificates
without charge upon written request of a holder of a certificate of a series
addressed to Morgan Stanley Capital I Inc., c/o Morgan Stanley & Co.
Incorporated, 1585 Broadway, 37th Floor, New York, New York 10036. Attention:
Mortgage Securities.

ASSIGNMENT OF ASSETS; REPURCHASES

     At the time of issuance of any series of certificates, Morgan Stanley
Capital I Inc. will assign or cause to be assigned to the designated trustee the
assets to be included in the related trust fund, together with all principal and
interest to be received on or with respect to the assets after the cut-off date,
other than principal and interest due on or before the cut-off date and other
than any retained interest. The trustee will, concurrently with the assignment,
deliver the certificates to Morgan Stanley Capital I Inc. in exchange for the
assets and the other assets comprising the trust fund for the series. Each
mortgage loan and mortgaged-backed security will be identified in a schedule
appearing as an exhibit to the related Agreement. Unless otherwise provided in
the related prospectus supplement, the schedule will include detailed
information:

          o    in respect of each mortgage loan included in the related trust
               fund, including without limitation, the address of the related
               mortgaged property and type of the property, the mortgage rate
               and, if applicable, the applicable index, margin, adjustment date
               and any rate cap information, the original and remaining term to
               maturity, the original and outstanding principal balance and
               balloon payment, if any, the Value and loan-to-value ratio as of
               the date indicated and payment and prepayment provisions, if
               applicable; and

          o    in respect of each mortgage-backed security included in the
               related trust fund, including without limitation, the related
               issuer, servicer and trustee, the pass-through or bond rate or
               formula for determining the rate, the issue date and original and
               remaining term to maturity, if applicable, the original and
               outstanding principal amount and payment provisions, if
               applicable.


                                       53



     With respect to each mortgage loan, Morgan Stanley Capital I Inc. will
deliver or cause to be delivered to the trustee or to the custodian, loan
documents, which to the extent specified in the related prospectus supplement
will include:

          o    the original mortgage note endorsed, without recourse, in blank
               or to the order of the trustee,

          o    the original mortgage or a certified copy with evidence of
               recording, and

          o    an assignment of the mortgage to the trustee in recordable form.

Notwithstanding the foregoing, a trust fund may include mortgage loans where the
original mortgage note is not delivered to the trustee if Morgan Stanley Capital
I Inc. delivers to the trustee or the custodian a copy or a duplicate original
of the mortgage note, together with an affidavit certifying that the original
thereof has been lost or destroyed. With respect to these mortgage loans, the
trustee or its nominee may not be able to enforce the mortgage note against the
related borrower. To the extent specified in the related prospectus supplement,
the asset seller will be required to agree to repurchase, or substitute for,
this type of mortgage loan that is subsequently in default if the enforcement
thereof or of the related mortgage is materially adversely affected by the
absence of the original mortgage note.

     Unless otherwise provided in the related prospectus supplement, the related
Agreement will require Morgan Stanley Capital I Inc. or another party specified
in the related prospectus supplement to promptly cause each assignment of
mortgage to be recorded in the appropriate public office for real property
records. However, recordation of the assignment of mortgage is not required in
the State of California or in other states where, in the opinion of counsel
acceptable to the trustee, recording is not required to protect the trustee's
interest in the related mortgage loan against the claim of any subsequent
transferee or any successor to or creditor of Morgan Stanley Capital I Inc., the
master servicer, the relevant asset seller or any other prior holder of the
mortgage loan.

     The trustee or a custodian will review the mortgage loan documents within a
specified period of days after receipt thereof, and the trustee or a custodian
will hold the documents in trust for the benefit of the certificateholders.
Unless otherwise specified in the related prospectus supplement, if any of these
documents are found to be missing or defective in any material respect, the
trustee or custodian shall immediately notify the master servicer and Morgan
Stanley Capital I Inc., and the master servicer shall immediately notify the
relevant asset seller. If the asset seller cannot cure the omission or defect
within a specified number of days after receipt of notice, then unless otherwise
specified in the related prospectus supplement, the asset seller will be
obligated, within a specified number of days of receipt of notice, to repurchase
the related mortgage loan from the trustee at the Purchase Price or substitute
for the mortgage loan. There can be no assurance that an asset seller will
fulfill this repurchase or substitution obligation, and neither the master
servicer nor Morgan Stanley Capital I Inc. will be obligated to repurchase or
substitute the mortgage loan if the asset seller defaults on its obligation. To
the extent specified in the related prospectus supplement, this repurchase or
substitution obligation constitutes the sole remedy available to the
certificateholders or the trustee for omission of, or a material defect in, a
constituent document. To the extent specified in the related prospectus
supplement, in lieu of curing any omission or defect in the asset or
repurchasing or substituting for the asset, the asset seller may agree to cover
any losses suffered by the trust fund as a result of this type of breach or
defect.

     With respect to each government security or mortgage-backed security in
certificated form, Morgan Stanley Capital I Inc. will deliver or cause to be
delivered to the trustee or the custodian the original certificate or other
definitive evidence of the government security or mortgage-backed security, as
applicable, together with bond power or other instruments, certifications or
documents required to transfer fully the government security or mortgage-backed
security, as applicable, to the trustee for the benefit of the
certificateholders. With respect to each government security or mortgage-backed
security in uncertificated or book-entry form or held through a "clearing
corporation" within the meaning of the Uniform Commercial Code, Morgan Stanley
Capital I Inc. and the trustee will cause the government security or
mortgage-backed security to be registered directly or on the books of the
clearing corporation or of a financial intermediary in the name of the trustee
for the benefit of the certificateholders. Unless otherwise provided in the
related prospectus supplement, the related Agreement will require that either
Morgan Stanley Capital I Inc. or the trustee promptly cause any mortgage-backed
securities and government securities in certificated form not registered in the
name of the trustee to be re-registered, with the applicable persons, in the
name of the trustee.


                                       54



REPRESENTATIONS AND WARRANTIES; REPURCHASES

     Unless otherwise provided in the related prospectus supplement, Morgan
Stanley Capital I Inc. will, with respect to each mortgage loan, make or assign
certain representations and warranties, as of a specified date covering, by way
of example, the following types of matters:

          o    the accuracy of the information set forth for the mortgage loan
               on the schedule of assets appearing as an exhibit to the related
               Agreement;

          o    the existence of title insurance insuring the lien priority of
               the mortgage loan;

          o    the authority of the warrantying party to sell the mortgage loan;

          o    the payment status of the mortgage loan and the status of
               payments of taxes, assessments and other charges affecting the
               related mortgaged property;

          o    the existence of customary provisions in the related mortgage
               note and mortgage to permit realization against the mortgaged
               property of the benefit of the security of the mortgage; and

          o    the existence of hazard and extended perils insurance coverage on
               the mortgaged property.

     Any warrantying party, if other than Morgan Stanley Capital I Inc., shall
be an asset seller or an affiliate thereof or another person acceptable to
Morgan Stanley Capital I Inc. and shall be identified in the related prospectus
supplement.

     Representations and warranties made in respect of a mortgage loan may have
been made as of a date prior to the applicable cut-off date. A substantial
period of time may have elapsed between the date on which the representations
are made and the date of initial issuance of the related series of certificates
evidencing an interest in the mortgage loan. Unless otherwise specified in the
related prospectus supplement, in the event of a breach of any representation or
warranty, the warrantying party will be obligated to reimburse the trust fund
for losses caused by the breach or either cure the breach or repurchase or
replace the affected mortgage loan as described in the next paragraph. Since the
representations and warranties may not address events that may occur following
the date as of which they were made, the warrantying party will have a
reimbursement, cure, repurchase or substitution obligation in connection with a
breach of such a representation and warranty only if the relevant event that
causes such breach occurs prior to the date on which they were made. The
warrantying party would have no obligations if the relevant event that causes
the breach occurs after that date.

     Unless otherwise provided in the related prospectus supplement, each
Agreement will provide that the master servicer or trustee or both, will be
required to notify promptly the relevant warrantying party of any breach of any
representation or warranty made by it in respect of a mortgage loan that
materially and adversely affects the value of the mortgage loan or the interests
in the mortgage loan of the certificateholders. If the warrantying party cannot
cure the breach within a specified period following the date on which the party
was notified of the breach, then:

          o    the warrantying party will be obligated to repurchase the
               mortgage loan from the trustee within a specified period from the
               date on which the warrantying party was notified of the breach,
               at the Purchase Price; or

          o    if so provided in the prospectus supplement for a series, the
               warrantying party will have the option, within a specified period
               after initial issuance of such series of certificates, to cause
               the mortgage loan to be removed from the trust fund and
               substitute in its place one or more other mortgage loans, in
               accordance with the standards described in the related prospectus
               supplement; or

          o    if so provided in the prospectus supplement for a series, the
               warrantying party will have the option to reimburse the trust
               fund or the certificateholders for any losses caused by the
               breach.


                                       55



     Unless otherwise provided in the related prospectus supplement, this
reimbursement, repurchase or substitution obligation will constitute the sole
remedy available to holders of certificates or the trustee for a breach of
representation by a warrantying party.

     Neither Morgan Stanley Capital I Inc. except to the extent that it is the
warrantying party, nor the master servicer will be obligated to purchase or
substitute for a mortgage loan if a warrantying party defaults on its obligation
to do so, and no assurance can be given that warrantying parties will carry out
their obligations with respect to mortgage loans.

     Unless otherwise provided in the related prospectus supplement the
warrantying party will, with respect to a trust fund that includes government
securities or mortgage-backed securities, make or assign certain representations
or warranties, as of a specified date, with respect to the government securities
or mortgage-backed securities, covering:

          o    the accuracy of the information set forth therefor on the
               schedule of assets appearing as an exhibit to the related
               Agreement; and

          o    the authority of the warrantying party to sell the assets.

     The related prospectus supplement will describe the remedies for a breach
thereof.

     A master servicer will make certain representations and warranties
regarding its authority to enter into, and its ability to perform its
obligations under, the related Agreement. A breach of any representation of the
master servicer which materially and adversely affects the interests of the
certificateholders and which continues unremedied for thirty days after the
giving of written notice of the breach to the master servicer by the trustee or
Morgan Stanley Capital I Inc., or to the master servicer, Morgan Stanley Capital
I Inc. and the trustee by the holders of certificates evidencing not less than
25% of the voting rights unless otherwise provided in the related prospectus
supplement, will constitute an Event of Default under the Agreement. See
"--Events of Default" and "--Rights Upon Event of Default" below.

CERTIFICATE ACCOUNT AND OTHER COLLECTION ACCOUNTS

     General

     The master servicer or the trustee or both will, as to each trust fund,
establish and maintain or cause to be established and maintained the certificate
account, which must be either an account or accounts:

          o    the deposits in which are insured by the Bank Insurance Fund or
               the Savings Association Insurance Fund of the Federal Deposit
               Insurance Corporation, to the limits established by the Federal
               Deposit Insurance Corporation, and the uninsured deposits in
               which are otherwise secured such that the certificateholders have
               a claim with respect to the funds in the certificate 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 institution with which the
               certificate account is maintained; or

          o    otherwise maintained with a bank or trust company, and in a
               manner, satisfactory to the rating agency or agencies rating any
               class of certificates of the series.

The collateral eligible to secure amounts in the certificate account is limited
to Permitted Investments. A certificate account may be maintained as an interest
bearing or a non-interest bearing account and the funds held in the account may
be invested pending each succeeding distribution date in short-term Permitted
Investments. Unless otherwise provided in the related prospectus supplement, any
interest or other income earned on funds in the certificate account will be paid
to a master servicer or its designee as additional servicing compensation. The
certificate account may be maintained with an institution that is an affiliate
of the master servicer, if applicable, provided that the institution meets the
standards imposed by the rating agency or agencies. If permitted by the rating
agency or agencies and so specified in the related prospectus supplement, a
certificate account may contain funds relating to more than one series of
mortgage pass-through certificates and may contain other funds respecting
payments on mortgage loans belonging to the master servicer or serviced or
master serviced by it on behalf of others.


                                       56



     Deposits

     A master servicer or the trustee will deposit or cause to be deposited in
the certificate account for one or more trust funds on a daily basis, unless
otherwise provided in the related Agreement, the following payments and
collections received, or advances made, by the master servicer or the trustee or
on its behalf subsequent to the cut-off date, other than payments due on or
before the cut-off date, and exclusive of any amounts representing a retained
interest:

     (1) all payments on account of principal, including principal prepayments,
on the assets;

     (2) all payments on account of interest on the assets, including any
default interest collected, in each case net of any portion thereof retained by
a master servicer or a subservicer as its servicing compensation and net of any
retained interest;

     (3) all proceeds of the hazard insurance policies to be maintained in
respect of each mortgaged property securing a mortgage loan in the trust fund,
to the extent the proceeds are not applied to the restoration of the property or
released to the borrower in accordance with the normal servicing procedures of a
master servicer or the related subservicer, subject to the terms and conditions
of the related mortgage and mortgage note, insurance proceeds and all
liquidation proceeds, together with the net proceeds on a monthly basis with
respect to any mortgaged properties acquired for the benefit of
certificateholders by foreclosure or by deed in lieu of foreclosure or
otherwise;

     (4) any amounts paid under any instrument or drawn from any fund that
constitutes credit support for the related series of certificates as described
under "Description of Credit Support";

     (5) any advances made as described under "Description of the
Certificates--Advances in Respect of Delinquencies";

     (6) any amounts paid under any cash flow agreement, as described under
"Description of the Trust Funds--Cash Flow Agreements";

     (7) all proceeds of any asset or, with respect to a mortgage loan, property
acquired in respect thereof purchased by Morgan Stanley Capital I Inc., any
asset seller or any other specified person as described above under
"--Assignment of Assets; Repurchases" and "--Representations and Warranties;
Repurchases," all proceeds of any defaulted mortgage loan purchased as described
under "--Realization Upon Defaulted Mortgage loans," and all proceeds of any
asset purchased as described above under "Description of the
Certificates--Termination";

     (8) any amounts paid by a master servicer to cover certain interest
shortfalls arising out of the prepayment of mortgage loans in the trust fund as
described under "Description of the Agreements--Retained Interest; Servicing
Compensation and Payment of Expenses";

     (9) to the extent that any item does not constitute additional servicing
compensation to a master servicer, any payments on account of modification or
assumption fees, late payment charges or prepayment premiums on the mortgage
loans and mortgage-backed securities;

     (10) all payments required to be deposited in the certificate account with
respect to any deductible clause in any blanket insurance policy described under
"--Hazard Insurance Policies";

     (11) any amount required to be deposited by a master servicer or the
trustee in connection with losses realized on investments for the benefit of the
master servicer or the trustee, as the case may be, of funds held in the
certificate account; and

     (12) any other amounts required to be deposited in the certificate account
as provided in the related Agreement and described in the related prospectus
supplement.


                                       57



     Withdrawals

     A master servicer or the trustee may, from time to time, unless otherwise
provided in the related Agreement and described in the related prospectus
supplement, make withdrawals from the certificate account for each trust fund
for any of the following purposes:

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

     (2) to reimburse a master servicer for unreimbursed amounts advanced as
described under "Description of the Certificates--Advances in Respect of
Delinquencies," the reimbursement to be made out of amounts received which were
identified and applied by the master servicer as late collections of interest,
net of related servicing fees and retained interest, on and principal of the
particular mortgage loans with respect to which the advances were made or out of
amounts drawn under any form of credit support with respect to those mortgage
loans;

     (3) to reimburse a master servicer for unpaid servicing fees earned and
certain unreimbursed servicing expenses incurred with respect to mortgage loans
and properties acquired in respect thereof, such reimbursement to be made out of
amounts that represent liquidation proceeds and insurance proceeds collected on
the particular mortgage loans and properties, and net income collected on the
particular properties, with respect to which the fees were earned or the
expenses were incurred or out of amounts drawn under any form of credit support
with respect to such mortgage loans and properties;

     (4) to reimburse a master servicer for any advances described in clause (2)
above and any servicing expenses described in clause (3) above which, in the
master servicer's good faith judgment, will not be recoverable from the amounts
described in clauses (2) and (3), respectively, the reimbursement to be made
from amounts collected on other assets or, if and to the extent so provided by
the related Agreement and described in the related prospectus supplement, just
from that portion of amounts collected on other assets that is otherwise
distributable on one or more classes of subordinate certificates, if any, remain
outstanding, and otherwise any outstanding class of certificates, of the related
series;

     (5) if and to the extent described in the related prospectus supplement, to
pay a master servicer interest accrued on the advances described in clause (2)
above and the servicing expenses described in clause (3) above while these
remain outstanding and unreimbursed;

     (6) to reimburse a master servicer, Morgan Stanley Capital I Inc., or any
of their respective directors, officers, employees and agents, as the case may
be, for certain expenses, costs and liabilities incurred thereby, as and to the
extent described under "--Matters Regarding a Master Servicer and the
Depositor";

     (7) if and to the extent described in the related prospectus supplement, to
pay or to transfer to a separate account for purposes of escrowing for the
payment of the trustee's fees;

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

     (9) unless otherwise provided in the related prospectus supplement, to pay
a master servicer, as additional servicing compensation, interest and investment
income earned in respect of amounts held in the certificate account;

     (10) to pay the person entitled thereto any amounts deposited in the
certificate account that were identified and applied by the master servicer as
recoveries of retained interest;

     (11) to pay for costs reasonably incurred in connection with the proper
management and maintenance of any mortgaged property acquired for the benefit of
certificateholders by foreclosure or by deed in lieu of foreclosure or
otherwise, these payments to be made out of income received on this type of
property;

     (12) if one or more elections have been made to treat the trust fund or
designated portions thereof as a REMIC, to pay any federal, state or local taxes
imposed on the trust fund or its assets or transactions, as and to the extent
described below under "Federal Income Tax Consequences--REMICs--Prohibited
Transactions and Other Taxes";


                                       58



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

     (14) to pay for the cost of various opinions of counsel obtained pursuant
to the related Agreement for the benefit of certificateholders;

     (15) to pay for the costs of recording the related Agreement if recordation
materially and beneficially affects the interests of certificateholders,
provided that the payment shall not constitute a waiver with respect to the
obligation of the warrantying party to remedy any breach of representation or
warranty under the Agreement;

     (16) to pay the person entitled thereto any amounts deposited in the
certificate account in error, including amounts received on any asset after its
removal from the trust fund whether by reason of purchase or substitution as
contemplated by "--Assignment of Assets; Repurchases" and "--Representations and
Warranties; Repurchases" or otherwise;

     (17) to make any other withdrawals permitted by the related Agreement and
described in the related prospectus supplement; and

     (18) to clear and terminate the certificate account at the termination of
the trust fund.

     Other Collection Accounts

     Notwithstanding the foregoing, if so specified in the related prospectus
supplement, the Agreement for any series of certificates may provide for the
establishment and maintenance of a separate collection account into which the
master servicer or any related subservicer will deposit on a daily basis the
amounts described under "--Deposits" above for one or more series of
certificates. Any amounts on deposit in any collection account will be withdrawn
from the collection account and deposited into the appropriate certificate
account by a time specified in the related prospectus supplement. To the extent
specified in the related prospectus supplement, any amounts which could be
withdrawn from the certificate account as described under "--Withdrawals" above,
may also be withdrawn from any collection account. The prospectus supplement
will set forth any restrictions with respect to any collection account,
including investment restrictions and any restrictions with respect to financial
institutions with which any collection account may be maintained.

COLLECTION AND OTHER SERVICING PROCEDURES

     The master servicer, directly or through subservicers, is required to make
reasonable efforts to collect all scheduled payments under the mortgage loans
and will follow or cause to be followed the collection procedures as it would
follow with respect to mortgage loans that are comparable to the mortgage loans
and held for its own account, provided the procedures are consistent with the
Servicing Standard. In connection therewith, the master servicer will be
permitted in its discretion to waive any late payment charge or penalty interest
in respect of a late mortgage loan payment.

     Each master servicer will also be required to perform other customary
functions of a servicer of comparable loans, including maintaining hazard
insurance policies as described in this prospectus and in any related prospectus
supplement, and filing and settling claims thereunder; maintaining escrow or
impoundment accounts of borrowers for payment of taxes, insurance and other
items required to be paid by any borrower pursuant to the mortgage loan;
processing assumptions or substitutions in those cases where the master servicer
has determined not to enforce any applicable due-on-sale clause; attempting to
cure delinquencies; supervising foreclosures; inspecting and managing mortgaged
properties under certain circumstances; and maintaining accounting records
relating to the mortgage loans. To the extent specified in the related
prospectus supplement, the master servicer will be responsible for filing and
settling claims in respect of particular mortgage loans under any applicable
instrument of credit support. See "Description of Credit Support."

     The master servicer may agree to modify, waive or amend any term of any
mortgage loan in a manner consistent with the Servicing Standard so long as the
modification, waiver or amendment will not:


                                       59



          o    affect the amount or timing of any scheduled payments of
               principal or interest on the mortgage loan; or

          o    in its judgment, materially impair the security for the mortgage
               loan or reduce the likelihood of timely payment of amounts due
               thereon.

     The master servicer also may agree to any modification, waiver or amendment
that would so affect or impair the payments on, or the security for, a mortgage
loan if, unless otherwise provided in the related prospectus supplement:

          o    in its judgment, a material default on the mortgage loan has
               occurred or a payment default is imminent; and

          o    in its judgment, that modification, waiver or amendment is
               reasonably likely to produce a greater recovery with respect to
               the mortgage loan on a present value basis than would
               liquidation.

     The master servicer is required to notify the trustee in the event of any
modification, waiver or amendment of any mortgage loan.

SUBSERVICERS

     A master servicer may delegate its servicing obligations in respect of the
mortgage loans to a subservicer, but the master servicer will remain obligated
under the related Agreement. Each sub-servicing agreement must be consistent
with the terms of the related Agreement and must provide that, if for any reason
the master servicer for the related series of certificates is no longer acting
in the capacity, the trustee or any successor master servicer may assume the
master servicer's rights and obligations under a subservicing agreement.

     Unless otherwise provided in the related prospectus supplement, the master
servicer will be solely liable for all fees owed by it to any subservicer,
irrespective of whether the master servicer's compensation pursuant to the
related Agreement is sufficient to pay those fees. However, a subservicer may be
entitled to a retained interest in certain mortgage loans. Each subservicer will
be reimbursed by the master servicer for certain expenditures which it makes,
generally to the same extent the master servicer would be reimbursed under an
Agreement. See "--Retained Interest; Servicing Compensation and Payment of
Expenses."

REALIZATION UPON DEFAULTED MORTGAGE LOANS

     A borrower's failure to make required payments may reflect inadequate
income or the diversion of that income from the service of payments due under
the mortgage loan, and may call into question the borrower's ability to make
timely payment of taxes and to pay for necessary maintenance of the related
mortgaged property. Unless otherwise provided in the related prospectus
supplement, the master servicer is required to:

          o    monitor any mortgage loan which is in default;

          o    contact the borrower concerning the default;

          o    evaluate whether the causes of the default can be cured over a
               reasonable period without significant impairment of the value of
               the mortgaged property;

          o    initiate corrective action in cooperation with the borrower if
               cure is likely;

          o    inspect the mortgaged property; and

          o    take any other actions as are consistent with the Servicing
               Standard.

     A significant period of time may elapse before the master servicer is able
to assess the success of the corrective action or the need for additional
initiatives.


                                       60



     The time within which the master servicer makes the initial determination
of appropriate action, evaluates the success of corrective action, develops
additional initiatives, institutes foreclosure proceedings and actually
forecloses or takes a deed to a mortgaged property in lieu of foreclosure on
behalf of the certificateholders, may vary considerably depending on the
particular mortgage loan, the mortgaged property, the borrower, the presence of
an acceptable party to assume the mortgage loan and the laws of the jurisdiction
in which the mortgaged property is located. Under federal bankruptcy law, the
master servicer in certain cases may not be permitted to accelerate a mortgage
loan or to foreclose on a mortgaged property for a considerable period of time.
See "Legal Aspects of Mortgage Loans."

     Any Agreement relating to a trust fund that includes mortgage loans may
grant to the master servicer or the holder or holders of certain classes of
certificates, or both, a right of first refusal to purchase from the trust fund
at a predetermined purchase price any mortgage loan as to which a specified
number of scheduled payments thereunder are delinquent. Any such right granted
to the holder of an offered certificate will be described in the related
prospectus supplement. The related prospectus supplement will also describe any
such right granted to any person if the predetermined purchase price is less
than the Purchase Price described under "--Representations and Warranties;
Repurchases."

     If so specified in the related prospectus supplement, the master servicer
may offer to sell any defaulted mortgage loan described in the preceding
paragraph and not otherwise purchased by any person having a right of first
refusal with respect thereto, if and when the master servicer determines,
consistent with the Servicing Standard, that this sale would produce a greater
recovery on a present value basis than would liquidation through foreclosure or
similar proceeding. The related Agreement will provide that any sale of this
type be made in a commercially reasonable manner for a specified period and that
the master servicer accept the highest cash bid received from any person
including itself, an affiliate of the master servicer or any certificateholder
that constitutes a fair price for the defaulted mortgage loan. In the absence of
any bid determined in accordance with the related Agreement to be fair, the
master servicer shall proceed with respect to the defaulted mortgage loan as
described in the paragraphs below. Any bid in an amount at least equal to the
Purchase Price described under "--Representations and Warranties; Repurchases"
will in all cases be deemed fair.

     If a default on a mortgage loan has occurred or, in the master servicer's
judgment is imminent, and the action is consistent with the Servicing Standard,
the master servicer, on behalf of the trustee, may at any time:

          o    institute foreclosure proceedings;

          o    exercise any power of sale contained in any mortgage;

          o    obtain a deed in lieu of foreclosure; or

          o    otherwise acquire title to a mortgaged property securing the
               mortgage loan.

     Unless otherwise provided in the related prospectus supplement, if title to
any mortgaged property is acquired by a trust fund as to which a REMIC election
has been made, the master servicer, on behalf of the trust fund, will be
required to sell the mortgaged property by the close of the third calendar year
following the year of acquisition, unless:

          o    the Internal Revenue Service grants an extension of time to sell
               the property; or

          o    the trustee receives an opinion of independent counsel to the
               effect that the holding of the property by the trust fund will
               not result in the imposition of a tax on the trust fund or cause
               the trust fund to fail to qualify as a REMIC under the Internal
               Revenue Code at any time that any certificate is outstanding.

     Subject to the foregoing, the master servicer will be required to:

          o    solicit bids for any mortgaged property so acquired by the trust
               fund as will be reasonably likely to realize a fair price for the
               property; and


                                       61



          o    accept the first and, if multiple bids are contemporaneously
               received, the highest cash bid received from any person that
               constitutes a fair price.

     The limitations imposed by the related Agreement and the REMIC provisions
of the Internal Revenue Code, if a REMIC election has been made with respect to
the related trust fund, on the ownership and management of any mortgaged
property acquired on behalf of the trust fund may result in the recovery of an
amount less than the amount that would otherwise be recovered. See "Legal
Aspects of Mortgage Loans--Foreclosure."

     If recovery on a defaulted mortgage loan under any related instrument of
credit support is not available, the master servicer nevertheless will be
obligated to follow or cause to be followed normal practices and procedures as
it deems necessary or advisable 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 outstanding principal balance of the defaulted mortgage
loan plus interest accrued thereon at the mortgage rate plus the aggregate
amount of expenses incurred by the master servicer in connection with such
proceedings and which are reimbursable under the Agreement, the trust fund will
realize a loss in the amount of that difference. The master servicer will be
entitled to withdraw or cause to be withdrawn from the certificate account out
of the liquidation proceeds recovered on any defaulted mortgage loan, prior to
the distribution of the liquidation proceeds to certificateholders, amounts
representing its normal servicing compensation on the mortgage loan,
unreimbursed servicing expenses incurred with respect to the mortgage loan and
any unreimbursed advances of delinquent payments made with respect to the
mortgage loan.

     If any 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
instrument of credit support, if any, the master servicer is not required to
expend its own funds to restore the damaged property unless it determines:

          o    that the restoration will increase the proceeds to
               certificateholders on liquidation of the mortgage loan after
               reimbursement of the master servicer for its expenses; and

          o    that the expenses will be recoverable by it from related
               insurance proceeds or liquidation proceeds.

     As servicer of the mortgage loans, a master servicer, on behalf of itself,
the trustee and the certificateholders, will present claims to the obligor under
each instrument of credit support, and will take such reasonable steps as are
necessary to receive payment or to permit recovery thereunder with respect to
defaulted mortgage loans.

     If a master servicer or its designee recovers payments under any instrument
of credit support with respect to any defaulted mortgage loan, the master
servicer will be entitled to withdraw or cause to be withdrawn from the
certificate account out of those proceeds, prior to distribution thereof to
certificateholders, amounts representing its normal servicing compensation on
the mortgage loan, unreimbursed servicing expenses incurred with respect to the
mortgage loan and any unreimbursed advances of delinquent payments made with
respect to the mortgage loan. See "--Hazard Insurance Policies" and "Description
of Credit Support."

HAZARD INSURANCE POLICIES

     To the extent specified in the related prospectus supplement, each
Agreement for a trust fund that includes mortgage loans will require the master
servicer to cause the borrower on each mortgage loan to maintain a hazard
insurance policy providing for the coverage required under the related mortgage
or, if any mortgage permits the holder thereof to dictate to the borrower the
insurance coverage to be maintained on the related mortgaged property, then the
coverage that is consistent with the Servicing Standard. To the extent specified
in the related prospectus supplement, the coverage will be in general in an
amount equal to the lesser of the principal balance owing on the mortgage loan
and the amount necessary to fully compensate for any damage or loss to the
improvements on the mortgaged property on a replacement cost basis, but in
either case not less than the amount necessary to avoid the application of any
co-insurance clause contained in the hazard insurance policy. The ability of the
master servicer to assure that hazard insurance proceeds are appropriately
applied may be dependent upon its being named as an additional insured under any
hazard insurance policy and under any other insurance policy referred to below,
or upon the extent to which information in this regard is furnished by
borrowers. All amounts collected by the master servicer under any policy, except
for amounts to be applied to the restoration or repair of the mortgaged property
or released


                                       62



to the borrower in accordance with the master servicer's normal servicing
procedures, subject to the terms and conditions of the related mortgage and
mortgage note will be deposited in the certificate account. The Agreement will
provide that the master servicer may satisfy its obligation to cause each
borrower to maintain a hazard insurance policy by the master servicer's
maintaining a blanket policy insuring against hazard losses on the mortgage
loans. If the blanket policy contains a deductible clause, the master servicer
will be required to deposit in the certificate account all sums that would have
been deposited in the certificate account but for that clause.

     In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements of the property by fire,
lightning, explosion, smoke, windstorm and hail, and riot, strike and civil
commotion, subject to the conditions and exclusions specified in each policy.
Although the policies relating to the mortgage loans will be underwritten by
different insurers under different state laws in accordance with different
applicable state forms, and therefore will not contain identical terms and
conditions, the basic terms thereof are dictated by respective state laws, and
most of these policies typically do not cover any physical damage resulting from
war, revolution, governmental actions, floods and other water-related causes,
earth movement, including earthquakes, landslides and mud flows, wet or dry rot,
vermin, domestic animals and certain other kinds of uninsured risks.

     The hazard insurance policies covering the mortgaged properties securing
the mortgage loans will typically contain a co-insurance 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 improvements on the
property in order to recover the full amount of any partial loss. If the
insured's coverage falls below this specified percentage, the co-insurance
clause generally provides that the insurer's liability in the event of partial
loss does not exceed the lesser of:

          o    the replacement cost of the improvements less physical
               depreciation; and

          o    the proportion of the loss as the amount of insurance carried
               bears to the specified percentage of the full replacement cost of
               the improvements.

     Each Agreement for a trust fund that includes mortgage loans will require
the master servicer to cause the borrower on each mortgage loan to maintain all
other insurance coverage with respect to the related mortgaged property as is
consistent with the terms of the related mortgage and the Servicing Standard,
which insurance may typically include flood insurance if the related mortgaged
property was located at the time of origination in a federally designated flood
area.

     Any cost incurred by the master servicer in maintaining any insurance
policy will be added to the amount owing under the mortgage loan where the terms
of the mortgage loan so permit; provided, however, that the addition of this
cost will not be taken into account for purposes of calculating the distribution
to be made to certificateholders. These costs may be recovered by the master
servicer or subservicer, as the case may be, from the collection account, with
interest thereon, as provided by the Agreement.

     Under the terms of the mortgage loans, borrowers will generally be required
to present claims to insurers under hazard insurance policies maintained on the
related mortgaged properties. The master servicer, on behalf of the trustee and
certificateholders, is obligated to present or cause to be presented claims
under any blanket insurance policy insuring against hazard losses on mortgaged
properties securing the mortgage loans. However, the ability of the master
servicer to present or cause to be presented these claims is dependent upon the
extent to which information in this regard is furnished to the master servicer
by borrowers.

FIDELITY BONDS AND ERRORS AND OMISSIONS INSURANCE

     To the extent specified in the related prospectus supplement, each
Agreement will require that the master servicer obtain and maintain in effect a
fidelity bond or similar form of insurance coverage which may provide blanket
coverage or any combination thereof insuring against loss occasioned by fraud,
theft or other intentional misconduct of the officers, employees and agents of
the master servicer. The related Agreement will allow the master servicer to
self-insure against loss occasioned by the errors and omissions of the officers,
employees and agents of the master servicer so long as criteria set forth in the
Agreement are met.


                                       63



DUE-ON-SALE PROVISIONS

     Some of the mortgage loans may contain clauses requiring the consent of the
lender to any sale or other transfer of the related mortgaged property, or
due-on-sale clauses entitling the lender to accelerate payment of the mortgage
loan upon any sale, transfer or conveyance of the related mortgaged property.
Unless otherwise provided in the related prospectus supplement, the master
servicer will generally enforce any due-on-sale clause to the extent it has
knowledge of the conveyance or proposed conveyance of the underlying mortgaged
property and it is entitled to do so under applicable law; provided, however,
that the master servicer will not take any action in relation to the enforcement
of any due-on-sale provision which would adversely affect or jeopardize coverage
under any applicable insurance policy. To the extent specified in the related
prospectus supplement, any fee collected by or on behalf of the master servicer
for entering into an assumption agreement will be retained by or on behalf of
the master servicer as additional servicing compensation. See "Legal Aspects of
Mortgage Loans--Due-on-Sale Clauses."

RETAINED INTEREST; SERVICING COMPENSATION AND PAYMENT OF EXPENSES

     The prospectus supplement for a series of certificates will specify whether
there will be any retained interest in the assets, and, if so, the initial owner
thereof. If so, the retained interest will be established on a loan-by-loan
basis and will be specified on an exhibit to the related Agreement.

     To the extent specified in the related prospectus supplement, the master
servicer's and a subservicer's primary servicing compensation with respect to a
series of certificates will come from the periodic payment to it of a portion of
the interest payment on each asset. Since any retained interest and a master
servicer's primary compensation are percentages of the principal balance of each
asset, these amounts will decrease in accordance with the amortization of the
assets. The prospectus supplement with respect to a series of certificates
evidencing interests in a trust fund that includes mortgage loans may provide
that, as additional compensation, the master servicer or the subservicers may
retain all or a portion of assumption fees, modification fees, late payment
charges or prepayment premiums collected from borrowers and any interest or
other income which may be earned on funds held in the certificate account or any
account established by a subservicer pursuant to the Agreement.

     The master servicer may, to the extent provided in the related prospectus
supplement, pay from its servicing compensation certain expenses incurred in
connection with its servicing and managing of the assets, including, without
limitation, payment of the fees and disbursements of the trustee and independent
accountants, payment of expenses incurred in connection with distributions and
reports to certificateholders, and payment of any other expenses described in
the related prospectus supplement. Certain other expenses, including certain
expenses relating to defaults and liquidations on the mortgage loans and, to the
extent so provided in the related prospectus supplement, interest thereon at the
rate specified in the related prospectus supplement may be borne by the trust
fund.

     If and to the extent provided in the related prospectus supplement, the
master servicer may be required to apply a portion of the servicing compensation
otherwise payable to it in respect of any Due Period to certain interest
shortfalls resulting from the voluntary prepayment of any mortgage loans in the
related trust fund during that period prior to their respective due dates
therein.

EVIDENCE AS TO COMPLIANCE

     Each Agreement relating to assets which include mortgage loans will provide
that on or before a specified date in each year, beginning with the first such
date at least six months after the related cut-off date, a firm of independent
public accountants will furnish a statement to the trustee to the effect that,
on the basis of the examination by that firm conducted substantially in
compliance with either the Uniform Single Attestation Program for Mortgage
Bankers or the Audit Program for Mortgages serviced for the Federal Home Loan
Mortgage Corporation, the servicing by or on behalf of the master servicer of
mortgage loans under pooling and servicing agreements substantially similar to
each other, including the related Agreement, was conducted in compliance with
the terms of such agreements except for any significant exceptions or errors in
records that, in the opinion of the firm, either the Audit Program for Mortgages
serviced for FHLMC, or paragraph 4 of the Uniform Single Attestation Program for
Mortgage Bankers, requires it to report. In rendering its statement that firm
may rely, as to matters relating to the direct servicing of mortgage loans by
subservicers, upon comparable statements for examinations conducted
substantially in compliance with the Uniform Single Attestation Program for
Mortgage Bankers or the Audit Program for Mortgages serviced for


                                       64



FHLMC, rendered within one year of that statement, of firms of independent
public accountants with respect to the related subservicer.

     Each Agreement will also 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 master servicer to the effect that the master servicer has fulfilled its
obligations under the Agreement throughout the preceding calendar year or other
specified twelve-month period.

     Unless otherwise provided in the related prospectus supplement, copies of
annual accountants' statement and statements of officers will be obtainable by
certificateholders without charge upon written request to the master servicer at
the address set forth in the related prospectus supplement.

MATTERS REGARDING A MASTER SERVICER AND THE DEPOSITOR

     The master servicer, if any, or a servicer for substantially all the
mortgage loans under each Agreement will be named in the related prospectus
supplement. The entity serving as master servicer or as servicer may be an
affiliate of Morgan Stanley Capital I Inc. and may have other normal business
relationships with Morgan Stanley Capital I Inc. or Morgan Stanley Capital I
Inc.'s affiliates. Reference to the master servicer shall be deemed to be to the
servicer of substantially all of the mortgage loans, if applicable.

     To the extent specified in the related prospectus supplement, the related
Agreement will provide that the master servicer may resign from its obligations
and duties thereunder only upon a determination that its duties under the
Agreement are no longer permissible under applicable law or are in material
conflict by reason of applicable law with any other activities carried on by it;
provided that the other activities of the master servicer causing the conflict
were carried on by the master servicer at the date of the Agreement. No
resignation will become effective until the trustee or a successor servicer has
assumed the master servicer's obligations and duties under the Agreement.

     To the extent specified in the related prospectus supplement, each
Agreement will further provide that neither any master servicer, Morgan Stanley
Capital I Inc. nor any director, officer, employee, or agent of a master
servicer or Morgan Stanley Capital I Inc. will be under any liability to the
related trust fund or certificateholders for any action taken, or for refraining
from the taking of any action, in good faith pursuant to the Agreement;
provided, however, that neither a master servicer, Morgan Stanley Capital I Inc.
nor any director, officer, employee or agent of a master servicer or Morgan
Stanley Capital I Inc. will be protected against any breach of a representation,
warranty or covenant made in the Agreement, or against any liability
specifically imposed thereby, or against any liability which would otherwise be
imposed by reason of willful misfeasance, bad faith or gross negligence in the
performance of obligations or duties thereunder or by reason of reckless
disregard of obligations and duties thereunder. Unless otherwise described in
the related prospectus supplement, each Agreement will further provide that any
master servicer, Morgan Stanley Capital I Inc. and any director, officer,
employee or agent of a master servicer or Morgan Stanley Capital I Inc. will be
entitled to indemnification by the related trust fund and will be held harmless
against any loss, liability or expense incurred in connection with any legal
action relating to the Agreement or the certificates; provided, however, that
the indemnification will not extend to any loss, liability or expense:

          o    specifically imposed by the Agreement or otherwise incidental to
               the performance of obligations and duties thereunder, including,
               in the case of a master servicer, the prosecution of an
               enforcement action in respect of any specific mortgage loan or
               mortgage loans, except as any loss, liability or expense shall be
               otherwise reimbursable pursuant to the Agreement;

          o    incurred in connection with any breach of a representation,
               warranty or covenant made in the Agreement;

          o    incurred by reason of misfeasance, bad faith or gross negligence
               in the performance of obligations or duties thereunder, or by
               reason of reckless disregard of its obligations or duties;

          o    incurred in connection with any violation of any state or federal
               securities law; or

          o    imposed by any taxing authority if the loss, liability or expense
               is not specifically reimbursable pursuant to the terms of the
               related Agreement.


                                       65



     In addition, each Agreement will provide that neither any master servicer
nor Morgan Stanley Capital I Inc. will be under any obligation to appear in,
prosecute or defend any legal action which is not incidental to its respective
responsibilities under the Agreement and which in its opinion may involve it in
any expense or liability. The master servicer or Morgan Stanley Capital I Inc.
may, however, in its discretion undertake any such action which it may deem
necessary or desirable with respect to the Agreement and the rights and duties
of the parties thereto and the interests of the certificateholders thereunder.
In this event, the legal expenses and costs of the action and any liability
resulting therefrom will be expenses, costs and liabilities of the
certificateholders, and the master servicer or Morgan Stanley Capital I Inc., as
the case may be, will be entitled to be reimbursed therefor and to charge the
certificate account.

     Any person into which the master servicer or Morgan Stanley Capital I Inc.
may be merged or consolidated, or any person resulting from any merger or
consolidation to which the master servicer or Morgan Stanley Capital I Inc. is a
party, or any person succeeding to the business of the master servicer or Morgan
Stanley Capital I Inc., will be the successor of the master servicer or Morgan
Stanley Capital I Inc., as the case may be, under the related Agreement.

EVENTS OF DEFAULT

     Unless otherwise provided in the related prospectus supplement for a trust
fund that includes mortgage loans, Events of Default under the related Agreement
will include:

          o    any failure by the master servicer to distribute or cause to be
               distributed to certificateholders, or to remit to the trustee for
               distribution to certificateholders, any required payment;

          o    any failure by the master servicer duly to observe or perform in
               any material respect any of its other covenants or obligations
               under the Agreement which continues unremedied for thirty days
               after written notice of the failure has been given to the master
               servicer by the trustee or Morgan Stanley Capital I Inc., or to
               the master servicer, Morgan Stanley Capital I Inc. and the
               trustee by the holders of certificates evidencing not less than
               25% of the voting rights;

          o    any breach of a representation or warranty made by the master
               servicer under the Agreement which materially and adversely
               affects the interests of certificateholders and which continues
               unremedied for thirty days after written notice of that breach
               has been given to the master servicer by the trustee or Morgan
               Stanley Capital I Inc., or to the master servicer, Morgan Stanley
               Capital I Inc. and the trustee by the holders of certificates
               evidencing not less than 25% of the voting rights; and

          o    certain events of insolvency, readjustment of debt, marshalling
               of assets and liabilities or similar proceedings and certain
               actions by or on behalf of the master servicer indicating its
               insolvency or inability to pay its obligations.

     Material variations to the foregoing Events of Default--other than to
shorten cure periods or eliminate notice requirements--will be specified in the
related prospectus supplement. Unless otherwise described in the related
prospectus supplement, the trustee shall, not later than the later of 60 days
after the occurrence of any event which constitutes or, with notice or lapse of
time or both, would constitute an Event of Default and five days after certain
officers of the trustee become aware of the occurrence of such an event,
transmit by mail to Morgan Stanley Capital I Inc. and all certificateholders of
the applicable series notice of the occurrence, unless the default shall have
been cured or waived.

RIGHTS UPON EVENT OF DEFAULT

     So long as an Event of Default under an Agreement remains unremedied,
Morgan Stanley Capital I Inc. or the trustee may, and at the direction of
holders of certificates evidencing not less than 51% of the voting rights, the
trustee shall, terminate all of the rights and obligations of the master
servicer under the Agreement and in and to the mortgage loans, other than as a
certificateholder or as the owner of any retained interest, whereupon the
trustee will succeed to all of the responsibilities, duties and liabilities of
the master servicer under the Agreement, except that if the trustee is
prohibited by law from obligating itself to make advances regarding delinquent
mortgage loans, or if the


                                       66



related prospectus supplement so specifies, then the trustee will not be
obligated to make the advances, and will be entitled to similar compensation
arrangements. Unless otherwise described in the related prospectus supplement,
in the event that the trustee is unwilling or unable so to act, it may or, at
the written request of the holders of certificates entitled to at least 51% of
the voting rights, it shall appoint, or petition a court of competent
jurisdiction for the appointment of, a loan servicing institution acceptable to
the rating agency with a net worth at the time of appointment of at least
$15,000,000 to act as successor to the master servicer under the Agreement.
Pending appointment, the trustee is obligated to act in the capacity of master
servicer. The trustee and any successor may agree upon the servicing
compensation to be paid, which in no event may be greater than the compensation
payable to the master servicer under the Agreement.

     Unless otherwise described in the related prospectus supplement, the
holders of certificates representing at least 66(2)/3% of the voting rights
allocated to the respective classes of certificates affected by any Event of
Default will be entitled to waive that Event of Default; provided, however, that
an Event of Default involving a failure to distribute a required payment to
certificateholders described in the first bullet point under "--Events of
Default" may be waived only by all of the certificateholders. Upon any waiver of
an Event of Default, the Event of Default shall cease to exist and shall be
deemed to have been remedied for every purpose under the Agreement.

     No certificateholder will have the right under any Agreement to institute
any proceeding with respect thereto unless the holder previously has given to
the trustee written notice of default and unless the holders of certificates
evidencing not less than 25% of the voting rights have made written request upon
the trustee to institute the proceeding in its own name as trustee thereunder
and have offered to the trustee reasonable indemnity, and the trustee for sixty
days has neglected or refused to institute any proceeding. The trustee, however,
is under no obligation to exercise any of the trusts or powers vested in it by
any Agreement or to make any investigation of matters arising thereunder or to
institute, conduct or defend any litigation thereunder or in relation thereto at
the request, order or direction of any of the holders of certificates covered by
the Agreement, unless the certificateholders have offered to the trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby.

AMENDMENT

     Each Agreement may be amended by the parties thereto, without the consent
of any of the holders of certificates covered by the Agreement:

          o    to cure any ambiguity;

          o    to conform the Agreement to this Prospectus and the prospectus
               supplement provided to investors in connection with the initial
               offering of the related certificates

          o    to correct, modify or supplement any provision in the Agreement
               which may be inconsistent with any other provision in the
               Agreement;

          o    to make any other provisions with respect to matters or questions
               arising under the Agreement which are not inconsistent with the
               provisions thereof; or

          o    to comply with any requirements imposed by the Internal Revenue
               Code;

provided that the amendment--other than an amendment for the purpose specified
in the fourth bullet point above--will not, as evidenced by an opinion of
counsel to that effect, adversely affect in any material respect the interests
of any holder of certificates covered by the Agreement.

     To the extent specified in the related prospectus supplement, each
Agreement may also be amended by Morgan Stanley Capital I Inc., the master
servicer, if any, and the trustee, with the consent of the holders of
certificates affected thereby evidencing not less than 51% of the voting rights,
for any purpose; provided, however, that to the extent specified in the related
prospectus supplement, no such amendment may:


                                       67



          o    reduce in any manner the amount of or delay the timing of,
               payments received or advanced on mortgage loans which are
               required to be distributed on any certificate without the consent
               of the holder of that certificate;

          o    adversely affect in any material respect the interests of the
               holders of any class of certificates in a manner other than as
               described in (1), without the consent of the holders of all
               certificates of that class; or

          o    modify the provisions of the Agreement described in this
               paragraph without the consent of the holders of all certificates
               covered by the Agreement then outstanding.

     However, with respect to any series of certificates as to which a REMIC
election is to be made, the trustee will not consent to any amendment of the
Agreement unless it shall first have received an opinion of counsel to the
effect that the amendment will not result in the imposition of a tax on the
related trust fund or cause the related trust fund to fail to qualify as a REMIC
at any time that the related certificates are outstanding.

THE TRUSTEE

     The trustee under each Agreement will be named in the related prospectus
supplement. The commercial bank, national banking association, banking
corporation or trust company serving as trustee may have a banking relationship
with Morgan Stanley Capital I Inc. and its affiliates and with any master
servicer and its affiliates.

DUTIES OF THE TRUSTEE

     The trustee will make no representations as to the validity or sufficiency
of any Agreement, the certificates or any asset or related document and is not
accountable for the use or application by or on behalf of any master servicer of
any funds paid to the master servicer or its designee in respect of the
certificates or the assets, or deposited into or withdrawn from the certificate
account or any other account by or on behalf of the master servicer. If no Event
of Default has occurred and is continuing, the trustee is required to perform
only those duties specifically required under the related Agreement. However,
upon receipt of the various certificates, reports or other instruments required
to be furnished to it, the trustee is required to examine the documents and to
determine whether they conform to the requirements of the Agreement.

MATTERS REGARDING THE TRUSTEE

     Unless otherwise described in the related prospectus supplement, the
trustee and any director, officer, employee or agent of the trustee shall be
entitled to indemnification out of the certificate account for any loss,
liability or expense, including costs and expenses of litigation, and of
investigation, counsel fees, damages, judgments and amounts paid in settlement,
incurred in connection with the trustee's:

          o    enforcing its rights and remedies and protecting the interests,
               and enforcing the rights and remedies, of the certificateholders
               during the continuance of an Event of Default;

          o    defending or prosecuting any legal action in respect of the
               related Agreement or series of certificates;

          o    being the lender of record with respect to the mortgage loans in
               a trust fund and the owner of record with respect to any
               mortgaged property acquired in respect thereof for the benefit of
               certificateholders; or

          o    acting or refraining from acting in good faith at the direction
               of the holders of the related series of certificates entitled to
               not less than 25% or a higher percentage as is specified in the
               related Agreement with respect to any particular matter of the
               voting rights for the series; provided, however, that the
               indemnification will not extend to any loss, liability or expense
               that constitutes a specific liability of the trustee pursuant to
               the related Agreement, or to any loss, liability or expense
               incurred by reason of willful misfeasance, bad faith or
               negligence on the part of the trustee in the performance of its
               obligations and duties under the related Agreement, or by reason
               of its reckless disregard of the


                                       68



               obligations or duties, or as may arise from a breach of any
               representation, warranty or covenant of the trustee made in the
               related Agreement.

RESIGNATION AND REMOVAL OF THE TRUSTEE

     The trustee may at any time resign from its obligations and duties under an
Agreement by giving written notice thereof to Morgan Stanley Capital I Inc., the
master servicer, if any, and all certificateholders. Upon receiving the notice
of resignation, Morgan Stanley Capital I Inc. is required promptly to appoint a
successor trustee acceptable to the master servicer, if any. If no successor
trustee shall have been so appointed and have accepted appointment within 30
days after the giving of the notice of resignation, the resigning trustee may
petition any court of competent jurisdiction for the appointment of a successor
trustee.

     If at any time the trustee shall cease to be eligible to continue as
trustee under the related Agreement, or if at any time the trustee shall become
incapable of acting, or shall be adjudged bankrupt or insolvent, or a receiver
of the trustee or of its property shall be appointed, or any public officer
shall take charge or control of the trustee or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation, then Morgan Stanley
Capital I Inc. may remove the trustee and appoint a successor trustee acceptable
to the master servicer, if any. Holders of the certificates of any series
entitled to at least 51% of the voting rights for that series may at any time
remove the trustee without cause and appoint a successor trustee.

     Any resignation or removal of the trustee and appointment of a successor
trustee shall not become effective until acceptance of appointment by the
successor trustee.

                          DESCRIPTION OF CREDIT SUPPORT

GENERAL

     For any series of certificates, credit support may be provided with respect
to one or more classes thereof or the related assets. Credit support may be in
the form of the subordination of one or more classes of certificates, letters of
credit, insurance policies, guarantees, the establishment of one or more reserve
funds or another method of credit support described in the related prospectus
supplement, or any combination of the foregoing. If so provided in the related
prospectus supplement, any form of credit support may be structured so as to be
drawn upon by more than one series to the extent described in the related
prospectus supplement.

     Unless otherwise provided in the related prospectus supplement for a series
of certificates, the credit support will not provide protection against all
risks of loss and will not guarantee repayment of the entire certificate balance
of the certificates and interest thereon. If losses or shortfalls occur that
exceed the amount covered by credit support or that are not covered by credit
support, certificateholders will bear their allocable share of deficiencies.
Moreover, if a form of credit support covers more than one series of
certificates, holders of certificates evidencing interests in any of the trusts
will be subject to the risk that the credit support will be exhausted by the
claims of other trusts prior to the trust fund receiving any of its intended
share of coverage.

     If credit support is provided with respect to one or more classes of
certificates of a series, or the related assets, the related prospectus
supplement will include a description of:

          o    the nature and amount of coverage under the credit support;

          o    any conditions to payment thereunder not otherwise described in
               this prospectus;

          o    the conditions, if any, under which the amount of coverage under
               the credit support may be reduced and under which the credit
               support may be terminated or replaced;

          o    the material provisions relating to such credit support; and

          o    information regarding the obligor under any instrument of credit
               support, including:


                                       69



          o    a brief description of its principal business activities;

          o    its principal place of business, place of incorporation and the
               jurisdiction under which it is chartered or licensed to do
               business;

          o    if applicable, the identity of regulatory agencies that exercise
               primary jurisdiction over the conduct of its business; and

          o    its total assets, and its stockholders or policyholders surplus,
               if applicable, as of the date specified in the prospectus
               supplement.

     See "Risk Factors--Credit Enhancement is Limited in Amount and Coverage."

SUBORDINATE CERTIFICATES

     If so specified in the related prospectus supplement, one or more classes
of certificates of a series may be subordinate certificates. To the extent
specified in the related prospectus supplement, the rights of the holders of
subordinate certificates to receive distributions of principal and interest from
the certificate account on any distribution date will be subordinated to the
rights of the holders of senior certificates. If so provided in the related
prospectus supplement, the subordination of a class may apply only in the event
of or may be limited to certain types of losses or shortfalls. The related
prospectus supplement will set forth information concerning the amount of
subordination of a class or classes of subordinate certificates in a series, the
circumstances in which the subordination will be applicable and the manner, if
any, in which the amount of subordination will be effected.

CROSS-SUPPORT PROVISIONS

     If the assets for a series are divided into separate groups, each
supporting a separate class or classes of certificates of a series, credit
support may be provided by cross-support provisions requiring that distributions
be made on senior certificates evidencing interests in one group of mortgage
loans and mortgage-backed securities prior to distributions on subordinate
certificates evidencing interests in a different group of mortgage loans and
mortgage-backed securities within the trust fund. The prospectus supplement for
a series that includes a cross-support provision will describe the manner and
conditions for applying these provisions.

INSURANCE OR GUARANTEES FOR THE MORTGAGE LOANS

     If so provided in the prospectus supplement for a series of certificates,
the mortgage loans in the related trust fund will be covered for various default
risks by insurance policies or guarantees. A copy of any material instrument for
a series will be filed with the Securities and Exchange Commission as an exhibit
to a Current Report on Form 8-K to be filed within 15 days of issuance of the
certificates of the related series.

LETTER OF CREDIT

     If so provided in the prospectus supplement for a series of certificates,
deficiencies in amounts otherwise payable on the certificates or certain classes
thereof will be covered by one or more letters of credit, issued by the letter
of credit bank. Under a letter of credit, the letter of credit bank will be
obligated to honor draws thereunder in an aggregate fixed dollar amount, net of
unreimbursed payments thereunder, generally equal to a percentage specified in
the related prospectus supplement of the aggregate principal balance of the
mortgage loans and mortgage-backed securities on the related cut-off date or of
the initial aggregate certificate balance of one or more classes of
certificates. If so specified in the related prospectus supplement, the letter
of credit may permit draws in the event of only certain types of losses and
shortfalls. The amount available under the letter of credit will, in all cases,
be reduced to the extent of the unreimbursed payments thereunder and may
otherwise be reduced as described in the related prospectus supplement. The
obligations of the letter of credit bank under the letter of credit for each
series of certificates will expire at the earlier of the date specified in the
related prospectus supplement or the termination of the trust fund. A copy of
any letter of credit for a series will be filed with the Securities and Exchange
Commission as an exhibit to a Current Report on Form 8-K to be filed within 15
days of issuance of the certificates of the related series.


                                       70



INSURANCE POLICIES AND SURETY BONDS

     If so provided in the prospectus supplement for a series of certificates,
deficiencies in amounts otherwise payable on the certificates or certain classes
thereof will be covered by insurance policies or surety bonds provided by one or
more insurance companies or sureties. The instruments may cover, with respect to
one or more classes of certificates of the related series, timely distributions
of interest or full distributions of principal on the basis of a schedule of
principal distributions set forth in or determined in the manner specified in
the related prospectus supplement. A copy of any instrument for a series will be
filed with the Securities and Exchange Commission as an exhibit to a Current
Report on Form 8-K to be filed with the Securities and Exchange Commission
within 15 days of issuance of the certificates of the related series.

RESERVE FUNDS

     If so provided in the prospectus supplement for a series of certificates,
deficiencies in amounts otherwise payable on the certificates or certain classes
thereof will be covered by one or more reserve funds in which cash, a letter of
credit, Permitted Investments, a demand note or a combination thereof will be
deposited, in the amounts so specified in the prospectus supplement. The reserve
funds for a series may also be funded over time by depositing in the reserve
funds a specified amount of the distributions received on the related assets as
specified in the related prospectus supplement.

     Amounts on deposit in any reserve fund for a series, together with the
reinvestment income thereon, if any, will be applied for the purposes, in the
manner, and to the extent described in the related prospectus supplement. A
reserve fund may be provided to increase the likelihood of timely distributions
of principal of and interest on the certificates. If so specified in the related
prospectus supplement, reserve funds may be established to provide limited
protection against only certain types of losses and shortfalls. Following each
distribution date amounts in a reserve fund in excess of any amount required to
be maintained in the reserve fund may be released from the reserve fund under
the conditions and to the extent specified in the related prospectus supplement
and will not be available for further application to the certificates.

     Moneys deposited in any reserve funds will be invested in Permitted
Investments, except as otherwise specified in the related prospectus supplement.
Unless otherwise described in the related prospectus supplement, any
reinvestment income or other gain from these investments will be credited to the
related reserve fund for the series, and any loss resulting from these
investments will be charged to the reserve fund. However, the income may be
payable to any related master servicer or another service provider as additional
compensation. The reserve fund, if any, for a series will not be a part of the
trust fund unless otherwise described in the related prospectus supplement.

     Additional information concerning any reserve fund will be set forth in the
related prospectus supplement, including the initial balance of the reserve
fund, the balance required to be maintained in the reserve fund, the manner in
which the required balance will decrease over time, the manner of funding the
reserve fund, the purposes for which funds in the reserve fund may be applied to
make distributions to certificateholders and use of investment earnings from the
reserve fund, if any.

CREDIT SUPPORT FOR MORTGAGE-BACKED SECURITIES

     If so provided in the prospectus supplement for a series of certificates,
the mortgage-backed securities in the related trust fund or the mortgage loans
underlying the mortgage-backed securities may be covered by one or more of the
types of credit support described in this prospectus. The related prospectus
supplement will specify as to each form of credit support the information
indicated above under "Description of Credit Support--General" to the extent the
information is material and available.


                                       71



                         LEGAL ASPECTS OF MORTGAGE LOANS

     The following discussion contains general summaries of certain legal
aspects of loans secured by single-family residential properties. The legal
aspects are governed primarily by applicable state law, which laws may differ
substantially. As such, the summaries do not purport to:

          o    be complete;

          o    reflect the laws of any particular state; or

          o    encompass the laws of all states in which the security for the
               mortgage loans is situated.

The summaries are qualified in their entirety by reference to the applicable
federal and state laws governing the mortgage loans. See "Description of the
Trust Funds--Assets."

GENERAL

     All of the mortgage loans are loans evidenced by a note or bond and secured
by instruments granting a security interest in real property. The instrument
granting a security interest may be a mortgage, deed of trust, security deed or
deed to secure debt, depending upon the prevailing practice and law in the state
in which the mortgaged property is located. Any of the foregoing types of
mortgages will create a lien upon, or grant a title interest in, the subject
property. The priority of the mortgage will depend on the terms of the
particular security instrument, as well as separate, recorded, contractual
arrangements with others holding interests in the mortgaged property, the
knowledge of the parties to the instrument as well as the order of recordation
of the instrument in the appropriate public recording office. However, recording
does not generally establish priority over governmental claims for real estate
taxes and assessments and other charges imposed under governmental police
powers.

TYPES OF MORTGAGE INSTRUMENTS

     A mortgage either creates a lien against or constitutes a conveyance of
real property between two parties:

          o    a mortgagor--the borrower and usually the owner of the subject
               property, and

          o    a mortgagee--the lender.

     In contrast, a deed of trust is a three-party instrument, among:

          o    a trustor--the equivalent of a borrower,

          o    a trustee to whom the mortgaged property is conveyed, and

          o    a beneficiary--the lender--for whose benefit the conveyance is
               made.

     Under a deed of trust, the borrower grants the property, irrevocably until
the debt is paid, in trust, generally with a power of sale as security for the
indebtedness evidenced by the related note. A deed to secure debt typically has
two parties.

     By executing a 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 time that the underlying debt is repaid, generally with a power of
sale as security for the indebtedness evidenced by the related mortgage note. If
a borrower under a mortgage is a land trust, there would be an additional party
because legal title to the property is held by a land trustee under a land trust
agreement for the benefit of the borrower. At origination of a mortgage loan
involving a land trust, the borrower executes a separate undertaking to make
payments on the mortgage note. The lender's authority under a mortgage, the
trustee's authority under a deed of trust and the grantee's authority under a
deed to secure debt are governed by


                                       72



the express provisions of the mortgage, the law of the state in which the real
property is located, certain federal laws including, without limitation, the
Soldiers' and Sailors' Civil Relief Act of 1940 and, in some cases, in deed of
trust transactions, the directions of the beneficiary.

INTEREST IN REAL PROPERTY

     The real property covered by a mortgage, deed of trust, security deed or
deed to secure debt is most often the fee estate in land and improvements.
However, the mortgage or other instrument may encumber other interests in real
property such as:

          o    a tenant's interest in a lease of land or improvements, or both,
               and

          o    the leasehold estate created by the lease.

A mortgage or other instrument covering an interest in real property other than
the fee estate requires special provisions in the instrument creating the
interest to protect the lender against termination of the interest before the
note secured by the mortgage, deed of trust, security deed or deed to secure
debt is paid. To the extent specified in the prospectus supplement, Morgan
Stanley Capital I Inc. or the asset seller will make certain representations and
warranties in the Agreement with respect to any mortgage loans that are secured
by an interest in a leasehold estate. The representations and warranties, if
applicable, will be set forth in the prospectus supplement.

COOPERATIVE LOANS

     If specified in the prospectus supplement relating to a series of offered
certificates, the mortgage loans may also consist of cooperative apartment loans
secured by security interests in shares issued by a cooperative and in the
related proprietary leases or occupancy agreements granting exclusive rights to
occupy specific dwelling units in the cooperatives' buildings. The security
agreement will create a lien upon, or grant a title interest in, the property
which it covers, the priority of which will depend on the terms of the
particular security agreement as well as the order of recordation of the
agreement in the appropriate recording office. This type of lien or title
interest is not prior to the lien for real estate taxes and assessments and
other charges imposed under governmental police powers.

     Each cooperative owns in fee or has a leasehold interest in all the real
property and owns in fee or leases the building and all separate dwelling units
therein. The cooperative is directly responsible for property management and, in
most cases, payment of real estate taxes, other governmental impositions and
hazard and liability insurance. If there is a blanket mortgage or mortgages on
the cooperative apartment building or underlying land, as is generally the case,
or an underlying lease of the land, as is the case in some instances, the
cooperative, as property borrower, or lessee, as the case may be, is also
responsible for meeting these mortgage or rental obligations. A blanket mortgage
is ordinarily incurred by the cooperative in connection with either the
construction or purchase of the cooperative's apartment building or obtaining of
capital by the cooperative. The interest of the occupant under proprietary
leases or occupancy agreements as to which that cooperative is the landlord are
generally subordinate to the interest of the holder of a blanket mortgage and to
the interest of the holder of a land lease. If the cooperative is unable to meet
the payment obligations:

          o    arising under a blanket mortgage, the lender holding a blanket
               mortgage could foreclose on that mortgage and terminate all
               subordinate proprietary leases and occupancy agreements, or

          o    arising under its land lease, the holder of the landlord's
               interest under the land lease could terminate it and all
               subordinate proprietary leases and occupancy agreements.

     Also, a blanket mortgage on a cooperative may provide financing in the form
of a mortgage that does not fully amortize, with a significant portion of
principal being due in one final payment at maturity. The inability of the
cooperative to refinance a mortgage and its consequent inability to make the
final payment could lead to foreclosure by the lender. Similarly, a land lease
has an expiration date and the inability of the cooperative to extend its term
or, in the alternative, to purchase the land could lead to termination of the
cooperatives' interest in the property and termination of all proprietary leases
and occupancy agreement. In either event, a foreclosure by the holder of a
blanket mortgage or the termination of the underlying lease could eliminate or
significantly diminish the value of any


                                       73



collateral held by the lender that financed the purchase by an individual tenant
stockholder of cooperative shares or, in the case of the mortgage loans, the
collateral securing the cooperative loans.

     The cooperative is owned by tenant-stockholders who, through ownership of
stock or shares in the corporation, receive proprietary lease 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 occupancy rights are financed through
a cooperative share loan evidenced by a promissory note and secured by an
assignment of and a security interest in the occupancy agreement or proprietary
lease and a security interest in the related cooperative shares. The lender
generally takes possession of the share certificate and a counterpart of the
proprietary lease or occupancy agreement and a financing statement covering the
proprietary lease or occupancy agreement and the cooperative shares is filed in
the appropriate state and local offices to perfect the lender's interest in its
collateral. Subject to the limitations discussed below, upon default of the
tenant-stockholder, the lender may sue for judgment on the 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. See "--Foreclosure--Cooperative
Loans" below.

FORECLOSURE

     General

     Foreclosure is a legal procedure that allows the lender to recover its
mortgage debt by enforcing its rights and available legal remedies under the
mortgage. If the borrower defaults in payment or performance of its obligations
under the note or mortgage, the lender has the right to institute foreclosure
proceedings to sell the mortgaged property at public auction to satisfy the
indebtedness.

     Foreclosure procedures with respect to the enforcement of a mortgage vary
from state to state. Two primary methods of foreclosing a mortgage are judicial
foreclosure and non-judicial foreclosure pursuant to a power of sale granted in
the mortgage instrument. There are several other foreclosure procedures
available in some states that are either infrequently used or available only in
certain limited circumstances, such as strict foreclosure.

     Judicial Foreclosure

     A judicial foreclosure proceeding is conducted in a court having
jurisdiction over the mortgaged property. Generally, the action is initiated by
the service of legal pleadings upon all parties having an interest of record in
the real property. Delays in completion of the foreclosure may occasionally
result from difficulties in locating defendants. When the lender's right to
foreclose is contested, the legal proceedings can be time-consuming. Upon
successful completion of a judicial foreclosure proceeding, the court generally
issues a judgment of foreclosure and appoints a referee or other officer to
conduct a public sale of the mortgaged property, the proceeds of which are used
to satisfy the judgment. The sales are made in accordance with procedures that
vary from state to state.

     Equitable Limitations on Enforceability of Certain Provisions

     United States courts have traditionally imposed general equitable
principles to limit the remedies available to a lender in connection with
foreclosure. These equitable principles are generally designed to relieve the
borrower from the legal effect of mortgage defaults, to the extent that the
effect is perceived as harsh or unfair. Relying on these principles, a court may
alter the specific terms of a loan to the extent it considers necessary to
prevent or remedy an injustice, undue oppression or overreaching, or may require
the lender to undertake affirmative and expensive actions to determine the cause
of the borrower's default and the likelihood that the borrower will be able to
reinstate the loan. In some cases, courts have substituted their judgment for
the lender's and have required that lenders reinstate loans or recast payment
schedules in order to accommodate borrowers who are suffering from a temporary
financial disability. In other cases, courts have limited the right of the
lender to foreclose if the default under the mortgage is not monetary, e.g., the
borrower failed to maintain the mortgaged property adequately or the borrower
executed a junior mortgage on the mortgaged property. The exercise by the court
of its equity powers will depend on the individual


                                       74



circumstances of each case presented to it. Finally, some courts have been faced
with the issue of whether federal or state constitutional provisions reflecting
due process concerns for adequate notice require that a borrower receive notice
in addition to statutorily-prescribed minimum notice. For the most part, these
cases have upheld the reasonableness of the notice provisions or have found that
a public sale under a mortgage providing for a power of sale does not involve
sufficient state action to afford constitutional protections to the borrower.

     Non-Judicial Foreclosure/Power of Sale

     Foreclosure of a deed of trust is generally accomplished by a non-judicial
trustee's sale pursuant to the power of sale granted in the deed of trust. A
power of sale is typically granted in a deed of trust. It may also be contained
in any other type of mortgage instrument. A power of sale allows a non-judicial
public sale to be conducted generally following a request from the
beneficiary/lender to the trustee to sell the property upon any default by the
borrower under the terms of the mortgage note or the mortgage instrument and
after notice of sale is given in accordance with the terms of the mortgage
instrument, as well as applicable state law. In some states, prior to the sale,
the trustee under a deed of trust must record a notice of default and notice of
sale and send a copy to the borrower and to any other party who has recorded a
request for a copy of a notice of default and notice of sale. In addition, in
some states the trustee must provide notice to any other party having an
interest of record in the real property, including junior lienholders. A notice
of sale must be posted in a public place and, in most states, published for a
specified period of time in one or more newspapers. The borrower or junior
lienholder may then have the right, during a reinstatement period required in
some states, to cure the default by paying the entire actual amount in arrears,
without acceleration, plus the expenses incurred in enforcing the obligation. In
other states, the borrower or the junior lienholder is not provided a period to
reinstate the loan, but has only the right to pay off the entire debt to prevent
the foreclosure sale. Generally, the procedure for public sale, the parties
entitled to notice, the method of giving notice and the applicable time periods
are governed by state law and vary among the states. Foreclosure of a deed to
secure debt is also generally accomplished by a non-judicial sale similar to
that required by a deed of trust, except that the lender or its agent, rather
than a trustee, is typically empowered to perform the sale in accordance with
the terms of the deed to secure debt and applicable law.

     Public Sale

     A third party may be unwilling to purchase a mortgaged property at a public
sale because of the difficulty in determining the value of the property at the
time of sale, due to, among other things, redemption rights which may exist and
the possibility of physical deterioration of the property during the foreclosure
proceedings. For these reasons, it is common for the lender to purchase the
mortgaged property for an amount equal to or less than the underlying debt and
accrued and unpaid interest plus the expenses of foreclosure. Generally, state
law controls the amount of foreclosure costs and expenses which may be recovered
by a lender. Thereafter, subject to the borrower's right in some states to
remain in possession during a redemption period, if applicable, the lender will
become the owner of the property and have both the benefits and burdens of
ownership of the mortgaged property. For example, the lender will become
obligated to pay taxes, obtain casualty insurance and to make the repairs at its
own expense as are 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. Moreover, a lender commonly
incurs substantial legal fees and court costs in acquiring a mortgaged property
through contested foreclosure or bankruptcy proceedings. Generally, state law
controls the amount of foreclosure expenses and costs, including attorneys'
fees, that may be recovered by a lender.

     A junior lender may not foreclose on the property securing the junior
mortgage unless it forecloses subject to senior mortgages and any other prior
liens, in which case it may be obliged to make payments on the senior mortgages
to avoid their foreclosure. In addition, in the event that the foreclosure of a
junior mortgage triggers the enforcement of a "due-on-sale clause" contained in
a senior mortgage, the junior lender may be required to pay the full amount of
the senior mortgage to avoid its foreclosure. Accordingly, with respect to those
mortgage loans, if any, that are junior mortgage loans, if the lender purchases
the property the lender's title will be subject to all senior mortgages, prior
liens and certain governmental liens.

     The proceeds received by the referee or trustee from the sale are applied
first to the costs, fees and expenses of sale and then in satisfaction of the
indebtedness secured by the mortgage under which the sale was conducted. Any


                                       75



proceeds remaining after satisfaction of senior mortgage debt are generally
payable to the holders of junior mortgages and other liens and claims in order
of their priority, whether or not the borrower is in default. Any additional
proceeds are generally payable to the borrower. The payment of the proceeds to
the holders of junior mortgages may occur in the foreclosure action of the
senior mortgage or a subsequent ancillary proceeding or may require the
institution of separate legal proceedings by these holders.

     REO Properties

     If title to any mortgaged property is acquired by the trustee on behalf of
the certificateholders, the master servicer or any related subservicer, on
behalf of the certificateholders, will be required to sell the mortgaged
property by the close of the third calendar year following the year of
acquisition, unless:

          o    the Internal Revenue Service grants an REO extension or

          o    it obtains an opinion of counsel generally to the effect that the
               holding of the property beyond the close of the third calendar
               year after its acquisition will not result in the imposition of a
               tax on the trust fund or cause any REMIC created pursuant to the
               Agreement to fail to qualify as a REMIC under the Internal
               Revenue Code.

Subject to the foregoing, the master servicer or any related subservicer will
generally be required to solicit bids for any mortgaged property so acquired in
a manner as will be reasonably likely to realize a fair price for the property.
The master servicer or any related subservicer may retain an independent
contractor to operate and manage any REO property; however, the retention of an
independent contractor will not relieve the master servicer or any related
subservicer of its obligations with respect to the REO property.

     In general, the master servicer or any related subservicer or an
independent contractor employed by the master servicer or any related
subservicer at the expense of the trust fund will be obligated to operate and
manage any mortgaged property acquired as REO property in a manner that would,
to the extent commercially feasible, maximize the trust fund's net after-tax
proceeds from the property. After the master servicer or any related subservicer
reviews the operation of the property and consults with the trustee to determine
the trust fund's federal income tax reporting position with respect to the
income it is anticipated that the trust fund would derive from the property, the
master servicer or any related subservicer could determine, particularly in the
case of an REO property that is a hospitality or residential health care
facility, that it would not be commercially feasible to manage and operate the
property in a manner that would avoid the imposition of an REO Tax. To the
extent that income the trust fund receives from an REO property is subject to a
tax on (i) "net income from foreclosure property" that income would be subject
to federal income tax at the highest marginal corporate tax rate--currently 35%
or (ii) "prohibited transactions," that income would be subject to federal
income tax at a 100% rate. The determination as to whether income from an REO
property would be subject to an REO Tax will depend on the specific facts and
circumstances relating to the management and operation of each REO property.
Generally, income from an REO property that is directly operated by the master
servicer or any related subservicer would be apportioned and classified as
"service" or "non-service" income. The "service" portion of the income could be
subject to federal income tax either at the highest marginal corporate tax rate
or at the 100% rate on "prohibited transactions," and the "non-service" portion
of the income could be subject to federal income tax at the highest marginal
corporate tax rate or, although it appears unlikely, at the 100% rate applicable
to "prohibited transactions." Any REO Tax imposed on the trust fund's income
from an REO property would reduce the amount available for distribution to
certificateholders.

     Certificateholders are advised to consult their tax advisors regarding the
possible imposition of REO Taxes in connection with the operation of commercial
REO properties by REMICs. See "Federal Income Tax Consequences" in this
prospectus and "Federal Income Tax Consequences" in the prospectus supplement.

     Rights of Redemption

     The purposes of a foreclosure action are to enable the lender to realize
upon its security and to bar the borrower, and all persons who have an interest
in the property which is subordinate to the mortgage being foreclosed, from
exercise of their "equity of redemption." The doctrine of equity of redemption
provides that, until the property covered by a mortgage has been sold in
accordance with a properly conducted foreclosure and foreclosure sale, those


                                       76



having an interest which is subordinate to that of the foreclosing lender have
an equity of redemption and may redeem the property by paying the entire debt
with interest. In addition, in some states, when a foreclosure action has been
commenced, the redeeming party must pay certain costs of the action. Those
having an equity of redemption must generally be made parties and joined in the
foreclosure proceeding in order for their equity of redemption to be cut off and
terminated.

     The equity of redemption is a common-law or non-statutory right which
exists prior to completion of the foreclosure, is not waivable by the borrower,
must be exercised prior to foreclosure sale and should be distinguished from the
post-sale statutory rights of redemption. In some states, after sale pursuant to
a deed of trust or foreclosure of a mortgage, the borrower and foreclosed junior
lienors are given a statutory period in which to redeem the property from the
foreclosure sale. In some states, statutory redemption may occur only upon
payment of the foreclosure sale price. In other states, redemption may be
authorized if the former borrower pays only a portion of the sums due. The
effect of a statutory right of redemption is to diminish the ability of the
lender to sell the foreclosed property. The exercise of a right of redemption
would defeat the title of any purchaser from a foreclosure sale or sale under a
deed of trust. Consequently, the practical effect of the redemption right is to
force the lender to maintain the property and pay the expenses of ownership
until the redemption period has expired. In some states, a post-sale statutory
right of redemption may exist following a judicial foreclosure, but not
following a trustee's sale under a deed of trust.

     Under the REMIC provisions currently in effect, property acquired by
foreclosure generally must not be held beyond the close of the third calendar
year following the year of acquisition. Unless otherwise provided in the related
prospectus supplement, with respect to a series of certificates for which an
election is made to qualify the trust fund or a part thereof as a REMIC, the
Agreement will permit foreclosed property to be held beyond the close of the
third calendar year following the year of acquisition if the Internal Revenue
Service grants an extension of time within which to sell the property or
independent counsel renders an opinion to the effect that holding the property
for such additional period is permissible under the REMIC provisions.

     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 by-laws, 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
permit the cooperative to terminate the lease or agreement in the event an
obligor fails to make payments or defaults in the performance of covenants
required thereunder. Typically, the lender and the cooperative enter into a
recognition agreement which establishes the rights and obligations of both
parties in the event of a default by the tenant-stockholder under the
proprietary lease or occupancy agreement which will usually constitute a default
under the security agreement between the lender and the tenant-stockholder.

     The recognition agreement generally provides that, in the event that the
tenant-stockholder has defaulted under the proprietary lease or occupancy
agreement, the cooperative will take no action to terminate the lease or
agreement until the lender has been provided with 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
thereon.

     Recognition agreements also provide that in the event of a foreclosure on 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, foreclosure on the cooperative shares is accomplished by a
sale in accordance with the provisions of Article 9 of the Uniform Commercial
Code and the security agreement relating to those shares. Article 9 of the
Uniform Commercial Code 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


                                       77



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 Uniform Commercial Code 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 cooperatives to receive sums due
under the proprietary lease or occupancy agreement. If there are proceeds
remaining, the lender must account to the tenant-stockholder for the surplus.
Conversely, if a portion of the indebtedness remains unpaid, the
tenant-stockholder is generally responsible for the deficiency.

     In the case of foreclosure on a building which was 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 which apply to certain tenants who
elected to remain in the building was so converted.

JUNIOR MORTGAGES

     Some of the mortgage loans may be secured by junior mortgages or deeds of
trust, which are subordinate to first mortgages or deeds of trust held by other
lenders. The rights of the trust fund as the holder of a junior deed of trust or
a junior mortgage are subordinate in lien and in payment to those of the holder
of the senior mortgage or deed of trust, including the prior rights of the
senior lender or beneficiary to receive and apply hazard insurance and
condemnation proceeds and, upon default of the borrower, to cause a foreclosure
on the property. Upon completion of the foreclosure proceedings by the holder of
the senior mortgage or the sale pursuant to the deed of trust, the junior
lender's or junior beneficiary's lien will be extinguished unless the junior
lienholder satisfies the defaulted senior loan or asserts its subordinate
interest in a property in foreclosure proceedings. See "--Foreclosure" in this
prospectus.

     Furthermore, because the terms of the junior mortgage or deed of trust are
subordinate to the terms of the first mortgage or deed of trust, in the event of
a conflict between the terms of the first mortgage or deed of trust and the
junior mortgage or deed of trust, the terms of the first mortgage or deed of
trust will generally govern. Upon a failure of the borrower or trustor to
perform any of its obligations, the senior lender or beneficiary, subject to the
terms of the senior mortgage or deed of trust, may have the right to perform the
obligation itself. Generally, all sums so expended by the lender or beneficiary
become part of the indebtedness secured by the mortgage or deed of trust. To the
extent a first lender expends these sums, such sums will generally have priority
over all sums due under the junior mortgage.

ANTI-DEFICIENCY LEGISLATION AND OTHER LIMITATIONS ON LENDERS

     Statutes in some states limit the right of a beneficiary under a deed of
trust or a lender under a mortgage to obtain a deficiency judgment against the
borrower following foreclosure or sale under a deed of trust. A deficiency
judgment would be a personal judgment against the former borrower equal to the
difference between the net amount realized upon the public sale of the real
property and the amount due to the lender. Some states require the lender to
exhaust the security afforded under a mortgage by foreclosure in an attempt to
satisfy the full debt before bringing a personal action against the borrower. In
certain other states, the lender has the option of bringing a personal action
against the borrower on the debt without first exhausting the security; however,
in some of these states, the lender, following judgment on a personal action,
may be deemed to have elected a remedy and may be precluded from exercising
remedies with respect to the security. In some cases, a lender will be precluded
from exercising any additional rights under the note or mortgage if it has taken
any prior enforcement action. Consequently, the practical effect of the election
requirement, in those states permitting such election, is that lenders will
usually proceed against the security first rather than bringing a personal
action against the borrower. Finally, other statutory provisions limit any
deficiency judgment against the former borrower following a judicial sale to the
excess of the outstanding debt over the fair market value of the property at the
time of the public sale. The purpose of these statutes is generally to prevent a
lender from obtaining a large deficiency judgment against the former borrower as
a result of low or no bids at the judicial sale.

     In addition to laws limiting or prohibiting deficiency judgments, numerous
other federal and state statutory provisions, including the federal bankruptcy
laws and state laws affording relief to debtors, may interfere with or


                                       78



affect the ability of the secured mortgage lender to realize upon collateral or
enforce a deficiency judgment. For example, with respect to federal bankruptcy
law, a court with federal bankruptcy jurisdiction may permit a debtor through
his or her Chapter 11 or Chapter 13 rehabilitative plan to cure a monetary
default in respect of a mortgage loan on a debtor's residence by paying
arrearages within a reasonable time period and reinstating the original mortgage
loan payment schedule even though the lender accelerated the mortgage loan and
final judgment of foreclosure had been entered in state court (provided no sale
of the residence had yet occurred) prior to the filing of the debtor's petition.
Some courts with federal bankruptcy jurisdiction have approved plans, based on
the particular facts of the reorganization case, that effected the curing of a
mortgage loan default by paying arrearages over a number of years.

     Courts with federal bankruptcy jurisdiction have also indicated that the
terms of a mortgage loan secured by property of the debtor may be modified.
These courts have allowed modifications that include reducing the amount of each
monthly payment, changing the rate of interest, altering the repayment schedule,
forgiving all or a portion of the debt and reducing the lender's security
interest to the value of the residence, thus leaving the lender a general
unsecured creditor for the difference between the value of the residence and the
outstanding balance of the loan. Generally, however, the terms of a mortgage
loan secured only by a mortgage on real property that is the debtor's principal
residence may not be modified pursuant to a plan confirmed pursuant to Chapter
11 or Chapter 13 except with respect to mortgage payment arrearages, which may
be cured within a reasonable time period.

     Certain tax liens arising under the Internal Revenue Code of 1986, as
amended, may in certain circumstances provide priority over the lien of a
mortgage or deed of trust. In addition, substantive requirements are imposed
upon mortgage lenders in connection with the origination and the servicing of
mortgage loans by numerous federal and some state consumer protection laws.
These laws include the federal Truth-in-Lending Act, Real Estate Settlement
Procedures Act, Equal Credit Opportunity Act, Fair Credit Billing Act, Fair
Credit Reporting Act and related statutes. These federal laws impose specific
statutory liabilities upon lenders who originate mortgage loans and who fail to
comply with the provisions of the law. In some cases this liability may affect
assignees of the mortgage loans.

     Generally, Article 9 of the Uniform Commercial Code governs foreclosure on
cooperative shares and the related proprietary lease or occupancy agreement.
Some courts have interpreted section 9-504 of the Uniform Commercial Code 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 LEGISLATION

     Certain states impose a statutory lien for associated costs on property
that is the subject of a cleanup action by the state on account of hazardous
wastes or hazardous substances released or disposed of on the property. Such a
lien will generally have priority over all subsequent liens on the property and,
in certain of these states, will have priority over prior recorded liens
including the lien of a mortgage. In addition, under federal environmental
legislation and under state law in a number of states, a secured party that
takes a deed in lieu of foreclosure or acquires a mortgaged property at a
foreclosure sale or becomes involved in the operation or management of a
property so as to be deemed an "owner" or "operator" of the property may be
liable for the costs of cleaning up a contaminated site. Although such costs
could be substantial, it is unclear whether they would be imposed on a lender
(such as a trust fund) secured by residential real property. In the event that
title to a mortgaged property securing a mortgage loan in a trust fund was
acquired by the trust fund and cleanup costs were incurred in respect of the
mortgaged property, the holders of the related series of certificates might
realize a loss if such costs were required to be paid by the trust fund.

DUE-ON-SALE CLAUSES

     Unless the related prospectus supplement indicates otherwise, the mortgage
loans will contain due-on-sale clauses. These clauses generally provide that the
lender may accelerate the maturity of the loan if the borrower sells, transfers
or conveys the related mortgaged property. The enforceability of "due-on-sale"
clauses has been the subject of legislation or litigation in many states and, in
some cases, the enforceability of these clauses was limited or denied. However,
with respect to certain loans the Garn-St Germain Depository Institutions Act of
1982 preempts state constitutional, statutory and case law that prohibits the
enforcement of due-on-sale clauses and permits lenders to enforce these clauses
in accordance with their terms, subject to certain limited exceptions.
Due-on-sale clauses


                                       79



contained in mortgage loans originated by federal savings and loan associations
of federal savings banks are fully enforceable pursuant to regulations of the
United States Federal Home Loan Bank Board, as succeeded by the Office of Thrift
Supervision, which preempt state law restrictions on the enforcement of these
clauses. Similarly, "due-on-sale" clauses in mortgage loans made by national
banks and federal credit unions are now fully enforceable pursuant to preemptive
regulations of the Comptroller of the Currency and the National Credit Union
Administration, respectively.

     The Garn-St Germain Act also sets forth nine specific instances in which a
mortgage lender covered by the act (including federal savings and loan
associations and federal savings banks) may not exercise a "due-on-sale" clause,
notwithstanding the fact that a transfer of the property may have occurred.
These include intra-family transfers, certain transfers by operation of law,
leases of fewer than three years and the creation of a junior encumbrance.
Regulations promulgated under the Garn-St Germain Act also prohibit the
imposition of a prepayment penalty upon the acceleration of a loan pursuant to a
due-on-sale clause. The inability to enforce a "due-on-sale" clause may result
in a mortgage that bears an interest rate below the current market rate being
assumed by a new home buyer rather than being paid off, 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 secured by
liens encumbering owner-occupied residential properties, if the loans are paid
prior to maturity. Since many of the mortgaged properties will be
owner-occupied, it is anticipated that prepayment charges may not be imposed
with respect to many of the mortgage loans. The absence of a restraint on
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.

SUBORDINATE FINANCING

     Where a borrower encumbers mortgaged property with one or more junior
liens, the senior lender is subjected to additional risks including:

          o    the borrower may have difficulty servicing and repaying multiple
               loans;

          o    if the junior loan permits recourse to the borrower--as junior
               loans often do--and the senior loan does not, a borrower may be
               more likely to repay sums due on the junior loan than those on
               the senior loan;

          o    acts of the senior lender that prejudice the junior lender or
               impair the junior lender's security may create a superior equity
               in favor of the junior lender. For example, if the borrower and
               the senior lender agree to an increase in the principal amount of
               or the interest rate payable on the senior loan, the senior
               lender may lose its priority to the extent any existing junior
               lender is harmed or the borrower is additionally burdened;

          o    if the borrower defaults on the senior loan or any junior loan or
               loans, the existence of junior loans and actions taken by junior
               lenders can impair the security available to the senior lender
               and can interfere with or delay the taking of action by the
               senior lender; and

          o    the bankruptcy of a junior lender may operate to stay foreclosure
               or similar proceedings by the senior lender.

APPLICABILITY OF USURY LAWS

     Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980, enacted in March 1980, provides that state usury limitations shall
not apply to certain types of residential first mortgage loans originated by
certain lenders after March 31, 1980. A similar federal statute was in effect
with respect to mortgage loans made during the first three months of 1980. The
Office of Thrift Supervision is authorized to issue rules and regulations and to
publish interpretations governing implementation of Title V. The statute
authorized any state to reimpose interest


                                       80



rate limits by adopting, before April 1, 1983, a law or constitutional provision
that expressly rejects application of the federal law. In addition, even where
Title V is not so rejected, any state is authorized by the law to adopt a
provision limiting discount points or other charges on mortgage loans covered by
Title V. Certain states have taken action to reimpose interest rate limits or to
limit discount points or other charges.

     Morgan Stanley Capital I Inc. has been advised by counsel that a court
interpreting Title V would hold that residential first mortgage loans that are
originated on or after January 1, 1980 are subject to federal preemption.
Therefore, in a state that has not taken the requisite action to reject
application of Title V or to adopt a provision limiting discount points or other
charges prior to origination of mortgage loans, any such limitation under the
state's usury law would not apply to the mortgage loans.

     In any state in which application of Title V has been expressly rejected or
a provision limiting discount points or other charges is adopted, no mortgage
loan originated after the date of the state action will be eligible for
inclusion in a trust fund unless the mortgage loan provides:

          o    the interest rate, discount points and charges as are permitted
               in that state; or

          o    that the terms of the loan shall be construed in accordance with
               the laws of another state under which the interest rate, discount
               points and charges would not be usurious and the borrower's
               counsel has rendered an opinion that the choice of law provision
               would be given effect.

     Statutes differ in their provisions as to the consequences of a usurious
loan. One group of statutes requires the lender to forfeit the interest due
above the applicable limit or impose a specified penalty. Under this statutory
scheme, the borrower may cancel the recorded mortgage or deed of trust upon
paying its debt with lawful interest, and the lender may foreclose, but only for
the debt plus lawful interest. A second group of statutes is more severe. A
violation of this type of usury law results in the invalidation of the
transaction, thereby permitting the borrower to cancel the recorded mortgage or
deed of trust without any payment or prohibiting the lender from foreclosing.

ALTERNATIVE MORTGAGE INSTRUMENTS

     Alternative mortgage instruments, including adjustable rate mortgage loans
and early ownership mortgage loans, originated by non-federally chartered
lenders have historically been subject to a variety of restrictions. The
restrictions differed from state to state, resulting in difficulties in
determining whether a particular alternative mortgage instrument originated by a
state-chartered lender was in compliance with applicable law. These difficulties
were alleviated substantially as a result of the enactment of Title VIII of the
Garn-St Germain Act. Title VIII of the Garn-St Germain Act provides that,
notwithstanding any state law to the contrary:

          o    state-chartered banks may originate alternative mortgage
               instruments in accordance with regulations promulgated by the
               Comptroller of the Currency with respect to origination of
               alternative mortgage instruments by national banks;

          o    state-chartered credit unions may originate alternative mortgage
               instruments in accordance with regulations promulgated by the
               National Credit Union Administration with respect to origination
               of alternative mortgage instruments by federal credit unions; and

          o    all other non-federally chartered housing creditors, including
               state-chartered savings and loan associations, state-chartered
               savings banks and mutual savings banks and mortgage banking
               companies, may originate alternative mortgage instruments in
               accordance with the regulations promulgated by the Federal Home
               Loan Bank Board, predecessor to the Office of Thrift Supervision,
               with respect to origination of alternative mortgage instruments
               by federal savings and loan associations.

     Title VIII of the Garn-St Germain Act provides that any state may reject
applicability of the provisions of Title VIII of the Garn-St Germain Act by
adopting, prior to October 15, 1985, a law or constitutional provision expressly
rejecting the applicability of the provisions. Certain states have taken this
type of action.


                                       81



SERVICEMEMBERS' CIVIL RELIEF ACT

     Under the terms of the Servicemembers' Civil Relief Act (formerly known as
the Soldiers' and Sailors' Civil Relief Act of 1940), as amended, a borrower who
enters military service after the origination of a mortgage loan, including a
borrower who was in reserve status and is called to active duty after
origination of the mortgage loan, may not be charged interest, including fees
and charges, above an annual rate of 6% during the period of the borrower's
active duty status, unless a court orders otherwise upon application of the
lender. The Servicemembers' Civil Relief Act, as amended, applies to borrowers
who are members of the Army, Navy, Air Force, Marines, National Guard, Reserves,
Coast Guard and officers of the U.S. Public Health Service assigned to duty with
the military. Because the Servicemembers' Civil Relief Act, as amended, applies
to borrowers who enter military service, including reservists who are called to
active duty, after origination of the related mortgage loan, no information can
be provided as to the number of loans that may be affected by the
Servicemembers' Civil Relief Act, as amended. Application of the Servicemembers'
Civil Relief Act, as amended, would adversely affect, for an indeterminate
period of time, the ability of any servicer to collect full amounts of interest
on certain of the mortgage loans. Any shortfalls in interest collections
resulting from the application of the Servicemembers' Civil Relief Act, as
amended, would result in a reduction of the amounts distributable to the holders
of the related series of certificates, and would not be covered by advances or,
to the extent specified in the related prospectus supplement, any form of credit
support provided in connection with the certificates. In addition, the Soldiers'
and Sailors' Civil Relief Act of 1940, as amended, imposes limitations that
would impair the ability of the servicer to foreclose on an affected mortgage
loan during the borrower's period of active duty status, and, under certain
circumstances, during an additional three month period thereafter. Thus, in the
event that an affected mortgage loan goes into default, there may be delays and
losses occasioned thereby.

FORFEITURE FOR DRUG, RICO AND MONEY LAUNDERING VIOLATIONS

     Federal law provides that property purchased or improved with assets
derived from criminal activity or otherwise tainted, or used in the commission
of certain offenses, can be seized and ordered forfeited to the United States of
America. The offenses which can trigger such a seizure and forfeiture include,
among others, violations of the Racketeer Influenced and Corrupt Organizations
Act, the Bank Secrecy Act, the anti-money laundering laws and regulations,
including the USA Patriot Act of 2001 and the regulations issued pursuant to
that Act, as well as the narcotic drug laws. In many instances, the United
States may seize the property even before a conviction occurs.

     In the event of a forfeiture proceeding, a lender may be able to establish
its interest in the property by proving that (1) its mortgage was executed and
recorded before the commission of the illegal conduct from which the assets used
to purchase or improve the property were derived or before the commission of any
other crime upon which the forfeiture is based, or (2) the lender, at the time
of the execution of the mortgage, "did not know or was reasonably without cause
to believe that the property was subject to forfeiture." However, there is no
assurance that such a defense will be successful.


                                       82



                         FEDERAL INCOME TAX CONSEQUENCES

     The following summary of the anticipated material federal income tax
consequences of the purchase, ownership and disposition of offered certificates
is based on the advice of Sidley Austin Brown & Wood LLP or Latham & Watkins LLP
or Cadwalader, Wickersham & Taft LLP, counsel to Morgan Stanley Capital I Inc.
This summary is based on laws, regulations, including the REMIC Regulations
promulgated by the Treasury Department, rulings and decisions now in effect or,
with respect to regulations, proposed, all of which are subject to change either
prospectively or retroactively. This summary does not address the federal income
tax consequences of an investment in certificates applicable to all categories
of investors, some of which, for example, banks and insurance companies, may be
subject to special rules. Prospective investors should consult their tax
advisors regarding the federal, state, local and any other tax consequences to
them of the purchase, ownership and disposition of certificates.

GENERAL

     The federal income tax consequences to certificateholders will vary
depending on whether an election is made to treat the trust fund relating to a
particular series of certificates as a REMIC under the Internal Revenue Code.
The prospectus supplement for each series of certificates will specify whether
one or more REMIC elections will be made.

GRANTOR TRUST FUNDS

     If a REMIC election is not made, Sidley Austin Brown & Wood LLP or
Cadwalader, Wickersham & Taft LLP or Latham & Watkins LLP will deliver its
opinion that the trust fund will not be classified as an association taxable as
a corporation and that the trust fund will be classified as a grantor trust
under subpart E, Part I of subchapter J of Chapter 1 of Subtitle A of the
Internal Revenue Code. In this case, owners of certificates will be treated for
federal income tax purposes as owners of a portion of the trust fund's assets as
described in this section of the prospectus.

A. SINGLE CLASS OF GRANTOR TRUST CERTIFICATES

     Characterization. The trust fund may be created with one class of grantor
trust certificates. In this case, each grantor trust certificateholder will be
treated as the owner of a pro rata undivided interest in the interest and
principal portions of the trust fund represented by the grantor trust
certificates and will be considered the equitable owner of a pro rata undivided
interest in each of the mortgage loans and mortgage-backed securities in the
pool. Any amounts received by a grantor trust certificateholder in lieu of
amounts due with respect to any mortgage loan and mortgage-backed security
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 grantor trust certificateholder will be required to report on its
federal income tax return in accordance with the grantor trust
certificateholder's method of accounting its pro rata share of the entire income
from the mortgage loans in the trust fund represented by grantor trust
certificates, including interest, original issue discount, if any, prepayment
fees, assumption fees, any gain recognized upon an assumption and late payment
charges received by the master servicer. Under Internal Revenue Code Sections
162 or 212, each grantor trust certificateholder will be entitled to deduct its
pro rata share of servicing fees, prepayment fees, assumption fees, any loss
recognized upon an assumption and late payment charges retained by the master
servicer, provided that the amounts are reasonable compensation for services
rendered to the trust fund. Grantor trust certificateholders that are
individuals, estates or trusts will be entitled to deduct their share of
expenses as itemized deductions only to the extent these expenses plus all other
Internal Revenue Code Section 212 expenses exceed two percent of its adjusted
gross income. In addition, the amount of itemized deductions otherwise allowable
for the taxable year for an individual whose adjusted gross income exceeds the
applicable amount under Internal Revenue Code Section 68(b)--which amount will
be adjusted for inflation--will be reduced by the lesser of:

          o    3% of the excess of adjusted gross income over the applicable
               amount and

          o    80% of the amount of itemized deductions otherwise allowable for
               such taxable year.


                                       83



     This limitation will be phased out beginning in 2006 and eliminated after
2009.

     In general, a grantor trust certificateholder 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 master servicer or, with respect to
original issue discount or certain other income items for which the
certificateholder has made an election, as the amounts are accrued by the trust
fund on a constant interest basis, and will be entitled to claim its pro rata
share of deductions, subject to the foregoing limitations, when the amounts are
paid or the certificateholder would otherwise be entitled to claim the
deductions had it held the mortgage loans and mortgage-backed securities
directly. A grantor trust certificateholder using an accrual method of
accounting must take into account its pro rata share of income as payment
becomes due or is paid to the master servicer, whichever is earlier, and may
deduct its pro rata share of expense items, subject to the foregoing
limitations, when the amounts are paid or the certificateholder otherwise would
be entitled to claim the deductions had it held the mortgage loans and
mortgage-backed securities directly. If the servicing fees paid to the master
servicer are deemed to exceed reasonable servicing compensation, the amount of
the excess could be considered as an ownership interest retained by the master
servicer or any person to whom the master servicer assigned for value all or a
portion of the servicing fees in a portion of the interest payments on the
mortgage loans and mortgage-backed securities. The mortgage loans and
mortgage-backed securities would then be subject to the "coupon stripping" rules
of the Internal Revenue Code discussed below under "--Stripped Bonds and
Coupons."

     Unless otherwise described in the related prospectus supplement or
otherwise provided below in this section of the prospectus, as to each series of
certificates, counsel to Morgan Stanley Capital I Inc. will have advised Morgan
Stanley Capital I Inc. that:

          o    a grantor trust certificate owned by a "domestic building and
               loan association" within the meaning of Internal Revenue Code
               Section 7701(a)(19) representing principal and interest payments
               on mortgage loans and mortgage-backed securities will be
               considered to represent "loans secured by an interest in real
               property which is ... residential property" within the meaning of
               Internal Revenue Code Section 7701(a)(19)(C)(v), to the extent
               that the mortgage loans and mortgage-backed securities
               represented by that grantor trust certificate are of a type
               described in that Internal Revenue Code section;

          o    a grantor trust certificate owned by a real estate investment
               trust representing an interest in mortgage loans and
               mortgage-backed securities will be considered to represent "real
               estate assets" within the meaning of Internal Revenue Code
               Section 856(c)(5)(B), and interest income on the mortgage loans
               and mortgage-backed securities will be considered "interest on
               obligations secured by mortgages on real property" within the
               meaning of Internal Revenue Code Section 856(c)(3)(B), to the
               extent that the mortgage loans and mortgage-backed securities
               represented by that grantor trust certificate are of a type
               described in that Internal Revenue Code section; and

          o    a grantor trust certificate owned by a REMIC will represent
               "obligation[s] which [are] principally secured by an interest in
               real property" within the meaning of Internal Revenue Code
               Section 860G(a)(3).

     Stripped Bonds and Coupons. Certain trust funds may consist of government
securities that constitute "stripped bonds" or "stripped coupons" as those terms
are defined in Internal Revenue Code Section 1286, and, as a result, these
assets would be subject to the stripped bond provisions of the Internal Revenue
Code. Under these rules, these government securities are treated as having
original issue discount based on the purchase price and the stated redemption
price at maturity of each security. As such, grantor trust certificateholders
would be required to include in income their pro rata share of the original
issue discount on each government security recognized in any given year on an
economic accrual basis even if the grantor trust certificateholder is a cash
method taxpayer. Accordingly, the sum of the income includible to the grantor
trust certificateholder in any taxable year may exceed amounts actually received
during such year.

     Buydown Loans. The assets constituting certain trust funds may include
buydown loans. The characterization of any investment in buydown loans will
depend upon the precise terms of the related buydown agreement, but to the
extent that buydown loans are secured in part by a bank account or other
personal property, they may not be treated in their entirety as assets described
in the foregoing sections of the Internal Revenue Code. There are no directly


                                       84



applicable precedents with respect to the federal income tax treatment or the
characterization of investments in buydown loans. Accordingly, grantor trust
certificateholders should consult their own tax advisors with respect to the
characterization of investments in grantor trust certificates representing an
interest in a trust fund that includes buydown loans.

     Premium. The price paid for a grantor trust certificate by a holder will be
allocated to the holder's undivided interest in each mortgage loan and
mortgage-backed security based on each asset's relative fair market value, so
that the holder's undivided interest in each asset will have its own tax basis.
A grantor trust certificateholder that acquires an interest in mortgage loans
and mortgage-backed securities at a premium may elect to amortize the premium
under a constant interest method, provided that the underlying mortgage loans
with respect to the mortgage loans and mortgage-backed securities were
originated after September 27, 1985. Premium allocable to mortgage loans
originated on or before September 27, 1985 should be allocated among the
principal payments on such mortgage loans and allowed as an ordinary deduction
as principal payments are made. Amortizable bond premium will be treated as an
offset to interest income on such grantor trust certificate. The basis for the
grantor trust certificate will be reduced to the extent that amortizable premium
is applied to offset interest payments. It is not clear whether a reasonable
Prepayment Assumption should be used in computing amortization of premium
allowable under Internal Revenue Code Section 171. A certificateholder that
makes this election for a certificate 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 such certificateholder
acquires during the year of the election or thereafter.

     If a premium is not subject to amortization using a reasonable Prepayment
Assumption, the holder of a grantor trust certificate acquired at a premium
should recognize a loss if a mortgage loan or an underlying mortgage loan with
respect to an asset prepays in full, equal to the difference between the portion
of the prepaid principal amount of such mortgage loan or underlying mortgage
loan that is allocable to the certificate and the portion of the adjusted basis
of the certificate that is allocable to the mortgage loan or underlying mortgage
loan. If a reasonable Prepayment Assumption is used to amortize the premium, it
appears that such a 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. The
Internal Revenue Service has issued Amortizable Bond Premium Regulations. The
Amortizable Bond Premium Regulations specifically do not apply to prepayable
debt instruments or any pool of debt instruments the yield on which may be
affected by prepayments, such as the trust fund, which are subject to Internal
Revenue Code Section 1272(a)(6). Absent further guidance from the Internal
Revenue Service and unless otherwise described in the related prospectus
supplement, the trustee will account for amortizable bond premium in the manner
described above. Prospective purchasers should consult their tax advisors
regarding amortizable bond premium and the Amortizable Bond Premium Regulations.

     Original Issue Discount. The Internal Revenue Service has stated in
published rulings that, in circumstances similar to those described in this
prospectus, the OID Regulations will be applicable to a grantor trust
certificateholder's interest in those mortgage loans and mortgage-backed
securities meeting the conditions necessary for these sections to apply. Rules
regarding periodic inclusion of original issue discount income are applicable to
mortgages of corporations originated after May 27, 1969, mortgages of
noncorporate borrowers other than individuals originated after July 1, 1982, and
mortgages of individuals originated after March 2, 1984. Such original issue
discount could arise by the financing of points or other charges by the
originator of the mortgages in an amount greater than a statutory de minimis
exception to the extent that the points are not currently deductible under
applicable Internal Revenue Code provisions or are not for services provided by
the lender. Original issue discount generally must be reported as ordinary gross
income as it accrues under a constant interest method. See "--Multiple Classes
of Grantor Trust Certificates--Accrual of Original Issue Discount" below.

     Market Discount. A grantor trust certificateholder that acquires an
undivided interest in mortgage loans and mortgage-backed securities may be
subject to the market discount rules of Internal Revenue Code Sections 1276
through 1278 to the extent an undivided interest in the asset is considered to
have been purchased at a "market discount." Generally, the amount of market
discount is equal to the excess of the portion of the principal amount of the
mortgage loan or mortgage-backed security allocable to the holder's undivided
interest over the holder's tax basis in such interest. Market discount with
respect to a grantor trust certificate will be considered to be zero if the
amount allocable to the grantor trust certificate is less than 0.25% of the
grantor trust certificate's stated redemption price at maturity multiplied by
the weighted average maturity remaining after the date of purchase. Treasury
regulations


                                       85



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 Internal Revenue Code Sections 1276 through 1278.

     The Internal Revenue 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 such 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 Internal Revenue 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. While the Treasury Department has not yet issued regulations, rules
described in the relevant 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. If a grantor trust certificate is issued with original issue discount,
the amount of market discount that accrues during any accrual period would be
equal to the product of

          o    the total remaining market discount and

          o    a fraction, the numerator of which is the original issue discount
               accruing during the period and the denominator of which is the
               total remaining original issue discount at the beginning of the
               accrual period.

     For grantor trust certificates issued without original issue discount, the
amount of market discount that accrues during a period is equal to the product
of

          o    the total remaining market discount and

          o    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 the above methods
in the case of instruments, such as the grantor trust certificates, that provide
for payments that may be accelerated by reason of prepayments of other
obligations securing such instruments, the same Prepayment Assumption applicable
to calculating the accrual of original issue discount will apply. Because the
regulations described above have not been issued, it is impossible to predict
what effect those regulations might have on the tax treatment of a grantor trust
certificate purchased at a discount or premium in the secondary market.

     A holder who acquired a grantor trust certificate at a market discount also
may be required to defer a portion of its interest deductions for the taxable
year attributable to any indebtedness incurred or continued to purchase or carry
the grantor trust certificate purchased with market discount. For these
purposes, the de minimis rule referred to above applies. Any such Deferred
Interest expense would not exceed the market discount that accrues during such
taxable year and is, in general, allowed as a deduction not later than the year
in which the market discount is includible in income. If such holder elects to
include market discount in income currently as it accrues on all market discount
instruments acquired by such holder in that taxable year or thereafter, the
interest deferral rule described above will not apply.

     Election to Treat All Interest as Original Issue Discount. The OID
Regulations permit a certificateholder to elect to accrue all interest, discount
(including de minimis market or original issue discount) and premium in income
as interest, based on a constant yield method for certificates acquired on or
after April 4, 1994. If this election were to be made with respect to a grantor
trust certificate with market discount, the certificateholder 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 such
certificateholder acquires during the year of the election or thereafter.
Similarly, a certificateholder that makes this election for a certificate that
is acquired at a premium will be deemed to have made


                                       86



an election to amortize bond premium with respect to all debt instruments having
amortizable bond premium that such certificateholder owns or acquires. See
"--Single Class of Grantor Trust Certificates--Premium" above in this
prospectus. The election to accrue interest, discount and premium on a constant
yield method with respect to a certificate is irrevocable without the consent of
the Internal Revenue Service.

     Anti-abuse Rule. The Internal Revenue Service can apply or depart from the
rules contained in the OID Regulations as necessary or appropriate to achieve a
reasonable result where a principal purpose in structuring a mortgage loan,
mortgage-backed security or grantor trust certificate or the effect of applying
the otherwise applicable rules is to achieve a result that is unreasonable in
light of the purposes of the applicable statutes, which generally are intended
to achieve the clear reflection of income for both issuers and holders of debt
instruments.

B. MULTIPLE CLASSES OF GRANTOR TRUST CERTIFICATES

     1. Stripped Bonds and Stripped Coupons

     Pursuant to Internal Revenue 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
Internal Revenue Code Sections 1271 through 1288, Internal Revenue Code Section
1286 treats a stripped bond or a stripped coupon as an obligation issued on the
date that such stripped interest is created.

     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 asset principal balance, or the certificates are initially sold with a
de minimis discount, assuming no prepayment assumption is required, any non-de
minimis discount arising from a subsequent transfer of the certificates should
be treated as market discount. The Internal Revenue Service appears to require
that reasonable servicing fees be calculated on a mortgage asset by mortgage
asset basis, which could result in some mortgage loans and mortgage-backed
securities being treated as having more than 100 basis points of interest
stripped off. See "--Multiple Classes of Grantor Trust Certificates--Stripped
Bonds and Stripped Coupons" in this prospectus.

     Although not entirely clear, a Stripped Bond Certificate generally should
be treated as an interest in mortgage loans and mortgage-backed securities
issued on the day the certificate is purchased for purposes of calculating any
original issue discount. Generally, if the discount on a mortgage loan or
mortgage-backed security is larger than a de minimis amount, as calculated for
purposes of the original issue discount rules, a purchaser of such a certificate
will be required to accrue the discount under the original issue discount rules
of the Internal Revenue Code. See "--Single Class of Grantor Trust
Certificates--Original Issue Discount" in this prospectus. However, a purchaser
of a Stripped Bond Certificate will be required to account for any discount on
the mortgage loans and mortgage-backed securities as market discount rather than
original issue discount if either

          o    the amount of original issue discount with respect to the
               mortgage loans and mortgage-backed securities is treated as zero
               under the original issue discount de minimis rule when the
               certificate was stripped or

          o    no more than 100 basis points, including any amount of servicing
               fees in excess of reasonable servicing fees, is stripped off of
               the trust fund's mortgage loans and mortgage-backed securities.

     Pursuant to Revenue Procedure 91-49, issued on August 8, 1991, purchasers
of Stripped Bond Certificates using an inconsistent method of accounting must
change their method of accounting and request the consent of the Internal
Revenue Service to the change in their accounting method on a statement attached
to their first timely tax return filed after August 8, 1991.

     The precise tax treatment of Stripped Coupon Certificates is substantially
uncertain. The Internal Revenue Code could be read literally to require that
original issue discount computations be made for each payment from each mortgage
loan or mortgage-backed security. Unless otherwise described in the related
prospectus supplement, all payments from a mortgage loan or mortgage-backed
security underlying a Stripped Coupon Certificate will be treated as a single
installment obligation subject to the original issue discount rules of the
Internal Revenue Code, in which


                                       87



case, all payments from the mortgage loan or mortgage-backed security would be
included in the stated redemption price at maturity for the mortgage loan and
mortgage-backed security purposes of calculating income on the certificate under
the original issue discount rules of the Internal Revenue Code.

     It is unclear under what circumstances, if any, the prepayment of mortgage
loans and mortgage-backed securities will give rise to a loss to the holder of a
Stripped Bond Certificate purchased at a premium or a Stripped Coupon
Certificate. If the certificate is treated as a single instrument rather than an
interest in discrete mortgage loans and the effect of prepayments is taken into
account in computing yield with respect to the grantor trust certificate, 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 the certificate is treated as an interest in discrete mortgage loans
or mortgage-backed securities, or if no Prepayment Assumption is used, then when
a mortgage loan or mortgage-backed security is prepaid, the holder of the
certificate should be able to recognize a loss equal to the portion of the
adjusted issue price of the certificate that is allocable to the mortgage loan
or mortgage-backed security.

     In light of the application of Internal Revenue Code Section 1286, a
beneficial owner of a Stripped Bond Certificate generally will be required to
compute accruals of original issue discount based on its yield, possibly taking
into account its own Prepayment Assumption. The information necessary to perform
the related calculations for information reporting purposes, however, generally
will not be available to the trustee. Accordingly, any information reporting
provided by the trustee with respect to these Stripped Bond Certificate, which
information will be based on pricing information as of the closing date, will
largely fail to reflect the accurate accruals of original issue discount for
these securities. Prospective investors therefore should be aware that the
timing of accruals of original issue discount applicable to a Stripped Bond
Certificate generally will be different than that reported to holders and the
Internal Revenue Service.

     Holders of Stripped Bond Certificates and Stripped Coupon Certificates are
urged to consult with their own tax advisors regarding the proper treatment of
these certificates for federal income tax purposes.

     Treatment of Certain Owners. Several Internal Revenue Code sections provide
beneficial treatment to certain taxpayers that invest in mortgage loans and
mortgage-backed securities of the type that make up the trust fund. With respect
to these Internal Revenue Code sections, no specific legal authority exists
regarding whether the character of the grantor trust certificates, for federal
income tax purposes, will be the same as that of the underlying mortgage loans
and mortgage-backed securities. While Internal Revenue Code Section 1286 treats
a stripped obligation as a separate obligation for purposes of the Internal
Revenue Code provisions addressing original issue discount, it is not clear
whether such characterization would apply with regard to these other Internal
Revenue Code sections. Although the issue is not free from doubt, each class of
grantor trust certificates, unless otherwise described in the related prospectus
supplement, should be considered to represent "real estate assets" within the
meaning of Internal Revenue Code Section 856(c)(5)(B) and "loans ... secured by,
an interest in real property which is ... residential real property" within the
meaning of Internal Revenue Code Section 7701(a)(19)(C)(v), and interest income
attributable to grantor trust certificates should be considered to represent
"interest on obligations secured by mortgages on real property" within the
meaning of Internal Revenue Code Section 856(c)(3)(B), provided that in each
case the underlying mortgage loans and mortgage-backed securities and interest
on such mortgage loans and mortgage-backed securities qualify for such
treatment. Prospective purchasers to which such characterization of an
investment in certificates is material should consult their own tax advisors
regarding the characterization of the grantor trust certificates and the income
therefrom. Unless otherwise specified in the related prospectus supplement,
grantor trust certificates will be "obligation[s]...which [are] principally
secured by an interest in real property" within the meaning of Code Section
860G(a)(3)(A).

     2. Grantor Trust Certificates Representing Interests in Loans Other Than
Adjustable Rate Loans

     The original issue discount rules of Internal Revenue Code Sections 1271
through 1275 will be applicable to a certificateholder's interest in those
mortgage loans and mortgage-backed securities as to which the conditions for the
application of those sections are met. Rules regarding periodic inclusion of
original issue discount in income are applicable to mortgages of corporations
originated after May 27, 1969, mortgages of noncorporate borrowers--other than
individuals--originated after July 1, 1982, and mortgages of individuals
originated after March 2, 1984. Under the OID Regulations, such 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


                                       88



deductible by the borrower under applicable Internal Revenue Code provisions, or
under certain circumstances, by the presence of "teaser" rates on the mortgage
loans and mortgage-backed securities. Original issue discount on each grantor
trust certificate 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 such income. The amount of original issue discount
required to be included in an owner's income in any taxable year with respect to
a grantor trust certificate representing an interest in mortgage loans and
mortgage-backed securities other than adjustable rate loans likely will be
computed as described below under "--Accrual of Original Issue Discount." The
following discussion is based in part on the OID Regulations and in part on the
provisions of the Tax Reform Act of 1986. The holder of a certificate should be
aware, however, that the OID Regulations do not adequately address certain
issues relevant to prepayable securities.

     Under the Internal Revenue Code, the mortgage loans and mortgage-backed
securities underlying the grantor trust certificate will be treated as having
been issued on the date they were originated with an amount of original issue
discount equal to the excess of such asset's stated redemption price at maturity
over its issue price. The issue price of a mortgage loan or mortgage-backed
security is generally the amount lent to the borrower, which may be adjusted to
take into account certain loan origination fees. The stated redemption price at
maturity of a mortgage loan or mortgage-backed security is the sum of all
payments to be made on these assets other than payments that are treated as
qualified stated interest payments. The accrual of this original issue discount,
as described below under "--Accrual of Original Issue Discount," will, unless
otherwise described in the related prospectus supplement, utilize the Prepayment
Assumption on the issue date of such grantor trust certificate, and will take
into account events that occur during the calculation period. The Prepayment
Assumption will be determined in the manner prescribed by regulations that have
not yet been issued.

     In the absence of such regulations, the Prepayment Assumption used will be
the prepayment assumption that is used in determining the offering price of such
certificate. No representation is made that any certificate will prepay at the
Prepayment Assumption or at any other rate.

     Accrual of Original Issue Discount. Generally, the owner of a grantor trust
certificate must include in gross income the sum of the "daily portions," as
defined below in this section, of the original issue discount on the grantor
trust certificate for each day on which it owns the certificate, including the
date of purchase but excluding the date of disposition. In the case of an
original owner, the daily portions of original issue discount with respect to
each component generally will be determined as set forth under the OID
Regulations. A calculation will be made by the master servicer or such other
entity specified in the related prospectus supplement of the portion of original
issue discount 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 grantor
trust certificates, or the day prior to each such date. This will be done, in
the case of each full month accrual period, by

          o    adding (1) 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
               (2) any payments included in the stated redemption price at
               maturity received during such accrual period, and

          o    subtracting from that total the "adjusted issue price" of the
               respective component at the beginning of such accrual period.

     The adjusted issue price of a grantor trust certificate at the beginning of
the first accrual period is its issue price; the adjusted issue price of a
grantor trust certificate 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 original issue discount allocable to that accrual
period 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 original
issue discount accruing during such accrual period will then be divided by the
number of days in the period to determine the daily portion of original issue
discount for each day in the period. With respect to an initial accrual period
shorter than a full monthly accrual period, the daily portions of original issue
discount must be determined according to an appropriate allocation under any
reasonable method.


                                       89



     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 the mortgage loans and mortgage-backed securities acquired by a
certificateholder are purchased at a price equal to the then unpaid principal
amount of the asset, no original issue discount attributable to the difference
between the issue price and the original principal amount of the asset--i.e.,
points--will be includible by the holder. Other original issue discount on the
mortgage loans and mortgage-backed securities--e.g., that arising from a
"teaser" rate--would still need to be accrued.

     3. Grantor Trust Certificates Representing Interests in Adjustable Rate
Loans

     The OID Regulations do not address the treatment of instruments, such as
the grantor trust certificates, which represent interests in adjustable rate
loans. Additionally, the Internal Revenue Service has not issued guidance under
the Internal Revenue Code's coupon stripping rules with respect to such
instruments. In the absence of any authority, the master servicer will report
Stripped ARM Obligations to holders in a manner it believes is consistent with
the rules described above under the heading "--Grantor Trust Certificates
Representing Interests in Loans Other Than Adjustable Rate Loans" and with the
OID Regulations. In general, application of these rules may require inclusion of
income on a Stripped ARM Obligation in advance of the receipt of cash
attributable to such income. Further, the addition of Deferred Interest to the
principal balance of an adjustable rate loan may require the inclusion of the
amount in the income of the grantor trust certificateholder when the amount
accrues. Furthermore, the addition of Deferred Interest to the grantor trust
certificate's principal balance will result in additional income, including
possibly original issue discount income, to the grantor trust certificateholder
over the remaining life of such grantor trust certificates.

     Because the treatment of Stripped ARM Obligations is uncertain, investors
are urged to consult their tax advisors regarding how income will be includible
with respect to such certificates.

C. SALE OR EXCHANGE OF A GRANTOR TRUST CERTIFICATE

     Sale or exchange of a grantor trust certificate prior to 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 grantor trust certificate. Such
adjusted basis generally will equal the seller's purchase price for the grantor
trust certificate, increased by the original issue discount included in the
seller's gross income with respect to the grantor trust certificate, and reduced
by principal payments on the grantor trust certificate previously received by
the seller. Such gain or loss will be capital gain or loss to an owner for which
a grantor trust certificate is a "capital asset" within the meaning of Internal
Revenue Code Section 1221, except to the extent described above with respect to
the market discount, and will generally be long-term capital gain if the grantor
trust certificate has been owned for more than one year.

     Long-term capital gains of individuals are subject to reduced maximum tax
rates while capital gains recognized by individuals on capital assets held
twelve months or less are generally subject to ordinary income tax rates. The
use of capital losses is limited.

     It is possible that capital gain realized by holders of one or more classes
of grantor trust certificates could be considered gain realized upon the
disposition of property that was part of a "conversion transaction." A sale of a
grantor trust certificate will be part of a conversion transaction if
substantially all of the holder's expected return is attributable to the time
value of the holder's net investment, and:

          o    the holder entered the contract to sell the grantor trust
               certificate substantially contemporaneously with acquiring the
               grantor trust certificate;

          o    the grantor trust certificate is part of a straddle;

          o    the grantor trust certificate is marketed or sold as producing
               capital gain; or


                                       90



          o    other transactions to be specified in Treasury regulations that
               have not yet been issued.

If the sale or other disposition of a grantor trust certificate is part of a
conversion transaction, all or any portion of the gain realized upon the sale or
other disposition would be treated as ordinary income instead of capital gain.

     Grantor trust certificates will be "evidences of indebtedness" within the
meaning of Internal Revenue Code Section 582(c)(1), so that gain or loss
recognized from the sale of a grantor trust certificate by a bank or a thrift
institution to which such section applies will be treated as ordinary income or
loss.

D. NON-U.S. PERSONS

     Generally, to the extent that a grantor trust certificate evidences
ownership in underlying mortgage loans and mortgage-backed securities that were
issued on or before July 18, 1984, interest or original issue discount paid by
the person required to withhold tax under Internal Revenue Code Section 1441 or
1442 to

          o    an owner that is not a U.S. Person or

          o    a grantor trust certificate holder 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 such lower rate as may be provided for interest by an applicable tax
treaty, unless such income is effectively connected with a U.S. trade or
business of such owner or beneficial owner.

     Accrued original issue discount recognized by the owner on the sale or
exchange of such a grantor trust certificate also will be subject to federal
income tax at the same rate. Generally, such payments would not be subject to
withholding to the extent that a grantor trust certificate evidences ownership
in mortgage loans and mortgage-backed securities issued after July 18, 1984, by
natural persons if such grantor trust certificateholder complies with certain
identification requirements, including delivery of a statement, signed by the
grantor trust certificateholder under penalties of perjury, certifying that the
grantor trust certificateholder is not a U.S. Person and providing the name and
address of the grantor trust certificateholder. To the extent payments to
grantor trust certificateholders that are not U.S. Persons are payments of
"contingent interest" on the underlying mortgage loans and mortgage-backed
securities, or such grantor trust certificateholder is ineligible for the
exemption described in the preceding sentence, the 30% withholding tax will
apply unless such withholding taxes are reduced or eliminated by an applicable
tax treaty and such holder meets the eligibility and certification requirements
necessary to obtain the benefits of such treaty. Additional restrictions apply
to mortgage loans and mortgage-backed securities of where the borrower is not a
natural person in order to qualify for the exemption from withholding. If
capital gain derived from the sale, retirement or other disposition of a grantor
trust certificate is effectively connected with a U.S. trade or business of a
grantor trust certificateholder that is not a U.S. Person, the certificateholder
will be taxed on the net gain under the graduated U.S. federal income tax rates
applicable to U.S. Persons and, with respect to grantor trust certificates held
by or on behalf of corporations, also may be subject to branch profits tax. In
addition, if the trust fund acquires a United States real property interest
through foreclosure, deed in lieu of foreclosure or otherwise on a mortgage loan
or mortgage-backed security secured by such an interest, which for this purpose
includes real property located in the United States and the Virgin Islands, a
grantor trust certificateholder that is not a U.S. Person will potentially be
subject to federal income tax on any gain attributable to such real property
interest that is allocable to such holder. Non-U.S. Persons should consult their
tax advisors regarding the application to them of the foregoing rules.

E. INFORMATION REPORTING AND BACKUP WITHHOLDING

     The master servicer will furnish or make available, within a reasonable
time after the end of each calendar year, to each person who was a
certificateholder at any time during the year, such information as may be deemed
necessary or desirable to assist certificateholders in preparing their federal
income tax returns, or to enable holders to make the information available to
beneficial owners or financial intermediaries that hold such certificates as
nominees on behalf of beneficial owners. On June 20, 2002, the Treasury
Department published proposed regulations which will, when effective, establish
a reporting framework for interests in "widely held fixed investment trusts"
that will place the responsibility of reporting on the person in the ownership
chain who holds an interest for a beneficial owner. A widely-held fixed
investment trust is defined as an entity classified as a "trust" under Treasury
regulation Section


                                       91



301.7701-4(c), in which any interest is held by a middleman, which includes, but
is not limited to (i) a custodian of a person's account, (ii) a nominee and
(iii) a broker holding an interest for a customer in street name. These
regulations were proposed to be effective beginning January 1, 2004, but such
date has passed and the regulations have not been finalized. It is unclear when,
or if, these regulations will become final. If a holder, beneficial owner,
financial intermediary or other recipient of a payment on behalf of a beneficial
owner fails to supply a certified taxpayer identification number or if the
Secretary of the Treasury determines that such person has not reported all
interest and dividend income required to be shown on its federal income tax
return, backup withholding at a rate of 28% (increasing to 31% after 2010) may
be required with respect to any payments to registered owners who are not
"exempt recipients." In addition, upon the sale of a grantor trust certificate
to, or through, a broker, the broker must withhold at the above rate of the
entire purchase price, unless either

          o    the broker determines that the seller is a corporation or other
               exempt recipient, or

          o    the seller provides, in the required manner, certain identifying
               information and, in the case of a non-U.S. Person, certifies that
               the seller is a Non-U.S. Person, and other conditions are met.

     Such a sale must also be reported by the broker to the Internal Revenue
Service, unless either

          o    the broker determines that the seller is an exempt recipient or

          o    the seller certifies its non-U.S. Person status and other
               conditions are met.

     Certification of the registered owner's non-U.S. Person status normally
would be made on Internal Revenue Service Form W-8BEN under penalties of
perjury, although in some cases it may be possible to submit other documentary
evidence. Any amounts deducted and withheld from a distribution to a recipient
would be allowed as a credit against the recipient's federal income tax
liability.

     Final regulations have been issued by the Treasury Department, which
provide for a new series of certification forms and modify reliance standards
for withholding, backup withholding and information reporting. Prospective
investors are urged to consult their own tax advisors regarding these
regulations.

REMICS

     The trust fund relating to a series of certificates 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 subject to federal income
tax (see, however "--Taxation of Owners of REMIC Residual Certificates" and
"--Prohibited Transactions and Other Taxes" below), if a trust fund with respect
to which a REMIC election is made fails to comply with one or more of the
ongoing requirements of the Internal Revenue 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 below under
"--Taxation of Owners of REMIC Residual Certificates," the Internal Revenue Code
provides that a trust fund will not be treated as a REMIC for the year and
thereafter. In that event, the entity may be taxable as a separate corporation,
and the REMIC Certificates may not be accorded the status or given the tax
treatment described below in this section. While the Internal Revenue Code
authorizes the Treasury Department to issue regulations providing relief in the
event of an inadvertent termination of the status of a trust fund 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 such status are not
satisfied. With respect to each trust fund that elects REMIC status, Sidley
Austin Brown & Wood LLP or Cadwalader, Wickersham & Taft LLP or Latham & Watkins
LLP will deliver its opinion generally to the effect that, under then existing
law and assuming compliance with all provisions of the related Agreement, the
trust fund will qualify as one or more REMICs, and the related certificates will
be considered to be REMIC Regular Certificates or a sole class of REMIC Residual
Certificates. The related prospectus supplement for each series of certificates
will indicate whether the trust fund will make one or more REMIC elections and
whether a class of certificates will be treated as a regular or residual
interest in a REMIC.

     In general, with respect to each series of certificates for which a REMIC
election is made:


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          o    certificates held by a thrift institution taxed as a "domestic
               building and loan association" will constitute assets described
               in Internal Revenue Code Section 7701(a)(19)(C);

          o    certificates held by a real estate investment trust will
               constitute "real estate assets" within the meaning of Internal
               Revenue Code Section 856(c)(5)(B); and

          o    interest on certificates held by a real estate investment trust
               will be considered "interest on obligations secured by mortgages
               on real property" within the meaning of Internal Revenue Code
               Section 856(c)(3)(B).

     If less than 95% of the REMIC's assets are assets qualifying under any of
the foregoing Internal Revenue Code sections, the certificates will be
qualifying assets only to the extent that the REMIC's assets are qualifying
assets.

     In some instances the mortgage loans and mortgage-backed securities may not
be treated entirely as assets described in the foregoing sections. See, in this
regard, the discussion of buydown loans contained in "--Single Class of Grantor
Trust Certificates" above. REMIC Certificates held by a real estate investment
trust will not constitute "Government Securities" within the meaning of Internal
Revenue Code Section 856(c)(5)(B), and REMIC Certificates held by a regulated
investment company will not constitute "Government Securities" within the
meaning of Internal Revenue Code Section 851(b)(4)(A)(ii). REMIC Certificates
held by certain financial institutions will constitute "evidences of
indebtedness" within the meaning of Internal Revenue Code Section 582(c)(1).

     A "qualified mortgage" for REMIC purposes includes any obligation,
including certificates of participation in such 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 Internal Revenue Code
Section 25(e)(10) will qualify as real property without regard to state law
classifications. Under Internal Revenue Code Section 25(e)(10), a single family
residence includes any manufactured home that has a minimum of 400 square feet
of living space and a minimum width in excess of 102 inches and that is of a
kind customarily used at a fixed location.

     Tiered REMIC Structures. For certain series of certificates, two or more
separate elections may be made to treat designated portions of the related trust
fund as REMICs for federal income tax purposes. Upon the issuance of any such
series of certificates, Sidley Austin Brown & Wood LLP or Cadwalader, Wickersham
& Taft LLP or Latham & Watkins LLP, counsel to Morgan Stanley Capital I Inc.,
will deliver its opinion generally to the effect that, assuming compliance with
all provisions of the related Agreement, the Master REMIC as well as any
Subsidiary REMIC will each qualify as a REMIC, and the REMIC Certificates issued
by the Master REMIC and the Subsidiary REMIC or REMICs, respectively, will be
considered REMIC Regular Certificates or REMIC Residual Certificates in the
related REMIC within the meaning of the REMIC Provisions.

     Other than the residual interest in a Subsidiary REMIC, only REMIC
Certificates issued by the Master REMIC will be offered hereunder. The
Subsidiary REMIC or REMICs and the Master REMIC will be treated as one REMIC
solely for purposes of determining whether the REMIC Certificates will be:

          o    "real estate assets" within the meaning of Internal Revenue Code
               Section 856(c)(5)(B);

          o    "loans secured by an interest in real property" under Internal
               Revenue Code Section 7701(a)(19)(C); and

          o    whether the income on such certificates is interest described in
               Internal Revenue Code Section 856(c)(3)(B).

A. TAXATION OF OWNERS OF REMIC REGULAR CERTIFICATES

     General. Except as otherwise stated in this discussion, REMIC Regular
Certificates will be treated for federal income tax purposes as debt instruments
issued by the REMIC and not as ownership interests in the REMIC or its


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assets. Moreover, holders of REMIC Regular Certificates that otherwise report
income under a cash method of accounting will be required to report income with
respect to REMIC Regular Certificates under an accrual method.

     Original Issue Discount and Premium. The REMIC Regular Certificates may be
issued with original issue discount. Generally, the original issue discount, if
any, will equal the difference between the "stated redemption price at maturity"
of a REMIC Regular Certificate and its "issue price." Holders of any class of
certificates issued with original issue discount will be required to include
such original issue discount 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. The following discussion is based in part on the OID
Regulations and in part on the provisions of the Tax Reform Act of 1986. The
REMIC Regular Certificateholders should be aware, however, that the OID
Regulations do not adequately address certain issues relevant to prepayable
securities, such as the REMIC Regular Certificates.

     Rules governing original issue discount are set forth in Internal Revenue
Code Sections 1271 through 1273 and 1275. These rules require that the amount
and rate of accrual of original issue discount be calculated based on the
Prepayment Assumption and the anticipated reinvestment rate, if any, relating to
the REMIC Regular Certificates 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 Internal Revenue 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 such REMIC Regular Certificates. The prospectus supplement for each
series of REMIC Regular Certificates will specify the Prepayment Assumption to
be used for the purpose of determining the amount and rate of accrual of
original issue discount. No representation is made that the REMIC Regular
Certificates will prepay at the Prepayment Assumption or at any other rate.

     In general, each REMIC Regular Certificate will be treated as a single
installment obligation issued with an amount of original issue discount equal to
the excess of its "stated redemption price at maturity" over its "issue price."
The issue price of a REMIC Regular Certificate is the first price at which a
substantial amount of REMIC Regular Certificates of that class are first sold to
the public (excluding bond houses, brokers, underwriters or wholesalers). If
less than a substantial amount of a particular class of REMIC Regular
Certificates is sold for cash on or prior to the closing date, the issue price
for that class will be treated as the fair market value of that class on the
closing date. The issue price of a REMIC Regular Certificate also includes the
amount paid by an initial certificateholder for accrued interest that relates to
a period prior to the issue date of the REMIC Regular Certificate. The stated
redemption price at maturity of a REMIC Regular Certificate includes the
original principal amount of the REMIC Regular Certificate, but generally will
not include distributions of interest if the distributions constitute "qualified
stated interest." Qualified stated interest generally means interest payable at
a single fixed rate or qualified variable rate, provided that the interest
payments are unconditionally payable at intervals of one year or less during the
entire term of the REMIC Regular Certificate. 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 REMIC Regular
Certificates with respect to which Deferred Interest will accrue will not
constitute qualified stated interest payments, and the stated redemption price
at maturity of the REMIC Regular Certificates includes all distributions of
interest as well as principal thereon.

     Where the interval between the issue date and the first distribution date
on a REMIC Regular Certificate 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 at maturity of the
certificate exceeds its issue price for purposes of the de minimis rule
described below in this section. The OID Regulations suggest that all interest
on a long first period REMIC Regular Certificate that is issued with non-de
minimis original issue discount, as determined under the foregoing rule, will be
treated as original issue discount. Where the interval between the issue date
and the first distribution date on a REMIC Regular Certificate 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 certificate's stated redemption price at maturity. REMIC
Regular Certificateholders should consult their own tax advisors to determine
the issue price and stated redemption price at maturity of a REMIC Regular
Certificate.

     Under the de minimis rule, original issue discount on a REMIC Regular
Certificate will be considered to be zero if such original issue discount is
less than 0.25% of the stated redemption price at maturity of the REMIC Regular


                                       94



Certificate multiplied by the weighted average maturity of the REMIC Regular
Certificate. For this purpose, the weighted average maturity of the REMIC
Regular Certificate 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 REMIC Regular Certificate and the denominator of which is the stated
redemption price at maturity of the REMIC Regular Certificate. Although
currently unclear, it appears that the schedule of the distributions should be
determined in accordance with the Prepayment Assumption. The Prepayment
Assumption with respect to a series of REMIC Regular Certificates will be set
forth in the related prospectus supplement. Holders generally must report de
minimis original issue discount pro rata as principal payments are received, and
the income will be capital gain if the REMIC Regular Certificate is held as a
capital asset. However, accrual method holders may elect to accrue all de
minimis original issue discount as well as market discount under a constant
interest method.

     The prospectus supplement with respect to a trust fund may provide for
Super-Premium Certificates. The income tax treatment of such REMIC Regular
Certificates is not entirely certain. For information reporting purposes, the
trust fund intends to take the position that the stated redemption price at
maturity of such REMIC Regular Certificates is the sum of all payments to be
made on such REMIC Regular Certificates determined under the Prepayment
Assumption, with the result that such REMIC Regular Certificates would be issued
with original issue discount. The calculation of income in this manner could
result in negative original issue discount, which delays future accruals of
original issue discount rather than being immediately deductible, when
prepayments on the mortgage loans and mortgage-backed securities exceed those
estimated under the Prepayment Assumption. The Internal Revenue Service might
contend, however, that certain contingent payment rules contained in final
regulations issued on June 11, 1996, with respect to original issue discount,
should apply to such certificates. Although such rules are not applicable to
instruments governed by Internal Revenue Code Section 1272(a)(6), they represent
the only guidance regarding the current views of the Internal Revenue Service
with respect to contingent payment instruments. These regulations, if
applicable, generally would require holders of Regular Interest Certificates to
take the payments considered contingent interest payments into income on a yield
to maturity basis in accordance with a schedule of projected payments provided
by Morgan Stanley Capital I Inc. and to make annual adjustments to income to
account for the difference between actual payments received and projected
payment amounts accrued. In the alternative, the Internal Revenue Service could
assert that the stated redemption price at maturity of such REMIC Regular
Certificates (other than interest only REMIC Regular Certificates) should be
limited to their principal amount, subject to the discussion below under
"--Accrued Interest Certificates," so that such REMIC Regular Certificates would
be considered for federal income tax purposes to be issued at a premium. If such
a position were to prevail, the rules described below under "--Taxation of
Owners of REMIC Regular Certificates--Premium" would apply. It is unclear when a
loss may be claimed for any unrecovered basis for a Super-Premium Certificate.
It is possible that a holder of a Super-Premium Certificate 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 such Super-Premium Certificate.

     Under the REMIC Regulations, if the issue price of a REMIC Regular
Certificate, other than a REMIC Regular Certificate based on a notional amount,
does not exceed 125% of its actual principal amount, the interest rate is not
considered disproportionately high. Accordingly, such REMIC Regular Certificate
generally should not be treated as a Super-Premium Certificate and the rules
described below under "--Premium" should apply. However, it is possible that
holders of REMIC Regular Certificates issued at a premium, even if the premium
is less than 25% of such certificate'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 Internal Revenue Code
Section 171 is made to amortize such premium. Generally, a REMIC Regular
Certificateholder must include in gross income the "daily portions," as
determined below, of the original issue discount that accrues on a REMIC Regular
Certificate for each day a certificateholder holds the REMIC Regular
Certificate, including the purchase date but excluding the disposition date. In
the case of an original holder of a REMIC Regular Certificate, a calculation
will be made of the portion of the original issue discount that accrues during
each successive period--an "accrual period"--that ends on the day in the
calendar year corresponding to a distribution date, or if distribution dates are
on the first day or first business day of the immediately preceding month,
interest may be treated as payable on the last day of the immediately preceding
month and begins on the day after the end of the immediately preceding accrual
period or on the issue date in the case of the first accrual period. This will
be done, in the case of each full accrual period, by:


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          o    adding (1) the present value at the end of the accrual
               period--determined by using as a discount factor the original
               yield to maturity of the REMIC Regular Certificates as calculated
               under the Prepayment Assumption--of all remaining payments to be
               received on the REMIC Regular Certificates under the Prepayment
               Assumption and (2) any payments included in the stated redemption
               price at maturity received during such accrual period, and

          o    subtracting from that total the adjusted issue price of the REMIC
               Regular Certificates at the beginning of such accrual period.

     The adjusted issue price of a REMIC Regular Certificate at the beginning of
the first accrual period is its issue price; the adjusted issue price of a REMIC
Regular Certificate 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 original issue discount 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
original issue discount accrued during an accrual period will then be divided by
the number of days in the period to determine the daily portion of original
issue discount for each day in the accrual period. The calculation of original
issue discount under the method described above will cause the accrual of
original issue discount 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
original issue discount may be determined according to an appropriate allocation
under any reasonable method.

     A subsequent purchaser of a REMIC Regular Certificate issued with original
issue discount who purchases the REMIC Regular Certificate 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 original issue discount
on that REMIC Regular Certificate. In computing the daily portions of original
issue discount for such a purchaser, 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 such 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 such holder for that REMIC
Regular Certificate exceeds the following amount:

          o    the sum of the issue price plus the aggregate amount of original
               issue discount that would have been includible in the gross
               income of an original REMIC Regular Certificateholder, who
               purchased the REMIC Regular Certificate 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 REMIC Regular Certificate 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
original issue discount by treating the purchase as a purchase at original
issue.

     The Treasury Department proposed regulations on August 24, 2004 that create
a special rule for accruing original issue discount on REMIC Regular
Certificates providing for a delay between record and payment dates, such that
the period over which original issue discount accrues coincides with the period
over which the right of REMIC Regular Certificateholders to interest payment
accrues under the governing contract provisions rather than over the period
between distribution dates. If the proposed regulations are adopted in the same
form as proposed, REMIC Regular Certificateholders would be required to accrue
interest from the issue date to the first record date, but would not be required
to accrue interest after the last record date. The proposed regulations are
limited to REMIC Regular Certificates with delayed payment for periods of fewer
than 32 days. The proposed regulations are proposed to apply to any REMIC
Regular Certificate issued after the date the final regulations are published in
the Federal Register.

     Variable Rate REMIC Regular Certificates. REMIC Regular Certificates may
provide for interest based on a qualifying variable rate. Under the original
issue discount rules, interest based on a variable rate will constitute
qualified stated interest and not contingent interest if, generally:

          o    the interest is unconditionally payable at least annually;


                                       96



          o    the issue price of the debt instrument does not exceed the total
               noncontingent principal payments; and

          o    interest is based on a "qualified floating rate," an "objective
               rate," a combination of a single fixed rate and one or more
               "qualified floating rates," one "qualified inverse floating
               rate," or a combination of "qualified floating rates" that do not
               operate in a manner that significantly accelerates or defers
               interest payments on the REMIC Regular Certificate.

     The amount of original issue discount with respect to a REMIC Regular
Certificate bearing a variable rate of interest will accrue in the manner
described above 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 certificate at the rate applicable on the date they are issued.
Appropriate adjustments are made for the actual variable rate.

     Although unclear at present, Morgan Stanley Capital I Inc. intends to treat
interest on a REMIC Regular Certificate that is a weighted average of the net
interest rates on mortgage loans as qualified stated interest. In such case, the
weighted average rate used to compute the initial pass-through rate on the REMIC
Regular Certificates will be deemed to be the index in effect through the life
of the REMIC Regular Certificates. It is possible, however, that the Internal
Revenue Service may treat some or all of the interest on REMIC Regular
Certificates with a weighted average rate as taxable under the rules relating to
obligations providing for contingent payments. No guidance is currently
available as to how original issue discount would be determined for debt
instruments subject to Internal Revenue Code Section 1272(a)(6) that provide for
contingent interest. The treatment of REMIC Regular Certificates as contingent
payments debt instruments may affect the timing of income accruals on the REMIC
Regular Certificates.

     Election to Treat All Interest as Original Issue Discount. The OID
Regulations permit a certificateholder to elect to accrue all interest, discount
(including de minimis market discount or original issue discount) and premium in
income as interest, based on a constant yield method. If such an election were
to be made with respect to a REMIC Regular Certificate with market discount, the
certificateholder 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 such certificateholder acquires during the year of the
election or thereafter. Similarly, a certificateholder that makes this election
for a certificate 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 such certificateholder owns or acquires. See
"--Premium" in this prospectus. The election to accrue interest, discount and
premium on a constant yield method with respect to a certificate is irrevocable
without the consent of the Internal Revenue Service.

     Market Discount. A purchaser of a REMIC Regular Certificate may also be
subject to the market discount provisions of Internal Revenue Code Sections 1276
through 1278. Under these provisions and the OID Regulations, "market discount"
equals the excess, if any, of (1) the REMIC Regular Certificate's stated
principal amount or, in the case of a REMIC Regular Certificate with original
issue discount, the adjusted issue price, determined for this purpose as if the
purchaser had purchased such REMIC Regular Certificate from an original holder,
over (2) the price for such REMIC Regular Certificate paid by the purchaser. A
certificateholder that purchases a REMIC Regular Certificate at a market
discount will recognize income upon receipt of each distribution representing
amounts included in such certificate's stated redemption price at maturity. In
particular, under Internal Revenue Code Section 1276 such a holder generally
will be required to allocate each such distribution first to accrued market
discount not previously included in income, and to recognize ordinary income to
that extent. A certificateholder may elect to include market discount in income
currently as it accrues rather than including it on a deferred basis in
accordance with the foregoing. If made, the election will apply to all market
discount bonds acquired by the certificateholder on or after the first day of
the first taxable year to which the election applies. Market discount with
respect to a REMIC Regular Certificate will be considered to be zero if the
amount allocable to the REMIC Regular Certificate is less than 0.25% of the
REMIC Regular Certificate's stated redemption price at maturity multiplied by
the REMIC Regular Certificate's weighted average maturity remaining after the
date of purchase. If market discount on a REMIC Regular Certificate is
considered to be zero under this rule, the actual amount of market discount must
be allocated to the remaining principal payments on the REMIC Regular
Certificate, 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 Internal Revenue Code
Sections 1276 through 1278.


                                       97



     The Internal Revenue 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, 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.

     The Internal Revenue 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 such time as 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 method rate or according to one of the following
methods. For REMIC Regular Certificates issued with original issue discount, the
amount of market discount that accrues during a period is equal to the product
of

     1) the total remaining market discount and

     2) a fraction, the numerator of which is the original issue discount
accruing during the period and the denominator of which is the total remaining
original issue discount at the beginning of the period.

     For REMIC Regular Certificates issued without original issue discount, the
amount of market discount that accrues during a period is equal to the product
of

     1) the total remaining market discount and

     2) 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 REMIC Regular Certificates) that provide
for payments that may be accelerated by reason of prepayments of other
obligations securing such instruments, the same Prepayment Assumption applicable
to calculating the accrual of original issue discount will apply.

     A holder who acquired a REMIC Regular Certificate at a market discount also
may be required to defer a portion of its interest deductions for the taxable
year attributable to any indebtedness incurred or continued to purchase or carry
the certificate purchased with market discount. For these purposes, the de
minimis rule referred to above applies. Any such Deferred Interest expense would
not exceed the market discount that accrues during such taxable year and is, in
general, allowed as a deduction not later than the year in which such market
discount is includible in income. If such holder elects to include market
discount in income currently as it accrues on all market discount instruments
acquired by such holder in that taxable year or thereafter, the interest
deferral rule described above will not apply.

     Premium. A purchaser of a REMIC Regular Certificate that purchases the
REMIC Regular Certificate 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 REMIC Regular Certificate at a premium and may
elect to amortize the premium under a constant yield method. A certificateholder
that makes this election for a certificate 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 such certificateholder
acquires during the year of the election or thereafter. It is not clear whether
the Prepayment Assumption would be taken into account in determining the life of
the REMIC Regular Certificate for this purpose. 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 REMIC Regular Certificates without regard to whether such certificates have
original issue discount, will also apply in amortizing bond premium under
Internal Revenue Code Section 171. The Internal Revenue Code provides that
amortizable bond premium will be allocated among the interest payments on such
REMIC Regular Certificates and will be applied as an offset against the interest
payment. The Amortizable Bond Premium Regulations do not apply to prepayable
securities described in Internal Revenue Code Section 1272(a)(6), such as the
REMIC Regular Certificates. Certificateholders should consult their tax advisors
regarding the possibility of making an election to amortize any such bond
premium.


                                       98



     Deferred Interest. Certain classes of REMIC Regular Certificates may
provide for the accrual of Deferred Interest with respect to one or more
adjustable rate loans. Any Deferred Interest that accrues with respect to a
class of REMIC Regular Certificates will constitute income to the holders of
such certificates prior to the time distributions of cash with respect to such
Deferred Interest are made. It is unclear, under the OID Regulations, whether
any of the interest on such certificates will constitute qualified stated
interest or whether all or a portion of the interest payable on such
certificates must be included in the stated redemption price at maturity of the
certificates and accounted for as original issue discount, which could
accelerate such inclusion. Interest on REMIC Regular Certificates must in any
event be accounted for under an accrual method by the holders of such
certificates and, therefore, applying the latter analysis may result only in a
slight difference in the timing of the inclusion in income of interest on such
REMIC Regular Certificates.

     Effects of Defaults and Delinquencies. Certain series of certificates may
contain one or more classes of subordinate certificates, and in the event there
are defaults or delinquencies on the mortgage loans and mortgage-backed
securities, amounts that would otherwise be distributed on the subordinate
certificates may instead be distributed on the senior certificates. Subordinate
certificateholders nevertheless will be required to report income with respect
to such certificates under an accrual method without giving effect to delays and
reductions in distributions on such subordinate certificates attributable to
defaults and delinquencies on the mortgage loans and mortgage-backed securities,
except to the extent that it can be established that those amounts are
uncollectible. As a result, the amount of income reported by a subordinate
certificateholder in any period could significantly exceed the amount of cash
distributed to such 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 subordinate certificate is
reduced as a result of defaults and delinquencies on the mortgage loans and
mortgage-backed securities. Timing and characterization of such losses is
discussed in "--Treatment of Realized Losses" below.

     Sale, Exchange or Redemption. If a REMIC Regular Certificate 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 REMIC Regular Certificate.
Such adjusted basis generally will equal the cost of the REMIC Regular
Certificate to the seller, increased by any original issue discount and market
discount included in the seller's gross income with respect to the REMIC Regular
Certificate, 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 REMIC Regular Certificate will
recognize gain equal to the excess, if any, of the amount of the payment over an
allocable portion of the holder's adjusted basis in the REMIC Regular
Certificate. A REMIC Regular Certificateholder who receives a final payment that
is less than the holder's adjusted basis in the REMIC Regular Certificate will
generally recognize a loss. Except as provided in the following paragraph and as
provided under "--Market Discount" above, any such gain or loss will be capital
gain or loss, provided that the REMIC Regular Certificate is held as a "capital
asset" (generally, property held for investment) within the meaning of Internal
Revenue Code Section 1221.

     Such capital gain or loss will generally be long-term capital gain or loss
if the REMIC Regular Certificate was held for more than one year. Long-term
capital gains of individuals are subject to reduced maximum tax rates while
capital gains recognized by individuals on capital assets held less than twelve
months are generally subject to ordinary income tax rates. The use of capital
losses is limited.

     Gain from the sale or other disposition of a REMIC Regular Certificate that
might otherwise be capital gain will be treated as ordinary income to the extent
that the gain does not exceed the excess, if any, of

          o    the amount that would have been includible in the holder's income
               with respect to the REMIC Regular Certificate had income accrued
               thereon at a rate equal to 110% of the AFR as defined in Internal
               Revenue Code Section 1274(d) determined as of the date of
               purchase of such REMIC Regular Certificate, over

          o    the amount actually includible in such holder's income.


                                       99



     Gain from the sale or other disposition of a REMIC Regular Certificate that
might otherwise be capital gain will be treated as ordinary income if the REMIC
Regular Certificate is held as part of a "conversion transaction" as defined in
Internal Revenue Code Section 1258(c), up to the amount of interest that would
have accrued on the REMIC Regular Certificateholder's net investment in the
conversion transaction at 120% of the appropriate applicable federal rate under
Internal Revenue Code Section 1274(d) in effect at the time the taxpayer entered
into the transaction minus any amount previously treated as ordinary income with
respect to any prior disposition of property that was held as part of such
transaction, or if the REMIC Regular Certificate is held as part of a straddle.
A sale of a REMIC Regular Certificate will be part of a "conversion transaction"
if substantially all of the holder's expected return is attributable to the time
value of the holder's net investment; the holder entered the contract to sell
the REMIC Regular Certificate substantially contemporaneously with acquiring the
REMIC Regular Certificate; the REMIC Regular Certificate is part of a straddle;
the REMIC Regular Certificate is marketed or sold as producing capital gains; or
other transactions to be specified in Treasury regulations that have not yet
been issued. Potential investors should consult their tax advisors with respect
to tax consequences of ownership and disposition of an investment in REMIC
Regular Certificates in their particular circumstances.

     The certificates will be "evidences of indebtedness" within the meaning of
Internal Revenue Code Section 582(c)(1), so that gain or loss recognized from
the sale of a REMIC Regular Certificate by a bank or a thrift institution to
which this section applies will be ordinary income or loss.

     The REMIC Regular Certificate information reports will include a statement
of the adjusted issue price of the REMIC Regular Certificate at the beginning of
each accrual period. In addition, the reports will include information necessary
to compute the accrual of any market discount that may arise upon secondary
trading of REMIC Regular Certificates. 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 Certificates. Payment Lag Certificates may provide for
payments of interest based on a period that corresponds to the interval between
distribution dates but that ends prior to each such distribution date. The
period between the closing date for Payment Lag Certificates and their first
distribution date may or may not exceed the interval. Purchasers of Payment Lag
Certificates for which the period between the closing date and the first
distribution date does not exceed the interval could pay upon purchase of the
REMIC Regular Certificates 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 REMIC Regular Certificate is allocable to pre-issuance
accrued interest and the REMIC Regular Certificate 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 REMIC Regular Certificate's 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 REMIC Regular Certificate.
However, it is unclear under this method how the OID Regulations treat interest
on Payment Lag Certificates. Therefore, in the case of a Payment Lag
Certificate, the trust fund intends to include accrued interest in the issue
price and report interest payments made on the first distribution date as
interest to the extent such payments represent interest for the number of days
that the certificateholder has held the Payment Lag Certificate during the first
accrual period.

     Investors should consult their own tax advisors concerning the treatment
for federal income tax purposes of Payment Lag Certificates.

     Non-Interest Expenses of the REMIC. Under 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 REMIC Regular Certificateholders that are
"pass-through interest holders." Certificateholders that are pass-through
interest holders should consult their own tax advisors about the impact of these
rules on an investment in the REMIC Regular Certificates. See "Pass-Through of
Non-Interest Expenses of the REMIC" under "Taxation of Owners of REMIC Residual
Certificates" below.

     Effects of Defaults, Delinquencies and Losses. Certain series of
certificates may contain one or more classes of subordinate certificates, and in
the event there are defaults or delinquencies on the mortgage loans, amounts
that would otherwise be distributed on the subordinate certificates may instead
be distributed on the senior certificates. Subordinate certificateholders
nevertheless will be required to report income with respect to such certificates
under an


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accrual method without giving effect to delays and reductions in distributions
on the subordinate certificates 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
subordinate certificateholder 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
subordinate certificate is reduced as a result of defaults and delinquencies on
the mortgage loans.

     Treatment of Realized Losses. Although not entirely clear, it appears that
holders of REMIC Regular Certificates that are corporations should in general be
allowed to deduct as an ordinary loss any loss sustained during the taxable year
on account of any such certificates becoming wholly or partially worthless, and
that, in general, holders of certificates 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 any such certificates becoming wholly worthless.
Potential investors and holders of the certificates are urged to consult their
own tax advisors regarding the appropriate timing, amount and character of any
loss sustained with respect to such certificates, including any loss resulting
from the failure to recover previously accrued interest or discount income.
Special loss rules are applicable to banks and thrift institutions, including
rules regarding reserves for bad debts. These taxpayers are advised to consult
their tax advisors regarding the treatment of losses on certificates.

     Non-U.S. Persons. Generally, payments of interest on the REMIC Regular
Certificates, including any payment with respect to accrued original issue
discount, to a REMIC Regular Certificateholder who is not a U.S. Person and is
not engaged in a trade or business within the United States will not be subject
to federal withholding tax if:

          o    the REMIC Regular Certificateholder does not actually or
               constructively own 10 percent or more of the combined voting
               power of all classes of equity in the issuer;

          o    the REMIC Regular Certificateholder is not a controlled foreign
               corporation, within the meaning of Internal Revenue Code Section
               957, related to the issuer; and

          o    the REMIC Regular Certificateholder complies with identification
               requirements, including delivery of a statement, signed by the
               REMIC Regular Certificateholder under penalties of perjury,
               certifying that the REMIC Regular Certificateholder is a foreign
               person and providing the name and address of the REMIC Regular
               Certificateholder.

     If a REMIC Regular Certificateholder is not exempt from withholding,
distributions of interest to the holder, including distributions in respect of
accrued original issue discount, may be subject to a 30% withholding tax,
subject to reduction under any applicable tax treaty. If the interest on a REMIC
Regular Certificate is effectively connected with the conduct by a holder that
is a non-U.S. Person of a trade or business in the United States, then the
holder will not be subject to the 30% withholding tax on gross income therefrom
but will be subject to U.S. income tax at regular graduated rates on its net
income and, if such holder is a corporation, may be subject to U.S. branch
profits tax as well.

     Further, a REMIC Regular Certificate will not be included in the estate of
a non-resident alien individual and will not be subject to United States estate
taxes. This exclusion may not apply if the non-resident alien individual
actually or constructively owns 10% or more of the residual interest in the
related REMIC. Certificateholders who are non-resident alien individuals should
consult their tax advisors concerning this question.

     REMIC Regular Certificateholders who are not U.S. Persons and persons
related to such holders should not acquire any REMIC Residual Certificates, and
REMIC Residual Certificateholders and persons related to REMIC Residual
Certificateholders should not acquire any REMIC Regular Certificates without
consulting their tax advisors as to the possible adverse tax consequences of
doing so. In addition, the Internal Revenue Service may assert that non-U.S.
Persons that own directly or indirectly, a greater than 10% interest in any
borrower, and foreign corporations that are "controlled foreign corporations" as
to the United States of which such a borrower is a "United States shareholder"
within the meaning of Internal Revenue Code Section 951(b), are subject to
United States withholding tax on interest distributed to them to the extent of
interest concurrently paid by the related borrower.


                                       101



     Information Reporting and Backup Withholding. The master servicer will
furnish or make available, within a reasonable time after the end of each
calendar year, to each person who was a REMIC Regular Certificateholder at any
time during that year, the information as may be deemed necessary or desirable
to assist REMIC Regular Certificateholders in preparing their federal income tax
returns, or to enable holders to make the information available to beneficial
owners or financial intermediaries that hold the REMIC Regular Certificates on
behalf of beneficial owners. If a holder, beneficial owner, financial
intermediary or other recipient of a payment on behalf of a beneficial owner
fails to supply a certified taxpayer identification number or if the Secretary
of the Treasury determines that such person has not reported all interest and
dividend income required to be shown on its federal income tax return, backup
withholding at a rate of 30% for 2003, 29% for 2004-05 and 28% for 2006-2010 may
be required with respect to any payments with respect to any payments to
registered owners who are not "exempt recipients." In addition, upon the sale of
a REMIC Regular Certificate to, or through, a broker, the broker must withhold
at the backup withholding rate on the entire purchase price, unless either:

          o    the broker determines that the seller is a corporation or other
               exempt recipient, or

          o    the seller provides, in the required manner, identifying
               information and, in the case of a non-U.S. Person, certifies that
               such seller is a non-U.S. Person, and other conditions are met.

     A sale of a REMIC Regular Certificate to, or through, a broker must also be
reported by the broker to the Internal Revenue Service, unless either:

          o    the broker determines that the seller is an exempt recipient, or

          o    the seller certifies its non-U.S. Person status and other
               conditions are met.

     Certification of the registered owner's non-U.S. Person status normally
would be made on Internal Revenue Service Form W-8BEN under penalties of
perjury, although in certain cases it may be possible to submit other
documentary evidence. Any amounts deducted and withheld from a distribution to a
recipient would be allowed as a credit against such recipient's federal income
tax liability.

     Final regulations have been issued by the Treasury Department, which
provide for a new series of certification forms and modify reliance standards
for withholding, backup withholding and information reporting. Prospective
investors are urged to consult their own tax advisors regarding these
regulations.

B. TAXATION OF OWNERS OF REMIC RESIDUAL CERTIFICATES

     Allocation of the Income of the REMIC to the REMIC 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" below. Instead, each original holder
of a REMIC 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 the holder owns any REMIC 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. Such a holder's share of the taxable income of the
REMIC for each day will be based on the portion of the outstanding REMIC
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 REMIC Residual Certificates without regard to the timing or amounts
of cash distributions by the REMIC. Ordinary income derived from REMIC Residual
Certificates will be portfolio income for purposes of the taxation of taxpayers
subject to the limitations on the deductibility of passive losses. As residual
interests, the REMIC Residual Certificates will be subject to tax rules,
described below, that differ from those that would apply if the REMIC Residual
Certificates were treated for federal income tax purposes as direct ownership
interests in the certificates or as debt instruments issued by the REMIC.

     A REMIC Residual Certificateholder may be required to include taxable
income from the REMIC 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 such a
mismatching of income and cash distributions that is, phantom income. This
mismatching may be caused by the use of certain required tax accounting


                                       102



methods by the REMIC, variations in the prepayment rate of the underlying
mortgage loans and mortgage-backed securities and certain other factors.
Depending upon the structure of a particular transaction, the aforementioned
factors may significantly reduce the after-tax yield of a REMIC Residual
Certificate to a REMIC Residual Certificateholder or cause the REMIC Residual
Certificate to have negative value. Investors should consult their own tax
advisors concerning the federal income tax treatment of a REMIC Residual
Certificate and the impact of the tax treatment on the after-tax yield of a
REMIC Residual Certificate.

     A subsequent REMIC Residual Certificateholder also will report on its
federal income tax return amounts representing a daily share of the taxable
income of the REMIC for each day that the REMIC Residual Certificateholder owns
the REMIC Residual Certificate. Those daily amounts generally would equal the
amounts that would have been reported for the same days by an original REMIC
Residual Certificateholder, as described above. The legislative history
indicates that certain adjustments may be appropriate to reduce or increase the
income of a subsequent holder of a REMIC Residual Certificate that purchased the
REMIC Residual Certificate at a price greater than or less than the adjusted
basis the REMIC Residual Certificate would have in the hands of an original
REMIC Residual Certificateholder. See "--Sale or Exchange of REMIC Residual
Certificates" below. It is not clear, however, whether the adjustments will in
fact be permitted or required and, if so, how they would be made. The REMIC
Regulations do not provide for any such adjustments.

     Taxable Income of the REMIC Attributable to Residual Interests. The taxable
income of the REMIC will reflect a netting of:

          o    the income from the mortgage loans and mortgage-backed securities
               and the REMIC's other assets, and

          o    the deductions allowed to the REMIC for interest and original
               issue discount on the REMIC Regular Certificates and, except as
               described above under "--Taxation of Owners of REMIC Regular
               Certificates--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:

          o    the limitations on deductibility of investment interest expense
               and expenses for the production of income do not apply,

          o    all bad loans will be deductible as business bad debts, and

          o    the limitation on the deductibility of interest and expenses
               related to tax-exempt income will apply.

     The REMIC's gross income includes interest, original issue discount income,
and market discount income, if any, on the mortgage loans, reduced by
amortization of any premium on the mortgage loans, plus income on reinvestment
of cash flows and reserve assets, plus any cancellation of indebtedness income
upon allocation of realized losses to the REMIC Regular Certificates. Note that
the timing of cancellation of indebtedness income recognized by REMIC Residual
Certificateholders resulting from defaults and delinquencies on mortgage loans
and mortgage-backed securities may differ from the time of the actual loss on
the assets. The REMIC's deductions include interest and original issue discount
expense on the REMIC Regular Certificates, servicing fees on the mortgage loans,
other administrative expenses of the REMIC and realized losses on the mortgage
loans. The requirement that REMIC Residual Certificateholders report their pro
rata share of taxable income or net loss of the REMIC will continue until there
are no certificates 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 REMIC Regular Certificates and the REMIC Residual Certificates, or, if a
class of certificates is not sold initially, its fair market value. The
aggregate basis will be allocated among the mortgage loans and mortgage-backed
securities and other assets of the REMIC in proportion to their respective fair
market value. A mortgage loan or mortgage-backed security 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
such discount, whether market discount or original issue discount, will be
includible in the income of the REMIC as it accrues, in advance of receipt of
the cash attributable to the income, under a method similar to the


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method described above for accruing original issue discount on the REMIC Regular
Certificates. The REMIC may elect under Internal Revenue Code Section 171 to
amortize any premium on the mortgage loans and mortgage-backed securities.
Premium on any mortgage loan or mortgage-backed security to which the election
applies would be amortized under a constant yield method. It is not clear
whether the yield of a mortgage loan or mortgage-backed security would be
calculated for this purpose based on scheduled payments or taking account of the
Prepayment Assumption. Additionally, such an 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 such a 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 original issue
discount on the REMIC Regular Certificates. The amount and method of accrual of
original issue discount will be calculated for this purpose in the same manner
as described above with respect to REMIC Regular Certificates except that the
0.25% per annum de minimis rule and adjustments for subsequent holders described
therein will not apply.

     A REMIC Residual Certificateholder will not be permitted to amortize the
cost of the REMIC Residual Certificate as an offset to its share of the REMIC's
taxable income. However, REMIC 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 REMIC Residual Certificates will be
added to the issue price of the REMIC Regular Certificates in determining the
REMIC's initial basis in its assets. See "--Sale or Exchange of REMIC Residual
Certificates" below. For a discussion of possible adjustments to income of a
subsequent holder of a REMIC Residual Certificate to reflect any difference
between the actual cost of the REMIC Residual Certificate to the holder and the
adjusted basis the REMIC Residual Certificate would have in the hands of an
original REMIC Residual Certificateholder, see "--Allocation of the Income of
the REMIC to the REMIC Residual Certificates" above.

     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 REMIC Residual Certificateholders in the same manner as the
REMIC's taxable income. The net loss allocable to any REMIC Residual Certificate
will not be deductible by the holder to the extent that the net loss exceeds the
holder's adjusted basis in the REMIC Residual Certificate. Any net loss that is
not currently deductible by reason of this limitation may only be used by the
REMIC Residual Certificateholder to offset its share of the REMIC's taxable
income in future periods (but not otherwise). The ability of REMIC Residual
Certificateholders that are individuals or closely held corporations to deduct
net losses may be subject to additional limitations under the Internal Revenue
Code.

     Mark-to-Market Rules. Prospective purchasers of a REMIC Residual
Certificate should be aware that the Internal Revenue Service finalized
Mark-to-Market Regulations which provide that a REMIC Residual Certificate
cannot be marked to market.

     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
REMIC Residual Certificates. In the case of a single class REMIC, however, the
expenses and a matching amount of additional income will be allocated, under
temporary Treasury regulations, among the REMIC Regular Certificateholders and
the REMIC Residual Certificateholders on a daily basis in proportion to the
relative amounts of income accruing to each certificateholder on that day. In
general terms, a single class REMIC is one that either:

          o    would qualify, under existing Treasury regulations, as a grantor
               trust if it were not a REMIC, treating all interests as ownership
               interests, even if they would be classified as debt for federal
               income tax purposes, or

          o    is similar to such a trust and is structured with the principal
               purpose of avoiding the single class REMIC rules. Unless
               otherwise stated in the applicable prospectus supplement, the
               expenses of the REMIC will be allocated to holders of the related
               REMIC Residual Certificates in their entirety and not to holders
               of the related REMIC Regular Certificates.

     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 REMIC
Regular Certificate or a REMIC Residual Certificate directly or through


                                       104



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, such expenses will be deductible under Internal
Revenue Code Section 67 only to the extent that such expenses, plus other
miscellaneous itemized deductions of the individual, exceed 2% of such
individual's adjusted gross income. In addition, Internal Revenue Code Section
68 provides that the applicable amount will be reduced by the lesser of:

          o    3% of the excess of the individual's adjusted gross income over
               the applicable amount, or

          o    80% of the amount of itemized deductions otherwise allowable for
               the taxable year.

     This limitation will be phased out beginning in 2006 and eliminated after
2009.

     The amount of additional taxable income recognized by REMIC Residual
Certificateholders who are subject to the limitations of either Internal Revenue
Code Section 67 or Internal Revenue Code Section 68 may be substantial. Further,
holders other than corporations subject to the alternative minimum tax may not
deduct miscellaneous itemized deductions in determining such holders alternative
minimum taxable income. The REMIC is required to report to each pass-through
interest holder and to the Internal Revenue Service such 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. REMIC Residual Certificateholders that are pass-through interest holders
should consult their own tax advisors about the impact of these rules on an
investment in the REMIC Residual Certificates.

     Excess Inclusions. A portion of the income on a REMIC Residual Certificate
referred to in the Internal Revenue Code as an excess inclusion, for any
calendar quarter will be subject to federal income tax in all events. Thus, for
example, an excess inclusion:

          o    may not, except as described below, be offset by any unrelated
               losses, deductions or loss carryovers of a REMIC Residual
               Certificateholder;

          o    will be treated as unrelated business taxable income within the
               meaning of Internal Revenue Code Section 512 if the REMIC
               Residual Certificateholder is a pension fund or any other
               organization that is subject to tax only on its unrelated
               business taxable income, as discussed under "--Tax-Exempt
               Investors" below; and

          o    is not eligible for any reduction in the rate of withholding tax
               in the case of a REMIC Residual Certificateholder that is a
               foreign investor, as discussed under "--Residual Certificate
               Payments--Non-U.S. Persons" below.

     Except as discussed in the following paragraph, with respect to any REMIC
Residual Certificateholder, the excess inclusions for any calendar quarter is
the excess, if any, of (1) the income of such REMIC Residual Certificateholder
for that calendar quarter from its REMIC Residual Certificate over (2) the sum
of the daily accruals for all days during the calendar quarter on which the
REMIC Residual Certificateholder holds a REMIC Residual Certificate. For this
purpose, the daily accruals with respect to a REMIC 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 REMIC Residual Certificate at
the beginning of the calendar quarter and 120 percent of the Federal long-term
rate in effect at the time the REMIC Residual Certificate is issued. For this
purpose, the adjusted issue price of a REMIC Residual Certificate at the
beginning of any calendar quarter equals the issue price of the REMIC 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 REMIC Residual Certificate before the beginning of the quarter. The "federal
long-term rate" is an average of current yields on Treasury securities with a
remaining term of greater than nine years, computed and published monthly by the
Internal Revenue Service.

     In the case of any REMIC Residual Certificates held by a real estate
investment trust, the aggregate excess inclusions with respect to the REMIC
Residual Certificates, reduced (but not below zero) by the real estate
investment trust taxable income (within the meaning of Internal Revenue Code
Section 857(b)(2), excluding any net capital gain), will be allocated among the
shareholders of such trust in proportion to the dividends received by the


                                       105



shareholders from such trust, and any amount so allocated will be treated as an
excess inclusion with respect to a REMIC Residual Certificate as if held
directly by the shareholder. Regulated investment companies, common trust funds
and certain cooperatives are subject to similar rules.

     The Internal Revenue Code provides three rules for determining the effect
on excess inclusions on the alternative minimum taxable income of a residual
holder. First, alternative minimum taxable income for the residual holder is
determined without regard to the special rule that taxable income cannot be less
than excess inclusions. Second, the amount of any alternative minimum tax net
operating loss deductions must be computed without regard to any excess
inclusions. Third, a residual holder's alternative minimum taxable income for a
tax year cannot be less than excess inclusions for the year. The effect of this
last statutory amendment is to prevent the use of nonrefundable tax credits to
reduce a taxpayer's income tax below its tentative minimum tax computed only on
excess inclusions.

     Payments. Any distribution made on a REMIC Residual Certificate to a REMIC
Residual Certificateholder will be treated as a non-taxable return of capital to
the extent it does not exceed the REMIC Residual Certificateholder's adjusted
basis in the REMIC Residual Certificate. To the extent a distribution exceeds
the adjusted basis, it will be treated as gain from the sale of the REMIC
Residual Certificate.

     Sale or Exchange of REMIC Residual Certificates. If a REMIC 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 REMIC Residual Certificate except that the
recognition of loss may be limited under the "wash sale" rules described in the
second following paragraph. A holder's adjusted basis in a REMIC Residual
Certificate generally equals the cost of the REMIC Residual Certificate to the
REMIC Residual Certificateholder, increased by the taxable income of the REMIC
that was included in the income of the REMIC Residual Certificateholder with
respect to the REMIC Residual Certificate, and decreased--but not below zero--by
the net losses that have been allowed as deductions to the REMIC Residual
Certificateholder with respect to the REMIC Residual Certificate and by the
distributions received thereon by the REMIC Residual Certificateholder. In
general, the gain or loss will be capital gain or loss provided the REMIC
Residual Certificate is held as a capital asset. However, REMIC Residual
Certificates will be "evidences of indebtedness" within the meaning of Internal
Revenue Code Section 582(c)(1), so that gain or loss recognized from sale of a
REMIC Residual Certificate by a bank or thrift institution to which such section
applies would be ordinary income or loss.

     The capital gain or loss will generally be long-term capital gain or loss
if the REMIC Residual Certificate was held for more than one year. Long-term
capital gains of individuals are subject to reduced maximum tax rates while
capital gains recognized by individuals on capital assets held twelve months or
less are generally subject to ordinary income tax rates. The use of capital
losses is limited. In addition, a transfer of a REMIC Residual Certificate that
is a "noneconomic residual interest" may be subject to different rules. See "Tax
Related Restrictions on Transfers of REMIC Residual Certificates--Noneconomic
Residual Certificates" below.

     Except as provided in Treasury regulations yet to be issued, if the seller
of a REMIC Residual Certificate reacquires such REMIC Residual Certificate, or
acquires any other REMIC Residual Certificate, any residual interest in another
REMIC or similar interest in a "taxable mortgage pool," as defined in Internal
Revenue Code Section 7701(i), during the period beginning six months before, and
ending six months after, the date of such sale, such sale will be subject to the
"wash sale" rules of Internal Revenue Code Section 1091. In that event, any loss
realized by the REMIC Residual Certificateholder on the sale will not be
deductible, but, instead, will increase such REMIC Residual Certificateholder's
adjusted basis in the newly acquired asset.

     A REMIC Residual Certificate may have a negative value if the net present
value of anticipated tax liabilities exceeds the present value of anticipated
cash flows. The REMIC Regulations appear to treat the issue price of such a
residual interest as zero rather than such negative amount for purposes of
determining the related REMIC's basis in its assets. Regulations have been
issued addressing the federal income tax treatment of "inducement fees" received
by transferees of non-economic residual interests. These regulations require
inducement fees to be included in income over a period reasonably related to the
period in which the related residual interest is expected to generate taxable
income or net loss to its holder. Under two safe harbor methods, inducement fees
must be included in income (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 related 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 related REMIC, determined
based on actual distributions projected as remaining to be made on such
interests under


                                       106



the related prepayment assumption. If the holder of a non economic residual
interest sells or otherwise disposes of the non economic residual interest, any
unrecognized portion of the inducement fee must be taken into account at the
time of the sale or disposition. Prospective purchasers of the REMIC Residual
Certificates should consult with their tax advisors regarding these regulations.

PROHIBITED TRANSACTIONS AND OTHER TAXES

     The Internal Revenue Code imposes a tax on REMICs equal to 100% of the net
income derived from prohibited transactions. In general, subject to certain
specified exceptions, a prohibited transaction means:

          o    the disposition of a mortgage loan or mortgage-backed security;
               the receipt of income from a source other than a mortgage loan or
               mortgage-backed security or certain other permitted investments;

          o    the receipt of compensation for services; or

          o    gain from the disposition of an asset purchased with the payments
               on the mortgage loans and mortgage-backed securities for
               temporary investment pending distribution on the certificates.

     It is not anticipated that the trust fund for any series of certificates
will engage in any prohibited transactions in which it would recognize a
material amount of net income.

     In addition, certain contributions to a trust fund as to which an election
has been made to treat the trust fund as a REMIC made after the day on which the
trust fund issues all of its interests could result in the imposition of the
Contributions Tax. No trust fund for any series of certificates will accept
contributions that would subject it to such tax.

     In addition, a trust fund as to which an election has been made to treat
the trust fund 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 certificates arises out of or
results from:

          o    a breach of the related servicer's, trustee's or depositor's
               obligations, as the case may be, under the related Agreement for
               such series, such tax will be borne by such servicer, trustee or
               depositor, as the case may be, out of its own funds; or

          o    Morgan Stanley Capital I Inc.'s obligation to repurchase a
               mortgage loan,

such tax will be borne by Morgan Stanley Capital I Inc.

     In the event that the servicer, trustee or depositor, as the case may be,
fails to pay or is not required to pay any Prohibited Transactions Tax,
Contributions Tax, tax on net income from foreclosure property or state or local
income or franchise tax, the tax will be payable out of the trust fund for the
series and will result in a reduction in amounts available to be distributed to
the certificateholders of the series.

LIQUIDATION AND TERMINATION

     If the REMIC adopts a plan of complete liquidation, within the meaning of
Internal Revenue Code Section 860F(a)(4)(A)(i), which may be accomplished by
designating in the REMIC's final tax return a date on which such adoption is
deemed to occur, and sells all of its assets other than cash within a 90-day
period beginning on such date, the REMIC will not be subject to any Prohibited
Transaction Tax, provided that the REMIC credits or distributes in liquidation
all of the sale proceeds plus its cash, other than the amounts retained to meet
claims, to holders of Regular and REMIC Residual Certificates within the 90-day
period.


                                       107



      The REMIC will terminate shortly following the retirement of the REMIC
Regular Certificates. If a REMIC Residual Certificateholder's adjusted basis in
the REMIC Residual Certificate exceeds the amount of cash distributed to such
REMIC Residual Certificateholder in final liquidation of its interest, then it
would appear that the REMIC Residual Certificateholder would be entitled to a
loss equal to the amount of such excess. It is unclear whether such a loss, if
allowed, will be a capital loss or an ordinary loss.

ADMINISTRATIVE MATTERS

     Solely for the purpose of the administrative provisions of the Internal
Revenue Code, the REMIC generally will be treated as a partnership and the REMIC
Residual Certificateholders will be treated as the partners. In general, the
holder of the largest percentage interest of a class of REMIC Residual
Certificates will be the "tax matters person" of the related REMIC for purposes
of representing REMIC Residual Certificateholders in connection with an Internal
Revenue Service proceeding. However, the duties of the tax matters person will
be delegated to the Trustee under the applicable Agreement.

     Certain tax information will be furnished quarterly to each REMIC Residual
Certificateholder who held a REMIC Residual Certificate on any day in the
previous calendar quarter.

     Each REMIC Residual Certificateholder is required to treat items on its
return consistently with their treatment on the REMIC's return, unless the REMIC
Residual Certificateholder either files a statement identifying the
inconsistency or establishes that the inconsistency resulted from incorrect
information received from the REMIC. The Internal Revenue Service may assert a
deficiency resulting from a failure to comply with the consistency requirement
without instituting an administrative proceeding at the REMIC level. The REMIC
does not intend to register as a tax shelter pursuant to Internal Revenue Code
Section 6111 because it is not anticipated that the REMIC will have a net loss
for any of the first five taxable years of its existence. Any person that holds
a REMIC Residual Certificate as a nominee for another person may be required to
furnish the REMIC, in a manner to be provided in Treasury regulations, with the
name and address of such person and other information.

TAX-EXEMPT INVESTORS

     Any REMIC 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 Internal Revenue Code Section 512 will be
subject to such tax on that portion of the distributions received on a REMIC
Residual Certificate that is considered an excess inclusion. See "--Taxation of
Owners of REMIC Residual Certificates--Excess Inclusions" above.

RESIDUAL CERTIFICATE PAYMENTS--NON-U.S. PERSONS

     Amounts paid to REMIC Residual Certificateholders who are not U.S. Persons
(see "--Taxation of Owners of REMIC Regular Certificates--Non-U.S. Persons"
above) are treated as interest for purposes of the 30% or lower treaty rate,
United States withholding tax. Amounts distributed to holders of REMIC Residual
Certificates should qualify as "portfolio interest," subject to the conditions
described in "--Taxation of Owners of REMIC Regular Certificates" above, but
only to the extent that the underlying mortgage loans were originated after July
18, 1984. Furthermore, the rate of withholding on any income on a REMIC Residual
Certificate that is excess inclusion income will not be subject to reduction
under any applicable tax treaties. See "--Taxation of Owners of REMIC Residual
Certificates--Excess Inclusions" above. If the portfolio interest exemption is
unavailable, such amount will be subject to United States withholding tax when
paid or otherwise distributed, or when the REMIC Residual Certificate is
disposed of, under rules similar to those for withholding upon disposition of
debt instruments that have original issue discount. The Internal Revenue Code,
however, grants the Treasury Department authority to issue regulations requiring
that those amounts be taken into account earlier than otherwise provided where
necessary to prevent avoidance of tax, for example, where the REMIC Residual
Certificates do not have significant value. See "--Taxation of Owners of REMIC
Residual Certificates--Excess Inclusions" above. If the amounts paid to REMIC
Residual Certificateholders that are not U.S. Persons are effectively connected
with their conduct of a trade or business within the United States, the 30% or
lower treaty rate withholding will not apply. Instead, the amounts paid to such
non-U.S. Person will be subject to U.S. federal income taxation at regular
graduated rates. For special


                                       108



restrictions on the transfer of REMIC Residual Certificates, see "--Tax Related
Restrictions on Transfers of REMIC Residual Certificates" below.

     REMIC Regular Certificateholders and persons related to such holders should
not acquire any REMIC Residual Certificates, and REMIC Residual
Certificateholders and persons related to REMIC Residual Certificateholders
should not acquire any REMIC Regular Certificates, without consulting their tax
advisors as to the possible adverse tax consequences of such acquisition.

TAX RELATED RESTRICTIONS ON TRANSFERS OF REMIC 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 (A) an amount, as
determined under the REMIC Regulations, equal to the present value of the total
anticipated "excess inclusions" with respect to such interest for periods after
the transfer and (B) 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. The person
otherwise liable for the tax shall be relieved of liability for the tax if the
transferee furnished to such person an affidavit that the transferee is not a
disqualified organization and, at the time of the transfer, such person does not
have actual knowledge that the affidavit is false. A "disqualified organization"
means:

          (A)  the United States, any State, possession or political subdivision
               thereof, any foreign government, any international organization
               or any agency or instrumentality of any of the foregoing
               (provided that such term does not include an instrumentality if
               all its activities are subject to tax and, except for FHLMC, a
               majority of its board of directors is not selected by any such
               governmental agency),

          (B)  any organization, other than certain farmers cooperatives,
               generally exempt from federal income taxes unless such
               organization is subject to the tax on "unrelated business taxable
               income," and

          (C)  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 such entity,
provided that all partners of an "electing large partnership as defined in
Section 775 of the Code, are deemed to be disqualified organizations. The amount
of the tax is equal to the product of (A) the amount of excess inclusions for
the taxable year allocable to the interest held by the disqualified organization
and (B) 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 such
entity, will be relieved of liability for the tax if such record holder
furnishes to such entity an affidavit that such record holder is not a
disqualified organization and, for such period, the pass-through entity does not
have actual knowledge that the affidavit is false. For this purpose, a
"pass-through entity" means:

          o    a regulated investment company, real estate investment trust or
               common trust fund,

          o    a partnership, trust or estate and

          o    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 such interest, be treated as a pass-through entity.
Electing large partnerships--generally, non-service partnerships with 100 or
more members electing to be subject to simplified Internal Revenue Service
reporting provisions under Internal Revenue Code sections 771 through 777--will
be taxable on excess inclusion income as if all partners were disqualified
organizations.

     In order to comply with these rules, the Agreement will provide that no
record or beneficial ownership interest in a REMIC Residual Certificate may be
purchased, transferred or sold, directly or indirectly, without the express


                                       109



written consent of the master servicer. The master servicer will grant consent
to a proposed transfer only if it receives the following:

          o    an affidavit from the proposed transferee to the effect that it
               is not a disqualified organization and is not acquiring the REMIC
               Residual Certificate as a nominee or agent for a disqualified
               organization and

          o    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 REMIC Residual
               Certificate.

     Noneconomic REMIC Residual Certificates. The REMIC Regulations disregard,
for federal income tax purposes, any transfer of a Noneconomic REMIC Residual
Certificate to a U.S. Person, unless no significant purpose of the transfer is
to enable the transferor to impede the assessment or collection of tax. A
Noneconomic REMIC Residual Certificate is any REMIC Residual Certificate,
including a REMIC 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,

          o    the present value of the expected future distributions on the
               REMIC 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

          o    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. A transferor is presumed not to have such
knowledge if:

     (1) the transferor conducted, at the time of the transfer, a reasonable
investigation of the financial condition of the transferee and, as a result of
the investigation, the transferor determined that the transferee had
historically paid its debts as they came due and found no significant evidence
that the transferee would not continue to pay its debts as they come due in the
future;

     (2) the transferee represents to the transferor that (i) it understands
that, as the holder of the REMIC Residual Certificate, the transferee may incur
tax liabilities in excess of cash flows generated by the interest, (ii) that the
transferee intends to pay taxes associated with holding the residual interest as
they came due and (iii) that the transferee will not cause income with respect
to the REMIC Residual Certificate to be attributable to a foreign permanent
establishment or fixed base, within the meaning of an applicable income tax
treaty, of such transferee or any other person; and

     (3) the transfer is not a direct or indirect transfer to a foreign
permanent establishment or fixed base, within the meaning of an applicable
income tax treaty, and either:

          (i) the present value of the anticipated tax liabilities associated
     with holding the REMIC Residual Certificate does not exceed the sum of:

               (a) the present value of any consideration given to the
          transferee to acquire the REMIC Residual Certificate;

               (b) the present value of the expected future distributions on the
          REMIC Residual Certificate; and

               (c) the present value of the anticipated tax savings associated
          with the holding the REMIC Residual Certificate as the REMIC generates
          losses. For purposes of the computations under this "minimum transfer
          price" alternative, the transferee is assumed to pay tax at the
          highest rate of tax specified in Internal Revenue Code Section
          11(b)(1) (currently 35%) or, in certain circumstances the alternative
          minimum tax rate. Further, present values generally are computed using
          a discount rate equal to the short-term Federal rate set


                                       110



          forth in Internal Revenue Code Section 1274(d) for the month of such
          transfer and the compounding period used by the transferee; or

          (ii) (a) at the time of the transfer, and at the close of each of the
     transferee's two fiscal years preceding the year of transfer, the
     transferee's gross assets for financial reporting purposes exceed $100
     million and its net assets for financial reporting purposes exceed $10
     million;

               (b) the transferee is an eligible corporation (as defined in
          Treasury regulation section I.860E-1(c)(6)(i)) that makes a written
          agreement that any subsequent transfer of the interest will be to
          another eligible corporation in a transaction which will also satisfy
          clauses (1) and (2) above and this clause 3(ii); and

               (c) the facts and circumstances known to the transferor on or
          before the date of the transfer must not reasonably indicate that the
          taxes associated with the residual interest will not be paid. For
          purposes of clause 3(ii)(c), if the amount of consideration paid in
          respect of the residual interest is so low that under any set of
          reasonable assumptions a reasonable person would conclude that the
          taxes associated with holding the residual interest will not be paid,
          then the transferor is deemed to know that the transferee cannot or
          will not pay the taxes associated with the residual interest.

     If a transfer of a Noneconomic REMIC Residual Certificate is disregarded,
the transferor would continue to be treated as the owner of the REMIC Residual
Certificate and would continue to be subject to tax on its allocable portion of
the net income of the REMIC.

     Foreign Investors. The REMIC Regulations provide that the transfer of a
REMIC Residual Certificate that has a tax avoidance potential to a foreign
person will be disregarded for federal income tax purposes. This rule appears to
apply to a transferee who is not a U.S. Person unless the transferee's income in
respect of the REMIC Residual Certificate is effectively connected with the
conduct of a United Sates trade or business. A REMIC Residual Certificate is
deemed to have a tax avoidance potential unless, at the time of transfer, the
transferor reasonably expects that the REMIC will distribute to the transferee
amounts that will equal at least 30 percent of each excess inclusion, and that
such amounts will be distributed at or after the time the excess inclusion
accrues and not later than the end of the calendar year following the year of
accrual. If the non-U.S. Person transfers the REMIC Residual Certificate to a
U.S. Person, the transfer will be disregarded, and the foreign transferor will
continue to be treated as the owner, if the transfer has the effect of allowing
the transferor to avoid tax on accrued excess inclusions. The pooling and
servicing agreement will provide that no record or beneficial ownership interest
in a REMIC Residual Certificate may be transferred, directly or indirectly, to a
non-U.S. Person unless the person provides the trustee with a duly completed
Internal Revenue Service Form W-8ECI or applicable successor form adopted by the
Internal Revenue Service for such purposes and the trustee consents to the
transfer in writing.

     Any attempted transfer or pledge in violation of the transfer restrictions
shall be absolutely null and void and shall vest no rights in any purported
transferee. Investors in REMIC Residual Certificates are advised to consult
their own tax advisors with respect to transfers of the REMIC Residual
Certificates and, in addition, pass-through entities are advised to consult
their own tax advisors with respect to any tax which may be imposed on a
pass-through entity.

REPORTABLE TRANSACTIONS

     Any holder of an offered certificate that reports any item or items of
income, gain, expense, or loss in respect of an offered certificate for tax
purposes in an amount that differs from the amount reported for book purposes by
more than $10 million, on a gross basis, in any taxable year may be subject to
certain disclosure requirements for "reportable transactions." Prospective
investors should consult their tax advisers concerning any possible tax return
disclosure obligation with respect to the offered certificates.

                            STATE TAX CONSIDERATIONS

     In addition to the federal income tax consequences described in "Federal
Income Tax Consequences," potential investors should consider the state income
tax consequences of the acquisition, ownership, and disposition of the offered
certificates. State or 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. Therefore, potential


                                       111



investors should consult their own tax advisors with respect to the various tax
consequences of investments in the offered certificates.

                              ERISA CONSIDERATIONS

GENERAL

     The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and Internal Revenue Code Section 4975 impose certain restrictions on Plans and
on persons who are parties in interest or disqualified persons with respect to
the Plans. Certain employee benefit plans, such as governmental plans and church
plans (if no election has been made under Internal Revenue Code Section 410(d)),
are not subject to the restrictions of ERISA. However, these plans may be
subject to other applicable federal, state or local law that is similar to the
provisions of ERISA or the Code. Moreover, any governmental or church plan that
is not subject to ERISA but is qualified under Internal Revenue Code Section
401(a) and exempt from taxation under Internal Revenue Code Section 501(a) is
subject to the prohibited transaction rules set forth in Internal Revenue Code
Section 503.

     Investments by Plans are subject to 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.

PROHIBITED TRANSACTIONS

     General

     Section 406 of ERISA prohibits parties in interest with respect to a Plan
from engaging in certain transactions involving the Plan and its assets unless a
statutory, regulatory or administrative exemption applies to the transaction.
Internal Revenue Code Section 4975 imposes excise taxes (or, in some cases, a
civil penalty may be assessed pursuant to Section 502(i) of ERISA) on parties in
interest that engage in non-exempt prohibited transactions.

     The United States Department of Labor has issued a final regulation (29
C.F.R. Section 2510.3-101) containing rules for determining what constitutes the
assets of a Plan. This regulation provides that, as a general rule, the
underlying assets and properties of corporations, partnerships, trusts and
certain other entities in which a Plan makes an "equity investment" will be
deemed for purposes of ERISA to be assets of the Plan unless an exception
applies.

     Under the terms of the regulation, the trust may be deemed to hold plan
assets by reason of a Plan's investment in a certificate; such plan assets would
include an undivided interest in the mortgage loans and any other assets held by
the trust. In this event, the asset seller, the master servicer, the trustee,
any insurer of the mortgage loans and mortgage-backed securities and other
persons, in providing services with respect to the assets of the trust, may be
parties in interest, subject to the fiduciary responsibility provisions of Title
I of ERISA, including the prohibited transaction provisions of Section 406 of
ERISA (and of Internal Revenue Code Section 4975), with respect to transactions
involving the plan assets unless such transactions are subject to a statutory,
regulatory or administrative exemption.

     The regulations contain a de minimis safe-harbor rule that exempts the
assets of any entity from plan assets status as long as the aggregate equity
investment in such entity by plans is not significant. For this purpose, equity
participation in the entity will be significant if immediately after any
acquisition of any equity interest in the entity, "benefit plan investors" in
the aggregate, own 25% or more of the value of any class of equity interest,
excluding from the calculation the value of equity interest held by persons who
have discretionary authority or control with access to the assets of the entity
or held by affiliates of such persons. "Benefit Plan Investors" include both
Plans and employee benefit plans not subject to ERISA (e.g., governmental and
foreign plans). To fit within the safe harbor, the 25% limitation must be met
with respect to each class of certificates, regardless of the portion of total
equity value represented by such class, on an ongoing basis.


                                       112



     Availability of Underwriter's Exemption for Certificates

     The United States Department of Labor has granted to Morgan Stanley & Co.
Incorporated Prohibited Transaction Exemption ("PTE") 90-24, Exemption
Application No. D-8019, 55 Fed. Reg. 20548 (1990) as amended by PTE 97-34,
Exemption Application Nos. D-10245 and D-10246, 55 Fed. Reg. 39021 (1997), by
PTE 2000-58, Exemption Application No. D-10829, 65 Fed. Reg. 67765 (2000) and by
PTE 2002-41, Exemption Application No. D-11077, 67 Fed. Reg. 54487 (2002) (the
"Exemption"), which, as amended, exempts from the application of the prohibited
transaction rules transactions relating to:

          o    the acquisition, sale and holding by Plans of certain securities,
               including certificates, representing an undivided interest in
               certain asset-backed pass-through entities, including trusts,
               with respect to which Morgan Stanley & Co. Incorporated or any of
               its affiliates is the sole underwriter or the manager or
               co-manager of the underwriting syndicate; and

          o    the servicing, operation and management of those asset-backed
               pass-through trusts,

provided that the general conditions and certain other conditions set forth in
the Exemption are satisfied.

     The Exemption sets forth the following general conditions which must be
satisfied before a transaction involving the acquisition, sale and holding of
the certificates or a transaction in connection with the servicing, operation
and management of the trust may be eligible for exemptive relief thereunder:

          (1) The acquisition of the certificates by a Plan is on terms
     (including the price for such certificates) that are at least as favorable
     to the investing Plan as they would be in an arm s-length transaction with
     an unrelated party;

          (2) The certificates acquired by the Plan have received a rating at
     the time of such acquisition that is in one of the three highest generic
     rating categories (or four highest, if the investment pool contains only
     certain types of assets, such as fully-secured mortgage loans) from any of
     the following rating agencies: Fitch, Inc., Moody's Investors Service, Inc.
     and Standard & Poor's Ratings Services;

          (3) The trustee is a substantial financial institution and is not an
     affiliate of any member of the Restricted Group (as defined below) other
     than an underwriter;

          (4) The sum of all payments made to and retained by the underwriter in
     connection with the distribution of the certificates represents not more
     than reasonable compensation for underwriting such certificates; the sum of
     all payments made to and retained by the asset seller pursuant to the sale
     of the mortgage loans to the trust represents not more than the fair market
     value of such mortgage loans; the sum of all payments made to and retained
     by each servicer represents not more than reasonable compensation for such
     servicer's services under the pooling and servicing agreement and
     reimbursement of such servicer's reasonable expenses in connection
     therewith;

          (5) The Plan investing in the certificates is an "accredited investor"
     as defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange
     Commission under the Securities Act of 1933 as amended; and

          (6) Unless the investment pool contains only certain types of assets,
     such as fully secured mortgage loans, the rights and interests evidenced by
     the certificates acquired by the Plan are not subordinated to the rights
     and interests evidenced by other certificates of the trust.

     The trust fund must also meet the following requirements:

          (i) the corpus of the trust fund must consist solely of assets of a
     type that have been included in other investment pools;

          (ii) certificates evidencing interests in such other investment pools
     must have been rated in one of the three highest (four highest, if the
     trust contains only certain types of assets) rating categories of a rating
     agency for at least one year prior to the Plan's acquisition of the
     securities; and


                                       113



          (iii) certificates evidencing interests in such other investment pools
     must have been purchased by investors other than Plans for at least one
     year prior to any Plan's acquisition of the securities.

     The Exemption provides exemptive relief to certain mortgage-backed and
asset-backed securities transactions that use pre-funding accounts and that
otherwise meet the requirements of the Exemption. Mortgage loans or other
secured receivables supporting payments to certificateholders, and having a
value equal to no more than twenty-five percent (25%) of the total principal
amount of the certificates being offered by the trust may be transferred to the
trust within a 90-day or three-month pre-funding 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 following conditions
are met:

          (1) The ratio of the amount allocated to the pre-funding account to
     the total principal amount of the certificates being offered (the
     "pre-funding limit") must not exceed twenty-five percent (25%).

          (2) All receivables transferred after the closing date (the
     "additional obligations") must meet the same terms and conditions for
     eligibility as the original receivables used to create the trust, which
     terms and conditions have been approved by a rating agency.

          (3) The transfer of such additional obligations to the trust during
     the pre-funding period must not result in the certificates to be covered by
     the Exemption receiving a lower credit rating from a rating agency upon
     termination of the pre-funding period than the rating that was obtained at
     the time of the initial issuance of the certificates by the trust.

          (4) Solely as a result of the use of pre-funding, the weighted average
     annual percentage interest rate for all of the receivables in the trust at
     the end of the pre-funding period must not be more than 100 basis points
     lower than the average interest rate for the receivables transferred to the
     trust on the closing date.

          (5) In order to insure that the characteristics of the additional
     obligations are substantially similar to the original receivables which
     were transferred to the trust fund:

                    (i) the characteristics of the additional obligations must
               be monitored by an insurer or other credit support provider that
               is independent of Morgan Stanley Capital I Inc.; or

                    (ii) an independent accountant retained by Morgan Stanley
               Capital I Inc. must provide Morgan Stanley Capital I Inc. with a
               letter (with copies provided to each rating agency rating the
               certificates, the related underwriter and the related trustee)
               stating whether or not the characteristics of the additional
               obligations conform to the characteristics described in the
               related prospectus or prospectus supplement or pooling and
               servicing agreement. In preparing such letter, the independent
               accountant must use the same type of procedures as were
               applicable to the receivables transferred to the trust as of the
               closing date.

          (6) The pre-funding period must end no later than three months or 90
     days after the closing date or earlier if the pre-funding account falls
     below the minimum level specified in the pooling and servicing agreement or
     an Event of Default occurs.

          (7) Amounts transferred to any pre-funding account or capitalized
     interest account, or both, used in connection with the pre-funding may be
     invested only in certain permitted investments.

          (8) The related prospectus or prospectus supplement must describe:

                    (i) any pre-funding account or capitalized interest account,
               or both, used in connection with a pre-funding account;

                    (ii) the duration of the pre-funding period;

                    (iii) the percentage or dollar amount, or both, of the
               pre-funding limit for the trust; and

                    (iv) that the amounts remaining in the pre-funding account
               at the end of the pre-funding period will be remitted to
               certificateholders as repayments of principal.


                                       114



          (9) The related pooling and servicing agreement must describe the
     permitted investments for the pre-funding account or capitalized interest
     account, or both, and, if not disclosed in the related prospectus or
     prospectus supplement, the terms and conditions for eligibility of
     additional obligations.

     Moreover, the Exemption provides relief from certain self-dealing/conflict
of interest prohibited transactions that may occur when any person who has
discretionary authority or renders investment advice with respect to the
investment of plan assets causes a Plan to acquire certificates in a trust
holding receivables on which that person or an affiliate is an obligor, provided
that, among other requirements:

          o    the person or its affiliate is an obligor with respect to no more
               than five percent of the fair market value of the obligations or
               receivables contained in the trust;

          o    no member of the Restricted Group (as defined below) is the "plan
               sponsor" (as defined in Section 3(16)(B) of ERISA) of the Plan;

          o    in the case of an acquisition in connection with the initial
               issuance of certificates, at least fifty percent of each class of
               certificates in which Plans have invested and at least fifty
               percent of the aggregate interest in the trust fund is acquired
               by persons independent of the Restricted Group;

          o    a Plan's investment in certificates of any class does not exceed
               twenty-five percent of all of the certificates 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 has discretionary authority or renders investment advice
               are invested in certificates representing an interest in one or
               more trusts containing assets sold or serviced by the same
               entity.

     This exemptive relief does not apply to Plans sponsored by the asset
seller, Morgan Stanley Capital I Inc., Morgan Stanley & Co. Incorporated and the
other underwriters set forth in the related prospectus supplement, the trustee,
the master servicer, any pool insurer, any obligor with respect to obligations
included in the trust fund constituting more than five percent of the aggregate
unamortized principal balance of the assets in the trust fund, any swap
counterparty of a permitted swap or notional principal contract included in the
trust, or any affiliate of any of such parties (the "Restricted Group").

     Before purchasing a certificate, a fiduciary of a Plan should itself
confirm (a) that the certificates constitute "securities" for purposes of the
Exemption and (b) that the specific and general conditions set forth in the
Exemption and the other requirements set forth in the Exemption would be
satisfied. The prospectus supplement for each series of certificates will
specify whether there is a "pre-funding period" and whether such additional
conditions will be satisfied. Each purchaser that is a Plan or that is investing
on behalf of or with plan assets of a Plan in reliance on the Exemption will be
deemed to represent that it qualifies as an accredited investor as defined in
Rule 501(a)(1) of Regulation D of the Securities Act. In addition, the rating of
a certificate may change. If a class of certificates no longer has a rating of
at least BBB- or its equivalent, then certificates of that class will no longer
be eligible for relief under the Exemption (although a Plan that had purchased
the certificates when they had a permitted rating would not be required by the
Exemption to dispose of them). If none of S&P, Moody's or Fitch rate the
applicable class of certificates in one of the four highest generic rating
categories at the time of such purchase, 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 PTE 95-60) to effect such purchase and is
eligible for exemptive release under and satisfies all of the conditions set
forth in Section I and III of PTE 95-60.

REVIEW BY PLAN FIDUCIARIES

     Any Plan fiduciary considering whether to purchase any certificates on
behalf of a Plan should consult with its counsel regarding the applicability of
the fiduciary responsibility and prohibited transaction provisions of ERISA and
the Internal Revenue Code and of the Plan Assets Regulation to such investment.
Among other things, before purchasing any certificates, a fiduciary of a Plan
should make its own determination as to the availability of the exemptive relief
provided in the Exemption, and also consider the availability of any other
prohibited transaction exemptions. In particular, in connection with a
contemplated purchase of certificates representing a beneficial


                                       115



ownership interest in a pool of single family residential first mortgage loans,
such Plan fiduciary should consider the availability of the Exemption or
Prohibited Transaction Class Exemption 83-1 ("PTCE 83-1") for certain
transactions involving mortgage pool investment trusts. PTCE 83-1 does not apply
to pools containing loans secured by shares issued by a cooperative association.
The prospectus supplement with respect to a series of certificates may contain
additional information regarding the application of any other exemption with
respect to the certificates offered thereby.

                                LEGAL INVESTMENT

     If so specified in the prospectus supplement, certain classes of
Certificates will constitute "mortgage related securities" for purposes of the
Secondary Mortgage Market Enhancement Act of 1984, as amended. Generally, the
only classes of Certificates which will qualify as "mortgage related securities"
will be those that (1) are rated in one of two highest rating categories by at
least one nationally recognized statistical rating organization; and (2) are
part of a series evidencing interests in a Trust Fund consisting of loans
originated by certain types of originators specified in SMMEA and secured by
first liens on real estate. The appropriate characterization of those
Certificates not qualifying as "mortgage related securities" for purposes of
SMMEA ("Non-SMMEA Certificates") under various legal investment restrictions,
and thus the ability of investors subject to these restrictions to purchase such
Certificates, may be subject to significant interpretive uncertainties.
Accordingly, all investors whose investment activities are subject to legal
investment laws and regulations, regulatory capital requirements, or review by
regulatory authorities should consult with their own legal advisors in
determining whether and to what extent the Non-SMMEA Certificates constitute
legal investments for them.

     Those classes of Certificates qualifying as "mortgage related securities"
will constitute legal investments for persons, trusts, corporations,
partnerships, associations, business trusts, and business entities, including
depository institutions, insurance companies, trustees, 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, whose authorized
investments are subject to state regulation to the same extent that, under
applicable law, obligations issued by or guaranteed as to principal and interest
by the United States or any of its agencies or instrumentalities constitute
legal investments for those entities.

     Under SMMEA, a number of states enacted legislation, on or prior to the
October 3, 1991 cut-off for those enactments, limiting to varying extents the
ability of certain entities (in particular, insurance companies) to invest in
"mortgage related securities" secured by liens on residential, or mixed
residential and commercial properties, in most cases by requiring the affected
investors to rely solely upon existing state law, and not SMMEA. Pursuant to
Section 347 of the Riegle Community Development and Regulatory Improvement Act
of 1994, which amended the definition of "mortgage related security" to include,
in relevant part, Certificates satisfying the rating and qualified originator
requirements for "mortgage related securities," but evidencing interests in a
Trust Fund consisting, in whole or in part, of first liens on one or more
parcels of real estate upon which are located one or more commercial structures,
states were authorized to enact legislation, on or before September 23, 2001,
specifically referring to Section 347 and prohibiting or restricting the
purchase, holding or investment by state-regulated entities in those types of
Certificates. Accordingly, the investors affected by any state legislation
overriding the preemptive effect of SMMEA will be authorized to invest in
Certificates qualifying as "mortgage related securities" only to the extent
provided in that legislation.

     SMMEA also amended the legal investment authority of federally-chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell, or otherwise deal in "mortgage
related securities" without limitation as to the percentage of their assets
represented thereby, federal credit unions may invest in those securities, and
national banks may purchase those securities for their own account without
regard to the limitations generally applicable to investment securities set
forth in 12 U.S.C. Section 24 (Seventh), subject in each case to those
regulations as the applicable federal regulatory authority may prescribe. In
this connection, the Office of the Comptroller of the Currency (the "OCC") has
amended 12 C.F.R. Part 1 to authorize national banks to purchase and sell for
their own account, without limitation as to a percentage of the bank's capital
and surplus (but subject to compliance with certain general standards in 12
C.F.R. Section 1.5 concerning "safety and soundness" and retention of credit
information), certain "Type IV securities," defined in 12 C.F.R. Section 1.2(m)
to include certain "residential mortgage-related securities." As so defined,
"residential mortgage-related security" means, in relevant part, "mortgage
related security" within the meaning of SMMEA. The National Credit Union
Administration (the


                                       116



"NCUA") has adopted rules, codified at 12 C.F.R. Part 703, which permit federal
credit unions to invest in "mortgage related securities," other than stripped
mortgage related securities (unless the credit union complies with the
requirements of 12 C.F.R. Section 703.16(e) for investing in those securities),
residual interests in mortgage related securities, and commercial mortgage
related securities, subject to compliance with general rules governing
investment policies and practices; however, credit unions approved for the
NCUA's "investment pilot program" under 12 C.F.R. Section 703.19 may be able to
invest in those prohibited forms of securities, while "RegFlex credit unions"
may invest in commercial mortgage related securities under certain conditions
pursuant to 12 C.F.R. Section 742.4(b)(2). The Office of Thrift Supervision (the
"OTS") has issued Thrift Bulletin 13a (December 1, 1998), "Management of
Interest Rate Risk, Investment Securities, and Derivatives Activities," and
Thrift Bulletin 73a (December 18, 2001), "Investing in Complex Securities,"
which thrift institutions subject to the jurisdiction of the OTS should consider
before investing in any of the Certificates.

     All depository institutions considering an investment in the Certificates
should review the "Supervisory Policy Statement on Investment Securities and
End-User Derivatives Activities" (the "1998 Policy Statement") of the Federal
Financial Institutions Examination Council, which has been adopted by the Board
of Governors of the Federal Reserve System, the OCC, the Federal Deposit
Insurance Corporation and the OTS, effective May 26, 1998, and by the NCUA,
effective October 1, 1998. The 1998 Policy Statement sets forth general
guidelines which depository institutions must follow in managing risks
(including market, credit, liquidity, operational (transaction), and legal
risks) applicable to all securities (including mortgage pass-through securities
and mortgage-derivative products) used for investment purposes.

     Investors whose investment activities are subject to regulation by federal
or state authorities should review rules, policies, and guidelines adopted from
time to time by those authorities before purchasing any Certificates, as certain
classes may be deemed unsuitable investments, or may otherwise be restricted,
under those rules, policies, or guidelines (in certain instances irrespective of
SMMEA).

     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, but not limited
to, "prudent investor" provisions, percentage-of-assets limits, provisions which
may restrict or prohibit investment in securities which are not
"interest-bearing" or "income-paying," and, with regard to any Certificates
issued in book-entry form, provisions which may restrict or prohibit investments
in securities which are issued in book-entry form.

     Except as to the status of certain classes of the Certificates as "mortgage
related securities," no representations are made as to the proper
characterization of the Certificates for legal investment purposes, financial
institution regulatory purposes, or other purposes, or as to the ability of
particular investors to purchase Certificates under applicable legal investment
restrictions. The uncertainties described above (and any unfavorable future
determinations concerning legal investment or financial institution regulatory
characteristics of the Certificates) may adversely affect the liquidity of the
Certificates.

     Accordingly, all investors whose investment activities are subject to legal
investment laws and regulations, regulatory capital requirements, or review by
regulatory authorities should consult with their own legal advisors in
determining whether and to what extent the Certificates constitute legal
investments or are subject to investment, capital, or other restrictions, and,
if applicable, whether SMMEA has been overridden in any jurisdiction relevant to
that investor.

                              PLAN OF DISTRIBUTION

     The offered certificates offered hereby and by the supplements to this
prospectus will be offered in series. The distribution of the certificates may
be effected from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices to be
determined at the time of sale or at the time of commitment therefor. If so
specified in the related prospectus supplement, the offered certificates will be
distributed in a firm commitment underwriting, subject to the terms and
conditions of the underwriting agreement, by Morgan Stanley & Co. Incorporated
acting as underwriter with other underwriters, if any, named therein. In such
event, the prospectus supplement may also specify that the underwriters will not
be obligated to pay for any offered certificates agreed to be purchased by
purchasers pursuant to purchase agreements acceptable to Morgan Stanley Capital
I Inc. In connection with the sale of offered certificates, underwriters may
receive compensation from Morgan Stanley Capital


                                       117



I Inc. or from purchasers of offered certificates in the form of discounts,
concessions or commissions. The prospectus supplement will describe any such
compensation paid by Morgan Stanley Capital I Inc.

     Alternatively, the prospectus supplement may specify that offered
certificates will be distributed by Morgan Stanley & Co. Incorporated acting as
agent or in some cases as principal with respect to offered certificates that it
has previously purchased or agreed to purchase. If Morgan Stanley & Co.
Incorporated acts as agent in the sale of offered certificates, Morgan Stanley &
Co. Incorporated will receive a selling commission with respect to the offered
certificates, depending on market conditions, expressed as a percentage of the
aggregate certificate balance or notional amount of the offered certificates as
of the cut-off date. The exact percentage for each series of certificates will
be disclosed in the related prospectus supplement. To the extent that Morgan
Stanley & Co. Incorporated elects to purchase offered certificates as principal,
Morgan Stanley & Co. Incorporated may realize losses or profits based upon the
difference between its purchase price and the sales price. The prospectus
supplement with respect to any series offered other than through underwriters
will contain information regarding the nature of such offering and any
agreements to be entered into between Morgan Stanley Capital I Inc. and
purchasers of offered certificates of such series.

     Morgan Stanley Capital I Inc. will indemnify Morgan Stanley & Co.
Incorporated and any underwriters against certain civil liabilities, including
liabilities under the Securities Act of 1933, or will contribute to payments
Morgan Stanley & Co. Incorporated and any underwriters may be required to make
in respect thereof.

     In the ordinary course of business, Morgan Stanley & Co. Incorporated and
Morgan Stanley Capital I Inc. may engage in various securities and financing
transactions, including repurchase agreements to provide interim financing of
Morgan Stanley Capital I Inc.'s mortgage loans pending the sale of such mortgage
loans or interests in the mortgage loans, including the certificates.

     Offered certificates will be sold primarily to institutional investors.
Purchasers of offered certificates, including dealers, may, depending on the
facts and circumstances of the purchases, be deemed to be "underwriters" within
the meaning of the Securities Act of 1933 in connection with reoffers and sales
by them of offered certificates. Certificateholders should consult with their
legal advisors in this regard prior to any such reoffer or sale.

     If specified in the prospectus supplement relating to certificates of a
particular series offered hereby, Morgan Stanley Capital I Inc., any affiliate
thereof or any other person or persons specified in the prospectus supplement
may purchase some or all of the certificates of any series from Morgan Stanley &
Co. Incorporated and any other underwriters thereof. This purchaser may
thereafter from time to time offer and sell, pursuant to this prospectus and the
related prospectus supplement, some or all of the certificates so purchased,
directly, through one or more underwriters to be designated at the time of the
offering of the certificates, through dealers acting as agent or principal or in
such other manner as may be specified in the related prospectus supplement. The
offering may be restricted in the manner specified in the prospectus supplement.
The transactions may be effected at market prices prevailing at the time of
sale, at negotiated prices or at fixed prices. Any underwriters and dealers
participating in the purchaser's offering of the certificates may receive
compensation in the form of underwriting discounts or commissions from such
purchaser and such dealers may receive commissions from the investors purchasing
the certificates for whom they may act as agent (which discounts or commissions
will not exceed those customary in those types of transactions involved). Any
dealer that participates in the distribution of the certificates may be deemed
to be an "underwriter" within the meaning of the Securities Act, and any
commissions and discounts received by such dealer and any profit on the resale
or such certificates by such dealer might be deemed to be underwriting discounts
and commissions under the Securities Act.

     All or part of any class of certificates may be reacquired by Morgan
Stanley Capital I Inc. or acquired by an affiliate of Morgan Stanley Capital I
Inc. in a secondary market transaction or from an affiliate, including Morgan
Stanley & Co. Incorporated. Such certificates may then be included in a trust
fund, the beneficial ownership of which will be evidenced by one or more classes
of mortgage-backed certificates, including subsequent series of certificates
offered pursuant to this prospectus and a prospectus supplement.

     As to each series of certificates, only those classes rated in an
investment grade rating category by any rating agency will be offered hereby.
Any non-investment-grade class may be initially retained by Morgan Stanley
Capital I Inc., and may be sold by Morgan Stanley Capital I Inc. at any time in
private transactions.


                                       118



                                  LEGAL MATTERS

     Certain legal matters in connection with the certificates, including
certain federal income tax consequences, will be passed upon for Morgan Stanley
Capital I Inc. by Cadwalader, Wickersham & Taft LLP, Sidley Austin Brown & Wood
LLP or Latham & Watkins LLP.

                              FINANCIAL INFORMATION

     A new trust fund will be formed with respect to each series of certificates
and no trust fund will engage in any business activities or have any assets or
obligations prior to the issuance of the related series of certificates.
Accordingly, no financial statements with respect to any trust fund will be
included in this prospectus or in the related prospectus supplement.

                                     RATING

     It is a condition to the issuance of any class of offered certificates that
they shall have been rated not lower than investment grade, that is, in one of
the four highest rating categories, by a rating agency.

     Ratings on mortgage pass-through certificates address the likelihood of
receipt by certificateholders of all distributions on the underlying mortgage
loans. These ratings address the structural, legal and issuer-related aspects
associated with such certificates, the nature of the underlying mortgage loans
and the credit quality of the guarantor, if any, ratings on mortgage
pass-through certificates do not represent any assessment of the likelihood of
principal prepayments by borrowers or of the degree by which such prepayments
might differ from those originally anticipated. As a result, certificateholders
might suffer a lower than anticipated yield, and, in addition, holders of
stripped interest certificates in extreme cases might fail to recoup their
initial 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.

                    INCORPORATION OF INFORMATION BY REFERENCE

     The SEC allows Morgan Stanley Capital I Inc. to "incorporate by reference"
information it files with the SEC, which means that Morgan Stanley Capital I
Inc. can disclose important information to you by referring you to those
documents. The information incorporated by reference is considered to be part of
this prospectus. Information that Morgan Stanley Capital I Inc. files later with
the SEC will automatically update the information in this prospectus. In all
cases, you should rely on the later information rather than on any different
information included in this prospectus or the accompanying prospectus
supplement.

     Morgan Stanley Capital I Inc., as depositor, will file, or cause to be
filed, with the Commission, the periodic reports and the Agreement with respect
to each trust fund required under the Exchange Act and the rules and regulations
of the Commission.

     All documents and reports filed, or caused to be filed, by Morgan Stanley
Capital I Inc. with respect to a trust fund pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act prior to the termination of an offering of
certificates are incorporated in this prospectus by reference. Each person to
whom this prospectus is delivered may obtain, without charge, from Morgan
Stanley Capital I Inc. a copy of any documents or reports relating to the
certificates being offered. (Exhibits to those documents may only be obtained if
they are specifically incorporated by reference in those documents.) Requests
for this information should be directed in writing to Morgan Stanley Capital I
Inc., c/o Morgan Stanley & Co. Incorporated, 1585 Broadway, 37th Floor, New
York, New York 10036, Attention: John E. Westerfield, or by telephone at (212)
761-4000. Morgan Stanley Capital I Inc. has determined that its financial
statements are not material to the offering of any certificates.


                                       119



     Morgan Stanley Capital I Inc. filed a registration statement relating to
the certificates with the Securities and Exchange Commission. This prospectus is
part of the registration statement, but the registration statement includes
additional information. For further information regarding the documents referred
to in this prospectus and the accompanying prospectus supplement, you should
refer to the registration statement and the exhibits thereto. The registration
statement and exhibits and the periodic reports and the Agreement can be
inspected and copied at prescribed rates at the public reference facilities
maintained by the Commission at its Public Reference Room, 450 Fifth Street,
N.W., Washington, D.C. 20549 or be accessed at the internet site
http://www.sec.gov maintained by the Commission. Additional information
regarding the Public Reference Room can be obtained by calling the Commission at
1-800-SEC-0330.


                                       120



                                GLOSSARY OF TERMS

     The certificates will be issued pursuant to the Agreement. The following
Glossary of Terms is not complete. You should also refer to the prospectus
supplement and the Agreement for additional or more complete definitions. If you
send a written request to the trustee at its corporate office, the trustee will
provide to you without charge a copy of the Agreement (without exhibits and
schedules).

     Unless the context requires otherwise, the definitions contained in this
Glossary of Terms apply only to this series of certificates.

     "Agreement" means the pooling and servicing agreement or the trust
agreement, as applicable.

     "Amortizable Bond Premium Regulations" means final regulations issued by
the Internal Revenue Service which deal with the amortizable bond premium.

     "Available Distribution Amount" means for each distribution date, the sum
of the following amounts:

     o    the total amount of all cash on deposit in the related certificate
          account as of the corresponding Determination Date, exclusive of:

          o    all scheduled payments of principal and interest collected but
               due on a date subsequent to the related Due Period;

          o    unless the related prospectus supplement provides otherwise, all
               prepayments, together with related payments of the interest
               thereon and related prepayment premiums, liquidation proceeds,
               insurance proceeds and other unscheduled recoveries received
               subsequent to the related Due Period; and

          o    all amounts in the certificate account that are due or
               reimbursable to Morgan Stanley Capital I Inc., the trustee, an
               asset seller, a subservicer, the master servicer or any other
               entity as specified in the related prospectus supplement or that
               are payable in respect of certain expenses of the related trust
               fund;

     o    if the related prospectus supplement so provides, interest or
          investment income on amounts on deposit in the certificate account,
          including any net amounts paid under any cash flow agreements;

     o    all advances made by a servicer or any other entity as specified in
          the related prospectus supplement with respect to the distribution
          date;

     o    if and to the extent the related prospectus supplement so provides,
          amounts paid by a servicer or any other entity as specified in the
          related prospectus supplement with respect to interest shortfalls
          resulting from prepayments during the related prepayment period; and

     o    unless the related prospectus supplement provides otherwise, to the
          extent not on deposit in the related certificate account as of the
          corresponding Determination Date, any amounts collected under, from or
          in respect of any credit support with respect to the distribution
          date.

     "Contributions Tax" means a tax on the trust fund equal to 100% of the
value of the contributed property.

     "Deferred Interest" means interest deferred by reason of negative
amortization.

     "Determination Date" means the close of business on the date specified in
the related prospectus supplement.

     "Due Period" means the period which will commence on the second day of the
month in which the immediately preceding distribution date occurs, or the day
after the cut-off date in the case of the first Due Period, and will end on the
first day of the month of the related distribution date.


                                       121



     "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.

     "Events of Default" means, with respect to the master servicer under the
pooling and servicing agreement, any one of the following events:

     o    any failure by the master servicer to distribute or cause to be
          distributed to certificateholders, or to remit to the trustee for
          distribution to certificateholders, any required payment.

     o    any failure by the master servicer duly to observe or perform in any
          material respect any of its other covenants or obligations under the
          pooling and servicing agreement which continues unremedied for thirty
          days after written notice of such failure has been given to the master
          servicer by the trustee or Morgan Stanley Capital I Inc., or to the
          master servicer, Morgan Stanley Capital I Inc., and the trustee by the
          holders of certificates evidencing not less than 25% of the voting
          rights;

     o    any breach of a representation or warranty made by the master servicer
          under the pooling and servicing agreement which materially and
          adversely affects the interests of certificateholders and which
          continues unremedied for thirty days after written notice of such
          breach has been given to the master servicer by the trustee or Morgan
          Stanley Capital I Inc., or to the master servicer, Morgan Stanley
          Capital I Inc. and the trustee by the holders of certificates
          evidencing not less than 25% of the voting rights; and

     o    certain events of insolvency, readjustment of debt, marshalling of
          assets and liabilities or similar proceedings and certain actions by
          or on behalf of the master servicer indicating its insolvency or
          inability to pay its obligations.

     "FHLMC" means the Federal Home Loan Mortgage Corporation.

     "Mark-to-Market Regulations" means the finalized Internal Revenue Service
regulations which provide that a REMIC Residual Certificate acquired after
January 3, 1995 cannot be marked to market.

     "Mortgage Rate" means the interest rate for a mortgage loan which provides
for no accrual of interest or for accrual of interest thereon at an interest
rate that is fixed over its term or that adjusts from time to time, or that may
be converted from an adjustable to a fixed mortgage rate, or from a fixed to an
adjustable mortgage rate, from time to time pursuant to an election or as
otherwise specified on the related mortgage note, in each case as described in
the related prospectus supplement.

     "OID Regulations" means the special rules of the Internal Revenue Code
relating to original issue discount (currently Internal Revenue Code Sections
1271 through 1273 and 1275) and the related Treasury regulations.

     "Payment Lag Certificates" means certain of the REMIC Regular Certificates.

     "Permitted Investments" means United States government securities and other
investment grade obligations specified in the Agreement.

     "Plans" means employee benefit plans subject to ERISA and certain other
similar plans and arrangements, including but not limited to individual
retirement accounts and annuities.

     "Prepayment Assumption" means the original yield to maturity of the grantor
trust certificate calculated based on a reasonable assumed prepayment rate for
the mortgage loans underlying the grantor trust certificates.

     "Prohibited Transaction Tax" means the tax the Internal Revenue Code
imposes on REMICs equal to 100% of the net income derived from prohibited
transactions.

     "Purchase Price" means, with respect to any mortgage loan and to the extent
set forth in the related prospectus supplement, the amount that is equal to the
sum of the unpaid principal balance, plus unpaid accrued interest at the
mortgage rate from the date as to which interest was last paid to the due date
in the Due Period in which the relevant purchase is to occur, plus certain
servicing expenses that are reimbursable to the master servicer.


                                       122



     "Record Date" means the last business day of the month immediately
preceding the month in which the distribution date for a class of certificates
occurs.

     "Related Proceeds" means related recoveries on the mortgage loans,
including amounts received under any form of credit support, for which advances
were made.

     "REMIC Certificates" means a certificate issued by a trust fund relating to
a series of certificates where an election is made to treat the trust fund as a
REMIC.

     "REMIC Provisions" means provisions of the federal income tax law relating
to real estate mortgage investment conduits, which appear at Section 860A
through 860G of Subchapter M of Chapter 1 of the Internal Revenue Code of 1986,
as amended from time to time, and related provisions, and regulations (including
any proposed regulations) and rulings promulgated thereunder, as the foregoing
may be in effect from time to time.

     "REMIC Regular Certificates" means REMIC Certificates issued by the trust
fund that qualify as REMIC Certificates and are considered to be regular
interests.

     "REMIC Regular Certificateholders" means holders of REMIC and Regular
Certificates.

     "REMIC Regulations" means the REMIC Regulations promulgated by the Treasury
Department.

     "REMIC Residual Certificate" means the sole class of residual interests in
the REMIC.

     "REMIC Residual Certificateholders" means holders of the REMIC Regular
Certificates.

     "REO Tax" means a tax on net income from foreclosure property, within the
meaning of Internal Revenue Code Section 857(b)(4)(B).

     "Restricted Group" means the underwriter, the asset seller, the trustee,
the master servicer, any insurer of the mortgage loans and mortgage-backed
securities, any borrower whose obligations under one or more mortgage loans
constitute more than 5% of the aggregate unamortized principal balance of the
assets in the trust, any swap counterparty of a permitted swap or notional
principal contract included in the trust, or any of their respective affiliates.

     "RICO" means the Racketeer Influenced and Corrupt Organizations statute.

     "Servicing Standard" means:

     o    the standard for servicing the servicer must follow as defined by the
          terms of the related pooling and servicing agreement and any related
          hazard, business interruption, rental interruption or general
          liability insurance policy or instrument of credit support included in
          the related trust fund as described in this prospectus under
          "Description of Credit Support" and in the prospectus supplement;

     o    applicable law; and

     o    the general servicing standard specified in the related prospectus
          supplement or, if no such standard is so specified, its normal
          servicing practices.

     "SMMEA" means the Secondary Mortgage Market Enhancement Act of 1984, as
amended.

     "Stripped ARM Obligations" means original issue discount on grantor trust
certificates attributable to adjustable rate loans.

     "Stripped Bond Certificates" means a class of grantor trust certificates
that represents the right to principal and interest, or principal only, on all
or a portion of the mortgage loans and mortgage-backed securities, if a trust
fund is created with two classes of grantor trust certificates.


                                       123



     "Stripped Coupon Certificates" means a class of grantor trust certificates
that represents the right to some or all of the interest on a portion of the
mortgage loans and mortgage-backed securities, if a trust fund is created with
two classes of grantor trust certificates.

     "Stripped Interest Certificates" means certificates which are entitled to
interest distributions with disproportionately low, nominal or no principal
distributions.

     "Stripped Principal Certificates" means certificates which are entitled to
principal distributions with disproportionately low, or no interest
distributions.

     "Super-Premium Certificates" means certain REMIC Regular Certificates to be
issued at prices significantly exceeding their principal amounts or based on
notional principal balances.

     "Title V" means Title V of the depository Institutions Deregulation and
Monetary Control Act of 1980.

     "U.S. Person" means a citizen or resident of the United States, a
corporation or a partnership organized in or under the laws of the United States
or any political subdivision thereof (other than a partnership that is not
treated as a U.S. Person under any applicable Treasury regulations), an estate
the income of which from sources outside the United States is included 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 a trust if a court
within the United States is able to exercise primary supervision of the
administration of the trust and one or more U.S. Persons have the authority to
control all substantial decisions of the trust. In addition, certain trusts
treated as U.S. Persons before August 20, 1996 may elect to continue to be so
treated to the extent provided in regulations.

     "Value" means:

     o    with respect to any mortgaged property other than a mortgaged property
          securing a refinance loan, generally the lesser of

          o    the appraised value determined in an appraisal obtained by the
               originator at origination of that loan, and

          o    the sales price for that property; and

     o    with respect to any refinance loan, unless otherwise specified in the
          related prospectus supplement, the appraised value determined in an
          appraisal obtained at the time of origination of the refinance loan.


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